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One Year After Attacks Experts Optimistic About Bali's Economic Outlook

It has been one year since the fatal terrorist attack on Bali, Indonesia. More than 200 people died in the twin bombings of a nightspot popular with tourists. Despite the tragedy, experts in security and tourism are optimistic the island is now a safer place with good prospects for economic expansion.

On October 12 last year a wall of fire ripped through the Sari nightclub in Kuta - a town that lies at the center of Bali's once thriving tourist industry. Two hundred people died in what soon became clear was a terrorist bombing. A large number of victims had been visiting the island to participate in an annual rugby tournament.

For those who saw their friends perish in the inferno - traveling back to Bali this year was an important part of grieving and defying the terrorist acts that claimed so many lives.

Hong Kong resident Anson Baily recently visited Bali where he played in this year's rugby tournament to commemorate those who died. "I was, I think emotionally scarred by all the things that I saw and by the terrible tragedy. But for some of these guys that were physically scared as well - for them to return to Bali I think was a very strong statement that we would not be defeated in our every ordinary lives… we would continue to play rugby, continue to enjoy life," says Mr. Baily. "I think we have honored the memory of those guys."

Less than a month after the attack, it became clear that Jemaah Islamiyah, an organization linked to the international terrorist network al-Qaida, planned and carried out the attacks. And much like the September 11 terrorist attack on New York - the attackers targeted 'Western' tourists - citizens of countries like Australia and Britain, which are allies of the United States.

The United States, Britain and Australia as well as governments in Asia warned their citizens to avoid Indonesia as members of the terrorist group remained at large.

The bombing and subsequent travel advisories had an immediate impact on Bali's tourism industry, which makes up roughly 30 percent of Bali's GDP (Gross Domestic Product). Bali's hotels were emptied in the attack's aftermath and airlines canceled flights to cope with shrinking demand.

While Mr. Baily says he will continue to return to Bali, many tourists have chosen to stay away. An economist based in Jakarta recently estimated that tourist arrivals are still down 20 percent from level before the attacks.

Harsha Varma, the Asia Pacific representative of the U.N.-affiliated World Tourism Organization, says discounted package tours helped bring some visitors back. "There was of course negative growth for the first three months, but immediately after Christmas and New Year the [tourist] traffic picked up," he says. "The government of Indonesia and the private sector, they used pricing as a very strong marketing tool, discount package tours a lot of value added products."

Mr. Varma says, that these days, both luxury, spa-style resorts and the so-called "boutique hotels" catering to simpler tastes are seeing occupancy rates return to normal levels.

A transportation analyst at investment bank UBS Warburg says that airline prices have since bounced back to last year's levels. But, he says hotels and goods dependent on tourist spending such as crafts and furniture are still highly discounted.

Mr. Varma of the World Tourism Organization says the future development of Bali's tourism industry was not hampered by the terrorist attacks. His organization found that large hotel and resort projects slowed down but none were canceled.

Mr. Varma also believes that Bali is now a much safer tourist destination. "Security has been tightened by the government [and] the private sector has taken a lot of security measures," he says. "They've employed more security guards. So there is a more professional awakening with regard to safety and security of tourists."

One risk analyst says many hotels and airlines have approached him to assess the threat Jemaah Islamiyah or other terrorist groups still poses to Bali.

Steve Vickers, chairman of International Risk based in Hong Kong, evaluates the possibility that Jemaah Islamiyah or a similar terror network could strike again. "There's been considerable success in not just the arrests but in the destabilization of the network," he says. "But these things are fairly quickly rebuilt… I think there are some guys out there who have not yet been picked up... I do believe they present a real and present threat."

He says the government's investigation into the Jemaah Islamiyah needs to be sustained on a proactive and aggressive basis if it is to have a lasting impact. But Mr. Vickers also says parallel efforts should be taken to break what he called the "high level of support" for Jemaah Islamiyah in small and poor Indonesian communities.