Can Bali Bounce Back? How terror took the top end off a tourist paradise.

Byline: Jonathan Kent

Transport, sir?" Wayan Oka, 28, spends much of his day hanging out with his friends on Monkey Forest Road in the town of Ubud. Indeed, walk down the streets of Bali's cultural capital, and in 10 minutes you'll be accosted by a dozen or more young men like Oka, sitting beside the road and hawking their services as unofficial taxi drivers. "You're my first job today," Oka says. It's past 9 p.m. and Ubud's streets are dark and almost deserted. The restaurants have long since emptied, and the bars are quiet Oka is 28 and an economics graduate, but with business this bad, there's no demand for economists. "My girlfriend and I want to get married, but I don't have enough money," he says.

Before Oct. 12, 2002, international tourists thronged to Bali, a Hindu jewel set in a necklace of predominantly Muslim islands strung through warm equatorial seas. Then came the awful day when bombs went off in the Sari Club and Paddy's Bar in the tourist center of Kuta, killing 202 people and injuring many more. The first major terrorist attack since 9/11 raised fears that the war on terror was opening a new Asian front, one that would choke off Bali's economic lifeline: tourism.

Remarkably, after plummeting for two years, the number of visitors to Bali rebounded to new, record highs by September 2005. But a month later suicide bombers struck again in Kuta, and at two seafood restaurants in Jimbaran Bay. "I heard an explosion at the Menaga Cafe a few meters down the beach," says Wayan Wirasa, owner of the Nyoman Cafe at Jimbaran, who was working that night. "Then I saw a man walk up to the Australians and there was another explosion. They found his head 50 meters over that way," he says, pointing down the beach. The bombers killed themselves and 20 other people, including five tourists. They also crippled Bali's tourism sector yet again.

This time, however, the fallout has taken a different form. "There wasn't the same rush to the airport as in 2002," says Michael Burchett, chairman of the Bali Hotels Association. "But new bookings just didn't come in." Prices had already been so heavily discounted ...