Quake: Thinking Long-Term

By Shahid Javed Burki

I have written before on the subject of the earthquake and its economic impact. But the subject covered in some of the earlier articles dealt with the effect of the disaster over the short term. In today’s article and the one next week I will look at the long-term implications.

I do this for the reason that the population that has suffered will need help not only to face the immediate consequences of the loss of loved ones, the injuries suffered, the assets lost, and the challenges the area’s brutal winter will necessarily bring. It will also need a great deal of assistance to prepare for the future.

We are all by now familiar with the numbers that portray the grimness of the tragedy brought by the earthquake of October 8, 2005 — six seconds that shook the earth and permanently altered the landscape of Azad Kashmir, northern and northeastern Pakistan, and a small part of Kashmir occupied by India. It could also permanently change the political, social, and economic landscapes in Kashmir and in Pakistan. This could happen in a way that would reward the people who have suffered mightily or it could further compound their difficulties. The future will be shaped by policy makers in Islamabad.

According to the government’s latest count, 86,000 people died in the earthquake. Among the dead, the number of young — those below the age of 15 — was disproportionately large, perhaps as high as 60,000. A number of cities, towns and villages were totally destroyed, among them Muzaffarabad, the capital of Azad Kashmir. This city of some 100,000 people is now ruined. It is a city of tents with most of its citizens displaced. Also obliterated were 900 towns and villages, some of which were precariously poised on the slopes of majestic mountains.

An enormous amount of damage was done to the region’s infrastructure, both physical and social. Roads and bridges, tunnels were destroyed, as were schools, hospitals, clinics and community centres. About 10,000 schools catering to two million students were levelled and another 8,000 seriously damaged. Thousands of clinics and hospitals were flattened or destroyed beyond repair.

Children have suffered a great deal and will suffer even more if the future is not carefully planned for them. They could become the victims of predators who will abduct those who are wandering in the hills orphaned by the earthquake. In similar situations in other parts of the world children were abducted for organs and other body parts, forced into prostitution, or used for hard labour in factories and homes. In other words, what Pakistan is dealing with is not only an unimaginable human tragedy but also an economic and social catastrophe.

The government, most foreign donors, and non-government organizations have focused understandably on the rescue and relief aspects of the disaster. There is also — once again fully understandable — great nervousness about the onset of winter and what further hardship it will bring to an already devastated population. An effort has been made to translate all this into a dollar amount.

The government went to the donors’ conference in Islamabad last month with a rescue, relief, and rehabilitation bill of more than $5 billion to be disbursed over a period of 10 years. It received pledges of more than $6 billion. This appears to be a generous level of support. Would it be enough to do what needs to be done?

My view is that the destruction that has occurred demands an effort of a much larger magnitude, one that will have to be financed from sources other than foreign aid. Let me work with some numbers. The relief effort alone — not to include in this the enormous amounts that will be needed for rebuilding the economy of Azad Kashmir — will need resources about 50 per cent more than the pledges received at the meeting in Islamabad. The amounts the donors said they will provide would mean an annual expenditure of $600 million or about $180 per head of the affected population.

I estimate a larger need valued at $7.5 billion for providing adequate relief. This will have to be spent over a period of five years at the rate of at least $1.5 billion a year, $450 per capita of the affected population. Even more will need to be done to take care of the future.

The earthquake will have a long-lasting impact on Pakistan’s economy, its social structure, and most definitely its political development. Unattended, those consequences will be negative; properly addressed, they could be turned into a series of positive developments. It is this aspect of the disaster the policymakers need to contend with as they plan for the future.

Deaths and injury of so many people from natural disaster is a traumatic event. It will leave a deep impact on the families and the communities that have suffered. For the long-term, however, what is even of greater consequence is the effect on those who have survived and by surviving have become extremely vulnerable economically and socially.

Pakistan is unique among developing countries to have already absorbed a number of demographic shocks. The earthquake has produced another demographic convulsion. The demographic shocks of the past include the exchange of population in 1947 when 14 million people moved, with eight million Muslims coming to Pakistan and six million Hindus and Sikhs going in the opposite direction.

It also includes the explosion of Karachi’s population. Of the city’s 13-14 million people, 10 million are long-distance migrants. The arrival of almost four million Afghan refugees in the 1980s and 1990s also left a deep impact on Pakistan.

We should also count among these demographic convulsions the migration of unskilled and semi-skilled workers to the UK in the late 1940s and 1950s, and to the Middle East in the 1970s and 1980s, and of highly skilled people to North America in the 1980s and 1990s. These movements have produced three Pakistani diasporas, each of which has begun to influence the mother country’s economic, social and political development. There is hardly a family, a community or an area of Pakistan that has been left untouched by these four different types of movement of people. A fifth movement may be about to begin that could bring millions of people from the earthquake affected areas to many cities and towns of northeastern Pakistan.

What will be the form and impact of the migration that is likely to result from the earthquake? In spite of its magnitude and despite the fact that the movement of people which might result from the disaster, policy-makers in Islamabad have paid little attention to the fact that a significant demographic event is likely to occur. Let me provide some indications of its magnitude.

About 10 million people are affected in one way or the other by the earthquake, of these four million live in Azad Kashmir and the Northern Areas, three million each in eastern NWFP and northeastern Punjab. It is the people in Kashmir that have been affected the most and could become involved in the next wave of migration Pakistan might experience in the next few months.

There are three options available to policymakers to deal with this situation. Two of these will have dire economic, social and political consequences; the third could provide some attractive opportunities to change the economic, social and political landscape in the part of Kashmir administered by Pakistan. What are the three options?

One, let the people remain where they are albeit displaced by the earthquake. In that case, Azad Kashmir will become one of the poorest areas in the world — a kind of Somalia or Liberia in Pakistan. Such a sharp decline in the standard of living of so many people will have a very negative impact on the rest of Pakistan.

Two, allow the displaced people to move to the adjoining areas of Pakistan. The size of the host population of the areas that will be most affected by this movement is about 10 million, of which about four million live in towns and cities. Since most of the migrants will go to the urban areas, the population of towns and cities — in particular Islamabad and Rawalpindi — could easily double. Such a demographic shock will also have enormous social, political and economic consequences.

Three, totally restructure the economy of the area so that it provides jobs to the displaced people. This will not happen in the agriculture sector; given the destruction of forests and other forms of land-cover, agriculture will take a long time to recover, if it can recover at all. Small scale manufacturing (relying on the inherent skills of the displaced people) offers much more attractive alternatives.

Let me briefly mention the main attributes of the economy of Azad Kashmir in order to make the important point that it will have to be restructured in a fundamental way in order to secure the economic and social future of the four million people. If this is not done, these people will migrate to the narrow belt that is contiguous with Azad Kashmir.

Azad Kashmir’s economy is considerably different from that of Pakistan’s; it is, in fact, also different from the adjoining areas of Pakistan. Compared to Pakistan’s economy, that of Azad Kashmir was dependent much more on agriculture (40 per cent of GDP), less on manufacturing (10 per cent), and about the same on services (50 per cent). That was in 2004-05, a year before the earthquake. Agriculture, forestry and horticulture had a much higher proportion.

In industry, small-scale manufacturing was predominant. The economy was also dependent on remittances from the people working in the urban areas of Pakistan. There are perhaps two million Kashmiris employed in Pakistan’s major cities and they send perhaps $500 million a year to their families in the area. This is equivalent to 25 per cent of the GDP. Three fourths of the area’s population depends on agriculture, about 10 per cent on manufacturing and 15 per cent on services.

What is the likely economic impact of the earthquake? I will offer some informed guesses, using numbers for purely illustrative purposes. I expect the size of the economy to decline by one-half, from $2 billion to $1 billion. The greatest loss will be felt by the productive sectors — agriculture and industry. There will be a slight increase in the number of people working in manufacturing. However, the number of people in the service sector will explode almost five times; from about half a million to three million people.

The service sector is a “catch-all” sector for all impoverished economies. People engaged in it eke out a modest living, well below the minimum required to sustain healthy and productive lives. This sector will grow significantly in Azad Kashmir, increasing the share in employment from only one-seventh before the earthquake to about two-thirds in 2005-06. How to deal with this situation? What should be Islamabad’s approach as it begins the enormous task of rehabilitation? How should the government raise the money that will be required for the job to be completed? I will turn to these questions next week.

Source: The Dawn

Date Created: 12/20/05

Date/Time Last Modified: 12/20/2005 12:22:41 PM

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