Economic Impact of the Bali Bombings

The most obvious effect is the damage to TOURISM on the island of Bali.Bali accounts for about 40 per cent of Indonesia's earnings from tourism. Tourism revenue ranks alongside clothing, textiles and petroleum products as the biggest sources of foreign income for Indonesia. The violence affecting the rest of the country could make rebuilding the industry a very difficult process.

But apart from the immediate effect on the tourism industry, the Bali explosions are likely to add to Indonesia's already serious problems with lack of foreign investment.Without new investment, sustained growth will be impossible, especially since five years of no investment in infrastructure such as power generation has left the economy with emerging structural weaknesses. Regular power failures are beginning to occur across the key island of Java.

Therefore..
Investors have been reluctant to commit to Indonesia because of perceived political instability and poor economic prospects, as well as problems with corruption in the bureaucracy and the legal and judicial system that make doing business costly and risky.