Asian economy seen wounded but not sunk by tsunami tragedy

Asian economy seen wounded but not sunk by tsunami tragedy

Shaun Tandon,
Agence France-Presse/Tokyo

The tsunamis that ravaged the coasts of the Indian Ocean
inflicted at least hundreds of millions of dollars in damage and
will likely force a rethink of 2005 spending priorities,
economists said on Tuesday.

The killer waves triggered by the world's most powerful
earthquake in four decades were particularly brutal to tourism
and fishing, two of the most lucrative industries for southern
Asia.

But there was relief that, save for some damage in Male, the
Maldives capital, the tragedy mostly spared the major cities,
where national infrastructure could have been torn apart and the
death toll would have been even more catastrophic.

"First and foremost, this was a human tragedy," said Glenn
Maguire, chief economist for Asia and Australasia at French
investment bank Societe Generale.

"With the enormous displacement of people, which has not been
of this magnitude in some time, there will be a serious
relaxation of fiscal policy, not just for those countries
directly affected but those that will open up their aid budgets,"
he said.

"The economic impact of it will certainly be large but it
should not be enough to derail the momentum of the region in
2005."

While there were few hard figures yet on how much
infrastructure was destroyed, the Associated Chambers of Commerce
and Industry of India estimated that the country suffered at
least US$450 million in damage.

Malaysia's state Public Order and Traffic Chief Lee Shuan Fat
put losses in his country's worst-hit northern state of Kedah at
$5.61 million.

Malaysian fisheries director-general Junaidi Che Ayub said
initial figures showed about 1,000 fishermen in the Penang area
were affected by the tsunami and that damage to the industry
would be "significant."

"We are only beginning to grasp the magnitude of the disaster
in terms of loss of life, material damage and economic impact
across the region," World Bank president James Wolfensohn said.

Experts believe that in the long term, the worst-hit nations
in raw economic terms may be Thailand and Sri Lanka given the
damage to their important and growing tourism industries.

In India, by contrast, the tragedy was most savage to
relatively undeveloped areas such as the Andaman and Nicobar
islands.

Chua Hak Bin, senior regional economist at DBS Bank in
Singapore, estimated damage in Thailand could be in the region of
$100 million, meaning 0.1 percent of its economic growth would be
shaved off.

But considering the massive loss of life, including at
Thailand's top resort Phuket, the economic impact is "quite
limited," Chua said.

"This is sort of a freak accident," Chua said. "It hasn't hit
the critical infrastructure of the cities."

Naoyoshi Noguchi, Asia-Oceania director for overseas research
development at the Japan External Trade Organization, said one
concern for exporters was the closing of the southern Indian port
of Madras which could prove serious if prolonged.

But southern India's star export industry, information
technology, is not dependent on sea shipments and the more
important port of Colombo in nearby Sri Lanka did not suffer
major damage.

However, the scenes of death and mayhem on Sri Lanka's beaches
were the worst possible image for the island, which was set to
see a record 570,000 foreign tourists in 2004 after a nearly two-
year truce with Tamil rebels.

Instead of beckoning tourists to discover the palm-fringed
tropical island, Sri Lanka was on Tuesday asking foreigners not
to come as it struggled to accommodate thousands displaced before
sending them back on charter flights.

Economists said the tragedy was unlikely to discourage either
tourists or business travellers permanently as few people other
than the most traumatized are fearing a new round of tsunamis.

"In the long-run, these natural disasters are viewed as a one-
off, not the same way terrorist attacks are," Maguire said.

Noguchi predicted the impact to Asia's economy would be
smaller than during the 2003 outbreak of SARS, or Severe Acute
Respiratory Syndrome, which killed almost 800 people, mostly in
Hong Kong and China.