Business Leaders Say Jakarta Bombings Do Little Damage to Economy

By Katie Hamann Jakarta 22 July 2009

Indonesian business leaders remain upbeat about the country's economy despite the recent suicide bomb attacks at two luxury hotels in the capital Jakarta. Business analysts say investor confidence in the country remains high. Tourist operators are also optimistic, saying cancellations have been limited.

The chairman of Indonesia's Chamber of Commerce, M.S. Hidayat, says while the Indonesia stock market and the rupiah fell moderately the day of the bombings, they have since recovered.

Hidayat describes the economic damage from last Friday's bombs as "minor turbulence."

Security guards man a gate outside the bombed Ritz-Carlton hotel in Jakarta, Indonesia, 22 Jul 2009

Two suicide bombers killed seven people and injured more than 50 at the J.W. Marriott and Ritz-Carlton hotels. Both are Western-owned chains popular with foreign travelers and Indonesian business leaders.

Even before Friday's attacks, the Indonesian government forecast that foreign direct investment would fall by as much as half this year, as a result of the global financial crisis.

But Hidayat rejects this gloomy outlook. Indonesia has defied expectations and regional trends, with the economy growing more than four percent in the first quarter of this year.

Hidayat says there have been very positive trends in recent months.

"Indonesia is one of three places that people still want to invest and this is very rare, this has not occurred before," he said. "Yes, of course the bomb did bring a moment of influence to Jakarta and investment, however in terms of investments, medium- to long-term investments, there will not be an effect because investments for this length are studied beforehand, security and stability is taken into account in this kind of foreign direct investment."

Hidayat emphasizes that police transparency and a speedy investigation into the bombings are needed to maintain investor confidence.

Jakarta Governor Fauzi Bowo sought to quell fears created by the blasts but says that security staff must be more vigilant.

"I would say as far as security is concerned Jakarta is as safe as any other metropolis in the world," said Bowo. "Police force and all the agencies involved are now evaluating the system and they are working to consolidate and to eliminate all the loopholes that are there now. And we are trying to also increase the awareness of the people in the field, so that do their job more consistently according to the standard operating procedures."

Indonesia's tourism industry is likely to bear the brunt of any economic fallout. Indonesia's Culture and Tourism Minister said losses could be close to $2 billion, with as many as one million fewer travelers entering the country this year.

But Michael Burchett, vice chairman of the Bali Hotels Association, says this that forecast is too gloomy.

"Definitely way, way over pessimistic. I think Bali will be minimally affected, probably more so in the meetings area because there are other issues related to duty of care, which put companies in a difficult circumstance, so they need to review options," he said. "But the security and the feed back we get from everyone is pretty good and there's a lot of confidence I think."

Hotels on the resort island of Bali saw bookings drop sharply after bombings there in 2002 and 2005 killed scores of people, including many foreign tourists. But this time, while travel agencies say some large groups have canceled tours, airlines have not recorded a significant drop in bookings or cancellations.

Security at hotels has been stepped up dramatically since Friday. Police there remain on high alert.

Burchett says there have been few cancelations in Bali.

"There certainly wasn't any mass exodus, that's for sure. And secondly, we're noticing just a small number of cancelations, probably three, four, maybe half a dozen in the larger hotels," he said.

As for the future of the Ritz-Carlton and Marriott, Poul Bitsch, the chairman of the Jakarta International Hotel's Association, says they will reopen.

"Based on my information from the managing director they will reopen as hotels, the question is when," said Bitsch.

The investigation into the hotel attacks continues. Indonesian police suspect that Noordin Mohammad Top, a Malaysian who was top leader of the militant group Jemaah Islamiyah, was involved. Several JI members were convicted of the bombings in Bali. Security experts in the region say it is possible that Noordin now leads a more violent JI splinter group.