Economic impact of the 2004 Indian Ocean Earthquake and Tsunami

The level of damage to the economy resulting from the tsunami depends on the scale examined. While local economies were devastated, the overall impact to the national economies was minor. The two main occupations affected by the tsunami were fishing and tourism. The impact on coastal fishing communities and the people living there, some of the poorest in the region, has been devastating with high losses of income earners as well as boats and fishing gear. In Sri Lanka artisanal fishery, where the use of fish baskets, fishing traps, and spears are commonly used, is an important source of fish for local markets; industrial fishery is the major economic activity, providing direct employment to about 250,000 people. In recent years the fishery industry has emerged as a dynamic export-oriented sector, generating substantial foreign exchange earnings. Preliminary estimates indicate that 66% of the fishing fleet and industrial infrastructure in coastal regions have been destroyed by the wave surges, which will have adverse economic effects both at local and national levels.

While the tsunami destroyed many of the boats vital to Sri Lanka’s fishing industry, it also created demand for fiberglass reinforced plastic catamarans in boatyards of Tamil Nadu. Since over 51,000 vessels were lost to the tsunami, the industry boomed. However, the huge demand has led to lower quality in the process, and some important materials were sacrificed to cut prices for those who were impoverished by the tsunami.

But some economists believe that damage to the affected national economies will be minor because losses in the tourism and fishing industries are a relatively small percentage of the GDP. However, others caution that damage to infrastructure is an overriding factor. In some areas drinking water supplies and farm fields may have been contaminated for years by salt water from the ocean. Even though only costal regions were directly affected by the waters of the tsunami, the indirect effects have spread to inland provinces as well. Since the media coverage of the event was so extensive, many tourists cancelled vacations and trips to that part of the world, even though their travel destinations may not have been affected. This ripple effect could especially be felt in the inland provinces of Thailand, such as Krabi, which acted like a starting point for many other tourist destinations in Thailand.

Both the earthquake and the tsunami may have affected shipping in the Malacca Straits, which separate Malaysia and the Indonesian island of Sumatra, by changing the depth of the seabed and by disturbing navigational buoys and old shipwrecks. In one area of the Strait, water depths were previously up to 4,000 feet, and are now only 100 feet in some areas, making shipping impossible and dangerous. These problems also made the delivery of relief aid more challenging. Compiling new navigational charts may take months or years. However, officials hope that piracy in the region will drop off as a result of the tsunami.

Countries in the region appealed to tourists to return, pointing out that most tourist infrastructure is undamaged. However, tourists were reluctant to do so for psychological reasons. Even beach resorts in parts of Thailand which were completely untouched by the tsunami were hit by cancellations.

References: http://en.wikipedia.org/wiki/2004_Indian_Ocean_earthquake_and_tsunami

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