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Surcharging air passengers?

Jakarta Post Editorial - April 29, 2024

Jakarta – For a country like Indonesia, which is desperately trying to resuscitate its tourism industry, imposing an extra surcharge on already costly airfare is never a good idea.

That includes proposed levy collection under the newly established Tourism Endowment Fund scheme, which the government claims will improve the country's appeal to foreign travelers.

This tourism fund is something to be expected, as such practice is already in place in many tourist destination countries. Tourism and Creative Economy Minister Sandiaga Uno revealed this in February, citing that such a fund could help Indonesia win bids to host megastars like Taylor Swift, as Singapore has done.

But then came a letter issued by the Office of the Coordinating Maritime Affairs and Investment Minister that sparked controversy for suggesting collecting fees on airfares to feed the tourism fund.

Public anger is something that the government should take into consideration as not everybody can fly today, unlike in the past. Flights within the archipelago could cost as much as those to international destinations of a similar distance.

Our domestic airline industry is in a mess, especially after the COVID-19 pandemic struck in early 2020 and hit the world's economy hard. Ticket prices are more expensive now than in the pre-COVID era. There are fewer planes in the skies, but demand is increasing as the economy shows a semblance of recovery.

Domestic airlines now must grapple with soaring prices of fuel and spare parts as well as maintenance and leasing costs as a consequence of the multi-year Rupiah depreciation against the United States dollar.

Adding a surcharge without revising the ceiling price would only strangle the already tight airline industry margin. At times like this, the sector needs every support the state can give, rather than more burdens.

We need to realize that a surcharge could also impede the aviation industry's recovery after the pandemic dealt it a big blow. The same goes for the tourism industry, which relies on air travel to connect people and destinations across the archipelago.

The government has also considered imposing additional fees obtained from foreign nationals' entry visa charges.

This would only make sense if Indonesia faced over-tourism like Italy has with Venice, but currently the country still badly needs to woo foreign tourist arrivals.

Statistics showed foreign tourist arrivals increased by 38 percent year-on-year to 1.04 million in February, thanks in part to the recovery of the tourism sector. This year, the government expects tourist arrivals to grow to between 9.5 and 14.3 million.

Instead of looking toward the pockets of the public, the government should incentivize the stagnating tourism industry.

This year, the government only earmarked around Rp 3.6 trillion (US$222.4 million) for tourism, compared to Rp 4 trillion on average over the past five years, despite many promises and plans to improve the domestic tourism sector.

There is always room in the state budget for the government to use more optimally. Asking the public to pay more to support the development is insensitive, considering the many taxes the public already has to pay to support the state budget.

The same goes for the regional government budgets, which have often come under scrutiny by the Finance Ministry for allocating too much for the bureaucracy instead of real development, including measures to boost tourism potential.

There has not yet been a final decision on this matter, but it seems that the government will not back down. It still believes that the surcharge will benefit the public and the tourism industry alike.

The government should think deeply about formulating the regulation on the tourism endowment fund, including how to raise it.

Clarity and certainty matter, otherwise the regulation will only generate public outrage and confusion, something that we experienced with the trade ministerial regulation on passenger import curbs a few months ago.

Source: https://www.thejakartapost.com/opinion/2024/04/29/surcharging-air-passengers.htm