'Marriott blast has limited impact'

Dadan Wijaksana, The Jakarta Post, Jakarta

The economic impact of the recent blast at the Marriott Hotel was expected to be limited to a few sectors, allowing the economy to remain on track to achieving the growth target of around 4 percent this year, analysts claimed.

The quick recovery of the rupiah and the stock market, both of which took a hit on the day of the bombing, leaves only the tourism and travel sectors to suffer a longer term impact, according to Citibank economist Anton Gunawan.

"Assuming that no similar bombs go off in the future, the Marriott blast should not cause a devastating economic impact overall, although tourism will suffer in the next couple of months," Anton told The Jakarta Post on Sunday.

Not that investor confidence, especially foreign, was not shaken because of the event, Anton added, but it would be unlikely to cause a mass exodus.

"The confidence of the existing foreign investors was indeed affected, but it would only make them cautious, but not to a degree that can create a capital exodus," he said, adding that even the more severe bombings in Bali, which caused the death of 200 people, last year did not cause much capital outflow.

He welcomed the planned stimulus package from the government to help mitigate the bombing's impact, referring to the government's plans to introduce a set of policies designed to improve business and investment climate at home.

The package will be officially announced next week when President Megawati Soekarnoputri unveils the 2004 national budget.

Last week's bombing attack rocked the prestigious five-star hotel in one of Jakarta's busiest business districts and has so far left 11 people dead and some 150 others injured. The rupiah and stock market stumbled on that day on fears of massive capital inflows resulting from the shattered confidence.

But, things changed for the better in the following days, with the local unit and the stock index starting to recover. By Friday, the rupiah extended its rally for three straight days to close at Rp 8,590 per dollar.

Likewise, the stock index ended at 505.36 points, also above the pre-blast closing of 503.94.

Those provide signs that the economic impact would be isolated and short-lived, with tourism to be the hardest hit.

"The direct longer term impact would be on tourism, which has just begun to bounce back from the Bali bombings. We won't see that recovery in the next several months," Sri Adiningsih, economist with the Gadjah Mada University, told the Post.

When the bombing took place, the hotel was averaging a 77 percent occupancy rate, way above the country's average of 45 to 50 percent, according to tourism-related associations.

Sri said that although she forecasted the economy to grow slightly below 4 percent this year, it was not because of the terror attack, but more due to the government's slow progress in boosting investment and exports.

Despite the limited impact, Sri and Anton cautioned the government against sitting back, because the investment community was now waiting for real action to restore security and stability and deter similar attacks in the future.

Meanwhile, Malaysian textile merchant Ng Chiaw Iang told AFP that the attack had raised the risk perception among foreign investors, and that a swift response from the government to resolve the matter would be the key to restoring that confidence.

"I still have confidence in doing business in Indonesia, but if there are new attacks, I may have to reconsider my business plans," he said.

Local businessman Anton Supit, while noting that the economic impact would be limited, said that the government still had to improve the investment climate, as even before the bombing, new foreign investors remained reluctant to invest because of a less than attractive business environment.