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A research report on the topic
ECONOMIC IMPACT OF EARTHQUAKE
Submitted To:
Mr. Dilip Verma
BBA Co-ordinator
Padmashree International College
Submitted By:
Pratil Koju
In the partial fulfilment of BBA course in Padhmashree International College
November 7, 2015
1
Abstract
This is a research report on the topic “Economic impact of Earthquake”. This report include
brief introduction about previous earthquakes in Nepal and other countries. This report also
include the economic impact of earthquake in economic sectors like agriculture, financial
sectors, tourism sectors, industry and commerce sectors, hydropower and so on. The report
should how much damage and losses had cause in these sectors and how much would be the
cost of these damages. Different data from various sources are used to support this report. The
data are all secondary and no primary data are used.
2
Acknowledgement
We would like to express our deep gratitude to our respective Lecturers Mr. Dilip Verma and
Mr. Nabin Bista for providing us with continuous guidance and supervision.
We would also like to express our deep gratitude to Mr. Eros Gautam for helping to do this
research report.
Finally, we would like to thank our friends and family for providing us support and
encouragement whenever necessary.
Pratil Koju
3
Table of Contents
Abstract ..................................................................................................................................... 1
Acknowledgement .................................................................................................................... 2
Table of Contents ...................................................................................................................... 3
List of Tables ............................................................................................................................ 5
List of Figures ........................................................................................................................... 6
Abbreviations ............................................................................................................................ 7
Chapter 1: Introduction ............................................................................................................. 9
1.1 Basic Introduction of Nepal ............................................................................................ 9
1.2 Economic background of Nepal.................................................................................. 9
1.2 Earthquake and Nepal ................................................................................................... 10
2.1 Nepal Earthquake 2015 ................................................................................................. 11
1.3 Objective ....................................................................................................................... 11
1.4 Limitation ...................................................................................................................... 11
1.4 Outline of the study ....................................................................................................... 12
Chapter 2: Literature review ................................................................................................... 14
2.1 The earthquake of Luzon 1990 ..................................................................................... 14
2.2 The economic impact of the Canterbury earthquake .................................................... 14
2.3 Bihar Nepal Earthquake 1934 ....................................................................................... 15
4
Chapter 3: Research methodology .......................................................................................... 16
3.1 Research Design............................................................................................................ 16
3.2 Nature and Sources of Data .......................................................................................... 16
Chapter 4: Economic Impact of Earthquake ........................................................................... 17
4.1 Macroeconomic impact ................................................................................................. 22
4.2 Impact on Agriculture ................................................................................................... 23
4.3 Impact on Commerce and Industries ............................................................................ 24
4.4 Impact on Tourism ........................................................................................................ 25
4.5 Impact on Finance Sector .............................................................................................. 28
4.6 Impact on Hydropower and Electricity ......................................................................... 31
4.7 Impact on Labor market and Employment ................................................................... 33
Chapter 5: Recommendation and conclusion ......................................................................... 35
References ............................................................................................................................... 36
5
List of Tables
Table 1: Abbreviations .............................................................................................................. 8
Table 2: Earthquakes in Nepal with magnitude greater than 6.5 ............................................ 10
Table 3: Per capita disaster effect in most affected districts ................................................... 19
Table 4: Loss and damages incurred in the earthquake .......................................................... 20
Table 5: Resources required for Recovery and Reconstruction .............................................. 21
Table 9: Damages and losses to the tourism sector by earthquake ......................................... 26
Table 10: News article published in a daily newspaper during the times of Earthquake ....... 28
Table 11: Total deposits in BFIs and SACCOs ...................................................................... 30
Table 12: Hydropower plants damaged by Earthquake .......................................................... 32
Table 13: Work days lost and income lost per district............................................................ 33
6
List of Figures
Figure 1: Death caused by natural disaster from 1st Baisakh 2072 to 11st Kartik 2072 ........ 17
Figure 2: Map of Nepal show districts with most deaths ........................................................ 18
Figure 3: Categories of Earthquake affected districts ............................................................. 19
Figure 4: Economic growth ................................................................................................... 23
7
Abbreviations
NEPSE Nepal Stock Exchange
HDI Human Development Index
HDR Human Development Report
NSC National Seismological Centre
UNDP United Nations Development Programme
PDNA Post Disaster Needs Assessments
SACCO Savings and Credit Cooperatives
USGS U.S. Geological Survey
GDP Gross Domestic Product
NRB Nepal Rastra Bank
CBS Bureau of Statistics
BFIs Bank and Financial Institutions
WTTC World Tourism and Travel Council
NEA Nepal Electricity Authority
IPPs Independent Power Producers
MoF Ministry of Finance
DoA Department of Agriculture
MoCTA Ministry of Culture, Tourism & Civil Aviation
TAAN Trekking Agencies’ Association of Nepal
HAN Hotel Association of Nepal
NTNC Nepal Trust for Nature and Conservation
SEBON Securities Board of Nepal
NEPSE Nepal Stock Exchange
8
MW Mega Watt
MFIs Microfinance institutions
NGOs Non-Governmental Organizations
FINGO Financial intermediary NGOs
NATO Nepal Association of Tour Operators
Table 1: Abbreviations
9
Chapter 1: Introduction
1.1 Basic Introduction of Nepal
Nepal is a small land locked country in South-East Asia, located in between two Asian giants,
India and China. The area roughly covers 56,827 sq. miles with a length of approximately 550
miles east west and 180 miles in breadth north south. It is surrounded by India on three sides
and by China in the North. Despite it being so small, Nepal boasts varied geographical
diversity. The lowest land is 105 meters from sea level and the highest is 8848 meters, which
is also the highest topography of the whole world. The climate varies with the altitude, with
high temperature down south and freezing cold up north while the people in the mid-region
enjoy the mild temperature. Nepal is heavily dependent on India for the import of daily basic
necessities and imports lots of other products from China.
1.2 Economic background of Nepal
Nepal is among the poorest and least developed countries. The real GDP of Nepal (at basis
price) is 690.3 Billion (Economic Survey Fiscal Year 2014/15, Government of Nepal, Ministry
of Finance, 2015). Agriculture is the mainstay of the economy, with more than two thirds
deriving their livelihood from it. Industrial sector is relatively small. In recent years, foreign
employment has emerged as the largest component of services sector and the largest source of
foreign reserves. Tourism is a growing industry and a major source of foreign currency. In
terms of contribution to GDP, agriculture’s share is about one third. The industrial and services
sector account for the remaining two-thirds of total GDP. The economy of Nepal can be divided
into three sectors as agriculture sectors, industrial sector and service sector. According to the
HDR 2014 launched by UNDP, Nepal’s HDI of Nepal is 0.540.
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1.2 Earthquake and Nepal
Nepal is the 11st most earthquake prone country in the world. Nepal is located right on the top
of subduction zone. It a place where one plate of earth crust slides under another. In this case,
India plate id pushing it self to the north under the Euasian plate. The first earthquake was
recorded back in 1255 A.D. Some of the earthquake in Nepalese history are the 1408 A.D.
earthquake, the earthquake of 1681 A.D. and 1810 A.D, but the exact location of these
locations are still unknown.
One of the most memorable earthquake is the earthquake of 1934 January 15. It is estimated
to be a magnitude of 8.0. Kathmandu valley was destroyed and one third of the population was
killed. The earthquake of 1934 A. D. is the most devastating earthquake ever occurred in the
territory of Nepal with casualties of more than 10000 people within Kathmandu valley. After
that 1988, there was another earthquake with magnitude of 6.9 with death tolls over 1500.
Since the great earthquake of 1934, there had been only six earthquake with magnitude greater
than 6.5. The last four earthquake was occurred within this year within a month.
Date Magnitude (Mw)
2015-05-12 6.8
2015-04-26 6.9
2015-04-25 6.6
2015-04-25 7.6
1988-08-21 6.9
1934-01-15 8.4
Table 2: Earthquakes in Nepal with magnitude greater than 6.5
Source: http://www.seismonepal.gov.np/
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2.1 Nepal Earthquake 2015
On Saturday, 25 April 2015 at 11:56 local time, a 7.6 magnitude earthquake as recorded by
Nepal’s National Seismological Centre (NSC), struck Barpak in the historic district of Gorkha,
about 76 km northwest of Kathmandu. The earthquake was originated just 9.3 miles (15
kilometers) below earth’s surface resulting greater damage to Nepal. The earthquake lasted
approximately 50 seconds. Nepal had not faced a natural shock of comparable magnitude for
over 80 years. The 7.6M earthquake was followed by more than 300 aftershocks with greater
magnitude than 4.0 (as of 7 June 2015). Among them three of them were pretty big with
magnitude of 6.6, 6.9 and 6.8.
The earthquake of 25th April have been a terrible disaster for Nepal since it affected almost
half of its districts among with 14 districts were declared crisis hit areas. According to Ministry
of Home Affair, The earthquake took the life of 8891 people and left 22302 people injured.
And half a million houses collapsed or damaged leaving thousands of peoples homeless.
The earthquake also caused avalanches in Mount Everest and also landslides in different part
of the country.
1.3 Objective
The major objective of the study are as follows:
To study the earthquake of April and May
To study the impact of earthquake in social sector
To study the economic losses due to earthquake
1.4 Limitation
In recent years, the social and economic cost of natural disaster is increased due to growth in
population, environmental degradation and unplanned urbanization. The calculation of actual
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damage is very tough quest to conquer. Small hazard like assets, gold, silver and other valuable
item don’t get registered during the process but they will definitely force general people to
poverty. And a good analysis of real economic impact of earthquake is not achieved just a
couple of months later. Only after 2-3 years later, real impact can be achieved.
The limitation of this study are as follows
This study is basically a secondary research and no primary data is included
Real economic impact is hard to analyze just after couple of months
Only economic impact is studied in this report
I may not have gone deep into detail studies due to lack of time span
1.4 Outline of the study
The study consist of 5 chapters
Chapter 1: Introduction
This part consist of introduction to the topic, background and also include objective and
limitation of the study
Chapter 2: Literature Review
This chapter includes the literature reviews. How other people have researched in similar topic
as this one.
Chapter 3: Research Methodology
This chapter deals with methodologies used in this study.
Chapter 4: Economic impact of Earthquake
This section deals with economic impact of earthquake in different sectors.
13
Chapter 6: Discussion and Conclusion
This chapter includes any discussion on the subject matter and the conclusion of the study.
14
Chapter 2: Literature review
This chapter include theoretical review of past studies regarding this topic. Theoretical review
comprises of selection of available document (both published and unpublished) on the related
topic, which contain information, idea, data and evidences compares how the different studies
have addressed the issue.
2.1 The earthquake of Luzon 1990
The report by Ignacio Armillas (1990) writes in their report that the destruction caused by the
earthquake was having serious repercussions on the lives and economic activities of not only
the people directly affected, but of Filipinos in general. The problem of broken road links
illustrates the manufacturers have been choked and as a result people who barely noticed the
seismic event how feel their standard of living decline in its aftermath. The earthquake has
resulted in increased food prices and unemployment, and had added pressure on the national
balance of payments.
Consequently, the earthquake has placed a heavy new burden on a nation already struggling
with major economic and other problems. The estimated cost of reconstruction and associated
development will be more than billion pesos.
2.2 The economic impact of the Canterbury earthquake
Miles Parker and Daan Steenkamp (2012) writes in their paper about the economic impact of
Canterbury earthquake.
In late 2010 and in 2011, Canterbury endured a series of major earthquakes. Overall, the
Canterbury economy has been reasonably resilient to the impact of the earthquakes, and the
spillover to other regions in New Zealand has been limited. Goods exports and manufacturing
activity appear to have held up well. Conversely, some sectors, notably retail, accommodation
15
and hospitality, have been hard hit. International visitor numbers are sharply down, and there
appears to have been some population loss from Christchurch. Repair and rebuild activity is
under way and expected to accelerate from here, peaking in the next few years, but will take
at least a decade to complete. Rebuilding costs of damages from the earthquake is around
NZ$20 billion (US$15 billion) excluding disruption costs, or 10% of GDP. The effect of the
earthquake had been seen every aspect of the economy like construction sector, financial
sectors, business sectors, housing market, labor market etc.
2.3 Bihar Nepal Earthquake 1934
M.R. Pandey and Peter Molnar (1988) studied the effect of the 1934 earthquake and mentioned
the findings in their report. Their study had been focus to the impact in the Kathmandu valley.
They writes that the destruction in the valley was particularly great. Rana (1935) stated that
12397 (or nearly 19%) of houses were completely destroyed by earthquake and 25658 (38%)
were badly fractured. The destruction was most complete at Bhaktapur and neighboring
villages in the eastern part of the valley. This reflected in part by the ratio of the number of
houses “totally destroyed” to the number of those “much fractured”, a ratio that is greater than
one only in Bhaktapur, among the subdivcision of the Kathmandu valeyliisted by Rana (1935).
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Chapter 3: Research methodology
This chapter deals with research methodology that aims at answering the research questions
raised and accomplishing the research objectives. Research methodology sets out overall plan
associated with the study. It provides basic frame work in which the study is based. Before
going further in the study, it is necessary that research methodology be described first.
3.1 Research Design
This research is qualitative study rather than quantitative study. However some data are
presented to support the statement in the study. The study was carried out to find the adequate
information in the context of Earthquake affecting the economy of Nepal. Different secondary
data were collect from different articles and other research papers. No interviews were taken
and no primary data is presented in the study.
3.2 Nature and Sources of Data
The study is solely dependent on secondary data. Secondary data were taken from credible
sources. Secondary data were used to support statements in the study. Different sources of
secondary data are as follows:
PDNA report
Nepal Stock Exchange
Ministry of Finance
Nepal Rastra Bank
Economic Survey
Previous research Papers
Ministry of Home Affairs
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Chapter 4: Economic Impact of Earthquake
In 25th of April 2015, a great earthquake of magnitude 7.6 hit the city of Barpak of Gorkha
district at 11:56 am. The earthquake lasted for almost 50 seconds. The earthquake was rather
shallow, the point of origin of the earthquake was just about 9.3 miles (15 km) below the
surface level. The earthquake was followed by series of aftershocks. There was about 300 of
aftershocks with magnitude greater than 4.0 (as of 7 June 2015). Among the aftershocks, three
were pretty big one. First one occurred in the same day and second on occurred in 26th April
and the last one occurred in 12th of May 2015.
The earthquake was the most terrible disaster after the great earthquake in 1933 with magnitude
8.4 almost 80 years ago. After that there was 1988 earthquake with magnitude of 6.9 also but
it was not as devastating as this one in comparison. This earthquake, because it was very
shallow turned out to be very devastating. According to ministry of Home affair, the
earthquake claim 8891 deaths with 22302 people left injured. The earthquake completely
destroyed 604930 houses while 288856 houses were partially damaged.
Figure 1: Death caused by natural disaster from 1st Baisakh 2072 to 11st Kartik 2072
Source: Ministry of Home Affairs
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It is estimated that the lives of eight million people, almost one-third of the population of Nepal,
have been impacted by these earthquakes. Thirty-one of the country’s 75 districts have been
affected, out of which 14 were declared ‘crisis-hit’ for the purpose of prioritizing rescue and
relief operations; another 17 neighboring districts are partially affected. According to the
figure, Sindupalchowk was the district with most death among other districts. The per capita
disaster effect in the 14 most effected district are given in table 3.
Figure 2: Map of Nepal show districts with most deaths
Source: USGS
North
19
District Per capital disaster effect, NPR/Person
District Per capital disaster effect, NPR/Person
Dolkha 255,860 Ramechhap 112,740 Sindhupalchowk 233,370 Bhaktapur 78,770 Gorkha 209,080 Okhaldhunga 74,500 Nuwakot 204,930 Sindhuli 57,865 Rasuwa 179,580 Lalitpur 52,765 Dhading 149,580 Kathmandu 49,495 Kavrepalanckowk 119,200 Makawanpur 43,760
Table 3: Per capita disaster effect in most affected districts
Source: Estimation by Post Disaster Needs Assessments (PDNA) team and UNDP
Apart from these, the earthquake triggered deadly avalanche in the world highest peak, Mount
Everest. 17 people were killed during the avalanche and 61 people were injured. The
Figure 3: Categories of Earthquake affected districts
Source: Ministry of Home Affairs
20
earthquake also triggered few landslides in the different part of the country claiming hundreds
of people. Landslides caused by the earthquakes continue to pose both immediate and long-
term hazards to villages and infrastructure within the affected region. Several landslides
blocked rivers, creating temporary dams, which were a major concern for villages located
downstream.
Sector Damage (In NRs
10 Million) Loss (In NRs
10 Million) Total (In NRs
10 Million) Social Sector 3,550,180.00 5,359.70 40,862.50 Housing and Human Settlements 3,036,310.00 4,690.80 35,054.00 Health 642.20 11,220.00 754.40 Education 2,806.40 325.40 3,131.80 Cultural Heritage 1,691.00 231.30 1,922.30 Productive Sector 5,807.40 12,004.60 17,812.00 Agriculture 1,640.50 1,196.20 2,836.70 Irrigation 38.30 - 38.30 Commerce 901.50 793.80 1,695.30 Industry 839.40 1,087.70 1,927.10 Tourism 1,886.30 6,237.90 8,124.20 Finance 501.50 2,689.00 3,190.50 Infrastructure Sector 5,246.00 1,432.30 6,678.30 Electricity 1,780.70 343.50 2,124.20 Communication 361.00 508.50 869.50 Community Infrastructure 334.90 - 334.90 Transport 1,718.80 493.00 2,211.80 water and Sewerage 1,050.60 87.30 1,137.90 Cross Cutting Issues 5,187.20 106.10 5,293.30 Governance 1,875.70 - 1,875.70 Natural Disaster Risk Reduction 15.50 - 15.50 Forest and Environment 3,296.00 106.10 3,402.10 Gross Total 51,743.40 18,902.70 70,646.10
Table 4: Loss and damages incurred in the earthquake
Source: Economic Survey 2015, Ministry of Finance
The losses incurred from the earthquake worth NRs 706.46 Billion which is roughly one third
of the current GDP. 517 billion worth of properties and infrastructure were fully destroyed by
21
the earthquake while 189 billion represent the losses and higher costs of production of goods
and services arising from the disaster. Of the total loss, social sector incurred the damage of
57.84%. Productive sector incurred damage of 178 billion (25.21% of total damage) and
infrastructure incurred damage of 66.78 billion i.e. 9.45% of total damage. And 51.87 billion
of loss in cross cutting issues.
Sector Amount required for
recovery and reconstruction (NRs 10 millions)
Share (Percent)
Social Sector 40,774.70 60.90 Housing 32,776.20 49.00 Health 1,469.00 2.20 Nutrition 503.60 0.80 Education 3,970.60 5.90 Cultural Heritage 2,055.30 3.10 Productive Sector 11,561.80 17.30 Agriculture 1,556.10 2.30 Irrigation 46.70 0.10 Commerce 2,005.10 3.00 Industry 735.70 1.10 Tourism 3,871.00 5.80 Finance 3,347.20 5.00 Infrastructure 7,426.60 11.10 Electricity 1,858.60 2.80 Communication 493.90 0.70 Community Infrastructure 445.00 0.70 Transport 2,818.50 4.20 Water and Drainage System 1,810.60 2.70 Cross Cutting 7,187.30 10.70 Governance 1,844.20 2.80 Natural Disaster Risk Reduction 820.40 1.20 Forest and Environment 2,519.70 3.80 Employment and Living Standard 1,254.70 1.90 Social Security 639.80 1.00 Gender and Social Inclusion 108.60 0.20
Total 66950.50 5,625.50
Table 5: Resources required for Recovery and Reconstruction
Source: Economic Survey, Ministry of Finance
22
The data shows the total amount of NRs 669.50 billion required for the reconstruction and
recovery from the earthquake. The amount required is almost equal to the announced budget
for the fiscal year 2072/73. The table shows social sectors require most of the recovery cost
i.e. 60.9 % of total amount. Cross cutting require the least i.e. 10.70%.
4.1 Macroeconomic impact
With 706 billion of losses and damages (about one third of GDP), it is expected the economy
to take a great hit. Before earthquake the GDP growth for the fiscal year 2071/72 was expected
to be 4.6 percentile. After the earthquake, according to economic survey done by Ministry of
finance, the GDP growth for the fiscal year 2071/72 was only 3.04%. This was a very huge hit
for an economy like our. According to economic survey by Ministry of finance, the
reconstruction cost of the earthquake will be 669.5 billion Nepalese Rupees that’s about one
year of budget. The social sector alone require 60.9% of the fund. According to World Bank’s
estimate, the earthquake will drive 2.5percent to 3.5 percent of Nepalese population back to
poverty adding 700,000 more poor to the country’s total poor by the end of Fiscal year 2015/16.
Likewise, Multidimensional poverty is likely to receive grave impact owing to hurdles in
drinking water and sanitation services, schools and health facilities, and increased food
insecurity.
Balance of Payment is estimated to receive negative effect as a result of increased imports
against low export volume thus making the domestic production failing to meet higher demand
of construction, materials such as steel, fitting accessories, cement, bricks, and timbeNRs
Revenue collection in fiscal year 2071/72 had fell by 7.0 percent to NRs 393 billion subsequent
to the disaster from the earlier estimates of NRs 423 billion. Likewise, total government
expenditure also declined to NRs 494 billion from expected NRs 618 billion, i.e. 20% decline
in expenditure. Similarly, export is expected to fall while trade deficit is likely to grow albeit
lower import growth rate.
23
The inflation had gone up since the earthquake, the consumer price index for the month March
was 7.0% according to Ministry of finance and after the earth in late April and early May, the
consumer price index went up to 7.4% June.
Figure 4: Economic growth
* based on Data for the first 8 months of the current fiscal year
Source: Ministry of Finance (2015)
4.2 Impact on Agriculture
Agriculture is the biggest employer in Nepal, particularly in rural areas, and is the main
contributor to household level food and nutrition security of the rural population. Nearly 80%
of Nepal’s nearly 28 million inhabitants and 60% of the labor force is dependent on agriculture.
Male out-migration in large numbers has left women to perform farm activities in the villages.
Women contribute 60% in crop production and 70% in livestock and poultry production. The
agriculture sector contributes approximately one-third of the national GDP in a country
Damages and losses in the agriculture sector are significant. The estimated number of small
and vulnerable farming households affected in the 24 districts is around 1 million, with female
headed households outnumbering male. Farmers keep their rice and millet grains harvested in
5.1
3.04, Actual
3.9
4.6
3.8
4.6, Expected
2
2.5
3
3.5
4
4.5
5
5.5
2010/11 2011/12 2012/13 2013/14 2014/15*
GDP Growth rate
24
previous year were stored in their own houses. With the houses destroyed those rice and millet
were also destroyed. The storage is yet to be problem during the harvest season this year. The
earthquake took the life of many livestock destroyed many commercial farms. Areas in some
of the most-affected districts reported cracks in both upland and irrigated fields. Nearly 1,000
hectares of land have been rendered useless due to landslides and land slips; these lands will
most likely not be recovered. It is feared that due to the heavy pressure of finding food and
shelter to the family people might not have time for farm work and the production losses may
be as high as 50%. Some of the crops were destroyed by the landslides triggered by the
earthquake. The cost of reconstruction and recovery for is sector is estimated to be NRs 15.56
which accounts for 2.30% of total reconstruction and recovery cost for earthquake. The
earthquakes increased the fragility of the food production systems making poor and marginal
farmers, including the elderly and women, more vulnerable to other possible future disasters.
The earthquakes seriously impacted agriculture-based livelihood in the affected districts
increasing their vulnerability to hunger and food insecurity. The loss of farm land and other
productive assets, and the risk of having land uncultivated on the hill slopes of the most
affected districts, further increases the risks of decreased production and food insecurity in the
coming months and in the next couple of years with far-reaching negative impacts.
4.3 Impact on Commerce and Industries
Commerce and industries are key aspect in any economy. Its plays a key role in economic
growth and to strengthen the economy. In our economy, this sector contributes 15% in the
Gross Domestic Product of fiscal year 2071/2072. This sector is also an important employer to
the people of Nepal.
According to PDNA report by Ministry of Home Affairs, the total damages accounted for this
sector is NRs 15.6 billion while losses account for NRs 16.87 billion in the 14 most affected
districts. For overall the country the numbers stand at NRs 17.4 billion for damages and NRs
18.8 billion for losses. The recovery and reconstruction cost for this sector is estimated to be
NRs 27.4 billion rupees.
25
Despite these numbers, the subsequent decline in commerce and industries due to earthquake
is likely to result in decline of government revenues and employment opportunities. Thus,
people are forced into poverty. The earthquake affect proper functioning of the industries in
follows:
Damages to premises, equipment, machineries, stock of raw materials and finished
goods.
The earthquake had taken 8891 lives and injured 22302. This is likely to decrease
supply of labor in labor market.
With the damages and losses to the people, their purchasing power is likely to reduce
thus creating lack of demand for goods, especially for non- essential goods.
Damage to trade related infrastructure like roads, bridges, distribution channel of
enterprises.
4.4 Impact on Tourism
Tourism sector is one of the growing sector of Nepalese economy. Tourism sector contribution
to the GDP of fiscal year 2071/72 account for 2.2% according to economic survey of 2015 by
Ministry of Finance. The income from hotels and restaurant accounts for 1.9% of GDP. Central
Bureau of Statistics (CBS) estimates that the hotel and restaurant may contributes to 75 to 80%
to the tourism sector’s revenue. World Tourism and Travel Council (WTTC) 2015 report,
based on pre-earthquake data, indicates that in 2014 travel and tourism in Nepal directly
supported 487,500 jobs (3.5 percent of total employment). The number of jobs was expected
to rise by 4 percent in 2015 and by 3 percent per annum to 681,000 jobs in 2025. Following
the earthquakes, these numbers will need to be revisited.
According to the PDNA report, the damages and losses incurred by this sector is NRs 18.86
billion. The number of tourists were down by a staggering 90% between May and July 2015.
It may take couple of year to gain tourists confidence and resume the number of tourists as
before. Domestic airline operation reported total monthly income loss of NRs 400 million for
the months following earthquake. Tourist accommodations of different types were either fully
26
or partially damaged in the Langtang, Gorkha-Manaslu, Khumbu, Charikot, Kalinchok, Jiri
and Rolwaling areas and in Dhanding district. A few hotels in the Kathmandu Valley
(including Nagarkot) were completely damaged with a majority having minor cracks. Many of
the tourism monument and cultural heritage attractions have been destroyed within and outside
Kathmandu valley. The earthquake affected a total of 691 buildings of historic value in 16
districts according DoA, MoCTA. Of these buildings, 131 were fully destroyed and 560 were
damaged. 150 km of trekking trail have noticed significant damages and 200 km require
maintenance and repair.
Table 6: Damages and losses to the tourism sector by earthquake
Officials declare Everest Hotel, some heritage properties “unsafe” By SANGAM PRASAIN, kathmandupost.ekantipur.com May 27 07:25 AM
The Everest Hotel in Baneshwor has been given a ‘red sticker’ by a government team which made a detailed inspect of the five-star hotel on Tuesday. A red sticker is given to any building the government officials deem unfit to live in.
A team of Department of Tourism and Hotel Association of Nepal, alongside government engineers, inspected 16 luxury hotels in the Kathmandu valley in the past few days.
Particulars Million NRs Hotels, other accommodations (Source: HAN/TAAN) 16,294.5 Homestays (report under housing sector) 1,720.0 Eco-Lodges in conservation Areas (Source: NTNC) 415.3 Trekking trails (Source: TAAN) 426.1 Tour operators (Source: NATO) 6.9 Total 18,862.8
27
The five-star property had initially been given a ‘green sticker’ after the April 25 Great Quake, declaring it fit for habitation. However, strong and continuous aftershocks since then had made it unsafe to live in, officials said on Tuesday.
A government inspection team placed a red sticker on the property on Tuesday, meaning that the structure had been damaged to the extent that it is now dangerous to inhabit. The hotel has been asked evacuate the occupants as soon as possible.
“As retrofitting of the building is necessary to avert seismic disasters, we have urged the hotel to act accordingly,” said Koshnath Adhikari, a leader of the inspection team. A number of structural experts had said that the hotel could be operated after repairs. “But considering that a five-star hotel should have adequate safety measures, we decided to red-tag the property.”
Adhikari, a senior divisional engineer at the Department of Urban Development and Building Construction, said that after a second round of inspections, they found out that the powerful aftershock on May 12 had severely damaged three main pillars in the hotel’s lobby.
The team will also be making a second round of inspections of another five-star property the Hotel Malla. Hotel Association Nepal (Han) has claimed that 90 percent of the hotels in the Kathmandu valley are fit for habitation. Meanwhile, the government team has said that a number of hotel buildings dating from the Rana period and heritage structures should either be dismantled or strengthened. According to Adhikari, a heritage building of the Kathmandu Guest House has been given a red sticker and not the whole hotel.
Likewise, the Hunter’s Lodge Restaurant at the Gokarna Forest Resort has also received a red sticker. The inspectors have recommended that it be dismantled. The property is more than 150 years-old, with a history of royalties using it. The team has also placed a red sticker on the old building of Dhulikhel Resort in Dhulikhel, though the rest of the property is said to be fine.
Adhikari said that the resort had started demolishing the old building. A tourist-standard Budget Hotel in Thamel collapsed during the earthquake.
It has become difficult to assess the stability of hotel structures and ascertain if they have been weakened by the quake due to lack of manpower, structural experts said. They can be strengthened through retrofitting.
Poor occupancy
Except for a few five-star hotels with 25-30 percent occupancy, all the luxury and tourist-standard hotels in the Capital have reported poor occupancy.
Amar Man Shakya, first vice-president of Han, said that rescue and media personnel were keeping a few five-star hotels busy, but many hotels were getting only 4-5 percent occupancy.
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The hospitality sector is worried that the trend might last a long time. A survey entitled Economic Activities Report 2013-14 conducted by Nepal Rastra Bank showed that there are 1,792 hotels and lodges in the country producing 36,371 room nights daily.
The country’s five-star hotels produce a combined 57,000 room nights every month. According to the Tourism Ministry, the average occupancy of five-star properties in April and May normally stands at 65 percent and 55 percent respectively.
The sharp drop in visitors after the earthquake and constant aftershocks is apparent in the tourist district of Thamel. Tourism entrepreneurs in Pokhara have already announced heavy discount packages in a bid to bring back tourists.
Travel trade entrepreneurs have also formed various bodies to revive the country’s tourism industry and have urged tourists to visit Nepal during the autumn.
The entrepreneurs say the tourist destinations are still safe and attractive and they could attract tourists.
The Annapurna Trekking Route, Pokhara, Chitwan, Lumbini, Bandipur, Tansen, Dolpa, Rara and Bardia are some of the destinations that were not affected by the tremor.
Three heritage sites to reopen
The Department of Archaeology has decided to reopen three heritage sites in the Kathmandu valley that were reduced to rubble by the quake to visitors by June-end.
Ram Bahadur Kunwar, spokesperson at the department, said that they had been working to reopen Kathmandu Durbar Square, Swayambhu and Patan Durbar Square to sightseers. According to him, Patan Durbar Square will be reopened in three-four days.
“As it will take six or seven years to fully renovate the damaged sites, we have decided to reopen them after confirming that they are safe to visit.”
Table 7: News article published in a daily newspaper during the times of Earthquake
4.5 Impact on Finance Sector
In the years prior to the earthquakes, successes have been achieved in expanding the reach of
the financial system, in restructuring state-controlled financial institutions and improving legal
frameworks. Nonetheless, a significant proportion of the population lacks access to financial
29
services, and the banking sector remains exposed to several vulnerabilities, including concerns
over asset quality. There are four classes of NRB-regulated banks and financial institutions
(BFIs) differentiated by their capital requirements and range of permissible activities. Non-
bank financial institutions and capital markets are in their initial stages of development, but
with very rapid growth in both numbers and share of system assets and deposits held in Savings
and Credit Cooperatives (SACCOs). Together with microfinance institutions (MFIs) and
financial intermediary NGOs (FINGOs), these are the primary source of financial services for
poor and rural communities.
The disturbance of earthquake in the operation of financial institution short lived. Banks and
financial institution were able to resume their services very soon after the earthquake. However
lots of infrastructures were destroyed by the earthquake. 408 branches and 652 ATMs owned
by Class A, B and C BFIs damaged. Also 502 SACCOs were affected by this earthquake.
Despite these infrastructure losses, many depositors gained access to their accounts very easily
which help to maintain public confidence in banking system. This is a remarkable achievement,
given the serious physical damage to Nepal Rastra Bank (NRB) premises, and the absence of
a Disaster Recovery Site (DRS) and Business Continuity Plans (BCPs). The cost of replacing
the two damaged NRB buildings with a well-equipped modern central bank is estimated at
NPR 3.1 billion.
Deterioration in the quality of loan portfolios of BFIs resulting from the disaster could occur
as a result of earthquake damage and disruption in three main ways:
As a result of damage or disruption to otherwise viable businesses (e.g. Hydro power
and tourism), which may need to restructure their debts and will need additional finance
to repair damage
Damage to uninsured real estate collateral
Losses on deprived sector lending in the affected areas where borrowers are unlikely
to be able to repay their loans. If the impact of these factors is significant, it would lead
to de-leveraging and constricting the flow of credit needed to support reconstruction
and development of the economy
30
Year Total deposits (NRs millions)
Mid- January Mid-May Mid- July 2015 1,774,615 1,471,047 2,221,201
Table 8: Total deposits in BFIs and SACCOs
Source: PDNA report
Despite these, the deposits in BFIs are increasing post-earthquake. After in just two months
after earthquake, the deposit BFIs had increased by 50%. This increase in deposit is certainly
going to increase the liquidity in BFIs as it will be hard to flow credit in such times of panic
not to mention there is huge risk of previous portfolio losing its quality. The Insurance
Association estimates that its total losses (i.e., net of reinsurance provided by foreign
reinsurers) will not be more than NRs 3.2 billion.
Beside these, the capital market also took hit by this earthquake. Despite not that much of
damages and losses from the loss of fees to Securities Board of Nepal (SEBON), Nepal Stock
Exchange (NEPSE) and Brokerage houses from no trading for nearly a month, Capital market
didn’t took much of a hit. Although NEPSE was forced to closed down almost for a month
after the earthquake. The market reopened in 24th of May, 28 days after the great earthquake
of 25th April. After the trading day opened, the NEPSE index fell by huge points for couple of
days, it regained its points rather quickly.
The total loss incurred by this sector is NRs. 31.9 billion and the recovery and reconstruction
cost is expected to be NRs 33.47 billion which is 5% of total disaster recovery cost.
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4.6 Impact on Hydropower and Electricity
The April 2015 earthquake significantly damaged hydropower plants, the transmission system
(substation and lines) and distribution lines. The damage to complete transmission lines and
grid substations are being assessed by means of a walk-through survey.
Existing hydropower plants
Three Nepal Electricity Authority (NEA) owned power plants (48 MW) and15 IPP-owned
power plants (123 MW) were damaged, resulting in an outage of 171 MW. Other hydropower
plants are still in operation, their damage status being unavailable. The magnitude of damage
to the power plants of NEA and IPP would be known only after a detailed assessment of
damaged power plants.
It is reported that in the Kulekhani storage hydropower plant (92 MW), a deep crack has
developed in the dam, going 0.8 m deep to the clay-core. Cracks are observed in the shaft
bearing block as well. Cracks have also been observed in the power house of Upper
Marsyangdi hydropower plant (75 MW). In Kaligandaki a hydropower plant (144 MW), cracks
have developed in the left bank of the reservoir which was damaged by heavy rain two years
back. Similarly, the waterway of cascade plants Trishuli (24 MW) and Devighat (14.1) have
reported damage.
However, all the power plants of NEA are currently in operation except for Sunkoshi (10MW);
its infrastructure is said to be seriously damaged. Although there seems no visible damage to
other hydropower plants, a thorough assessment is needed for confirmation. Out of 15 IPP
power plants, Chilime hydropower plant, under a NEA subsidiary company, is already in
operation. Other power plants require major reconstruction work for a period ranging from
four months to 12 months.
Hydropower plants under construction
There are reports of damage to hydropower projects under construction that are owned by NEA
and IPP. The construction work in major hydropower projects such as UpperTrishuli 3A
32
(60MW), Upper Tamakoshi (456 MW), Rasuwagadhi (111MW), Madhya Bhotekoshi (102
MW), Sanjen (45 MW) and Upper Sanjen (14 MW) and UT1 (216 MW) was stopped in the
wake of the earthquake and subsequent landslides. The details of damage are yet to be assessed.
Similarly, other small IPP projects under construction, totaling 43 MW capacity, are also
reported to be severely damaged.
Hydropower plant Installed capacity (MW) District Trishuli 24.00 Nuwakot Devighat 14.10 Nuwakot Sunkoshi 10.00 Slridhupalchowk Chilime 22.00 Rasuwa Bhotekoshi 45.00 Sindhupalchowk Baramchi 4.20 Sindhupalchowk SipringKhola 10.00 Dolakha BhairavKunda 3.00 Slridhupalchowk Chaku 3.00 Slndhupakhowk MadheChaku 1.80 Sindhupalchowk Lower Chaku 1.80 Sindhupalchowk Sunkoshi 2.60 Sindhupalchowk AnkhuKhola 8.40 Dhadlng MallungKhola 5.00 Rasuwa RadhiKhola 4.40 Lamjung Jiri 2.20 Dolakha TadiKhola 5.00 Nuwakot SiuriKhola 5.00 Lamjung Total affected: 171.50
Table 9: Hydropower plants damaged by Earthquake
Source: PDNA report, Ministry of Home Affairs
About 600,000 households were directly affected by the earthquake in the form of loss of
electricity services. This impact was either through damage to electricity facilities, on-grid and
off grid, or due to house collapse. Loss of access to electricity has a direct bearing on people’s
ability to derive their livelihoods and generate income, particularly so for rural communities
engaged in small- and medium-scale enterprises. The disruption in the power supply will
further pose challenges to the government’s avowed goal of universal access to modern energy
services by 2030in Nepal. NRs 21.24 billion of damages and losses are estimated for this sector
and NRs 18.58 billion is estimated to be the cost of recovery and reconstruction.
33
4.7 Impact on Labor market and Employment
The 25 April and 12 May earthquakes affected the livelihoods of about 2.29 million households
and 5.6 million workers across 31 districts, resulting in the loss of 94 million work days and
NPR 17 billion of personal income in fiscal year 2071/72. The agriculture sector appears to
be the most severely affected; it is estimated that 49.9 percent of all work days lost occurred
in agriculture, followed by tourism with 31.1 percent and commerce and industry with 20
percent. Although the personal income loss is equivalent to only two percent of the total
disaster effect, it is important to highlight that annual labor earnings in Nepal are extremely
low. Therefore, even a minor income loss has serious implications for poverty in the country.
District Lost work days Losses in personal income
(NRs in millions) Bhaktapur 3,288,619 594.00 Dhading 6,466,268 1,167.90 Dolkha 6,011,318 1,085.70 Gorkha 6,859,487 1,238.90 Kathmandu 12,153,573 2,195.10 Kavrepalanchowk 5,855,575 1,057.60 Lalitpur 3,399,321 614.00 Makawanpur 2,410,099 435.30 Nuwakot 7,260,420 1,311.30 Okhaldhunga 1,400,633 253.00 Ramechhap 2,909,959 525.60 Rasuwa 995,447 179.80 Sindhuli 2,201,064 397.50 Sindhupalchowk 8,528,389 1,540.40 Sub - total (14 districts) 69,740,172 12,596.00 Other (17 districts) 25,074,666 4,529.00 Total (31 districts) 94,814,838 17,125.10
Table 10: Work days lost and income lost per district
Source: PDNA report, Ministry of Home Affairs
34
Despite the heavy losses suffered, the reconstruction and recovery phase is an opportunity for
job creation and employment growth. It is estimated that large-scale housing reconstruction
may generate up to 352 million workdays over the next five years.
Enabling households and workers to recover their productive and income-generating activities
and increasing the resilience of livelihoods to future shocks must be a key component of the
reconstruction and recovery process. A comprehensive strategy –Working out of Disaster,
Building Resilient Livelihoods–is proposed, consisting of a package of interrelated
downstream and upstream activities to bridge the continuum from immediate income
generation to medium- and long-term employment recovery. The estimated budget for the
employment and livelihoods recovery needs amounts to NPR 12.5 billion.
35
Chapter 5: Recommendation and conclusion
With so much destruction and the how livelihood of general people had been affected by the
great earthquake of April and the aftershocks, the recovery and reconstruction campaign is
expected to initiate soon. General people had already initiated their effort for recovery at their
level and they expect the government to initiate their effort soon. But it should be kept in mind
that detailed study is required before acting. Detail study of damages and need assessment
should be done. The recovery strategy should be focused on restoration and reconstruction of
all damaged and destroyed cultural heritage. The heritages should be restored in its previous
state or designed with may be new method included to make the establishment earthquake
proof. Post-disaster recovery will therefore be more effective and sustainable if gender equality
and social inclusion are acknowledged as one of the key guiding principles of implementation.
It is estimated that the cost of recovery and reconstruction is expected to be NRs 669 billion.
The campaign is very huge thus the planning should be detailed and long term.
Conclusion
The main objective of the study is to research about the economic impact of earthquake. The
earthquake of April 25th and their aftershocks had been economically expensive to our country.
The economic cost of this earthquake is NRs 706.46 billion according to the economic survey
carried out by MoF. The social sector took the big hit among all of NRs 408.62 billion. This
sector include health, education, housing and cultural heritage. The damages and losses in the
productive sector and infrastructure sector account for NRs 178.12 billion and NRs 66.78
billion. These are only the economic damages and losses incurred. The earthquake also took
the life of 8891 and injured 22,302 peoples. The psychological and mental impact left in the
mind of people are unmeasurable but they are very significant.
36
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