LONDON, 3 January 2005 — The ten countries directly affected by the tsunami disaster — India, Sri Lanka, Indonesia, Anadaman & Nicobar (under Indian administration), Somalia, Maldives, Malaysia, Myanmar, Thailand, and Bangladesh — are some of the poorest and most dysfunctional states on earth.

Malaysia with a GDP per capita of $9,000 is the exception in terms of economic prosperity; and perhaps least affected in terms of loss of life and destruction compared to neighboring Indonesia. Thailand, with per capita income of $7,400, is particularly popular with Western tourists.

Thailand, politically and economically, remains precarious and is still trying to recover structurally from the effects of the Asian financial crisis in 1998, which was precipitated by the effective collapse of the Thai currency, the baht. Indonesia is one of the poorest countries on earth and the most populous Muslim nation. Aceh province, which was just off the epicenter of the quake, has been fighting a bitter war of secession with the central government in Jakarta in the last two years. Aceh also has oil, whose installations have been largely unscathed by the disaster.

In 2003, Indonesia, for instance, had a debt burden of almost $17 billion, which cost just over $4 billion to service annually. More disturbingly, the country’s foreign aid receipts — Official Development Assistance (ODA) by the beginning of 2003 had dropped to $1.8 billion from $3.2 billion in the previous year.

Somalia and Myanmar are effectively pariah states.

Sri Lanka too has been plagued by a 20-year internecine civil war in the northeast Jafna peninsula with the Tamil Tigers.

The total economic cost of the Asian quake is estimated at $15 billion. This is for all the ten countries affected. Compare this to the $50 billion estimated cost of the 9/11 Twin Towers attack only. The reasons for this, we are told, is that the New York victims were highly insured, whereas the Asian quake victims are largely under-insured.

The Twin Towers were economic targets. As such businesses had to be paid huge amounts to compensate for losses, damages, and inability to continue trading because of destruction of premises. Then there was the loss of life and aircraft.

In contrast, while the losses in the Indian Ocean rim were in human terms far greater; in economic and opportunity costs terms they dwarfed those of the Twin Towers. Never mind those thousands of fishermen who lost their lives and livelihoods — they engaged in subsistence fishing, which in the parlance of Wall Street hardly gets a mention in terms of shareholder value or valuation. In reality, most of the cost estimation of the tsunami disaster will be eaten up by costs borne by the international five-star hotels and resorts dotted along the coasts in the Indian Ocean paradise locations of the Maldives, Sri Lanka, Phuket, and Penang.

In this respect the recovery of the lucrative tourism industry will be swift because of the involvement of the international players such as the Taj Group, Hiltons, Berjaya, Marriott, Holiday Inn, etc. Some tourists are deliberately continuing their holidays at unaffected resorts even in Phuket and Phi Phi in Thailand; and in Sri Lanka, in the belief that they are helping the local economy and the continuity of the tourism sector. Aid and other groups in the West are in fact urging people to go to these countries for their holidays during 2005 to help consolidate this process.

This may be a noble initiative, but spare a though for the other economic victims of the tsunami disaster. They will have to rely on the largesse of the international hand-outs and their own governments, many of whom even in relatively good times find it difficult to manage poverty alleviation initiatives.

How ironic that the economics of inequality are at their starkest, and some would say at their most obscene, when it comes to assessing the cost of disasters, whether man-made or natural.

How ironic also that as the New Year unfolds economic and investment pundits are already predicting Asia, albeit East Asia, as one of the best prospects for equity and investment returns in 2005.