Aid and Assistance

Though Thailand was not as severely affected as Indonesia or Sri Lanka, it attracted particularly strong international media attention because of the very large number of foreign tourists who were caught up in the tragedy. Furthermore, the areas hit by the tsunami included famous tourist destinations. Thus, Thailand was inundated with offers of assistance from governments, multilateral donor agencies, corporate and community groups, and individuals. Philanthropy was shown to exist among both large and small corporations, and among both the rich and the poor.

The immediate response to the disaster can be considered a success, but poor coordination among aid donors hampered effective delivery and distribution. There were many instances of wasteful aid. Some donations of food and clothes were wasted because they were not appropriate for Muslims. Some houses constructed by the military were not appropriate for the lifestyle of fisher folk. Many of the inefficiencies in aid programs reflected the problems of supply-driven assistance, ignoring the particular needs of the victims.

The Thai government turned down offers of financial assistance from foreign governments, including offers of debt relief from Europe, though it accepted technical assistance. The rationale given was that Thailand wanted funds to be given to other countries in more difficult circumstances, such as Indonesia. It is also likely that the government wanted to send a message to the global investor community concerning its financial stability, fearing that acceptance of debt relief might hurt Thailand’s credit rating and thus raise Thai borrowing costs and discourage capital inflows.

6.1 Foreign Assistance

However, as seen in Table 10 [ PDF 70.1KB | 1 pages ], following the tsunami Thailand received significant assistance from a range of foreign donors. This assistance included technical assistance from foreign governments. The total amount of aid committed was $131 million, ranging from contributions of $5,000 to $27 million. This foreign commitment was around 10 per cent of Thailand’s tsunami-related budget. The government also received substantial donations from the corporate sector, estimated at $50–60 million in 2005 (Bernhard et al., 2005).¹² This amount is quite substantial when compared with the amount contributed by international donors. Nearly all large foreign companies operating in Thailand provided some type of contribution within a short period following the disaster.

Figure 8 [ PDF 105.7KB | 1 pages ] shows that 80 per cent of the total amount donated came from donations larger than $250,000. These larger donations came primarily from large organizations and corporations. Contributions of less than $25,000 accounted for about eight per cent of total contributions.

6.2 Delivery of Assistance: Speed and Efficiency

Emergency assistance to the tsunami victims was delivered quickly. Government officials and volunteers were able to reach affected areas immediately after the tsunami because basic infrastructure was not totally damaged and access to affected areas remained open. Moreover, relief agencies and individuals were able to reach disaster areas without having to obtain prior permission from provincial governments.

In the early phase of relief, aid disbursement was rapid. As shown in Figure 9 [ PDF 105.2KB | 1 pages ], disbursement was 20 per cent of the total fiscal budget within two months of the disaster. The rate went up to 70 per cent by the end of the first year, an acceptable rate in the circumstances. However, disbursement in the second year slowed down and it seems that by the end of 2006 it may not have been higher than 80 per cent.

Of course some types of financial assistance should and can be spent faster than others. This is seen in Table 11 [ PDF 70.8KB | 1 pages ], which shows the disbursement rates of government funds in various expenditure categories. For example, funds allocated to provide assistance to foreign tourists (medical care, helping those who lost their belongings, helping them to return home, and so on) were completely disbursed and utilized. On the other hand, assistance to students—less urgent—had the lowest disbursement. Disbursement was also slower for assistance to fishers.

The disbursement rate of foreign pledges varied a great deal. As of November 2006, the disbursement was only 50 per cent. Some pledges (Table 10) had not been disbursed at all. Larger donations with commitments of $20 million or more (e.g., FFEM, USAID, World Vision) seem to have had a slower disbursement rate. It is not surprising that large donations tend to have a slower rate of disbursement, because the objective of the pledges was to achieve longer term rehabilitation. Further, speeding up the disbursement of the large amounts of money with no effective monitoring and careful evaluating system would have created problems of accountability. Zero disbursement rates were related to small amount of donations.

6.3 Aid Delivery: Equity Issues

Issues have arisen over the manner in which assistance has been distributed. As previously discussed, damage of fisheries accounted for about 12 per cent of total damage, and various organizations contributed compensation that amounted to 32 per cent of total fishery damage. However the distribution of compensation did not correspond to the actual damages. Fishers in Phang Nga, who suffered 50 per cent of the total damage, received only 30 per cent of the total value of aid. In contrast, Satul’s share of damage was only 6.6 per cent, but it received 39 per cent of total compensation. Krabi fisheries, with 65 per cent of total compensation, also received much more than their fair share. It may be noted here that Phang Nga is the home of minority ethnic groups that may not be given the highest priority. In addition, some of them had not obtained Thai citizenship or necessary documents. Uneven disbursement can also be due to allocation of budgets by central and local governments among affected provinces.

Arguably, there may be a similar issue with regard to the allocation of loans extended to firms to help revive businesses. Large hotels that suffered heavy losses received government subsidies in the form of loans at concessionary rates; in total, such enterprises received financial injections of over $1 billion (Table 12 [ PDF 87.3KB | 1 pages ]). In contrast, around 10,000 small and medium enterprises (SMEs) received a total of around $5 million. It is not clear what criteria were employed in deciding the allocation of funds between large enterprises and SMEs, whether this was the best means of helping to revive the tourism industry of the Andaman coast, and whether the marginal product of capital injected into large enterprises is higher than that of SMEs. The employment effect of assisting SMEs versus large enterprises, too, is a factor to be considered.

6.4 Public Assistance, Insurance, and Credit Markets

This raises a wider and longer term issue about the impact of public sector provision of compensation and assistance to business enterprises on how such enterprises will behave in terms of obtaining private insurance for disasters. Kunreuther and Pauly (2006) show that public disaster assistance is a form of insurance that is suboptimal when compared to insurance purchased before the disaster. Firms maximize expected profits by taking into account insurance premiums and the expected extent of public assistance. Mandatory comprehensive private disaster insurance with risk-based rates can help minimize costly and poorly targeted disaster assistance. An ex ante public coverage program to cover catastrophic losses and to subsidize insurance coverage for small and medium firms can be more efficient than costly ex post relief programs. From a public policy perspective, preparations for disasters should involve assessments of how disaster insurance markets can be developed and how private firms can be induced to invest in disaster insurance.

In this context, policies to cope with natural disasters need to address issues raised by the underdeveloped nature of financial and capital markets in developing countries and the restricted access of the poor to such markets. Natural disasters typically hit the poor hardest. Those engaged in small and microenterprises, including craftspeople, small shopkeepers, and fisher folk, require credit to replace their equipment and inventories to re-start businesses. In this context, microfinance appears to have a major role to play. However, the Grameen Foundation USA, which looked into the availability of microfinance in the tsunami- affected areas, did not find NGOs or other organizations offering micro-lending services. The Foundation believes that poverty hindered the development of effective microlending initiatives, particularly in the south (Counts et al., 2005).¹³ We revisit this issue below.

6.5 Assistance to Children

Thousands of children lost both of their parents and became orphans following the tsunami. The Thai government provided financial aid to almost 1,500 orphans and almost 27,000 other children (Table 13 [ PDF 70KB | 1 pages ]). Most of those orphaned were from the six affected provinces; some were from other locations whose parents had been working in the tsunami-hit areas. The government provided the orphans with clothes and educational materials, including scholarships through to university level. The response of the government in terms of providing access to education was strong and swift. Most schools were able to re-open almost immediately (on January 4, 2005). Children’s attendance was initially low, but soon returned to pre-tsunami levels. For those children, particularly the orphans, the impact of the tsunami will obviously not be confined to the short-term. Recognizing this, psychological support was provided through a broad community-based psychosocial recovery program to mitigate the negative impact on children’s learning.

6.6 Assistance to Deal with Trauma and Stress

The impact of the tsunami was not confined to physical and economic losses. The trauma associated with loss of family members, relatives, and friends, as well as loss of physical assets and livelihoods, imposed heavy economic and psychological pressures on the survivors. It has been reported that some fishers, for example, have suffered from hallucinations and paranoia, and have been unable to go back to sea. Attempted suicides and symptoms of acute stress and other mental problems have also been widely reported (Table 14 [ PDF 70KB | 1 pages ]). These reports are given credence by the heavy demand for mental health services provided by the Mental Health Center for the Thai Tsunami Disaster.

6.7 Social Tensions

Many disputes and conflicts threatened social cohesion in the affected communities and these may have aggravated trauma among affected communities. Many villagers, already depressed by misfortunes, faced disputes over land ownership. More than 20 per cent of affected villages experienced some land disputes. Many traditional owners—villagers and ethnic communities—do not have secure legal titles to their land. In the aftermath of the tsunami, many found themselves locked into disputes with local governments who wanted to maintain land for public use and to protect the environment and developers interested in obtaining prime land along pristine beaches for commercial purposes.

Conflicts have also arisen because of perceptions that assistance has not been equitably distributed. In the early phase of relief assistance, there was a strong emphasis on speedy delivery of aid, which sometimes meant that some needy people missed out on assistance. For example, in some cases when the aid distributors arrived in a village, some people did not receive assistance because they were elsewhere searching for their family members. Irrespective of the reason, for people already traumatized by the disaster perceptions of unfair treatment tended to exacerbate community tensions.

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