Macroeconomic policymakers have been concerned to decrease barriers which impede international flows of goods, services and financial capital and to ensure flexibility of exchange rates, interest rates and wages, with the aim of inducing markets to operate more efficiently. The introduction of such macroeconomic policies has been a source of some controversy because of the implications for income and employment, as well as income distribution and the welfare of local populations. Policies to promote trade liberalisation are a case in point. Trade liberalisation is occurring in conjunction with World Trade Organisation, IMF and World Bank pressures for lower tariffs and the elimination of import quotas, and also as part of the process of integration within regional trading blocs. Although trade liberalisation is supposed to bring about long-term benefits by allowing countries to reap gains from specialisation in production on the basis of their comparative advantage, a number of problems may occur.The first can take the form of a balance of trade deficit, as consumers purchase increasing quantities of the cheaper imports. The second involves a government budget deficit, as the government receives less revenue from the lower tariffs. The third concerns the effects of trade liberalisation on the distribution of income and levels of welfare of the local population. The issue addressed here is, therefore, whether the growth of tourism can help to resolve these problems. This issue has received little attention from macroeconomic policy-makers, who have tended to formulate and implement policies without taking account of their predicted effects in the context of tourism growth, even in countries whose economies are highly dependent on tourism.The growing international demand for these assets, in the context of decreasing levels of trade protection, has significant implications for domestic income and employment generation, income distribution and welfare. Tourism has a big role for Indonesia because it has a lot of beautiful islands and the income from tourism is so huge In 2005, the number of arrivals from abroad is expected to be around 11 million, generating foreign currency receipts of over $15 billion. Tourism contributed 16% of total job creation in 1995, and in 2007 it is estimated that 1 of every 11 new jobs will originate from tourism (Kompas, 06/02/1999). tourism in Indonesia is expected to play a more important role in the future, especially in the face of the declining role of oil and dependence on low wage, labour-intensive sectors. The increasing reliance on the tourism sector is also demonstrated by the government’s efforts to attract more foreign investment in the tourism industry, by allowing 100 % foreign ownership, introducing a tax holiday and welcoming foreign professional workers in the tourism sector. The CGE is use to indicate the but rather to measure the ‘overall-indicative’ directions of the effects, especially on production activities, factor markets, foreign trade, the welfare of domestic residents and income distribution, i.e. the general equilibrium economywide effects. While the SAM is use to represent the economic and social structure of a country (region) at particular time, by defining its economic actors and recording their transactions.
So Two main macroeconomic policy scenarios were considered, first in isolation and subsequently in conjunction with foreign tourism growth. The first is termed ‘partial globalisation’ and is modelled by a reduction of 20% in the tariffs on imported commodities. This reflects external pressure on the government to implement tariff reductions in conjunction with Indonesia’s membership of AFTA and APEC. It occurs in the context of the government’s reluctant attitude towards globalisation, stemming from its increasing reliance on revenue from import tariffs. In the second scenario, termed ‘far-reaching globalisation’, the government is more pro-business and balances the ‘involuntary’ (externally determined) import tariff cuts with a ‘voluntary’ removal of distortions in the domestic market. The two scenarios are analysed by using the CGE model to estimate the effects of partial and far-reaching globalisation on key economic variables: GDP, employment,a range of measures of inflation, external performance, welfare, household and foreign tourist consumption. While the partial globalization has given a bad impact because the import goods has a lower price than the domestic products because the tariff of import product is not exist anymore. So it will decrease the government income and also it will decrease the domestic products demand. But the increase in consumption by foreign tourists may be higher, as the lower prices of domestic commodities may encourage them to consume more or even attract more of them to visit Indonesia. indicate that price is a crucial
factor for most tourists when choosing a holiday destination. Globalisation and foreign tourism growth can, in fact, reduce the domestic price level and increase the amount of foreign trade and availability of products in the domestic economy, thereby stimulating further production. The end result in the Indonesian case is improved macroeconomic performance and welfare, as domestic absorption, and household consumption increase. Foreign tourists are also better off for they can consume more, given their spending level, and also benefit from the greater availability of products. The trade balance and government accounts are in a better position, owing to the additional receipts from tourism. The ongoing growth of foreign tourism also reduces the government’s burdens as a result of embarking on globalisation, by enabling it to reduce its reliance on import tariffs and indirect taxation while, at the same time, maintaining the level of income necessary to finance its expenditure. Tourism growth would, therefore, enable the government to follow a fiscal policy of revenue neutral globalisation, allowing it to finance its expenditure without imposing higher taxes on the Indonesian population.