The Bali property industry is particularly vulnerable because much of the development is funded by US and European banks, one of the island's leading businessmen is warning.
'Property is the sector most at risk,' said I Gde Wiratha, head of the Bali Chamber of Trade and Industry, who has had a number of crisis meetings with Bali Governor Made Mangku Pastika.
'This sector will be the most vulnerable because it is financed mostly by foreign funds. Most property businesses in Bali, especially villas and hotel development businesses, are owned by foreign investors and financed by US and European banks,' he explained.
He said the impact of the crisis was already being felt at the moment. 'It is in a wait-and-see mode,' he said. Next week Malaysian Finance Minister, Datuk Seri Najib Razak, is expected to announce new measures to try to cushion the effects of the world economic slowdown.
The peak of the crisis in the property sector is likely to take place by the end of this year and early next year, Wiratha added.
'After that there will be many projects we fear could be abandoned in Bali,' said Wiratha, who is also the former chairman of the Bali chapter of the Indonesian Hotels and Restaurants Association.
Only those projects financed by local investors will be able to survive because liquidity in the local banking industry remains strong, he added.
His gloomy predictions come as south East Asian markets continue to suffer from the global finance downturn. Malaysia was closed today for a public holiday but elsewhere in the region shares were plummeting.
Concern is growing that more and more countries will follow Hungary and Ukraine and seek help from the International Monetary Fund.
There is consensus that the current credit crises are more serious and unpredictable than the slump in commodity prices in the 1980s and the 1997 Asian Financial Crisis when Malaysia rejected IMF money.
