Rising from Haiyan’s ruins

Recovering from the tragedy wrought by Typhoon Haiyan, the most potent typhoon ever to hit land in planet earth’s recorded history, is evidently no mean task. Difficult to estimate is the economic cost; virtually incalculable is the human cost, including lost human capital going to economic cost

The overwhelming show of concern and assistance from the international community in kind or cash has been heartening. Along with the constrained resources of the Philippines’ public and private sectors, this combined effort addresses the relief and rehabilitation requirements in the immediate to short term, and may be a good start in the long road to recovery.

The government’s short-term plan, estimated to cost Php40.09 billion (US$922 million), should run through the rest of 2013 until the end of 2014. It covers shelter provision for families who lived in danger zones, assistance for other affected families in rebuilding their homes, a cash-for-work program, assistance to farmers and fishermen, and repair of public schools, hospitals, government offices and public markets. Meanwhile, the government is yet to release a medium- to long-term master plan for the reconstruction of major public infrastructure.

To speed up the recovery, given that the early phase of relief and rehabilitation is ongoing and its momentum sustainable with political will, the longer-term master plan could well begin in earnest around mid-2014. In other words, the short-, medium- and long-term plans should be made to judiciously overlap, comprising a comprehensive ‘Master Plan’, for rapid recovery with minimal disruption to the economy’s growth momentum.

Such a Master Plan should include a programme of expert counselling for those suffering trauma due to the loss of loved ones and property, helping to revive their morale and assist their return to normal life. A programme retraining workers for transition into likely changes in occupation and livelihood should also be included.

The provinces devastated by Haiyan are reckoned to account for 12.5 per cent of the national economy, and the disaster is expected to shave roughly 1 percentage point off GDP growth in the short run. If the amount budgeted for Haiyan’s aftermath, and the further Php5 billion (US$15 million) allotted for the 7.2-magnitude earthquake destruction in Bohol province in mid-October 2013 (totalling about US$1 billion), are efficiently spent over the short term, such spending (assuming a fiscal multiplier of 4) should more than make up for the putative cut in GDP growth rate. This excludes the contribution of spending initiated from purely private sources. 

Nevertheless, this is pure and simple economic calculation and does not consider the psychosocial setback to families and individuals, and likely decreases in labour productivity.

Preliminary government aggregate cost estimates of the short- to longer-term master plan is around Php130 billion (US$3 billion) covering the combined devastations of Haiyan, the Bohol earthquake, and the September Zamboanga City siege by the rebel Nur Misuari faction. This budget figure implies an additional US$2 billion for the longer-term rebuilding of major public infrastructure. This seems conservative even if it does not include the reconstruction or rehabilitation of old churches considered national cultural treasures. Fortunately, assistance has been pledged by private philanthropists and groups, as well as by the Spanish government for these treasures, providing additional stimulus to regional economies.

In the final analysis, what will critically matter for a speedy recovery from the ruins will be firm, resolute and imaginative national-cum-local leadership supported by the wider citizenry and the international community. It will need to build on the economy’s strong fundamentals. It would of course greatly help if the international community deliver on their pledges in a timely manner, and the multilaterals (like the World Bank and Asian Development Bank) cut their usual red tape for the committed concessional loans. The noted resiliency and bayanihan spirit, or solidarity, among Filipinos should help carry those affected through their ordeal. The president and other leaders must inspire the people and tap this precious social capital for optimum effect.

Ernesto M. Pernia is Emeritus Professor of Economics at the University of the Philippines, and former Lead Economist at the Asian Development Bank