Investment in Bali: an Investor’s Paradise

Admin   |    31 October 2018

With its stunning beaches and distinctly vibrant local culture, Bali has become one of the most popular vacation destination in the Indonesian archipelago. Its natural splendour and beautiful landscapes, coupled with a notoriously energetic night life, has attracted many tourists from both overseas as well as Indonesians looking to escape city life.

Recently there have been many international events that have attracted international attention, such as annual music festivals (Ultra Beach Bali and Bestival Bali to name a few), distinguished cultural festivals, several food festivals, and an International Film Festival called “Balinale”. However, from an investment perspective the most relevant was Bali’s hosting of the International Monetary Fund and World Bank Annual Meetings, one of the most prestigious economic events in the world. Undoubtedly these meetings drew further attention to what the island has to offer from an investment perspective.

What is clear is that Bali’s property and infrastructure must continuously expand in order to accommodate the continuously growing number of tourists - and this is where investors must focus in our view. A report by “Global Property Guide”  released earlier this year  estimates that around 80% of Bali’s economy depends on tourism. The report goes on to estimate that there are currently about 30,000 expatriates living in Bali, further cementing the international appeal of the island.

This in turn has caused Bali’s property market to witness persistent growth over the last few decades and the outlook has improved further of late given a weaker Rupiah attracting foreign investment as well as continued growth in tourism. Bank Indonesia stated in their most recent report that Bali's economic growth is expected to increase in the range of 6.0% to 6.4% Year on Year (YoY) largely due to an improved performance of household consumption, government consumption, investment and foreign exports. The recent relaxation of Bank Indonesia's loan to value (LTV) policy, which began in August of 2018, has also helped to drive Bali’s property market forward, stimulating the growth of mortgages.

Despite the high interest in properties, one of the biggest obstacles facing tourism and, in turn, property and investment in Bali has always been its infrastructure. Acknowledging this concern, the government has pushed several public and private sector projects to ensure the burgeoning tourist industry can be accommodated. The government is planning to partner with private firms in its project to build an a US$2-billion airport in the North of Bali. Earlier in April, Jakarta and Beijing signed five contracts worth US$23.3 billion as part of China’s Belt and Road Initiative, which includes a US$1.6-billion joint venture project to build a power plant in Bali. From 2015 to 2019, it is estimated that as much as US$520 billion is required to meet Indonesia’s overall infrastructure needs, which in turn has made the government eager to help build an investor friendly market.

But even before the loosening of policy, Bali has always been a friendly market for foreign investors. According to the Deputy for Investment Cooperation in the Investment Coordinating Board (BKPM), Wisnu Wijaya Soedibjo, investors from countries such as Singapore, Hongkong, the British Virgin Isles, as well as South Korea and Japan have been investing heavily Bali for years. Singapore is one of the biggest players, reaching IDR19,4 trillion in investment or around 39,1% of the total foreign tourism investment from the year 2015 to the first semester of 2018. According to BKPM, Bali ranks number one in Indonesia for Tourism investment,  amounting to IDR19,2 trillion or 29% of Indonesian Investment in Tourism. Even with previous natural disasters that have happened in Bali, the interest of investors have stayed relatively stable with no signs of significant shift..

Bali’s Investment Board is targeting total investment of at least 18 trillion Indonesian rupiah or about US$1.3 billion for the year 2018. This proves that no matter how high the prices have gone up, with an ever-present market of eager buyers and an expected growth in infrastructure, demand remains very strong for property in Bali.

Written By : Fajar Adi Nugroho