0 Association warns of dubious investments

Prominent hoteliers and businessmen in Bali have expressed their serious concerns about the number of unclear investments in tourist accommodation, stressing their doubts about the origins of the investment funding. Cokorda Oka Artha Ardhana Sukawati, chairman of the Bali branch of the Association of Indonesian Hotels and Restaurants (PHRI), told Bali Daily on Tuesday that many people in the island’s tourism industry were suspicious about the new investment funding. 

“Their business calculations on their investments are beyond any comprehension. I’m worried that the money comes from illicit business practices, such as money laundering, which will seriously affect the local business climate,” Sukawati said. Gianyar Regent Sukawati, popularly known as Cok Ace and a member of the influential Puri Ubud royal house, admitted he had found no clear evidence on the possible practice of money laundering in these types of investments. 

“But, I can sense that there is something wrong with these investments,” he said. He cited one example of a multi-billion rupiah investment in a hotel, at which the owner and operator set a very low room rate of only Rp 300,000 (US$31) per night. “From any business perspective such an investment is not feasible and prudent. How can they break-even, let alone get a return on their investment,” explained Cok Ace. The PHRI has been aware of possible fraudulent business practices for a while. 

“We have seen the fast growing number of hotels and tourist accommodation creating unhealthy competition among hoteliers and uncontrolled development projects, which have already affected the island’s environment,” Cok Ace said. These investors, he said, did not have any interest in the living conditions of Balinese people or the environment. “They don’t care that their businesses may cause environmental damage or have a negative effect on society. 

Their utmost interest is in channeling their money and enjoying huge profits,” he said. Cok Ace added that some foreign investors disguised their business activities by partnering with local people or companies. “We suspect some foreign investors of putting their money here using local names,” he added. The government, tourism industry and business community here in Bali must find a quick solution to this serious problem. Ida Bagus Made Parwata, head of the Bali Investment Coordinating Board (BKPMD), admitted that he also suspected that some investments in Bali used money from illicit businesses, including money laundering. 

“Several investors are willing to pay billions of rupiah only to get a 100-square-meter plot of land. It is completely irrational from a business point of view,” Parwata said, adding that it would be very difficult to obtain evidence of money laundering practices. Data from the Bali investment Agency shows the realization of investment in Bali had reached Rp 9.64 trillion (US$1 billion) by the end of September 2012. Local and national companies have dominated investments for the last two years. 

Around Rp 5.49 trillion, or about 57 percent of the total investment realization, came from domestic investment, while the remaining Rp 4.15 trillion was generated from foreign investment. Around 4,145 local companies invested in Bali to a total value of Rp 5.49 trillion, while 266 foreign companies placed Rp 4.15 trillion in investments on the island. In 2011, the BKPMD recorded total investments of Rp 11.7 trillion. About Rp 7.3 trillion, or 62 percent of the total, originated from domestic sources, while around Rp 4.4 trillion came from foreign investments. Most investments, both local and domestic, focused on the hospitality industry, including hotels, villas, restaurants, cafés and other supporting businesses.

source : bali daily