Risk & Crisis Management in Tourism Sector:
Recovery from Crisis
in the OIC Member Countries
67
By the late 1980s several other destinations across Indonesia had become popular with tourists,
including Yogyakarta and other parts of Central Java, Torajaland (in Sulawesi), Lake Toba (in
Sumatra) and Lombok (the neighbouring island to Bali). All of these destinations except for
Lombok were significant for cultural tourism. The capital city Jakarta also attracted tourists,
especially business travellers. Much of the increase in tourism development was due to
deregulation of the industry: up until the early 1980s the country had depended for its export
revenues on the oil and gas sector, but the steep decline in oil prices in the early 1980s caused a
serious budgetary shortfall. This stimulated the government to diversify into other areas of
export-oriented economic activity, including tourism (Cochrane, 2003).
Throughout the 1980s and up to 1997 the sector developed steadily, as can be seen from Table
4.1 below. The number of international arrivals grew from 129,000 in 1970 to over 1 million by
1987. In the next decade (1988-1997) international arrivals increased by almost 500%, reaching
5,185,000 in 1997, accompanied by foreign exchange earnings of US$ 6,648 million. However,
in 1998-99 the country went through severe economic problems and social unrest related to a
wider Asian financial crisis, which slowed tourism development. The sector recovered slowly
between 1998-2001.
In 2002, as the sector had almost fully recovered from the economic and social uncertainties of
the previous five years, terrorists bombed two nightclubs in Bali, killing over 200 people. This
impacted the tourism sector not only in Bali but in Indonesia as a whole. The immediate outcome
of the attacks was an 11% decline in the number of visitors for 2002 and 2003. The sector only
recovered fully from the shock in 2004 when the number of international visitors reached
5,321,000 visitors. However, although there was recovery in terms of regaining the number of
arrivals recorded in 2001, the total income in foreign currency was still in decline, as total
foreign exchange earnings in 2004 were US$ 5,226 million, less than US$ 982 per visit
(compared to US$ 5,227 million in 2001, which represented US$ 1,034 per visit).
The strong reaction from the government after the 2002 attacks in Bali, including the security
measures implemented after the attacks in Bali and further attacks in Jakarta, were not enough
to prevent the terrorists from attacking Bali again in 2005, although the preparedness and
coordination of the various authorities and stakeholders reduced the impact of the second
attack. Nevertheless, there was a measurable decline in the number of arrivals in 2005 of around
6%, as shown in Table 4.1.