Bali Beyond the Tragedy

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized ABBREVIATIONS AND ACRONYMS APBD Provincial/District/Local Budget HIPMI Association of Indonesian Young APBN National Budget Entrepreneurs ASITA Association of Indonesian Travel Hotel Melati Non S tarred Hotel Agents IWAPI Association of Indonesian Babinkamtibmas Village level police present Women’s Entrepreneurs Balitbangda Provincial Government, Research Kabupaten District and development office KADIN Indonesian Chamber of Banjar Balinese village Commerce BAPPEDA tingkat I Provincial Planning Agency KAPOLDA Regional Police Chief BAPPEDA tingkat II District Planning Agency Kecamatan Sub-district BAPPENAS National Planning Agency Kepala desa adat Traditional village heads Bendesa adat Traditional village leader KIPEM Temporary residency card Biro Perjalanan Travel Agent Kota City Pariwisata KUKM Credit for Small and Medium BPR Village Bank Enterprise BPS Central Bureau of Statistics LPD Village Credit Institution BRI Indonesian state owned bank MAP Business start-up capital focusing largely on the MENKO EKUIN Coordinating Minister for microfinance Economic Affairs Camat Sub-district heads MENKO KESRA Coordinating Minister for Social Casa Grande Association of 35 four and five star Welfare hotels in Bali MENKO POLKAM Coordinating Minister for DAU General block grant Political and Security Departemen Budaya Department of Culture and Tourism MENPARSENIBUD Minister of Culture and Tourism Pariwisata Seni dan PAD Local revenue sources Budaya Pecalang Traditional village security Desa adat Village system under traditional personnel values Pemarisuda Cleansing ceremony Dinas Koperasi dan Provincial Government Office Karipubaya UKM Department of Cooperative and PHR Taxes for Hotel and Restaurant SMEs POLDA Provincial Police Dinas Pariwisata Bali Bali Provincial Government POLSEK Sub-district police station Tourism Office Pondok Wisata Guest House and Homestay Forum Dialog Tourism Dialogue Forum PUSKOWANJATI East Java Center for Women”s Pariwisata Cooperatives Forum Kepala Desa Forums of village heads Rwa bineda Balance between opposing forces Forum Kerjasama Inter-faith forums Sembayangan Prayer Antar Umat SUSENAS National Socio-Economic Survey Beragama TKI Indonesian migrant workers PREFACE On 12 October 2002, two bombs went off in the tourist resort of Kuta, Bali leaving more than 200 people dead. With many of the victims being holidaymakers enjoying Indonesia’s premier tourist destination, this was an international tragedy that affected people all over the world. Less well appreciated is the way in which this event, followed by the war in Iraq and the outbreak of SARS in East Asia, affected Bali’s tourism-dependent economy. This report is the outcome of more than four months work by the UNDP and World Bank. It assesses the socio-economic impacts of the impact of the bombings on Bali’s economy and people, and the associated impacts that have been felt in the nearby areas of East Java and Lombok. The report aims to provide: (i) an independent assessment of the current condition of the tourism and tourist-related business sectors and how the crisis is affecting social welfare, (ii) an overview and analysis of government and international donor responses, and (iii) recommendations for short-term recovery and longer-term sustainable development in Bali and beyond. We hope that these findings will be used by government, donors and other stakeholders in understanding the nature of the current problems faced by Bali and associated areas and in promoting a more prosperous future for all those affected by events since October 2002. The study is complimented by ongoing work to facilitate the interface between research and policy development and to enhance to the consultative nature of the study and its findings in order to engage stakeholders in developing responses. This study was made possible through the contributions of a wide range of organizations and people. The report was written by the UNDP-World Bank assessment team of Nick Mawdsley (UNDP), Eugenia Piza-Lopez (UNDP) and Kai Kaiser (World Bank). Monica Tanuhandaru (UNDP) led the assessment in East Java, I Putu Widhiantara Sri Bangun (UNDP) contributed greatly to the Bali assessment, and Michael Bak (USAID), Ketty Kadarwati (USAID), Sofyan Lubis (USAID), Laurie Pierce (USAID) provided valuable assistance during the preparation of the assessment, as did Jennica Larrison. Much of the information is based on primary surveys and studies conducted by the University of Udayana (Bali), Yayasan Manikaya Kauci (Bali), East Java Women’s Cooperative Centre / Pusat Koperasi Wanita Jawa Timur (East Java), University of Mataram (Lombok), ISAI and Gravitasi (Lombok). Significant contributions to these studies were provided by DR. IGW. Murjana Yasa (Assessment Coordinator), Dra. Aain. Marhaeni (Schools survey), Drs. Made Suyana Utama (Key Respondents survey) and Drs. Ketut Djayastra (Traders survey) from the Faculty of Economics at Udayana University; the team at Yayasan Manikaya Kauci; Ibu Hj. Joos Lutfi and Shahputra Waworuntu and the team at East Java Women’s Cooperative Centre; Pak Hj. Busaini and the team at the University of Mataram; Bimo Nugroho and Agus Sudibyo at ISAI; Munzirin and the team at Gravitasi. Menno Pradhan and Melanie Moechtar provided invaluable assistance in the finalization of the survey instruments. George Soraya and Bert Hofman (World Bank) and Paul Hulshoff (UNDP) provided helpful comments on early drafts of the report. Nina Herawati and Christina Sukmawati (World Bank) processed the report for printing, under guidance of Mohamad Al-Arief (World Bank). The team extends its gratitude to those mentioned above and the numerous other people who made this study possible through collection and processing of the data presented, and the many people in Bali, East Java and Lombok who committed time to participate in the assessment. This report builds on a series of updates completed in the context of the Consultative Group Indonesia (CGI) process in the wake of the Bali bombings, including Vulnerabilities of Bali’s Tourism Economy: A preliminary Assessment (Informal World Bank Staff Paper, Interim CGI, 1st November 2002) and Confronting Crisis: Impacts & Response to the Bali Tragedy (Brief to the CGI in Bali, January 2003 based on joint UNDP/USAID/WB assessment). TABLE OF CONTENTS Page No. ABBREVIATIONS AND ACRONYMS i PREFACE ii TABLE OF CONTENTS iii TABLES IN TEXT iv FIGURES IN TEXT v EXECUTIVE SUMMARY vi CHAPTER 1: INTRODUCTION 1 1.1 Indonesia’s Tourism Boom 1 1.2 Tourism Development in Bali 3 1.3 Tourism Development in Lombok 8 1.4 Tourism Expenditures and Multiplier Effects 10 CHAPTER 2: IMPACTS 12 2.1 Tourism 13 2.2 Tourism-Related Industries 18 2.3 Socio-Economic Impacts 21 2.4 Social Tensions Impacts and Local Security 30 2.5 Local Security 36 2.6 Local Management of Social Tensions 37 2.7 Off-Bali Impacts: East Java 38 CHAPTER 3: RESPONSES 45 3.1 National Government Responses 46 3.2 Provincial and Local Government Responses 47 3.3 Donor Responses 51 3.4 Sectoral Responses for Recovery and Development 52 Assistance 3.5 Community Priorities and Responses 56 3.6 Summary of Government and Donor Responses 57 CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS 58 4.1 Managing the Crisis and Promoting Recovery 59 4.2 From Recovery to Sustainable Development and Growth 64 4.3 Continued Monitoring and Donor Coordination 66 TABLES IN TEXT Table 1. Distribution of Hotels in Bali.......................................................................4 Table 2. Dinas Pariwista’s View on Accomodations.................................................5 Table 3. BPS Estimates of Total Visitors to Bali.......................................................6 Table 4. The Structure of the Balinese Economy ......................................................6 Table 5. Bali’s Employment by Sector ......................................................................7 Table 6. Distribution of Hotels in Lombok................................................................9 Table 7. Visitor Expenditures by Type, Bali ...........................................................10 Table 8. Lombok Tourist Arrivals ...........................................................................17 Table 9. Income Decline for Beach Vendors and Traders.......................................18 Table 10. Tourism Related Industry Survey..............................................................18 Table 11. Micro and Small Businesses Are Hit Harder.............................................19 Table 12. Summary of Bank and Village Credit Institutions in Bali.........................19 Table 13. Crisis Impacts for Lombok Small Industries .............................................21 Table 14. Crisis Impacts for Lombok Traders ...........................................................23 Table 15. Coping Mechanisms in the Community ....................................................23 Table 16. Socio-Economic Impacts on Lombok........................................................24 Table 17. Lombok Coping Mechanisms in the Community......................................25 Table 18. Lombok Community Preferences for Assistance ......................................26 Table 19. Main Perceived Agent for Assistance........................................................27 Table 20. Schools Dropouts Indicators ......................................................................28 Table 21. Perceptions

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