The REAL cost of Ondoy (according to an economist)

*This was another email I received today, through one of my e-groups. I cannot vouch for the veracity of these statements, but according to the person who sent this to us, the person who wrote this is an economist and knows what he’s talking about. Still, I get the feeling that he’s right–if not in terms of numbers, then at least in terms of what he’s really trying to convey. ~ NTZ*

Hi guys,

Philippine government is underestimating the impact of typhoon Ketsana (locally known as typhoon Ondoy).  The government estimated the cost of damage at P8.3 billion as of 4 October 11pm.

A.  So what’s the story?

Economic cost should include not only the nominal, direct effects but also indirect losses, system losses (e.g. linkages), foregone revenues and opportunity costs.  Not to mention the social impact.

I did a bit of calculations using official reports from NDCC, DepED, DA and statistical reports from various govt agencies and here’s my initial assessment.  (Of course, the figures will go higher as official data unravels).

Total economic cost: no less than P14.9 billion (this does not include the losses incurred by the business sector. I am still waiting for the Phil Chamber of Commerce report).  The breakdown:
1. Agri and Fisheries: P8.6 billion
2. Transportation: P3.1 billion (this includes the foregone revenues of civil aviation (passengers) at P358 million
3. Housing: P2.5 billion
4. Government sector (including educ infra and assistance): P284 million
5. Access Cost of Students (who were effectively displaced from their schools. these schools were converted into evacuation centers): P88 million.  This could go up to P140 million.
6. Foregone revenues of the dead, present value: P290 million

In addition, no less than P1.06 billion YEARLY forgone revenues in agriculture for agri lands that are considered ‘no chance of recovery’.

These estimates are conservative and does not include other things: (i) destruction of durables and non-durable household items, foregone revenues of business establishments, actual damage in assets of business establishments, unaccounted donations, sea transport, actual medical expenses of the injured and future health/medical expenses to curb water-borne diseases, among others.

B. How about the response?

On average, there are 628 persons in one evacuation center.  These individuals are those actually served/housed in evacuation centers.  Some of these evacuation centers are public schools.  But, if we take all of the individuals affected by Ondoy, the ratio is 7,571 persons in one evacuation center.  That would be a multiple of 12 evacuation centers given the current average population of an evacuation center in the field.  The figures, of course, varies by region.  Central Luzon has 14,070 persons in one evacuation center while only 661 persons are actually housed in the center.

C. What about government assistance?

The total amount of government assistance (including those given by NGOs) is valued at P80.02 million (of which, P64.6 million constitutes as direct government assistance and P15.38 million is the assessed value of sacks of rice).  Total number of affected individuals, to date: 3,899, 307.  This translates to P20.52 per person.  What can this buy?  Well, one (1) kilo of NHA rice is P18.25 and maybe two (2) ice water at one peso each.  But with looming uncertainties faced by those affected on how to go on with their daily lives, P20.52 is absolutely not sustaining.

But not all 3,899,307 people are actually served by the government. The government has actually served only 982,408, again, to date.  This means: each served individual has received P81.45 pesos.  That’s the value of social protection programme per person, for this type of catastrophic risk.  And, that value, I am sure, will increase each day hence as support pours in.  If we compare that, however, with properties and lives destroyed, well…..

D. So where do the rest of the affected get help from?

From kins, friends and social networks.  They are proofs that support can come from what economists and sociologists call ‘informal arrangements’ (as opposed to ‘formal arrangements’ by the government and from international support).  At times, catastrophic events like that havocked by Ondoy can wipe out a whole host of insurable material assets and the only asset left is friends, relatives and social networks.  They act as social insurance which allows individuals to even out consumption during hard times.  They are extremely valuable.

That’s all for now.



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