ECONOMIC EFFECTS OF THE 2004 TSUNAMI - Research Paper Example

? Introduction Indeed, the impact of the 26th December 2004 tsunami was very devastating on the lives of people across Asia and beyond. The tsunami affected entirely all facets of human life in the countries where it was felt. The corporate world was very swift in the response as donations of supplies and other commodities were quickly channeled to the affected people. In that terrible event, it was realized that the corporate world is indeed made up of real citizens and that business is never emotionless. This arose out of the many supplies that actually came from the corporate world as small organizations and global multinationals were almost competing in their donations towards the affected people. In the analysis of the physical and economic impact of the tsunami, many issues begin to emerge. The effect of the tsunami was indeed much greater than initially presumed and some of those effects continue to be felt to this day. In the same vein, there are certainly many lessons to be learnt from the economic impact of the tsunami more than the mere short term effects on the affected countries. Physical facts The tsunami began with a seismic shift on the floor of the Indian Ocean on the 26th December 2004 off the island of Sumatra in Indonesia. The whole shift set off a giant tidal wave that destroyed and swept houses and other structures on the beaches wherever if reached. On the Richter scale, the oceanic earthquake measured 9.0 which was certainly a strong force. In less than three weeks later, the number of people who had been confirmed dead from the effects of the tsunami had reached 165,000. More deaths were later realized from water borne diseases, malnutrition and other effects that arose later. In the end, the estimated death toll was over 300,000 (Allen 45). The countries that were physically affected by the tsunami were Indonesia, Sri Lanka, Thailand, India, Maldives, Kenya, Somalia, Tanzania, Myanmar, Seychelles and Bangladesh. Economic impacts of the Tsunami In the face of the tsunami, the immediate direct economic impact was the radical reduction in the consumption and business activity in the affected areas. Many people were greatly affected and they totally had to rely on food donations that mainly came from the corporate bodies. The economic effect of this phenomenon was, therefore, the reduced purchasing power which certainly affected organizations which mainly relied on the Asian markets. The most affected country was Indonesia which experienced a lot of costs in the reconstruction process given that the tsunami had greatly destroyed the costal infrastructure of that country. It was estimated that in the most affected area of Aceh, the government would need over $4 billion in the next five years in order to assist in the reconstruction process given that the area was totally flattened by the great waves. Figures from the International Labor Organization (ILO) reveal that more than 1 million jobs were lost as consequence of the tsunami in Indonesia (Askew 56). In Sri Lanka, the economy was enjoying a relatively high economic growth rate and peaceful times following the end of the 2 year civil unrest in the country. Just like Indonesia, the country was faced with a hefty reconstruction bill considering that its destroyed infrastructure was certainly the most advanced in the whole affected area. The Asian Development Bank estimated the amount to be used in the reconstruction process to be over $1.5 billion (Karan 65). Most importantly, the greatest challenge in the Indonesian case was the long-term effect of the tsunami on the critical tourism industry which contributes greatly to the economy of the country. It was actually realized that tourism, which accounted up to 4.6% of the country’s GDP prior to the tsunami, was greatly affected given that most tourists had to avoid the area for several months that followed the event (Murty 65). Moreover, the tourism infrastructure was totally destroyed and this created the need for reconstruction before the industry could eventually pick. In a way, the malady in Indonesia came as a slight blessing for Sri Lanka. The stock market in Indonesia had been very robust before the tsunami but was totally affected in the process. The deregulation of international trade subsequently benefited the Sri Lankan manufacturers as the demand for textiles increased (Wallendorf 112). The manufacturing sector was therefore quite instrumental in providing the much needed funds for the reconstruction process and resuscitating the affected sectors in the country. In India, it certainly appeared that the tsunami had not really affected the economy of the country. However, the government decided to shoulder the reconstruction of the coastal areas instead of relying on aid from the developed world. In the end, there was a very direct impact of the tsunami on the budgets of the country following the event. The effect on the Indian mainland was assessed and estimated to be $1.2 billion. However, estimates from Citigroup gave a much higher figure of $6.5 billion which was actually the highest from all estimates. However, compared to other affected countries, the Indian economy was in a stronger financial position to weather such effects and the effects of the tsunami were not long lasting as in the case of other countries. It was realized that countries that depended mostly on tourism were affected most by the tsunami. The Maldives being such a country was seriously affected and had to depend on international aid for the reconstruction process and to assist in the recovery process. In the business world, the effects of the tsunami were actually felt across the world and not only in the Asian continent. Before the event, a lot of furniture was always exported from Indonesia to Britain. The events of the tsunami disrupted the supply chain and affected business between Britain and Indonesia in this respect. The tourism business was the most affected as tourists kept off even months after the affected areas were declared safe and fit for business. In the Maldives, over 29 resort islands were damaged and more than 40 islands were damaged in total. In tourist town of Phuket in Thailand, over 3,000 hotel rooms were completely damaged in the tsunami and several island hotels ceased operation for a long period after the event. The tourism sector in the Asian continent was generally affected on the long run as most tourists from the Western countries avoided the areas. However, much of that fear eventually lapsed and the tourism business resumed activity and the countries experienced positive economic growths. In the period after the tsunami, the affected countries experienced the most trying economic times. In Indonesia, Sri Lanka and Thailand, there were higher changes in the economic flows as the production process was mostly affected. This was realized as higher operational costs for production activities while the production itself was very limited and could not satisfy the demand in the market. There was the urgent need for humanitarian assistance, relocation of humanity and cleaning of the affected areas. These had a lot of economic impact on the economies of the countries. Moreover, the strategies that were put into place in order to deal with the long terms impacts on the tsunami in these countries had great financial implications and meant that funds had to be channeled to the reconstruction process other than in other pressing economic needs of the people. The effect of the tsunami on the social welfare of the people was realized in other sectors such as housing, health, culture and religion. The housing sector had to be revived at very high costs in the affected coastal areas. The educational infrastructure that was destroyed did not merely have a short-term impact in the social lives of the people. On the contrary, the uneducated kids and the children who were left without care still translate into many costs for the government. Moreover, on the positive note, the impact of the tsunami created awareness, in many Asian countries, of the imperative need to establish very functional disaster mitigation and management units that can effectively deal with such humanitarian crises and address the needs of the country in such dire situations. In countries like Mauritius, a lot of funds were channeled into the development of disaster management programs after the realization of the terrible effects of that tsunami. The tsunami affected the social lives of the people in the affected areas much as it impacted them on the economic perspective. There was certainly a disruption in the functional societies as most people were separated from their families. Children were left alone and people lost touch with their loved ones. The whole mix had very devastating effects on the social relations of the people. It was further realized that there was increased vulnerability of the poorest people as they could not afford to address even the basic of their needs at this time. In the end, it was a ripple effect that transcended into a state of penury and distress for the people. The increased poverty in the Asian continent translated into long term effects on other social aspects of the people. The affected people could not therefore afford proper medical attention and the resulting poverty meant little focus on such imperative aspects like education. The poverty reduction programs instituted by most governments in the regions have also contributed to further costs for the governments of these countries. In a way, the increased social problems that resulted from the Asian tsunami basically boiled down to the need for intervention measures which had to be shouldered by the governments and other humanitarian bodies. Such expenses normally affect the general economic order as funds are directed into sectors which do not directly contribute to the growth of the economy. To this day, the Asian countries that were affected continue to experience the effects of the tsunami in terms of dealing with the long term effects that continue to be realized. Orphaned children have to be taken back to school and their education and needs mostly fall on the government’s budget. It is therefore realized that such costs will continue to be faced as long as the affected people still exist. In conclusion, it is realized that the economic effect of the tsunami was far more than what was incurred in the conventional sense. In most cases, the estimate that were given by most bodies failed to correctly measure the long-term economic effects of the event and the financial implication of the measures to prevent a repeat of such situations. In the end, it was realized that the economic effects of the tsunami transcended more than the affected countries and had much effects on the trading partners and other countries that in a way interacted with the affected nations. Appendix Damages vs. Losses in Thailand Total Impact of Tsunami (9930 million US $ for 5 countries) Effects on Sri Lanka Suffering Children in Indonesia Costs of reconstruction are actually high The source and extend of the Tsunami Works Cited Allen, Ronald. After the Tsunami. Sydney, N.S.W.: ABC, 2005. Print. Askew, Edward S. Atlantic and Indian Oceans: New Oceanographic Research. New York: Nova Science Publishers, 2009. Print. Karan, Pradyumna P. The Indian Ocean Tsunami: The Global Response to a Natural Disaster. Lexington, Ky.: University Press of Kentucky, 2011. Print. Murty, T. S. The Indian Ocean Tsunami. London: Taylor & Francis, 2007. Print. "The Economic Impact of the Asian Tsunami." CSR, Sustainability & Governance Consultants. N.p., n.d. 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