Building a Tourism Powerhouse: Indonesia’s Path to Jobs, Growth, and Inclusion

Indonesia is crafting a new chapter in economic development, anchored in the promise of its vibrant tourism sector and supported by extensive research from global institutions such as the World Bank, the International Finance Corporation (IFC), and the World Travel and Tourism Council (WTTC). Between 2001 and 2012, the country saw impressive growth, with GDP expanding by 5.6 percent annually and the poverty rate falling to 11 percent. Yet this trajectory faltered in the following years, exposing vulnerabilities in the labor market. Youth unemployment reached 20.6 percent in 2022, and women’s labor force participation remained low at 53 percent. Tourism, meanwhile, presented a strong economic multiplier: the WTTC estimated that every $1 million spent in Indonesian tourism generates $1.7 million in GDP and supports 200 jobs, 67 of which are direct. Furthermore, the sector is particularly inclusive, employing millions, with women making up 58 percent of workers in hotels and restaurants.

Transforming Destinations through the Indonesia Tourism Development Project

To harness this potential, the World Bank launched the Indonesia Tourism Development Project (P157599), injecting $300 million through its IBRD and IDA arms. The project forms part of the Indonesian government’s National Tourism Development Priority Program and aims not only to boost visitor numbers but to develop sustainable, inclusive, and resilient tourism economies. At its core, the initiative was structured around four synergistic components. The first provided technical assistance to boost institutional capacity for long-term, integrated tourism planning. The second focused on hard infrastructure, building and upgrading transport, sanitation, and cultural preservation efforts in key destinations. The third emphasized local economic inclusion by supporting small businesses and training local workers. The fourth, developed with IFC, helped design tailored investment plans for each destination and provided support for project preparation and monitoring.

Initially targeting three tourism destinations, the project expanded to six, with an ambitious long-term vision to increase annual tourist arrivals from 15.3 million in 2015 to 27.3 million by 2041. It aimed to more than double annual tourist spending from $1.2 billion to $3.3 billion and increase private investment in tourism thirteenfold, targeting $421 million. By 2024, many of these benchmarks had not only been met but exceeded.

Infrastructure, Inclusion, and Innovation on the Ground

The impacts of the project on infrastructure and community well-being have been striking. Improved water access was extended to 570,000 people, while sanitation enhancements reached 470,000. In addition, 542,000 square meters of non-motorized public space were developed, improving accessibility and sustainability. Over 84,000 tourism professionals earned official certifications, boosting service quality across the board. More than 20,000 businesses expanded their online presence, enabling them to reach new markets and improve their competitiveness in an increasingly digital economy.

The initiative placed significant focus on community-level transformation, working directly with 155 tourism villages. A total of 18,000 people received tourism-related training, from hospitality and management to entrepreneurship. Of these villages, 65 were able to prepare and execute tourism development plans that translated into tangible income and improved livelihoods. One such example is Indah, a former barista who returned from Medan to her native Sibaganding Tourism Village, where she launched a coffee stall with training and support from the project. Her story is emblematic of the program’s grassroots ethos, revitalizing rural communities and enabling local talent.

Private Sector Confidence and Economic Ripple Effects

Private sector investment, a cornerstone of the program, has surged past expectations. The project successfully mobilized over $870 million in private capital, more than double its target. This demonstrates strong investor confidence in Indonesia’s tourism future, particularly in emerging and less-developed destinations. Job creation has mirrored this momentum. An estimated 1.2 million people have found new or better jobs because of the project. Employment in accommodation, food, and beverage services grew by 27 percent in project areas, and average wages rose by over 15 percent, clear signs that not only are more jobs being created, but they are of higher quality and better paid.

The project’s success reflects its carefully balanced investment strategy: pairing “hard” infrastructure development with “soft” interventions such as training, certification, and digital literacy. It proved that tourism development need not be extractive or top-down; instead, it can be a participatory process that empowers local communities, improves services, and protects cultural and natural assets.

Looking Ahead: Sustaining the Tourism Transformation

The Indonesia Tourism Development Project has become the World Bank Group’s largest tourism-focused initiative to date. It has served as a template for how cross-sector collaboration, thoughtful planning, and robust community engagement can drive national development. It repositions tourism as not merely an economic sector, but as a transformative force that touches every corner of society, public and private, urban and rural, male and female.

Building on this momentum, a new phase is being prepared. One of the key features will be the launch of the Indonesia Quality Tourism Fund (IQTF), aimed at supporting tourism ventures that adhere to high sustainability and service standards. With institutions like the World Bank and IFC continuing to provide guidance and investment, Indonesia’s tourism sector is poised for a sustained renaissance. What began as a strategy to address unemployment and sluggish growth has evolved into a robust, inclusive model for economic resilience, one that other nations may well look to replicate in the years ahead.