Call to create relief fund for natural catastrophes

After one shattering underwater earthquake, the economic foundations of a great number of South East Asian economies have been devastated. The death toll is growing, and the long-term damage to the economies of some of these countries is difficult to comprehend.

Take Maldives as an example. An archipelago of low-lying islands geared for tourism has been damaged badly. The economy was fragile and depended on the year-round lure of its natural beauty for tourists seeking sunshine and pristine beaches.

In one fell swoop, the industry has been wiped out. It will take years for this economy to recover. It is easy to assume the process of reconstruction means simply putting up hotels again. While tsunamis do not occur every year, the confidence of the tourist takes time to rebuild.

Indonesia, at the epicentre of the earthquake, is most likely to suffer the worst damage of all. Its cost of recovery is going to be enormous. Some areas have been swept clean off the map, and there is little if any evidence of human life on some of the islands.

The devastation caused to Sri Lanka and India is also enormous. The impact this will have on the economies of these countries will be tremendous. The direct cost of the damage will run into billions - and many of these losses are not even insured. This complicates matters even more for these fragile economies.

In the past 12 months, the total damage worldwide resulting from natural catastrophes was $102 billion (Dh374 billion), of which $42 billion (Dh154 billion) was insured, and this was mostly due to direct insurance claims following the destruction caused by the hurricanes in the United States.

In Asia, it is normal for even large resort developments not to have specific insurance for the sort of damage tsunamis and earthquakes or even typhoons cause.

Thus, developers of resorts and the governments will have to absorb much of the losses resulting from this disaster, insofar as infrastructure is concerned. Developers may seek, in the future, specific insurance to safeguard themselves next time around.

The bulk of the population, however, worries about the damage done to fishing villages, for example, where the people are generally poor. It is here the brunt of the damage has been felt, and there are no remedies for this other than governmental aid.

Perhaps governments should start to consider some sort of general insurance for natural catastrophes that might befall their general population.

There is a need for the underdeveloped countries to also create, with the OECD, an emergency relief fund for rebuilding economies after such events. This is essential, as responses to such disasters usually move slowly.

In the final analysis, the response of the international community, while generous in terms of emergency supplies, was not intended to rebuild the economy but merely as a stop-gap emergency measure.

The writer is the UAE-based president of Sher Consulting.