Anupama Jaiswal

As the struggle goes on to recover from the aftermath of the biggest earthquake ever seen where there can be no underestimating the scale of the human devastation wrought by Asia's horrific tsunamis and yet the overall economic impact is minimal.

Humans build. Nature reclaims. It is a cycle as old as time, people enduring the crucibles of drought, hurricanes, earthquakes, fire, flood. "TSUNAMI", a natural disaster on the staggering magnitude of the earthquake that struck beneath the Indian Ocean reminds us of our vulnerability, reminds us that the work of human beings, indeed our very existence, can be extinguished in an instant by the immense power of nature.

Literally speaking, what is a Tsunami?

A tsunami (pronounced tsoo-nah-mee) is a wave train, or series of waves, generated in a body of water by an impulsive disturbance that vertically displaces the water column. Earthquakes, landslides, volcanic eruptions, explosions, and even the impact of cosmic bodies, such as meteorites, can generate tsunamis. Tsunami is a Japanese word with the English translation, "harbor wave." Represented by two characters, the top character, "tsu," means harbor, while the bottom character, "nami," means "wave." In the past, tsunamis were sometimes referred to as "tidal waves" by the general public and as "seismic sea waves" by the scientific community.

Indonesia, where the December 26 tsunami took its greatest toll with a confirmed death toll of over 90,000 so far, is mobilizing the nation to deal with the aftermath of the devastating earthquake and tsunami. A large and little understood country, Indonesia has had more than a few years of living dangerously. And for sure, after the tsunami, it should never again hear the common misconception that it's part of Bali, the most popular of its more than 17,000 islands.

The tsunami that hit the northern tip of the island of Sumatra is the latest drama to draw attention to this country of 223 million people. Each drama has helped the young and diverse nation cement its new democracy and force it to reach for its potential as a global leader.

From an economic point of view, an analysis of the impact of the tsunami on the overall economy of Indonesia would probably say that it was not very disruptive (economically). But that could be misleading. The question is in place, even if it is not in the overall balance very big, it could be extremely big for the area, which was worst hit. Maybe it is not so much in terms of GDP (gross domestic product) because the area has oil and gas resources that have not been affected - but it could be very destructive in terms of fisheries and agriculture. This, in turn, will initiate the important need for the budget to allocate funds for reconstructing infrastructure and taking care of such social needs as health and water supply facilities.

A Morgan Stanley report said "Given that the energy (mainly oil and natural gas) production facilities in Aceh or Northern Sumatra have survived the tsunami, the overall damage to Indonesia's economy appears to be minimal."

Since the Aceh province contributes only 2.1 percent of Indonesia's gross domestic product, Indonesia's economy is unlikely to suffer much. The raging ocean has not affected Aceh's most lucrative industries, the oil and gas production facilities. Shipments of liquefied natural gas have reportedly not been disrupted.

In the last decades, Asian tourism has been extremely successful - showing the highest growth rates of all world regions. Together the 12 South-East, South-Asian and East-African countries affected by the tsunami received some 31 million international tourist arrivals in 2003 and earned receipts of US$ 23 billion.

When the tragedy happened, destinations in Asia, especially those that had fully recovered from the recent tourism crises, were experiencing spectacular tourism growth. WTO estimates that Asia experienced some 37 percent growth of international tourist arrivals during the first eight months of 2004. The twelve countries represent four percent of the global tourism market share. According to WTTC research, travel & tourism accounts for some 19 million jobs in South-East Asia, representing 8.1% of total employment in the region. Research also shows that in 2004, travel & tourism accounted for 7.4 % of the region's total GDP, equivalent to some US$103.8 billion.

In Indonesia, WTTC research shows that in 2004, travel & tourism generated 10.3% of GDP and 8.5% of total employment.

Source: World Travel and Tourism Council

However, the tourism stock directly affected by the tsunami in the six most impacted Asian countries is estimated to represent less than one percent of the global market share.

Last year's SARS epidemic and the 2002 Bali terrorist bombing have given us some insight into how the economic impact of natural disasters unfolds. The trend suggests a V-shape economic impact - a large dip in economic activity followed by a policy response that tends to involve increased government spending, leading ultimately to economic recovery in a year or so. Clearly the scale of this disaster is far greater and impacts more countries, but the profile may well be the same; initially, a huge economic setback, followed by a strong policy response and economic recovery.

The immediate economic impact tends to be direct, with negative effects on consumption and business activity in the regions and sectors affected. The direct economic impact in this case is likely to be concentrated on tourism and fishing in the coastal areas affected. The wider, indirect impact is harder to predict. For instance, following the Bali bombing there was a wider, negative impact on tourism across Indonesia, but conversely some benefit to tourist sectors in Thailand and Malaysia as tourists changed plans.

Considering that in Indonesia the main tourist areas of Bali and Lombok have remained untouched by the earthquake, the country may even benefit from increased tourist arrivals due to the destruction of holiday resorts in neighboring Thailand.and Maldives. That would mark a reversal in the flow to areas, including Thailand's Phuket, of tourists who abandoned Bali in the aftermath of the 2002 terrorist bombing, which killed 202 people, including 88 Australians.

The immediate response towards rehabilitation is, of course, likely to be humanitarian in focus. The rebuilding of coastal infrastructure will take far more time. The need of the hour is effective planning and could be costly. Also, often bottlenecks mean that spending on construction has to be phased. For the region in general, the rebuilding process will be greatly helped by the current economic and political climate. The shock absorber in economic terms is likely to be government fiscal positions.

On a concluding note, following three years of strong growth, the economy of Indonesia is in a strong position to overcome the tragedy.

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