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. Last Updated: 07/27/2016

Investors Flee After Bali Blasts

JAKARTA, Indonesia -- Weekend blasts that killed almost 200 people on Indonesia's resort island of Bali will make it next to impossible to attract much-needed investment into the vast archipelago, the head of the chamber of commerce said Monday.

Reacting to increased fears over political stability and security, investors fled the markets, pulling Jakarta stocks down more than 10 percent by late afternoon trade to 336.38, and the rupiah down more than 3 percent to 9,245/9,265.

The stock market drop is close to Indonesia's biggest daily fall since the height of the financial crisis in 1998, when the bourse sank 11.96 percent on Jan. 8 that year.

"We're finished. Our defense to convince people that doing business in Indonesia is safe is finished," said Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry.

"Who wants to invest in this kind of situation? ... Not only foreign investors, but local investors will think a thousand times before making any investment," he said.

No one has claimed responsibility for the deadly blasts that killed mostly foreigners, but Bakrie urged the government to find the culprits as quickly as possible.

"It [the attack] can't be tolerated because of its huge, extraordinary impact on Indonesia's efforts to lift itself out from crisis," he said.

Market dealers echoed these sentiments as Indonesia is still struggling to deal with the effects of the Asian financial crisis of the late 1990s, which ravaged the banking and financial sector.

A foreign businessman who has worked in Indonesia for decades agreed the blasts would further hurt investor perceptions of the world's fourth most populous nation but said it was important to put things into perspective.

"Well it's a terrible event. ... On the other hand there was so little investment," he said.

"It just shows Indonesia is going to have to overcome some significant problems before there's going to be much investment."

One of the few cash cows for Indonesia's government has been tourism revenue, especially from Bali -- one of the world's most popular tourist destinations -- but this came to an end Saturday.

Experts are already saying it will take years for Bali to get back to normal and rival last year's foreign visitor figures of almost 1.5 million from a total of about 5 million who visited Indonesia.

Analysts said the explosions would further aggravate the core economic problem facing the vast archipelago -- its huge foreign and domestic debt burden.

Higher capital outflows and lower inflows on the back of weaker investor confidence would in turn affect efforts to service total external debt of about $130 billion, close to Indonesia's annual GDP.

And the weaker local unit would also push up inflationary pressures as many key necessities are still imported.

"These blasts could hit the economy hard with the rupiah exchange rate likely to be hit first to be followed by interest rates as the weaker rupiah will prompt concerns over higher inflationary pressures," said economist Anton Gunawan of Citibank.