Preface (2024)

When a large tsunami inundates a coastline, it has a range of direct and indirect economic and social impacts. These may be summarised as:

Electricity/gas/generating units and transmission networks/water/sewerage

Power generating stations and their ancillary facilities, transmission networks and lines as well as petroleum and gas supply systems may be damaged or destroyed. Such destruction’s can lead to interrupted supplies of electricity and gas. Water and sewerage provision may be entirely lost due to damage and destruction to stores, treatment plants, pipes, drains and pumping stations. There will be direct costs involved in the repair and replacement costs of these facilities dependent on the severity of damage and the percentage of facilities damaged, level of state aid and level of insurance cover (see Tables 1 and 4).

Railroads/Highways/Airports/Ports and Harbours/Shipping and Navigation Aids

Tsunamis frequently have a catastrophic impact on coastal transportation networks and facilities located within flood zones. Railroad terminals, marshalling yards, sheds and track may be destroyed or damaged. Such loss of facilities may hamper movement of goods, passengers, relief work and reestablishment of normal economic activity. Coastal highways and road networks can be badly damaged and unpaved roads are easily washed away. Bridges, tunnels, flyovers, petrol and fuel stations and viaducts are all susceptible to damage and destruction. Airports and airstrips located on low-lying coastal plains subject to tsunami inundation may sustain damage or loss of run- and taxi ways, hangers, storage facilities, lighting systems and control/radar networks. Due to their location, harbours, ports and other shipping related services can be very severely affected by tsunami. Harbour structures (e.g. docks, piers, jetties), ancillary equipment (e.g. lifting cranes), warehouses and transport terminals as well as ships, boats, and fishing fleet stock are especially vulnerable. Direct losses for the insurance industry will be incurred when claims are made. Indirect losses may be sustained due to the costs associated with the dredging of sediments deposited by tsunamis in harbours and navigation channels. Loss of navigation aids can also hamper shipping movements in and around harbours and sea channels resulting in a decline of shipping and thus, economic activity.

Radio/telephone/television network systems/satellite/fibre-optic communications

Following major tsunamis, loss of radio, telephone, satellite, fibre-optic and television networks may occur. These losses may result from either direct damage to lines, buildings, cables, dishes and transmission networks or due to loss of power through interruption to electricity supply.

Industrial/commercial/agricultural

Immediately following a tsunami disaster, many businesses will be unable to trade because of destruction to premises, stock, machinery, facilities, transport networks, supplies and loss of staff. All sectors of the business community are likely to be affected, though to various degrees of severity (see Table 2). Loss of agricultural production (by various means e.g. loss of crops, contamination of soils, destruction of market and distribution networks, loss of livestock populations) can have major economic implications, especially for developing nations and small island states dependent on agricultural activity. For example, where contagious (epizootic/zoonotic) diseases break out in livestock populations (e.g. Foot and Mouth) because of the negative impacts of a disaster, trading restrictions may have a significant economic impact. For example, it has been estimated that loss of export revenues associated with Foot and Mouth (FMD) disease in south America are in excess of US$500 million per year. A similar outbreak of FMD in the US national herd would cost an estimated US$7 billion.

Businesses impacted by a tsunami will take time to recover their activity to pre-disaster levels (see Table 3). This time period will vary from business to business depending on a range of factors including level of preparedness, supply of raw materials, availability of distribution/transport networks and requirements of the market place/product user and variations in price. In extreme cases, the business recovery phase may last considerable periods of time. For example, reestablishment of crab fishing beds in Prince William Sound following total destruction by the 1964 Alaska tsunami took between 8 and 12 years. Such a recovery period would have had significant consequences for the crab fishing industry and its employees.

Any large disaster event will cause a disruption of business activity and continuity. Some service sectors will see increases in product demand after the disaster (e.g. power/water suppliers and construction/building firms) whilst others will see falls in their business activity. Also, there may be large changes in the employment market with large unemployment in most sectors where these businesses have been destroyed or badly damaged. There will however, be associated shifts in the employment market with large numbers of building/construction jobs (e.g. labourers) becoming available.

Research has demonstrated that in most cases and especially for developing countries, the trade deficit (surplus) as a percentage of imports will increase sharply in the period after a disaster and as such, a country’s balance of payments will be negatively affected. Such a macroeconomic effect will be especially severe where a country relies heavily on export of a limited and specific commodity e.g. bananas, olives, mineral resource. That is, if the entire economic crop is destroyed, or the facilities to transport/ distribute and refrigerate a product are lost, then the disaster may have a profound and prolonged economic impact.

Following a major tsunami, serious damage or destruction may occur to hospital and medical centre buildings, equipment and ancillary facilities. Often too, ambulance stations and paramedical facilities can be adversely affected or lost. There will be a direct cost involved in the reestablishment of these facilities. Direct insurance loss will be sustained in respect of claims for rebuilding and equipment loss. Indirect costs associated with tsunami impacts on the health sector might include the extra costs (e.g. spraying) of dealing with water vector-borne disease outbreaks following sea water inundation of freshwater bodies (e.g. bacterial infections, cholera, typhoid, dengue and malaria). For example, following a major sea surge flood on Haiti in 1963, 75,000 cases of malaria were reported in the five months after the disaster because of poor vector-borne disease control. Following the July 1998 Papua New Guinea tsunami, the potential health threat associated with disease outbreak at Sissano lagoon resulted in the closure and exclusion of the lagoon until April 1999. The closure of the lagoon occurred in spite of its importance for the fishing industry both in the provision of subsistence catches and as a source for small scale economic fishing activity.

Loss of or damage to housing stock and personal property may result in considerable insurance claims for compensation. Claims are likely to be made on both building and contents policies. Levels of destruction and loss will reflect the level of insurance cover, building design specifications, magnitude of tsunami event and preparedness measures.

Many parts of the world depend heavily on the revenue derived from its tourist industry and all the associated support services. A large natural disaster which has a negative impact on tourism and the aspects of the natural environment which bring tourists to an area can have a serious impact on the economic viability of a region or country. This will vary from place to place and country depending on the relative proportion of tourist derived GDP and the size and breadth of a country’s economic base. For example, the Caribbean island of Anguilla derived some 40% (US$51 million) of its GDP from tourism in 1994. Following a major hurricane (with associated sea surge flooding in September 1995), the direct costs of damage to the tourist sector (hotels, restaurants, beach facilities and shops) accounted for US$29.5 million (some 50% of the total damage costs). The subsequent calculated loss of tourist income because of the disaster was expected to result in a fall of Anguilla’s GDP of 12% during 1995/1996. The impacts of a major tsunami in an area where tourism plays a significant role in the economy could be very severe. This will be especially so where the general public perceives there to be a high risk and where significant damage has been done to the natural environment (e.g. loss of sandy beaches, destruction of hotel and beach facilities) (The Guardian – 19/08/99 – "Tourism must be added to the cost of war and natural disasters").

It has been reported in some cases that following major natural disasters there is some element of social unrest and in more extreme cases, break downs in law and order. In such situations, there will be indirect costs associated with the need to police business areas with extra police or military forces. Following the Turkey earthquake and tsunami of August 1999, the Turkish government had to deploy conscript soldiers to patrol unguarded shops and banks in the central business districts of numerous towns following episodes of looting and localised breakdowns of law and order (The Guardian – 25/08/99 – "Troops ordered to shoot looters").

In extreme cases it is possible that a combination of a disgruntled population, slow official response and rehabilitation, increased market prices, lack of basic social services, poor food and health provision, civil unrest and fear, may lead to the destabilisation of a national government. When governmental collapse takes place, inflation may rise, investment may fall and economic trade may suffer.

In many parts of the world affected by natural disasters like earthquakes and tsunamis, national governments have legislated that built structures should be designed to withstand natural events of specific magnitudes. Unfortunately, in many countries (especially those in the developing world), these regulations are not adhered to by either the structural designers, planners, builders or those commissioning buildings for a variety of reasons. Where catastrophic failure of such structures occurs, the injured or relatives of the victims may be eligible to make financial claims against the construction and engineering companies. As such, litigation may be a considerable indirect cost of a major tsunami flood. Following catastrophic structural failure because of incorrect building design in the August 1999 Turkey earthquake and tsunami, considerable public anger has resulted in a cry for accountability and financial liability (The Guardian – 25/08/99 – "Survivors turn anger on cowboy builders").