The Effects of Disasters on Turkeys Economic Development - Term Paper Example

The Effects of Disasters on Turkey’s Economic Development From scholarly research, the frequency of occurrence and the intensity with which Natural disasters occur around the world have increased notably over the last five decades. These range from earthquakes and tsunamis to typhoons, floods especially places receiving heavy rains, volcanic eruptions, mudslides, hurricanes and extensive earth movements, to droughts and famines. Disasters have far-reaching effects on various aspects including loss of lives and livelihoods, destruction of infrastructure, disease out breaks, destruction of social and economic structures in their wake. Different countries depending on the level of development have different coping capacities and therefore the impacts and resilience levels in the event of disasters do vary a lot. Less developed countries in particular suffer from adverse disaster effects in all aspects and usually take long to recover as compared to the developed economies. Occurrence of disasters has repeatedly affected the economic development in Turkey, which is one of the countries prone to natural disasters, especially those related to tectonic movements and weather vagaries. This paper will look into the real long-term effects of these natural disasters on the economic development of Turkey over the years. The country has an approximate population of 63million people, which is largely young and expanding. It is the largest in terms of landmass in the entire Western Europe region with its economy ranked as one of the largest emerging in the world at number sixteen. The World Bank recently rated the country’s economy among the ten promising ones that may join the top economies category of the world (World Bank 27). The country follows a liberal economic policy based on free market and international orientation principled and has maintained an average economic growth of more than 5% over the last two decades. The various sectors of the economy include industry, which is highly developed and the top driver of the economy with world –wide standards of production. It has several subsectors that include; iron and steel, glass and cement manufacture, sugar production, electronics and defence, agriculture machinery and inputs and textiles processing. The agriculture sector is also a leading foreign exchange earner besides making the country food reliant. It approximately accounts for up to 20% of the country’s GNP besides being one of the leading employers especially for the rural society. It was one of the hardest hit by the 1999 earthquakes leading to sharp decline in its contribution to the GDP, losing to the industrial sector. Animal production and fishing also account for large portions of the economy. Animal rearing thrives very well especially on the parts of the country that are unfavourable to other forms of agriculture due to their rugged terrains. Having a very extensive coastline, the country has developed its fishing industry in to one of the greatest in the region. Forestry and tourism are the other important sectors of the economy having considerable influence on the country’s economic growth. Privatization of the several state enterprises since the 1980’s has seen the economy become more productive owing to competition. It also has boosted foreign investments through permitting direct investments for foreigners in various sectors of the economy and great improvements in technological advances. With the well-trained young labour force, abundant natural resources and well-developed infrastructure, the country boasts of a vibrant transportation and communication sector as well as a swiftly growing home market offering a secure and promising foreign investment.  Natural Disasters and the Economy of Turkey In determining the impact of natural disasters on the economy of Turkey, several aspects are considered. According to Pelling, economists argue that there is a strong link between natural disasters and economic growth of a country’s GDP level and the negative short and long-term impacts (112). Although disasters seem to have positive effects on the short term if their direct losses are small, their long-term negative impacts become increasingly visible on the overall economic development as the losses increase. This link is however not easy to determine given the fact that there are various types of costs involved. These include direct costs, indirect costs, indirect costs, and secondary effects of a disaster on both the local and national economies. Direct costs are those that relate to physical damages caused on capital assets like infrastructure, buildings, industrial plants, crops on farmlands, and inventories of raw materials, intermediary or finished goods damaged by the direct impact of the disaster. Indirect costs on the other hand refer to the flow of goods and services including low output from damaged infrastructure. This category includes losses due to damage of marketing infrastructure such as roads, rails and ports, and job losses resulting from damaged industries and other work places and the increased expenses associated with increased prices of inputs due to destruction of the usual cheap sources of supply. They also include costs incurred in medical care expenses and the lost productivity due to illnesses, injuries and deaths. These costs are however difficult to establish because of their knockout effect. For instance, destruction in the provision of services due to destruction of infrastructure like roads, telecommunication networks, power, and water supply has far-reaching effects. Gross indirect costs caused by disasters are offset in part by the positive impacts of rehabilitation and rebuilding efforts especially in the construction industry, creating situation s of double counting (Kumar 141). Secondary effects of disasters relate to both the short and long-term impacts on the economic development, such as deterioration of trade and government balances and thus creation of increased indebtedness situations. They also include shifts in government monetary and fiscal policies, in order for example to reduce the effect of disaster-induced inflation or to finance increased government expenditure and impacts on the scale of income and increased poverty, the government will have to spend more on recurrent expenditure than on development expenditure. The potential implication of a natural disaster on public finance and the related fiscal and monetary policy provides vivid complexity of the indirect and secondary effects they pose. Disasters may at times have serious impacts on public finance resulting in either additional spending or redeployment of budget allocation to cater for emergencies. They can also lead to reduced government revenue since lower rates of economic activity since reduced imports and exports as well as stalled production implies reduced direct and indirect tax revenues for the government. Although these costs reduce with increase in the flow of official external assistance, such flows rarely cover the increased expenditure completely (Kreimer and Arnold 67). Public enterprises also experience loss-related disasters. This places more burdens on the national economic resources. All these factors lead to increased budgetary pressures on the government, which it is obliged to meet by increasing the money supply, running down foreign exchange reserves or increasing levels of domestic and external borrowing. This borrowing of money increases it flows in the economy, often having a knock on effect of inflation. Domestic borrowing exerts upward pressure on lending rates, which could result to credit squeeze harmful to the recuperating economy. On the other hand, foreign borrowing can lead to an appreciation of exchange rate, reduced prices of imports, and increase in exports, alongside the risk of putting future strain on the economy through debt servicing costs. Another option, through a rundown of foreign exchange reserves is limited by the size of those reserves and entails an appreciation of exchange rates with possible associated risk of capital flight of payment crisis (Fischer and Easterly 15). Earthquakes and floods are the most common natural disasters in turkey. Their impacts on the economy are sometimes devastating due their intensities. For instance, the 1999 two devastating earthquakes hit the nine most productive provinces which account for over 50% of the country’s manufacturing activities, over 47% of all business ventures in the country and cater for close to 50% of all the jobs. This created immense losses in the economy in terms of job losses, reduced exportation, stalled manufacture of essential commodities and a lot of pressure on the government for services (World Bank 33). The relatively frequent occurrence of disasters in turkey has however made the nation invest in emergency preparedness and mitigation measures, which have resulted to reduced economic hardships and sometimes-negligible impacts on economic growth (Pelling 111). Conversely, predictable flooding and dry seasons have been used for economic advantage of agricultural zones. In the 1960’s, the country deliberately moved many agricultural processes to the western sides including sugar cane where drier conditions assured higher sugar content. The wide spread cultivation of deep-water rice is usually encouraged for area that are predicted to be hit by flooding in the process making the disaster become productive. Forecasting and predicting of disasters plays an important role in averting immense impacts. Theoretical forecasting has seen the economic development of the country remain uninterrupted especially by in the case of flooding. To some degree, it is possible to respond to disasters as they evolve by reflecting their slow onset. Such predictions usually help the Turkey government to advice farmers on water usage, the type of crops to grow and the ways to avoid losses. Short-term cyclone warnings issued by the government have helped the local residents move to safer cyclone shelters, salvage belonging as well as cut tree branches to avoid massive losses. However, earthquakes have been the biggest threat to the country since they are hard to predict. Even in the very developed countries like Japan and the United States of America, provision of effective warning alerts is not easily achievable since the seismic movements are instantaneous (Kunreuther and Useem 157). Owing to the large geographic area and a relatively strong economy, recent natural disasters did not widespread short-term impacts on the national aggregates. These include GDP, balance of payments, and rate of investment in the country. On the contrary, their effect was felt in terms of foregone opportunities at the national level despite the serious havoc locally. However, the occurrence of disasters in some areas also causes relocation of investment to areas that are less prone to them, which creates localized impacts since the national level economy remains unchanged. Large geographical size of the country means that the effects of natural disasters cannot cripple the whole country at once. Therefore, the unaffected areas support the suffering ones by providing for food supplies, as well as relocation zones for the displaced. This has been the case in Turkey where area far from the coast lines are hardly hit by earthquakes, hence provide continued supply of the economic services to the rest of the country. The same case applies to the high altitude areas, which continue agricultural production even in times of flooding. Turkey’s economic structure exhibits a high degree of dualism with large capital-intensive extractive sector, which feature significantly, but has a links to other sectors of the economy. The impact of these disasters on the economy has always been based on the impact it has on the extractive sectors. Massive earthquakes especially those experienced in the year 1999 had intense destruction of infrastructure in this sector leading to massive economic losses and a decline in the country’s economic growth for a few years that followed reconstruction. For instance, before the disaster, agriculture accounted for over 50% of the country’s exports, but after the disaster, investment priorities focused more on the industrial and mining industries, which today account for the greatest percentage of exports for the country. Smaller magnitude disasters including the earthquake experienced recently in the month of October, as well as floods and several other disasters over the last decade had small impact on the extractive sector of the economy and therefore did not cause any significant changes in the economic development of the country. In all these disaster situations, there has been relative retention of the import-export balance at a constant level meaning that there was insignificant alteration in Turkey national revenue generation from taxes. Due to the extractive mining economy of the country, it has always had surplus to cater for such disasters without having to make redeployment of already planned budgetary allocations. In the wake of the earthquake, the country being a bigger exporter than it is an importer, the resultant loss in production of such commodities as automobiles, agricultural produce and steel was well offset by the increase in the prices of the same commodities. This phenomenon is typical of the Japan situation after the recent earthquake and tsunami, which disrupted the country’s manufacture and export of motor and electronics leading to their market scarcity and hence higher prices. Foreign assistance in the wake of devastating earthquakes has seen the country make quick recoveries and refocus its economic development without incurring deep hitches. International development facilitators including the World Bank and the International Monetary Fund (IMF) as well as assistance from developed countries and trade partners in the European Union and the United States of America contributed towards helping meet short-term response measures. This meant that government spending on the intervention process was minimized as the country came back to life. The economy of Turkey has always maintained a growth in the economy backed by many export earners than their import spending. This aspects of the economy have enabled the country realize an offset of the decline in production by the higher prices that the shortfall causes. The country’s reserves especially for mineral and agriculture based exports, a factor of preparedness, has seen the country maintain it export earning and maintain its markets even when disasters disrupt its production of such commodities. On occasions, disaster related reinsurance inflows have further boosted the country’s balance of payment adding to its resilience and maintaining economic growth at constant levels as before the disasters struck. Compensation to private owners of industries and companies ensures that they go back into businesses almost immediately at no increased debts hence their businesses are able to pick up easily, in the process ensuring that the effects do not spill into the long-term aspects of the economy. In conclusion, the economic development of Turkey does not exhibit clear impacts of natural disasters whether positive or negative. In the short term, the economy has always been affected by the disasters’ but this negative effects are not reflected on the overall economic development in the long-term because of offsets occasioned by reconstruction interventions. As discussed earlier in the paper, the large size of the country geographically, its vibrant dual economy, and considerably well developed warning and response systems have worked positively in building the resilience of the country in disaster situation. The negative impacts on the economy as well as the positive ones in respect to natural disasters seem to create offset effects leading to negligible if any impact on the country’s economic development. The researcher is of the opinion that the real impact of natural disasters on the economy of Turkey is not clearly distinct and can be only determined by isolation of the various aspects of the economy at local levels. The long-term aggregate effect on the national economic development is ambiguous to determine since the economy has a cushioning mechanism that has helped maintain a stable growth in the economy as discussed earlier. Work cited Alcira, Kreimer and Margaret Arnold. Managing disaster risk in emerging economies, London: World Bank Publications, 2000. Print. Charlotte, Benson and Edward J. Clay. Understanding the economic and financial impacts of natural disasters. London: World Bank Publications, 2004. Print. Howard, Kunreuther and Michael Useem, Learning from catastrophes: strategies for reaction and response, New Jersey: Pearson Prentice Hall, 2010. Print. Madan, Kumar. Natural and Anthropogenic Disasters: Vulnerability, Preparedness and Mitigation. New York: Springer, 2010. Print. Pelling, Mark. Natural disasters and development in a globalizing world. London: Routledge, 2003. Print. Rashid, Ergener and Reşit Ergener. About Turkey: geography, economy, politics, religion, and culture. New York: Pilgrims Process, Inc., 2002. Print. Read More