Some Lessons and Recommendations

Our review of Sri Lanka’s experience with the tsunami and its aftermath has highlighted several short term as well as longer term issues that need to be addressed by policy makers. Some aspects of the Sri Lankan experience also hold lessons of wider relevance for governments and donor agencies in developing counties grappling with similar problems. In this section, we present a series of conclusions and recommendations relating to the following issues:

1. Livelihood related cash payments to households
2. Assistance for rebuilding houses
3. Titles to new houses
4. Buffer zone rules
5. Early warning systems and disaster management systems
6. Coordination of donor assisted activities
7. Macroeconomic policy issues

9.1 Review Livelihood-related Cash Grants for Tsunami Affected Households

The scaling back of the Rs.5,000 (US$50) grant for affected households and the new eligibility rules for grant entitlement appears to be both inequitable and counterproductive in terms of encouraging affected households to re-engage in income earning activities. It must be emphasised that Rs.5000 for a household is a quite modest amount even by Sri Lankan standards must be seen in the context of Sri Lanka’s poverty line, which was Rs.1526 per capita per month in May 2004. The scale of the disaster, the extent of price inflation, the many costs associated with narrow targeting, and the perverse incentives set up by the new rules justify the provision of the grant for all affected households for at least four months and preferably six months as many had anticipated earlier. A continuation of this grant would go someway towards easing the hardships faced by affected households, and also provide a transparent and simple way of disbursing donor funds to all tsunami affected households.

9.2 Review Cash Grants for House Repairs/Rebuilding

The cost escalation in house construction documented above makes it obvious that the amount of assistance provided to tsunami-affected families for house repairs and rebuilding is quite inadequate and will rapidly erode further in real terms. While there is an argument for not providing full costs so that households have to make some contribution towards house repairs and rebuilding, the poorest households (outside the buffer zone) who are not eligible for new housing will find it extremely difficult to rebuild their houses without getting deeply into debt, thus aggravating their present plight, immersing them in a long term debt-poverty trap and aggravating social tensions. Again, though this too will also obviously increase the fiscal burden on the government, a review and upward revision of the cash grant amount should be seen as a priority issue.

9.3 Selection of Housing Beneficiaries and Titles to New Houses

The selection of beneficiaries for housing grants has caused dissatisfaction in some places. The process can be improved by improving transparency. Lists should be prepared by the government in consultation with donors, displayed in public places and people should be allowed to appeal.

A survey by the IPS (IPS, 2005) showed that households expecting new houses were unclear about their titles. Clearly, a decision is needed soon. The title may be awarded to the male head of households under the existing State Lands Act. Restrictions on sale of the house outside the family are also likely, as has been the case with state land (and house) allocations to settlers in irrigation settlement schemes. Restrictions of this nature in land markets, though well intentioned, have serious drawbacks highlighted by the resulting land use inefficiencies (and the numerous illegal land transactions that are known to occur in practice). If restrictions were to be imposed to minimize the possibility that undesirable distress sales in the immediate future may occur, such restrictions should nevertheless be of relatively short duration, and transfers outside the family after, say, at most 10 years should be permitted.

We believe that the case of title transfers also gives an opportunity to implement gender equality in state transfers. When houses are allocated, clear titles should be granted jointly to the husband and wife unless it is a single parent family even though this may require changes to existing legislation. Joint title held by both spouses is likely to be a deterrent to land sales arising from debts associated with gambling and excessive drinking by the household head.

9.4 Buffer Zone Rules

The concept of buffer zones to achieve coastal environmental protection and minimize impact of future natural hazards in future has intrinsic merit. However, as demonstrated by the failed attempt to implement a rigid and somewhat discriminatory system, the set of related issues needs to be more carefully examined and thought out for a comprehensive system to be developed. Both from a conservation and public safety point of view, a complete abandonment of the approach is not desirable. Further, it will create confusion for the programme of alternative house building currently in progress.

In any case, the process of setting out a new strategy, including the specification of Buffer Zone limits should be a transparent and consultative process that clarifies the underlying scientific and economic rationale for particular measures. In formulating an effective coastal management strategy, the potential for combining regulations with incentive-based systems for achieving the hoped for environmental and hazard management objectives should be explored to avoid over reliance on regulatory restrictions alone, which are often difficult and costly to enforce. There is considerable international experience that demonstrates the greater effectiveness of approaches which utilize both regulations and community-based incentive approaches. Even in Sri Lanka, coral protection, for example, appears to have been most effective in locations where the local tourist industry had an interest in its protection, and tsunami damage was correspondingly lower.

9.5 Early Warning Systems and Disaster Management Systems

The tsunami, unexpected as it was, dramatically exposed the absence of an adequate warning system, and appropriate civic and administrative mechanisms to cope with a natural disaster in Sri Lanka. In this sense the tsunami has been a wake up call to the country. International experience points to the value of investing in natural disaster information and management systems.³⁷ Since then there has been considerable discussion about the nature of the risks faced by Sri Lanka and the kind of early warning system and related disaster management systems. Though the recent historical record indicates that there have been no recent major disasters of this type, there are several factors that suggest that risks of natural disasters in Sri Lanka may be increasing. This is to be expected in the context of global evidence which suggests that " … as a result of both climate change and increasing concentration of the world’s population in vulnerable areas—natural disasters will become more frequent, more intense and more costly in the coming years" (Freeman, Keen and Mani, 2003: p. 3).

Of particular relevance to Sri Lanka is the scientific consensus that is emerging that the geographic region in which Sri Lanka is situated can expect increasing seismic activities as a result of the fracturing of the tectonic plate on which the country is located. Though Sri Lanka is not in close proximity to any of the 12 or 13 main plate boundaries that are prone to earthquakes, it rests on a plate that extended from Australia to India. This appears to be cracking up opening a fissure between the "Australian" and "Indian" plates. Some scientists believe that this is leading to a new plate boundary across the Southern Indian Ocean.38 The earthquake that hit Pakistan and parts of India in October 2005 serves as a grim warning of the potentially catastrophic consequences of major earthquakes (which may also unleash tsunamis closer to the Sri Lanka, this time on the more heavily populated Western side of the country). Sri Lankan scientists have also been warning about the potential for serious earthquakes, and increased seismic activity was recorded in the days leading up to the tsunami. This coupled with the possibility that global warming related changes may increase the potential for cyclonic activities suggest that there is a case for placing greater emphasis on the need for preparedness to cope with natural disaster. Risks also emanate from the presence of several large dams that are vulnerable to earthquakes and movements.

In this context, what is needed is not a single tsunami focused warning system—based on a single low probability event—but one that is geared to coping with the multiple hazards. A developing country with severe financial constraints cannot afford a multiplicity of specialized warning systems. With international assistance, steps have been taken to link Sri Lanka to regional disaster warning systems. Although the Sri Lanka Disaster Management Act (presented to Parliament in February, 2005) makes a useful start, the preparation of a comprehensive disaster management system for the country that is scientifically sound and financially feasible remains to be formulated.³⁹

There are other longer term issues that need to be explored, such as the how a developing country like Sri Lanka can prepare itself to meet the financing issues arising from low probability catastrophic risks, and the benefits and costs of different options such as purchasing such insurance in global insurance markets versus setting aside reserves to meet such needs. It has been noted that countries tend to be "reluctant to divert resources towards mitigation measures and the purchase of insurance, especially if the event is of sufficiently low probability that the consequences of under-preparation are likely to be borne by a subsequent government".⁴⁰

Box 1 [ PDF 60.6KB | 2 pages ]. Recommendations for the Design of an Effective All-Hazard National Early Warning System

9.6 Aid Coordination

Poor coordination across the many agencies and groups involved in the tsunami assistance effort has emerged as a serious constraint in the post-tsunami environment. Since the tsunami, slow decision-making processes have been criticized for keeping aid from those who need it while poor coordination has reduced the effectiveness of some of the assistance. The setting up of TAFREN as a single coordinating agency was a welcome step, but concerns about its composition, links to line agencies, and overall effectiveness have led to a new body being set up under the newly established Ministry of Disaster Management (headed by the Prime Minister) following the election in November 2005.

The reluctance to engage with government administrative structures by certain international NGOs (and their 'competitive' behavior in relation to local NGOs) has also been a major problem in Sri Lanka hampering coordination.

The mechanism for aid disbursement has run into further controversy in the context of the conflict affected North and East of the country. Balancing political realities and humanitarian concerns is a difficult but unavoidable task. The failures in Sri Lanka highlight the both the need for international facilitation and assistance as well as their inherent limitations. These are not issues confined to Sri Lanka alone but should be taken up by donors and NGOs. They emphasize the need to re-examine the modalities of aid spending, including procedures and mechanisms, so that assistance can be provided quickly in response to disasters.

9.7 Transparency and Accountability in Aid Disbursement

Transparency and accountability in aid disbursement are obviously desirable but in practice not an easy task. In the immediate relief phase of a natural disaster, humanitarian assistance inevitably takes precedence over formal aid accountability mechanisms. This can open avenues for various forms of corruption. The significant lapses in the clearance of relief goods, management of aid goods received, management of funds, payment of cash allowances, etc., highlighted in the interim report by the Auditor General’s Department must be urgently addressed and those responsible for deliberate mismanagement made accountable (GOSL, 2005c).

Donor governments, as well as some international agencies, are influenced by the view that developing country governments are too corrupt and/or inefficient to be trusted to distribute aid funds effectively. This leads to a search for more efficient means of aid delivery, and NGOs have been often favored. It is not clear that this is necessarily a more efficient delivery path in all developing countries. The extent to which domestic corruption may lead to leakages must be weighed against the high overheads of INGOs, and the fact they are not always in touch with the ground realities. Further, with financial backing from large donors, INGOs who are tempted to act overly independently of local government administrative systems can complicate the already difficult task of coordination of complex relief and reconstruction efforts. At times this can lead to severe tensions between INGOs and local organizations. It should be recognized that local government institutions, despite their real and perceived inadequacies, often can and do play a positive role in disaster situations. A balanced approach that recognizes the significant differences among developing country local government institutions is needed. Attempts to totally by pass them based on a ‘one size fits all’ attitude can be counterproductive in many circumstances.

9.8 Macroeconomic Policies

Macroeconomic management in the post-tsunami environment is going to be critical to the effectiveness of medium-term recovery of the Sri Lankan economy. Ironically, the tsunami itself provided a measure of stability to an economy that had been straining under growing macroeconomic imbalances, most visibly by averting a growing currency crisis by providing an unanticipated source of foreign capital inflows for the relief and reconstruction effort.

However, several critical issues are posed. First, cost blowouts will almost certainly create funding gaps, make reconstruction tasks difficult and impose further strains on government fiscal expenditures. Second, the tsunami reconstruction process it self places further strains on existing macroeconomic imbalances, and raises the costs of policy errors. Third, the success of the reconstruction effort cannot be divorced from the overall macroeconomic circumstances and policies.

We note in particular that inflationary pressures arising from policies unrelated to tsunami reconstruction will adversely impact the reconstruction effort both by reducing the real value of donor contributions and by reducing the fiscal capacity of the government to meet required funding gaps. Given the understandable community sensitivity to rising inflation, there are political imperatives to resist exchange rate depreciation. If, as discussed earlier, external sector developments exert downward pressure on the exchange rate, there is likely to be increasing temptation to use currency reserves to maintain the nominal exchange rate to control inflation in the short term. This would imply postponement of reconstruction activities for which the foreign funds were provided in the first place. Such policies will this will not only aggravate other imbalances but be costly for the reconstruction effort. As attention shifts over time from the tsunami victims, the poorest households in particular are likely to be losers from such delays. Tsunami reconstruction should remain a fundamental high priority issue both from a growth and equity point of view. Tsunami funds should be utilized for the purposes for which they were intended, and wider macroeconomic imbalances should be addressed by targeting their direct sources.

We hope that our discussion and suggestions made in this report will make a useful contribution to the policy formulation process and assist the country to recover from its tsunami inflicted damage and moves on to a path of sustainable and equitable growth path.

The views expressed in this paper are the views of the author/s and do not necessarily reflect the views or policies of the Asian Development Bank Institute nor the Asian Development Bank. Names of countries or economies mentioned are chosen by the author/s, in the exercise of his/her/their academic freedom, and the Institute is in no way responsible for such usage.

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