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HomePublicationsAdjustment and Recovery in Thailand Two Years after the TsunamiConclusion

Conclusion

This study has examined the impact of and the responses to the December 2004 tsunami disaster in Thailand, the worst natural disaster in the world’s recorded history, using both official and other publicly available data supplemented by a field survey of affected households, tourists, and NGOs. Two years after the tsunami, while the human dimensions of the tragedy will take much longer to heal, the country has made major steps towards recovering from the worst economic effects of the disaster.

There is a general consensus that the initial relief effort was quite satisfactory, given the unpredicted nature of the disaster and the further complications created by having a very large number of foreign tourists among the victims. The huge international media coverage of the disaster led to an outpouring of offers of assistance from governments and communities around the world. Thailand, however, refused to solicit official financial assistance for the recovery and reconstruction phase, relying on domestic sources and organizations. The domestic community and corporate sector response was very positive, leading some analysts to argue that the decision to rely on domestic finances probably ensured a stronger overall response than would have otherwise have been the case.

The largest economic impact was on the tourism industry, followed by the fisheries sector in the affected southern regions. In contrast to the situation in Indonesia and Sri Lanka, the economic losses were not primarily from damages to physical assets and infrastructure but to losses from foregone earnings from the tourism industry. In the tourism industry itself, the tsunami did not completely destroy all hotels and other facilities even in the affected regions, but large losses came from the sharp falls in tourist arrivals. The immediate impact on the regional economy was severe. But the overall effects of the tsunami on the wider national economy—even in the short term—were muted to some extent by the fact that alternative destinations in the country were able to become substitute destinations for tourists. Overall, initial estimates of the negative impact on the economy were quickly revised. Over the past two years we have also witnessed a general recovery in tourist arrivals, though Asian tourists have been more reluctant to return and the fisheries sector has had most of the necessary boats, equipment, and so on restored.

The relief and subsequent reconstruction efforts were facilitated by the relative proximity of the affected areas to the Bangkok metropolitan region. Relatively easy access to the region meant that emergency assistance could be rushed in quickly. The availability of a large pool of construction labour and materials allowed reconstruction activities to be undertaken without major supply-side constraints. In particular, with a construction sector that had yet to recover fully from depressed demand in the wider economy, the demand generated by large- scale reconstruction did not produce the kinds of cost increases seen elsewhere. In other words, reconstruction efforts were not affected by cost increases associated with Dutch disease effects of a construction boom.

Though the immediate response to the disaster within the first few weeks of the tsunami can be considered a success, poor coordination among aid donors, NGOs, and aid recipients hampered effective delivery, and sometimes led to inequities and waste in aid distribution. Some job training programmes did not lead to employment because they did not provide skills that were in demand in regional labour markets. In any case, the fact that the disaster was seen as a temporary (one-off) shock of which the effects would not last for long meant that most people were not interested in undertaking costly training for a new occupation. The assistance they sought in the short term was primarily financial assistance (cash) and/or access to credit markets so that they could cope with the immediate problems caused by loss of incomes and livelihoods. In the longer term, they primarily sought assistance to restore their damaged or destroyed assets.

The overall reconstruction effort, despite some of these limitations, is seen by most people as reasonably successful. However, the experience of post-tsunami reconstruction suggests that greater direct cash assistance, improved access to credit markets (including microfinance), and better coordination among assistance agencies could significantly improve the performance of future programmes in dealing with the effects of natural disasters. That kind of assistance can also address possible concerns about the development of aid dependency. Our study showed no evidence that the growth of aid dependency was a problem. Most people who continued to ask for assistance did so because they were genuinely in need of financial assistance because they had lost their livelihoods and were unemployed, with little or no access to credit markets.

Many of the inefficiencies in aid programmes reflected the problems of supply-driven assistance. Beyond the immediate emergency relief stage where food, medicine, clothing and basic shelter were priorities, direct financial assistance would have allowed most households to obtain what they required from the markets. While supply-oriented assistance cannot be avoided during the immediate response phase because donating agencies and corporations are most efficient in utilizing their core competencies, the reconstruction experience has highlighted the need to adopt a more demand-oriented, participatory approach during the period of rehabilitation and reconstruction so that aid can be effectively channelled into areas of greatest need in cooperation with local communities.18

Broader issues have been raised about the need for greater preparedness to face natural disasters. These include establishment of early warning systems, development of greater community awareness about natural disasters and how to prepare for them, and use of market instruments on the part of the private sector and households to insure against damages from such disasters. Subsidized insurance policies covering catastrophic losses, through providing tax incentives to market participants, can develop disaster insurance markets and induce private firms to get involved. This public subsidy would be less costly than spending on relief programs after disasters strike. Some progress has already been made with early warning systems. However, the relative infrequency of this kind of major disaster may mean that in the absence of any similar disaster in the near future, community recognition of the dangers of such disasters may not be sustained.

Broader lessons and issues have also been raised for the international community. The Thai government did not specifically ask for financial aid from the international community; indeed it encouraged international donors to direct their assistance to other countries, such as Indonesia and Sri Lanka, which suffered more than Thailand and which were less able to generate the financial resources needed for reconstruction. However Thailand did ask for a different form of assistance from developed countries: It requested the lifting of barriers that prevented access to donor markets for Thailand’s exports. Thailand argued that the removal of tariff and non-tariff barriers is the best kind of assistance developed countries can give to developing countries hit by disasters. Such market access would give developing countries a chance to achieve sustainable recovery. Regrettably, this request was largely ignored despite the rhetoric of many foreign governments that trade is better than aid as a form of assistance for development.

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    The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

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