Economic Impact from Bali's Latest Terrorist Bombings May be Limited
03 October 2005
The tourist-dependent island of Bali has suffered a new blow just after having recovered from a devastating terrorist bombing in 2002. Saturday's bombings again targeted tourist areas, this time killing at least 25 people. Politicians and business people are at odds over what effect the latest bombings will have on Bali's - and Indonesia's - economy.
Bali's tourism industry has been slowly but steadily recovering from the devastating bombings in October 2002 that killed 202 people, mostly foreign tourists. Last year, two years after the attack, Bali set a new all-time record of 1.5 million visitors.
Saturday's bombings, which killed at least 25 more, threaten to reverse those gains. Some officials, like Australian Foreign Minister Alexander Downer, have already predicted that the latest bombings will be "devastating for tourism in Bali" and that it will take "years to rebuild out of this."
But others, tourism experts and economists, predict that this time, the impact on Bali's economy will be more limited.
Song Sen Wun, a regional economist with G.K. Goh-CIMB Securities in Singapore, says that even though Bali will probably suffer, the fact that the world is getting used to terrorism may limit the overall economic impact.
"This is more of a setback for the Balinese economy than say the Indonesian stock market or the overall economy. Not to say that we are completely heartless, but the shock factor is certainly not as strong as before," he said.
Robert Kelsall, chairman of the Bali Hotels Association, says tourists already on the island when the bombs went off are not fleeing in panic.
"The situation is totally different to that before…. The reaction by the authorities, the reaction by everybody has been much faster. Therefore the whole situation is much calmer, whereas the last time there was quite a panic… There hasn't been a mass exodus to the airport. We do expect some cancellations but nothing like on the scale of 2002."
By comparison, Bali's hotel occupancy rates fell to as low as nine percent in the months immediately following the October 2002 attacks, compared with 68 percent before the bombings.
After Saturday, Mr. Kelsall urged foreign governments not to issue advisories against travel to Bali, saying these would be devastating to the Balinese people and would delay the island's recovery.
Ken Scott, a director of the Pacific Asia Travel Association, also expects Bali to bounce back fairly quickly despite the new attacks.
"Bali has proven that you can come back after a major calamity and this calamity of October 1 was a smaller scale blast," he said. "In terms of direct hit to tourism, perhaps this would not be as bad as the one three years ago. We're quietly optimistic that the Balinese will make a rebound within weeks rather than months or years."
Any serious economic downturn in Bali would have an impact throughout Indonesia. Tourism accounts for around five percent of the Indonesian economy, and most tourist dollars are spent in Bali and surrounding areas.
Even before the bombings, Indonesia was taking drastic economic measures because of high oil prices. On Saturday, domestic fuel prices more than doubled after the government cut subsidies in order to reduce its deficit. The Indonesian economic planning minister said Sunday that the price hikes and the bombings are expected to weaken economic growth.
|Join the GlobalSecurity.org mailing list|