TCS Daily

Crisis and Opportunity

By Alan Oxley - January 3, 2005 12:00 AM

The Sumatra tsunami looks like the biggest natural killer since the Tangshan earthquake in China nearly 30 years ago. The latest estimate of the deathtoll is 150,000. Crises like these are natural circuit breakers. They also create danger and opportunities for politicians. Let us hope they seize the opportunity.

Indonesia's new President, Yudhoyono is most exposed. The highest deathtoll, 80,000 so far, is in the rebellious province of Aceh on the Western tip of Sumatra which has 36 million people, 20 percent of Indonesia's total. Aceh has fabulous reserves of natural gas. In the past it has been Exxon's best-earning field. The Acehnese number 3 to 4 million and have long harbored the ambition of breaking away from Indonesia to form an independent and radical state.

Nobody thinks that is a good idea except the Acehnese and, until recently, Sweden who gave refuge to the secessionist leaders (until they realized they were in breach of UN rules). The Indonesian Army has been busy trying to suppress the rebellion. Yudhoyono might hope the tsunami has weakened the rebellion. On the other hand, if the central government can't act to alleviate the distress, which is considerable, things might go the other way.

Sri Lanka's Prime Minister has a similar problem. Twenty-five thousand died there and up to a million are homeless. There is an uneasy truce with the Tamil Tigers, a separatist terrorist group which has waged civil war for years. The area they control has been hard hit.

Yudhoyono's basic problem is that Indonesia's distribution and transport infrastructure is poor at the best of times. The tsunami removed most of what there was in Aceh. Aid is piling up at the airport in the capital Jakarta but there is no effective way of getting it in quantity to the homeless and starving in Aceh.

Yudohyono has called a Summit in Jakarta on 6 January. Heads of Government from ASEAN, Japan and Australian will attend, as well as Jeb Bush and Colin Powell. Kofi Anan will be there, no doubt advocating coordination of relief efforts by the UN. Let's hope he fails. The UN has no capacity to do this and when it does its record is poor. The World Bank's chief James Wolfenson will also attend, "to support reconstruction", he told US ABC News.

So what can be done? Indonesian seismologists warn the movement of the tectonic plates which caused this earthquake are likely to cause more before things settle down. The Australian Prime Minister reportedly will offer to support building an Indian Ocean Tsunami warning system like the one which serves the Pacific.

The greatest, immediate need is food, water, medicines and shelter for the homeless in Sri Lanka and Indonesia. US 2 billion dollars has been pledged. Supplies will eventually get through, but a greater death toll is inevitable because poor infrastructure will prevent speedy delivery. The human tragedy will capture the headlines and the attention of politicians.

But let us hope Wolfenson can get them to focus as well on reconstruction. Then the biggest problem will become apparent. "Developing" countries are just that, not developed. Government is inefficient and bureaucracies are too large and underpaid. Trying to work through such systems is one of the great challenges for aid agencies. These agencies are not particularly effective either. They are also slow and unwieldy.

It is the problem of treating AIDS/HIV writ large. The high cost of the drugs is not the primary impediment to treating more patients, it is the lack of capacity of government agencies in poor countries to deliver them.

In a nutshell, our experience tells us if Government agencies are to rebuild Aceh and Sri Lanka, it will take a long time. So here's a radical idea. When the Leaders meet, why don't they agree to mobilize the private sector?

The level of reconstruction required will vastly exceed the capacity of local construction companies. The situation facing providers of telecommunications, power, transport and water will be the same. The most effective strategy will be to encourage foreign companies in these fields to meet the demand. In Indonesia, several key services industries, particularly in transport and distribution, are closed to foreign investors.

On his election, Yudhoyono inherited a badly stalled development program. Sixty percent of his Government's revenues are earmarked to pay the interest on the debt of a long list of government-owned businesses bloated by the recovery strategy after the 1997 currency crisis. A nationalistically-minded Parliament deterred his predecessor from privatizing these businesses and liberalizing restrictions on trade and investment.

Yudhoyono should use the occasion of the crisis to push through the Indonesian Parliament the economic reform program Indonesia needs to restore growth. It is the only available tool to rebuild Aceh rapidly. This is the support James Wolfenson and regional leaders should give him.

Alan Oxley is host of the Asian Pacific page of Techcentralstation.


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