The Impact of Visa-Free Entry on the Determinants of Inbound Tourism Demand in Indonesia

Many countries have applied a new visa-free policy to boost the number of international tourist. In 2003, the Presidential Decree of the Republic of Indonesia No. 18/2003 concerning the Exemption from Brief Visit Visa for citizens from 11 countries was enacted. Further the revised on Presidential Decree of the Republic of Indonesia No. 43/2011, the latest exemption regarding brief visa-free visit, was implemented for 15 countries. In this study, a panel data set that covers 25 years (1990-2014) for a group from 20 of 30 main export destination countries was used. The number of inbound international visitor arrivals was employed as a dependent variable in this research. The impact of visa-free entry will be measured in this research. Other variables that determine the dependent variables are the real GDP per capita of the source countries; the trade value between Indonesia and the source country, the population levels of the source country, the total number of rooms in hotels available in Indonesia; the export value for the iron metal, steel, machinery, and automotive sector, and the palm oil processing sectors; the relative CPI of Indonesia; the number of world heritage sites in Indonesia; the distance between the capital city of the source country to Indonesia; dummy variables for the Bali bombings, Aceh tsunami, and Economic Crisis in 1998; and the geographical characteristic of Indonesia and the source country, such as whether there are neighboring regions, and whether they practice the same language as Indonesia, and whether they practice the same religion as Indonesia. The results show that the new visa-free entry policy has a positive impact on the number of tourist arrivals. The new visa policy positive significantly can boost the number of tourist arrivals.