INTERNATIONAL JOURNAL OF SCIENTIFIC & TECHNOLOGY RESEARCH VOLUME 9, ISSUE 03, MARCH 2020 ISSN 2277-8616 6476 IJSTR©2020 www.ijstr.org Tourism And Economic Development In Indonesia Fafurida Fafurida, Shanty Oktavilia, Sucihatiningsih Dian Wisika Prajanti, Yoris Adi Maretta Abstract: Tourism sector is important as the leveraging sector of regional economic growth. It is because tourism activities bring multiplier effect to the economic sector movement in it. The Indonesian government encourages the tourism sector development because it is expected to be fast enough to accelerate the increase in economy and social welfare. This research analyzes a relationship between the tourism using the proxy with the number of international tourist visits and the economic development in Indonesia by using two models of econometric data panel (33 provinces in 2011-2017 period of time). The first model hypothesis covering gross domestic regional income (GDRB), human development index (HDI), and international trade (TRD) has the positive effect on tourism variable (WIS), while poverty (POV) has the negative effect. The second model analyzes the relationship between WIS, HDI, and TRD variables and GDRB with a hypothesis having the positive effect. Poverty variable (POV) has the negative effect on the economic development. The result of research on the first model indicates that there is a conformity of the hypothesis and the significant relationship (α = 1 percent) on tourism. Similarly, the second model also indicates the significant result and is in accordance with the hypothesis. The findings in this study indicate that tourism sector is capable to give the positive effect on the economic development in Indonesia during the period of research. IndexTerms: data panel, development, economic, tourism. ——————————  —————————— 1 INTRODUCTION Tourism is designated as a leading sector in increasing the economic growth and in encouraging the increase in foreign exchange reserves. The Acts No. 10 of 2009 defines tourism as various kinds of tourism activities and supported by various facilities and services provided by the society, entrepreneurs, government, and local government. The Acts states that tourism is the integral part of the national development, which is conducted systematically, planned, integratedly, sustainably, and responsibly by still giving protection to religious values, cultures living in society, preservation and environmental quality, and national interests. The government projects Tourism Industry in 2019 to be the greatest foreign exchange in Indonesia that is US$ 24 billion, going beyond the Oil and Gas, Coal and Palm Oil sectors (Ministry of Tourism RI, 2017). Country Branding Wonderful Indonesia that previously was not included in the branding rank in the world, in 2015 has sped up more than 100 ranks to be the 47th rank, beating out Country Branding Truly Asia Malaysia (the 96th rank) and Country Branding Amazing Thailand (the 83rd rank). Country Branding Wonderful Indonesia reflects the Positioning and Differentiating of the Indonesian Tourism (World Economic Forum, 2017) [1]. The performance of Indonesian tourism sector is indicated by the increase in the number of foreign tourists that has increased since 2009. The greatest number proportions of foreign tourists are from Tiongkok (21.4%), India (16.7%), Australia (10.4%), and Malaysia (9.3%) (Ministry of Tourism RI, 2017) [2]. Tourism has been a potential contributor on the economy through the multiplier effect existing in this sector. Experiences in some countries indicate that the increase in economy is contributed by tourism sector (Kreishan (2010), Saha & Cambell (2016); Simundi, Kulis, Seric (2016)) [3]. Kim, Chen and Jang (2006) state that tourism sector becomes a stimulus for the increase in capital investment activities supporting the tourism sector especially in the infrastructure expansion and the tourism network to other economic sectors such as transportation, retailing, manufacture, and distribution of other goods and service [4]. It is in line with a research conducted by Eugenio et al. (2004) stating that tourism demands four main services those are accommodation, transportation, food, and entertainment service in its tourism journey. Thus, the industries supporting tourism such as hotelier, food, and transportation also develop in line with the development of tourism sector. In the performance report of the Ministry of Tourism in 2016, it is stated that the government has succeeded in reaching the target of the number of employment of tourism sector amounted 12 million due to the ease of investment and the increase in the number of tourism business. The Ministry of Tourism has conducted efforts to increase the number of tourism business by many activities such as technical guidance for excellent services in tourism business, preparation of investment proposals and investment promotion and community empowerment. The tourism sector that develops in aggregate in an area will also be influenced by the economic condition existing in that period. This research analyzes the influence of relationship between tourism in Indonesia and some indicators of economic development and analyzes how the effect of tourism sector in increasing the Indonesia economy is. 2 LITERATURE REVIEW The studies conducted to analyze the relationship between the economic growth and tourism and vice versa are conducted in some countries. There are two groups of study thinking those are studies conducted on single country and on groups of countries. Besides the relationship between the effect and the correlation among variables, some studies focus on the causal relationship between tourism expansion and economic growth, and some are combined with some existing development issues. Researchers conducted by Ekanayake & Long (2012), Brida & Pulina (2010), Kreishan (2010) and Lee and Chang (2008), find the empirical evidence that the economic growth is influenced by the tourism sector [5]. The different results of studies, as conducted by Katircioglu (2009), Narayan (2004), and Lanza et al. (2003), show that the rapid growth of the tourism sector is encouraged by an increase in economic growth in the aggregate. Although it is relatively few, the reciprocal hypothesis is still supported by some researchers conducted by, for example, Dritsakis N. (2012), Arslanturk, et al. (2011) and Kim, et al. (2006) [6]. Tourism is often seen as an ————————————————  Fafurida Fafurida, Universitas Negeri Semarang, Indonesia. E-mail: fafurida@mail.unnes.ac.id  Shanty Oktavilia, Universitas Negeri Semarang, Indonesia  Sucihatiningsih Dian Wisika Prajanti, Universitas Negeri Semarang, Indonesia  Yoris Adi Maretta, Universitas Negeri Semarang, Indonesia