Bali Tourism News

Potential Bali villa crackdown

September 17th, 2007

In Bali today, at the height of the tourist season with visitors flooding back into the island, you’d be hard pushed to buy a bottle of half-decent wine. By mistake or design, the authorities have decreed that all imported wines on sale are illegal. Even newly opened French megastore Carrefour has hardly a bottle on its once-groaning shelves.

If that’s putting a dampener on the holiday season, try this on for size. It’s not just visitors and their favoured quaff but also the very roof over their heads that’s under threat. From August 30, over 250 rental-villa properties or over a third of the total could in theory be closed or even pulled down.

A recent report in Tempo, Indonesia’s top newsweekly, even estimated that 70 percent of villas for rent in Bali are operating illegally. In the regency of Badung, where most villa development is situated, only 253 of 711 villas are operating legally. Ismoyo Soemarlan, Chairman of the Bali Villa Association (BVA), puts the total even higher and says there are about 1,000 villa properties in Bali and of these, “the majority are operating without licences,” he asserts.

In May, A. A. Agung, the Regent of Badung, blew the whistle on illegal operators, giving them a grace period until August 29 to register for a fast-track legalisation process without penalisation under existing law. Some illegal villas would not qualify for exemption if, for example, they had been built in designated green zones and could still be pulled down even if they complied.

Clamping down
Visitors to Bali have a fast-growing appetite for villa accommodation, with Ismoyo estimating that 25% of all foreign visitors this year would stay in villas. This figure is expected to grow substantially in the next few years.

However, Made Subawa, Head of Government Tourism Service in Badung regency, told Tempo that illegal villas were causing large losses in tax revenue and his office was currently engaged in a “massive crackdown” to remedy this. According to him, tax revenues in 2006 should have amounted to US$28 million. He went on to say that he expected two to three registrations a day.

Few people in the industry believe it will come to that. Are they right to be so unconcerned? In the past, crackdowns of various kinds have come and gone in Indonesia. This time, however, villa developers and owners might do well to think carefully.

“Don’t dismiss it. It’s a relatively easy thing to go online and see who’s renting out villas, and they could actually do it,” warns Jack Daniels, owner of Bali Discovery Tours, a leading in-bound operator who publishes the online Bali Discovery newsletter.

“There are a number of aspects to this,” Daniels adds. “Competition: is it fair to those who do comply? The significant tax revenue lost, which Bali badly needs. And then there’s security. It’s hard to monitor potential terrorists if they’re holed up in a private, unregistered villa and owners don’t register identity details with the police as required. Then there’s the greater question of what this unregulated villa free-for-all means for Bali’s future? That’s a question that’s increasingly tabled.”

Helping hand
The founders of the Bali Villa Association (BVA), established in May 2006, are quick to assure villa owners and prospective members that the organisation is not there to add to the problems but to assist in the registration and legalisation of commercial villas.

Only fully legal villas will be admitted into the association and prospective members falling short of the minimum legal requirements will be assisted in the application and fulfilment process. To this end the BVA has called on the provincial government to clarify the rules and regulations affecting villa operations.

That sounds all well and good, but there’s a snag. The implication is that if you join the BVA, or some organisation like it, the regulations will be eased in various ways to allow ‘latecomer’ villa owners to comply. That could be how it pans out, but don’t bet on it.

The established larger villa developers and the owners of the five-star hotel properties, many of whom now run villa estates alongside their standard hotel operations, who have complied and who have complained about unfair competition, may well baulk at any significant easing of the rules at their expense.

Meanwhile, next year is Visit Indonesia Year 2008 and tourism officials have targeted 7 million visitors for Bali in 2009. The current figure is a little over a million. In the unlikely event that such a questionable aspiration is realised, where are they going to stay?

The last word goes to a nameless industry cynic who says: “We’ve seen it all before. A few examples will be made. But the fact is, Bali property is undervalued and there’s a good four-year catch-up period. Things are looking good. Crackdowns come and go, and regulations are unclear. So, what’s new? We shall muddle through.” And those who know where to look can still get a bottle of Grand Cru to toast the good times.

Source: http://www.property-report.com

Entry Filed under: Bali Tourism News