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Economic Aspects

The Economical Impacts and Aspects of the 2004 Indian Ocean Tsunami on Indonesia

By: ALEX PUDNEY

(Jan. 14, 2005) Source: U.S. Navy photo by Photographer's Mate 3rd Class Tyler J. Clements

How could you recover from losing everything you own, when you didn’t really have much to start with in thefirst place? Fifteen billion dollars was the amount of damage that immediately resulted from the tsunami that hit Indonesia from the Indian Ocean in 2004. 238 million is the rough population of Indonesia. With the population of Indonesia and the poverty the country had already faced before the disaster, not even the population of Indonesia giving their life savings altogether could afford to fix the damage from the tsunami that hit their own country. The Indian Ocean earthquake and tsunami is a known natural disaster, yet the economical aspect of its major destruction in Indonesia is not widely known; however by examining the tsunami’s characteristics to other similar disasters, the relief efforts made afterwards, and the economic situation before and after the tsunami hit, one can see the exact impact that this natural disaster had on the country of Indonesia as a whole.

(May 17, 2006) Source:Vasily V. Titov, Chief Scientist, NOAA Center for Tsunami Research (incorporates the former Tsunami Inundation Mapping Efforts (TIME)), NOAA/PMEL - UW/JISAO, USA.

In examining the economic tribulations resulting from a natural disaster, comparing the Indonesian tsunami to other natural disasters that are similar will give a person insight as to the economic standing the country faced. Tsunamis, especially the ones that have hit or hit near Indonesia, have been caused by another disaster first, such as an earthquake or volcanic eruption. The eruption of the Tambora volcano in 1815 has been said to be the worst recorded volcanic eruption in history. The resulting deaths were approximately 92,000 people (Athukorala, & Resosudarmo, 2005).  The death toll from the 2004 Indonesian tsunami was a total of 350,000 people. In Indonesia itself between 1997 and 2004 (excluding the tsunami) there was a death toll of 36,000 people. Just the number of deaths from the tsunami alone is almost ten times the deaths from all of the other natural disasters combined in 7 years. The total damage cost for the tsunami has been reported to be 2,920.4 million (U.S.) dollars (Athukorala, & Resosudarmo, 2005).  Hurricane Katrina, one of the worst hurricanes to hit landfall and cost the most damage of any other hurricane, was reported to have cost 110 million (U.S.) dollars in damage (Escelaras, & Register, 2008). Comparing the two disasters it is seen that even the costliest hurricane does not come close to the cost of the Indonesian tsunami. The previous numbers are broad economical aspects of natural disasters, and when examined closer,the numbers are still stacked towards the tsunami being one of the worst natural disasters in history.

The relief efforts made after the Indonesian tsunami were large contributions, yet still weren’t enough to put the country back on good terms economically. Indonesia was helped in large with a total of 810 million (U.S.) dollars from outside aid (Athukorala, & Resosudarmo, 2005). Due to Indonesia’s standing before the disaster as it was rising in economic standing, the blow that the tsunami put on the country made the GDP smaller right after the disaster and put a halt on the growth for a few years (“Indonesia Economy”, 2010). Most of the country’s relief efforts were given by the government, while the country’s own input on relief efforts was only a small contributing factor (Hedman, 2009). Through the relief efforts made by all contributors, Indonesia can be seen regaining its economy slowly, but surely. Indonesia is slowly picking up its GDP and over the past few years has made a significant recovery in their economy (“Indonesia Economy”, 2010).

(Jan. 1, 2005) Source: Michael L. Bak

When trying to understand the condition of Indonesia’s economy, one must examine the condition it was in before and after the day the tsunami struck. With the large hit to East Asia’s economy as a whole in 1997 (Nasution, 2007), the tsunamis that hit the countries in East Asia only suffered even more, putting them economically in a bad position. Indonesia as a rising economy has suffered many natural disasters; however the tsunami in 2004 greatly impacted the economy. Before the tsunami struck, Indonesia was beginning to gain an economy and starting to raise its GDP after the financial crisis that hit East Asia in 1997. As the economy was on the rise, the tsunami hit in 2004 when Indonesia was on its way to making a comeback was comparable to China (“Indonesia Economy”, 2010). The insurmountable fate that Indonesia faced when the tsunami came was a cross to bear, however the country, after a few years of rough economical struggles, got back on its feet and is now doing very well for itself. With the amount of money that the country had to put forth to get back economically, Indonesia used a lot of money to put its industries back into swing and get more money regulated through the country (Jayatilleke , & Naranpanawa, 2007). With the industry fluctuating greatly between 1997 to today, it is safe to say that Indonesia has greatly improved economically since the tsunami struck in 2004.

In retrospect, the economy for Indonesia was greatly affected from the tsunami which hit the country in 2004. By evaluating the way the economy was influenced through comparison to other natural disasters, the relief efforts made by Indonesia itself, international aid, and the way the economy was before and after the tsunami hit, one can truly see the impact the tsunami had on Indonesia. The economic stature of Indonesia is important to know, because the tsunami had a large effect on the country and not only caused many lives to be lost, but families to be torn apart and a great deal of money to be used to reform the country after the disaster. With Indonesia recovering from the tsunami, no one can say exactly how the country will do in the future, but it is safe to say that with numbers steadily rising, Indonesia is headed in the right direction currently to make a better economy for itself.

Works Cited

Athukorala, P., Resosudarmo, B. (2005). The Indian Ocean tsunami: economicimpact, disaster management, and lessons. Manuscript submitted for publication, Division of Economics Research School of Pacific and Asian Studies, Australian National U, Canberra, Australia. Retrieved November 3, 2010, from EconLit.

Escaleras, M., Register, C. (2008). Mitigating natural disasters through collective action: the effectiveness of tsunami early warnings. Southern Economic Journal, 74(4), Retrieved November 3, 2010, from EconLit.

Hedman, E. (2009). Deconstructing reconstruction in post-tsunami Aceh: governmentality,displacement and politics. Oxford Development Studies, 37(1), Retrieved November 3, 2010, from EconLit.

Indonesia economy. (2010). Retrieved from http://www.economywatch.com/world_economy/indonesia/

Jayatilleke, B., Naranpanawa, A. (2007). The economic effects of the Asian tsunami on the’tear drop in the Indian Ocean’: a general equilibrium analysis. South Asia Economic Journal, 8(1), 65-85.

Nasution, A. (2007). Global savings-investment imbalances: what role for East Asia? AsianEconomic Papers, 6(2), 01-13

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