Tsunami Tragedy: Relief-to-Reconstruction Strategy

Tsunami Tragedy: Relief-to-Reconstruction Strategy

Tsunami Tragedy: On the U.S. Government's Relief-to-Reconstruction Strategy

Alan Larson, Under Secretary for Economic, Business and Agricultural Affairs
Testimony before the International Relations Committee and the Appropriations, Committee on Foreign Operations
U.S. House of Representatives
January 26, 2005

The Indian Ocean tsunami was truly horrific, and we are still uncovering, over a month later, the full human cost of this disaster. Some of you on this committee have been out to visit the region, and have seen first-hand the unimaginable destruction of whole towns erased in the span of minutes. According to the best estimates to-date by affected country governments and the UN, more than 162,000 are reported dead in seven countries over two continents. The United Nations Children Fund (UNICEF) estimates that children comprise more than one-third of all deaths.

Americans have great sympathy and respect for the people of these devastated communities, who have come together to search for the living, bury the dead, care for those who have lost families and livelihoods and rebuild their lives. People suffering their own personal losses are helping others. It is the people of the affected countries and regions who will set the priorities and goals for rebuilding after this disaster. Leaders in these areas are already working to organize their own efforts and to identify what help they will need from abroad.

The United States was there to help in the immediate aftermath of the disaster, and we will continue to be there to help as the countries move toward recovery and reconstruction. President Bush set the tone for our response when he said ". . .We join the world in feeling enormous sadness over a great human tragedy . . . . The carnage is of a scale that defies comprehension . . . . As the people of this devastated region struggle to recover, we offer our love and compassion, and our assurance that America will be there to help."

The United States government and its people have responded to those in need with speed and generosity. The President committed an initial $350 million in U.S. government assistance for relief and reconstruction assistance. U.S. private sector donations to date are estimated to exceed that amount.

The United States has also agreed, along with members of the Paris Club of creditor nations that, given the magnitude and severity of the disaster, we would not expect debt payments from affected countries that request such forbearance, subject to national laws, until the World Bank and the International Monetary Fund have assessed the impacted countries' financial and reconstruction needs. Should the Administration decide to proceed with such treatment for countries that request it, we first would seek the required legislative authority and appropriations. We have also been consulting with potentially interested countries to make sure they understand that any funds for debt relief could reduce funds available for reconstruction.

I want to thank and commend the U.S. Agency for International Development and the U.S. military -- our first responders, who provided critical humanitarian relief. I also want to acknowledge the outstanding contributions of the U.S. Pacific Command. My colleagues on the panel will supply you with more details on the remarkable things they accomplished to speed assistance to those in need, and to facilitate the work of the United Nations, NGOs and other donors.

The State Department has worked continuously throughout the crisis. We facilitated the work of the military -- including through establishing Status of Forces Agreements and basing arrangements -- and USAID in the region. Immediately after the tsunami struck, my colleague, Under Secretary Marc Grossman, called together and led an international core group that included Australia, India, Canada, the Netherlands, Japan and the UN to coordinate the first stages of the international response. This core group ensured one country did not duplicate the efforts of others, and identified and filled needs and gaps in the first days. As the UN mobilized and took on a central role in the relief response, the core group passed its coordinating functions to the UN.

It is an indication of the strength of our partnership with these countries, that we were able to rapidly pull together this group, which never had a physical meeting and established no bureaucracy in addressing these critical issues. The experience of this group sets an example of how to deal cooperatively and effectively with international partners in a crisis situation of this scale. Such cooperation can only occur because of our well-established relationships with like-minded democracies.

The Department has also worked to help American families locate their loved-ones in affected countries. We received 30,000 inquiries from all over the country and around the world about missing Americans. Within hours of the disaster, the State Department set up a task force to respond to these inquiries, and our embassies abroad and consular officers here in Washington, DC, have worked around the clock to locate Americans. We have identified 15,112 inquiries on specific individuals, and currently have 128 unresolved cases. We estimate the number of Americans who lost their lives, or are presumed dead, at 34. We are hopeful that this number will remain close to its present level.

As the President said, "The government of the United States is committed to helping the people who suffer. We're committed today and we will be committed tomorrow." As we begin the transition from immediate relief operations to longer-term reconstruction, the State Department, in close cooperation with USAID, is leading the U.S. government in organizing our medium- and long-term assistance plans. I anticipate in the near term that we will establish a working group that will focus on medium and long-term reconstruction. We are working across the U.S. government and in close liaison with the private sector to ensure internal coordination, efficient use of resources, full deployment of our policy tools and effective external communication of U.S. priorities.

These U.S. activities have been in support of the tremendous efforts being made by the governments, people and organizations in affected countries. I want to emphasize the outstanding efforts being made by these countries to care for their own people and to accelerate the process of reconstruction:

* The governments of India and Thailand responded rapidly to the crisis, marshaled resources quickly and have been able to extend help to other affected nations. India, which suffered tremendously itself from the tsunami, provided assistance to the Maldives and Indonesia, and continues to play a prominent role in assisting Sri Lanka, the Maldives, and Indonesia with immediate relief;
* Thailand made available to the United States, the UN and the international community the use of the facilities at Utapao as a regional hub for humanitarian assistance to the affected areas;
* Indonesia quickly adapted several previously planned infrastructure and development meetings to include initial tsunami damage assessments and provide a venue to discuss relief and reconstruction;
* Sri Lanka on January 17 announced a reconstruction master plan developed by the Presidential Task Force for Rebuilding the Nation, which coordinates assessments. Sri Lanka intends to post a comprehensive project listing on the internet, and hopes to have projects initiated in January; and
* The Maldives created a board on January 10 to ensure transparency and accountability in the management of the Tsunami Relief and Reconstruction Fund.

Coordination on the ground was challenging at first, particularly in the health sector, but is being steadily improved. In evaluating coordination efforts it is important to remember the sheer scale of the disaster and the immensity of the international response, and that in the early stages of response, speed can be more important than coordination. As the UN takes over coordination responsibilities they are looking candidly at how well UN agencies, donors and NGOs are working together, and are assisting affected countries in managing the aid flows.

The response of the U.S. private sector and non-profit community has also been admirable in its speed and notable in its depth. According to the Center on Philanthropy at Indiana University, to-date U.S. relief organizations have raised over $580 million for tsunami relief efforts from individuals, private foundations and businesses. Members of the American international business community and U.S. NGOs operating overseas are in many places on the ground in Asia helping. President Bush has enlisted former Presidents George H.W. Bush and Bill Clinton to raise further funds from the private sector and American citizens.

U.S. companies and NGOs are stepping forward to assist in the long task of helping the people affected by the tsunami rebuild their infrastructure, homes and livelihoods. On January 18, the American Chamber of Commerce brought together U.S business executives with ambassadors and representatives of affected countries to discuss ways the private sector can connect its donations and offers of assistance with needs in affected countries. I want to recognize all of the individuals, companies, private foundations and NGOs that have contributed, directly or indirectly, to the relief effort. Private Americans are showing the world the true generosity of the American people. They are showing the world American values in action.

The support of the international community has also been remarkable. Many countries have given cash, in-kind contributions and military support. Financial and on-the-ground support from the United Nations Development Group -- especially the UN Office of the Coordinator for Humanitarian Affairs, the World Food Program, the UN Development Program, UNICEF and the World Health Organization -- and other international organizations has rapidly poured into the region:

* The UN Office of the Coordinator for Humanitarian Affairs estimates that over $5.3 billion has been pledged as grant aid;
* The multilateral development banks moved quickly to identify resources, with the World Bank providing $412 million, the Asian Development Bank $675 million and the Islamic Development Bank $500 million. The World Bank and Asian Development Bank are drafting, or in some cases have completed, initial damage assessments, which will form the basis for longer-term needs assessments; and
* The International Monetary Fund has identified loan options and has shifted Sri Lanka's $113 million debt due in 2005 by one year to 2006.

I want to acknowledge all those who have contributed to this effort, and note especially the coordinating role the UN has played on the ground. We all must now stay focused, coordinated and committed, because the needs will become clearer, even as the publicity fades.

As we begin the transition from assisting with immediate relief to the task of medium- and long-term reconstruction, we face a daunting challenge. The sheer scale of the destruction is nearly unimaginable. As Secretary Powell said after touring the area: "In the course of my career as a soldier and more recently as a diplomat, I've been involved in many, many humanitarian relief operations. I've had to respond as a commander to any number of natural disasters over the years, but nothing in my experience prepared me for this disaster." This means the task of those affected is not only to rebuild physical infrastructure, but also to rebuild communities and social structures to rebuild lives.

The primary responsibility for rebuilding lies with the affected people, governments and regions, and reconstruction plans will reflect their priorities and development goals. The United States wishes to work with the international community and those affected to help rebuild not only what was lost, but to build a better future. Together we can work to address key development challenges, such as poverty alleviation, local empowerment, environmental stewardship, good governance and long-term, sustained economic growth.

We also have a chance to do our best to ensure that a disaster like this does not wreak the same human toll in the future. The Bush Administration supports creating a global tsunami warning system that will cover all countries vulnerable to such natural disasters and we will be working internationally to make this a reality. Efforts to move forward on a warning system have been under discussion in a number of international fora, including the UN General Assembly, which resumed in special session on January 18, and the World Conference on Disaster Reduction, which held a special tsunami session on January 20. The internationally coordinated Group on Earth Observations (GEO), currently with 54 member nations and open to all nations, will hold its third Earth Observations Summit on February 16 in Brussels to adopt a 10-year implementation plan for a Global Earth Observation System of Systems (GEOSS). The U.S. is committed to work through GEO to develop tsunami warning systems in the Atlantic and Indian Oceans, and anywhere coastal communities are threatened by tsunamis, using the existing Pacific Tsunami Warning System as a model. The current system is coordinated under UNESCO's Intergovernmental Oceanographic Commission, a GEOSS partner. We will also continue to show leadership on this issue through the G-8. While we cannot stop natural disasters, we can work to put in place mechanisms for warning coastal communities of impending disaster, so that their impacts are reduced as much as possible.

The brunt of the disaster hit some politically sensitive regions. In both Indonesia and Sri Lanka, governments and rebel groups put aside their differences to an extent that allowed relief to get through. Despite some public statements by the Liberation Tigers for Tamil Eelam (LTTE), local LTTE and government officials in many areas have cooperated in delivering assistance, and there is reason to hope that more formal mechanisms will be established to continue such cooperation during reconstruction. Most recently, on January 18 the President of Sri Lanka's office announced that the government of Sri Lanka was sending heavy vehicles and generators to northern Sri Lanka at the request of the LTTE. In Indonesia, despite ceasefire calls, there are reports of continued conflict, but aid operations have not been impeded. The United States will look for opportunities to help the parties in Sri Lanka and Indonesia further defuse those conflicts and move toward peace.

It will be vitally important for public and private donors to work in close, coordinated fashion with each other, with local governments and with the agencies conducting reconstruction needs assessments so that resources are used wisely and effectively. Each one of the affected countries has a different set of needs, and we have to assess those needs to ensure we are using our assistance wisely. Working with local authorities, the UN, the World Bank, the Asian Development Bank, bilateral aid agencies like the Japanese Bank for International Cooperation and USAID, have already completed initial and preliminary damage assessments for Indonesia and Sri Lanka, which estimates preliminary damage costs to be $4.5 billion in Indonesia and between $1.4 and 1.5 billion in Sri Lanka.

These early assessments may be followed by some updates, and sectoral cost estimates would be appraised more deeply during the preparation of financing operations by the Bank, ADB and other financiers in Indonesia, Sri Lanka and the Maldives. The United States is coordinating its own efforts with others' and is encouraging continued close collaboration as they develop longer-term needs assessments and prepare for a coordinated donor response. We are strongly urging the multilateral development banks to complete the long-term assessments as quickly as possible.

In addition to coordination, transparency is also key to ensuring effective use of the massive outpouring of assistance. We welcome the initiative of the UN Office for the Coordination of Humanitarian Affairs in launching a new mechanism to track and account for official assistance. Sri Lanka and Indonesia have already outlined extensive plans for ensuring accountability and transparency in the use of the funds. Indonesia has also accepted the offer of Price Waterhouse Coopers accounting firm to audit assistance fund disbursements. The U.S. government has its own stringent domestic requirements to ensure that money is accounted for and we will meet those requirements. We also call on NGOs to meet similar standards of transparency and accountability.

In our response to the tsunami crisis, the United States demonstrated the generosity of our people, and the importance of American leadership. We now have the opportunity to work with affected countries and regions on the longer term task of reconstruction. The United States is uniquely equipped and willing to contribute our resources to employ the many tools at our disposal in working with tsunami-affected regions to build a better future.

There are some resources we can mobilize quickly by adjusting programs and facilities to meet needs that affected countries and regions have identified. For example:

* Immediately following the tsunami, Millennium Challenge Corporation (MCC) officials were in contact with the government of Sri Lanka, one of the 17 countries eligible for funding from the Millennium Challenge Account. In response to Sri Lanka's request, MCC has offered to work with the Sri Lankan government to revise their earlier compact proposal (submitted in November 2004) to address the long-term reconstruction needs following the tsunami;
* Indonesia is seeking to minimize local and international trade barriers to prevent price increases. The U.S. has been in active consultations with affected countries' trade ministries to discuss ways to help facilitate reconstruction efforts, such as extending preferential trade access. We will be consulting with domestic stakeholders and with the Congress as this process continues; and
* The housing and fishing industries were hard-hit in Indonesia and Sri Lanka. Indonesia reports housing as the largest dollar-value loss, with environment (which includes fisheries) and fishing as the next highest in damage estimates. In Sri Lanka, tourism, which accounts for 20% of GDP, was severely damaged, housing and transport sectors were hit hard, and fisheries were decimated. USAID is already providing cash-for work opportunities in community clean up activities and assisting micro- and small-entrepreneurs. USAID plans to develop public/private partnerships to address particular needs in the areas of tourism, fisheries and livelihoods.

In addition to these targeted new efforts, the U.S. can also look to its existing development policy to guide its support.. Over the last four years, the United States has helped shape new thinking about the effectiveness and application of international development -- approaching developing countries as partners who are competent and willing to address their own development challenges. This approach also seeks to take advantage of all available resources for development, especially those marshaled by the private sector. At Indonesia's recent Infrastructure Summit, for example, the Government of Indonesia heavily stressed the importance of private sector investment to the country's recovery from the tsunami and its overall future.

Some of the existing programs in the U.S. development toolkit that can also support medium- to long-term tsunami reconstruction:

* Foreign Direct Investment (FDI): In 2003, developed countries sent $193 billion in foreign direct investment to developing countries, 60 percent more than total official development assistance (ODA) flows to these same countries. In 2003, U.S. FDI to Indonesia was $72 million, and $14 million to Sri Lanka. The U.S. government is discussing with Indonesia a business climate pilot project to promote entrepreneurship and increased investment, for example, by reducing the time needed to secure a business license. The Overseas Private Investment Corporation has established a special line of credit of up to $150 million to mobilize U.S. private sector investment in reconstruction.
* Small Business: A key component of a balanced and effective development strategy is to help "unleash" the private sectors of the developing world via the establishment of small businesses. Currently, the U.S. Trade Development Agency is working with Thailand on a venture capital conference for tsunami recovery, which will provide technical assistance to help small businesses access financing for their business recovery efforts. We also plan to help Thailand with the creation and operation of its proposed "Tsunami Venture Capital Fund." We are prepared to offer this assistance to other countries as well, depending on internal budgetary resources.
* Trade: The World Bank estimates that successful completion of the Doha Development Round World Trade Organization negotiations could lift more than 140 million people out of poverty and add $350 billion annually to developing country incomes. The U.S. is a particularly strong market for countries affected by the tsunami, with an average of 34 percent of affected-country exports flowing to the United States.

Trade will be an important part of U.S. reconstruction efforts of the tsunami-affected countries. To be effective, trade initiatives must be informed by a clear understanding of the needs of the victims of this disaster. To this end, the U.S. has been in active consultations with affected countries' trade ministries and with their Ambassadors in Washington in recent days.

Based on the needs and opportunities identified in those consultations, we will work closely with domestic stakeholders and with the Congress to develop responsive proposals that leverage available trade tools and initiatives. For example, we are currently in Free Trade Agreement negotiations with Thailand, and we believe conclusion of this agreement will help with reconstruction efforts. We also plan to advance our work under the President's Enterprise for the Association of Southeast Asian Nations (ASEAN) Initiative, including through Trade Investment Framework Agreements with such countries as Indonesia and Malaysia, and strengthening our existing TIFA agreement with Sri Lanka. In addition, the International Trade Commission, an independent agency separate from the Administration, will consider whether the tsunami's impact on the affected countries' industries warrants a review of their anti-dumping finding against some shrimp products from these countries.

* Remittances: In 2002 the World Bank reported that remittances reached $1.3 billion to Sri Lanka and to Indonesia. These flows can provide significant supplemental financial assistance to households, especially during times of need. The key is having access to these financial services on a regular basis. Since 2002, the US has been working with a number of countries in South East Asia, like Indonesia and Thailand, on examining how to improve access to and the efficiency of remittance services through the Asian Pacific Economic Cooperation (APEC) remittance initiative. This work has focused on how to improve data on remittance flows, strengthening financial infrastructure to support cross border flows, expanding awareness on how to use remittance services (through financial education) and balancing regulatory requirements to support remittance services.
* Political stability and accountability: Investment flourishes best in a stable political environment. Political stability and an accountable government are also essential for U.S. assistance to be delivered. In Indonesia, USAID has supported the Forum for Aceh Recovery (a group made up of local non-governmental organizations, academics, religious leaders, etc.) for over a decade. USAID continues to support this group, which is now playing a key role in relief and reconstruction. The Forum for Aceh Recovery gives a voice to Acehnese civil society with the central government as they dialogue on the future of reconstruction. This organization can also serve as a civil society "watch-dog" group for implementation and to help prevent corruption. In the tsunami affected districts, USAID's ongoing programs will continue to create opportunities to foster accountability and transparency in the provision of relief services and reconstruction.

My colleague Andrew Natsios will outline some of the priorities that new reconstruction programs targeted to the tsunami will include.

The philosophy that underlies the U.S. government's approach to the longer-term rehabilitation and reconstruction of the nations affected by the Tsunami is the same philosophy that underlies our overall approach to development assistance: each country has primary responsibility for its own economic and social development; all resources, including public and private resources, trade, investment, and other external resources, as well as official assistance must be tapped to achieve sustainable economic growth; good governance, sound economic policies and responsive democratic institutions are essential to growth; and aid is used most effectively by those countries taking steps to improve governance and create the economic environment conducive to utilizing effectively the full-range of resources for development.

In closing I would like to thank the Congress for its strong support of the those struck by this terrible tragedy. There is a long way yet to go before those affected can restore livelihoods, rebuild homes and mend communities. The Administration looks forward to continuing to work with you as the U.S. supports the tsunami victims in their efforts.

Released on January 27, 2005

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