Budget Cuts Impacts Hospitality and Transportation Sectors
The policy to cut travel budgets by at least 50%, implemented through Presidential Instruction (Inpres) No. 1 of 2025, has raised concerns within the air transportation and hospitality sectors.
Bayu Sutanto, Secretary General of the Indonesia National Air Carriers Association (INACA), explained that this policy would directly impact passenger numbers for both airlines and hotels, which are heavily reliant on government business travel.
“There will certainly be an impact on passenger numbers for both central and regional government segments due to the reduction in official travel budgets,” Sutanto stated on Wednesday (January 29, 2025), as quoted from monitorindonesia.com.
He mentioned that government business travel contributes about 30%-35% to the aviation industry, with state-owned airlines like Garuda Indonesia, Citilink, and Pelita Air expected to be the most affected by this budget cut.
Challenges for the Hospitality and Restaurant Sectors
Similarly, the hospitality and restaurant industries are bracing for a decline in business due to the government’s budget cuts. Hotel and restaurant owners are expected to take measures to adjust or streamline their operations to maintain their businesses.
Maulana Yusran, Secretary General of the Indonesian Hotel and Restaurant Association (PHRI), highlighted regions outside of Java, such as Sumatra, Kalimantan, Papua, Sulawesi, and Nusa Tenggara, are particularly dependent on government activities, given the lack of private sector economic activities in these areas.
If activity in these regions decreases, business owners may be forced to temporarily halt daily worker operations or even suspend new recruitment. This is particularly concerning since the hospitality sector plays a significant role in creating job opportunities. The decline in hotel and restaurant businesses will also affect regional revenue.
The Ripple Effect on Regional Economies
In alignment with this, Nasrullah, Secretary of the BPD PHRI Sulsel, noted that a decline in hotel activity will impact PAD and the demand for agricultural and fishing products.
As a result, some business owners may implement efficiency measures, such as reducing their workforce or laying off employees, which could further reduce PAD and decrease the purchase of staple goods like rice, eggs, and meat.
“If hotel activities decrease, it will definitely affect other sectors. PAD will drop, and the purchase of rice, eggs, meat, and other goods will decrease, which will impact farmers, livestock producers, transporters, and others,” Nasrullah said, as quoted from inikata.co.id.
Presidential Instruction (Inpres) and Budget Cuts Overview
Through Inpres No. 1/2025 on Efficiency in the Implementation of the State Budget (APBN) and Regional Budget (APBD) for the 2025 Fiscal Year, President Prabowo Subianto has ordered budget savings totaling IDR 306.69 trillion.
According to pajak.com, this Inpres includes seven key efficiency measures, one of which requires governors and regents/mayors to adjust their regional budgets in line with the efficiency policy. These measures include:
- Restricting spending on ceremonial activities such as studies, comparative studies, printing, publication, seminars, and focus group discussions (FGDs).
- Cutting travel budgets by 50%.
- Restricting honorarium spending, adjusting team sizes and honor standards.
- Reducing spending on support activities that do not produce measurable outcomes.
- Focusing budget allocation on public service performance, rather than mere distribution across regional devices.
- Being selective in direct grants (money, goods, or services) to ministries/agencies (K/L).
- Aligning regional budgets sourced from TKD (Regional Tax Fund) with the efficiency policy set by the central government.
The impact of these policies will continue to be monitored, as the hospitality and restaurant sectors play a crucial role in supporting regional economies.
Source: monitorindonesia.com, inikata.co.id, pajak.com
Special Photo Credit: via pajak.com
