Jakarta, South Sumatra Receive Vital Economic Boost From Asian Games

The Asian Games had an immediate impact on the economies of the two host cities, in the form of increased retail sales, a tourism boost and improved public infrastructure. (Antara Photo/Inasgoc//Widodo S Jusuf)

By : Adinda Normala | on 4:49 PM August 31, 2018
Category : Business, Economy

Jakarta. The Asian Games had an immediate impact on the economies of the two host cities, in the form of increased retail sales, a tourism boost and improved public infrastructure.

The international multisport event, which kicked off on Aug. 18 and ends on Sunday (02/09), is estimated to have boosted August retail sales in Palembang by between 10 percent and 15 percent month-on-month, and by up to 10 percent in Jakarta, according to Roy Mandey, chairman of the Indonesian Retailers Association (Aprindo).

"In Palembang, the increase was mostly felt around Jakabaring," Roy told the Jakarta Globe, referring to Jakabaring Sport City, the city's main Asian Games venue.

"While in Jakarta, because it is a larger area, we have not yet compiled all the data," he added.

The retail sales boost was mainly driven by transactions made by athletes, officials and tourists in malls and retail stores, Roy said.

In addition to an estimated 150,000 foreign visitors – mainly tourists – and around 5,000 members of the media, the two cities also welcomed around 15,000 athletes and officials from the 45 countries competing in 40 sports disciplines during the Asian Games.

The Ministry of Tourism estimates that foreign visitors will contribute an additional Rp 3 trillion ($202 million) in foreign exchange, assuming they spend between $1,200 and $1,500 each during their visit.

"Thus, it does not only function as a big sports event, but it is also useful to boost economic growth in Indonesia," Roy said.

Retail sales are estimated to have grown by up to 10 percent to more than Rp 100 trillion in the first six months, according to Aprindo, thanks to improving consumer purchasing power. Around 40 percent, or Rp 40 trillion, came from sales during Idul Fitri and Ramadan. Aprindo has set a retail sales target of Rp 220 trillion for this year, 10 percent higher than last year.

Retail sales are a gauge of household spending, which accounted for 55 percent of Indonesia's nominal gross domestic product in the second quarter.

Wider Impact

The tourism and hospitality industries in Jakarta and Palembang expect to have doubled their daily revenues during the Asian Games, said Asnawi Bahar, chairman of the Association of Indonesian Tour and Travel Agencies (Asita).

"Occupancy rates at hotels near sports venues in Jakarta and Palembang reached 100 percent," Asnawi told reporters last week.

He said Indonesia should consider presenting annual world-class events, such as Formula One, or a Grand Prix motorcycle race, to boost tourism.

Rosan Roeslani, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said although Asian Games events were mainly held in Jakarta and Palembang, small and medium businesses from across the country were involved in producing souvenirs and memorabilia.

The Indonesia Asian Games Organizing Committee (Inasgoc) chose 15 local businesses as official license holders of 350 different merchandise items.

"We're involving all businesses, from food and beverages to transportation and services, to improve purchasing power," Rosan said.

The result of a study by the National Development Planning Agency (Bappenas) that was released last month showed that the Asian Games would likely contribute up to Rp 22 trillion to Jakarta's economy and Rp 18.7 trillion to that of South Sumatra.

Investment in construction between 2015 and 2018 amounted to Rp 13.7 trillion in Jakarta and Rp 15.4 trillion in South Sumatra, while Asian Games events would likely contribute another Rp 5.8 trillion to Jakarta and Rp 2.1 trillion to South Sumatra. Tourists are meanwhile expected to spend up to Rp 2.6 trillion in Jakarta and Rp 968 billion in South Sumatra, Bappenas said.

The multisport event is also expected to have created an additional 57,300 jobs in Jakarta and 51,500 in Palembang between 2015 and 2019, which may raise the average wage by between 0.36 percent and 0.46 percent in the two provinces.

"The indirect impact on the economy will come from a multiplying effect that will trigger job creation, economic growth and additional personal income," Bappenas head Bambang Brodjonegoro said.

Bhima Adhinegara, a researcher at the Institute for Development of Economics and Finance (Indef), predicts that the Indonesian economy will be stable in the third quarter of this year, thanks to the Asian Games. Southeast Asia's biggest economy expanded by 5.27 percent in the second quarter – its fasted rate since 2014.

"The most obvious economic effect can be seen in household consumption, which in the third quarter will be quite stable within the 5 percent range, thanks to the Asian Games. Then, there are also increased retail sales, as athletes and tourists are visiting malls between events," Bhima told the Jakarta Globe.

He added that the Asian Games will also have a sustainable impact on Indonesia due to the facilities and infrastructure that have been developed for the event, such as stadiums and light rail transit systems. The country will further benefit from free promotion, having demonstrated its ability to host a major international event.

"The promotion started with the Asian Games opening ceremony, which drew lavish praise from other countries, making foreign tourists curious about Indonesia," Bhima said.

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