The Impact of Neoliberalism on Crisis Management in Bali’s Tourism Sector

ABSTRACT

With the demise of sustainable tourism as a panacea for the community-level impacts of mass tourism, some scholars have) called for destination management and planning to re-focus on the politics behind tourism. In response, we examine tourism destination management from a political economy perspective to provide a contemporary understanding of tourism crises and inform what changes are required to achieve sustainable tourism. We do this by investigating of a well-known global tourism destination, Bali, using interviews and a survey. These indicate the extent to which neoliberal development policies in Indonesia’s tourism sector have intensified Bali’s susceptibility to crises and kept crisis management policies minimal, temporary and unable to respond effectively. While the obvious argument is that tourism planning at all levels needs to be more cognisant of the sector’s vulnerability to crisis, neoliberal development doctrine inhibits engagement with crisis and its impacts on society, which was demonstrated during the COVID-19 pandemic.

KEYWORDS:

• Bali
• Indonesia
• neoliberalism
• tourism
• crisis management
• COVID-19

Introduction

The challenges of mass tourism in the 1970s and 1980s were to be overcome through sustainable tourism, meaning the effective management of destination growth to ensure local communities benefited from tourism within environmental limits (Butler, 1991; Mowforth & Munt, 2015; World Tourism Organization, 2004). However, sustainable tourism has failed. Swarbooke (2023) attributed this to a critical oversight – not identifying tourism as a political issue connected to the distribution of resources, which produces winners and losers (see also Mowforth & Munt, 2015). The classic text Tourism Planning recognised that “Nationals and communities have accepted the popular belief in expanded tourism as an unlimited economic good” (Var & Gunn, 2023, p. 76), and very little has been done to change this perception or the forces within the global political economy that contrive mass tourism. Too often tourism operators are donating to not-for-profits rather than “challenging governments over their failure to better regulate tourism … ” (Swarbooke, 2023, p. 19).

What is needed is a clear understanding of the politics and economics behind the tourism conundrum to re-set its sustainability by building upon some new, potentially more effective, strategies that bring together the tested tenets of tourism planning with newly established conditions in the political economy. This research seeks to contribute to this by providing a contemporary understanding of factors resulting in the vulnerability of a tourism destination. By critically analysing tourism crises on the island of Bali, particularly during the COVID-19 pandemic, insights can be derived to inform tourism planners and policy makers on the economic conditions that contrive crisis, rather than build destination resilience.

Bali as a mass tourism, large-scale destination provides useful insights that might inform other tourism-dependent regions facing similar traditional challenges, such as locals receiving few of the economic benefits and enduring the negative consequences on their natural resources (Mowforth & Munt, 2015; Swarbooke, 2023), as well as the emerging vulnerability to “‘polycrisis’ combining climate change with energy and social inequality” (Blanco-Romero et al., 2023). Findings are most likely to be relevant to developing country contexts, due to the political economies surrounding these destinations, for example Angkor Wat, Cambodia (Ellis & Sheridan, 2014) or Machu Picchu, Peru (Rice, 2018). However, some aspects of the findings may be of use to scholars exploring mass tourism destinations in the Global North that were likewise vulnerable during COVID-19, such as Seville in Spain (Argaú, 2021), or those that face the perennial challenge of mass tourism.

Our research begins with the premise that international tourism and neoliberal processes are inextricably interrelated. Neoliberalism emerged as the dominant economic paradigm in response to the global oil shocks of the 1970s and the resultant debt crisis in the early 1980s, and the doctrine has focused on restoring private profitability and evading government accountability by deliberately repudiating the state’s economic capacity (see inter alia Harvey, 2010; Soederberg, 2014). As such, markets have been established as key governance mechanisms and have transformed the state’s social function from protecting domestic enterprise and mitigating socio-economic inequalities to encouraging international economic competition and efficiency, particularly in the developing world (Wearing et al., 2019). The two key issues we consider are how the hollowing out of state capacity (Jones & Hameiri, 2021) and the “successive rounds of distinctively patterned, market-oriented regulatory restructuring” produced by neoliberalisation processes (Brenner et al., 2010, p. 209) have operated in the tourism sector in Bali. Further, we consider if, as per Brenner et al. (2010, p. 209), it might be the case that policy failure is central to neoliberalisation processes as it provides pathways for “forward momentum for the project as a whole”.

International tourism has materially stimulated neoliberal processes as destinations in the developing world offer first, natural comparative advantage in scenery, culture, and landmarks to be potentially exploited with limited disbursements. And second, a geographic fix for capitalism’s overaccumulation problem which, when combined with the weakening of economic sovereignty under the Washington Consensus policies designed to implement neoliberalism, creates new opportunities to take advantage of the increased mobility of individuals and global capital (Harvey, 2010; Salazar, 2010). Indeed, neoliberal orthodoxy facilitates large-scale, capital-intensive tourism projects, which instil dependency on foreign monopolistic institutions in developing countries as governments frequently lack the financial capacity to fund such ventures (Sugiyarto et al., 2003). According to Mowforth and Munt (2015), the World Bank and the IMF view tourism as a way to attract investment, especially from transnational corporations. They use conditionality to ensure neoliberal policies are implemented and all this has concentrated wealth and power rather than combatted poverty. The reliance on external capital inhibits local ownership of destinations as profits are regularly leaked abroad and top professional positions are awarded to outsiders (Fletcher, 2011). As such, host communities and local workers in the developing world are commonly denied involvement in decision-making processes (Dahles, 2001, p. 5). The rapid expansion of international tourism in the Global South has thus intensified land dispossession, loss of local self-reliance, and environmental and cultural degradations, with little discernible reduction in inequalities (Alam & Paramati, 2016).

These issues intensify the vulnerability of destination communities, MSMEs, and workers during crises (Ritchie, 2004). According to Higgins-Desbiolles et al. (2019, p. 1), “neoliberal capitalism has become increasingly reliant on growth as the panacea to the crises it inevitably creates” a trend that has only intensified competition in international tourism as states seek to attract tourists to enhance economic growth. Furthermore, Liodakis (2019) argues that most tourism scholarship overlooks the reality that tourism, influenced by an unlimited growth paradigm, is becoming self-destructive as it produces and compounds socio-ecological crises through labour exploitation, land-grabbing, rent extraction, and accumulation by dispossession. To hedge against the volatility invoked by the severity and frequency of “crisis tendencies of contemporary capitalism”, Gibson (2019, pp. 5–7) highlighted that investors are reinvesting surplus capital in tourism development projects through increasingly diverse methods “of enclosure and value capture” as reconstruction resources are channelled more quickly to destinations familiar to foreign donors and transnational tourism corporations. Still, the scale of COVID-19’s impacts on tourism has resulted in strong calls to learn from it and reinvent its business framework to create resilience (Traskevich & Fontanari, 2023).

The intricate relationship between tourism, neoliberal capitalism, and crisis has been particularly pronounced in the globally renowned destination of Bali in recent decades. This article analyses empirical data from interviews and a qualitative survey with key stakeholders in Indonesia’s tourism sector to provide original insights into the management of the crisis on Bali using a political economy perspective that can inform tourism planners and policy makers in other contexts, particularly those in the Global South. It seeks to critically investigate the extent to which neoliberal policies in Indonesia’s tourism sector heightened Bali’s vulnerability to crisis, how they have influenced crisis management policies on the island, and which stakeholders have been most affected by the COVID-19 pandemic.

Methodology

This article employs a case study methodology informed by a critical theory research paradigm. Ontologically, Jennings (2010, p. 44) contends that “critical theory portrays the world as being complex and organised by both overt and hidden power structures. Subsequently, the world involves oppression, subjugation and exploitation of minority groups who lack any real power”. Knowledge production within this political economy approach requires critical analysis of unequal power dynamics to reveal restrictive and alienating conditions imposed by hegemonic structures (Sarantakos, 2013). The article therefore employs predominantly qualitative research methods, as essential for critical examination of the historical domination of social institutions (Creswell, 2007).

Analysing empirical data from interviews and a qualitative survey with key stakeholders in Indonesia’s tourism sector provides original insights into the management of the crisis on Bali. This article uses data from 11 interviews. Four were conducted with various professional private sector stakeholders from different levels of Bali’s tourism sector including a local Balinese owner of a small hotel, a foreign owner of a tour guide company, a curator for a family-owned, private museum, and a member of a tourism business association in Bali who had extensive experience with the Pacific Asia Travel Association (PATA), a membership association encompassing public and private organisations. Three interviews were with officials from regency, provincial, and national levels of government to reveal how tourism crises have been managed by different state strata, while four more interviews were conducted with members of locally, regionally, and nationally orchestrated CSOs engaged in tourism and/or crisis management on the island. Interviewees are identified below by their broad category of occupation to protect their identity in line with the ethics approval for the project.

Due to the inability to physically conduct fieldwork in Bali during the COVID-19 pandemic, a qualitative survey was distributed online to complement data derived from the interviews. The survey comprised a set of standardised questions designed to engage owners of, and professionals in, tourism enterprises in Indonesia, as well as workers from tourism-related businesses, to offer a wider variety of perspectives from the private sector. Written in Bahasa Indonesia, the survey was open between 16 July 2021 and 18 October 2021 and distributed online via social media pages pertaining to tourism in Bali and through networks. A total of 34 respondents participated in the survey, comprising thirteen owners/professionals from Java, as well as seven owners/professionals and fourteen tourism workers from Bali.

Contextualisation of crisis management in Bali’s tourism sector

The following brief historic overview of tourism development on Bali demonstrates how neoliberal tourism development strategies exacerbated the island’s predisposition to crisis prior to the COVID-19 pandemic. We highlight the key periods of transnationally embedded restructuring and the policy responses that had international and domestic drivers and were “inescapably incomplete and contradictory” (Brenner et al., 2010, p. 209).

Tourism on Bali until the end of the Suharto era

Bali became a tourism destination once Dutch colonial authorities gained control of the island in the early twentieth century but came into focus after Suharto established his New Order regime in the mid-1960s. President Suharto engaged with international development agencies and implemented liberal reforms to address foreign debt, hyperinflation, decrepit infrastructure, and widespread famine (Hill, 2000, p. 65). He relied heavily on an expert advisory group of US-educated, Indonesian economists and technocrats, referred to as the “Berkeley Mafia”, to direct economic reform during the New Order’s early years (Hanna & Hannigan, 2016, p. 250). Suharto prioritised development of large-scale international resorts on Bali, evidenced by the regime’s invitation to the World Bank to formulate a Bali Tourism Master Plan, which proposed the majority of facilities be constructed in Nusa Dua in the island’s south.

Highly remunerative oil exports during the 1970s motivated a decade-long adherence to a dirigiste economic paradigm largely favouring domestic business. The country faced an economic crisis in the early 1980s as oil prices substantially declined. Suharto again heeded the Berkeley Mafia who, heavily influenced by the Washington Consensus, recommended the reinstatement of not just a market-oriented economic paradigm but neoliberal policies as well as diversification away from the oil sector (Booth, 1992). Structural adjustment began in 1982 with the deregulation of monetary, fiscal, and exchange rate policies aimed at attracting foreign capital and stimulating market activity by expanding non-oil, export sectors, while export regulations were simplified through reduced trade tariffs, duties, and permits (Sugiyarto et al., 2003).

International tourism development became a significant source of foreign exchange and investment in the 1980s as several policies were introduced to fuel its growth. In 1983, visa-free entry for tourism and business was offered to nationals of OECD and ASEAN countries, and entry requirements for most other nationalities were significantly simplified (Wall, 1997). Another decline in oil prices in 1985–6 saw new issues with revenue and the balance of payments prompting the New Order to introduce additional neoliberal policies (Hannigan, 2015). These reforms further streamlined foreign investment in the tourism sector by simplifying licencing processes, introducing a tax holiday for tourism enterprises, and relaxing migration restrictions for foreign workers and investors (Sugiyarto et al., 2003). They had a profound impact on Bali’s tourism sector as they attracted more international hotel chains catering to the new trend of package tourism, particularly in the rapidly expanding exclusive Nusa Dua resort complex (Hampton & Jeyacheya, 2015), which created its own contradictions and opportunities. By the 1990s, the Suharto family had established deep connections with Jakarta-based, Chinese-Indonesian consortiums channelling foreign investment into a series of tourism megaprojects on Bali (Shaw & Shaw, 1999). The result of intensive tourism development during the 1990s was the number of foreign visitors to Bali grew from one million in 1990 to around two million in 1997 (Picard, 2008, p. 101). According to Pringle (2004, p. 195), Bali had transformed into a “resort island” as foreign investment in luxurious, capital-intensive tourism projects deepened.

Notwithstanding advancement of the island’s economy and employment opportunities, neoliberal policies intensified social and environmental issues. Economic overreliance on the sector meant growing dependence on foreign actors concerned predominantly with profit maximisation, who increasingly outsourced employment and services and repatriated revenue (Dahles, 2001). Increasing exogenous control by transnational tourism corporations reduced government capacity to adequately address issues in the sector and marginalised local involvement in decision-making processes (Hampton & Jeyacheya, 2015). Real estate became progressively valued based on prices tourism entrepreneurs were willing to pay rather than the previous traditional method of pricing land based on its worth as a subsistence resource (Macrae, 2003).

Indonesia was the country worst affected by the 1997 Asian Financial Crisis (AFC) due to substantial capital flight as currency speculators and Indonesian companies elicited financial panic through mass selloffs of the rupiah (Hill, 2000). In October 1997, the New Order was compelled to accept a $23 billion IMF bailout package and conditionally adopted further neoliberal prescriptions such as austerity measures, account deficit reductions, and closure of financial institutions (Panayiotopoulos, 2001). The AFC revealed the extent to which the New Order was built on KKN (Korrupsi, Kolusi, Nepotisme) or corruption, collusion and nepotism. It also demonstrated how crisis and the imposition of neoliberal policies was intertwined in a process that neglected important social issues. This resulted in rampant unemployment, widespread bankruptcy, and poverty increasing dramatically from 11.3 per cent in 1996–24.2 per cent in 1998 (Sugiana, 2008, p. 69). As the value of the rupiah declined 85 per cent, many hotels closed as they had been financed with foreign debt that could not be repaid. Thousands of tourism workers were forcibly retrenched on the island, revealing the sector’s vulnerability.

The New Order regime largely succeeded over its lifetime in stimulating relatively consistent economic growth, attracting foreign investment, managing the exchange rate, and expanding Indonesia’s structural capacity. However, these achievements were predicated upon neoliberal development policies and a predatory state whose shortcomings were exposed by the AFC. Prioritisation of Bali for international tourism development under the New Order was pushed by multilateral organisations’ emphasis on quickly accruing foreign exchange to revive the national economy and address balance-of-payments deficits, but the capacity of the regime to extract their own income streams from this concentrated development also facilitated it. In Bali, Gurtner (2006, p. 59) notes that:

rationalized by the perceived economic advantages, most tourist facilities were built indiscriminately, with little consideration to the local environment, natural resources, and pervading sociocultural issues. Similarly, the community developed a growing dependence on tourist expenditure.

Compounding this was the fact that transnational tourism corporations haemorrhaged economic leakage through profit remittance and outsourcing of necessary services and materials (Shaw & Shaw, 1999). Neoliberal tourism policy failed to acknowledge the sector’s profound vulnerability to crisis, which would come to haunt Bali in the new millennium.

Tourism, crisis, and neoliberalism in post-Suharto Indonesia

In the midst of the AFC, Vice-President Bacharuddin Jusuf Habibie took over as Indonesia’s third president on 21 May 1998, ushering in an era of reformation during which political power was formally (if not always practically) devolved to the regions, another neoliberal policy, which generated new tensions. The new government prioritised addressing inflation and the deteriorating rupiah, and re-establishing public confidence in the state apparatus by forging new democratic institutions (Bell, 2003). In reviving international tourism, Habibie adopted further neoliberal strategies such as transferring Indonesia’s Tourism Promotion Board to private interests, streamlining business licensing processes in the sector, and offering discounts and other incentives to gain a competitive advantage in the region (Hitchcock, 2000). Notably, Indonesia’s predatory patronage networks did not disappear with Habibie’s reforms, rather they re-established themselves at the local and regional levels (Hadiz & Robison, 2005). Government coordination of tourism development in Bali was weakened after Habibie’s successor, President Abdurrahman Wahid, implemented the Regional Autonomy Laws on 1 January 2001, which led to ineffectual coordination of tourism development processes between bodies.

Megawati Sukarnoputri’s presidency was significantly impacted by a new type of crisis: the Bali Bombings on 12 October 2002. It saw international arrivals to Bali at the end of October decline to just 750 daily compared to 4,650 three weeks earlier (Nanda & Hargreaves, 2013, p. 7). Without sufficient custom, many tourism establishments furloughed staff, reduced working hours and wages, or closed operations. Jakarta’s Centre for Labour and Development estimated that the downturn occasioned the loss of approximately 150,000 tourism positions on the island, with other related industries also adversely affected (Wilks & Moore, 2004, p. 48). The government’s lack of crisis management policies resulted in ad hoc responses overwhelmingly interested in rapid recovery to continue attracting foreign exchange and investment. This reflected the Administration’s economic overreliance on the sector, evident in the National Recovery Plan, which emphasised security enhancement, international promotion, and fiscal incentives at the expense of important social welfare issues and community participation (Pringle, 2004). Still, this is where we start to see minimalist (inadequate), temporary welfare packages as a response to crisis, which have been backed by the World Bank and other international organisations. This arose from the fact that neoliberalisation processes were seen to be producing poverty at an unacceptable level, a tension that needed some redress. Still, according to Gurtner (2006, p. 60), “despite the contribution Bali’s tourism industry makes to the gross domestic product (GDP), national government financially based commitments to the victims and affected tourism sector were reportedly limited” and insufficiently conveyed to the public.

Private sector responses were led by PATA, which viewed the government’s response as deficient owing to maladministration, preoccupation with security issues, and inadequate media control (Putra, 2010). PATA advised the private sector to restore confidence in the sector by heavily promoting the island through marketing and discounting initiatives (Gurtner, 2016). These campaigns catalysed increased competition in Bali’s tourism sector, which higher starred hotels managed to weather better due to their access to vital capital and resources (Gurtner, 2006).

Considering the lack of economic diversification and social support, civil society developed its own coping mechanisms (Nanda & Hargreaves, 2013). Within days of the attack, the Bali Recovery Group was established, a coordinating committee of eclectic local NGOs, which shared vital information and offered social services for those in need (Gurtner, 2014). The local community essentially developed its own “Balinese model of crisis management” through stopgap coping mechanisms (Hitchcock & Putra, 2005, p. 71).

Notwithstanding their shortcomings, crisis management strategies implemented in Bali were largely successful in reinvigorating tourism following the 2002 Bali Bombing, though the voracious international appetite for cheap package tourism also played a key role. Despite civil society stressing the need for improved coordination and economic diversification away from international tourism to reduce Bali’s vulnerability to crisis, there was limited consideration of the long-term sustainability of tourism projects, no perceptions of the sector beyond economic remuneration, nor the development of a formal crisis management plan (Gurtner, 2006). Furthermore, there was insufficient progress in enhancing community participation or fiscal allocation to social welfare, revealing the fundamental weaknesses of neoliberal crisis policy.

Under Susilo Bambang Yudhoyono’s presidency, Bali once again fell victim to Islamic extremism on the night of 1 October 2005 when twenty people were killed by suicide bombers. While security concerns and promotional activities were similarly of predominant concern, the government established improved leadership and media communication, and recognised the importance of the private sector in recovery efforts. However, as Gurtner (2006, p. 66) concluded, “although Bali seems to have been better prepared to manage this predicament, it is evident that without greater regional stability, economic diversification, and sustainability, both destination and stakeholders will continue to remain vulnerable”.

In 2009, with heavy influence from high-profile entrepreneurs and business associations, the Yudhoyono administration developed the Masterplan for Acceleration and Expansion of Indonesia Economic Development (MP3EI) to stimulate rapid economic growth for Indonesia to compete for a place in the ten most advanced global economies by 2025. Of the Master Plan’s six economic corridors, it distinguished Bali as the gateway for Indonesia’s tourism sector, and acknowledged challenges to future development, such as insufficient average daily tourist expenditure and length of stay. As such, the MP3EI endeavoured to galvanise “up-market” tourism by relaxing visa requirements and developing necessary infrastructure to accommodate international functions and events, as well as foreign cruise ships and yachters (Coordinating Ministry for Economic Affairs, 2011, p. 145). Redolent of its predecessors, the neoliberal plan predominantly sought to further deregulate the sector to accommodate transnational tourism corporations, while salient social issues and the frequency of crises were again largely ignored.

President Jokowi has struggled to deliver on many ambitious development promises, though tourism expanded significantly again prior to the pandemic, in part due to a weakening rupiah and growing demand abroad, particularly from China. A major tourism policy implemented under the Jokowi Administration was the ambitious Five-Year Strategic Plan (RENSTRA) released in 2015, which established numerous objectives to be achieved by 2019: receiving 20 million foreign visitors; accumulating IDR240 trillion ($17.2 billion) in foreign exchange; enlarging tourism’s contribution to eight per cent of GDP; and employing 13 million people (KEMENPAR, 2015). It involved further simplifying processes for foreign investment and extending visa-free eligibility from 45 to 169 countries in 2016. Restrictions on foreign ownership and construction of hotels and restaurants were also further relaxed, and time-consuming land acquisition processes for foreigners were streamlined by presidential decree. RENSTRA clearly demonstrates Jokowi’s implementation of neoliberal deregulatory policies designed to attract foreign capital with inadequate concern for social issues and crisis management, consequently exacerbating Bali’s vulnerability to crisis, particularly among its community, MSMEs, and tourism workers.

COVID-19 on Bali

The Indonesian government initially belittled the severity of COVID-19 and ignored international expert recommendations. Only on 2 March 2020 did President Jokowi announce the nation’s first confirmed case, and international borders were closed on 20 March 2020, long after other nations in the region (Hakim, 2020). Jokowi was initially averse to lockdowns due to the potential economic ramifications, though was ultimately obliged to issue Large-Scale Social Restrictions on 31 March (Olivia et al., 2020, p. 148). By mid-June, the government had injected more than Rp. 710 trillion into the economy via stimulus packages in response to the economic fallout (Nazara & McCawley, 2020). This is around US $48.6 billion, though the value of the Rupiah fluctuated quite dramatically over 2020 as did the currencies of many developing countries. Demonstrating how the hollowing out of state capacity reflects broader political factors, the context here is that low – and middle-income countries only had a fraction of the fiscal space of high-income ones with emerging market and developing economies spending only 6.2 per cent of GDP compared to high-income countries where it was over 22 per cent (Institute for New Economic Thinking, 2021, p. 9). Rp. 87.55 trillion was earmarked to strengthen Indonesia’s health sector and testing laboratories, and Rp. 210 trillion was apportioned to expand social protection systems, though only Rp. 22.47 trillion was allocated for Direct Cash Assistance (BLT) (Susilawati et al., 2020, p. 1154). The bulk was directed towards tax incentives and exemptions for private enterprises and to corporate financing (Olivia et al., 2020, pp. 161–162). What is notable here is that the small-scale temporary welfare payments, which are now part of the response to crisis, were tacked onto packages for business that outstripped individual or household support.

COVID-19 has had the most severe impact of any crisis recently impacting Bali’s tourism sector, and the island was the most devastated Indonesian province due to its overreliance on international tourism. GDP growth for Bali contracted by 24.47 per cent by October 2020, compared to the next worst affected province, Banten, which contracted by just 13.11 per cent in the same period (Ernawati & Ningtyas, 2022, pp. 3–4). In 2019, tourism had contributed to approximately 60 per cent of Bali’s GDP, while more than half of the island’s approximately 2.5 million-strong labour force was directly employed in the sector to accommodate the incoming 6.3 million international, and ten million domestic, tourists (Guild, 2020). However, by April 2020, as many as 96 per cent of hotels on Bali had closed, with locally owned lodgings impacted more severely than international hotel chains and other transnational tourism corporations (Hakim, 2020). This was problematic considering the significant role small-scale enterprise plays in the Indonesian economy and in absorbing unskilled labour (Atmojo & Fridayani, 2021).

Impatient to continue generating tourism revenue vital for Bali’s economic recovery, the provincial government introduced regulation 556/2782/IV/ Dispar on 25 June 2020, designed to develop a “New Normal” protocol through which to gradually reanimate the sector (Prajnawrdhi, 2020, p. 53). It included a three-phased reopening plan. The initial stage commenced on 9 July 2020 and permitted the reopening of local businesses and public services, with the exception of educational institutions and tourism attractions. The second phase began on 31 July 2020 and reopened Bali to domestic tourists given they arrived with a negative test and adhered to safety protocols (Anshori, 2020). Intended to come into effect on 11 September 2020, phase three would have reopened the island to international tourism, albeit with health protocols. However, the Governor announced on 22 August that Bali would remain inaccessible to foreign tourists, as the premature reopening of the island to domestic tourism caused a spike in COVID-19 cases and deaths. As borders remained closed, the Ministry of Tourism and Creative Economy and the Bali Provincial Government launched the “We Love Bali” campaign in September 2020. The two-month promotional campaign invited 4,400 influencers to partake in “familiarisation trips” throughout the island and post promotional activities to their social media accounts (Handayani et al., 2021). By October 2020, Bali was receiving between 5,000 and 6,000 domestic tourists daily, resulting in local criticism for reopening too early in pursuit of tourism revenue (Winterflood, 2020). The number of domestic tourists arriving at Ngurah Rai airport declined to 2,000–3,000 per day by December as the provincial government introduced additional testing requirements for visitors (Kurniadi et al., 2021, p. 8).

As for assistance, the Bali government issued the Policy for the Acceleration of Handling Covid-19 in the Province of Bali, which reallocated a Traditional Village Fund of Rp. 300 million to each desa adat on the island.¹ Rp. 100 million was allocated to provide cash transfers (BLT) for terminated workers to the value of Rp. 600.000 per month, as well as Non-Cash Food Aid for formal sector workers receiving below 50 per cent of their original wages (Sari et al., 2021, p. 58). However, as described by the data below, this support was nowhere near enough to adequately address social issues on the island during the pandemic (Teja, 2020). The provincial government also implemented several credit policies through the Bali Regional Development Bank (BPD) to help local tourism businesses overwhelmed by the crisis and encourage economic growth in Bali. For example, BPD disbursed loans through the Kredit Usaha Rakyat (KUR) microcredit programme to help fulfil collateral requirements hindering MSMEs from accessing credit, which by 5 November 2020 totalled Rp.1.481 billion to 7,060 debtors, 53.32 per cent of whom were MSMEs according to one government official interviewed. This mix of minimal social assistance and debt-based development strategies such as government-endorsed microfinance schemes for the poor is a perfect example of later neoliberal doctrine promoting “debtfare” as much as, or more than, welfare (Soederberg, 2014).

Findings and discussion

This section looks at what the data indicated first, on issues of government support and its communication and coordination strategies, next on the private sector’s response to the crisis and finally on the civil society response.

When asked how the government had responded to the pandemic in Bali, two interviewees from the private sector avowed that the state response had been effective, particularly referring to the government’s public vaccination drive on the island. However, two interviewed managers from NGOs in Bali intimated that the government was concentrating the vaccination program in tourist areas in the southern regencies to ensure tourist safety and expedite economic recovery, rather than guaranteeing the wellbeing of the local population. Moreover, a surveyed sales director from a transnational tourism corporation in Java, determined that all levels of government were implementing effective health programs in Bali such as hygiene facilities and education protocols. However, two interviewees from the private sector criticised that implementation was expensive, and enforcement was lacking. This latter point supports Jones and Hameiri’s (2021) contention that neoliberal states are less likely to enforce laws than they are to establish regulations and reporting processes that private enterprises are expected to satisfy through internal “box ticking” exercises.

A major encumbrance to effectively managing the impact of the COVID-19 pandemic in Bali’s tourism sector was the state’s overdependence on foreign exchange from, and investment in, international tourism on the island. Two interviewees highlighted how many Balinese had previously sold their land to foreign tourism developers, which diluted local ownership of the sector and exacerbated inequalities on the island as much tourism revenue was expatriated to foreign HQs and professional positions were occupied by skilled outsiders. This supports the argument that the market dominance of transnational tourism corporations in destinations in the Global South inhibits local ownership of resources and participation in decision-making processes (Dahles, 2001; Fletcher, 2011; Mowforth & Munt, 2015). Overdependence on the sector also catalysed impatience to revive international tourism in Bali to ensure revenue rebounded. For example, the “We Love Bali” campaign was rebuked for prematurely reopening tourism in pursuit of revenue, leading to a significant increase in COVID-19 infections and deaths (Winterflood, 2020).

Regarding government assistance for tourism businesses, an owner of a tour guide company asserted that “Indonesian governments have done nothing basically in helping [tourism] companies. There’s been very little support … the government isn’t organised enough to be putting things in place to support local businesses”. Access to business support programs in Indonesia and many countries is constrained by knowledge and connection, this did not change during COVID-19. This was certainly the case for many civil society organisations as two interviewees said most NGOs received nothing from the state. Among tourism businesses attaining some government assistance, an employee from Fair Trade Tourism in Bali mentioned in an interview a friend working at a five-star hotel chain in Nusa Dua, which collected government assistance of Rp. 300 million every three months. An interviewee from a tourism business association in Bali stated that the government had extended some assistance to the private sector in the form of “grant funding to hotels to help with operational debt about seven or eight months ago, but this was one-off. And it wasn’t for the entire island. Only partial unfortunately, for those lucky enough to get it”. A corporate director of sales participating in the survey stated that the hotel chain in Bali where he is employed acquired one-off government assistance in the form of money and training, and a local owner of a 19-room hotel was afforded a solitary government payment of Rp. 2.4 m, though he included that “in general I think we are on our own and do not expect to receive significant assistance from the government”. Overall, state support for business was irregular and a disproportionate amount was directed towards larger hotel chains and other foreign enterprises, substantiating Gibson’s (2019) assertion that transnational tourism corporations are often the preferred beneficiaries of limited crisis recovery resources due to their contribution to foreign exchange. Support for MSMEs was mostly through microfinance and provided indirectly with the support going to microfinance institutions.

The government also failed to provide adequate financial assistance to the local community and tourism workers furloughed by the pandemic. Three respondents were offered nothing at all. As a Balinese owner of an 8-room hotel affirmed in an interview, “in terms of economic support, they provide the surface, but it’s very limited and selected”. An interviewed curator of a private museum concurred that, “so far, I have not seen any significant help from the government. I think it’s still very limited”. Two tourism workers in Bali who responded to the survey confirmed collecting BLT, but only once, and another procured some through the head of her family, but that was only three times. Another survey respondent divulged that he was given Rp. 600,000 twice from the government, but only at the beginning of the pandemic and it was for a family certificate, not as an individual. The interviewee from Fair Trade Tourism said a friend had secured a one-off payment of Rp. 600,000 as well but had Rp. 4.3 million in overheads, so the assistance was “not enough”. Moreover, an unemployed tourism worker in Bali received food and cash assistance, but only sometimes, as did a private tour guide who attained a one-off payment of “about $180”. Cash transfers have grown across the majority world in recent years, in general, and specifically as a response to crisis. But framed by neoliberalism, our data confirms they are minimal, temporary, and hard to access.

Food support and subsidies are a traditional way the Indonesian state has attempted to ameliorate extreme poverty or assist in a crisis. Two survey respondents avowed that while it was available, it was not regular, or very rare, with the interviewee from Fair Trade Tourism professing it was only issued once or twice in the first six months, after which a manager of an ecotourism NGO in Bali insisted there was no more. Among those describing direct attainment of assistance, a furloughed bell boy accepted irregular basic government food support, and a surveyed tour guide obtained two ten-kilogram bags of rice from the banjar, but nothing after that. This was supported by another tour guide who disclosed that “yes, we get support from the government in the form of basic necessities, but only some people get it, not the community fully gets it. And also only a few times during Corona”. A tour guide in the survey noted: “very few government policies and the lack of government assistance to them. Not everyone gets help. Only a few people get assistance from the Indonesian government”. While neoliberal rhetoric claims to offer universal, albeit partial, social safety nets, the gaps evince shortfalls, planned or otherwise. The downturn induced the proliferation of “COVID-poor” on the island and was linked to growing depression, anxiety, hunger, and crime (Al Jazeera, 2020). Some common coping mechanisms included relying on savings, selling assets, looking for odd jobs, and opening new MSMEs or online businesses selling food. Upon exhaustion of these resources and opportunities, thousands of tourism workers returned home to pool resources with family members and seek more traditional avenues of employment such as agriculture and fishing.

Effective management of the crisis was further hindered by inadequate coordination between levels of government, which is in part a product of the earlier neoliberal rapid decentralisation program. A survey respondent noted that Bali’s provincial government-imposed regulations were incongruent with other government levels, resulting in confusion and a prevaricated state response. There were also issues with communication between the government and other stakeholders, which were intensified by the lack of a centralised government spokesperson (Kurniadi et al., 2021, p. 9). As a tour guide company owner proclaimed, “the main thing I find really frustrating about the whole situation is the lack of communication from the government … That would have been so key … It’s been very frustrating”. Furthermore, an NGO manager stated that government mitigation is “not in the same direction with what the community or the private sector want … it’s just too little too late … [there’s] not much of a ‘let’s work together to handle this issue’ thing”.

Regarding government communication with civil society, an ecotourism NGO manager confessed “I feel a little bit disappointed with the Bali government because … they only communicate with the private sector, those people who run five-star hotels in Nusa Dua and tourism associations”. Citing the frequency of crises recently impacting Bali’s tourism sector, the interviewee from Fair Trade Tourism insightfully noted that “the government doesn’t even try to tell the people that this is a very fragile kind of industry … [crises] happened many times, but I don’t think that Bali’s tourism industry has security awareness about how fragile this industry is”. These shortcomings are representative of limitations on state capacity and responsibility for crisis management espoused by the neoliberal agenda in the Global South (Jones & Hameiri, 2021). Clearly, the “hollowing out” of state authority precipitated by the adoption of neoliberal development policies induced under-resourced, ad hoc responses predominantly preoccupied with returning the tourism sector “back to normal” to exploit its economic benefits, thus drastically impairing the government’s ability to sufficiently address the crisis and support the most vulnerable.

As for the private sector response, its contribution and adherence to health protocols were seen as strengths by some respondents. In practice, while some generous establishments gave terminated employees impromptu financial assistance, such practices were uncommon (Bhaskara & Filimonau, 2021, p. 371). As a travel agent owner declared, for most businesses “I think the bottom line is to cut costs, layoffs and focus on surviving”. Interviewees also noted how entry-level and informal workers were most vulnerable to termination due to increasing outsourcing and subcontracting in the sector, which offered employers greater freedom to furlough workers. This supports Bianchi and de Man’s (2021) contention that small-scale entrepreneurs and entry-level workers are most vulnerable in the sector, particularly in the Global South, due to the precarity of international tourism.

Similar to previous crises impacting Bali, many businesses, particularly large-scale enterprises, marketed incentives and promotions to attract tourists to the island. As an airport employee revealed, “many hotels in Bali have started to offer wide-ranging promotional rates with the majority of big hotel chains having reaped the benefits, because many domestic travellers would have used those opportunities, but what about the smaller hotels?” A tourism business association member said that domestic tourists are “the only fish available. They [hotels] started to down the price so it is becoming like a price war”, while a local hotel owner was forced to reduce his room rates from Rp. 900.000 to Rp. 200.000 as “a way to be competitive in this day [and] ensure that we still get a high occupancy rate compared to others”. Among tour guides, the Fair Trade Tourism employee claimed that domestic tourism “competition is really intense right now … so it’s hard for the Balinese to compete” as multinational travel agents have well-established relationships with airlines, hotels, and transport. Thus respondents noted how transnational tourism corporations fared better than smaller, locally owned establishments as they were more diversified, and possessed more extensive contacts with global tourism networks and better marketing resources to attract domestic tourists. Market logic for private enterprises has meant they are generally incapable or unwilling to assist the most vulnerable during such a crisis.

As with previous crises, the unique structure of Balinese society was vital to the community’s response to the COVID-19 pandemic. Desa adat supplemented government response efforts through bottom-up strategies creating awareness of the crisis’ severity and enforcing hygiene practices, social distancing, and masks (Utama, 2021, p. 5). Furthermore, the gotong royong philosophy of mutual assistance prompted community members to distribute food to those most affected by the crisis as two interviewees and two survey respondents noted, as a hotel accountant observed “there are some people who share their fortune for other people who need it, such as giving rice wraps, distributing groceries for free”. Many NGOs also distributed aid to the community, and even established communal gardens and pertinent training workshops, which spurred a sense of resilience among the community and helped members cope with the crisis. However, neoliberalism’s tendency to transform the state’s social objectives from allaying inequalities and protecting domestic business to inciting international economic competition so as to increase efficiency and profits, has resulted in the depletion of democratic decision-making processes (Jones & Hameiri, 2021), thus limiting community involvement in crisis management within Bali’s tourism sector during the pandemic.

Conclusion

The precarious connection between crisis, tourism, and neoliberal capitalism has been examined previously using political economy perspectives (Fletcher, 2011; Gibson, 2019; Higgins-Desbiolles, 2020; Liodakis, 2019). Analysing the political economy of tourism on the island of Bali and how this interacted with the COVID-19 crisis, this article has demonstrated how politics and economics have continually combined to weaken rather than strengthen the resilience of this destination.

The historical overview of tourism in Bali highlighted the influence of successive rounds of neoliberalisation of tourism development policy since the 1980s in Bali and its distinct Indonesian elements including creating space for KKN to flourish. This increased Bali’s overreliance on international tourism and limited attention to resilience, which is vital given the numerous crises impacting the island in post-New Order Indonesia. Using primary data collected provided further eclectic insights into the impact of the COVID-19 pandemic on Bali’s tourism sector. While governments should be most responsible for formulating, introducing, and supporting crisis management in the tourism sector (Coles, 2004), the data demonstrated how the “hollowing out” of the state engendered by neoliberal policies significantly limited state resources and coordination, thus diminishing the Indonesian government’s capacity to adequately respond to crisis on the island confirming the insights from Jones and Hameiri (2021). It has also shown how the previous rounds of neoliberalisation-linked reform contained predictable failures and produced insufficient temporary welfare programs such as cash support and food aid, and the tendency to rely on debtfare. Indonesia’s place in the global political economy further limited its fiscal space to respond to the crisis, with high-income countries facing fewer constraints.

Due to the government response’s neglect of social issues, civil society was obliged to yet again intervene and assist those most affected by the crisis at a time they required more comprehensive protections. According to Jones and Hameiri (2021), “as the COVID-19 pandemic demonstrates, neoliberal states may be highly functional for large-scale, internationally-oriented capital, but they have clearly become dysfunctional for solving very basic social problems”. This is particularly salient as the global dissemination of the doctrine was borne of crisis, yet it has proven inadequate in times of crisis. Evidently, neoliberal development prescriptions have amplified social and economic issues in tourist destinations during crisis, especially COVID-19 (Higgins-Desbiolles, 2020, pp. 617–618).

This research also highlighted how extensive business welfare programs have become; they are a new normal in neoliberal crisis response, clearly indicating the political nature of neoliberalisation and who it is intended to benefit. Further, COVID-19 crisis response efforts repeated the historical tendency of scarce state recovery resources being directed towards transnational tourism corporations, often at the expense of tourism workers and MSMEs. This reflects, in part, specific Indonesian political economy factors, in particular the linkage between domestic patronage networks and big business.

Since reopening for international tourism in March 2022, Bali has gone from receiving 14,260 foreign visitors per month to 377,276 in December 2022 (Theurillat, 2023). The Indonesian government’s new “Second Home Visa”, which went into effect in December 2022, intends to further stimulate growth. Launched in Canggu, Bali on 25 October 2022, the permit allows “wealth visitors” to stay in Indonesia for five or ten years tax-free on the condition they consistently provide evidence of at least two billion rupiah (approx. US$140,000) in an Indonesian bank account or ownership of luxury real estate, while also streamlining foreign investment processes for these funds (Sampson, 2022). This radical policy presages continued overreliance on neoliberal policies at the expense of social and environmental issues on the island increasing the likelihood of ongoing “crisis-induced, crisis-managing and crisis-inducing – processes of regulatory transformation” (Brenner et al., 2010, p. 210). For Bali to grow its resilience and diversify away from mass tourism to reduce its overreliance on the sector and resultant vulnerability to crisis, the current neoliberal model of tourism development espoused throughout the island must be seriously reconsidered.

This concurs with what Swarbooke (2023) calls COVID-19 sustainable tourism’s missed opportunity as the economic problems generated by the pandemic have led to a desire for tourism to re-set to pre-COVID conditions rather than seek out a new path. However, it is clear from the people of Bali, and likely experienced by many destinations around the world who are in a similar position of dependency, that tourism cannot literally take lives like it did during COVID-19 and that tourism destination planning and management has to look different. From this, we have learned that the political economy must look different with many respondents from this research fervently advocating improving the amount, frequency, reliability, and coverage of state assistance for the most vulnerable impacted by crises in Bali’s tourism sector. Another common recommendation from research participants was for the state to strengthen communication and collaboration with host communities and civil society during crises in order to increase local involvement in decision-making processes for tourism development and crisis management. This relates directly to Wearing et al.’s (2019) “social valuing” approach to tourism development, which seeks to eschew overreliance on ubiquitous neoliberal logic espoused throughout the sector by decommodifying tourism sites and enhancing community empowerment and resilience by establishing vital dialogue between all stakeholders in the sector and democratically involving host communities and civil society in decision-making processes.

To reduce Bali’s vulnerability to crisis, several respondents from civil society advocated the social benefits of ecotourism, with which the government and private sector were largely unfamiliar. For example, a Bali-based NGO promoted sustainable cultivation of member villages’ choice of agricultural product as the predominant economic sector, which deviates significantly from the Indonesian government’s perception of ecotourism as empowering communities to rely on income generated by conventional tourism. Emphasis here is on participants understanding and managing their potential, and promoting this via tourism, rather than vice versa. In this model, tourism is just seen as a bonus, an approach that also recognises, appreciates, and respects the fragility of international tourism in Bali and the vulnerability of stakeholders. This links to the concept of degrowth, which is often presented as a good option, by reducing mass tourism with high-spending tourism. But as Blanco-Romero et al. (2023, p. 1) warned, this ignores other political considerations such as fair degrowth that considers “equitable redistribution of resource use and access”. At the end of the day, these are socio-political decisions to be made.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Australian Research Training Scheme.

Notes

1 Desa Adat are village level governance entities tasked with maintaining local Balinese religious, social, cultural wisdom. Below this are banjar; interconnected residential units collectively constituting a desa, which generally own communal infrastructure Pringle (2004). A short history of Bali: Indonesia's Hindu realm. Allen & Unwin Australia.