Bali Considers Tourism Development Pause Amid Environmental Concerns

Bali has been recognized as one of the world's most popular travel destinations in the last years.

A Moratorium letter from the Indonesian Government has been released with a proposal to limit tourism-related development in Bali, though it's important to note that as of now (early November 2024), the letter is still under discussion and has not been put into force by the Bali Provincial Government. It was signed on October 15, 2024, by Indonesia's Coordinating Minister for Maritime Affairs and Investment, Luhut B. Pandjaitan, and proposes several key measures:

• A two-year pause on new business permits through the Online Single Submission (OSS) system for hotels, villas, restaurants, bars and beach clubs in the Sarbagita region (the area comprising Denpasar, Badung, Gianyar and Tabanan) as well as in Nusa Penida

• Greater measures to protect the environment, such as restricting land conversion to less than 5% per year

• Stricter regulations and evaluations in place for foreign investment, including changing the risk level of Foreign Direct Investment to only medium-high and high risk (and eliminating low and medium-low risks)

• Conducting surveys and studies on the effectiveness of spatial planning to create high-quality tourist destinations

• Better monitoring of Bali-based business owners' permits

• Enhanced communication between different levels of the government by providing input and data on land-use conversion changes

The Context:

If you've been in Bali for some time, or have come back to the island after some time away, you've most likely noticed some changes across Denpasar, Badung, Gianyar and Tabanan. The Moratorium letter outlines that tourism currently makes up 51% of the region's GRDP (Gross Regional Domestic Product), with 71% of tourism activities being centered in this small area. It is in light of this information and increasing ecological issues that questions have been raised regarding the sustainability of such a high concentration of tourists in a small region.

Some of the main environmental issues the island faces are:

• Freshwater scarcity, with the large-scale extraction of groundwater by hotels and tourism facilities

• Water pollution due to insufficient infrastructure, and the contamination of rivers, coastal waters and marine ecosystems

• Agricultural land loss due to land conversion

• Waste issues due to the high volume of single-use plastics

• Traffic congestion and air pollution

• Loss of animal habitats

This Moratorium Letter is an effort by the Indonesian government to preserve environmental sustainability, spatial planning, and improve the quality of tourists visiting Bali.

Current Status:

The Moratorium letter has sparked concerns among foreign investors. However, as mentioned before, the letter is simply offering a framework for potential changes and has not yet been implemented. After speaking with our government contacts, we were informed that these are preliminary points for discussion, pending confirmation, specifications, and further input from regional Bali authorities.

Having said that, there are already informal impacts being observed on the ground. Some officers in Badung have been unofficially putting hold on SLF (building applications) for PT PMAs (foreign-owned companies), despite the fact that this hasn’t been mandated. Another noteworthy aspect of the situation is that the Ministry of Maritime Affairs and Investments, who issued the original moratorium letter, has since been dissolved by the new presidential administration. We would recommend that stakeholders continue operations as normal until further information is provided, keeping an eye out for both formal and informal changes in the permit application process.

We would recommend that stakeholders continue operations as normal until further information is provided.

Looking Ahead:

While some investors may be concerned, the environmental considerations highlight the need to balance tourism with the long-term health of the island. Rather than being mere restrictions, these measures will help Bali remain a world-class tourist destination for many years to come.

Written by Team Bali Solve
November 4th 2024