2nd Bali bombings have less adverse effects on investment

James Van Zorge, Jakarta

Governments and citizens alike often assess the risk of a terrorist attack much like they treat accidents. When we see or hear about an automobile accident, for example, we exercise much more caution when driving. Scenes of a plane crash on CNN make us think twice before booking our tickets and those who do decide to fly cringe upon take off.

In fact, it is a fallacy of our reasoning to believe that because we saw or heard about an accident it makes it objectively more likely that we will experience an accident ourselves. But that is exactly how most of us think.

In the cognitive sciences, this fallacy of reasoning is described as ease of representation. The more vivid the event, the higher the risk we assign to it. Because terrorist attacks are covered extensively by the media and the images remain impressed on our memory, we often make the irrational conclusion that the risk of another terrorist attack in the near future is much higher.

Foreign governments issue warnings and travel advisories, security measures are tightened, and tourists cancel their travel plans. The man in the street exercises more caution in his normal practices, and tends to limit visits to the local shopping mall, restaurant, or night club.

In reality, the logic employed by terrorists suggests that the actual risk of an attack following shortly after another is probably much smaller than we expect. After a successful attack, harsher security measures employed by the government may lead to terrorists deciding, quite rationally, to lie low and wait until security is relaxed and public awareness fades.

Waiting would therefore increase the chance of success for the next attack. There are other reasons why terrorists may wish to wait. One is that resources need to be replenished and planning for the next attack takes time. Another is that once a successful attack has been made, a publicity reminder may not be needed for a while.

Not only is it unlikely that another attack will follow in the near future, but it is certainly true that everybody is at greater risk from disease than becoming a victim of a bombing. Bali I -- which killed 202 people -- was truly a devastating attack; but since then, there have been only 55 fatalities from terrorist attacks in Indonesia.

There are signs, however, that the local and foreign communities are becoming more rational in their assessment of terrorist risk.

We remember after Bali I, which exacted a high toll amongst foreigners, there was an atmosphere of fear within the expatriate community. Foreign corporations, feeling that they were acting responsibly, knocked down the doors of security consultants to help them think through evacuation plans in the event another attack would occur.

As virgins in the world of terrorism, executives told us that, should another bombing occur, they would seriously consider relocating to safer shores. They also told us of numerous conference calls with headquarters to discuss the security situation -- for the majority of companies, the bombing was the final nail in the coffin as company directors decided to shelve any investment plans they had.

Today, the situation is starkly different. In a recent snap poll that we conducted with a group of 18 large foreign investors, 15 said that before Bali II they were considering the expansion of their operations in Indonesia but, at the same time, the bombing had no impact on their decision-making. Also interesting was the fact that out of the 18 polled, 13 said that Bali II had a less negative impact on their outlook for Indonesia than after Bali I.

So, what is happening? One answer is that investors in Indonesia have started to take a less emotional and more objective view of terrorist risk. After having experienced the fallout of four attacks over the past four years, businessmen are now becoming more accustomed to the risk of terrorist attacks as they would with other risks to which we are all familiar.

Furthermore, as suicide bombings in other countries have become a part of the daily media landscape, people are becoming desensitized. Going back to the analogy of how one reacts upon seeing a horrible automobile accident, the first time we see an accident we think twice about getting back on the road -- but as we acquire more experience as drivers and see more accidents, the less shocking it becomes. We still might slow down a bit, but it doesn't stop us from getting on with our daily lives and business.

For corporate Indonesia, this is good news. It also is a message that the heads of terrorist organizations will find a little more than disheartening.

The writer is a senior partner of Van Zorge, Heffernan & Associates, a government relations consulting firm based in Jakarta. He can be reached at jvzorge@rad.net.id.