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Poorest In S. Asia Face New Hardship

Maldives, Sri Lanka Worst Off, Study Says

By Anthony Faiola
Washington Post Foreign Service
Thursday, January 13, 2005; Page A15

TOKYO, Jan. 12 -- An estimated 2 million people in Asia are at risk of sinking deeper into poverty as a result of the Dec. 26 tsunami and its aftermath, with the harshest long-term economic damage expected in Sri Lanka and the Maldives, according to a study by the Philippines-based Asian Development Bank.

The study released Wednesday by the bank -- a multilateral lender whose largest shareholders are the United States and Japan -- found that as many as 1 million Indonesians, 435,000 Indians and 250,000 Sri Lankans are in danger of falling further into poverty. Particularly hard hit will be the fishermen and farmers whose boats and equipment washed away with the violent waves.

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The recovery of Sri Lanka and the Maldives, among the smaller countries devastated by the tsunami, will depend on the extent and coordination of international assistance. Estimates in Sri Lanka, which was already facing a large budget deficit, indicate the tsunami tore up railways and roads and destroyed 100,000 homes and 150,000 vehicles -- although the key port of Colombo sustained only light damage.

"Now they have little financial leeway to cope with this disaster," Ifzal Ali, the bank's chief economist, said in a telephone interview.

Still, the region hit by the tsunami -- which had been experiencing some of Asia's fastest economic growth -- appears resilient enough to absorb much of the broader financial impact, particularly given the outpouring of international aid, the study concludes. Losses should be markedly less than those suffered in the region during 2003 following the outbreak of SARS, or severe acute respiratory syndrome, the study says.

"Most of the countries that were hit did not sustain damage to their industrial bases," Ali said. "And while this is a huge humanitarian disaster, economic growth in the area will be only marginally affected. In fact, in some countries that were hit, the investment in reconstruction may actually lead to higher economic growth by year's end."

Although the loss of life and property damage were worst in Indonesia, the report indicates that the nation should be able to cope with the economic fallout. No major heavy industries were damaged, and oil and natural gas production facilities in hard-hit Aceh province and elsewhere on northern Sumatra survived intact. Aceh accounts for only 2 percent of Indonesia's gross domestic product.

The Indian economy is also expected to suffer a minimal amount. Though the port city of Madras was hit, its industrial and port infrastructure has not been affected. Bangladesh, Malaysia and Burma are also expected to suffer minimally.

"In Indonesia and India, the risk is not to the national economies but rather to the individuals who lost their livelihoods and now need grants and loans to buy new boats and equipment," Ali said. "They will need assistance, or else there is a major risk they could find themselves slipping further into misery."

In Thailand, economic recovery will depend in large part on whether tourists -- particularly Europeans -- return to resort islands such as Phuket, sections of which were slammed by the tsunami. Reconstruction in Thailand is underway, with about 70 percent of Phuket's hotels already at least partially operational.

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