Re-opening Bali for Business?

17 February 2021 Jarryd de Haan, Research Analyst, Indo-Pacific Research Programme

Petitioning to re-open Bali is a move of desperation from the local government. It will be difficult to attract a suitable number of tourists, though, given the many factors beyond the control of the Indonesian authorities.

Background

Indonesia’s Tourism and Creative Economy Minister, Sandiaga Uno, is considering measures to welcome international visitors back to Bali. Those measures, which are reportedly in their ‘final stages’, will likely involve a COVID-free corridor from low-risk countries that have implemented vaccination programmes. Bali’s deputy governor has also proposed measures to the central government aimed at attracting Chinese tourists.

Comment

The COVID-19 pandemic has had a significant impact on the Indonesian economy and has led to its first economic contraction since the 1998 Asian Financial Crisis. Some recently released statistics outline the severity of the impact. GDP growth for 2020 was -2.07%, a significant fall from the average growth of 5.35% that Indonesia experienced throughout the previous decade. GDP per capita also fell by 3.7% and pulled the country back under the threshold as an upper-middle income country, a status it only held for a few months. Due to those economic hardships, an extra 2.76 million Indonesians fell underneath the National Poverty Line, an increase of over eleven per cent.

As a province that relies significantly on tourism to survive, Bali was hit especially hard by the pandemic. As seen in graph above, international arrivals at Nguarah Rai Airport, the main airport in Bali, began to fall sharply even before the airport was closed in mid-March. As a result, the total international arrivals for 2020 were at just sixteen per cent of the previous year, and local businesses missed out on over five million extra customers. It is understandable, therefore, that the local government is eager, even desperate, for foreign tourists to return.

The mere opening of borders, however, does not guarantee that number of international arrivals will return to their previous levels and will depend largely on travel restrictions for returning nationals in other countries as well as traveller confidence. Thailand’s move to re-open its border in October 2020 has not seen any success, with arrivals falling far below expectations, leaving most of the resorts empty. Maldives, on the other hand, has been more successful, but only by abolishing all restrictions on incoming visitors.

With the current restrictions in place in Malaysia, China, Singapore and Australia for returning travellers, such as mandatory quarantine, Bali will likely struggle to attract visitors after borders open. Indonesia will need to do more than just greenlight those countries for visitors; joint policies will need to be implemented so that tourists can travel freely to Bali, as well as return freely to their home countries. The likelihood of that happening, however, is low. An attempt by Maldives to secure a “fast lane” arrangement with China (i.e. no quarantine requirements) looks to have fallen short. Those countries have little to gain from allowing their citizens to travel to Bali and return without quarantine; for many it is simply not worth the risk.

There is, however, a glimmer of hope with vaccinations slowly rolling out across the globe. Part of Indonesia’s plan is to greenlight countries which have been successful in implementing their vaccine programmes. As yet,however, there are only a few countries that have made good progress on vaccination. China’s vacciantion programme is rolling out more slowly than first expected, while Malaysia and Australia are yet to begin their programmes. If Indonesia maintains that barrier for entry, it will likely add months of further strain to the Balinese economy.

As it stands, Bali sits between a rock and a hard place. The government must weigh up the economic livelihoods of its local populace against the risks of a COVID-19 outbreak. If the government hopes to quickly bring back tourist numbers to revive the economy, it must forfeit many of the precautions already set in place. Waiting until vaccination programmes have been implemented successfully is the safer option, but will add months of economic stress and the potential loss of hundreds of millions of dollars.

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

Published by Future Directions International Pty Ltd.
Suite 5, 202 Hampden Road, Nedlands WA 6009, Australia.