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Indonesia braces for economic
fallout
By Kafil Yamin
JAKARTA - Many Indonesians are asking how the
nation will cope with the economic fallout from the
attack on Bali, the hub of Indonesia's tourism industry.
Unlike other parts of Indonesia, Bali has been
spared the separatist violence seen in Aceh, East Timor
and Papua over the past few decades. The popular island,
whose residents are mostly Hindu, has avoided the
communal and anti-Chinese violence that have hit parts
of the capital, Jakarta, and the archipelago since the
downfall of Suharto in 1998.
Despite the years
of sectarian violence, internal repression, ethnic
conflict and religious tension, Bali could always be
counted on to attract international tourists and to
bring in hard currency the whole year around. As the
nation's No 1 destination for foreign tourists, Bali
attracted 1.35 million foreigners last year.
But
Saturday night changed all that. Many here are asking
whether the island will hold on to its title of pulau
dewata (island of the gods), as it has long been
referred to.
Economists agree that confidence
has been shaken in the short term, especially as the
investigation into the blasts continues. Some are
optimistic that despite initial reactions from the stock
market and a decline in the value of the Indonesian
rupiah, these trends should be temporary.
"The
bomb blast definitely negatively affected the currency
and share prices. But it is more psychological in
nature. Things will return to normal," said economist
Drajad H Wibowo. "Even the September 11 attack on the
Pentagon and the World Trade Center had only a temporary
effect on the New York Stock Exchange. Fund managers and
investors are very familiar with such incidents in
Indonesia."
A key gauge of international
sentiment on Indonesia's economy will be a meeting in
Yogyakarta of Indonesia's donors on October 28-29.
"Before that meeting, Indonesia should have been able to
make significant improvements in national security,"
said economist Umar Juoro of Center for International,
Development and Economic Studies (CIDES).
"So
far, we are only hearing the government statements that
the country is safe and secure. But we don't see their
actions," he said.
For now, the tourism industry
is showing the most damage from last weekend's blasts.
Hotel bookings continue to be canceled, and one
hotel in Bali has already received 400-450 room
cancellations since the blast killed nearly 200 people
on Saturday night.
"If there are no
extraordinary measures to restore international
confidence, tourism businesses here will totally
collapse," said the governor of Bali, Edi Bharata.
Unlike its Southeast Asian neighbors that are
heavily dependent on tourist dollars, Indonesia relies
on tourism for 3-4 percent of its gross domestic product
and it employs only about 8 million of the country's 92
million workforce.
But tourism revenues have
been rising from a low point in 1998, the year of
Suharto's fall, and hit US$5.8 billion in 2000, compared
with $6.3 billion in revenues in 1996.
In the
wake of the Saturday attack, however, foreign consulates
have been closing down - 18 have pulled out of Surabaya,
East Java - and analysts expect expatriates, including
businessmen and investors, to follow suit.
The
United States, Britain, Germany, Australia and Singapore
have urged their citizens to refrain from traveling to
Indonesia as well. But some tourists in Bali and
Yogyakarta interviewed on local television said they
would not be rushing home despite their governments'
warnings. "The risk is there, but I think it is an
extraordinary thing that will not happen every day, not
even every month," an American tourist told Rajawali
Citra Televisi Indonesia.
Still, bracing for the
immediate negative effects of the blast, Indonesian
officials have been meeting with different business and
economic groups.
Cabinet officials are reviewing
economic projections for the year, including state
revenues that may be affected by a slump in tourism.
Looking further into the future, economist Umar
Juoro said the plunge in international confidence after
the Bali attack could make valueless the planned selloff
of public-sector corporations - part of the
International Monetary Fund-sponsored privatization
drive under the Indonesian Banking Restructuring Agency
(IBRA).
"The selling prices will fall. The
government then would not reach sales targets," he said.
(Inter Press Service)
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