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Tsunami's social cost yet to come

Despite economic resilience, nations will face future burdens

By Geoff Hiscock
CNN Asia Business Editor


Asian Development Bank
Disasters (General)

(CNN) -- Despite its devastating toll of human misery, the December 2004 tsunami had relatively little impact on the broad picture of Asian regional economic growth in 2005.

Excluding Japan, Asia grew about 6.3 percent this year and is expected to marginally exceed that rate in 2006.

But the apparent economic resilience of the four countries most deeply affected by the tsunami -- Indonesia, Sri Lanka, India and Thailand -- masks what experts say is a much deeper and long-lasting social cost to the communities that were devastated.

Twelve months after the disaster, it is this cost that is the focus of reconstruction efforts by United Nations agencies, the World Bank, the Asian Development Bank, donor countries and relief organizations.

Unlike slow-burning health crises such as AIDS, the 2003 outbreak of SARS or the possibility of a global pandemic from bird flu, the tsunami was a one-off event that prompted an immediate financial and humanitarian response.

In the days following the tsunami, money flowed in for rescue and reconstruction work, and to help badly affected industries such as tourism in Thailand and fishing in Indonesia, Sri Lanka and India. About $5 billion was pledged by donor countries, businesses and individuals.

The International Monetary Fund estimated immediate damage in the region to be $8.4 billion, with Indonesia suffering the bulk of that at $5.4 billion.

Now, the aid effort has switched to long-term solutions covering permanent housing, education, employment, health services, infrastructure and environmental protection.

In one sense, the worst is yet to come in terms of social impact for the many thousands of vulnerable survivors of the tsunami disaster. Relief experts estimate it could take up to a decade for some places to fully recover, and reconstruction will cost about $9 billion.

Former U.S. President Bill Clinton, the special U.N. envoy for tsunami recovery, said recently that the primary goals had to include protecting the most vulnerable and marginalized communities, and to create sustainable jobs for people in the affected regions.

Clinton, who returned to Sri Lanka and Indonesia at the end of November to see firsthand the recovery work there, said the people hardest-hit by the tsunami were those who fell outside the "formal" economy -- mainly fishermen, farmers, women and people running small businesses.

Speaking in Sri Lanka, Clinton said on November 29: "If we are to truly build back better, we need to ensure that the recovery effort does not exacerbate existing inequities."

Community involvement

Clinton has previously stressed the need for transparency, accountability, good governance and the absolute imperative of involving the communities themselves in deciding on how they might diversify their economies beyond, say, farming and fishing.

"We need to allow the people in each affected country to decide how to seize the opportunity to diversify their local economies," he said in late October after a meeting in New York with officials from U.N. agencies, the World Bank, non-government organizations and the private sector.

Indonesia's Aceh province on the island of Sumatra suffered the greatest loss of life after the December 26 earthquake and tsunami: 126,804 dead, another 93,458 missing, and 474,619 displaced, according to official figures. Another strong earthquake in March near Nias island off the coast of Sumatra claimed about another 900 lives and caused further damage to communities.

An assessment by the Indonesian government estimated total damage from the tsunami at $4.5 billion to $5 billion -- almost equal to the entire GDP of Aceh.

Housing, commerce, agriculture, fisheries, and transport vehicles and services suffered losses of $2.8 billion, or 63 percent of the total.

Estimated public sector damage of $1.1 billion (25 percent of the total) covered infrastructure, social sectors, and government administration. The remainder ($0.55 billion, 12 percent) was damage to the environment.

In Sri Lanka, where more than 31,000 people died, 4,000 are missing and another half million were displaced, an initial assessment put the recovery and reconstruction cost at about $1.5 billion, with most losses in housing, tourism, fisheries and transport.

Clinton said in Sri Lanka on November 29 the ongoing challenges were to restore livelihoods and distribute aid fairly.

He noted real progress, with 90 percent of children back at school and transitional shelter given to most of the displaced people.

But he said there was still more to be done, with the focus on maintaining the shelters as the monsoon season approaches, providing jobs for hundreds of thousands of people who lost their income source, and building permanent homes.

In India, where more than 10,700 people died and another 5,600 are missing presumed death, the reconstruction cost for the four affected states on the mainland was put at $1.2 billion earlier this year in a joint report by the World Bank, Asian Development Bank and U.N.

But because of the size of India's economy, the macro impact of the tsunami was minimal. The ADB said the output of the four states would not be affected because economic activity along the coastline contributed very little to their income.

In Thailand, where the death toll was about 5,400 with another 2,900 missing, six provinces on the Andaman coast were hit hard by the tsunami.

Coastal villages and tourist resorts were destroyed and tourism earnings were sharply reduced, affecting private spending. But an assessment by the Thai government said restoration work would stimulate the economy in 2005 to the point where there would be no change in the nation's projected overall growth rate of 5.5 percent to 6.5 percent.

But if the macro picture is relatively bright, the Asian Development Bank noted at the start of this year that the number of people living in absolute poverty would increase as a result of the tsunami, and the poverty gap would widen for the already poor people who lost their livelihood.

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