Business, Finance & Economics

Trouble in Paradise?


JAKARTA, Indonesia — The story of Bali in the last six years is one of miraculous comebacks.

In the face of Islamic extremism, natural disasters, outbreaks of disease and an airline industry beset by lax safety standards, Indonesia's tiny island paradise has managed to surpass all its foreign tourist arrival records for the second year in a row.

Even fresh challenges — such as the global financial crisis and the solemn reminder from Mumbai of the persistent threat of terrorist attacks — have not yet thwarted Bali's resurgence.

The numbers are clear: In October, which marked the sixth anniversary of the 2002 Bali bombings that killed 202 people, including 88 Australians, foreign arrivals surged 20 percent from the previous year.

The Island of the Gods, as it is affectionately known, is on track to receive almost 2 million foreign tourists by the end of 2008, the most in its history.

The thousands of hotels, which only several years ago were eerily vacant, are reporting capacity of more than 90 percent. Throngs of tourists, led by those from Japan, Australia and the U.S., now flood the streets and the shops.

"There are many more customers than before," said Suzie, who goes by only one name and offers massages on one of Bali's high-end beaches for about $3.

"Life has been a little bit easier for me and my family lately," she said. "I still worry though that something will happen and the visitors will stop coming again."

Immediately after the 2002 bombings, tourism on the island plummeted, forcing the millions of Balinese who depend on the tourism industry into dire straits. At least two-thirds of the more than 3 million people living in Bali rely on tourism, while the rest make their livings mostly from agriculture.

The island had just begun to recover from the 2002 bombings in 2005 when three suicide bombers launched coordinated attacks on tourist hot spots, killing more than 20 people and once again crushing the tourist industry. Since 2005, Bali has sometimes struggled to convince potential tourists that it remains a safe destination. 

A string of plane crashes throughout the Indonesian archipelago and the decision by the European Union to ban any Indonesian airlines, including state carrier Garuda, from its airspace pending improved safety standards further challenged the Bali tourism industry.

Deadly outbreaks of Bird Flu and a myriad of natural disasters only worsened the outlook. Then, in November, the three men charged with carrying out the first Bali bombings were executed, igniting fears of a possible retaliatory attack just as Australian university students embarked on their school breaks.

No such attacks have so far materialized, though Indonesian counterterrorism police foiled several potential plots leading up to the executions.

Indonesia has been, by all accounts, widely successful in combating terrorism since the 2002 bombings. Police have arrested or killed most of the leaders connected to the southeast Asian terror network, Jemaah Islamiyah, which seeks to establish an Islamic state here and has claimed responsibility for most of the major bombings in Indonesia.

The U.S. rewarded the Indonesia's success by revoking a long-standing travel warning earlier this year, which led to increased tourism, especially from U.S. corporations looking to hold large events on the island.

Australia, meanwhile, has maintained its travel warning, citing credible intelligence that indicates another terrorist attack in Indonesia is likely. As a result, few Australian government or corporate events are held in Bali, though individuals continue traveling to the island in record numbers.

Having learned from past mistakes, the island's provincial government has dramatically increased security around major tourist areas and has established a central office to help prevent and respond to disasters, whether natural or man-made.

A year ago, the United Nations held a major conference on climate change, which brought hundreds of foreign ministers and heads of state, non-governmental organizations and environmental activists to the island. The week-long conference concluded with no serious security problems.

"We have learned from the past," said Gede Nurjaya, head of tourism for the Bali provincial government. "We are now more aware of our surroundings and possible threats. The Balinese have worked together to make this a safe place once again."

The latest potential calamity, however, might be beyond Bali's control.

Already, tour operators have recorded cancellations and postponements from tourists in countries such as the U.S., where the global economic crisis has taken root. Officials are beginning to write off 2009,  and instead are focusing on 2010 and 2011.

"2009 is a real concern for everyone; it could be yet another disaster," said Ida Bagus Lolec, who runs a major tour operation in Bali. "But just like everything else, the Balinese will come together and recover from this as well."