(Adds cannabis weight in sixth paragraph, currency in 34th.)
Oct. 12 (Bloomberg) -- Swedish deejay Fadi Alturk joined the 52,000 tourists who fled the island of Bali in 2002, reeling from nightclub bombings that left 202 dead in Indonesia’s worst terrorist attack. A year later, he was back.
“When the bombing happened, we thought that was it, people would never come back,” said Alturk, 31, who was due to appear at one of the two clubs destroyed that night, before a last-minute change of venue. On the ninth anniversary of the bombings, “business on Bali is better than ever,” he said. “Everybody’s just investing and investing.”
Alturk, who today manages a condominium project, is among those profiting from a building and investment boom on Indonesia’s “Island of the Gods,” whose rice terraces, temples and surfing beaches have preserved its status as Indonesia’s top tourist destination for more than four decades.
Now, Bali is suffering from its popularity. A record 2.5 million visitors, led by Australians whose currency is near a 13-year high against the rupiah, are clogging roads, littering beaches and straining water supplies, residents and hotel managers say. As the government plans a $1.3 billion rail line and second airport to spread tourism to less-developed areas, the head of the district around the artistic center of Ubud said the pace of construction risks destroying the culture that is key to Bali’s success.
“What we want for Bali in the future is quality tourism,” said Tjokorda Oka Artha Ardhana Sukawati, regent of Gianyar, in a home adorned with sculptures of gods and life- sized replicas of now-extinct Balinese tigers. “If we have a cup of tea, and we keep on putting more water on it, eventually you cannot taste the tea. We’re worried that soon we may not be able to taste we are in Bali anymore.”
The arrest of a 14-year-old Australian boy in Bali last week for allegedly possessing 3.6 grams (0.1 oz) of cannabis highlighted these risks. Prime Minister Julia Gillard called the boy on Oct. 9 to reassure him that the government was doing everything it could to free him, her office said in an e-mail. Schapelle Corby, an Australian who was sentenced to 20 years in jail after being caught with 4.1 kilograms of marijuana in Bali in 2004, is still in prison.
At 153 kilometers (95 miles) by 112 kilometers, Bali is a little larger than Rhode Island and attracts more than a third of all visitors to Indonesia with a mix of nightlife and surfing in the southern beach resorts near the airport, and rice terraces, temples and local culture around Ubud in the volcanic, mountainous center. Arrivals have doubled since 2006, the year after a second terrorist attack killed 20 people.
Surf and Golf
A predominately Hindu enclave in Muslim-majority Indonesia, Bali has drawn travelers since German painter Walter Spies moved there in 1927, becoming a bellwether for economic wealth from U.S. surfers in the 1960s to Japanese golfers in the 80s.
Australian tourists in the first eight months of 2011 are set to exceed last year’s total of about 648,000, which was about five times more than in 2006. Chinese visitors increased 484 percent in that time to 197,000, while arrivals from Japan fell 4 percent, statistics from the Bali Tourism Board show.
“The mining boom is helping tourism to places like Bali,” Qantas Airways Ltd. Chief Executive Officer Alan Joyce said in a Sept. 13 interview. “Our largest customers are in the mining sector and we are still seeing a big increase in demand. Perth to Bali has been great for us.”
The three-and-a-half-hour flight is the fastest-growing of Australia’s top 10 international routes. Passenger numbers from Perth to Denpasar, the Balinese capital, increased 17 percent in the year ended July, to 778,049, government figures show.
The gain helped the $7.4 billion economy -- comparable with the Bahamas -- grow at an average 6.5 percent since 2006. With nine out of 10 star-rated hotels clustered around the southern beaches, according to Knight Frank LLP, most tourists head to accommodation within 10 kilometers of the airport.
“The biggest problem we have here in Bali is the roads -- we’ve seen very little progress,” Sukawati said. “The number of tourists coming to Bali in 2002 was about 1,500 a day. Now it’s close to 7,000.”
On Seminyak beach in the south, Australian tourist Peter Anyalai sits under an umbrella, watching groups learn to surf, surrounded by discarded food wrappers, cups and condoms, as foul-smelling water drains into the sea from the streets.
“The sewage, the garbage, the smells are a major concern,” said Anyalai, 56, who’s surfed there since 1977.
Responding to the outcry, Bali Governor I Made Mangku Pastika in December banned development of new hotels in the three most-developed southern districts. Still, capacity in hotels will grow by 3,242 rooms, or 16 percent, to 23,500 rooms before the end of 2012, according to a Knight Frank report.
Among projects under way, the airport, on the southern peninsula, will double capacity to 24 million passengers per year by 2013, and Marriott International Inc., the largest publicly traded U.S. hotel chain, plans to open a Ritz-Carlton in 2013 in nearby Nusa Dua. A new convention center in Jimbaran, next to the airport, is scheduled for the Asia-Pacific Economic Cooperation meeting in 2013.
Secunderabad, India-based GVK Power & Infrastructure Ltd., the builder of airports and utilities controlled by Indian billionaire GV Krishna Reddy, signed an agreement this year to build an airport in the north, and the government plans to start building the rail line to circle the island next year.
“Everyone understands the island has reached capacity,” said Jean-Charles Le Coz, general manager of the Nikko Bali Resort and chairman of the Bali Hotels Association. “Everything is overworked in the south.”
The spread of commercialization beyond the southern beaches threatens the agrarian lifestyle of Bali’s mountainous interior that has attracted travelers since the 1920s, said Elora Hardy, creative director of Ibuku, a company in the hills south of Ubud that designs bamboo buildings.
“If you cover this island in bamboo houses built on stilts, the world would be better off,” she said, as workers nearby built villas for a project called the Green Village. “But that’s not how big money investors in Bali are going.”
Hardy, a former designer for LVMH Moet Hennessy Louis Vuitton SA’s DKNY brand who grew up in Bali and went to university in the U.S., said the lack of roads outside the tourist area may help slow the pace of development. “Traffic will save this island for the next few years,” she said.
For most of Bali’s history, foreigners were kept at bay. As islands to the west adopted Islam, Bali retained a branch of Hinduism and its concept of the God-King. Eight families ruled distinct areas that remain districts today.
Charlie Chaplin, anthropologist Margaret Mead and Spies were among the early visitors, while surfers from Hawaii and Australia followed in the 1960s, looking to ride Balis’ 3 meter (10 feet) waves. Within eight years of the airport’s first international flight in 1966, Japanese developers had built Bali Handara Kosaido Country Club’s 18-hole golf course 1,100 meters up in the mountains.
Now, busloads of tourists from China, Russia and South Korea traverse the hilly streets of Ubud and haggle in the central market for sarongs and wooden backscratchers. Merchants are trying to learn Chinese, said Wayan Aeka, 29, who has sold goods there since she was a child.
“Bali is beautiful and it’s cheap,” said Ronnie Qi, a 37-year-old Shanghai shipping company worker on his first trip to the island, as he walked through the market.
With 237 million people, Indonesia’s success has added to Bali’s boom. The $707 billion economy expanded twice as fast as global output since 2008. President Susilo Bambang Yudhoyono targets average growth of as much as 6.6 percent through 2014. Domestic travelers to the island increased 32 percent last year to 4.6 million.
Ronald Akili, 29, opened the Potato Head Beach Club restaurant complex in Bali in December, building on a branch in the Indonesian capital started in 2008. The Jakarta native expects to complete an all-suite hotel nearby in two years.
“We thought Bali would be the perfect stepping stone to show the national and international audience our concept,” Akili said in an e-mail. “The traffic of the domestic market coming to Bali has increased tremendously.”
Beachfront property in the most popular locations costs more than 7.5 million rupiah ($839) a square meter, according to Bali-based property agency Elite Havens. That’s nearly double the price of residential land in Sydney, Australia’s biggest city, according to the Housing Industry Association in Canberra.
‘Half Their Brain’
“Bali has this attraction, this image,” for holiday-home buyers, said Ingo Mueller, a partner with Bangkok-based law firm Limcharoen, Hughes & Glanville, who moved to the island in 2009. “It’s more an emotional thing than a purely rational investment. They leave half their brain at the airport.”
For those who come to live on the island, many now are in the resources industry, said Shane Menere, head of investment at Far East Resources Fund Ltd., after dropping his daughter at the Bali International School in Sanur in the south.
“You get a lot of mine workers, electricians and contract administrators, drill rig operators, because Indonesia’s so rich in resources,” said Menere, 41, who moved his family from Brisbane, Australia, last year after tiring of twice-monthly trips to Jakarta. “I certainly have no intention of going back to Australia. I love Bali.”
Back in the bars and clubs around the beach resorts, Australians keep arriving, even after 88 of the country’s citizens died in the 2002 bombings, taking advantage of an Australian dollar that touched 9,425.09 Indonesian rupiah in May, the strongest level since July 1998. The Aussie traded at 9,023.61 rupiah at 9:20 p.m. in Sydney.
On a recent Friday night at Ku De Ta bar on Seminyak beach, hundreds of tourists, wealthy Indonesians and expatriates gathered to watch the sunset and sip 110,000 rupiah ($12) cocktails, three times the average daily earnings of the Balinese, as the smell of sewage wafted in from the sea.
“It’s just taking the money, short-term thinking,” said Michael Pohorly, a representative with 61 Legian, which owns a complex of bars and clubs across the street from the site of the 2002 blasts. “The rice fields have been in existence for thousands of years, and when they’re gone, they’re gone. All of a sudden, Bali might be paved over.”
--With assistance from Jason Scott in Perth, Robert Fenner in Melbourne, Nichola Saminather, Elisabeth Behrmann and James Paton in Sydney, Kartikay Mehrotra in New Delhi, Femi Adi in Jakarta and Kristine Aquino in Singapore. Editors: Adam Majendie, Chris Collins.
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