53691 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 Starred 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 about Causes of Social Disturbances in Bali since 1998 .......33 Table 22. Possible causes of future social unrest by District .....................................34 Table 23. Attitudes to Security Providers in Bali. .....................................................36 Table 24. Bali Regional Public Finance in 2003. ......................................................50 Table 25. Local Providers of Support during Crisis in Bali.......................................57 FIGURES IN TEXT Figure 1. Direct Tourist Arrivals in Indonesia and Bali ..............................................1 Figure 2. Tourism Areas (Kawasan Wisata) in Bali....................................................3 Figure 3. Relative RGDP Growth of Bali ...................................................................8 Figure 4. Tourism Arrivals to Lombok .......................................................................9 Figure 5. Foreign Visitor Arrivals to Bali 1997-2003...............................................13 Figure 6. Regional Trends in Tourism ......................................................................14 Figure 7. Bali Occupancy Rate by Levels of Stars....................................................15 Figure 8. Domestic Tourism No Substitute ...............................................................15 Figure 9. Composition of Foreign Visitors to Bali 2000-2003 .................................16 Figure 10. Bali Reported School Dropouts .................................................................29 Figure 11. Reported Incidents of Social Disturbances in Bali since 1998 ..................31 Figure 12. Reported Social Disturbances by District ..................................................32 Figure 13. Concerns about Social Tensions December 2002 and May 2003..............38 Figure 14. Concerns about Future Social Disturbances May 2003 .............................40 Figure 15. East Java Handicraft and Food Sector Impacts..........................................41 Figure 16. East Java Sales and Staff Changes .............................................................42 * The front cover pictures of Bali courtesy of Ross A. Taylor. B ALI B EYOND THE TRAGEDY EXECUTIVE SUMMARY The October 2002 terrorist attack in Bali came information to target interventions at the as a terrible shock to Indonesia and the sub-district level. In the medium term, international community, while shattering the beyond restoring Indonesia's and Bali's image of a peaceful, innocent Bali. Beyond the image as a tourist destination, the tragic loss of life, the bombings adversely Government should facilitate an inclusive affected the livelihoods of many on and off Bali, debate among stakeholders on how to shape hitting the poor and vulnerable especially hard. sustainable tourism-led development that The war in Iraq and the SARS epidemic benefits all. Finally, the Government should preempted what appeared to be a nascent formulate a strategy on how emergency recovery and by mid-2003, income losses of responses should work in a newly over 40 percent were reported in affected areas, decentralized Indonesia, in order to be better major cut-backs in employment in tourist related prepared in the future. Donors can assist in industry occurred, and school drop-outs, all of these efforts. They should continue especially in poor districts on Bali, were on the implementing the programs initiated in the rise. The Government's security response to the aftermath of the bombings, maximize Bali bombings was commendable, and targeting of these programs to vulnerable assistance to the victims was quick to emerge. groups, support a continuation of impact However, safety net operations faced monitoring, and consider technical considerably more challenges in planning and assistance to regional governments in implementation. enhancing strategic planning for tourism-led development, and to central government to Now, one year after the bombings the worst of help design emergency response strategies. the impact may have passed, but is unlikely to be over. While tourist arrivals are recovering, revenues are still lagging, as deep discounts The Impact of the Bali Bombings were needed to attract new visitors, and those new visitors spend less than traditional ones. Tourism is Indonesia's second largest Moreover, the recent Marriott bombing foreign exchange earner after oil and gas. highlights the continued vulnerability of Bali's tourism industry has grown rapidly Indonesia's tourist industry and economy to during the past two decades, and has been terrorist attacks. Targeted interventions are the island's main engine for growth. As a therefore needed. In the short term, it will result, Bali's poverty rate before the tragedy remain necessary to: (i) be vigilant in was only 4 percent in 2002 compared to implementing measures to ensure security, (ii) 16% for Indonesia as a whole. Tourism in focus on implementing existing and committed Indonesia had already been affected by the programs, (iii) improve coordination among 1998 riots, and by the slump in the global levels of government in implementing the travel industry in the aftermath of September programs, and (iv) continue to monitor the 11, 2001, but in the run-up to the bombings economic impact of the crisis, and use the had shown a recovering trend. i Tourist Arrivals in Bali, 2001-2003 Direct Foreign Visitor Arrivals 160,000 140,000 120,000 2001/2 100,000 80,000 60,000 2002/3 40,000 20,000 0 Sept Oct Nov Dec Jan Feb Mar April May Jun Jul Aug The overall socio-economic impact of the recovering to some 70-80 percent of normal October 2002 bombings has been significant levels. But the quality of these visitors has and deepened during the first half of 2003. changed from before the bombings. High Beyond the sharp initial decline in tourist discounts were needed to attract the current arrivals and the impact on the hotel and travel tourists, and spending per tourist is likely industry, there was an immediate shrinking in significantly less than that of tourists in the demand for industries that directly cater for past. Moreover, much of the 2003 peak tourism, such as taxis drivers and local season was lost before visitor numbers handicrafts producers. Smaller enterprises recovered. Thus, tourism revenues, and appear to be the hardest hit. Especially the therefore incomes, are likely to lag the poorer districts on Bali, and interlinked regions tourist numbers significantly. elsewhere, felt the strong impact on income and Income. Vulnerabilities on and beyond Bali employment. soon became apparent as tourism demand Tourism. The Bali bombings cut sharply into slumped. In Bali, 94% of kecamatan level direct international tourist arrivals. Right after key respondents observed income declines the crisis, these were barely a third of normal in their communities between October 2002 levels, and after a brief recovery early 2003 on and May 2003, with an average income the back of special deals and discounts, fell decline of 43% across the island. Highest again to less than half of normal levels in average declines were recorded in May/June. After a brief recovery in tourism Karangasem (49%) and Gianyar (47%) early 2003, the effects of the bombings were districts, and lowest in Buleleng (39.6%) compounded by the effects of the Iraq war and and Denpasar (40.7%). The sustained the outbreak of SARS, which affected tourism failure of demand over the last 8 months has throughout the region. A year after the led to reported declines in turnover of over bombings, international arrivals remain well 60% in some occupations. Market traders, below past levels, but have recently been beach vendors and taxi drivers reported a ii drop in sales revenues between 32% (Pasar of children into the new school year that Badung) up to 71% in (Pasar Ubud) with profit started in July 2003. falling in line. Social Tensions. Contrary to initial fears, Employment. Overall, key respondents across social tension has remained limited. all sub-districts in Bali estimated that 29% of Generally, social cohesion has even workers were affected by job losses between improved during 2003, although tensions January and the end of April 2003. Throughout remained high in a few sub-districts with the economy employment impacts are more particularly severe economic pressures, generally expressed in terms of reduced incomes social issues, and youth and unemployment. and underemployment, rather than formal The majority of social disturbances in the unemployment and total loss of livelihood. past had occurred in the north and east Official statistics of formal sector job losses (Buleleng, Karangasem), and there has been show that by May 2003 out of roughly 50,000 no noticeable increase in social disturbances people employed in the hotel sector, around reported by respondents in May 2003. 1,400 hotel workers had been made redundant. Importantly, only a small proportion of past Anecdotal evidence suggests that up to three- disputes involve Balinese and migrants, with quarters of those employed in the hotel sector most incidents between different Balinese were either working on reduced shifts or had community groups. Village heads, been made temporarily redundant. Of those traditional (adat) leaders, and the police losing employment in the tourist areas of the were identified as the main actors for south of Bali, many have migrated back to their managing social tensions, highlighting the home villages. Over one-half of respondents need to combine socio-economic and recorded people returning to the villages. security approaches in vulnerable sub- districts. Small and medium enterprises Surveys suggested that SMEs adjusted by shedding of Impact Off-Bali. Impacts off Bali were far workers, 52% reduced staff with a total more diffuse. In Lombok, three-quarters of reduction of almost 60% in the overall numbers respondents in the most affected sub- in some industries. Many firms were reporting districts reported average in come declines increased strains in servicing financial of around 50%. The reduction in demand for obligations, and many small and family run handicrafts in Bali as well as the reduction businesses reported resorting to asset sales. in employment opportunities for migrant workers from Lombok in Bali is School dropouts. The adverse impact on compounding these impacts. incomes and employment has also had ramifications in the education sector, with In East Java, there was little impact at the potentially significant disruptions in children's provincial level in macroeconomic terms, education. Thirty one percent of schools but impacts were more severe in certain reported students dropping out of school during villages and districts that have strong this year. These reported rates varied economic linkages to Bali including trade significantly by district, with the highest levels and migrant labor silver and wood industries reported in the poorest North Eastern belt of in Pasuruan, granite and metal producers in Bali, with Buleleng (60%) and Karangasem Tulungagung, and wood and bamboo (55%) reporting the highest rates. In terms of producers in Banyuwangi all experienced number of students, however, actual reported more than 50% reductions in turnover. numbers were less than 1 percent. However, However, comprehensive information on some uncertainty remains about the enrollment these trading patterns and the importance of iii Bali to producers in East Java and elsewhere is Socio-economic r esponse. From the onset not available. of the response, there was little question that the slump in tourism would have a broader fall-out on social welfare, and possibly Response to the Crisis social tensions. But there was a significant Government, donors, and the Bali community degree of uncertainty about the scope and all responded in the wake of the Bali bombings. incidence of these impacts. This led to an Initial efforts focused successfully improving early recognition that the strategy for security, and some initial relief for the direct recovery would not only need to be sensitive victims was mobilized. Initiatives to address the to ameliorating economic impacts but socioeconomic impact were slower to take off, restoring the underpinnings of Bali as a safe in part because of administrative delays and and attractive, culturally diverse tourist required lead times. destination. Community level organizations, most notably Governments at central, provincial, and Bali's strong traditional (adat) institutions, local level focused their response in three responded swiftly to the crisis. Communities areas: (i) promotion of tourism recovery, (ii) clearly recognized that they had a stake in the social welfare protection, and (iii) promotion recovery of tourism. Initial fears of rising social of alternatives to tourism. Governments at tensions were dispelled as communities actively all levels quickly established so-called mobilized to dissipate potential local level Recovery Teams covering six areas of conflict and strengthen security. Almost all attention: (i) security, (ii) tourism schools in Bali (97%) had school committees, promotions and events, (iii) infrastructure which brought parents and educators together. development, (iv) transportation, (v) Over two thirds (70%) came together to address budgetary incentives, and (vi) socio- the impacts of the crisis, frequently mobilizing economic recovery. Central government cash resources. allocated Rp 100 billion (est. USD 12 million) for the efforts. As of June 2003 Emergency Response. Emergency support to over half of this amount had been allotted to the victims, and assistance to police programs for rescue efforts, tourism investigations was quickly available, and campaigns, and security improvement, while measures to improve public security on the some 20 percent of this amount has been island were implemented early on. The disbursed. assistance to the victims, including medical and financial support in excess of $10 million was Provincial and district governments have disbursed. Early on, donors and Government implemented a number of programmes also agreed to set up a monitoring system for the aimed at supporting those affected by the socio-economic impact of the bombings, and bombings, including ensuring access to first results of this effort were available in health care and education. However, January 2003. To the extent possible, efforts regional government lacked the finance to focused on making existing programs more take forwards a comprehensive recovery responsive to the context of the bombings. For programme. The Bali Provincial example, USAID and AusAID provided key Government also developed a plan for a Bali assistance in immediate post-bombing recovery Recovery Programme, focusing on efforts, while UNDP supported short term needs community-level support, income generating of the most affected communities. activities and maintaining access to social services, but resources were not available for implementation. The teething pains of iv government response stemmed from the tourism industry. Whereas foreign unprecedented nature of this crisis as well as the governments needed to stress potential new realities of a decentralized Indonesia, continued risks to their citizens, the which gives greater prominence to district and Indonesian government was concerned with provincial governments. Coordination among the countervailing effects of these advisories levels of government in implementing programs on tourism and local livelihoods. proved particularly challenging. Ultimately, however, neither foreign nor domestic governments could impose on the Donor responses have focused on social welfare decisions of tourists to come to Indonesia. protection and supporting non-tourism income The travel warnings further highlight that generation, livelihoods and community while Bali may be the world's main gateway development. Prior to the bombings, Bali had to Indonesia, security and political stability not been a focal province for donor financed elsewhere in the archipelago will affect poverty programs due to its relative prosperity. recovery efforts in Bali. The specter of prolonged adverse impacts on Bali therefore had to be put in the context of pressing social development challenges Beyond the Tragedy throughout the archipelago. The main donor programmes focused on socio-economic issues One year after the terrorist attack, targeted active in Bali included: (i) AusAID's Bali interventions are still needed to support Rehabilitation Fund, (ii) World Bank Bali's on-going recovery and improve the Kecamatan Development Program (iii) USAID islands future prospects. At this stage, the Bali Response, (iv) UNDP/Community priority is the effective implementation and Recovery Programme (v) World Bank Bali disbursement of existing government and Urban Infrastructure Project and (vi) World donor commitments, although some key Bank-Dutch Trust Fund, USD 2-3 million to interventions suggested here remain to be support grants to schools, a program which is funded. As circumstances are continuously not yet implemented. evolving, monitoring remains important, and programs should stand by to respond In light of the uncertainty surrounding the creatively and flexibly. In the short run, impacts of the bombings on Bali and relative continued vigilance on security, prosperity of the island, donors agreed to implementation of existing programs, and continually assess the situation should monitoring of impact are the priority. additional assistance be needed. The Netherlands government, through the World Promoting a safe environment. Bali and the Bank, earmarked potential school grants to stem tourism industry in Indonesia require dropouts. While dropout did appear to increase, continued efforts to address the treat of conditions in Bali were still far better than the terrorism and violence and create a safe national average, meaning that the grants were environment for Indonesians and tourists not utilized during the 2002/3 school year. alike. Such an environment will serve as the Beyond monitoring, few donor programs were precondition for efforts to revitalize the developed off-Bali to ameliorate the fall-out of private sector and support sustainable the bombings. community efforts. This would require: Many donor country governments issued travel · At national level, the government to advisories in the aftermath of the bombings. continue its efforts to prevent further These highlighted the vital role played by attacks. security perceptions in the recovery of the v · Support for efforts by the Government of · Repeat school facilities surveys to assess Indonesia to strengthen dialogue and on-going impacts on access and quality effective collaboration between the private to education. sector, communities, and the police to · Consider targeted household surveys to ensure a say of all stakeholders in creating a assess coping strategies, in advance of safe environment. the 2004 SUSENAS. · Support for efforts at ensuring · Undertake a rapid labor market, job professionalization of the police and develop seekers and SMEs needs assessment in targeted, area based, community policing cooperation with respective provincial pilot projects in vulnerable areas aimed at and district authorities to design a ensuring strengthened police-community medium term strategy for labor intensive relations and the design of tension and work programs and support to medium violence prevention initiatives. and small size enterprises. Implementing existing programs. The focus for · Evaluate the current debt situation of programs to alleviate the impact should be on enterprises hit by the crisis, especially existing ones, not new commitments. To small and medium enterprises. achieve results on the ground, In the medium run, the Government should · Ensure effective targeted disbursement of shift attention from the crisis to more governmental grants to most affected areas sustainable and diversified development in and groups to avoid further declines in Bali and beyond. And drawing from the social welfare. lessons of the Bali bombings, it should · Ensure health and education agencies revamp its mechanisms for crisis response in remain vigilant regarding access, especially a decentralized Indonesia. on the part of the poor. Promoting sustainable tourism-led · Review programs providing community development. Until Bali emerges from the grants (KDP, BUIP and CRP) to ensure economic slump, a short-term agenda of effective targeting in line with findings in tourism-led recovery that mitigates the the assessment and improve coordination of impacts of the crisis and focuses on access inputs with local government. to key social services and alternative employment opportunities remains crucial. Impact Monitoring. While tourism has Ultimately however, Bali's tourism-based embarked on a recovery, on-going monitoring economy needs to be more sustainable and of vulnerabilities and those getting left behind in sensitive to shocks through promoting the recovery is necessary. To do so, the innovation and participation by local Government should: communities. Current trends in global · Consolidate and enhance the collection and tourism and future uncertainty may imply a management of data and information repositioning and renovation of Bali as a relating to domestic and international destination and building a more diverse and tourism in Bali to provide a better sustainable economy less prone to shocks. foundation for policy-making (e.g., to BPS The history of Bali's tourism development Bali and the tourism agencies and suggests that top-down planning is not organizations). always effective. Despite planning, the tourist industry in Bali took on a dynamic on its own, progressing at a rate that created vi intense vulnerabilities in the economic structure · Developing a market and development of the island. This legacy should underscore plan for tourism related SMEs for Bali, that top down plans will prove increasingly Lombok and East Java focusing on ineffectual in managing the complex process of strengthening market analysis and tourism-led development in Indonesia, starting product research, delivery of support with its focal point Bali. A range of services, building skills and capacity and stakeholders ­ including central, provincial, enhancing trade links and information local government, communities, and the private management. sector ­ will each have to play their part. · Considering pilot projects on community Sustainability requires a better understanding of based tourism and tourism revitalization how tourism can benefit communities, both sites in Bali and Lombok to draw lessons directly and in directly. There is no doubt that and best practice for future replication tourism will remain the lead sector in Bali, and elsewhere. This could be developed by effective partnerships and linkages between provincial and district governments with communities, businesses and other local participation from relevant stakeholders economic actors need to be developed so that including communities and support from the benefits of Bali's economy can be more donors. fairly distributed. This vision requires: Redesigning crisis response mechanisms. · Enhancing dialogue between regional One clear lesson from the Bali bombings governments and tourism stakeholders in aftermath is that crisis coordination and Bali, NTB and other destinations through implementation issues will have to be more broad multi-stakeholder Tourism Recovery squarely addressed in the post- Groups (government, police, industry, decentralization era. The Government community representatives) for taking should therefore review the mechanisms for forwards a comprehensive tourism recovery crisis response and post crisis recovery in a strategy that effectively coordinates between decentralized environment, and agree on the National Tourism Recovery working efficient instruments for disbursements of group and provincial actors. resources, means of coordination and effective cooperation among levels of · Encouraging stakeholders to produce government. strategy documents with clear timelines, milestones and resources for Donors can support in all of these efforts. implementation, and with communities First, they should continue implementing the identify possible revitalization projects of programs initiated in the aftermath of the tourism sites that can be undertaken by local bombings. Key to the success of the communities with government or donor programs focused on social welfare relief funding as part of a community-based will be the targeting of the truly vulnerable approach to tourism that will also provide groups. Given the highly differential impact much needed job opportunities. of the crisis, targeting at the sub-district level is appropriate, making use of the · Exploring options to diversify Bali's information generated by the monitoring economy, leveraging on linkages to the efforts reported upon in this report. Second, tourism sector, for instance by strengthening donors should consider continued support export channels that build on existing tourist for these monitoring exercises. A further oriented industries. round of monitoring surveys could shed light on whether the apparently emerging vii recovery in tourism is trickling down terms of and budgeting. Assistance to provincial and improved livelihoods of those affected. Third, local governments to facilitate strategic donors should consider supporting technical planning for a longer-term recovery and assistance to governments at all levels. This diversification strategy is needed as well. assistance could support planning and Finally, donors can assist in developing a implementation for already committed strategy for coordinated responses to programs, and a longer-term effort in planning possible future crises. viii Chapter 1: Introduction CHAPTER 1: INTRODUCTION Tourism has emerged as one of the most dynamic sectors in the Indonesian economy, Bali acting as its locomotive. The sector is now second only to oil and gas in terms of Indonesia's foreign exchange earnings. The tourism industry in Bali remains concentrated in the south of the island, having gained impetus in the seventies and eighties with large-scale developments such as the Nusa Dua peninsula. Although planners initially sought to shield Bali's perceived cultural vulnerability to international tourism through such developments, growth in accommodations and tourism-related industries mushroomed in a number of locations, most notably Kuta, the epicenter of the October 2002 blasts. Tourism now impacts the livelihoods of the whole island, including the poorer North and East, through such linkages as migration, remittances, and general spending across all sectors. These linkages reach further to Lombok, which supplies Bali, as well as having developed its own tourism industry. 1.1 Indonesia's Tourism Boom around one-quarter of tourist arrivals to Indonesia being direct arrivals into Bali. 1. The island of Bali has developed as one of Despite the turbulent times of Indonesian the world's premier tourist destinations with economic upheavals and political transition over one million foreign visitors flying directly after 1998, visitors continued to come, in part to Bali each year since 1994 (Figure 1). Since due to a cheaper Rupiah. the mid-eighties, visitor numbers to Indonesia as a whole as well as Bali have increased by 2. While Bali's 3.4 million inhabitants more than six-fold, doubling in the 1990s, with account for just 1.6 percent of Indonesia's Figure 1. Direct Tourist Arrivals in Indonesia and Bali Number of Direct Foreign Tourist Arrivals ('000s) 6,000 0.35 Bali Direct Share 5,000 0.3 0.25 4,000 0.2 3,000 Indonesia 0.15 2,000 0.1 1,000 0.05 Bali 0 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 Year 1 Chapter 1: Introduction population, almost all foreigners coming to growth of the Bali tourist industry including Indonesia are exposed to the island. The handicrafts, furniture, silver, and food as well international image of Indonesia indeed as migrant labor. Major commodities traded appears inextricably tied to Bali. Actual with Bali include wood, rattan, silver, metal, visitors to Bali far exceed those arriving stone and gemstones, bamboo, leather, clay directly in Denpasar, with an estimated one- and ceramics, garments, food and fresh half of international visitors to Bali coming via produce. other ports such as Jakarta, often combining their visit with other destinations such as 5. The tragic events of 12 October 2002 Yogyakarta.1 In addition, many Indonesians, followed by the war in Iraq and the outbreak as well as foreigners based in Indonesia, of SARS have all contributed to a major crisis choose Bali for their domestic holiday. in Bali's and Indonesia's tourism-related Visitors to Bali therefore include three types: economy, which has had repercussions in foreign direct arrivals, indirect foreign arrivals other parts of the country, notably Lombok, and domestic visitors. East Java, Central Java, Yogyakarta and beyond. 3. Tourism has also become increasingly important for the neighboring island of 6. In January 2003, UNDP, USAID and Lombok, although it is less than a tenth the World Bank presented a summary of the size of that in Bali. The tourist areas of socio-economic impacts of the Bali bombings Sengiggi, Gili Islands (West Lombok), and to the CGI Annual Meeting three months after Kuta (Central Lombok) cater for a mix of the bombing. It was clear at that time that domestic and foreign visitors, many of whom recovery had not yet begun, and that it was come via Bali. Mataram focuses principally important to keep monitoring the crisis and on the domestic market. Limited development review responses to promote recovery and of tourism facilities outside of these areas mitigate adverse impacts. This report focuses exists, but the local government is promoting on the impacts and responses some seven the development of other areas as more remote months after the October bombings in three destinations. Lombok has many producers of provinces, Bali, Lombok and East Java, ceramics, textiles and other handicraft affected by these and subsequent events w aith products that are sold to the local tourist focus on Bali, given the island's high market as well as being exported to Bali and dependence on tourism. Chapter 1 of this beyond. Traders sell both locally produced report details the background to tourism in and imported goods directly to the local tourist Bali and Lombok, and analyses the likely market as well as exporting local products to impacts based on knowledge and published Bali. data of Bali's tourism sector. Chapter 2 presents an updated review of the socio- 4. East Java, with a population of more than economic situation in Bali, Lombok, and East 38 million and a workforce of over 18 million, Java based on primary field data collected in is Indonesia's second most populous province. May 2003. Chapter 3 reviews the various It has significant linkages to Bali based largely responses of the Government of Indonesia and upon trade and migration. The province has donors to the crisis. Conclusions and increasingly provided for the needs of the recommendations are provided in Chapter 4. 1 PROPEDA Bali 2000-2004. 2 Chapter 1: Introduction previous experience of Indonesia, and there 1.2 Tourism Development in Bali was no process of consultation with broader 7. While tourism to Bali dates back to the Balinese stakeholders. Second, the focus of past century, mass tourism only gained early the study was clearly the development of momentum in the mid-to-late eighties long international tourism without sufficient after Bali had been discovered and made home priority being given to either the broad by groups of aficionados ranging from artists development of Bali or the social, cultural, and to surfers. Development was initially focused environmental impacts of mass international most notably on the southern peninsula of tourism on the island. Picard (1996) highlights Nusa Dua, in addition to the existing the fact that the SCETO team recognized the concentrations of Sanur (the site of the Bali dilemma that developing Bali for mass tourism Beach Hotel, built by the Soekarno presented: government in the fifties with Japanese war "What happens is that the visitors arrive as reparations), Kuta, and Legian (Figure 2). individuals with a high standard of living 8. The first Bali Tourism Development who are more or less frustrated in their Master plan was funded by UNDP with the own culture and then attempt to idealize a World Bank as executing agency. civilization they can appreciate only Development began in April 1970 by the superficially, identifying it with a Lost French firm Societe Centrale pour Paradise they hope to see preserved. Their l'Equipement Touristique Outre-Mer hosts, on the other hand, only see the (SCETO). The concept of `cultural tourism' exterior trappings of a foreign way of life was thought to minimize the impacts of and are tempted to think of the countries tourism on the island's cultural life. First, the from which these tourists arrive as a sort of involvement of the Balinese in developing the Promised Land they must make all efforts to plan was minimal. The provincial emulate." (SCETO 1971: Vol.2, p.97, cite government's role was limited to consultations in Picard (1996) with the team, none of the SCETO team had 9. In 1983, the Indonesian government took Figure 2. Tourism Areas (Kawasan Wisata) in Bali 3 Chapter 1: Introduction further measures to promote Indonesia and contributed to the inequalities between the Bali as tourist destinations. Measures included economies of Bali's districts, with the direct through the formation of the Department of employment opportunities of tourism, as well Tourism, Post and Telecommunications, the as local revenues from hotels and restaurants, exemption of visas for tourists (which has being concentrated in the districts of Badung become a contemporary issue), the opening of and Denpasar (Table 1). By 2000, Bali had new ports of entry into the country (i.e., not 113 starred hotels (forty-eight 4 and 5 star), just Jakarta), and facilities to attract foreign with more than 80% of these in Badung and investment. Liberalization measures to Denpasar. With over thirty six thousand promote trade and foreign capital investment rooms, Bali now had over five times as many in 1988 also spurred on the tourism industry in rooms as the ambitious targets initially set by Bali, and during the 1980's and 1990s, new the SCETO planners. The majority of these international hotels opened in Nusa Dua and rooms were attributable to the non-starred other areas. sector, which according to the Central Bureau of Statistics encompassed more than one 10. In 1988, the first Bali Master Plan for thousand two hundred establishments and Tourism expired, and the Bali provincial almost twenty thousand rooms. government adopted a new General Development Plan. The new plan promoted 12. The Bali Provincial Government's tourism as the mainstay of the Balinese Tourism Office (Dinas Pariwisata) also economy across the island as opposed to the maintains an inventory of licensed previous concentrated model. The Bali accommodations in Bali (Table 2). While provincial government established 15 centers their estimates of the starred hotel sector are of tourism, expanding this to 21 centers quite similar to those of BPS, there are larger (Figure 2) that covered 178,470 ha or 24.7% of unexplained discrepancies regarding the non- Bali's land area. The Balinese were expected starred sector. Their inventory of rooms to benefit more widely from employment, suggests that only fourteen thousand rooms trade, cultural performances and the provision were presented in the non-starred sector in of services in the tourism centers. 2001, compared to a figure of almost twenty thousand in the BPS statistics (i.e. 40 percent 11. Present Accommodation Stock in Bali. more). The data confirm the concentration of The focus on the south of the island has all types of hotels in the southern district of Table 1 - Distribution of Hotels in Bali GRDP per Number hotels Number hotel rooms District capita (Rp) Starred Non- Total Starred Non- Total (2000) starred starred Jembrana 4.8 million 0 22 22 0 263 263 Tabanan 3.9 million 2 38 40 317 441 758 Badung 10.1 million 71 317 388 12,933 8,221 21,154 Gianyar 5.1 million 7 407 414 291 3,059 3,350 Klungkung 5.1 million 0 26 26 0 231 231 Bangli 3.8 million 0 24 24 0 184 184 Karangasem 3.1 million 7 121 128 250 1,550 1,800 Buleleng 3.6 million 4 132 136 297 1,909 2,206 Denpasar 6.1 million 22 168 190 2,939 3,670 6,609 Total (2001) 113 1,255 1,368 17,027 19,528 36,555 Source: BPS 2001, Bali dalam Angka 4 Chapter 1: Introduction Table 2 - Dinas Pariwista's View on Accomodations Pondok Wisata Hotel Melati Hotel (Starred) Bintang District Units Rooms Units Rooms Units Rooms Denpasar 44 204 140 3,185 23 3,034 Badung 81 377 274 6,589 86 14,954 Bangli 5 23 15 185 Buleleng 26 125 63 1,095 5 225 Gianyar 123 563 87 1,269 9 422 Jembrana 14 70 23 314 Klungkung 9 40 3 30 3 36 Karangasem 43 195 63 1,130 7 293 Tabanan 27 124 23 425 2 305 Total (2002) 372 1,721 691 14,222 135 19, 269 2001 330 1,411 613 12,721 128 18,464 2000 322 1,474 598 12,357 117 17,933 1999 305 1,371 594 12,476 112 17,713 1998 289 1,291 555 11,766 106 16,697 Source: Dinas Pariwisata, 2002, Directory of Licensed Establishments (Direktori Berijin Usaha: Hotel, Pondok Wisata, Rumah Makan/Restaurant Bar, Biro Perjalanan Wisata). Badung. For example, 78 percent of starred The accommodations data from the Central rooms were reported concentrated in Badung. Bureau of Statistics (BPS), the only Non-starred hotels (Pondok Wisata and Hotel comprehensive and regular source of data on Melati) were far more disbursed throughout the topic, suggests that total foreign visitors to the island. However, accommodations in a Bali were somewhere in the range of 4.3 to 5.1 number of districts (e.g., Bangli, Buleleng, million visitors in 2001/2 (Table 3). Even Jembrana, and Klunkung) remain quite accounting for repeat visitors, these numbers limited. appear to be implausibly high. They would suggest that nearly every foreign visitor to 13. Overnight Stays and Visitors to Bali. The Indonesia came to Bali. This raises some exact number and type of tourists that come to concerns about the quality of both the annual Bali per year is subject to some debate. and monthly update data.3 Beyond the numbers for direct international tourism arrivals to Bali, we must rely on hotel occupancy statistics and other indirect information on tourist arrivals to Indonesia for 3 a more complete picture of the number of Our understanding is that BPS collects indirect foreign and domestic visitors to Bali.2 accommodations data on the basis of two forms. Once a year it fields the VHT-L questionnaire, which is sixteen pages. In addition to asking about the total number of visitors in the previous years, including domestic versus 2 BPS collects accommodation data on the number of individual foreign nationalities, the questionnaire also overnight guests per month and annually in starred asks about facilities (e.g., rooms) and employment. (bintang) and non-starred (melati) hotels (see below), Once a month, BPS then also fields a short while the Bali Office of Tourism collects data on non- questionnaire (VHT-S) to all starred hotels and a sample starred (melati) hotels. The former provincial office of (about 15%) of the non-starred hotels. These are used the Department of Culture and Tourism (ex-Kanwil) to estimate the monthly occupancy figures. Since not used to collect data on the starred hotels in Bali, but this all establishments report, the figures have to be adjusted function has not yet been taken on by the Bali Tourism to reflect those establishments that did not report in a Office (Dinas) since regional autonomy. given month. 5 Chapter 1: Introduction Table 3. BPS Estimates of Total Visitors to Bali Starred Rooms Foreign Domestic Total Non- Rooms Foreign Domestic Total Guests Guests Guests Starred 2002 2001 126 - 2,009,221 500,661 2,509,882 - - - - - 2000 113 17,027 1,155,129 253,120 1,408,249 1,255 19,529 3,169,999 1,146,053 4,316,052 1999 104 22,254 1,333,233 210,739 1,543,973 1,240 18,529 - - - 1998 102 16,371 1,177,074 202,346 1,379,420 1,189 18,379 - - - 1997 90 14,626 1,283,157 241,232 1,524, 389 1,157 19,022 - - - 1996 - 13,938 - - - 1,127 17,410 - - - Source: Bali Dalam Angka , Table 8.7 ff Bali Dalam Angka. 14. The weaknesses in the overall occupancy numbers that make the headlines. accommodations data lie with the non-starred The over 1,000 non-starred establishments are accommodation sector. Since the published a heterogeneous lot. The non-starred hotels data on starred hotels, especially in the luxury tend to be more geographically dispersed than category, has been timelier, the non-starred other types of accommodation. They may sector may have received less attention due to therefore be especially important for direct the absence of commensurate data. Their tourism employment outside of the Southern reporting is far better, so while numbering just tourism agglomeration areas. over a hundred, it is always their latest Table 4. The Structure of the Balinese Economy Employment RGDP Growth National National National (2002, %) (2000, %) (1997- Employment RGDP (%) Growth (Rp. T.) 2000, %) (%) (Rp. T.) (1997- 2000, %) Agriculture 32.2 20.6 0.5 44.9 16.0 5.4 Mining & Quarrying 0.5 0.7 -1.6 0.9 8.7 5.5 Manufacturing 14.5 9.6 -3.5 12.6 20.9 -11.1 Utilities 0.1 1.3 30.9 0.1 1.0 23 Construction 7.9 4.2 -9.6 4.4 4.6 -33.7 Trade, Restaurants, & 24.2 33.2 1.1 18.3 15.4 -6.8 Hotels - Wholesale and Retail 20.2 12.1 -12.2 17.3 12.7 -7.4 - Hotels 2.9 12.9 9.1 0.2 0.5 -6.1 - Restaurants 1.1 8.14 7.1 0.7 2.23 2.7 Transport and 5.1 11.3 -2.8 5.6 5.2 4.6 Communications Financial Services 1.2 6.0 0.6 0.62 5.4 -17.22 Public Administration 14.3 13.2 -0.9 12.61 7.13 -2.45 and Services TOTAL 1.71 million 1.65 -0.5 87.29 million 1,291 -6.48 Source: National Socio-Economic Survey (SUSENAS) 2002 and BPS Regional Accounts. National figures include oil and gas processing, which accrues to mining and manufacturing. These differ somewhat from the national accounts. Figures for 2001 were not yet available. 6 Chapter 1: Introduction Table 5. Bali's Employment by Sector Average Wages Levels (PC Bali Rp./month) Formal Informal Total National Bali Number % Number % Agriculture 18,045 3.27 534,021 96.73 552,066 347,520 474,377 Mining 2,591 33.74 5,088 66.26 7,679 1,143,482 631,243 Manufacturing 113,052 45.50 135,402 54.50 248,454 607,078 433,783 Electricity 2,149 100.00 0 0.00 2,149 1,021,943 1,214,801 Construction 88,868 65.91 45,968 34.09 134,836 618,986 635,380 Services: - Transportation 33,780 50.90 32,584 49.10 66,364 755,868 778,099 - Wholesale trade 20,232 61.43 12,703 38.57 32,935 848,263 627,272 - Retail trade 73,568 23.45 240,218 76.55 313,786 500,717 500,337 - Hotel 49,014 97.50 1,255 2.50 50,269 830,224 821,900 - Restaurant 14,277 78.22 3,976 21.78 18,253 483,994 585,765 - Travel agent 11,201 81.80 2,492 18.20 13,693 1,195,428 892,326 - Telecommunication 6,511 91.89 575 8.11 7,086 1,071,142 895,409 - Financial service 21,196 100.00 0 0.00 21,196 1,331,869 744,330 - Housing 0 0.00 373 100.00 373 986,970 - - Busines service 7,655 74.59 2,608 25.41 10,263 1,183,879 998,955 - Government service 143,840 97.61 3,521 2.39 147,361 979,160 1,096,319 - Other services 46,747 53.32 40,919 46.68 87,666 368,922 390,519 TOTAL 652,726 38.07 1,061,703 61.93 1,714,429 670,104 701,583 Source: SUSENAS 2002. 15. Annual variations in Table 3, however, direct employment effects in Bali account for suggest that even the data for starred hotels less than 3 percent of the total workforce requires some degree of caution. For example, (about 50 thousand workers). The majority of data for 1999 suggests an implausibly large the population is spread throughout increase in the number of starred rooms, agriculture, trade, and manufacturing, many of whereas the data for 2001 suggests a steep which have direct and in-direct linkages to the increase in both the foreign and domestic tourism economy. Table 4 suggests that while visitor numbers of starred hotels. More Bali was still suffering from the impacts of the bewildering are the figures for non-starred Asian Economic Crisis in 2000, overall hotels. With a similar room capacity, visitor regional income (RGRP) was only down by numbers are almost three times as high in 2000 0.5 percent. as in starred hotels. The inconsistencies in these figures are especially worrying, as they 17. Bali is fortunate that its poverty rate was provide one of the few insights into the only 4 percent in 2002 (compared to 15.9 relative importance of domestic visitors, as percent in Indonesia as a whole). The data well as the performance of the non-starred suggests that the poor will not initially be the sector. most vulnerable to a downturn in the tourism industry. Evidence from SUSENAS 2002 16. Employment and the Balinese Economy. suggests that 71 percent of the poor in Bali Despite the rapid growth of the hotel sector, its depend on agriculture, which may not be 7 Chapter 1: Introduction Figure 3. Relative RGDP Growth of Bali (1983-1996) 150.0 Nom PC RGDP (1983), Av.= 100 SUMS 125.0 KALC ACEH RIA KALS SUMN BALIWPAP 100.0 JAVE SUMW MALK SULN KALW BEGK JAM SULS SULSE YOGY 75.0 JAVC SULC JAVW LAMP NTT NTB 50.0 25.0 25.0 50.0 75.0 100.0 125.0 150.0 Nom PC RGDP (1996), Av.= 100 Note: Excluding Jakarta and E. Kalimantan directly impacted by the bombing. Only to the 1.3 Tourism Development in Lombok extent the poor in agriculture supply the tourist industry, or their incomes have diversified to 19. The development of tourism in Lombok an increased reliance on off-farm tourism lagged well behind that in Bali and grew as a related incomes, will they suffer. Workers in result of the success of Bali's tourism industry. hotels were almost exclusively formal wage Even at its highpoint in 1996, foreign visitor earners (97.5 %) in 2002, as are those in the levels to Lombok were less than a tenth of restaurant sector (78.2%) (Table 5). Almost those to Bali (Table 7). Despite rapid growth two-thirds of construction workers were wage in the early 1990s and the interest shown by earners. In contrast, those in the retail trade the regional government and private sector in were predominantly informal (75.5%). tourism, foreign tourist visitors to NTB have been dropping since 1997. Instability in 18. The prosperity of Bali is underscored by Indonesia since 1998, an increase in crime and the fact that between 1987 and 1996, Bali outbreaks of violence in Lombok, notably the managed to increase its standing of just below riots of 17 January 2000, have been the major the national per capita non-oil and gas RGDP factors in the decrease in the number of to 30 percent above the national average (see tourists visiting Lombok (Figure 4). Figure 3). While on the eve of the Bali bombings, tourism had brought a high level of prosperity to Bali, it also made the island extremely vulnerable to a change in fortunes of its mainstay sector. 8 Chapter 1: Introduction Table 6. Distribution of Hotels in Lombok GRDP per Number hotels Number hotel rooms District capita (Rp.) Non- Non- Starred Total Starred Total 2000 starred starred West Lombok 2.3 million 16 142 158 1,161 1,068 2,229 Central Lombok 1.8 million 1 10 11 108 156 264 Mataram 4.1 million 9 45 54 476 933 1,409 Total 26 197 223 1,745 2,157 3,902 Source: BPS 20. Nevertheless, there is interest amongst development policy guidelines.4 A significant Lombok based travel agents to promote step for the formal development of tourism in ecotourism and Lombok's Sasak culture, Lombok was the classification of nine areas in which to date has not been a main part of Lombok as tourist areas (kawasan wisata), Lombok's tourism image. This may help covering 27,630 ha or roughly 6% of the land promote the development of tourism in area of Lombok (cf. 25% in Bali).5 The most Lombok and the sharing of benefits with local significant of these areas are: communities, but given the constraints on transportation and infrastructure in Lombok · Gili Islands and Senggigi in West coupled with relatively high levels of crime Lombok (1,805ha) compared to Bali, the future development of · Kuta in Central Lombok (2,590ha) Lombok's tourism industry looked fragile · Mount Rinjani covering parts of West, even before October 2002. Central and East Lombok (17,100ha) 21. A Master Plan for Tourism Development 22. Lombok promotes an image of "Bali in Lombok has never been produced, and the twenty years ago", which has helped it attract provincial parliament is content for the private visitors to Bali who are looking for something sector to take the initiative as long as it does different. In general, there has been significant not contravene the national tourism investment from the private sector in the Senggigi area (West Lombok) and, to a lesser extent, Kuta (Central Lombok), where the Figure 4: Tourism Arrivals to Lombok local government is working closely with the Plan Actual Lombok Development Tourism Consortium.6 The experience of Kuta, where the community 400,000 has been involved in a long running land 350,000 Number of foreign visitors 300,000 4 250,000 Syahreza, A. (1999) Where to Lombok? Bali Echo No. 200,000 41/VIII. 5 150,000 Provincial Parliament through Regional Regulation No 100,000 9/1989, Dinas Kebudayaan dan Pariwisata NTB (2002) Pariwisata NTB Dalam Angka 2001. 50,000 6 0 See Dinas Kebudayaan dan Pariwisata NTB (2002) 1996 1998 2000 2002 2004 Pariwsiata NTB Dalam Angka 2001 for summary of Year private-public partnerships in tourism development in Lombok; for article on LTDC see Kompas (4 August 2001) Pariwisata Kute, Lombok Tengah: Lunturnya Sebuah Cita-cita. 9 Chapter 1: Introduction dispute, illustrates the risks of putting tourism tourist dependent regions have not been development in the hands of the private sector infrequent (Pizam and Smith 2001). Yet without any strategic plan, resulting in the loss international experience offers only a very of local community voice in the process of imperfect yardstick. Incidents involving direct land acquisition and development. attacks on tourists, like in Bali, have been less frequent. The most comparable event was in 1.4 Tourism Expenditures and Multiplier Luxor, Egypt where the killing of 58 tourists Effects in November 1997 at the temple of Queen Hatshepsut followed a 20% annual expansion 23. Prior to turning to a more detailed in Egypt's tourism industry since 1994. The evaulation of the impacts of the Bali bombings immediate impact of the attack was marginal in Chapter 2, average tourism expenditures for growth in 1997, and a decline in arrivals of 13 foreign and dometic vistors provide some percent in the next year. However, growth indication of the relative economic incidence returned to 30 percent in 1999 (ILO 2001). of a loss of these visitors in the wake of the Evidence from Israel and Greece, also bombings. suggests that the impact of shocks is temporary (Aly and Strazicih 2000). The 24. Tourism expenditures are not solely international evidence that terrorist shocks on concentrated on hotels. Visitors spend on a tourism are temporary, rather than permanent, variety of other goods that feed through the is heartening. However, they do not detract economy. Different nationalities spend at from the fact that destinations that suffer different levels (wisman), and in turn spend declines may suffer a loss of several years of differently than domestic visitors (wisnus). growth before returning to trend, and will for a Survey evidence suggests that foreign tourists long time not achieve the levels of tourism spend significantly more than domestic activity they would have achieved in the tourists (Table 7). absence of the terrorist shock (ILO 2001). 25. Predicting the aggregate effects of the fall- 26. Estimates drawing on input-output tables out of the Bali bombing on the island's and provide one means of projecting potential nation's incomes and employment relied on macro-economic impacts. Simulation using a very imperfect assumptions about decreases in national input-output table suggested that tourism and how these would reverberate reductions in national GDP could range from through the economy. Terrorism impacts on 0.25 to 0.56 percent of GDP (Yoshioka 2003). Table 7. Visitor Expenditures by Type, Bali Expenditure Type Foreign Domestic Daily (USD) Total (USD) Daily (USD) Total (USD) Accommodation 29.60 324.71 7.38 32.77 Food & drink 11.82 129.67 4.11 18.25 Transport 2.11 23.15 0.64 2.84 Attractions 1.54 16.89 0.97 4.31 Trips 2.81 30.83 0.98 4.35 Souvenirs 9.81 107.62 6.02 26.73 Guides 3.63 39.82 0.26 1.15 Other 0.92 10.09 0.32 1.42 Total (Daily versus Overall Stay) 62.24 682.77 20.68 91.82 Source: Dinas Pariwisata Bali. The total is a result of daily expenditures and length of stay. National data is also prepared by the Ministry of Tourism (www.depbudpar.go,id). 10 Chapter 1: Introduction Owing to the concentration of the tourism economy, the predicted impacts on Bali would be larger. Simulations with the 2000 Bali Input-Output suggest that an annual decline of tourists expenditures ­ invariably driven by foreign tourists -- ranging from 10, 30, to 50 percent would be associated far more significant impacts on employment and regional income than at the national level. While indicative, these figures would not capture adjustments (e.g., in employment) or actual coping strategies in response to the economic shock. 11 12 Chapter 2: Impacts CHAPTER 2: IMPACTS The impacts of the Bali bombings, the war in Iraq, and SARS have reverberated throughout Bali, Lombok, and, to a lesser extent, East Java. While the hotel sector has been most directly impacted, tourism related industries as well as regions linked through trade, migration, and remittances have seen significant impacts. Direct impacts have been highest where the tourism industry is concentrated: in the South of Bali (Badung and Denpasar) and other smaller tourism centers, and among such groups as hotel workers and beach vendors. However, relative vulnerability to the impacts has been equal, if not greater, in poorer areas of North and East Bali. While communities, households, and businesses have shown a variety of coping strategies, the prolonged nature of the crisis has put these under significant pressure. Lombok has also seen pronounced impacts, but more in the context of a longer run slump that predates the Bali bombings. Impacts in East Java, ten times the size of Bali in terms of population, are also significant but far more diffuse, with our assessments finding regional pockets of vulnerability. 27. The Bali bombings, the Iraq war, and second round of assessments was fielded in SARS all stood have adverse impacts May and June 2003. Given the wide scope of throughout the Indonesian economy. anticipated impacts both on and off-Bali, the Fortunately, the national impacts proved to be instruments were designed in such a way as to more limited than initially feared. While provide both broad geographic and sectoral tourism brought prosperity to Bali, as well as coverage, while at the same time honing in on neighboring regions, its very success also those localities and sectors that were perceived made is especially vulnerable to the exodus of to be most vulnerable. Rather than a tourists in the wake of the bombings. Owing traditional reliance on household surveys to to the significant regional contribution of measure socio-economic impacts, which was tourism to Bali, Lombok, and linked areas in not possible given the constraints of time and East Java, a specialized rapid regional resources, the assessment drew heavily of assessment was completed in January 2003. structured key respondent and establishment The more protracted nature of the tourism surveys. slump reinforced initial plans for a repeat assessment, which was completed in July 29. Core instruments included a survey of 2003. The objective of these rapid appraisals seventeen key respondents in each of the was to provide timely and comprehensive islands fifty three sub-districts (kecamatans), a information on actual and anticipated impacts survey of over four hundred schools across the to assist policy making by national and island, and targeted surveys of traders, beach regional government and donors. vendors, taxi drivers, and tourism related industries. 7 A similar structure of assessments 28. The impact assessment relied on a range of quantitative surveys, as well as qualitative 7 assessments, in addition to a variety of On Bali, the Key Respondent Sample covered 901 key secondary information. After the October respondents across Bali, seventeen key respondents in each of Bali's 53 kecamatans. In addition to the 2002 bombing, a first round of assessments kecamatan head (camat), the survey randomly selected was placed in the field by January 2003. A two villages/neighborhoods. In each community, we 13 Chapter 2: Impacts Figure 5. Foreign Visitor Arrivals in Bali 1997-2003 Number Direct Foreign Arrivials Relative to 2000 monthly average May 1998 October 2001 180,000 Direct arrivals to Bali 140% Soeharto Downfall September 160,000 2001 120% 140,000 Relative to 2000 direct arrivals 100% 120,000 80% 100,000 80,000 60% 60,000 40% 40,000 20% 20,000 0 0% Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- Jan- Jul- 97 97 98 98 99 99 00 00 01 01 02 02 03 03 Month was adopted in Lombok, although coverage 2.1 Tourism was only extended to those sub-districts that were perceived to be most vulnerable. Given 30. Tourist Arrivals. Tourism flows to the vast size of East Java's economy, the Indonesia, and Bali especially, remain well assessment there focused on identifying the below normal levels in the wake of the most vulnerable localities and sectors. October 12th tragedy. The first few months of Consequently, the assessment completed rapid 2003 showed a rebound of visitors to about appraisals in just under one-third of the two-thirds the levels of 2000, a relatively provinces districts. normal year. But the subsequent SARS outbreak and the Iraq war proved a setback for recovery (Figure 5). The impact of the recent events on tourism is much more severe than that of the May 1998 riots and the September 11, 2001 events that also affected tourism to surveyed the village/neighborhood head, the traditional Indonesia. While numbers showed some (adat) leader, the village cooperative, the head of the evidence of firming up in June and July, these village credit agency (LPD), t e head of the village h do not yet confirm a full-fledged recovery. welfare movement (PKK), the village midwife, a village youth group representative (sekaa taruna), and a non- 31. Regional trends. The whole region felt the Balinese community leader. The School Survey impact of the Bali bombing and the subsequent revisited 425 schools across Bali, eight schools in each of Bali's 53 districts. These were initially surveyed in security concerns, although Indonesia was hit January 2003 for the first CGI. The eight schools hardest. Malaysia, Thailand, Viet Nam and included five public primary schools, two public China all saw a slowdown in tourism after secondary schools, and one private secondary school. October 12, 2002. In contrast, the Iraq war Tourism Related Industry surveyed six hundred beach and SARS affected the region more than vendors, traders, and taxi drivers selected in main centers of commercial activity (Kuta Beach, Markets in Indonesia in terms of tourism decline (Figure Badung, Sukawati, Ubud, and Amlapura), as well as 6). 140 producers in ten local industry clusters. 14 Chapter 2: Impacts Figure 6 - Regional Trends in Tourism 160 Malaysia 140 120 Indonesi a China 100 80 Thailand 60 40 Jan-02 Mar-02 May-02 Jul-02 Sep-02 Nov-02 Jan-03 Mar-03 May-03 Jul-03 32. Hotel Occupancy. As noted in Chapter 1, 33. Figure 7 plots reported occupancy rates by the direct international tourism arrivals starred establishment. Capacity utilization in provide only a partial picture of tourism flows five star hotels has typically been highest, and to Bali. A comprehensive view of all foreign just before the bomb had climbed to over 75 and domestic visitors must rely on hotel percent. From this peak, the bombings saw occupancy data. Whereas the data on the one occupancies collapse below 20%. These hundred and thirty or so starred hotels is hotels managed to stabilize their occupancy relatively timely, the situation in the over one rates to 40 percent between December 2002 thousand non-starred sector establishments is and March 2003, presumably in part due to less readily assessable. However, there are -3 competitive offerings. In contrast, the 1 star some indications that the latter sector has been category has not been able to match these especially hard hit and possesses fewer levels, possibly because the more luxurious response mechanisms. Those that depend for hotels are wooing away their demand. 1-3 star their livelihoods on these non-starred hotels, however, only represent about one establishments may therefore be more quarter of reported rooms sold per night of vulnerable. starred hotels. In the first quarter of 2003 this average was 17 percent. 15 Chapter 2: Impacts Figure 7. Bali: Occupancy Rates by Levels of Stars 2002-3 90 80 Hotel Occupancy Rate (%) 70 60 50 40 5-star 4-star 30 3-star 20 2-star 1-star 10 0 02 02 2 2 2 2 2 3 02 02 03 02 2 03 3 2 -0 -0 -0 r-0 -0 r-0 -0 -0 l-0 g- p- n- n- n- b- b- ov ec ay ct ar ar Ju Ap Ap Au Se Ja Ju Ja Fe Fe O M M N D M Month 34. Luxury hotels may not only be in a because of aggressive price-cutting and position to weather the crisis for longer, they promotions. Visitors who would otherwise may also have more effective individual have stayed in other segments of the market coping mechanisms to address the overall migrated to luxury. Unlike hotels with less slump in demand. Indications are that five star stars, or non-starred hotels, the international hotels managed to stabilize their occupancy luxury hotels have access to marketing rates at 40%. Such a strategy worked in part networks abroad. These can in part work to Figure 8. Domestic Tourists No Substitute 200.0 400.0 Domestic Domestic Number of Room-Nights Sold ('000s) 180.0 350.0 160.0 Foreign Foreign 300.0 Number of Guests ('000s) 140.0 250.0 120.0 100.0 200.0 80.0 150.0 60.0 100.0 40.0 50.0 20.0 0.0 0.0 Jan- Feb- Mar- A p r - M Jun- Jul- A S Oct- N D Jan- Feb- Mar- A p r - 02 02 3 03 2 02 2 03 3 2 2 02 0 2 02 0 2 0 2 ay- 02 02 ug- ep- 02 o v - e c - 03 03 03 03 02 02 2 2 -0 -0 -0 -0 l-0 -0 -0 -0 n- n- n- b- b- r- g- p- ar ar pr ay ct ov ec Ju Ap Fe Fe Ja Ju Ja Au Se 02 02 02 0 2 02 M M O A M N D Month Month Source: BPS VHT-S hotel survey 16 Chapter 2: Impacts offset the bruised public international image of spectrum of accommodations. While the share Bali. The stabilization in the visitor numbers of domestic tourists in the total number of and occupancy levels to starred hotels are guests at starred hotels increased, notably in encouraging. However, there is some reason December 2002, foreign tourism remains to suspect that lags in the recovery of the non- dominant (Figure 8). This is the case for both starred sector may be significant. We were total stay overs, and to a greater degree room unable to examine hotels by sub-district. nights. While domestic tourists did increase Anecdotal evidence suggests that demand was their share of demand in luxury four and five concentrated in such conurbations as Kuta star hotels, they remain in the minority with beach, which were attracting visitors that respect to foreigners. Domestic tourism only a would otherwise have gone farther a field. partial substitute. Accommodations "off the beaten track" may therefore have proved more susceptible, 36. Composition of Foreign Visitors. The crisis especially in such poorer areas such as has also witnessed some changes in the Karangasem. composition of foreign tourists (Figure 9). The biggest losses were initially due to 35. Domestic substitution. Although domestic Australians and visitors from Europe ceasing tourism has increased since late 2002, the travel to the region. While the diversification number of tourists and their spending levels of visitor patterns is welcome, these have not did not substitute for those of foreign tourists. compensated in terms of overall absolute Foreign visitors continue to be the mainstay of numbers of visitors. Moreover, like domestic Bali's tourism economy. This is true for most visitors, regional visitors may be spending less segments of accommodations, not just luxury than other international visitors. However, it hotels: occupancy rates dropped across the is unclear whether this demand is concentrated Figure 9. Composition of Foreign Visitors to Bali (2000-2003) 600,000 160,000 140,000 500,000 Japan 120,000 Other Eur. 400,000 Number of Visitors 100,000 Taiwan Number of visitors Others Europe Australia 300,000 Americas 80,000 Malaysia/ ASEAN S'pore Asia Pacific Germany 60,000 200,000 UK 40,000 USA 100,000 20,000 0 0 2000 2001 2002 2003 2000 2001 2002 2003 Year Year 17 Chapter 2: Impacts in hotels that are more labor intensive. April. Occupancy rates of this sample of hotels Clearly, it will be important for the remain well below their break-even points of government to continue monitoring the actual 38% and 47% respectively. economic impacts of not only the number of visitors to Bali, but also their impact on the 39. In January 2003, none of the 16 hotels overall recovery in local employment and visited in Lombok had reduced operational livelihoods. expenditures, but 88% had done so in May 2003 with two-thirds reporting an inability to 37. In May 2003, there was little optimism in cover operational expenditure. Non-starred Bali's tourism industry and most operators hotels were affected greater than starred were focused on surviving the crisis. Casa hotels. 58% of hotels indicated that they had Grande, the association of 35 four and five star problems with debt repayments. Two in five hotels in Bali, asked members about future hotels reported that current conditions were bookings, and found bookings for June- worse than after the January 2001 riots. In October 2003 to be considerably down on last response, hotels had begun to discount room year. A total of 878 staff had been made rates (76% of hotels visited), reduce staff officially redundant in Bandung and around salaries (29%), and reduce working hours 600 in Denpasar (including Sanur) making a (35%). By May 2003, a few non-starred hotels total of about 1,400 redundancies. Hotels had made staff redundant, but more hotels are closed include Bali Grand Mirage, and Le now unsure about the possibility of staff Meridien Nirwana Resort (Tabanan) making redundancies in the future compared to 90 people redundant through a voluntary January. redundancy scheme for which 150 staff applied. 40. Most hotels had reviewed their marketing strategies and many now look to the domestic 38. Hotels in Lombok. The hotel sector in and Asian market. However, it appears that in Lombok continues to reel from a prolonged April the predominant trend was a reduction of slump prior to the Asian economic crisis. both foreign and domestic visitors. The Hotel occupancy rates (Table 8), estimated respondents in the hotel survey are now less through a survey of 17 hotels in this optimistic about future prospects for recovery assessment, were about 50% before the Kuta than they were in January 2003. In January, tragedy, falling to 18% in November 2002 and most starred hotels thought it would take 6-12 rebounding over the Christmas holiday before months for occupancy rates to increase ­ in settling at a level of around 20% through to May 2003, three out of the five were unsure of Table 8. Lombok Tourist Arrivals Tourist Arrivals Hotel Occupancy ** Month * Starred Non-starred September 2002 31,425 47.6% 52.3% October 2002 29,738 30.4% 14.1% November 2002 21,075 18.4% 18.6% December 2002 34,497 46.4% 30.5% January 2003 7,450 22.0% 18.8% February 2003 6,223 21.4% 17.7% March 2003 11,659 22.2% 19.6% April 2003 - 23.0% 20.2% * Data from Unram Report (BPS/Disparda) ** Data from Lombok Hotel Survey (University of Mataram, January & May 2003) 18 Chapter 2: Impacts Table 9. Income Decline for Beach Vendors and Traders Average Daily Average Daily Sales: Profit: Reduction Reduction Trading Market Before Six Before Six in Profit District N in Sales Location Type Tragedy months (%) Tragedy months (%) Kuta (Rp) after Kuta after (Rp) (Rp) (Rp) Pantai Kuta Badung Tourist 102 151,716 60,735 60% 48,284 18,578 62% Pasar Badung Badung General 48 294,167 200,313 32% 83,854 68,021 19% Pasar Gianyar Tourist 50 561,000 176,400 69% 177,000 35,900 80% Sukawati Pasar Ubud Gianyar Tourist 30 398,333 116,667 71% 148,333 43,500 71% Pasar K'asem General 30 734,000 275,833 62% 101,333 34,167 66% Amlapura Source: Universitas Udayana (Denpasar), Traders Survey, May 2003. when recovery would come. Most non-starred time been of far shorter duration. The hotels in May thought it would be at least 1-2 sustained failure of demand to return after years for occupancy rates to increase. almost nine months has significantly tested the coping mechanisms of these sectors, evidenced 2.2 Tourism-Related Industries for example by the emergence of significant layoffs. 41. The January 2003 assessment captured the immediate shrinking in demand for industries 42. Sales and Impacts in Bali. Traders have and traders that catered directly to tourist. experienced a dramatic average decrease in Taxi drivers, traders, and local handicrafts turnover and profits. Beach vendors and producers all saw turn over collapse. While traders in most markets reported declines in significant, the decrease in demand had at that turnover of over sixty percent (Table 9). A survey among market traders, beach vendors, Table 10. Tourism Related Industry Survey Future Labor Force Profitability Outlook % not Sub-district District Product N % confident % reduction Break reducing Loss business will in staff even staff survive to end of year Sth Denpasar Denpasar Textiles 14 42.9 39.2 35.7 7.1 0.0 Kuta/Nth Kuta Badung Silver/metal 14 92.9 35.8 64.3 7.1 7.1 Kuta/Nth Kuta Badung Textiles 14 7.1 5.0 21.4 21.4 7.7 Sukawati Gianyar Furniture/wood 14 84.6 57.0 64.3 28.6 0.0 Blahbatuh Gianyar Furniture 14 69.2 69.4 7.1 7.1 7.1 Sukawati Gianyar Wood 14 71.4 57.0 21.4 28.6 0.0 Ubud Gianyar Wood 14 71.4 51.8 21.4 42.9 7.1 Sukawati Gianyar Silver/metal 14 57.1 60.0 42.9 7.1 7.1 Selat/Be'dem/Abang Karangasem Wood 14 78.6 57.0 7.1 7.1 7.1 Rendang Karangasem Wood 14 21.4 33.8 7.1 0.0 0.0 All - 140 59.4 51.6 29.3 15.7 4.3 19 Chapter 2: Impacts and taxis reveals a sharp drop in sales revenues Table 11. Micro and Small Businesses Are and profits, up to 70 percent in some cases Hit Harder (Table 10). Reported profit declines are in the Micro Small Medium same order of magnitude. Income losses were Business Indicator 1-4 5-20 20+ reported throughout the island, not just the staff staff staff tourist areas, in part because of reduced % production outside transfers from the tourist areas to other parts of of Bali 25.0 39.4 35.0 % reduction in staff 61.4 51.0 29.2 the island. % reduction in production 66.6 54.9 38.6 43. A survey of 140 tourism related producers % reduction in price 21.2 23.3 23.3 in 10 clusters in June 2003 also suggested very % export 18.7 24.5 33.8 high impacts. The data indicated significant % reduction in sales 65.1 55.8 41.4 levels of adjustment in terms of production levels (average declines of 55%), pricing (22%), and financing difficulties (71%). The to have more limited coping, for example majority of establishments did not report through a smaller reliance on exports. making a loss, but appeared to be adjusting in terms of significant shedding of workers (52% 44. Local Finance in Bali. The main local reduced staff, with a total reduction of almost finance institutions in Bali are the state-owned sixty percent in the overall numbers of staff in Bank Rakyat Indonesia (BRI), the private the sample).8 Smaller enterprises evidenced Bank Perkreditan Rakyat (BPR) and the the highest shedding of staff (61.4% versus Lembaga Perkreditan Desa (LPD), which is 29.2%, Table 11). Impacts in terms of owned by the desa adat in which it is situated. production and sales exceed those of larger The LPD network now has the greatest establishments. These establishments appear coverage of local finance institutions with Table 12. Summary of Bank and Village Credit Ins titutions in Bali Average Sum % of LPD Credit LPD No. of Offices No. of Borrowers Borrowed Total (Diragukan / Insitutional District (Rp million) LPD Macet) Health System No. Tidak Sehat/ BRI BPR LPD BRI BPR LPD BRI BPR LPD Loans Funds Clients Macet Denpasar 14 9 31 4.5% 9.6% 0.0% 19,237 48,631 61,995 5.7 5.3 5.1 49.6% Badung 13 57 103 1.6% 4.2% 0.0% Buleleng 12 9 159 6,593 6,249 33,068 4.4 3.4 1.1 5.7% 2.6% 7.9% 10.7% Jembrana 8 1 56 10,533 2,841 10,828 3.6 0.3 1.3 2.2% 3.7% 14.2% 12.5% Tabanan 14 25 225 9,203 12,957 44,100 4.7 4.3 1.7 11.8% 3.4% 8.0% 8.9% Gianyar 11 31 225 9,188 24,522 58,457 4.8 5.1 2.0 18.4% 2.6% 25.0% 0.0% Bangli 4 3 123 2,313 2,029 24,131 6.4 4.9 1.2 4.5% 1.8% 5.0% 4.1% Klungkung 9 6 84 6,164 1,609 13,754 3.8 4.3 1.8 3.9% 4.2% 10.3% 4.8% K'asem 10 5 146 5,992 1,992 22,370 4.6 4.0 1.1 3.9% 4.2% 11.2% 13.7% Total Bali 95 146 1,152 69,223 100,830268,703 - - - 100% 2.6% 11.5% 6.3% Source: Data from BI and BPD Bali, December 2002. 8 Udayana, Hasil Survai: Eksistensi Industri Yang Terkait Dengan Pariwisata Bali Pasca "Tragedi Kuta" Putaran Kedua, July 2003, pp. 22. 20 Chapter 2: Impacts more than 1,100 branches in the 1,392 desa 46. Tourist-Related Industries in Lombok. adat in Bali (Table 12).9 There have been Lombok's tourist-related industries produce a increasing concerns that small and medium- variety of handicrafts including ceramics, sized businesses as well as hard hit families wood sculpture, baskets, and woven fabrics are entering a debt crisis, with people selling that are sold directly in Lombok, Bali, and assets to meet debt repayments. other parts of Indonesia, as well as exported overseas. The May 2003 assessment in 45. The total amount of credit, as of December Lombok interviewed traders, producers (small 2002, provided by BRI, BPRs and LPD was and household industries), and cooperatives to Rp. 329 billion, Rp. 485 billion and Rp. 636 find out how their businesses were coping with billion respectively. The majority of loans the situation seven months after the Bali within the LPD system are in Badung and bombings. Lombok's tourism and handicrafts Denpasar, reflecting higher borrowings on industries have been as badly affected as those average in these districts. In the sample of 140 in Bali by events since October 2002, businesses visited in May 2003, roughly one- impacting social welfare in those areas most quarter of businesses in Gianyar had taken closely linked to these sectors. The reduction loans from their local LPD, while business in in demand for handicrafts in Bali, as well as other districts, like those in Gianyar, relied on the reduction in employment opportunities for their own, as well as bank capital. As of migrant workers from Lombok in Bali, is December 2002, 2.6% of the credits provided compounding social welfare impacts. Unlike by the LPD were rated as diragukan or macet, Bali, the impacts in Lombok are more involving 11.5% of borrowers. Although the localized, with impacts in East Lombok and system retains high liquidity, these data Mataram believed to be less than in West suggest a high number of small borrowers are Lombok. As tourism and handicrafts are not facing difficulties repaying their debts, such a dominant part of Lombok's local especially in Gianyar where one-quarter of economy, the reduction in these sectors has not debtors were rated as diragukan or macet. As led to a general reduction in consumer institutions, a higher proportion of LPDs in spending as in Bali, and those working in Karangasem (14%), Jembrana (13%), and agriculture do not appear to have been affected Buleleng (11%) were rated as tidak sehat or badly in Lombok. There are no significant macet. Taken together, these data indicate that residual impacts from the Bali bombing on problems of microfinance provision may be social tensions in Lombok, but local internal greatest in the poorer areas of Bali, while issues require addressing to ensure that future Gianyar stands out as having a high proportion events, such as the upcoming elections, do not of borrowers facing difficulties in repaying unnecessarily escalate social tensions. loans. 9 LPDs were first established in Bali in the 1980s to fight exploitative forms of credit relations, increase the living standards of the village population and strengthen village finance, particularly microfinance. In terms of borrowers, the LPD system provides credit to more than 250,000 people, typically providing smaller loans than BRI or BPR. Oversight of the LPD network is provided by BPD Bali and technical guidance is given by 16 PLPDK under the auspices of district governments. 21 Chapter 2: Impacts Table 13. Crisis Impacts for Lombok Small Industries Metal All Products Wood Products SMALL INDUSTRY ECONOMIC INDICATOR Products (n=23) (n=10) (n =5) Mean number of permanent staff 9.6 9.1 16.4 Mean number of temporary staff 13.7 7.8 8.0 Percentage of businesses reducing staff (%) 67% 60.0% 60.0% Of those, average reduction in staff (%) 58.9% 67.7% 46.7% Production per month (Rp million) 41.2 10.1 219.0 Percentage of businesses with reduced production (%) 82% 80% 60% Of those, reduction in production (%) 57.8% 62.5% 41.7% 47. The sample of 23 traders surveyed showed the main problem and generally, more than that monthly turnover was down by roughly 85% stated that they were experiencing two-thirds in May 2003 compared to before marketing problems. There is clearly a need the Kuta tragedy. This has led to a reduction in for support to these industries through trade both temporary and permanent staff by 50%. promotion and the development of market Wood traders appear to have been more linkages. heavily hit than ceramic traders, with wood traders experiencing on average an 80% 2.3 Socio-Economic Impacts reduction in monthly turnover. Sixty percent of traders stated market information as their 49. The impact of the bombing on employment main need. As in Bali, there are indications and income was much more severe in May that overseas exports of products are still 2003 than in January 2003. On Bali, 94 continuing to provide some buffering to the percent of the key respondents reported a drop reduction in local demand for handicraft in income and 70 percent a drop in products.10 employment.11 Average incomes were estimated to have dropped by 40 percent, 48. Small Producers, Cooperatives and whereas 20 percent of people were reported to Household Industries. More than 80% of the have lost their job as a result of the bombing small handicraft (wood, textiles, gold, and (though some found new jobs). silver) producers surveyed reported that they had reduced production by 58% on average, Key Respondent Survey and a similar number had reduced staff (Table 13). Overall, 9% of small producers said that 50. Bali Community Incomes. Ninety-four they were losing money in May 2003, with percent of respondents observed income just over half still making profit. All of the 17 declines in their communities since the cooperatives (wood, woven textiles, gold, and bombings. The island wide average decline in silver) visited were also experiencing n the reported level of i come was 43.4%. The reduction in turnover by more than 50% on highest averages were in Karangasem (48.6 %) average. Household industries producing and Gianyar (47.4 %), and lower in the handicrafts had been affected to a similar northern district of Buleleng (3 9.6 %) and the extent with 60% reporting reduction in capital Denpasar (40.7%). Household survey turnover by an average of 70%. All groups expressed the reduction in visitors/buyers as 11 Key Respondent Survey. Note that these are not actually measured drops in income and employment, 10 Bali Post, 10 February 2002, Di Mataram, Pemasaran but those perceived by key respondents for their Kerajinan di Arshop Anjlok. community. 22 Chapter 2: Impacts BOX 1: Evidence from the Balinese Economic and Social Transitions Study A Longitudinal Survey of Individuals and Households Policies intended to mitigate the consequences of the Bali bombing will be more likely to succeed to the extent that they are based on a clear understanding of how the bombing affected the well-being of individuals and households. The Economic and Social Transition Study (EST-B), a unique longitudinal household survey of Bali, provides such information. In February 2002, as part of the broader National Social and Economic Survey, the Central Bureau of Statistics (BPS) interviewed a representative sample of 7,500 individuals living in 2,000 households on the island of Bali. BPS graciously gave us permission to re-interview the same individuals after the bombing and, in early 2003, we successfully interviewed 92% of them as part of EST-B. Taken together, these surveys provide unique information on how the lives of the Balin ese were affected by the bombings. Specifically, because multiple indicators of well-being of individuals and their households were measured before the bombing, and we measured the same indicators for the same individuals after the bombing, we can pin down the effects of the bombing. Moreover, because the data provide information on the entire household, we are able to identify some of the coping mechanisms that individuals and households have adopted in response to the bombing as well as determine how the effects of the bombing have been shared within and between households. The results provide many new insights into the consequences of the bombing for economic and family life of the Balinese population. First, contrary to the expectations of many, unemp loyment did not increase substantially after the bombing. Declines in employment for prime age men are small, and a compensating increase in employment occurs for prime age women. Instead, the drama of the Bali bombing lies in the collapse of real earnin gs­and not only in the market wage sector. Earnings fell even more for those who were in the self-employed sector prior to the bombing. On average, total household income declined by fully 25%. Apparently, however, households were able to protect their day-to-day spending levels from the full impact of lower earnings. Total household expenditures declined by 14% --and while this is a large decline, it is substantially less than the fall in household income. In addition, households re -allocated their spending in ways that likely mitigated the immediate reduction in spending power. For example, they cut back on purchases of food prepared away from home (spending on this category fell by 50%) and reduced outlays for clothing and personal care, semi durables and festivities all of which could presumably be delayed with little impact on current well-being. Households also reacted to reduced earnings by adjusting their living arrangements and, specifically, by combining households so that they could take more advantage of shared resources like housing and food preparation. Despite these coping mechanisms, the health consequences of the bombing have been substantial. At a time when total expenditures fell, per capita expenditures on health doubled in 2003 relative to the previous year. The surveys provide evidence of a concomitant rise in use of health care services in the month before the interview for both adults and children, increasing by 50% between 2002 and 2003. Reports of limitations of daily activities because of poor health rose by about 50% as well, as did the proportion of respondents experiencing fevers, coughs, or headaches in the four weeks before the interview. For example, the percentage experiencing a fever increased from 30% to 60% among children and from 35% to 58% among adults. It is very likely that this reflects a worsening of psycho-social health status. Questions asked in 2003 confirmed this interpretation. Over two -thirds of adults reported feeling upset when something reminded them of the Bali bombing and 10% reported having recurring memories of the bombing. Moreover, about 7% of adult males and 13% of adult females reported their emotional well-being was worse after the bombing than before. The findings from the study show that t he negative impacts of the Bali bombing are pervasive, affecting individuals and households across the socioeconomic spectrum. But poor households were especially hard hit. Among households whose income placed them at the 25 th percentile of the distribution in 2002, income in 2003 fell by nearly 75%. In contrast, the decline for households at the 75th percentile in 2002 was 25%. The economic costs have been especially great for the poorest households. These statistics, along with the fact that health s tatus worsened, and that spending on health care rose significantly during a period when total expenditures shrank, suggest that efforts to strengthen the social safety net might focus on the poorest households first. The 2003 data reveal a lot about the consequences of the bombing for well-being. The study documents that people's health suffered but that they have been able to protect expenditure levels in the face of declining income. Households coped by reallocating expenditures and drawing down savings. These mechanisms may not be sustainable in the medium term, particularly if the tourism industry does not regain some of its strength, and economic well-being may fall further than it has already. On the other hand, health may actually improve again as time passes after the bombing. The only way to document the medium term effects of the bombing and the behavioral responses to it is through continuing to follow the same individuals and households over time. This information will provide unparalleled opportunities to measure the dynamics of adaptation to an event that has had far-reaching economic and health consequences for individual and households throughout Bali. The next round of Est-B is planned for the first quarter of 2004. The survey will re-interview the same individuals and households that were interviewed in 2002 and 2003, tracking them to new locations if they have moved. The 2004 questionnaire will repeat questions asked in 2002 and 2003 while enhancing the survey instruments to capture a fuller picture of the lives of the Balinese today. Source: EST-B, Wayan Suriastini at wayan@chaka.sscnet.ucla.edu 51. 23 Chapter 2: Impacts Table 14. Crisis Impacts for Lombok Traders Wood Product Pottery All Traders Trader Economic indicator Traders Traders (n=23) (n=6) (n =6) Mean number of before Kuta tragedy 6.0 8.7 5.0 permanent staff May 2003 2.8 3.0 3.3 Mean number of before Kuta tragedy 9.0 7.8 21.2 temporary staff May 2003 4.4 1.7 13.5 Mean monthly before Kuta tragedy (Rp millions) 30.8 28.2 24.1 turnover May 2003 (Rp millions) 11.8 5.9 12.2 Source: University of Mataram Survey, May 2003 impacts earlier in the year found declines in community respondents suggested that household incomes of one quarter (see Box 1). handicrafts were of importance in their communities. Of these respondents, 84 % 52. Bali Unemployment. Seventy-one percent responded that fortunes had decreased or of respondents felt unemployment had severely decreased this year. Only 2 percent increased or increased significantly during suggested that things had gotten better. 2003. On average, respondents estimated that 20 % of workers were affected by job losses in 54. Bali Migration. Over half of community the last quarter of 2003, and 29 % were respondents (54%) observed return migration affected by job losses between January and the to their communities. Eight percent did not end of April 2003. know, whereas the remainder observed no return migration. 53. Bali Handicrafts. Seventy percent of Table 15. Coping Mechanisms in the Community Yes No Don't Know (%) (1) Decreased Expenditures 827 41 16 93.6% (2) Loans for Daily Consumption 405 435 43 45.9% (3) Delay Debt Repayments 612 235 36 69.3% (4) Sale of Assets 431 403 50 48.8% (5) Pawning of Assets 528 311 45 59.7% (6) Change of Business 311 514 48 35.6% Putting Other Family Members to (7) Work 349 474 58 39.6% (8) Changing Professions 395 411 46 46.4% (9) Decrease Arisan Participation 228 592 63 25.8% (10) Decrease Village Contributions 222 616 45 25.1% (11) Change Staple Diet 213 617 53 24.1% (12) Reduce Number of Meals 46 791 45 5.2% Postpone/Decrease Religious (13) Practices 48 809 25 5.4% Postpone/Decrease Facilities/Infrastructure (14) Maintenance 527 317 31 60.2% Source: Udayana University Key Respondent Survey 24 Chapter 2: Impacts Table 16. Socio-Economic Impacts on Lombok Time Period / West Central East Socio-economic Indicator Mataram Total Destination Lombok Lombok Lombok % respondents reporting reduction in Oct 2002 - May 2003 96% 93% 59% 61% 76% incomes in village If yes, average reduction in incomes in Oct 2002 - May 2003 51% 59% 51% 58% 54% village Agriculture (most impacted sector) Oct 2002 - May 2003 21.4% 13.3% 18.8% 0.0% 14.3% Industry (most impacted sector) Oct 2002 - May 2003 51.6% 78.6% 92.0% 54.2% 68.5% Hotel / restaurants (most impacted sector) Oct 2002 - May 2003 77.8% 50.0% 0.0% 38.5% 58.5% Traders (most impacted sector) Oct 2002 - May 2003 31.0% 0.0% 13.0% 31.8% 20.7% Transport (most impacted sector) Oct 2002 - May 2003 4.3% 0.0% 0.0% 8.3% 2.7% % respondents reporting job losses in Oct 2002 - May 2003 83% 100% 55% 83% 78% village If yes, average percentage of people Oct-Dec 2002 38% 34% 39% 28% 34% losing work Jan-April 2003 26% 28% 25% 25% 26% % respondents reporting people Oct 2002 - May 2003 35% 61% 25% 37% 37% returning July-Sept 2002 25 6 4 1 6 Number of people returning to the Oct-Dec 2002 20 19 6 4 13 village Jan-March 2003 13 15 3 3 9 % respondents reporting people Oct 2002 - May 2003 57% 11% 9% 34% 30% leaving July-Sept 2002 2 19 16 1 12 Number of people leaving the village: Oct-Dec 2002 10 14 24 3 14 Jan-March 2003 29 17 21 1 17 Within NTB 1 3 2 4 3 Ranked destination of those leaving Java 3 4 2 4 village: Bali 4 2 3 1 2 Other 2 1 1 3 1 Source: University of Mataram Survey, May 2003. Note: Respondents represent up to eight village-level key respondents. West Lombok n= 46; Central Lombok n=29; East Lombok n= 44; West Lombok n= 42. 55. Bali Response and Coping Mechanisms. Manggis), suggesting that further work needs Respondents reported a variety of coping to be done to identify specific pockets of mechanisms in their communities (Table 15), impacts. ranging from decreasing expenditures (93.6%) to taking out loans (45.9%). Almost one 56. Community social safety net programs quarter (24.1%) did report changes in staple proved important. In a kecamatan diets in their communities. Actual reductions development project survey fielded in Bali in in meals (5.2%) and religious practices May 2003, 76% of respondents claimed that expenditures (5.4%) were the least frequent. It the family would be the first group to help in a must be noted that these responses were highly crisis, with 66% of respondents citing a friend concentrated in a number of kecamatan. In in the neighborhood as the second most likely only about one quarter of kecamatans did more candidate for aid.12 than one of the 17 key respondents report reduction in the number of meals as one of the coping mechanisms. Responses were higher in known poor areas like Karangasem (e.g., 12 The Kecamatan Development Project (KDP) fielded a survey in Bali in May 2003 to ascertain the perceived 25 Chapter 2: Impacts Table 17: Lombok Coping Mechanisms in the Community Coping Mechanism Yes No Don't Know (%) (1) Decreased Expenditures 123 43 3 72.8% (2) Loans for Daily Consumption 72 93 4 42.6% (3) Delay Debt Repayments 115 47 7 68.0% (4) Sale of Assets 104 63 1 61.5% (5) Pawning of Assets 133 33 3 78.7% (6) Change of Business 27 137 5 16.0% (7) Putting Other Family Members to Work 71 97 1 42.0% (8) Changing Professions 69 93 7 40.8% (9) Decrease Arisan Participation 34 116 19 20.1% (10) Decrease Village Contributions 52 102 15 30.8% (11) Change Staple Diet 51 113 5 30.2% (12) Reduce Number of Meals 17 149 3 10.1% (13) Postpone/Decrease Religious Practices 10 155 4 5.9% (14) Postpone/Decrease Facilities/Infrastructure Maintenance 61 96 12 36.1% Source: UMRAM Key Respondent Survey 57. Lombok Income Reduction. Three-quarters 58. Lombok Job Losses and Social Impacts. of respondents in Lombok reported that people Three-quarters of respondents also reported in their villages were experiencing reduced job losses in their villages, especially in income of roughly 50% after the Bali bombing Central Lombok and to a much lesser extent in (Table 16) and that those most heavily East Lombok. Job losses were greater impacted were the poor. These impacts were between October and December 2002 than greatest in West and Central Lombok. Overall, between January and April 2003. The two respondents thought that (small) industry, main social welfare impacts mentioned were hotels, and restaurants were the most heavily people unable to go to the hospital for impacted sectors, with few highlighting treatment (35%) and school dropouts (25%). agriculture, unlike in Bali. Not surprisingly, in Almost half of the respondents reported West Lombok, where most hotels on the island worrying about the future and 43% highlighted are found, the hotel and restaurant sector was the use of alcohol and drunkenness. reported as the most impacted. impacts of the bombing. 79 KDP facilitators queried residents of Bali to determine the perceptions of individuals on the island. The results from the May KDP Crisis Assessment Survey fielded correspond greatly to the results obtained from the key respondents surveys, demonstrating the accuracy and usefulness of having the KDP facilitators on the ground. The KDP has facilitators in the bulk of kecamatans in Indonesia. This network of facilitators can be readily used to access impacts of crises in the country. Bali was not added to the KDP until early this year, and was not present for the first round of key respondent surveys in Bali. 26 Chapter 2: Impacts Table 18. Lombok Community Preferences for Assistance Mentioned 2nd Choice 3rd Choice 1st Choice (%) Additional (%) (%) Choice (1) Health Assistance (Puskesmas) 20.3% 15.3% 10.4% 492 (2) Health Assistance (Hospitals) 3.1% 10.4% 6.8% 714 (3) Education (Schools) 18.8% 21.2% 21.6% 366 (4) Grants for Traditional Villages 7.7% 4.5% 8.2% 713 (5) Grants for Subak 2.2% 3.4% 4.2% 803 (6) Revolving SME Credit (UKM) 18.3% 15.0% 14.0% 483 (7) Non-Credit Assistance (e.g., Training) 2.8% 5.3% 4.5% 778 (8) Livestock Assistance 2.6% 3.6% 5.4% 788 (9) Farmer Credit/Revolving Funds 12.5% 11.3% 10.0% 598 (10) Non-Credit Assistance for Farmers 2.6% 4.3% 4.7% 787 (11) Facilities/Infrastructure Rehabilitation 5.4% 4.6% 9.0% 726 (12) Others 3.7% 1.2% 1.3% 831 59. Lombok Migration. Roughly one-third of 60. Lombok Coping Strategies. The coping respondents reported people returning or mechanisms most prominently mentioned in leaving the village between October 2002 and Lombok include the pawning of assets, May 2003. The main reasons for return reduction in expenditures, delay of debt reported were insufficient incomes (83%), job repayments, selling of assets, borrowing for losses (59%), security (56%) and residency daily consumption, and putting other family regulation (33%). The pattern of results members to work (Table 17). In comparison indicates increased migration out of West with Bali, more respondents reported selling Lombok after the bombing and more people and pawning of assets in Lombok, while fewer returning to villages sampled in Central reported the decrease of expenditures, Lombok. Of those leaving East and Central changing businesses, or postponing the Lombok, it is believed that many were going maintenance of facilities and infrastructure. to work overseas. Lombok has roughly 30,000 TKI working overseas, particularly in 61. Lombok Community Response Priorities Malaysia. In 2002, NTB contributed 24,685 and Main Agents for Help. Respondents were overseas workers, 99% migrated to asked what the main priorities for assistance 13 were in their own views. The highest first Malaysia. The numbers sent between January and May 2003 were reduced by 27% priority given by respondents was community from the same period in 2003, possibly as a health clinics (20.3%), followed by education result of SARS. (18.8%). Credit or revolving funds for SMEs (18.3%) and farmers (12.5%) together account for almost a third of first choices. 13 Data from BP2TKI PROP NTB 27 Chapter 2: Impacts Table 19. Main Perceived Agent for Assistance 1st Choice 2nd Choice 3rd Choice Actor (%) (%) (%) (1) Village Head 20.9% 31.7% 10.5% (2) Traditional Village/Banjar 40.0% 20.2% 10.6% (3) Head of Sub-District (Camat) 1.8% 14.8% 45.6% (4) Local Government 21.1% 15.1% 16.4% (5) Provincial Government 10.2% 12.9% 7.0% (6) NGO 3.8% 4.3% 8.7% (7) Other 2.3% 1.0% 1.2% 62. The traditional village is still viewed by on schools in Bali. As an assessment respondents as the principal means of instrument, a facilities survey presents a rough assistance (40.0%, Table 19), followed by the illustration of the surveyed area at any given local government (21.1%). However the moment.14 In terms of a rapid appraisal of village head ranks as one of the main second localized effects (e.g., by kecamatan), the choices (31.7%). Overall, Lombok has approach proved more timely and implement- experienced knock-on effects of the Bali able than a household survey with similar bombing and is attempting to employ coping levels of representation, despite some mechanisms. drawbacks. 65. Impacts. Thirty one percent of schools Bali Schools Level Impacts reported students dropping out of school 63. The adverse impacts on incomes and during this year (Table 20). These reported employment also had ramifications in the rates varied significantly by district, with the education sector. These effects potentially greatest levels reported in the poorest North range from difficulties in the payment of Eastern belt of Bali, with Buleleng (60%) and school fees (in turn creating strains for schools Karangasem (55%) reporting the highest rates. to meet their needs and provide a quality The areas with schools least affected by education) to full-fledged dropouts during the dropouts were Tabanan and Badung with school year or failure to embark on a new 12.5% and 14.6% of schools reporting children school year. In many circumstances, children leaving (see Figure 10). Approximately one might be forced to migrate to other schools, quarter of respondents (25.9%) felt that further often in poorer home regions of their extended dropouts would occur. In Buleleng (47.9%) families. Other coping mechanisms include and Karangasem (46.9), almost one-half of the children working before or after school and a respondents felt that further dropouts were decrease in child food consumption, which could further erode the quality of education. If 14 children are working or receiving less The alternative to a facilities survey is a household survey, such as SUSENAS. A household approach nutrition, adverse side effects in the school enables one to track children from year to year, creating include lack of energy, concentration, and a more accurate picture than a facilities survey. The interest. sample size to produce a valid result is cost-preventative and timely outside the SUSENAS survey conducted in 64. Assessment Approach. A school facilities February of each year. The core typically on offers survey sought to assess the impact of the crisis representative general welfare indicators at the district level. 28 Chapter 2: Impacts likely. Twenty-three percent of respondents students quitting school out of 113,096 Table 20. School Dropouts Indicators Dropouts Schools as coping Observe Population Poverty Poverty mechanism Drop-Outs (000s) Rate (%) Depth (%) through through December April 2003 2002 (%) 10-Denpasar 382 1 0.23 0 20.8% 20-Badung 312 3.2 0.56 6 14.6% 30-Gianyar 337 6.4 1.08 0 19.6% 40-Klungkung 164 13.1 3.91 4 28.1% 50-Bangli 198 13.2 2.42 0 34.4% 60-Karangasem 379 19.5 5.43 0 54.7% 70-Tabanan 387 4.2 0.69 4 12.5% 80-Jembrana 195 7.4 1.62 4 15.6% 90-Buleleng 576 12.1 2.04 0 59.7% All 2,900 8.9 2.0 31.6% Source: Bali Schools Surveys, Ministry of Finance DAU database suggested that these dropouts involved out- students. This is a less than 1% dropout rate in migration.15 these schools combined. Comparable to the school level data, areas possessing a high 66. "Normal" level of attrition versus crisis percentage of dropouts included Karangasem related dropouts. The results of examining and Buleleng, with schools reaching levels of drop-outs on a per school basis is very 16% and 8% respectively. 16 disconcerting, painting a picture of high drop- out rates, assumed to be crisis related. In order 68. Our information presently allows us to say to determine the ultimate impact of the crisis little about the students who enrolled in the on schools, benchmarking is important. 2002/2003 school year, but failed to enroll f ro Usefully this would focus on what "normal" the 2003/2004 school year. The start of the levels of during year dropout are, and school year typically involves larger upfront typically, rates of student attrition between fees, causing parents to defer the enrollment of school years. their children in periods of crisis. Regrettably, a comprehensive insight will only be available 67. The figures in perspective. Although when the 2004 SUSENAS household survey is dropout rates appear to be alarming, in fielded in February of 2004. But other forms actuality, schools surveyed reported 805 of continued monitoring ­ including field based and school level assessments ­ should provide additional insight into attrition from 15 The picture presented by the migration data requires further analysis. The story most often told is that the crisis has seen parents working in the south send kids back to home villages in the North and East (e.g., 16 Buleleng and Karangasem). At first blush the rates of These figures are not necessarily representative of a migration incidence across these regions are quite regions overall school aged population, as they are un- similar. weighted for the number of students actually covered. 29 Chapter 2: Impacts Figure 10. Bali: Reported School Dropouts D A N A U BU Y A N B A NGL I B U LE LE N G D A N A U BR A T A N J E M B R AN A K A R AN G A S E M T A BA N AN G I AN YA R BADUNG K O T A D E N P A SA R K LU N G K U N G the last school year to this school year, and 2002/2003 school year, while troublesome, potential responses. look to be occurring in the context of relatively high retention rates. Therefore, the use of 69. The SUSENAS household survey allows school grants to stem dropouts needs to be for some comparison, but not a full picture. viewed in the context of the marginal impact While the facilities survey does not account of interventions in regions with higher levels for year-to-year attrition, SUSENAS does not of "normal" dropouts. currently account for attrition rates during the school year. In Indonesia overall, an estimated 70. The quality of education often suffers from 4% of primary students dropped out of school such a crisis as well. Teachers often teach from the 2000/2001 school year to the private lessons outside of the classroom for 2001/2002 school year. Twelve percent of 1st extra income. Twenty percent of schools graders in 2000 did not return to 2nd grade in reported a decrease in children taking private 2001, illustrating that maintaining attendance lessons, negatively impacting the learning of from the first year to the second year is children and the ability of teachers to earn critical. In contrast, the primary school drop more income. Thirty-one percent of schools out rate for Bali from the 2000/2001 school noted that teachers began moonlighting after year to the 2001/2002 school year was less the bombing. If teachers are forced to work a than 1%, approximately .3%, according to second job to subsist, they are less motivated SUSENAS. The attrition rate for NTB was and tired in the classroom. Thus, not only is 8%, while the attrition rate for East Java was the quantity of education affected, but the 9% from the 2000/2001 to 2001/2002 school quality diminishes as well. year. When examined in this light, the percentage of dropouts in Bali during the 30 Chapter 2: Impacts 71. A number of factors could be established highly useful in a time of crisis to lessen the to offset these impacts. Grants or scholarships stress placed upon schools. As discussed in for education expenses provided by the this report, the majority of governmental government or private donors would help funding has yet to be released. Thus, the abate further dropouts and reduce the strain on importance of community response and schools. Social safety net programs within the resilience must be stressed. By the time many community, such as school committees, could areas are eligible for aid from the government, respond with aid for the affected schools and well over a year will have passed since the children. The actual impacts of and responses bombing. Communities must start by looking to the crisis in Bali vary greatly. within to mitigate the effects of the crisis. On going qualitative and quantitative monitoring 72. Community Response. The school survey of the impacts experienced by the education allowed for linkages between issues of sector are necessary to ensure that children and governance and school financing. Schools schools do not suffer further. who possess active school committees are thought to be better equipped, financially and 2.4 Social Tensions Impacts and Local technically, to cope with matters as issues Security arise. Furthermore, the department of education (DINAS Pendidikan) can readily 75. The Bali bombings were followed by fears consult with school committees to determine of ethnic strife as a result of a predicted the needs of individual schools. increase in Balinese-migrant social tensions. The Bali update in January 2002 found that 73. In Bali, 97% of the 425 schools surveyed although there were widespread fears of social possess a school committee. School unrest, community and religious leaders, along committees in Bali acted quickly and with the community in general, effectively efficiently in the aftermath of the Bali managed these fears through calls for calm and bombing, as 70% of school committees reflection in the aftermath of the attacks and a provided assistance to the schools, most often series of cleansing ceremonies in Bali. in the form of cash (83%).17 The crisis in Bali Nevertheless, a minority reported that ethnic demonstrated that, although school committees relations in Bali had deteriorated, and that do not meet frequently, committees unite and actions to maintain community relations and respond effectively in a time of need. social cohesion were still needed. 74. Government Assistance. Over half 76. Since January 2003, the economic impacts (54.2%) of schools reported receiving of the crisis have deepened, leading to assistance from the government since the concerns that social tensions as a result of bombings. Only a fraction (6.5%) reported social and economic pressures could result in that this was in the form of cash. Grants and increased disturbances and unrest. scholarships, while comprising a relatively Furthermore, the trials of the Bali bombing small percentage of school revenue, would be suspects, continued enforcement of restrictions on residency for migrants, and increased mobilization in the run up to the elections in 17 83% of school committees represented in the survey 2004 may exacerbate social tensions in the provided cash assistance after the bombing, 25% offered community. Any social unrest in Bali would assistance in goods, and 34% offered assistance through building renovations. reflect negatively on Bali's image and recovery. 31 Chapter 2: Impacts 77. In order to assess these issues and the Social Disturbances in Bali between 1998 and factors contributing to social tensions in Bali, 2003 the assessment conducted qualitative research in 26 sub-districts and included a social 78. Occurrence of Social Disturbances.18 Bali tensions component in the key respondents has experienced isolated incidents of social survey in all 53 sub-districts. The social disturbances over the past few years. The BPS tensions assessment focused on past and PODES 2003 survey records 7.8% of villages present incidents of social disturbances and in Bali reporting conflict at the end of 2002, unrest, the nature and intensity of past with Bali ranked 11th of the 30 provinces in incidents, current concerns of social unrest, the terms of the occurrence of local conflict. management of social tensions, and local Information from key respondents from all 53 security arrangements. Overall, the sub-districts in Bali recorded only fourteen assessment found that social tensions in Bali sub-districts without reports of social conflict are now lower than in January 2003, although or disturbances since 1998 (Figure 11). The tensions remain high in a small number of sub- incidents reported in the key respondents districts with particular concerns relating to survey include disturbances that have mostly economic pressures, social issues, youth, and led to the destruction of property, however in unemployment. Importantly, only a small two districts, notably Gianyar and Buleleng, proportion of past disputes involve Balinese this has led to casualties and, in Buleleng, to a and migrants, with most incidents involving number of deaths. The majority of past different Balinese community groups. disturbances reported occurred in Buleleng (34 incidents, Figure 12)) followed by Karangasem (18 incidents), Badung (14), Klungkung (10), Gianyar (8), Bangli (6), Figure 11. Reported Incidents of Social Disturbances in Bali since 1998 D A N A U B U YA N B A NG L I B UL E L E N G D AN AU B RA T AN J E M B R A NA KA R AN G AS EM T A B AN AN G I A N Y AR BA D U N G KO T A D E N PA S AR KL U N G K U N G 18 A `social disturbance' is defined here as the mobilization of groups within the community leading to confrontation and/or violence directed at property or people. 32 Chapter 2: Impacts Table 21. Perceptions about Causes of Social Disturbances in Bali since 1998 Poor Economic Social Religion Illegal Problems District community pressure problems and adat Politics activities between Revenge Other relations youths Denpas ar 25% 13% 13% 19% 6% 6% 0% 13% 6% Badung 3% 13% 21% 8% 8% 0% 37% 3% 8% Gianyar 5% 7% 9% 14% 7% 5% 34% 16% 5% Klungkung 5% 0% 10% 0% 5% 5% 38% 24% 14% Bangli 0% 33% 25% 8% 8% 8% 17% 0% 0% Karangasem 13% 23% 17% 7% 0% 3% 23% 3% 10% Tabanan 0% 0% 10% 0% 50% 0% 20% 10% 10% Negara 0% 0% 17% 0% 50% 0% 0% 0% 33% Buleleng 9% 11% 18% 5% 35% 2% 17% 2% 2% All Bali 7% 12% 16% 7% 17% 3% 24% 7% 7% Note: Figures in bold are the top two factors in each district. (Data represents percentage of respondents). Negara (5), Denpasar (3) and Tabanan (3). pressures were the most commonly identified factor in Bangli and Karangasem, which may 79. The occurrence of social disturbances by be significant given that these areas are district in Bali shows no noticeable increase in experiencing economic hardships as a result of 2003. A possible exception to this is in the downturn in tourism. Politics was the most Gianyar, which was found to have experienced common factor in Tabanan, Negara, and the same number of disturbances in previous Buleleng, although the number of incidents years by May 2003.19 The villages visited in was few in Tabanan and Negara. Incidents Karangasem and Buleleng experienced a peaked in 1999 in Buleleng, mainly due to similar level of 2-3 disturbances in the first disturbances as a result of Megawati losing the five months of this year. In terms of incidents, Presidential election in October 1999. Overall, these data suggest no m ajor increase in social the most important factors in the other three disturbances following the Bali bombings districts (Badung, Gianyar, Klungkung) and in occurred. Karangasem were disputes between youths from different banjars and villages that result 80. The most commonly reported causes of in confrontation and sometimes violence. past social tensions were problems between These are compounded by social problems youths, followed by politics, social problems, such as drunkenness with youths being and economic pressure (Table 21). Poor identified as a key vulnerable group. community relations were generally not an important factor identified by the respondents; only in Denpasar was it the most commonly mentioned factor, although the number of incidents are few in the city. Economic 19 In June and July 2003, disturbances have further occurred in Batubulan and Sukawati relating to a misunderstanding between youths about land. See Bali Post, 11 July 2003, `Lagi, Warga Tengkulak Tengah ­ Tengkulak Mas Bentrok'. 33 Chapter 2: Impacts Figure 12. Reported Social Disturbances by Districts (1998-2003) 12 10 8 6 4 2 Bul Kar ele Ba an Klu du gas ng Gia ngk ng em 0 Ba nya un Ne ngli r g 1998 1999 De gar 2000 Ta np a 2001 2002 2003 ba asa na r n 81. Disputes in Bali since 1998. In contrast to (31%) adat villages. Some of these land disturbances, the survey of key respondents disputes have led to confrontation, violence, showed that land disputes are the most and damage to property, which could be frequent form of dispute recorded (71 out of important post-12 October given an increase in 124 reported disputes) in 106 villages, with land use and/or sale of land as a coping most occurring between (56%) or within strategy. Any increase in future social tensions Table 22. Possible causes of future social unrest by District Responses to Factors as Possible Causes of Future Social Tensions District Poor Economic Business Social Religion Illegal community Migration Politics Provocateur Other pressure competition issues and adat activities relations Denpasar 54.9 82.4 29.4 58.8 15.7 23.5 31.4 35.3 29.4 6.3 Badung 43.5 78.7 30.0 74.6 10.3 38.0 79.2 50.0 57.4 Gianyar 54.9 74.6 47.3 88.6 45.5 50.9 67.0 61.9 75.2 20.0 Klungkung 38.5 63.1 43.1 67.7 12.3 29.2 55.4 49.2 68.8 6.7 Bangli 31.6 71.4 50.0 81.6 4.2 37.8 79.2 46.9 61.5 7.1 Karangasem 33.3 69.9 22.8 47.8 7.9 6.4 37.4 29.1 37.0 8.6 Tabanan 30.6 40.0 12.0 48.0 1.6 4.8 69.8 20.0 43.7 7.7 Negara 56.3 79.7 51.6 73.4 12.5 23.4 59.4 60.9 57.8 Buleleng 21.3 53.5 15.7 52.3 6.3 9.4 49.6 18.0 28.1 6.9 All Bali 38.8 65.3 30.3 63.7 14.0 22.4 59.0 38.1 49.3 6.8 Note: Data represent the percentage of key respondents per district identifying a particular factor as a possible cause of future social tensions. Figures in bold signify >50percent of respondents) 34 Chapter 2: Impacts in Bali is likely to be through existing fault important. Within districts, a similar pattern lines, which have been shown in the past five was observed, although the emphasis varied years to relate to youth and social issues, from district to district. In Buleleng, which politics, land, and community relations both has the highest proportion of respondents within the Balinese and, to a lesser extent, worried about social tensions, the main factors between Balinese and migrant communities. identified were economic pressures, social Disputes between Balinese and non-Balinese problems, and politics, while in Gianyar, accounted for just 10% of disputes, mostly social issues were the most important possible over socio-cultural issues. cause with community relations being mentioned by more than half of the 82. Future Concerns over Social Tensions in respondents.20 2003. Concerns about Social Unrest over Next Six Months. Overall, 34 percent of 84. Impact of the Trials on Social Tensions. respondents in May 2003 expressed concerns The trials relating to the Bali bombings began over social unrest compared to 65 percent in on 12 May 2003, just before this survey was December 2002. This downward trend was conducted. The provincial police (Polda) were recorded in all districts except Klungkung, and proactive in ensuring and demonstrating to the was especially pronounced in Denpasar and public that adequate security arrangements Jembrana, both of which have a high were in place for the trials.21 The trials had proportion of non-Balinese residents. Thirteen long been anticipated in Bali and were being sub-districts had more than 50 percent of broadcast live on local television (Bali TV). respondents expressing concern about future One in five respondents in the survey thought social unrest over the next six months in that the trials could increase social tensions. Buleleng (7 sub-districts), Tabanan (2), Not surprisingly, this was high in South Gianyar (2), Karanagasem (1) and Badung (1) Denpasar (50%) where the trials were taking (Figure 10). In seven of these sub-districts place, but not in Central Kuta (25%). Of the [Kuta Utara (Badung), Payangan (Gianyar), twelve sub-districts with more than one in Manggis (Karangasem), Kubutambahan, three respondents anticipating increased social Sukasada, Seirit, Busungbiu (Buleleng)], there tensions as a result of the trials, four of these was a greater proportion of respondents were sub-districts in Buleleng (Grogkak, expressing concern in May 2003 than in Sukasada, Banjar) and Karangasem (Manggis) December 2002. Bangli, Klungkung and where respondents were also concerned about Jembrana were the districts with the lowest social tensions over the next six months. social tensions, with less than one-quarter of respondents being concerned over the next six 85. Residency Administration. In the report months. presented to the CGI in January 2003, the implementation of residency permits for 83. Factors Influencing Current Social migrants outside of a particular district was Tensions. The survey of key respondents in highlighted as causing some concerns, notably May 2003 identified three main factors believed by respondents to be causes of 20 current and future social tensions, namely The KDP survey fielded in May found similar results economic pressure (65%), social problems with 92% of respondents believing that the economic downturn could potentially provoke social tensions and (64%) and political tensions (59%) (Table 22). 87% believing political differences could cause social The action of provocateurs (49%), poor tension. community relations (39%) and the impacts of 21 Bali Post, 10 May 2003, Dari Gelar Pasukan Polda illegal activities (38%) were considered less Bali - Dari Jihandak sampai Anjing Pelacak. 35 Chapter 2: Impacts in Denpasar and Badung.22 Since then, the areas, `Forums of Political Parties' have been provincial and district governments in Bali formed with the goal of ensuring that the have agreed to a standardized procedure in elections occur peacefully and smoothly. which the cost for a KIPEM for three months Interviews with respondents in many sub- is Rp. 50,000 for migrants from outside of Bali districts revealed increasing apathy toward and Rp. 5,000 for migrants who are residents political parties and elections, with concerns of other districts within Bali.23 In May 2003, that the parties are not focusing on issues and most of the key respondents thought that political education, but rather on mobilizing residency administration services had either supporters in a show of strength that only improved (25%) or were the same (37%) as creates security concerns within the December 2002. Both the key respondents community. In certain areas, apprehension and traders surveys illustrated that more than that political parties may cause divisions in the 70 percent of people supported the residency community if support is based on adat or administration policy as a security measure, family ties exists. although it is clear from qualitative studies that there is a need for care in the definition of 2.5 Local Security `local resident' and `migrant', and for the implementation of the policy not to be over- 87. Bali has taken forward measures to excessive. Encouragingly, in May 2003 improve security in tourist areas, key strategic people's place of birth (Bali vs. outside of facilities (such as the airport), and the local Bali) had no relation to their attitudes neighborhood security system following the regarding residency administration, suggesting Kuta tragedy. The provincial police have that the policy was now being seen as an identified ten main security threats including important security measure by all people in terrorism, violent crime, narcotics, small arms Bali. Of fifty non-Balinese traders interviewed trade, women trafficking, people smuggling, in May 2003, roughly three-quarters possessed money laundering, fraud and deception, fights a temporary residency card (KIPEM), with the between banjars and conflict between political cost of the permit being the main reason given parties.24 Crime rates, in general, were by those not possessing a KIPEM permit. reported to be declining by almost one-quarter of respondents, about half thought they had not 86. Elections. National elections in April 2004 changed, while almost 10 percent thought may increase social tensions between political crime rates were increasing. More than one-in- parties. In May 2003, recent clashes between five people thought crime rates were supporters of different parties were most increasing in Blahbatuh (58%), Kubutambahan commonly mentioned in Badung (3.2%), (33%), Denpasar Barat (28%), Sawan (25%) Tabanan (2.3%), Denpasar (2.0%) and and Sukasada (21%). Premanism is also Buleleng (1.5%), and it is likely that political becoming an increasing security concern for tensions will increase into 2004. In some 44 percent of respondents in Bali, more so in 22 World Bank, UNDP, USAID (2003) Confronting 24 Irjen Pol Drs Made Mangku Pastika (2003) Efforts Crisis: Impacts and Response to the Bali Tragedy. towards Tourism Recovery from a Police Perspective. January 2003 23 Paper presented at the workshop on `Tourism Recovery Kesepakatan Bersama Gubernur Bali dengan in Bali', 8 July 2003 (Centre for Research and Bupati/Walikota SeBali No. 153 Tahun 2003 tentang Development in Tourism and Culture, University of Pelaksanaan Tertib Administrasi Kependudukan di Udayana with support from Bali Tourism Office, Propinsi Bali. USAID and UNDP). See http://www.bali.go.id/terkini/berita/100203.htm. 36 Chapter 2: Impacts Table 23. Attitudes to Security Providers in Bali 2.6 Local Management of Social Tensions Commu - District Pecalang Police Hansip nity 89. Social tensions in Bali have generally been Denpasar 2.30 2.35 1.96 2.97 managed effectively, but there remains a need Badung 1.93 2.23 1.99 3.18 for support in specific targeted areas to address Gianyar 2.14 2.13 2.24 2.60 underlying causes of tensions. The strong Klungkung 1.80 2.45 2.21 3.00 social ties in Bali coupled with the Balinese Bangli 1.74 2.04 2.65 3.40 view of the world as a balance between Karangasem 1.52 2.04 2.23 3.20 opposing forces (rwa bineda), where daily Tabanan 1.26 2.13 2.92 2.93 conduct (karma) aims to ensure that this Jembrana 1.52 1.94 3.09 2.98 balance is maintained, were undoubtedly of Buleleng 1.85 1.92 2.41 2.92 great importance. The bombings have hugely All Bali 1.68 2.10 2.34 3.00 disrupted this balance in Bali, and a response Note: Figures represent the average rank given to each actor based on violence would be at odds with the (lower number = greater importance). needs of the Balinese for more order in their world. It is not surprising, therefore, that one urban (63%) than rural (36%) areas.25 More of the main responses has been introspection than three-quarters of respondents highlighted and prayer (sembayangan), highlighted by the this in the following sub-districts Kuta Selatan cleansing ceremony (Pemarisuda Karipubaya) (100%), Negara (100%), Kuta Tengah (88%), of 15 November 2002. In many interviews Sawan (88%), Pupuan (83%), Mengwi (82%), conducted, the view presented is that the Denpasar Selatan (77%), Tabanan (77%), bombing represented a sign that something Ubud (75%) and Tembuku (75%). must be out of balance in Bali, which has led to an increase in critical reflection on some 88. Key respondents have relatively high aspects of the nature of present-day tourism in confidence in the police in Badung and Bali. Denpasar, and they are the most trusted security provider in Denpasar (Table 23). The 90. Village heads, traditional (adat) picture is somewhat different in other districts, community leaders and the police, along with where generally key respondents gave a higher sub-district heads (camat) and other importance to the community and pecalang. community leaders, were the most important Bali police chief Irjen Pol Drs Made Mangku actors in terms of local players who managed Pastika plans to upgrade security in Bali to past social conflicts mentioned in the key meet international standards, highlighting the respondents survey conducted in January need for professional community policing 2003. Overall, the resolving conflict, although approaches. greater emphasis was placed on the role of traditional (adat) community leaders, reflecting the increasing importance of the desa adat under regional autonomy. 25 Premanism refers to the semi-criminal and criminal actions undertaken by gangs whose members include disenfranchised, unemployed youth and others from the informal labor sector. See Phillip King, Securing the 1999 Indonesian Election: Satgas Parpol and the State. CAPSTRANS Working Paper. 37 Chapter 2: Impacts Figure 13. Concerns about Social Tensions, December 2002 and May 2003 % respondents worried about social unrest over December 2002 May 2003 90% 80% 70% 60% next 6 months 50% 40% 30% 20% 10% 0% ng ar em n li r ng g a ali sa ng na un an ny du le lB as pa Ba ba gk br ia le Ba ta ng en Bu m G Ta un To Je ra D Kl Ka District Note: Figures represent the percentage of respondents in the survey of sub-district (kecamatan) key respondents reporting concerns in each district. Data for December 2002 are from University of Udayana (January 2003) and data for May 2003 are from University of Udayana (June 2003). Community and religious leaders at all levels traditional (adat) community leaders, and in Bali have been active in maintaining calm police. At the district and sub-district levels, and good community relations, including inter- forums of village heads ( Forum Kepala Desa), faith forums at provincial and district levels traditional leaders (Forum Bendesa Adat), and (Forum Kerjasama Antar Umat Beragama), police (Polres, Polsek) could be supported in that have had a positive impact. Of concern is dealing with the underlying causes of tensions how these structures reach out to those most and those potentially vulnerable to becoming susceptible to becoming involved in involved in violence acts. confrontation and violence, especially the sections of the unemployed and youth. In 91. Bali, like many other societies, has a recent terms of targeting institutional support, these history of social tensions that were clearly results suggest that appropriate measures to exacerbated after the Kuta bombings. The support actors involved in reducing social immediate tensions in the weeks and months highest ranked actor was the village head, with following 12 October were managed 39 percent of respondents ranking the village effectively by community leaders, and Bali head as the most important actor, far in excess proved its reputation as a peace-loving island of other actors. In terms of future conflicts and in the face of a monumental tragedy. social tensions, more than half (54%) of the Nevertheless, the persistence of the economic key respondents ranked the village head as the crisis in Bali has placed new stresses on the most important actor for tensions and conflict society as mounting socio-economic pressures should focus on the role of village heads, including reduced incomes, unemployment, 38 Chapter 2: Impacts and school dropouts begin to affect people's and gas exports from East Java in 2002 ability to cope and sense of future. With reached US$ 4.8 billion, a downturn of 8.9% increases in criminality and continuing local compared to 2001. In 2002, exports of security concerns in certain areas, the inter- plywood, handicrafts, and food increased from dependence of human prosperity and security 2001, while for the first two months of 2003, are clearly seen and demand responses that exports overall showed an increase of 10% on link traditional welfare and security 2002. Comparison of January-February 2002 approaches. Indeed, the police chief, Irjen Pol and 2003 reveals a downturn in exports in Drs. Made Mangku Pastika, states that Bali early 2003 of textiles (-23%), handicrafts (- potentially faces an even greater disaster than 24%) and clothing & apparel (-21%) amongst 12 October if there is no successful response to others. In sum, East Java continues to the socio-economic situation.26 experience the effects of the 1998 economic crisis, with per capita GRDP incomes in 2002 92. These problems faced in Bali are not still 8% lower than 1997. uniformly spread across the island. Rather, Bali has a number of `tense' sub-districts 94. Some of these declines may have been where social welfare and other social issues, effects of the Bali bombing, but external security, political tensions, and community factors such as increased competitiveness from relations factors are interacting and tending to other economies in the region such as China increase overall social tensions. Of particular and internal factors such as the decline in the concern are the broad problems associated prawn industry are likely also to have with youth and unemployment. This report has influenced these trends. Overall, East Java in provided a first step in assessing the extent and 2001 was ranked 22nd out of 26 provinces level of concerns over social tensions and their based on the Human Development Index with underlying causes in Bali. In the short-term, a poverty rate of 29.5%, suggesting that the government, the police, community leaders, Bali bombings play only a minor role in a and other actors should build on this and work greater range of development challenges.27 together to ensure that these underlying causes The small and medium scale sector in East are addressed and that social cohesion in the Java dwarfs that of Bali, with the direct most conflict-prone areas of Bali is impacts of the Bali bombings probably only maintained. playing a limited role in its overall fortunes.28 2.7 Off-Bali Impacts: East Java 27 UNDP (2001) Towards a New Consensus: 93. The sheer size of East Java and its Democracy and Human Development in Indonesia. economic structure means that the impacts of Indonesia Human Development Report 2001. 28 the Bali bombings on the province's economy Small and medium-sized enterprises are estimated at have been both far more diffuse and localized more than 6 million in East Java (Dinas Koperasi dan UKM Jawa Timur, 2002) and are involved in a range of than in Bali. The effects of the Bali bombings activities including agriculture, handicrafts and food are moreover overshadowed by a generally production with more than half of these businesses slow recovery of East Java in the wake of the active in non-agricultural sectors. Small and medium- Asian economic crisis after 1997/8. Non-oil sized enterprises in East Java are a major source of employment, accounting for 92% of jobs, but less than 50% of the GRDP of East Java. The total export value of goods produced by SMEs in 2001 was estimated at 26 US$ 337m, more than half of these being handicrafts Interview with Irjen Pol Drs. Made Mangku Pastika, and food. (Joint Research on SMEs Export potential, June 2003. Balitbangda, Institut Teknonologi Surabaya and 39 Chapter 2: Impacts Small-scale enterprises in East Java mostly collected data that reflects trade linkages market their products and services in the same between provinces. Products exported through sub-districts and districts (48% and 30%, Bali are believed to represent 36% of total respectively), with only 8% marketing to other exports from small and medium-sized provinces and less than 1% producing for enterprises in East Java with more than 50% of export markets.6 Small businesses within East food consumed in Bali coming from East Java appear, therefore, to be dependent on Java.29 Products are typically exported to Bali local markets within the province, indicating as half or partially processed, and are finished that the impacts of the crisis in Bali are in Bali from where they may then be exported. unlikely to be broad and widespread in East Many producers in Java have showrooms in Java, but focused on specific commodities in Bali, and export of products may be made specific areas that have trade linkages with directly from Bali or from the production area Bali. in Java. Information on these trading patterns and the importance of Bali to producers in East 95. Unfortunately, there are no routinely Java and elsewhere is sadly lacking. Figure 14. Concerns About Future Social Disturbances in May 2003 DA NA U B UYA N B ULE LE NG DAN AU B RA T AN B A NG LI JE MB RA NA KA RAN GAS EM TA B AN AN GI A NY AR BA DUNG KOTA DE NPA S AR KLUNGK UNG 29 Joint Research on SMEs Export potential, Universitas Brawijaya, December 2002 and Balitbangda, Institut Teknonologi Surabaya and PUSKOWANJATI Economic Impact Assessment Jan Universitas Brawijaya, December 2002 and Researcher 2003, BPS, DEPERINDAG Jawa Timur). interview with ASDP, Dinas Perhubungan Jawa Timur. 40 Chapter 2: Impacts 96. East Java is also a source of labor, impacts recorded in the May 2003 assessment especially in the informal sector, and labor were a consequence of the Bali bombings, migration from East Java to Bali increased with businesses reporting the war in Iraq and following the onset of the economic crisis in SARS as having limited impact. 1998.30 Estimates of people entering Bali via seaports in 2002 are roughly 230,000 from 98. Three-quarters of community leaders in the East Java via Gilimanuk and roughly 460,000 10 districts reported reduced incomes in the from Lombok via Padangbai.31 It is not community since October 2002. This appears known what proportion of these people came to have multiple causes including the to Bali for work, but given that Badung district economic downturn in those areas with in December 2002 is reported to have issued linkages to Bali, the lack of employment about 80,000 temporary residency permits opportunities in Bali as well as the increase in since 2000, which are a requirement for both fuel, electricity and telephone tariffs in Balinese and non-Balinese residing January 2003. This does appear to have led to temporarily in the district, it is likely that the hardship with participants in focus-group proportion is relatively small even accounting discussions reporting reduced levels of for temporary residents that do not possess a expenditure and consumption, and even school temporary residency permits.11 Nevertheless, dropouts. Since the bombing, there has been these data show that up to one-quarter of no significant increase in social tensions, residents in Badung are likely from other although respondents commented on increased districts in Bali and beyond. anti-American attitudes as a result of the war in Iraq. 97. The May 2003 assessment identified ten districts as manifesting the most likely 99. Sales Volume Downturn. The Bali impacts: Surabaya, Sidoarjo, Mojokerto, bombing did have a significant localized Lamongan, Pasuruan, Lumajang, Jember, impact on the turnover of the sample of 200 Situbondo, Banyuwangi and Tulungagung. handicraft and food industry businesses visited Within the districts, 200 small businesses in (Figure 15). On average, these reported a sales East Java show impacts restricted to certain downturn of 50% in April 2003 compared to areas with specific trade linkages to Bali. For before October 2002 (up to 70% from some example, these included silver and wood business). The Iraq war and SARS were seen industries in Pasuruan, granite and metal to have a much smaller impact. Those products in Tulungagung, wood and bamboo businesses with trade links to Bali were the products in Banyuwangi, all of which most affected six months after the Bali experienced over 50% reductions in turnover. bombings due to cancellations and reductions The impacts on small businesses in the in orders as well as delays in payments.32 industrial areas of Surabaya and Sidoarjo were minimal compared to other areas. Most of the 100. Most Impacted Commodities. Of the 10 commodities investigated, those with significant export markets - wood (furniture), 30 silver, handicrafts, and garments - are thought Universitas Airlangga, UNDP, USAID, World Bank, Rapid Assessment Report January 2003 to be the most affected. Seventy percent of 31 silver products are exported from East Java, Bali Post, 3 December 2002, Upaya Penertiban Penduduk; see also Bali Post, 15 January 2003, Aparat Bertindak Cepat dan Bebas Sogokan which states that Kuta has issued 31,677 temporary residence permits, 32 PUSKOWANJATI Socio-economic Impact Benoa 13,151 and Dalung 12,407 permits since 2000. Assessment, May 2003 41 Chapter 2: Impacts Figure 15. East Java Handicraft and Food Sector Impacts 100 90 100 70 % Businesses with Sales Downturn % Sales Downturn % Businesses with Staff Reductions 90 80 90 % Reduced Staff Relative Monthly Staff Employed Relative Monthly SalesVolume 60 Monthly Sales Employment 80 Volume 70 80 70 70 50 60 60 60 50 40 50 50 40 30 40 40 30 30 30 20 20 20 20 10 10 10 10 0 0 0 0 Pre-bomb Post-bomb Iraq War SARS Pre-bomb Post-bomb Iraq War SARS Period Period Source: Assessment Survey May 2003 principally to Europe, America, and Japan. orders of these commodities from East Java. Several producers interviewed reported no export orders since October 2002. The 101. Most Impacted Areas: The survey garments industry has also been in decline, at indicates that the most impacted areas are the bottom of its economic cycle in May and districts with clusters or village industries with facing increased competition from other direct or indirect trade with Bali. These are countries in the region. In general, overseas Pasuruan (silver and wood industries), buyers for a range of commodities are reported Tulungagung (granite and metal products), to have reduced their visits to Bali and East Lumajang (silver, garments and foods), Java, which has consequently reduced export Banyuwangi (wood and bamboo products), Figure 16. East Java: Sales and Staffing Changes Post Bali Bomb Iraq War SARS outbreak Post Bali Bomb Iraq War SARS outbreak 100 100 90 90 80 80 Monthly Employment 70 70 Monthly Sales 60 60 50 50 40 40 30 30 20 20 10 10 0 0 ng n gi to r g r an to g ya g gi n jo an be o o be ga ya jo un an an gu an er ga er nd nd an ar ru ba ar ru m ba on m Ag aj ok ok aj do A on w bo bo su do w su Je ra m Je ra m yu oj m oj ng yu Si m tu tu Pa Si Lu ng Su Pa Su Lu M La M an La Si Si an lu lu Tu B Tu B District District Note: Data are relative measures to pre-bombing sales and employment (= 100) from a sample of 200 small businesses in East Java. 42 Chapter 2: Impacts and Situbondo (wood, fisheries and shell in search of work (e.g., from Banyuwangi), handicrafts). Clusters or village industries these migration flows are limited in visited in Surabaya and Sidoarjo appear to comparison to the overall size of East Java. have had less impact because of the better Since the Bali tragedy more than 1,100 access to local markets in these urban areas. workers are recorded as having lost employment in Bali and returned to East Java. 102. Unemployment. Downturns in sales 34 However, it is likely that the actual number have affected employment in the sample of of people returning to East Java is much industries visited. At first, employers cut work greater and includes those who have left due to hours for staff and laid off temporary workers, a lack of work opportunities as well as the but with the sustained impact of the downturn, several thousands of people who have been layoffs of permanent staff eventually occurred. sent back to Java due to residency violations. More than 80% of the focus businesses Working overseas is a potential coping reported laying off in excess of 50% of staff as mechanism and opportunity for families to a result of the Bali bomb, with the impacts of increase their incomes. With East Java the war in Iraq and SARS being much less in contributing more than 40,000 migrant comparison (Figure 16). workers in 2002, the assessment found increased interest for resident to become 103. Social Welfare. There appears to be overseas migrant workers (TKI). localized impacts on social welfare in East Java, although the full extent and intensity of 105. Social Issues and Tensions. The Bali these were difficult to measure. The survey of bombings increased worry in East Java (39% key respondents in East Java found 74% of of respondents) but overall had little impact on community leaders reporting decreased social issues and tensions. A number of household incomes in the community since respondents reported that they were afraid of October 2002.33 Focus-group discussions traveling to crowded places away from home highlighted that, since October 2002, people (16%), were increasingly cautious talking were reducing levels of consumption and about SARS (16%), and increased anti- expenditure on food and healthcare and America sentiments over the war in Iraq experiencing difficulties in paying school fees, existed (22%). The Bali bombing had no with reports of children dropping out of impact in Surabaya and Sidoarjo according to school. District governments have an respondents, where the price increases in important role in following up these findings goods, especially sugar, BBM, telephone, and identifying in more detail the social electricity and water had a much greater welfare impacts from the Bali bombings and impact on the community. In Lamongan, other factors that have affected local people reported that there was increased economies and people's livelihoods in East difficulty in traveling to Bali and going to Java. Malaysia to work as an overseas worker due to discrimination. 104. Migrant Labor. While the 2000 Population Census shows that a significant 106. Coping Mechanisms in East Java. number of East Javanese have migrated to Bali Coping strategies identified and used by most survey respondents are as follows: reducing 33 Key respondents in East Java included fifty village 34 heads, community leaders, ulama/kyai, teachers, and Interview with BAPPEPROP East Java, January heads of local cooperatives in the 10 districts. 2003. 43 Chapter 2: Impacts employees; selling assets; exploring local and domestic markets; seeking direct export opportunities; adjusting and creating local demands; reducing prices; increasing loans and borrowings; savings to secure further crisis; employ families or relatives; closing down businesses; seeking other potential sources of income. Some of the respondents do not have an idea how to promote their businesses in the future. Overall respondents were positive and optimistic about recovery potential, but were unsure of exactly "when" and" how" this would be achieved. 107. Bali, Lombok, and East Java have experienced negative impacts due to the October 2002 bombings. Impacts were highest in areas directly linked to tourism and ranged from direct loss of income to socio- economic difficulties to fear of social tensions. On each island, residents employed coping mechanisms to mitigate perceived and real impacts. 44 Chapter 3: Responses CHAPTER 3: RESPONSES 108. Responses and pledges of support to delivery, good governance, environmental the direct and anticipated impacts of the Bali management and spatial planning) will not bombings came from a wide range of actors make Bali any more resistant to further including the Government of Indonesia, crises and trends that may affect tourism in international donors, private charitable the future. donators and civil society organizations locally · The impacts have not been area-specific and overseas, reflecting the level of worldwide but dispersed, presenting difficulties for support and solidarity for Bali and Indonesia the effective targeting of responses. in the face of the worst terrorist attack since 11 September 2001. While it would be valuable · Present responses were mostly designed in to review all the support and responses that the aftermath of the Kuta bombings and no have occurred as a result of the Bali bombings, longer reflect current needs in late 2003. A this remains beyond the scope of the present recovery in tourism arrivals, which seemed assessment. Instead, we focus on government to be occurring in early 2003, would h ave and donor responses that address the socio- led to an easing of the economic crisis in economic impacts of the resultant crisis in Bali and related areas. However, since order to assess the timeliness and effectiveness October's terrorist attacks, the war in Iraq of responses to the crisis in Bali, and whether and the emergence of SARS has further these are adequate to mitigate the present attenuated the recovery in international impacts of the crisis. tourism arrivals and its socio-economic consequences, leading to a deeper and 109. The downturn in tourism arrivals to more prolonged crisis than anticipated in Bali and Indonesia since October 2002 has January 2003. presented multiple challenges for responding. Broadly, five issues relating to context, impact · Much can be done by regional and response are worth highlighting: governments through restructuring current development spending and programs, · Many areas with significant tourism however local governments are required to linkages in Bali previously benefited take proactive measures in linking the economically and have become relatively changed context in Bali and elsewhere prosperous compared to other areas, with current and future developmental raising issues regarding relative need spending. This in part reflects the absence compared to other areas in Indonesia with of detailed information on the crisis as well higher levels of poverty as difficulties experienced in the · Bali faces serious longer-term operationalization of new development development issues in addition to the approaches and strategies. shorter-term recovery agenda. Dealing 110. This chapter of the report focuses on with the latter by focusing on tourism the responses from the Government of recovery at the expense of the longer-term Indonesia and international donors to the Bali developmental issues (such as economic crisis based on results from surveys and diversification, effective public service 45 Chapter 3: Responses interviews, and analyses these responses in the development, (iv) transportation, (v) budgetary light of the findings of the assessment. A incentives, and (vi) social safety nets.35 major issue in determining policy for the overall response to the Bali crisis is the 112. In December 2002, the government's balance between (a) tourism-led recovery target was to achieve tourism recovery in Bali initiatives, (b) social protection responses, and within one year. Recovery would include three (c) medium-term economic diversification stages: "rescue" (October-December 2002), initiatives to enhance sustainability. The "rehabilitation" (January-June 2003) and government policy following 12 October normalization (July-November 2003). The appears to consist mostly of tourism-led main indicator for recovery as defined by the recovery responses focusing on security and Coordinating Ministry for Social Welfare is tourism promotion, but this policy does not 5,000 foreign direct arrivals to Bali per day, appear to be widely appreciated by many with 3,000 being the estimated "break even stakeholders, emphasizing the greater attention point".36 From the government's perspective, needed for effective communication and the main obstacles to recovery in Bali relate to public relations. In contrast, donor responses perceptions of security and tourism, which has have on the whole been supporting either led to a focus on security and tourism social protection responses or medium-term promotion. diversification initiatives through a combination of changes in existing programs 113. The government allocated Rp. 100 and additional new ones, although many of billion (est. USD 12 million) for the short-term these are yet to show tangible impacts on the recovery work of the National Tourism ground. These issues and delays in the Recovery Team. 37 These funds were realization of responses have contributed to the contingent on proposals for the actual release overall sense in Bali that pledges for support of funds. Ministries or department must immediately following the bombing have not submit their proposals to the Coordinating been followed through with concrete Ministry of Social Welfare for review, then for outcomes. secondary reviews by BAPPENAS and the Ministry of Finance. The disbursement of funds is based on approval of the Minister of 3.1 National Government Responses Finance, who releases the funds to the Coordinating Ministry of Social Welfare, who 111. Following the emergency phase in the will then approve the money to the relevant days and weeks following 12 October 2002, Ministry or Department. BAPPENAS and the government and donors began to address the Ministry of Finance requested all Ministers immediate consequences of the bombings. and Agency heads to prioritize Bali when The national government formed a `Team for drawing up the 2003 development budget. By the Coordination of National Tourism Recovery' at the end of November 2002 headed by the Coordinating Minister for Social Welfare, and consisting of six working groups 35 Keputusan Bersama Menko Polkam, Menko Ekuin, focusing on: (i) security in tourist areas, (ii) Menko Kesra ­ 29 November 2002. promotions and events, (iii) infrastructure 36 Pikiran Rakyat, 14 Desember 2002, 'Bali Harus Kembali Dikunjungi 5.000 Wisatawan/Hari Setahun untuk Normalkan Kepariwisataan Nasional' 37 Bali Post, 6 Januari 2003, Pencairan Dana Pemulihan Pariwisata Bali. 46 Chapter 3: Responses early June 2003, the following funding emergency, short-term, medium-term and allocations had been made by the central long-term phases (see Annex 2).39 The Bali government in response to the Bali crisis Recovery Team, headed by the Vice Governor, (details of sectoral responses will be discussed formed six working groups matching the in section 3.4): working groups of the national team for tourism recovery. The group was reorganized · Rp. 12 billion to Coordinating Ministry of in March 2003 and the team's activities were Social Welfare for rescue, preparatory and to rely on the 2003 provincial budget (APBD) coordination operations (disbursed). 2003. The new team, which remains headed · Rp. 8 billion to Ministry of Culture and by the Vice Governor and coordinated by Tourism for coordination and preparatory BAPPEDA, has six sub-teams as follows: activities for campaigns and events to stimulate tourism (disbursed). · Security System ­ headed by the Deputy · Rp. 36 billion to recover security to Chief of Police with members including Department of Defense and Security for district heads and other government security system revitalization program officials. (approved). · Tourism Promotion and Events ­ led by · An additional proposal has been submitted the Head of Bali Tourism Office with by the Ministry of Culture and Tourism for members including other officials and the Rp 18 billion, however no decision has private sector (Bali Tourism Board, PHRI, been made. and tourism associations). · Transportation ­ led by the Head of the 114. At the end of June 2003, the Minister Bali Office of Transportation with for Culture and Tourism formed a Working members including the Head of Ngurah Group involving government, industry Rai airport and other government officials. representatives (ASITA), and the Tourism · Infrastructure Development in Tourism Dialogue Forum (Forum Dialog Pariwisata) to Areas ­led by the Head of Bali Public support national tourism recovery. The Works Office and including the Bupati of Working Group will develop and implement Badung, Parum Samigita, and Bali Human programs on tourism promotion, human Ecology Study Group. resource development and international · Fiscal Incentives ­led by the Head of Bali cooperation, tourism products and incentives Cooperatives, Small and Medium Size for the tourism industry.38 Enterprises Office with members including other government officials and the head of 3.2 Provincial and Local Government Bank Indonesia, Denpasar. Responses · Socio-Economic Recovery ­ led by the Head of the Bali Board for Community Provincial Government Response in Bali Empowerment with members including the heads of relevant government offices and 115. The provincial government of Bali NGOs. formed a Team for Bali Recovery and produced a plan for recovery including 38 39 Bisnis Indonesia, 15 July 2003, `Pokja pemulihan Governor Decree Nos. 472/04-F/HK/2002 and pariwisata terbentuk'. 102/04-F/HK/2003. 47 Chapter 3: Responses 116. Regrettably, issues of financing, utilization of funds, rather than a especially for short-term recovery funds from comprehensive recovery package. It was the central government, and poor coordination, anticipated that the central government would planning and budgetary mechanisms among provide funds for Bali recovery programs the various levels and parts of government ­ implemented by regional governments. In July central, provincial, and local ­ has meant the 2003, the Bali provincial office of DG Bali Recovery Team has not yet been effective Anggaran, Department of Finance stated that in initiating a comprehensive recovery the budgeted deconcentrated funds for 2003 response.40 The level of effective response from the APBN was Rp. 341 billion. potentially provides not only lessons for BAPPEDA reports that approximately Rp. 10 moving forward, but center-regional billion of these deconcentrated funds has been collaboration in other future regional/sub- received from the APBN, and that there are national crisis response initiatives. insufficient resources for regional governments to implement recovery programs. 117. With decentralization in 2001, Indonesia's local (kabupaten and kota) 119. Provincial recovery efforts have governments attained a greater degree of therefore depended upon existing funds from autonomy and resource allocations. The provincial budgets. The provincial response of the regional government must government in Bali has focused on security therefore be seen in the context of their (including residency administration) and evolving authority and resource base, tourism promotion. By early 2003, many of especially to the extent that this was sensitive the other plans developed by the provincial to the post-bombings downturn of the tourism government had not yet been implemented. In industry. The regional governments of Bali ­ order to secure funding for recovery province, kota, and kabupaten ­ spent Rp. 2.5 programming, BAPPEDA Bali submitted a trillion in 2001 (est. USD 284.60 million). proposal to the central government in February The regional governments, however, have only 2003, but failed to secure funding, for the `Bali a limited degree of discretion for short-term Rescue and Recovery Program.' This focused fiscal responses, as the majority of these funds on community grants, food security, education, are devoted to civil servant salaries. The and health support covering about one-half of center now maintains far fewer civil servants Bali's desa adat with a proposed budget of Rp. in the province, but in 2001 spent at least 350 billion. another Rp. 0.57 trillion (est. USD 63 million) in deconcentrated development expenditures.41 120. Under decentralization, the bulk of provincial and local government revenues still 118. The disbursement of funds from central come from the central government through the government departments to provincial level general block grant (DAU). These funds are offices has occurred in the absence of a allocated in such a way that insulates them strategic budgeted programmatic framework. from major regional economic downturns, Poor coordination has resulted in ineffective such as those that occurred in Bali in the wake of the bombings. Taxes on hotels and restaurants (PHR) are a local revenues source 40 For example, see Bali Post, 6 March 2003, `Menko (PAD) in Indonesia. While in most parts of Kesra Akui Dana ''Recovery'' Bom Bali Lamban'. Indonesia these revenues are not very 41 This data accounts for just over half of central significant, they were a major source of development expenditures to specific provinces (WBOJ revenue in Bali, especially in those districts 2002). with a high concentration of tourism like 48 Chapter 3: Responses Badung. For example, in 2001 the kabupaten several districts (including Karangasem and enjoyed a per capita local budget (APBD) that Bangli) reported that actual PHR revenues was double that of the national average (Rp. were well behind targets set in budgets. 1.3 versus 6.6 million per capita) by deriving almost half of its total revenues from hotels 123. Despite being granted a more limited and restaurants. role in basic service delivery with the 2001 decentralization, the provincial level government may still be best placed, from a District Government Response in Bali fiscal and coordination stand point, to play a 121. Table 24 evaluates recent more proactive role in the crisis response. The developments for the regional revenue base. revenues of Bali province stood at Rp. 245,000 Drawn from comparisons between 2002 per capita in 2001, almost one-third above the realizations and plans, the impacts of own national average of Rp. 189,000 per capita. revenues have been significant. While Badung Moreover, less than one-third of its appears to face lower pressures in terms of its expenditures were effectively earmarked for wage bill (44% versus almost 80% in wages. At the same time, the province Karangasem), its own revenue impacts have however has not been immune from a fiscal been more significant, with PHR revenues squeeze of its own. The province is also down an estimated 40 percent (est. Rp. 100 significantly reliant on motor vehicle fuel billion or 11 million USD). While more stable taxes and registration taxes (PBBKD, PKB, sources such as the general block grant (DAU) BBNKD), which would have been highly have meant that local governments can susceptible to the economic downturn. As continue to cover their recurrent costs taxes are also shared with the local (especially wages). Discretionary resources in governments, this would have further the development budget that could have been constrained their fiscal position. Effectual used for rapid crisis response at the local level targeting of the provincial budget, in close have been squeezed through a reduction of coordination with central government own revenues.42 deconcentrated funds, therefore appears to emerge as the major fiscal channel for an 122. Districts with reduced target APBD for effective response to the impacts on Bali. 2003 are Badung, Denpasar, Gianyar and Karangasem. Badung, which prior to the 124. These data suggest that local bombing shared 30% of its PHR with six other governments on both ends of the directly and districts (Klungkung, Bangli, Tabanan, indirectly impacted spectrum have been Jembrana, Buleleng and Karangasem), has affected and will compromise the ability of reduced this share to 22%.43 In June 2003, district governments to meet the additional resource needs for initiating recovery responses as well as meeting regular 42 Until 2002, regional governments in Indonesia broke commitments. While Badung was richer and down their budgets into routine and development enjoyed larger discretion in terms of its budgets. Projects, such as assistance to particular development budget, the fiscal impact of the sectors or transfers to villages, were typically booked bombings has been most direct. Whereas under the development budget. impacts in Karangasem have been more muted 43 The sharing of hotel and restaurant revenues by Badung appears to reflect a negotiated realization of the interdependencies of the islands local governments in in the tourism sector, although this also reveals their the context of tourism, and possibly the seeds of vulnerability to periods of economic downturn. enhanced provincial level coordination and management 49 Chapter 3: Responses Table 24. Bali Regional Public Finance in 2003 Restaurant and Wa Per capita Total Own Revenues Local Budget -APBD Hotel (PHR) Own ges APBD (Rp) (Rp billions) (PAD) (%) District (Rp billions) Revenues (Rp billions) 1 % 1 % 1 % 1 2002 2003 2002 2003 2002 2003 2001 2002 2003 change change change Badung 2 516.0 379.5 -26.5% 310.7 205.0 -34.0% 250.0 150.0 -40.0% 43.9 1,491,920 1,097,255 Denpasar 379.0 325.0 -14.2% 91.0 85.8 -5.7% 45.0 37.5 -16.7% 56.5 711,817 610,397 Tabanan 282.3 317.2 +12.4% 31.2 34.0 +9.0% 7.6 6.5 -14.8% 76.7 750,738 843,550 Jembrana 192.7 187.6 -2.6% 6.0 7.0 +16.7% 0.13 0.11 -16.0% 62.8 831,299 809,384 Buleleng +29.6 296.1 379.8 +28.3% 16.2 19.7 +21.6% 2.5 3.3 85.2 530,384 680,453 % Karangasem 243.6 238.0 -2.3% 23.7 23.2 -2.1% 10.0 8.0 -20.0% 78.3 675,754 660,220 Bangli 137.3 166.3 +21.1% 6.1 5.6 -8.2% 0.6 0.15 -75.0% 66.0 708,550 858,207 Klungkung 151.0 172.7 +14.3% 12.4 10.3 -16.9% 0.7 0.5 -26.5% 77.4 972,743 1,112,313 Gianyar 930,42 365.8 283.2 -22.6% 54.2 44.0 -18.8% 21.2 21.0 -0.9% 17.1 720,327 2 Province 29.8 Source Notes: 2002 figures refer to realizations, 2003 figures to planned budgets, 2001 figures are from the Ministry of Finance owing to a smaller share of direct tourism responses to deal with specific issues such as related impacts. Karangasem has less unemployment, as well as longer-term discretion in its budgets, its 420,000 per capita economic development planning. On the budget was already over a third below the whole, district governments expected the national average, its wage share of 78% was provincial and national government to be well above the national average in 2001, and leading recovery responses, and expressed a the extent of vulnerability among its need for better coordination amongst population was higher. governmental levels in response. Overall, district governments expressed four priorities 125. Present Crisis Responses. Despite for future responses: budgetary constraints, district governments have initiated various responses to the · Maintain and increase security measures. downturn in tourism and associated impacts. · Crisis response programs to mitigate the An overview of district government responses impacts of the crisis. reported during meetings with several key · Technical assistance in economic officials in each district is given in Annex 3, though, in general, these responses are not developmental planning. comprehensive nor strategically planned. 44 · Establishment of an effective coordination Almost all district governments visited in Bali system between the provincial and district requested support with funding and/or governments. technical assistance in developing short-term 44 Meetings held in June 2003 by UNDP with district BAPPEDA, Offices of Tourism, Manpower, Trade and Industry, Board for Community Empowerment and Board for Social Unity and Community Protection. 50 Chapter 3: Responses Regional Government Responses in East Java 129. NTB/Lombok. The provincial and NTB government of NTB has not initiated a formal response to the impacts of the crisis.47 126. East Java. The East Java provincial Government departments in NTB have government responded to the crisis focusing undertaken limited responses such as trade on small businesses and social impacts.45 For promotion to support business affected by the small business, the Bureau of Economy of the crisis, but local stakeholders generally do not Provincial Government is undertaking a believe in the ability of the local government mapping exercise for SMEs that will identify to deliver an effective response.48 support for SMEs such as access to capital, training and trade promotion. Trade links 3.3 Donor Responses abroad are promoted by attending international trade fairs and exhibitions, and by working 130. The international community with Indonesian overseas missions. East Java responded rapidly to the Bali crisis. has also been active in developing links with Responses included the restructuring of other areas in Indonesia (e.g. Yogyakarta) in existing programs to address the crisis, as well marketing products from the province. as the commitment of new resources. In addition to the assessment process initiated by 127. Employment overseas is an important the UNDP, the World Bank, and USAID, source of income for East Java, more so during donors have supported a number of the prolonged economic crisis in the province. emergency, short-term recovery, and longer- For that reason, the provincial government has term development initiatives (see Annex 4). set forth as a priority support to migrant workers (TKI). Measures include agreements 131. The main donor initiatives addressing and coordination with governments in socio-economic recovery that are operational destination countries, legalized documents for on the ground in Bali include: migrant workers, rights protection, and upgrading skills through education and · AusAID - Bali Rehabilitation Fund (AUD training. 750,000 in direct grants) · USAID - Office for Conflict Prevention 128. At the district level, the 10 local and Response (in excess of USD 5 million) governments visited during the assessment in East Java had not initiated a formal response to · UNDP - Community Recovery Programme the crisis. The USAID PERFORM project (USD 300,000) will support planning, program design and · World Bank - Kecamatan Development budgeting for 2004 in East Java, which Project (USD 28 million over three years) presents an opportunity for supporting local government responses in the province.46 45 Meeting Summary with East Java Governor H. Imam management of regional finance, urban service Oetomo PUSKOWANJATI , UNDP Consultant. provision, and participatory development planning. See 46 www.perform.or.id. The PERFORM (Performance Oriented Regional 47 Management) Project supports the development of Interview with Head of BAPPEDA, NTB. regional government institutional capacity in West 48 University Mataram, Workshop on the crisis in Sumatra, West Java, Central Java, East Java, South Lombok, June 2003. Sulawesi and Papua, specifically in respect to the 51 Chapter 3: Responses 132. With the exception of USAID, these development of viable microfinance donor responses have yet to disburse institutions, and the strengthening of significant funds, and have yet to impact the systems and frameworks in East Java, Bali, current socio-economic conditions. These and NTB since 1999. initiatives have mostly been undertaking initial · World Bank ­ Bali Urban Infrastructure preparatory work, while some have Project ­ disbursements of USD 2-3 experienced administrative delays. It is million via the Community-based anticipated that these programs will be fully Development (CBD) Programme being operational and disbursing funds in the first implemented and planned in almost 300 half of 2004. desa adat; support for community 133. In addition, a number of other donor consultation in Kuta and labor intensive projects in Bali existed before the crisis and drainage works in Kuta. are developing or implementing activities that 134. Outside of Bali, in Lombok, East Java, assist recovery. These include: and other areas affected by the decline in the tourism sector following 12 October 2002, · International Finance Corporation - East there are few specific donor responses. Indonesia Business Facility (USD 20 However, the IFC, AusAID, and USAID million for four provinces including Bali, responses listed above, plan to provide Lombok and East Java over five years) program support in Lombok, and IFC will also · CIDA ­ PEP II (Private Enterprise be active in East Java. Overall donor support Participation, Second Phase) aims to has been concentrated in Bali. This should be contribute to poverty reduction in East reviewed given the prolonged crisis as a result Java, Bali, South Sulawesi and North of the war in Iraq and SARS. Areas such as Sulawesi through (i) improving the Lombok and Yogyakarta where tourism and environment for SME development and related industries provide important livelihood growth and (ii) providing interventions and employment opportunities may deserve aimed at supporting job creation within further support from donors. SMEs. 135. Donor Coordination. UNDP has been · European Commission - Sustainable supporting donor coordination with the Development of Irrigated Agriculture in government at the national and provincial Buleleng and Karangasem Project will levels in Bali, East Java and Lombok/NTB. introduce high income generating mixed Meetings with district governments in Bali farming systems through the introduction provided an opportunity to make district of new high yielding crops, increase governments aware of donor responses. involvement of female community Meetings were held between donors and local members in agriculture and other income stakeholders in Bali to brief the provincial generating activities, and enhance the government on overall donor assistance and to professional capacity of local irrigation discuss support to the business sector. Overall, and agricultural organizations.49 the resources available for donor coordination · GTZ ­ PROFI (Promotion of Small did not lead to a significant increase in the Financial Institutions) is supporting the level of engagement between donor projects, the government, and other stakeholders, which should be a priority for the coming months. 49 See http://www.delidn.cec.eu.int/develop1.htm. 52 Chapter 3: Responses 3.4 Sectoral Responses for Recovery and · Provision of security equipment for the Development Assistance airport by the Japanese government ­ this equipment has yet to be made operational. Emergency Response · Implementing new security measures through the traditional villages (desa adat) 136. The days and weeks following 12 in Bali that have provided a greater role for October 2002 saw a major emergency crisis traditional village security personnel response led by government agencies, the (pecalang) and greater surveillance of Indonesian Red Cross and local residents temporary residents through identity supported by the international community. checks and the issuance of temporary The Australian Red Cross was active in initial residence permits. response and tracing services (AUS 174,451), · Increased security at tourism facilities such the supply of three ambulances (AUS as hotels and restaurants, tourist sites and 281,000), a tuberculosis project (AUS other public spaces. Security will be 400,000), support to the regional blood bank included as a variable in hotel (AUS 250,000) and a disaster preparedness classification procedure and the provincial project (AUS 2,506,025). WHO has also police will oversee hotel security undertaken a review of the emergency measures. response at Sanglah hospital. · Increasing the number of Tourist Police who are performing security measures at Security Response tourist resorts by patrolling regularly in the area. 137. The enhancement of security measures · Strengthening of police intelligence, police has been a key part of the government's presence at the airport and increasing response to the Kuta tragedy and is directed at numbers of police active at the community ensuring Bali is safe from further terrorist level through the polsek (subdistrict police attacks and maintaining security in the station) and Babinkamtibmas (village level community. Security measures have included: police presence). · Increased security at ports of entry such as 138. Responding to crime and social issues Ngurah Rai airport, Gilimanuk50 , Benoa, through anticipating the socio-economic Padang Bai and Celukan Bawang through impacts of the crisis has been part of a checks of identity cards and goods. preventative policing strategy in Bali aiming to · Technical assistance from the World build community trust in the police. At the Tourism Organization (WTO) to evaluate village level, the police are working with and propose enhancement of security village heads in dealing with the social measures at Ngurah Rai Airport, finding impacts and tensions that have arisen through that although certain safety and security supporting neighborhood security and youth, measures were carried out, there is a need but with limited budgets, the extent of for further improvements. achievements is curtailed. The Bali police received new equipment, motorcycles and cars, but according to the Bali Police Chief, 50 Jembrana district government currently administers the latter are not in active service due to a lack security at Gilimanuk and has requested additional of operational funds. security equipment for the port. Jembrana district also proposes that the provincial government manage security at the port given it is a provincial entry point. 53 Chapter 3: Responses 139. The Bali Police Chief's goal is to the end of 2004. The plan aims to restore upgrade security in Bali to international confidence in the international domestic standards and to receive verification from an markets during a phased rescue (3 months), independent group. The security assessment at rehabilitation (4 months), normalization (6 the airport by the World Tourism Organization months), and expansion (6 months) plan that revealed over thirty recommendations for will include domestic and international action, and it is important that these are promotion, a media campaign, support to pursued. Similarly, other aspects of security marketing representatives, Indonesian culture provision in Bali could be assessed and promotion, tourism product development, and regularly verified by an independent third fiscal incentives for the tourism industry. party. Real improvements in security systems should be effectively communicated to 142. With SARS under control, other stakeholders, especially the tourism sector. countries in the region are dramatically increasing their promotional activities in an attempt to regain much valued tourism Tourism Recovery revenue. Hong Kong launched a USD 128 140. The national working group on million `Looking Ahead' campaign, Thailand promotions and events developed recovery a `Smiles Plus Campaign', and most of the policies, established a media center for other countries with significant tourism sectors information dissemination to Indonesian in the region (such as Malaysia, the embassies, developed a national tourism Philippines and Australia) are increasing their campaign, organized a music concert in Bali, tourism promotion campaigns. Real concerns and recruited international consultants remain that Indonesia is simply not doing including Gavin Anderson & Co (Australia) enough effective tourism promotion and and Marketing Garden (Japan).51 Promotional marketing to rival the increased competition in activities overseas included advertisements on the region, which possesses significant CNN and promotional visits to key tourism implications for the longer-term future of the fairs. A key strategy has been to promote industry and its employees. domestic visitors to Bali and the holding of 143. PATA Bali Recovery Task Force. In conferences and meetings on the island. December 2002, the Pacific Asia Travel 141. Although Indonesia was not directly Association's (PATA) Bali Recovery Task affected by the emergence of SARS in March Force visited Bali and provided a series of 2003, some important direct routes (e.g. recommendations to support the recovery of Taiwan) and hub routes (e.g. Singapore) tourism in Bali and Indonesia which included: experienced outbreaks of the disease, which · All elements relating to tourism in Bali effectively took the Bali tourism recovery should come together to produce a unified efforts `back to square one.' Since then, the agenda for action. Ministry of Culture and Tourism has developed a new National Tourism Recovery · Create an environment for careful tourism Plan that began in mid-2003 and will last until planning including issues of safety and security. 51 · Establish an Integrated Crisis Management The global tourism promotion plan developed by Plan in Bali. Gavin Anderson was delivered to the Government of Indonesia in March 2003, but has yet to be · Rebuild and broaden the Bali brand to implemented. encompass culture and heritage. 54 Chapter 3: Responses · Market the Bali brand to contemporary plans to abolish the visa on arrival facility. markets and through partnership Instead, the government has replaced this marketing. regulation with a USD 35 fee for the `visa on arrival' for all 48 countries with this 144. Overall, the PATA Task Force argues agreement, which, based on 2001 national that "the major tourist organizations involved visitor arrivals, would raise roughly USD 140 in Indonesia have neither reacted effectively to million.53 More importantly, this policy, like the current situation nor provided the its predecessor, may act as a disincentive for institutional leadership necessary under the tourists to visit Bali and Indonesia. It is not circumstances." The PATA report highlights clear exactly how this `tourism tax' would be the importance of travel advisories, outreach used and its net benefit for Indonesia should be campaigns, safety and security, an effective reviewed. publicity and communications program, and the need for regional and national actors to Industry work together toward a common agenda and strategy that has adequate funding for 147. Support to Cooperatives and SMEs. implementation. Regionally (such as in The Ministry of Cooperatives and Small and Malaysia, Singapore, and Thailand), many Middle Enterprises has three main activities in models of tourism management and promotion Bali, and although none of these are in from which Indonesia could benefit exist. response to the impacts of the economic crisis on local businesses, they do present provincial 145. Central Government Response to government with the opportunity to target SARS. The Ministry of Health formulated a funds to businesses that could benefit. The policy to respond to SARS that included three programs in 2003 are: (1) an allocation socialization activities, increased surveillance from the fuels (BBM) subsidy of Rp. 3.56 at airports, seaports, and land borders, as well billion; (2) de-concentration funds of Rp. 2.9 as a capacity building element in the billion allocated to support the development surveillance of pneumonic epidemiology. for entrepreneurship and small and micro Indonesia did not suffer a direct SARS enterprise (Pengembangan Kewirausahaan dan outbreak, although preventative measures were KUKM) and Rp. 1.88 billion to support the taken at ports of entry and medical centers. development of an information system of small and micro enterprise; and (3) a Business 146. Visa Regulations. In March 2003, the Start-up Capital (Modal Awal Padanan) government issued Presidential Decree No. program allocated to support clusters of small 18/2003 to abolish the existing Free Short and micro enterprise identified by the local Visit visa facility as part of an international government. commitment to fight against terrorism, the international drug trade, trafficking of women 148. Fiscal Responses and Incentives for and children, and other forms of international Tourism-Related Industries. The central crime.52 The new regulation was to be government has not granted any tax implemented six months from the day it was enacted, but following lobbying from the tourism sector the government dropped its 53 Bisnis Indonesia, 28 June 2003. The article suggests that just a 4.7% decline in arrivals as a result of the tax would offset any of its benefits, but it is not clear how 52 Interview with Planning and Preparation Division of these projections were calculated, and whether they the Department of Justice and Human Rights. refer to total tourism expenditures or tax yields. 55 Chapter 3: Responses concessions to businesses affected by the Bali working group for budgetary incentives was in bombing. However for those who experience the process of developing a range of incentives problems with repaying loans, Bank Indonesia that allow tourism-related industries to published a decree in December 2002 asking continue operations. banks to assist businesses with restructuring of their credit.54 The Jakarta Initiative Task Social Welfare Force also held meetings and a conference in March 2003 with banks and businesses in Bali 150. Support for those Directly Affected by to promote debt restructuring between debtors the Bombings. A wide range of support was and creditors. The task force found that banks provided to the families of victims of the were taking steps to allow debtors to defer October bombings from abroad and within interest and postpone principal payments but Indonesia, which together is in excess of USD that a policy for dealing with a crisis deeper 10 million. Support has included financial and longer than six months did not exist. BRI support, medical support, counseling and has been active in debt restructuring in Bali scholarships for children, and longer-term since October 2002, and has restructured projects including support to Sanglah hospital approximately Rp. 20 billion of debt owed by and the building of a memorial hospital. over 1,500 customers.55 Bank Indonesia was Although efforts were made to coordinate concerned that the rural credit banks could not these responses, donations and support have keep pace with the crisis and that they needed come from many sources, complicating these technical assistance with debt restructuring efforts.58 Strengthened mechanisms for techniques. facilitating the use of private funds raised for Bali through effective programming could lead 149. Recently, there have been increasing to more diverse and beneficial outcomes. calls from industry for such a package to assist the industry in recovering from the combined 151. Social Safety Nets. The national shocks of the Bali bombing, war in Iraq, and working group for social safety nets is SARS.56 Other countries in the region have developing relief distribution plans for regions launched recovery packages to assist their affected by the demise of national tourism, tourism industries.57 In June 2003, the which have yet to be approved. At present, there is no national social safety net program in Bali, but some district governments are 54 Peraturan BI No 4/11/PBI/2002 dated 20 December providing free education (e.g. Jembrana), free 2002 (see http://www.bi.go.id). primary health services (e.g. Denpasar), or 55 BRI Presentation - Perbankan Bali dan Tragedi Bali 12 Oktober 2002. 56 Bali Discovery Tours News, 14 July 2003, `Calls Mount for Tourism Supports: State Ministry Supports service tax for hotels and restaurants from June to Calls for Scheme of Supports and Relief for Damaged December 2003, (v) abolishment of service tax on Tourism Sector'. See http://www.balidiscovery.com. complimentary rooms in hotels beginning June 2003, 57 Malaysia, for example, launched an economic (vi) postponement of income tax installments for tour stimulus package in May 2003 to help travel agencies operators from June to December 2003, (vii) and tour operators over the next six months. The restructuring and rescheduling of loans by finance package offers (i) a Special Relief Guarantee Facility institutions for workers whose salaries are subjected to fund worth RM1 billion for tourism sector operators, (ii) pay cuts due to poor business for the industry. Source: five percent discount in electricity bills for hotel owners Tourism Malaysia, May 2003. from June to December 2003, (iii) fifty percent rebate 58 See www.balirecoverygroup.com. for six months road tax for taxis, (iv) exemption from 56 Chapter 3: Responses limited padat karya work programs (e.g. 154. Community Priorities for Response. Tabanan). The International Republic Institute (IRI), with support from USAID, assisted the provincial 152. Community Grants. Community grants government through polling community views are being provided by the Kecamatan on priorities for recovery programming in Development Project (World Bank), the December 2002. The IRI study found that Community-based Development program local neighborhood security measures (World Bank-BUIP) and the Community (including the regulation of residency), support Recovery Program (UNDP). Coordination for the poor including health and education between the government and these initiatives and support to SMEs were the highest could be improved to help stakeholders be priorities for response. In May 2003, the better informed over progress and targeting highest-ranking priority need was support to issues. the poor focusing on unemployment and other impacts of the crisis as identified by 57% of 3.5 Community Priorities and Responses key respondents. Other important response needs included strengthening the police (24%), 153. Community Responses and the Desa tourism promotion (21%), support for SMEs Adat. Bali's social and cultural capital has (15%), support for agriculture (14%), and been a vital asset during the crisis. Within the improvement of residency administration local community, at the family, banjar (local (13%). Priorities for socio-economic programs community group), and desa adat (traditional included access to primary health care (35%), village) levels, there are communal coping credit for SMEs (31%), education (26%), mechanisms that assist families through credit for farmers (24%), community grants difficult times. More than half (51%) of (21%), infrastructure and facilities (14%), non- respondents identified a traditional system credit support for SMEs such as trade within the desa adat that helps families promotion etc. (13%), hospitals (11%), grants overcome economic difficulties and that to subak (11%), livestock assistance (10%), addresses social problems. For help with and non-credit support for farmers (11%). socio-economic problems, people in Bali tend to get help first from families, then community Table 25. Local Providers of Support during leaders and friends, then from the village head Crisis in Bali (Table 25). This clearly shows the importance of traditional leaders and the banjar in terms of Average Rank Group Importance responding to social welfare needs. Many Families 1.67 traditional villages (desa adat) have incomes Balinese community leader from village finance institutions (LPD) and (kelian adat) 2.38 other funds raised through contributions from Local friends 2.43 local businesses and residents, possessing the Village head 2.70 potential to be used for the benefit of local Religious leader 3.49 residents. 59 Village midwife 4.08 Doctor 4.36 PKK 4.65 Source: University of Udayana, Key Respondents Survey 59 The LPD in Kuta, one of the most profitable LPDs in Bali, had a net profit of Rp 2 billion in 2002, although the details of how these funds were used is not known. 57 Chapter 3: Responses 3.6 Summary of Government and Donor Responses have been fragmented and there has Responses been a lack of focus on the most vulnerable. This was exacerbated by the limited data 155. The overall response to the Bali crisis available providing an overview of the tourism has been measured according to initial sector and information on impacts relevant to predictions of the time required for recovery in policy-makers, so that responses have typically tourism and the level of socio-economic not been based on a clear view of the situation. impacts. It is clear now that the crisis is Regional governments have the best deeper and longer lasting than at first understanding of the current situation, yet are anticipated, giving greater urgency to the need unable to elicit an effective response due to for effective action. Recovery responses from financial and other constraints. both donors and government are not yet having significant impacts on the ground for a 157. The key requirement is for district, range of reasons including (a) complexities provincial, and central governments to use associated with effective targeting, (b) delays available information on the socio-economic in disbursement, (c) a limited focus on welfare situation in Bali and related areas, in responses, (d) poor coordination, (e) a lack of cooperation with donors to define a synergy between government and donor comprehensive and coordinated recovery responses, (f) perceptions of Bali as rich, (g) program. Over the coming weeks, a greater limited tourism promotion activity and (h) focus is required on using the information assumptions of a recovery in tourism. In May from this assessment and other sources in 2003, only 13% of key respondents in Bali planning the effective utilization of resources reported knowledge of any response to the allocated to Bali recovery, initiating new crisis. Clearly the visibility of crisis responses responses to mitigate the deeper impacts of the is low, which in part reflects the need for crisis and develop long-term economic plans enhanced public relations and communication that will promote sustained growth and about Bali recovery initiatives, but more development. In particular, effective importantly reflects the fact that many consultation in Bali and other areas will be responses are not yet being implemented or important in order for the voices of having impacts. communities and other stakeholders affected by this crisis to be heard. 156. A key weakness in the Bali recovery response has been in the planning process. 58 Chapter 4: Conclusions and Recommendations CHAPTER 4: CONCLUSIONS AND RECOMMENDATIONS of the growth of tourism in Bali and Lombok 158. The socio-economic impacts of the has been spontaneous and has occurred outside Bali bombings, compounded by the effects of of a well-regulated planning framework. The the war in Iraq and SARS, have worsened process has often involved opposition from considerably since January 2003. Direct local people who felt that their interests were tourism arrivals in the second quarter only not given sufficient importance in the increased to above 3,000 per day in mid-June decision-making process. Tourism is a 2003, the government's estimated `break- complex industry with many actors. The even' point for the Bali economy.60 Even challenge is for government to develop under optimistic scenarios, in the absence of processes and approaches that provide any other unanticipated shocks, it is unlikely opportunities for local people to have a say in that numbers will return to normal before future development and in influencing 2004, thereby deepening the lingering impacts government policies and priority programs. of the crisis. On the positive side, exports Furthermore, Bali will need to continuously from Bali have generally been maintained, diversify and strengthen sectors that can thrive providing some respite for the island's even in circumstances where the tourism economy. Nevertheless, small and medium- sector is less buoyant, in particular agriculture sized enterprises are feeling the crisis, with and small industries. financial institutions reporting increased levels of non-performing loans. Especially worrying 160. Many of the responses put in place six are indications of localized hardship in certain months ago have yet to deliver impacts on the areas of Bali and Lombok with indications that ground, and have proved to be inadequate for local coping mechanisms are failing. The h meeting the diverse needs of t ose affected by effects of the crisis on unemployment and the the crisis in Bali, Lombok, and other areas. youth will also require special attention. In Donor responses have not always addressed this context, the maintenance of social priority needs, have taken some time to begin harmony and security remains a key issue to disbursement, and have lacked effective ensure Bali's retains its peaceful image. targeting mechanisms, in part due to an absence of information about impacts. 159. Despite the significance of these Government responses have appeared to lack impacts from the crisis in tourism, it is vital coordination and pro-action, and have lacked that government, industry, and donors do not an effective communication strategy. Over lose sight of the long-term agenda of tourism both, the short and longer-term, new and sustainable development in Bali and approaches are required that bring together elsewhere. Chapter 1 underscored that much government, the private sector, and communities in a more effective manner. 60 Daily direct foreign arrivals for the peak months of 161. The Government of Indonesia, both at June to September between 1997 and 2001 averaged the national and regional level, and donors 4,140 arrivals per day. Information on the number of should consider the following conclusions and indirect foreign arrivals and number of domestic arrivals combined with visitor spending habits are required to recommendations of this assessment in assess fully the status of Bali's tourism economy . planning new, and reshaping existing, 59 Chapter 4: Conclusions and Recommendations responses to mitigate the crisis and stimulate `Back to Bali': Supporting Recovery in long-term sustainable development in affected Indonesia's Tourism Sector areas. It is important to recognize that recovery in the sense of return to past 163. Tourism-led recovery presents the conditions may not be an option for Bali. greatest short-term opportunity for supporting Current trends in global tourism and future economic recovery in Bali. The formulation scenarios of these in relation to Bali mean that and implementation of a Comprehensive the longer-term agenda of regenerating Bali as Multi-Stakeholder Tourism Recovery Plan a destination and building a more diverse with linkages to longer-term planning would economy should not be delayed. be the most cost effective measure to support short-term recovery and maintain social welfare. Past experience from other tourism 4.1 Managing the Crisis and Promoting crises show a coordinated plan that provides a Recovery consistent message to the market, inclusive of 162. Over the short-term, Bali and related current concerns over safety and security, is areas will continue to be in crisis until tourism the most effective approach. Although a arrivals increase to generate the economic number of promotional activities have been demand that will pull these areas out of crisis. undertaken to date and the private sector has Until this happens, a short-term agenda for initiated its own specific responses, this cannot promoting a tourism-led recovery and be said to represent a comprehensive and mitigating the impacts of the crisis should be coordinated response to the crisis. followed. The timeframe for this remains 164. Tourism growth cannot be controlled somewhat unpredictable, but it is generally in a top down approach. Initiatives must also thought that recovery will not occur until the be in the long-term interest of communities final quarter of 2003 at the earliest, and more and other stakeholders. Creative solutions likely, no earlier than 2004. Although visitor must be found to ensure effective distribution arrivals increased in June and July 2003, with of the benefits of tourism. A traditional plan hotels, restaurants and retailers offering large will not work, and it will be important to discounts combined with a changed visitors involve stakeholders to develop a unified and profile with unknown spending habits, Bali's comprehensive strategy and action plan. This tourism-based economy remains fragile. Yet will require the establishment of a multi- the absence of comprehensive information and stakeholder mechanism to coordinate planning data on Bali's tourism sector leaves a and implementation with representation from knowledge gap that must be filled to enable various stakeholders in Bali. In particular, effective policy-making. Chapters 1 and 2 regional autonomy has created difficulties in suggested that only direct international tourism effectively coordinating the management of arrivals to Bali serve as an effective leading tourism and related functions. Tourism can be indicator in the sector at this time. Indicators argued to represent a provincial asset in Bali, on indirect international and domestic stay- so that in the context of Law 22/1999, the overs and spending are proving far less concentration of responsibilities for tourism, reliable and timely. spatial planning, and environmental management may be more effectively placed at the provincial level. 60 Chapter 4: Conclusions and Recommendations A. Recommendations for Tourism Recovery 1 Government agencies, with possible support from UNDP/World Bank, should consolidate the collection and management of data and information relating to tourism in Bali in order to provide a better foundation for policy-making. BPS Bali and the Bali Tourism Authority, in particular, should consolidate their data and should build on the efforts of the Bali Tourism Authority to make this widely available to stakeholders. 2 Government and donors should support the implementation of action plans resulting from the July 2003 meeting and provide similar support to other tourism destinations such as Lombok and Yogyakarta. Canceling the USD 35 fee for a tourist visa upon arrival is a key point for consideration. 3 Provincial governments in Bali, NTB, and other destinations form broad multi-stakeholder Tourism Recovery Groups (government, police, industry, community representatives) for implementing a comprehensive tourism recovery strategy that effectively coordinates between the National Tourism Recovery working group and provincial actors. These groups should produce strategy documents with clear timelines, milestones and resources for implementation. Donors could support with appropriate technical assistance. 4 Government, with possible donor support, ensures new security measures (e.g. WTO airport security review) are implemented and enhanced security systems are strengthened and verified to international standards. The provision of police advisors, as has been done in the past by UNHCR in other areas in Indonesia, would provide assistance to the police in improving security in Bali and other areas. 5 Government intensifies international promotion campaigns and information dissemination at an appropriate time in key markets as part of the overall tourism recovery strategy. Government should review the strategy proposed by Gavin Anderson & Co as part of this overall effort. 6 Government reviews the needs and options for fiscal measures to support the tourism industry in crisis. Donors could support the government with technical assistance in determining options for fiscal policy responses. 7 Provincial governments in Bali, Lombok and other key tourism destinations engage with district governments and communities to identify possible revitalization projects of tourism sites that can be undertaken by local communities with government or donor funding as part of a community-based approach to tourism that will also provide much needed job opportunities. Donors should consider supporting such public-private agencies such as the Bali Heritage Foundation. 8 UNDP and other donors could support the Department of Tourism and Culture in the formulation of national and regional tourism plans including Bali. Private-public partnerships like the newly established Bali Heritage Trust, based on a Governors decree of February 2003, provide possible avenues of support in this context. 9 Government reviews the management of tourism, spatial planning and environmental management in Bali in the context of Law 22/1999. 61 Chapter 4: Conclusions and Recommendations B. Recommendations for Support to Small Businesses 10. The government and Bank Indonesia in Bali (via the Provincial Sub-Team for Fiscal Incentives) and Lombok undertake a consultative policy review, with donor support if required, to identify appropriate fiscal responses for businesses in Bali, Lombok, and possibly other areas such as East Java and Yogyakarta, affected by the tourism crisis. This should be published and communicated effectively to the business community prior to the implementation of any measures. 11. Provincial government, Bank Indonesia, business associations (e.g. KADIN, ASITA, HIPMI, IWAPI etc.), financial institutions (e.g. BRI, BPRs, LPDs), and donors should cooperate to establish and consolidate local mechanisms to assist the renegotiation of debts between debtors and creditors. Activities could include a Small Business Roadshow, technical assistance to financial institutions and business associations and small business training through existing networks. 12. Provincial and district governments develop strategies and support pilot projects with the business community and cooperatives (e.g. PUSKOWANJATI in East Java) (including possible donor support from IFC, AusAID, Japan, and USAID) in developing and implementing new marketing and trade promotion initiatives, and over the medium-term new product development, in Bali, Lombok, East Java and other areas affected by the crisis. 13. UNDP and/or IFC could support the establishment of an effective coordination mechanism between donors, government, Bank Indonesia, financial institutions, business associations, and other actors in Bali and Lombok. 165. In July 2003, local stakeholders for tourists traveling to other destinations in (police, government, private sector, and non- Indonesia such as Lombok and Yogyakarta. governmental actors) in Bali met to develop a Strategic decisions on how to develop the unified agenda for action aimed at promoting `Indonesia tourism product,' reinvent the Bali recovery in tourist arrivals to Bali. As follow brand, and support development with linkages up to this, stakeholders in Jakarta and Bali to other destinations in Indonesia need to be should coordinate closely in the delivery and taken that involve the development of new and implementation of an action plan. In addition, attractive destinations matching the the strategy developed by Gavin Anderson & contemporary travel market. Over the Co, under contract to the Indonesian Culture medium-term, this will require the production and Tourism Board, which addresses the main of a new tourism strategy for Bali and other issues for tourism promotion in Bali in several destinations in Indonesia through a multi-level key markets, deserves review as a key (national, provincial, and district) and multi- component of the government's management stakeholder process (including broad public of the crisis. and other stakeholder participation). Associated activities should focus on spatial 166. Bali is the "crown jewel" of planning, environmental management, Indonesia's tourism industry and the prospects governance, support to local institutions, and for tourism in Bali directly relate to the future communities so that they can benefit from of the sector nationally. Bali acts as a gateway 62 Chapter 4: Conclusions and Recommendations C. Recommendations for Measures to Maintain Social Welfare 14. ABD and World Bank, with support of the Netherlands government, decide with local and provincial government whether targeted school grants in the most affected areas (emerging from the recent schools survey) are needed. 15. The Ministry of Health and regional health authorities, with support from the ADB if required, should ensure effective mechanisms are in place for the distribution of health cards to eligible families and that health centers and hospitals have adequate funding for the treatment of patients presenting health cards. 16. Community grant provision through KDP, BUIP, and CRP should be better coordinated with government and targeted to those communities hardest hit by the crisis. These mechanisms should also be coordinated effectively with other recovery initiatives, where possible. 17. UNDP with possible support from ILO and other agencies (e.g. KDP, AusAID) should support a rapid labor market and job seeker assessment in cooperation with regional governments focused on key areas. This assessment should lead to concrete programs and incentives for job creation linked to small business development and local economic diversification, vocational training opportunities and institutions, labor intensive work programs and improved approaches for dealing with unemployment. 18. The Provincial Sub-Team on Socio-Economic Recovery should coordinate effectively with relevant donor projects. tourism and other activities focused on culture much greater than the current capacity, and heritage. especially for small businesses. Based on the work of the Jakarta Initiative Task Force and Small and Medium Sized Businesses others, there is a need to (a) keep monitoring the situation, (b) facilitate debt restructuring 167. Many small and medium-sized negotiation mechanisms, (c) support businesses in Bali are in need of support to businesses in simple financial planning, ensure the survival of those with good long- preparation of cash flows and other financial term prospects. The government and donors management skills to help debtors manage should focus on immediate initiatives to their businesses and negotiate realistic support the financial situation of local repayment terms with lenders, and (d) support businesses through debt restructuring and financial institutions, especially small financial perhaps other fiscal measures, provide support institutions such as BPRs and LPDs, in with training for business management in a determining action (accept loss or improve crisis situation, and support businesses in collections), particularly over consumer loans. accessing new markets for existing products. 169. Many companies and business actors 168. Debt restructuring has been completed advocate provision of subsidized credit as a for some Bali tourism and tourism-related response. While some businesses may benefit industries, but the extent of the problem is from having access to soft credit, given the 63 Chapter 4: Conclusions and Recommendations D. Recommendations for Maintaining Local Security and Managing Social Tensions 19. Government and other donors should support the provincial police by ensuring adequate equipment and operational budgets for enhancing security and the performance of the police in Bali. Donors could support the police in developing effective and professional community policing through the provision of police advisors. 20. Government and the donor community could develop area-based preventative responses in those sub-districts that are experiencing high levels of social tensions as a result of the crisis. These may include support to local institutions and community forums as well as programming to deal with the underlying causes of tensions such as unemployment and crime. current economic uncertainty this may not be a put in place targeted social safety net programs sustainable intervention and may lead to to assist those facing the greatest hardship as a greater financial difficulties for business result of the crisis. Social safety nets should, during the crisis. This issue requires careful where possible, build on local community policy analysis, but the provision of credit responses and avoid creating dependence, as through a Working Capital Injection Fund on a for example with cash handouts. The main case-by-case basis where appropriate may policy instruments available to donors will be provide important longer-term benefits. school grants and community grants/credits. 170. Access to markets is considered to be 172. Education and health are two key the main problem facing small business sectors for social protection interventions. affected by the crisis. These impacts are felt Every effort should be made to ensure that well beyond Bali and require enhanced efforts children do not drop out of school and the in marketing and trade promotion to support quality of education does not decrease owing affected businesses. In particular, the effective to the downturn of the tourism industry on provision of information, cooperation between Bali. Access to primary health care and provinces, and where appropriate, the use of hospitals needs to be maintained and the information technology and the media can help identification of those eligible to receive health to make promotion cost-effective. Regional cards should be conducted. governments and business associations should seek how to use Indonesia's overseas missions 173. The quality and quantity of education and trade promotion facilities in their in Bali continues to decline. Quantitative and marketing activities qualitative monitoring is imperative in order to ascertain the exact degree to which schools are affected. A further survey should be fielded to Social Welfare capture the changes in school composition 171. Social welfare impacts have increased now that a new school year has begun. since January 2003 and Bali is now truly 174. Community grants provide an effective experiencing the beginning of the predicted way of stimulating the local economy in crisis socio-economic crisis following the Kuta situations. Targeted grants in the education tragedy. Government and donors should now 64 Chapter 4: Conclusions and Recommendations sector could mitigate the impact of the crisis Managing Socio-Economic Impacts and Social on schools, while maintaining enrolment rates. Tensions Donor projects providing community grants include the Kecamatan Development Project, 176. Maintaining security and the the Community Recovery Programme, and a management of social tensions as a result of proposal submitted by BAPPEDA Bali to the the crisis are critical components of the overall central government for recovery in which a response in Bali. Although the local key part is the provision of community grants. community and pecalang are playing an At present, the provision of community grants important role in local neighborhood security, has been limited due to a lack of operational the key security actor in Bali is the police. mechanisms or funding. Enhanced Donors and government can support the police dissemination of disbursement schedules and others responsible for security by ensuring should help inform the degree to which these that improved security measures are programs are meeting the direct social impacts implemented and made operational, policies to of the tourism slump on Bali. maintain standards of operation and professionalism are met, and that trust in the 175. Current information indicates that police is enhanced through community probably hundreds of thousands of people policing and other means. have experienced substantial reductions in working hours and salaries for a sustained 177. Concern remains in some parts of Bali period since the crisis began, while many that the impacts of the crisis and social others have lost jobs and livelihoods. tensions may threaten local security. Much of Unemployment, and more importantly this is related to problems of youth and underemployment, is emerging as one of the unemployment, but the specific causes and key issues requiring response, and highlights context differ from place to place. A need the need for responses that include (a) support remains to work with local stakeholders to to employee / employer relations and formulate approaches and action to deal with mediation, (b) job creation, (c) support to job the underlying causes of social tensions in seekers / effective vocational skills / reskilling these areas. programs, and (d) linkages to SME development for entrepreneurs with new ideas 4.2 From Recovery to Sustainable and business concepts.61 Development and Growth 178. The future of tourism is much more uncertain following recent events in and outside of Indonesia, highlighting the inherent risk in the sector, and the industry as a whole. On top of this, Bali has faced a period of 61 The AusAID Bali Rehabilitation Fund has supported stagnation in the growth of tourism that a training needs assessment of Bali and Lombok that requires strategic planning to support the has suggested people in Bali identify few opportunities longer-term agenda of revitalization of the for work outside of tourism, although more wish to find work outside of the industry. Training without being island as a premier tourism destination. Rather linked to job opportunities and job creation will not be than depending on tourism for the future, Bali successful, rather training requires linkages to work further needs to diversify its economy, placements, apprenticeships, and job creation in sectors especially to support further growth and outside of tourism. development in the districts where tourism 65 Chapter 4: Conclusions and Recommendations does not play a significant role in the comprehensive economic development plans. economy. Small and medium-sized enterprises In particular, the rural sector is highlighted as in Bali, East Java, Lombok, and beyond an area in need of support. Developing dependent on markets in Bali require support effective policies and programs for rural in order to reduce their dependence on tourist economic development will have significant arrivals and create more sustainable local impact on the regions poorest and help provide E. Recommendations for Long-Term Economic Development in Bali 21. Donor support affected districts in consolidating information on regional economic potential and developing new economic development plans with a focus on the rural sector. With the cooperation of local universities and other stakeholders, there is a need to coordinate the production of long-term economic development strategies for districts in Bali and Lombok. 22. Government and donors should support the review of policies and procedures relating to investment and design incentives to attract smaller investors to Bali and Lombok. 23. Regional governments should use the results of this assessment and other information in consultation with local stakeholders and donor projects to develop operational revised strategies for sustainable economic development. economies. Given the high degree of linkages realistic opportunities to slow migration to between Bali, East Java and Lombok, urban areas. cooperation between these areas in marketing products would potentially be more cost- 181. Although Bali is currently in crisis, effective. Bali has much potential for future investment. Foreign investors can assist in bringing in skills and experience that can support the Long-Term Economic Development development of added-value industries. 179. Tourism is the mainstay of Bali's economy and has been concentrated in the Small Businesses: Building a Strong Private south of the island. Bali needs to balance its Sector future development strategy to (i) promote greater equity in the distribution of the benefits 182. Bali has emerged as the showroom for of tourism, (ii) develop an environment many Indonesian products. Yet with supportive of investment, (iii) support other Indonesia facing increased competition from sectors to mitigate against the inherent risks of other countries for export markets, there is a the tourism sector and (iv) create effective long-term need for Bali, East Java, and rural development policies that benefit those Lombok to cultivate further innovation, not benefiting directly from tourism. competitiveness, and market development in order to reap more fruits from new sectors and 180. District governments in Bali have move up the value chain. This will require a expressed the need for support in developing range of longer-term responses including (i) 66 Chapter 4: Conclusions and Recommendations F. Recommendations for Enhanced Coordination and Response Planning 24. UNDP and government disseminate the results of the assessment to national, provincial, and local stakeholders. 25. Government at central, provincial and district levels work together in undertaking a comprehensive but rapid planning process that includes consultation with local private sector and non-governmental stakeholders to define and target specific recovery responses. This process should be led by the Provincial Team for Socio- Economic Recovery in Bali, and donors can lend support to this process. 26. Government, UNDP and other donors work together to hold public meetings in Bali, East Java and Lombok on the findings of this report. 27. The use of private donations is better coordinated with donor and government responses in order that these resources are used effectively to respond to existing needs. market analysis and product research and some of these approaches to building a strong development, (ii) business development private sector in particular fields, and should services, (iii) access to capital, (iv) trade ensure that it effectively shares its experiences promotion, (v) building of small business with other stakeholders. capacity and skills, and (vi) trade linkages and information. 4.3 Continued Monitoring and Donor Coordination 183. Government and donors could (i) identify and strengthen economic clusters, 184. With the continuation of the crisis and village industries, SMEs and fair trade systems the need to strengthen responses, continued / networks, (ii) provide support for technical monitoring, enhanced coordination and joint assistance for product design, innovation, planning are required. production, marketing, management, and business strategy development, (iii) support Coordination and Planning education and vocational training from unskilled to skilled workers and support 185. A comprehensive and prioritized vocational training institutes, (iv) use programmatic framework for Bali recovery information technology and multimedia tools responses is lacking. This assessment to support, define, and win new markets, (v) provides government at central, provincial and make information and training available to district levels an opportunity to work together small businesses and cooperatives on relevant to produce short-term crisis responses (e.g. appropriate technologies, (vi) consolidate through government crisis response information on economic potential providing mechanisms and donor support) and longer- easy access for small businesses, cooperatives term developmental responses (e.g. through and small investors. The IFC East Indonesia the APBD/APBN). Small Business Facility, with an office in Denpasar, will play a key role in developing 67 Chapter 4: Conclusions and Recommendations G. Recommendations for Future Monitoring and Evaluation 28. ABD or the World Bank repeats the schools survey in November 2003 with implementation by Udayana university. Extension of this survey to other regions, including East Java should be integrated into a more general post-decentralization monitoring of schools. 29. World Bank repeat the key respondents survey in November 2003 with implementation by Udayana University. 30. IFC Bali Facility repeat the industry survey in November 2003 with implementation by Udayana University. 31. World Bank provide monitoring information through the KDP facilitator network in 47 kecamatans and a survey with implementation by Udayana University. 32. World Bank liaise with GTZ PROFI in the monitoring of local financial institutions. 33. Government and donors consider supporting a limited monitoring and evaluation mechanism that can feed back information on Bali recovery program constraints and effectiveness. 186. The coordination between donor Monitoring and Evaluation support and government responses needs to be enhanced to avoid overlap of responses and to 187. Monitoring and assessment activities build synergy between responses. In addition, need to be continued in light of the continuing significant resources have been mobilized crisis. Furthermore, an independent through private donations. There is a need for monitoring and evaluation system to provide greater coordination between these private feedback to government and donors on the charitable initiatives and government/donor implementation and effectiveness of responses initiatives to ensure that funds raised lead to needs to be established. Such a system would substantial benefits for those affected ­ both be beneficial over the next 12 months in directly and indirectly - by the Kuta tragedy. providing a continuous evaluation of response mechanisms. 68 Annexes 69 70 Annex 1: Bali Tragedy Impacts Management Programme Initiated by Departments, Ministries, Non-Departmental Agencies and Local Government NATIONAL REGIONAL OUTSIDE NO PROGRAMME BUDGET BUDGET NATIONAL TOTAL (FY 2003) (FY 2003) BUDGET A. Departments/Ministries/Non-Departmental Agencies 1 Office of the Coordinating Minister for Political and Security Affairs 8,969,367,000 8,969,367,000 2 Office of the Minister for People's Welfare 40,000,000,000 40,000,000,000 3 Ministry of Transportation 2,400,000,000 122,000,000,000 124,400,000,000 4 Ministry of Home Affairs 3,650,000,000 46,500,000,000 50,150,000,000 5 Ministry of Finance 22,659,158,000 22,659,158,000 6 Ministry of Trade and Industry 2,005,386,000 2,005,386,000 7 Ministry of Health 69,472,770,040 48,369,000,000 117,841,770,040 8 Office of the State Minister for Cooperatives and SMEs 23,746,000,000 23,746,000,000 9 Ministry of National Education 260,214,450,000 260,214,450,000 10 Ministry for Resettlement and Regional Infrastructure 72,369,160,000 72,369,160,000 11 Culture and Tourism Development Board 180,000,000,000 180,000,000,000 12 Ministry of Foreign Affairs 13 Ministry of Manpower 14 Ministry of Energy and Mineral Resources 15 Ministry of Religious Affairs 16 National Development Planning Board (BAPPENAS) 17 Office of the Minister for State Companies Sub-Total (National Government) 652,770,924,040 249,584,367,000 902,355,291,040 B. Local Government 1 Bali Province 207,193,810,700 35,097,012,000 748,466,300,000 990,757,122,700 2 East Java Province 15,750,000,000 15,750,000,000 3 South Sulawesi Province 8,195,000,000 3,200,500,000 11,395,500,000 4 Central Java Province 5 DI Yogyakart a Province 6 NTB Province Sub-Total (Local Government) 231,138,810,700 38,297,512,000 748,466,300,000 1,017,902,622,700 Total (Government) 883,909,734,740 38,297,512,000 998,050,667,000 1,920,257,913,740 (Source: BAPPENAS, May 2003). 71 Annex 2: Bali Provincial Government Recovery Matrix for (A) Emergency, (B) Short-Term Recovery, (C) Medium-Term Recovery and (D) Long-Term Recovery. A. Emergency Phase Action Agency When Social Recovery Initiation and workshop for national and regional 1 Bappenas / Bappeda 4th week October 2002 teams Recovery of Image I: Roadshow, International November 2002 - 2 M. Foreign Affairs, Bali Government, M. Culture & Tourism, BTB Media and Events January 2003 Recovery of Bali Tourism's Positive Image via Dep. Rel. Affairs, M. Foreign Affairs, Bali Government, M. Culture & November 2002 3 Humanity Approach (prayers, victim-support) Tourism, BTB 4 Development of Tourist Packages ASITA, PHRI, Airlines, Dinas Culture & Tourism November 2002 5 Consolidation with Large Investors in Bali KADIN, BTB, BTDC, Dep. BUDPAR, DIPARDA November 2002 Increase Security and Services (police hotline, Police, tourism and transportation agencies, local governments and 6 equipment, neighborhood security, residency November 2002 community system, tourist police, entry points) Clearance of bomb site and planning of a Pemda Bali/ Dinas PU 7 November 2002 monument Assessment of Socio-Economic Impact (poor, Institusi/Tim Koordinasi Pemulihan Kondisi Sosial Ekonomi Pasca Tragedi November 2002 - 8 SMEs etc.) Kuta January 2003 Incentives (airline fees and domestic tourism 9 PT. Angkasa Pura, M. Culture & Tourism packages) 10 Hospital Services Dinas Kesehatan November 2002 Improving clean water system, roads, drainage and Dinas PU 11 December 2002 pavements 12 Food Security Dinas Pertanian October 2002 Reporting and Public Accountability of Bali Socio- Institusi / Tim koordinasi Pemulihan Kondisi social Ekonomi Pasca 13 January 2003 economic recovery Tragedi Kuta 72 B. Short-Term Recovery Action Agency When B1. Social Recovery Implement community-based socio-economic development programmes for 1 Institusi / Coordinating Team for Bali Recovery February - April 2003 the poor via desa adat (KDP, CBD etc.) 2 Basic Social Services for the Poor and Victims (Health and Education) Dinas Kesehatan February-April 2003 Develop Public Socio-Economic Infrastructure at Bomb Site in Kuta-Legian 3 Dinas PU February - April 2003 (clean water, drains, roads, housing) Institutionalise Inter-faith Forums at village, sub-district, district and 4 Biro Tata Pem Balimas April 2003 provincial levels to strengthen grass-roots social cohesion 5 Regulation and security at entry points into Bali Police, local governments February - April 2003 6 Development of social welfare (support for victims) Dinas Sosial 7 Business development and support to SMEs Dinas Kop, PK&M 2003 8 Credit for cooperatives including from fuel subsidy Dinas Kop. PK&M 2003 Empowerment of human resources and institutional strengthening of 9 Dinas Kop, PK&M 2003 cooperatives and SMEs B2. Peaceful Bali Campaign 1 Recovery of Image II: Roadshow, International Media and Events M. Foreign Affairs, Bali gov., M. Cult/Tour, BTB February-April 2003 2 Reporting and Public Accountability of Bali Socio-economic recovery Institusi / Coordinating Team for Bali Recovery April 2003 B3. Economic Recovery 1 Restructuring credit of SMEs Coordinating Team for Bali Recovery February - April 2003 2 Supporting business through subsidised credit, tax breaks etc. Coordinating Team for Bali Recovery February - April 2003 Programme to facilitate the intensification and diversification of SMEs in job 3 Coordinating Team for Bali Recovery February - April 2003 creation, production skills, marketing, credit, trading house 4 National and local economic policy that is conducive to economic recovery Coordinating Team for Bali Recovery February - April 2003 5 Develop international airline routes Merpati Nusantara Develop fisheries agribusiness, management and development of marine 6 Dinas Perikanan 2003 resources and fisheries 7 Livestock assistance to the community Dinas Pertenakan 2003 Development of food security (food security, agribusiness, horticulture, 2003 8 Dinas Pertanian empower agricultural extension workers) Develop plantation agribusiness (credit, development, management, 9 Dinas Perkebunan 2003 marketing, infrastructure) 10 Technical services in productive fields Dinas Perindag 2003 11 Technical service and domestic and foreign trade promotion Dinas Perindag 2003 73 C. Medium-Term Recovery Action Agency When C1. Social Recovery 1 Reorientate regional development programmes to be pro-poor Coordinating Team for Bali Recovery and DPRD 2003 Implement community-based socio-economic development programmes for 2 Institusi / Coordinating Team for Bali Recovery 2003 - 2005 the poor via desa adat (KDP, CBD etc.) 3 Basic Social Services for the Poor and Victims (Health and Education) Institusi / Coordinating Team for Bali Recovery 2003 - 2005 Develop Public Socio-Economic Infrastructure at Bomb Site in Kuta-Legian 4 2003 - 2005 (clean water, drains, roads, housing) Institutionalise Inter-faith Forums at village, sub-district, district and 5 Institusi / Coordinating Team for Bali Recovery 2003 - 2005 provincial levels to strengthen grass-roots social cohesion 6 Normalise regulation and security at ports of entry Polda Bali, Pemda Bali 2003 - 2005 Improve services and security (insurance for tourist sector workers, airport 7 security, signage) C2. Peaceful Bali Campaign Institusi / Coordinating Team for Bali Recovery; 2003 - 2005 1 Recovery of Image III: Roadshow, International Media and Events Diparda Reporting and Public Accountability of Bali Socio-economic recovery / 2 Coordinating Team for Bali Recovery 2003 - 2005 Good Governance 3 Community education and enhancing the National Discipline Movement Polri, Instansi terkait, Industri Par C3. Economic Recovery 1 Restructuring credit of SMEs Institusi / Coordinating Team for Bali Recovery 2003 - 2005 2 Supporting business through subsidised credit, tax breaks etc. Institusi / Coordinating Team for Bali Recovery 2003 -2005 Programme to facilitate the intensification and diversification of SMEs in job 3 Institusi / Coordinating Team for Bali Recovery 2003 - 2005 creation, production skills, maketing, credit, trading house 4 National and local economic policy that is conducive to economic recovery Institusi / Coordinating Team for Bali Recovery 2003 - 2005 Program pengembangan Pariwisata Bali yang berwawasan lingkungan dan 5 Institusi / Coordinating Team for Bali Recovery 2003 - 2005 pro poor growth 6 Develop `Wisata Bahari' (development of Benoa port and marina) Pemda Bali, Pelindo, Dephub, Gahawisri 7 Programme for strengthening non-tourist sectors of the economy Institusi / Coordinating Team for Bali Recovery 2003 - 2005 8 Financial Incentives (reduced tariffs, tax reforms etc.) PT. PLN, Meneg BUMN, Dep.Keu Marketing and Public Relations (professional company hired to undertake Pata Annual Conf. Host Committee, Kementerian & 9 PR, security; tour operators invited; film made; PATA conference; ASEAN 2003 BP Budpar, Pemda Bali, BTB, Tourism Associations cooperation; charity night with int.artists) BP Budpar, BTB, Industri Par, Asosiasi Par, Pemda 10 Promote domestic tourist packages Bali 74 D. Long-Term Recovery Action Agency When D1. Social Recovery Tim Koordinasi Pemulihan Kondisi sosial ekonomi 1 Organise Scenario planning for Future Bali 2004 - 2005 Pasca Tragedi Kuta dan DPRD Institutionalise Inter-faith Forums at village, sub-district, district and Institusi /Tim Koordinasi Pemulihan Kondisi sosial 2 2003 provincial levels to strengthen grass-roots social cohesion Ekonomi Pasca Tragedi Kuta Tourism Associations, Depkes, Ditjen Imigrasi Improve services and security (insurance for tourist sector workers, maskapai Penerbangan, Dephub, PT. Angkasa Pura, 3 emergency health facilities in tourist areas, immigration services, airport maskapai Penerbangan, Dep Kimpraswil, Pemda security, signage etc.) Bali, Kabupaten /Kota D2. Diplomacy for Peaceful Bali Institusi / tim Koordinasi Pemulihan Kondisi sosial 1 Establish a body for promoting Bali 2005 ekonomi Pasca Tragedi Kuta Reporting and Public Accountability of Bali Socio-economic recovery / Institusi / tim Koordinasi Pemulihan Kondisi sosial 2 2003 ­ 2005 Good Governance Ekonomi pasca Tragedi Kuta D3. Economic Recovery Programme to facilitate the intensification and diversification of SMEs in job Institusi / Tim Koordinasi Pemulihan Kondisi sosial 1 2003 creation, production skills, marketing, credit, trading house Ekonomi Pasca Tragedi Kuta Institusi / Tim Koordinasi Pemulihan Kondisi Sosial 2 National and local economic policy that is conducive to economic recovery 2005 Ekonomi pasca Tragedi Kuta Development of Tourism Development Programme emphasizing Institusi / Tim Koordinasi Pemulihan Kondisi sosial 3 2005 environmental protection and pro-poor growth Ekonomi Pasca Tragedi Kuta Programme for strengthening non-tourist sectors of the economy Institusi / Tim Koordinasi Pemulihan Kondisi Sosial 4 2005 Ekonomi Pasca Tragedi Kuta 5 International Media Campaign BP Budpar, BTB 6 Building of a Monument for the Bali Tragedy Dep. Kimpraswil, Pemda Bali Community education and enhancing the National Discipline Movement Instansi terkait Industri Par, LSM, Deperindag, Dept. 7 (Tourism Awareness at the village level, training on development of non- pertanian, Dep. kelautan & Perikanan, Instansi tourism products) terkait 75 Annex 3: Responses to the Crisis in Bali from District Governments. These are based on meetings with all district governments held by UNDP in June 2003, and represent the responses highlighted by officials in these meetings. District Response Future Plans and Needs · Hotels given three-month grace period for tax (PHR) payments from · Increased community-level security. October 2002. · Revolving funds for industries which provide · Urged hotels to avoid staff redundancies and held meetings with union wide employment opportunities. and hotel associations. Denpasar · Provision of training for those without work. · Regulation of residency undertaken in cooperation with Village Head Forum and Traditional Leaders Forum. · Establishment of Board for Security Coordination in Sanur. · Free treatment in health centres for all residents. · Hotels given three-month grace period for tax (PHR) payments from · Maintain and increase security measures. October 2002. · Short-term support to (i) develop rural · Distribution of PHR to other districts (except Gianyar and Denpasar) economies, (ii) enhance SDM, (iii) increase Badung reduced from 30% to 22%. small-scale investment. · Provision of training for those without work. · Longer-term TA support to develop master plan · Identification of work experience placements for those without work for economic development. · Regulation of residency. · Tourism promotion with local travel agents focusing on domestic tourists · Support for rapid impact economic responses. · Handicrafts promotion. · Assistance for security facilities. · Regulation of residency and return of people without identity cards. · Support for development and planning of Gianyar tourism. · TA to support the development of strategies to overcome the crisis. · Provide training for the unemployed people and crating new field of · Support for strengthened security measures; worked. social programmes. Klungkung · Disbursing micro credit loan throughout the community by desa adat ( · Longer-term TA support to develop master plan traditional village) scheme. for economic development. · Regulation of residency. · Increased community-level security. 76 District Response Future Plans and Needs · Handicraft promotion activities undertaken but with limited impact. · Support for strengthened security measures; · Provision of training for those without work. social programmes. Bangli · TA for development of region's economic potential. · Business development assistance. · Reduction in government budget of about 10% limiting response. · Maintenance of security through TA and · Promotion of overseas employment opportunities/TKI (e.g. South Korea). equipment. · Work programmes (Padat Karya) initiated in four villages. · Support in the establishment of community-based · Local economic support in several sub-districts including assistance in industries that provide wide employment form of livestock, capital and machinery. opportunities. Tabanan · Credit to farmers in support of food security in 8 sub-districts. · TA to support strategies in economic · Pilot project in Kediri subdistrict of formation of village enterprise development following the October bombings. (BUMDES). · Establishment of village market in 1 sub-district. · Revolving credit for home improvements for poor families. · Promotion activities undertaken. · TA to develop tourism development plan in · Art Market being established. Jembrana. · Rp. 15 billion for poverty programmes including revolving credit. · TA and extension services for small businesses. Jembrana · Training for overseas workers TKI. · Formation of Inter-faith Forum, coordination with police and promoting conflict prevention. · Security and identity card checked at entrance door for Padangbai harbor. · Work programmes linked to the development of Karangasem · Collecting and identify of changes compositon of number PRA KS (poor roads to reach isolated villages. family) as impact of Bom tragedy. · TA to support the development of an economic · Revolving credit for home improvements for poor families. development plan for the district. · Tourism promotion program by following national or international art · TA to develop tourism development plan in event. Singaraja. · Work programmes (Padat Karya) initiated in four villages. · TA to support the development of an economic Buleleng · Revolving fund for informal sector, i.e. traditional market vendor, farmer. development plan for the district. · Increasing district budget allocation for promotion of tourism and · Support for facilitating coordination and among handicrafts. district and provincia level. 77