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Putting the Brakes on Tourism Investment

Jakarta Post: Experts Warn Against Prioritizing Tourism Sector.

(10/14/2011) The following article by Andrea Wisnu, the Bali correspondent for The Jakarta Post appeared in the Wednesday, January 28, 2009 edition of that newspaper:
Experts warned the administration Tuesday to stop allocating money to tourism -related infrastructure projects.
They cited the sector's inability to promote long-term economic growth and its "cannibalization" of other important sectors.
In a seminar on tourism and agriculture at the Art Center in Denpasar, experts told the Bali government to begin pushing programs that would promote growth in the island's other sectors.
"For the past 20 years, people have been trying to find a breakthrough in the tourism sector that could propel our annual economic growth back to pre-1997 levels," Dr. Nyoman Erawan, a professor of economics from Udayana University, said.

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"Data has shown that the tourism sector cannot be relied upon for economic growth. It's time for the government to move funding to other sectors."
He added that a reliance on the tourism sector had caused the island's economic growth to drop significantly over the past four decades.
He said that in the 1970s, when the government intensified development, the tourism sector helped propel the island's economic growth rate to an average of 9.07 percent per year.
But by the 1980s, that growth rate decreased to 8.41 percent and decreased further in the 1990s to 7.99 percent. The Bali bombings, the SARS scare and the bird flu scare caused that number to drop further to 4.26 percent in 2006.
While many still look forward to a revitalization of the tourism industry, Erawan said the island could not afford to keep on hoping, citing the tourism sector's dangerous "cannibalization" of other economic sectors.
He said the tourism sector, which required additional infrastructure development, was limiting the expansion of other economic sectors.
"Take agriculture - the rapid development of roads and buildings are taking away space required for farmland and irrigation at a rate of nearly 1,000 hectares per year," he said.
He further cited the agriculture sector as a more sustainable tool for economic growth, saying that the rate at which a farmer's income fluctuated was relatively more stable than that of those working in the tourism sector.
He said that a farmer's real income grew at a rate of 4.83 percent in the 1970-1980 period. Though stunted by market marginalization, which preferred tourism, to 2.98 percent in the 1980s and a further 2.35 percent in the 1990s, the agriculture sector did record of real income growth per capita of 3.92 percent in the 2000-2006 period.
In comparison, real wages in the services sector including tourism continued to fall. During the Bali tourism heyday of the 1980s, real income growth per capita in the services sector showed a spike of 8.93 percent from 5.21 percent during the 1970s.
In the 1990s and during the Asian financial crisis, the number dropped to 5.97 percent. From 2000 to 2006, the services sector recorded a freefall with a real income growth per capita of 1.04 percent.
"This proves at least one thing: Our reliance on market mechanisms to support fair and equal development requires a second look," he said.
"This applies not only to the government, but to all stakeholders such as the public and businessmen."
Bagus Sudibya, former head of the Bali Tourism Board who was present at the seminar, admitted that an over-reliance on the tourism sector had caused the government some difficulty in growing the island's economy.