Unrest weakens economy

Unrest weakens economy

Tourism, besides mining and agribusiness, should be the most
promising industry in Indonesia when most other economic sectors
are still suffering from depressed domestic market demand and
credit crunches. As the rupiah's exchange rate against the
American dollar remains low, or almost 70 percent below its level
before the economic crisis hit Indonesia in August 1997, this
vast archipelagic country is theoretically a paradise for foreign
tourists and the most competitive supplier of minerals in the
world market.

However, the recent wave of sectarian clashes on several
islands in Maluku and Lombok island in West Nusa Tenggara, the
separatist rebellion in Aceh, the northernmost province in
Sumatra and demonstrations by thousands of villagers on Bintan
island, near Singapore, have prompted governments in many
countries to issue advisories warning their citizens against
traveling to Indonesia. The hotel association in Lombok estimated
it would take many years to restore the credibility of the
island, east of Bali, as a tourist destination. All hotels on the
island, which used to cater for more than 300,000 tourist
arrivals a year, now look like haunted properties. The local
administration said it might receive only a tiny fraction of the
Rp 9 billion (US$1.2 million) in local levies it expected from
hotels this year.

Unrest on the Indonesian island of Halmahera has forced
Australia's Newcrest Mining Ltd. to shut its Gosowong gold mine
and evacuate 300 employees to Manado, North Sulawesi.

Last week, Iluka Resources Ltd.'s 75 percent-owned PT Koba Tin
unit halved its output at its operations on Bangka Island in
southern Sumatra due to increasing tensions in the province. Its
operations have been affected by a breakdown of law and order in
the region, resulting in the uncontrolled theft of tin
concentrate from production sites.

This spate of violence is showing just how readily the long-
repressed tensions, so common in diverse Indonesia but checked
under Soeharto's centralized authoritarian rule, are coming to
the surface. Many are afraid that the simmering conflict and the
breakdown of law and order in several areas might encourage local
leaders elsewhere to push against the power of the central
government. This momentum, if uncurbed, could grow to the point
where the process will spread quickly, like an epidemic, to other
areas.

Unrest or violence is especially inimical to the tourism
industry as tourism is foremost an experience, a lifestyle choice
one makes to escape familiar surroundings and explore different
parts of the world. Everyone involved in the travel industry,
from customs officers and taxi drivers to hotel receptionists,
contributes to the memories visitors take away with them and
plays a part in delivering total customer service, satisfaction
and delight. But security conditions or the perception about the
security situation is the key to tourism credibility. Nothing
within the travel industry means anything without security.

Tourists will not even consider plans to visit a country where
the security situation is out of control and this is especially
damaging to the process of Indonesian economic recovery. Because
of its multi-faceted nature, the tourism industry involves a wide
variety of economic activities. Tourist arrivals immediately
inject additional purchasing power into the local economy,
generating additional demand for a host of services and goods,
ranging from transportation, hotels, food and souvenirs. These
sectors happen to be labor-intensive, the very type of economic
activity the country sorely needs to create jobs from its massive
pool of the unemployed.

The tourism industry is completely friendly to the environment
as it feeds on local attractions such as natural beauty and the
creativity of human resources to arrange cultural events and
produce goods.

It is tragic that the unfavorable security conditions have
lead to a situation where the country is unable to capitalize on
its present highly competitive edge in the tourism industry. Even
the goodwill of Singapore's Prime Minister Goh Chok Tong, who in
the middle of this month committed his government to spending
$1.2 million to promote Indonesia and Singapore as a joint
tourist destination, will not help much. This is a great loss, as
the planned joint promotion would enable Indonesia to take
advantage of the more than seven million tourists annually
visiting the island republic.

It is, therefore, more imperative than ever for the government
to act firmly and quickly restore a strong system of law and
order and strengthen local leadership in the various provinces to
bring things under control. Without these preconditions, there
will be no change for the better and the series of whirlwind
visits President Abdurrahman Wahid has made or will make to many
countries to promote Indonesia will be wasted.