Tsunami could increase poverty, but regional economies will recover: ADB

Tsunami could increase poverty, but regional economies will recover: ADB

Hrvoje Hranjski, Associated Press, Manila

Poverty could surge across tsunami-devastated southern Asia, but most of the stricken nations will suffer limited economic damage, the Asian Development Bank said on Thursday.

Though more than 150,000 people were killed and hundreds of thousands left homeless, the damage was largely confined to rural areas, rather than key economic urban centers and industrial hubs, the bank said in an initial assessment report.

Solid growth coupled with strong fiscal policies in India, Indonesia, Malaysia and Thailand in the last four years could help limit the disaster's impact, the bank said.

However, it will be felt "severely at the local and community levels, dragging hundreds of thousands of already poor people into even deeper poverty."

"Poverty is potentially the most important effect of this natural disaster," said Ifzal Ali, the ADB's chief economist.

The number of Asia's poor - 1.9 billion people, or 60 percent of the population living on less than US$2 a day - could rise by nearly 2 million "if concerns over sanitation and health conditions, as well as other basic needs of the survivors, are not properly and quickly addressed," the bank said.

In India, an additional 645,000 people could join 357 million others who lived in extreme poverty in 2002; in Indonesia, where 52 percent of the population survives on less than $2 a day, the number could increase by more than 1 million.

The bank said about 250,000 Sri Lankans could be pushed into poverty, and in the Maldives, where about half of the country's houses were destroyed or damaged, absolute poverty of 43 percent in 1998 could increase to more than 50 percent.

But the ADB said while Indonesia has been severely affected in terms of human lives, "oil and natural gas production facilities in Aceh and Northern Sumatra have survived intact."

The bank said Aceh's population depends on agriculture, "so the extent of the damage will depend partly on how much agricultural land was inundated by the water and affected by salination."

In Thailand, where most of the damage hit the country's famous beach resorts, the crucial tourism industry could suffer a short term decline in tourists. The bank said it might also face a foreign perception that it is an unsafe destination.

However, the recovery of the Maldives and Sri Lanka - which were most affected because of their size - will be more difficult and depend on the extent and coordination of international assistance.

On a positive note, the bank said the tragedy could also provide a surge in economic activity.

"Reconstruction ... requires new investment ... and investment should translate into jobs," it said, adding the aid process has already increased demand for food, water, medicines, building materials and clothing, which will benefit domestic businesses.