23 October 2006
The Bali bombings will have only a short-term affect on tourist arrivals to the Indonesian island, with tourism remaining a sustainable industry in Bali, a Monash University study has concluded.
By analysing time series properties of data on tourist arrivals Professor Russell Smyth, from Monash's Department of Economics, has examined whether the Bali bombings have had a permanent or transitory effect.
A report released this year by the World Bank and United Nations Development Program concluded that Bali was too reliant on tourism, making it vulnerable to shocks, and recommended that the Indonesian government initiate reforms to build a more diverse and sustainable economy.
However, Professor Smyth said his analysis suggested that tourist arrivals would return to their long-run growth path and the impact on tourist numbers would be only transitory.
"The policy implication of this analysis is that tourism in Bali is a sustainable industry," Professor Smyth said.
"While some diversification may be desirable for a more balanced economy, Bali should not neglect or downplay its tourist sector on the premise that shocks will have permanent effects on international tourist arrivals to the island."
Professor Smyth said there was no doubt that terrorism and tourism were inextricably linked. "There is a great deal of evidence that tourists alter their behaviour in response to terrorist attacks," he said.
"On 12 October 2002 Bali's reputation as a peaceful haven was shattered. Tourist arrivals from Australia and other source destinations fell dramatically. Tourism began to return to normal throughout 2004 and the first eight months of 2005, but declined sharply following the second suicide bombing on 1 October 2005.
"However, the downturn in tourist arrivals following both terrorist bombings in Bali has been short-lived, suggesting that the long-run returns from investment in the region's tourist industry are sustainable."
Professor Smyth said Bali was an interesting destination to examine the effects of shocks on tourism, since it had experienced well-known acts of terrorism and relied on tourism as an important source of income.
"The fall in tourist arrivals has had adverse economic implications for the Balinese economy. However, it is likely that the industry will recover."
For further information contact Ms Penny Fannin, Media Communications, on +61 3 9905 5828 or 0417 125 700 or Ms Jacqui Golding, Faculty of Business and Economics, on +61 3 9903 2265.
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