TSUNAMI DISASTER, WHAT IMPLICATION ON ECONOMIC SYSTEM IN THIS REGION? We view with awe a release of power on this scale. We know that this power is greater than that of our species - nature holds us in its hands. We may be able to mitigate some of the consequences; in some cases we may be able to give advance warning of the threat; but we are not in control; the tsunami has demonstrated this ancient truth. William Rees-M ogg INTRODUCTION 1. On the morning of December 26, 2004 a magnitude 9.

3 earthquake struck off the Northwest coast of the Indonesian island of Sumatra. The earthquake resulted from complex slip on the fault where the oceanic portion of the Indian Plate slides under Sumatra, part of the Eurasian Plate. The earthquake deformed the ocean floor, pushing the overlying water up into a tsunami wave. The tsunami wave devastated nearby areas where the wave may have been as high as 25 meters (80 feet) tall and killed nearly 300, 000 people from nations in the region and tourists from around the world. The tsunami wave itself also traveled the globe, and was measured in the Pacific and many other places by tide gauges. Measurements in California exceeded 40 cm in height, while New Jersey saw water level fluctuations as great as 34 cm.

2. Named the biggest earthquake in 40 years struck off the coast of North Sumatra, creating the greatest human catastrophe in living memory. The epicenter of the quake, on the shallow ocean floor, caused a major tsunami to sweep through the Bay of Bengal, the Andaman Sea, and the Indian Ocean. Human casualties exceeding 260, 000 and massive damage to property had been reported in Southeast Asia (Malaysia, Thailand, Indonesia, Myanmar), South Asia (India, Sri Lanka, and Bangladesh), Eastern Africa (Somalia and Tanzania) and the Maldives. AIM 3. The aim of this paper is to examine Tsunami disaster that happened on December 26, 2005, in brief, and its implication on economic system particularly to the impact of South East Asia region.

Subsequently, I will further examine the destruction of economy on short and long term impact. In realizing this, the yardstick that is use is the measurement index created by World Bank. The paper will focus in brief to the whole country that affected by the disaster but main focus will be on South East Asia, the regional limitation as per topic given to me. At length, I will discuss on economy that effecting three larger Southeast Asian economies - Thailand, Indonesia, and Malaysia. SCOPE 4.

Scope of this paper are as follows: a. Tsunami - What Are They? b. South East Asia Economic Resources. c. Aftershock And Aftermath Loses. d.

Economic Impact. e. Conclusion. f.

Recommendations. TSUNAMI - WHAT ARE THEY? 5. Tsunamis are not wind-generated waves. Rather, they are shallow-water waves, with long periods (time between two successional waves) and wave lengths (distance between two successional waves). The wind-generated swell one sees at a California beach, for example, spawned by a storm out in the Pacific and rhythmically rolling in might have a period of about 10 seconds and a wave length of 150 m. A tsunami, on the other hand, can have a wavelength in excess of 100 kilometer and period on the order of one hour.

As a result of their long wave lengths, tsunamis behave as shallow-water waves. A wave becomes a shallow-water wave when the ratio between the water depth and its wave length gets very small. Shallow-water waves move at a speed that is equal to the square root of the product of the acceleration of gravity and the water depth. In the Pacific Ocean, where the typical water depth is about 4, 000 meter, a tsunami travels at about 200 meter per second, or over 700 kilometer per hour. However, when the ocean is 6, 100 meter deep, unnoticed tsunami travel about 890 kilometer per hour, the speed of a jet airplane. It can move from one side of the Pacific Ocean to the other side in less than one day.

Because the rate at which a wave loses its energy is inversely related to its wave length, tsunamis not only propagate at high speeds, they can also travel great, transoceanic distances with limited energy losses. Physics of Tsunami 6. The phenomenon we call a tsunami (so-NAH-me) is a series of waves of extremely long wave length and long period generated in a body of water by an impulsive disturbance that displaces the water. Tsunamis are primarily associated with earthquakes in oceanic and coastal regions. Landslides, volcanic eruptions, nuclear explosions, and even impacts of objects from outer space (such as meteorites, asteroids, and comets) can also generate tsunamis. 7.

As the tsunami crosses the deep ocean, its length from crest to crest may be a hundred miles or more, and its height from crest to trough will only be a few feet or less. They can not be felt aboard ships nor can they be seen from the air in the open ocean. In the deepest oceans, the waves will reach speeds exceeding 970 kilometer per hour. When the tsunami enters the shoaling water of coastlines in its path, the velocity of its waves diminishes and the wave height increases. It is in these shallow waters that a large tsunami an crest to heights exceeding 30 meter and strike with devastating force. 8.

The term tsunami was adopted for general use in 1963 by an international scientific conference. Tsunami is a Japanese word represented by two characters: 't su' and 'name'. The character 't su' means harbor, while the character 'name' means wave. In the past, tsunamis were often referred to as 'tidal waves' by many English speaking people. The term 'tidal wave' is a misnomer.

Tides are the result of gravitational influences of the moon, sun, and planets. Tsunamis are unrelated to the tides; although a tsunami striking a coastal area is influenced by the tide level at the time of impact. Also in the past, the scientific community referred to tsunamis as 'seismic sea waves'. 'Seismic' implies an earthquake-related mechanism of generation. Although tsunamis are usually generated by earthquakes, tsunamis are less commonly caused by landslides, infrequently by volcanic eruptions, and very rarely by a large meteorite impact in the ocean. 9.

As a tsunami leaves the deep water of the open sea and propagates into the more shallow waters near the coast, it undergoes a transformation. Since the speed of the tsunami is related to the water depth, as the depth of the water decreases, the speed of the tsunami diminishes. The change of total energy of the tsunami remains constant. Therefore, the speed of the tsunami decreases as it enters shallower water, and the height of the wave grows. Because of this 'shoaling' effect, a tsunami that was imperceptible in deep water may grow to be several feet or more in height. 10.

When a tsunami finally reaches the shore, it may appear as a rapidly rising or falling tide, a series of breaking waves, or even a bore (a step-like wave with a steep breaking front). Reefs, bays, entrances to rivers, undersea features and the slope of the beach all help to modify the tsunami as it approaches the shore. Tsunamis rarely become great, towering breaking waves. Sometimes the tsunami may break far offshore. Or it may form into a bore. A bore can happen if the tsunami moves from deep water into a shallow bay or river.

The water level on shore can rise many feet. In extreme cases, water level can rise to more than 15 meter for tsunamis of distant origin and over 30 meter for tsunami generated near the earthquake's epicenter. The first wave may not be the largest in the series of waves. One coastal area may see no damaging wave activity while in another area destructive waves can be large and violent.

The flooding of an area can extend inland by 305 meter or more, covering large expanses of land with water and debris. Flooding tsunami waves tend to carry loose objects and people out to sea when they retreat. 11. Since science cannot predict when earthquakes will occur, they cannot determine exactly when a tsunami will be generated. But, with the aid of historical records of tsunamis and numerical models, science can get an idea as to where they are most likely to be generated. Past tsunami height measurements and computer modeling help to forecast future tsunami impact and flooding limits at specific coastal areas.

There is an average of two destructive tsunamis per year in the Pacific basin. Pacific wide tsunamis are a rare phenomenon, occurring every 10 - 12 years on the average. SOUTH EAST ASIA ECONOMIC RESOURCES 12. The main sources of South East Asia economy is Agro-Industries, followed by tourism-industries and industrial. Saturation of Services-industries tend to be locally contained and will have relatively small or no effect on global economy. AFTERSHOCK AND AFTERMATH LOSES 13.

Numerous aftershocks were reported off the Andaman Islands, the Nicobar Islands and the region of the original epi centre in the hours and days that followed. The largest aftershock was 7. 1 off the Nicobar Islands. Other aftershocks of up to magnitude 6. 6 continue to shake the region on a daily basis. 14.

The earthquake came just three days after a magnitude 8. 1 earthquake in an uninhabited region west of New Zealand's sub-Antarctic Auckland Islands, and north of Australia's Macquarie Island. This is unusual, since earthquakes of magnitude 8 or more occur only about once per year on average. Some seismologists have speculated about a connection between these two earthquakes, saying that the former one might have been a catalyst to the Indian Ocean earthquake, as the two quakes happened on opposite sides of the Indo-Australian Plate. However the US Geological Survey sees no evidence of a causal relationship.

15. Coincidentally the earthquake struck almost exactly one year (to the hour) after magnitude 6. 6 earthquakes killed an estimated 30, 000 people in the city of Bam in Iran. 16. As well as continuing aftershocks, the energy released by the original earthquake continued to make its presence felt well after the event.

A week after the earthquake, its reverberations could still be measured, providing valuable scientific data about the Earth's interior. 17. The reported death toll from the earthquake, the tsunami and the resultant floods varies widely due to confusion and conflicting reports, but could total of 300, 000 people with tens of thousands reported missing, and over a million left homeless. Early news reports after the earthquake spoke of a toll only in the 'hundreds', but the numbers rose steadily over the following week.

18. Relief agencies report that one-third of the dead appear to be children. This is a result of the high proportion of children in the populations of many of the affected regions and the fact that children were the least able to resist being overcome by the surging waters. 19. In addition to the large number of local residents, up to 9, 000 foreign tourists (mostly Europeans) enjoying the peak holiday travel season were among the dead or missing, especially Scandinavians. The European nation hardest hit may have been Sweden, which reported more than 60 dead and as many as 1, 300 missing.

20. States of emergency were declared in Sri Lanka, Indonesia, and the Maldives. The United Nations has declared that the current relief operation will be the costliest ever. UN Secretary-General Kofi Annan has stated that reconstruction would probably take between five and ten years. Governments and NGOs fear the final death toll may double as a result of diseases, prompting a massive humanitarian response. 21.

Measured in lives lost, this is one of the ten worst earthquakes in history. It is also the single worst tsunami in history; the previous record was the 1703 tsunami at Awa, Japan, that killed over 100, 000 people. 22. On South East Asia, the devastation wrecked on Thailand, Indonesia and Malaysia by December's 2005 tsunami would have limited effect on their economies. Early estimates show that it would be about 0. 25 per cent of gross domestic product.

The International Monetary Fund (IMF) forecast on February 3, 2005 that South East Asia economy would expand 6. 5 per cent in fiscal year 2004 and 2005, which ends in March. 23. The western tip of the Indonesian island of Sumatra, the closest inhabited area to the epicenter of the earthquake, was devastated by the tsunami. More than 70% of the inhabitants of some coastal villages are reported to have died. More than 130, 000 lives were affected.

The exact number of victims will probably never be known. The number of homeless is estimated at 800, 000. Indonesian government estimates that reconstruction will cost RM 17 billion over the next three years. 24.

Overall growth in Indonesia could be lowered by between zero and 0. 25 percentage points, while inflation should remain about 6 per cent, the IMF said. It noted that the impact of production cutbacks caused by the tsunami on GDP would be more than offset by reconstruction aid. 25. The west coast of Thailand was severely hit, including outlying islands and tourist resorts near Phuket. Some bodies may still lie in the rubble of ruined hotels.

More than 5, 300 are confirmed dead. More than 1, 700 foreigners from a total of 36 countries are among the dead. Thailand has not asked for disaster relief aid, but it has requested technical help to identify the dead. A huge operation to take DNA samples from the bodies is under way. 26. Thailand's growth could be reduced by half a percentage point to one percentage point, taking into account the RM 5.

7 billion relief package approved by the Government. 27. Although Malaysia lies close to the epicenter, much of its coastline was spared widespread devastation because it was shielded by Sumatra. However, scores of people were swept from beaches near the northern island of Penang and Kedah. ECONOMIC IMPACT 28. Although there are not many printed sources of information on economy impact of the tsunami disaster, previous disasters give us some insight into the likely economic impact of this tragedy.

29. There tends to be a V-shape economic impact, a large dip in economy activity followed by a policy response that tends to involve increased government spending ultimately to economic recovery in a year or so. Indonesia 30. Indonesia was the worst hit of the three Southeast Asian nations in terms of human and economic destruction. Most of the deaths were in the province of Aceh on the northern tip of Sumatra island, and on several outlying islands in the Indian Ocean. 31.

Despite the severe damage to Aceh's economic infrastructure, the republic's energy (mainly oil and natural gas) production facilities in Aceh and Northern Sumatra seem to have survived intact. As per early assessment, the overall economic impact on the republic is fairly small, as Aceh accounts for only 2. 2% and 2. 0% of Indonesia's GDP and population (2003 numbers), respectively. Since oil and gas contribute 31% of Aceh's GDP, the damage to Indonesia's economy appears minimal. 32.

Indonesia's domestic demand strength and a probable recovery in domestic investment will shelter the economy from a global slowdown in 2005. It is believe economic aid and reconstruction of Aceh province will compensate for the loss in economic activity resulting from the tsunami disaster, and we are holding our GDP growth forecast unchanged at 4. 5%. Thailand 33.

There has been considerable property damage and loss of human life on the island of Phuket, and the five other provinces and surrounding resort islands on the southwestern side of the kingdom facing the Andaman Sea. The rest of the country's economic infrastructure and production capacity has been unaffected. 34. Combined, the six tsunami-hit Thai provinces on the Andaman coast account for roughly 2. 7% of the kingdom's GDP and 3. 1% of its population (based on 2002 and 2003 numbers).

However, it is believe that the damage to its major economic activity, tourism, will have a multiplier effect on the entire Thai economy, as close to a third of its international tourists visit resort facilities in these provinces. The Tourism Authority of Thailand had projected 13. 4 million tourist arrivals for 2005-since December to March is peak months for tourism, it is realistic to assume that the kingdom may achieve only 75-80% of this forecast as tourism rebounds after the first quarter. In turn, tourism receipts and the multiplier impact on the Thai economy will drop off significantly, with the bulk of the impact to be felt in the first quarter of 2005. 35.

While, based on rough estimates, a 25-30% decline in tourist arrivals could shave 0. 75-1% off the 6% GDP growth projection for 2005, it is believe the Thai economy has enough fiscal and domestic demand latitude to mitigate the impact of the tsunami disaster. The economy is in a state of fiscal balance and has retired part of its fiscal and foreign debt over the past few years. The public debt to GDP ratio declined from 57% in 2000 to 48% in 2004, while the public foreign debt ratio fell from 42% to below 25% over the same period.

36. The case for a sharp pick-up in domestic investment in 2005 and thereafter, creates a compelling economic story. Among the Association of Southeast Asian Nations' big four, Thailand and Indonesia look more able to generate a structural investment boom. Thailand's average savings rate of 34% from 1994 to 2003 allows considerable room for gross investment to rise from the present 25% to perhaps 35-36% over the next few years. In fact, that is exactly what Prime Minister Thaksin Shinawatra wants to do in 2005 and over the next few years.

Such a pick-up in investment would help mitigate the damage wrought by the tsunami. 37. The World Bank downgrading 2005 Thai GDP projection by a moderate 0. 3 percentage point, from 6% to 5. 7%, a deceleration from 2004's estimated 6. 3%.

While there are further downside risks to the revised 2005 forecast if tourist arrivals, receipts, and the multiplier effect shrink further than anticipated in the coming months. It is believe Thailand can leverage its fiscal and domestic investment strength if necessary. Malaysia 38. The cost, both human and economic, has been relatively minor and largely confined to the island of Penang and Kedah. No major or permanent damage to Malaysia's economic infrastructure or industrial production capacity (the island of Penang is a major IT/electronic production hub) has been reported. We expect tourism and the economic infrastructure to suffer the smallest impact among the tsunami-hit countries.

39. Given the long-held view that a global slowdown will curb Malaysian growth in 2005 from the super-charged 6. 7% in 2004 to only 4. 8% in 2005, and with tourism's contribution to real GDP likely to hover at around 3-4%, Malaysian growth forecast for 2005 is then unchanged at 4. 8%. 40.

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. CONCLUSION 41. 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 set back, followed by a strong policy response and economic recovery. While the tsunami catastrophe has inflicted massive human suffering and economic damage on the countries bordering the Indian Ocean, in the case of the three affected Southeast Asia economies-Malaysia, Thailand, and Indonesia-the damage is largely confined to rural areas rather than the key economic and densely populated urban centers and industrial hubs. Direct and Indirect Costs to Hit Growth 42. 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. 43. 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.

44. After the Kobe earthquake, there was a wider negative impact on business confidence in Japan. Similarly after this disaster there will be a wider negative impact, as tourism and consumer and business confidence is impacted by the scale of the disaster. Not only is tourism important, but also for many countries this is the peak tourist season, compounding the impact.

45. While the tourist sector is a similar size of both Indonesia's and Thailand economies, the impact is likely to vary considerably. In Indonesia the main tourist areas of Bali and Lombok are not impacted. 46. In contrast, the extent of the devastation on Thailand suggests its tourist sector and economy will be hit harder.

Given the size of the economies Thailand is worst affected in economic terms, although all countries will be impacted. RECOMMENDATIONS 47. In recent years, the world economy has shown a remarkable resilience to economic, financial and terrorist shocks. Asia, too, has been resilient, as evident from last year's SARS outbreak. The bigger economies impacted by this disaster will be resilient, while the smaller ones will need more assistance.

Experience suggests the policy response will be key. In Bali, for example, the Indonesian government moved quickly to rebuild the local economy and spent significant amounts in promoting tourism. After Kobe, there was huge infrastructure spending. 48. Similar experiences have been seen after other natural disasters.

Of course, the scale of this disaster is huge in comparison, suggesting the policy response not only needs to be speedy but significant in size. Clearly some economies will be more resilient and governments better able to respond. 49. The immediate response is of course likely to be humanitarian in focus. The rebuilding of coastal infrastructure will take for more time. It will need effective planning and could be costly.

Also, often bottlenecks mean that spending on construction has to be phased. 50. For the region in general, the rebuilding process will be greatly helped by the current economic and political climate. Following three years of strong growth, the economies of India, Indonesia, Thailand and Malaysia are in a strong position to overcome the tragedy.

51. For these countries, recent growth has been strong, fiscal positions have improved and external reserves are high. The shock absorber in economic terms is likely to be government fiscal position. For instance, ahead of the forthcoming general election, the Thai government was already planning huge government spending. 52. This disaster provides the justification for even more, and concentrated in the coastal regions affected.

In Indonesia, governments elected earlier this year, will be keen to demonstrate their effectiveness. Moreover, the economic shock may encourage central banks in these countries to delay rate hikes - notably in the Thailand. National, Regional and Global Response Is Key 53. The policy response to this disaster needs to be simultaneously national, regional and global in nature. It must be national in the governments will be expected to respond with increased spending to address immediate problems and rebuild local infrastructures. 54.

It must be regional in the sense of the need to coordinate in the same way in which many countries cooperated in response to last year's SARS epidemic. 55. Finally, it must be global in the some of the poorer economies impacted will need greater assistance from outside. The United Nations had already indicated it will launch an immediate aid appeal.

Longer term, there may be the need for assistance with infrastructure spending. 3, 953 words March 2005 A MEEN SOLI HIN BIN MOHAMAD NOHKapt BIBLIOGRAPHY Abe, K. , Size of great earthquakes of 1837-1974 inferred from tsunami data, J. Geophys. Res. , 84, 1561-1568, 1979.

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