- 1. A Case Study On Recovery After2004 Tsunami, South
AsiaSubmitted by:-Poonam Shekhawat2013PCD5302
2. INTRODUCTION The tsunami that occurred in Asia in December
2004, causedby an earthquake with an epicenter off the southwest
ofSumatra in Indonesia, was one of the most destructivenatural
disasters in recent history. The impact of the tsunami was felt in
countries in Asia andAfrica, thousands of miles away from the
epicenter. There was an unprecedented global response to the
disaster.Governments, international agencies, and millions of
peopleacross the world donated to help communities devastated bythe
tsunami. As one survey of the disaster put it: The nature of the
tragedy, combined with the clear andconstant exposure it received
through the media, ledhundreds of millions of individuals around
the globe to donatefunding to various national and international
charities andrelief organisations. An outpouring of this magnitude
fromindividuals has never been witnessed before for a singleevent.
(Bernhard, Yritsilpe, and Petchkul 2005: 82) 3. Most of the
affected countries were entirely unpreparedfor the disaster; this
was not surprising. Towards the end of the first year after the
tsunami, therehabilitation and reconstruction effort supported
byinternational aid programs seemed to have been aresounding
success Soon after relief operations began, problems with therelief
and reconstruction effort began to come to light. In2005, there
were widespread reports of inefficiencies inthe distribution of
funds, unsatisfactory plans for therebuilding of houses, slow
progress in reconstruction,allegations of corruption, cost
escalations, funding gapsfollowing the slow disbursement of funds,
andcoordination failures. A report presented to the PrimeMinister
of Sri Lanka in December 2005 by Sri LankasInstitute of Policy
Studies highlighted the coordinationproblems that had emerged
following the influx of largenumbers of donors, including many
newly-establishedNGOs. 4. Subsequent developments confirmed
thatproblems persisted despite substantial progresswith
reconstruction in both Sri Lanka andIndonesia. The World Bank
tsunami website also reportedciting sources from the Indonesian
Reconstructionand Rehabilitation Agency (Badan Rekonstruksidan
Rehabilitasi, or BRR)that 30,000 housesremained to be built (World
Bank 2008a). In bothIndonesia and Sri Lanka, there were reports
notonly of cost escalations producing funding gaps butalso of
institutional and procedural bottleneckshindering the expenditure
of available funds. 5. TSUNAMI RECONSTRUCTIONASSISTANCE Tsunami
damage, as estimated on the basis ofreplacement costs of the
physical assets andinfrastructure and foregone income flows,
waslargest in Indonesia (4.4% of gross domesticproduct [GDP])
followed by Thailand (2.2% ofGDP) and Sri Lanka (1.5% of GDP) Much
of the attention, particularly in theinternational media and in
reports of major donoragencies, was focused on the
internationalassistance effort. This was widely described asthe
"largest ever" international assistance effort inresponse to a
natural disaster 6. Reports in the international media tended to
suggestthat the international community was prepared tobear most of
the cost of post-tsunami reconstruction.Unfortunately, there is no
reliable source of datawhich records the amount of aid provided
byinternational donors Information on aid flows shows that
numerouscountries provided assistanceA. Terms, Composition, and
Additionality of AidSome part of the total funding was
providedimmediately in the form of grants with few stringsattached;
a larger amount appears to have beenoffered with various conditions
attached, in amixture of grant and loan terms over varying
timeperiods. 7. Accurate valuation of aid provided in kind is
difficult.Sometimes the goods or services provided,
especiallysupport provided by military organizations, were
veryexpensive to supply, even making allowance for thedifficult
logistics involved. In addition, the items providedwere not
necessarily those which recipient government oragencies would
themselves have selected. For example,out of a total of a reported
$908 million allocated by theUS government to tsunami assistance,
$327 million wasspent on emergency relief. Part of this amount went
to theUS Department of Defense to cover some of the costsincurred
in the provision of tsunami relief (USGAO 2007:8). Similarly,
conditionalities set down by donors appear tohave varied widely Any
effort to arrive at rough estimates of the level of"additionality"
rests on assumptions about the level of aidthat would have been
provided normally to regionalcountries in the absence of the
tsunami disaster. 8. What do these rough estimates indicate
aboutadditionality? Perhaps the main utility of the data isthat
they indicate rough limits of minimum andmaximum likely aid flows
to the main tsunami-affectedcountries over the 20052011 period.
Twoscenarios are shown: a "full additionality" scenario "no
additionality" scenario Under the full-additionality scenario,
total assistancemight be expected to reach around $24.5 billionover
the seven-year period. However, under a no-additionalityscenario,
assistance flows would onlyamount to around $14 billion. 9. B.
Delivery, Disbursement, andSpending It is hard enough to obtain an
accurate picture of themobilization of funds for tsunami
assistance. Recent audit reports from the US and Australia on
theuse of tsunami funds provide thoughtful summaries ofthe
practical challenges of implementing spendingprograms following the
disaster. In the case of theUS, in May 2005 Congress appropriated
$908 millionfor relief and reconstructionit is hardly surprising
that total reported spending inthe first nine months after the
tsunami appears tohave been only around 30% of total
plannedexpenditures.To some extent, the need to give priority
toimmediate relief and humanitarian must be balancedagainst the
priority given to longer term developmentprograms. Perhaps the main
thing that can be said is 10. C. Quality of Assistance From the
earliest stages of the relief effort,international donors indicated
that the quality of aiddelivery was a matter of major concern There
were several reasons for this. First, thequality of all aid
programs has been a matter ofmuch discussion in the international
donorcommunity in recent years. Second, following muchinternational
publicity from agencies such asTransparency International about
corruption inIndonesia since the 1990s, Indonesia was
widelyregarded as a corruption-prone country Overall, the picture
that emerges is that the post-tsunamiaid program did provide a
substantialadditional flow of funds into the countries affectedby
the tsunami and, then, within those countries,into the specific,
tsunami-affected regions 11. IMPACT OF FINANCIAL FLOWS:EMERGENCE OF
A CONSTRUCTIONBOOM A surge of financial flows is to be expected as
aidarrives following a natural disaster. Physical assetreplacement
involving the supply of capital items(such as fishing boats and
nets) that can beimported (either from overseas or from
elsewherewithin the country) is relatively easy and can bearranged
as assistance in kind. If the effects of a disaster are small
relative to thesize of the national economy, the supply of
inputsthat the construction industry needs (both materialsand
labor) will tend to be relatively elastic. Howeverit is rarely the
case that all of the inputs needed in areconstruction program are
in elastic supply 12. The different experiences in Indonesia, Sri
Lanka, and Thailanddemonstrate how the interaction between higher
demand andsupply elasticities took place in different places
following thetsunami. In Aceh, Indonesia, the cost of building a
new 36square meter house increased from an initial estimate
ofUS$3,000 to around US$5,000 by end-2005. In Sri Lanka, too, total
construction costs for houses planned fortsunami-affected families
rose quickly This discussion of the impact of the local
construction boomsfollowing the Asian tsunami has marked
similarities to issuesdiscussed in the well-known Dutch Disease
literature.Whenever a particular sector in a particular
economyexperiences a marked boom, the demand for inputs used in
thatsector (both factors of production and materials) tends
toincrease. This increased demand, in turn, tends to causenegative
impacts for other industries that compete for the inputsused in the
booming sector. The increased prices of inputs raisecosts and
reduce profitability in the booming sector. Theincreased prices of
inputs raise costs and reduce profitability inthe competing
(non-booming) industries. The resulting negativeimpact on the
non-booming sectors is known as DutchDisease, sonamed after the
experience in the Netherlands ofde-industrialization in the wake of
large inflows of exportrevenues from North Sea Oil in the late
1970s 13. CONCLUSIONS Drawing on experiences in Indonesia, Sri
Lanka,and Thailand, this study focused on two aspects ofthe large
relief and reconstruction program thatfollowed the Asian tsunami in
December 2004, aresult of which, almost 230,000 people died. First,
various aspects of the effectiveness andfinancing of aid delivery
activities following thetsunami are considered. . Second, the
challenges ofdesigning significant reconstruction programs in
thewake of the tsunami were discussed with referenceto the
well-known literature about the impact ofDutch Disease effects in
booming economies. More generally, post-disaster relief and
rehabilitationprograms involve the participation of
(andcontributions from) public agencies, private sector
