In September 2025, a torrential downpour was brought upon the island that held a thousand temples and wielded the moniker as "Pulau Dewata." The land was not left unscathed; a flood trailed soon after the torrent stopped. It was acclaimed to be the worst flood that the island of the Gods ever had in the last decade. The island is in mourning, casualties reported, the kind of tragedy that didn't discriminate, with all kinds of people affected by it, the provincial government declared a week-long state emergency. But where does this flood fit in the large scheme of things? The flood wasn't just a representative of one thing; it was a portrayal of one of the many systemic faults of this island that presents itself as a paradise. Be it the surging prices of goods and land for locals, the pressing matter of water scarcity, the unsettling amount of waste that was generated by tourism, and many other things that don't fit with the idealism that this island is of paradise reincarnate.
All of this could be traced back to colonialism; we could always thank the Dutch for a large number of matters in this country, don't we? Â As all colonies do, Bali first served as a provider of agricultural products for the colonizer with barren lands. The Dutch first featured Bali's magnificent culture to the world during an International Expo held in Paris, where each colonizer competed with each other, ironically, showcasing the cultures of their colonies. When the Indonesian government realized how profitable they could make of this land of paradise, many projects were kick-started to boost tourism and promote this island as a utopia people can escape to.
In 1963, Soekarno's move on Bali focused on putting down the foundations of a tourism spot, he issued an order to build a five-star hotel in Sanur and to expand a beatdown airport near Kuta into the highly modern and international airport we know as I Gusti Ngurah Rai. Then, during Soeharto's reign, the development of Bali was included in the agenda of the Five-Year Development Plan (Repellita) as it was highly pushed upon by foreign consultants who helped the late president back then. In 1982, the Bali Tourism Development Corporation (BTDC) complex was created in Nusa Dua. This new appearance of these five-star luxurious resorts shifted the tourism industry. The development of mass-tourism models is highly encouraged, thus becoming more and more commonly seen, as we look at famous areas like Kuta, Canggu, Sanur, and Ubud. Â
Dutch as They Came, Dutch as They Left
Although the Dutch popularized Bali to the world since before Indonesia gained its independence, tourism didn't immediately become the main actor of this acclaimed paradise's economy. Even until the mid-80s, Bali's economy was mainly dominated by the agricultural sector, which contributed to almost one-third of the province's GDRP. It only took a decade later for the tourism industry to become a dominant player, causing the rise of the service sector, with its proportion taking up more than half of the labor market.
In turn, the agricultural sector took a huge blow, paddy lands were transformed into non-agricultural uses to boost the more dominant sector. From 1998 through 2007, it was reported that the decline in paddy fields reached 7% with an average of around 0.7% per year. The decrease in agricultural land directly affects the demand for labor in the industry. In 2017, the rate of decline in the agricultural industry reached a shocking reality, with the total jobs left being half of the total agricultural industry jobs during 2003 (Meydianawathi & Sunan, 2024). Even with the shock of the tragic bombing that landed on Bali during 2002-2005, the workers that have already shifted from the agriculture industry to the tourism sector were reluctant to go back.
The tourism boom led to discoveries of new uses for natural resources, as well as changes in relative prices and affecting the production structure of the economy. With the newly demanded labor in the booming industry, the labor market shifted from tradable and non-tradable goods sectors to the tourism industry, causing production in those two sectors to decline (Javier Capo et al, 2007). This correlates with the classical economic model developed by W. Max Corden and J. Peter Neary in 1982, the Dutch disease, where the non-tradable sectors and two tradable sectors are the booming sector and lagging sector. In Bali's case, the effect seen could be argued as the spending effect; indirect industrialization happens where tourism brings in high revenue and inflates the non-tradable sectors (housing, land, services) for the locals. Foreign investment flows in, the cost of living for locals increases, and services dominate the labor market, while manufacturing or agriculture declines as it is less profitable. With other sectors becoming more unbalanced throughout the years, the tourism boom phenomenon is something that could be a threat in the long term.
One of the cases of a region having the most specialized tourism economies is the Balearic and the Canary Islands in Spain. The tourism boom gave a significant increase in wealth, thus the government shifted a higher focus on tourism, while manufacturing and agriculture were becoming highly downtrodden. Even with all the positive injections tourism gave to the economy, it is also worrying because the specialization of tourism in those islands has brought low levels of education and training, while also decelerating the rate of innovation and technological advancement (Javier Capo et al., 2007).
As it was mentioned before, with the economy being overly reliant on tourism, a minor disruption to one of its elements affects all. One of the most catastrophic cases occurred during the pandemic. With restrictions on travel being imposed worldwide, the island's decline in foreign tourists in 2020 reached 82.96% when compared to the year before. Bali's economy saw the biggest contraction among other provinces in Indonesia, with the number being at 9.3%. Its main sectors recorded a negative economic growth that heavily impacted the transportation, warehousing, and FnB sectors. Many of those contractions could be attributed to the fact that there was a huge decline in both domestic and international tourists. Â This trend continued on until the second quarter of 2021, when the economy went back to its positive growth, although at a much slower pace when compared to other provinces in Indonesia (Sanjaya et al, 2024). This shows that the economy would be in a very vulnerable position if tourism were to take a hypothetical huge blow.
The Reality of Shangri-La Does Not Exist
The second quarter of Bali's GDRP in 2025 saw a surge of 5.95% (yoy), which made it achieve the fourth-highest provincial growth. The reported economic growth was also higher than the national average, which is 5.12% (yoy). The land of the gods is usually present in the front rows of economic growth in Indonesia. Nuryanto (2018) states that increasing economic growth does not always go hand in hand with decreasing income inequality. One does wonder, do these results actually transfer to the life of the locals?
First, we start with the disparities that are, in fact, happening across the regions. The regional development in this paradise has significant gaps between areas, with most of the local government's focus on development centered on South Bali, or more specifically, in Denpasar. Regencies such as Klungkung, Karangasem, and Tabanan are less noticed by the government and are categorized as the least developed (Raeskesya et al, 2019). Concerning Karangasem, the reality of this regency could be seen as a paradox, as it holds the achievement of being one of the largest paddy producers in the island, but is also the regency with the highest poverty percentage in all of Bali at 6.52% in 2024 (BPS, 2025). The disparities that Bali experiences do not only consist of regional development, but also education. The percentage of those who completed higher education in Denpasar differs significantly from those in Buleleng, with it being 18.6% for the former and 5.54% for the latter (Databoks, 2024). In Buleleng itself, there is an unsettling matter about literacy that over 400 students at the middle-school level are having difficulties in reading and spelling, with half of them still being unable to read (Kompas, 2025). If we dive deeper into examining the composition of the labor force by educational level in Bali, we discover a deeply worrying fact that the labor force is dominated by elementary school graduates and below, with it being at 29.9% (BRIDA, 2024).
