The tourist boom in Bali: is it harming prospects for future economic development?

The economic impact of tourist boom in Bali is quite visible, having spread across the island from the late 1980s, even though the social, cultural and environmental effects have been mixed. However some observers drawing on international experience have questioned the longer-term economic benefits of tourism. They have pointed to the potential ‘Dutch Disease’ (D-D) effects of tourist expansion, resource movements and price increases, which inhibit the expansion of other more dynamic tradable sectors and the development of new technology, thus slowing economic transformation.

This paper challenges this view and argues that tourism has been a dynamic industry contributing to structural change, skills development and the widespread application of information technology. In addition, it has promoted a complex web of interactions with other industries. At the same time, the paper finds the assessment of the economic benefits from tourist growth for Bali and Indonesia is complicated by the economic relations between Bali and the much larger national economy. This dimension of tourism has often been neglected in the discussion of the impact of the industry on the island economy. The paper examines some of these interactions. It discusses the engagement of both unskilled and skilled migrant workers from elsewhere in Indonesia and the cointegration of prices between Bali and neighbouring regions.

Sisira Jayasuriaya, Professor of Economics at Monash University

I. Wayan Sukadana, Faculty of Economics and Business, Udayana University

Chris Manning, Honorary Associate Professor, Arndt-Corden Department of Economics, Crawford School of Public Policy, The ANU