2nd Bali bombings have less adverse effects on investment

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.