Earthquake Shakes South Asia’s Economies

When the bodies are finally buried and the lights come back on, the economic troubles in South Asia will just be starting. Tourism, for instance, accounts for 6% of Thailand’s GDP. That’s $8 billion per year that has just been washed away. And the real question is whether that will come back in full as the waters and the memories recede.

The insurers will, of course, take a hit. However, because the value of the land is less, and because the replacement costs are lower, the damage done by the earthquake won’t cost them as much as the four hurricanes in Florida this year did. The tab for those was $27 billion. Munich Re said in a statement, "This is primarily a human tragedy. It is too early for us to state what our financial burden will be." However, if it is less than that suffered in Florida, the results won’t be too bad.

On the other hand, many of the survivors have to figure out what to do as a new career. In the region affected, 19 million people rely directly on tourism for their daily bread. In the Maldives, close to 70% of the population worked in tourism or supporting fields. With no tourists, no tourist infrastructure left, precisely what comes next is anyone’s guess. And remember, this area was already hurt by the 9/11 murders and the ensuing decline in foreign travel. There just aren’t going to be that many jobs in tourism anymore.

To help, the World Bank is likely to put forward a $5 billion aid package. This is about the same size as that offered to the nations of Central America after Hurricane Mitch hit. And in rebuilding roads, power lines and the like, that money will come in handy. Yet, once the infrastructure is repaired, there will be long lines of the unemployed.

One solution would be to permit the emigration, temporary or permanent, of many of the displaced. This, however, is unlikely due to the worries about terrorism and national security in those countries that could absorb these people. New industries will be needed in the places hardest hit.

© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.

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