Haiti reconstruction costs could reach US$ 14 billion

16 February 2010

A new study by the Inter-American Development Bank (IDB) estimates the cost of Haiti's reconstruction following the magnitude 7.0 earthquake on January 12 could be between US$ 8 and US$ 14 billion, making it proportionately the most destructive natural disaster of modern times.

The study by IDB economists Andrew Powell, Eduardo Cavallo and Oscar Becerra is a preliminary estimate of the potential cost of rebuilding the country's infrastructure - homes, schools, roads, ports and airport, using simple regression techniques employing data from past natural disasters and their damage estimates.

The study takes into account several variables including the magnitude of the disaster, the number of fatalities, and the affected country's population and per capita GDP.

A detailed accounting of the cost of reconstruction will emerge in coming months as a full Post Disaster Needs Assessment is completed, said a statement by the IDB.

But the new IDB study indicates the cost is likely to be larger than anticipated.

The study calculates damages assuming either 200000 or 250000 dead or missing (as of February 11, the Haitian government had reported 230000 dead).

The IDB study calculated a base estimate of US$ 8.1 billion for a 250000 dead-or-missing toll, but estimates this figure is likely to be at the low end and concludes an estimate of US$ 13.9 billion is within the statistical margin of error.

While the results are subject to many caveats, the study confirms the Haitian earthquake is "likely to be the most destructive natural disaster in modern times", when viewed in relation to the size of the Haiti's population and its economy.

In this respect the Haiti earthquake was vastly more destructive than the Indonesian Tsunami of 2004 and the cyclone that hit Myanmar in 2008. It caused five times more deaths per million inhabitants than the second-ranking natural killer, the 1972 earthquake in Nicaragua.

The study concludes the scale of the damages will require unprecedented coordination among the multiple bilateral, multilateral and private donors. To ensure the efficient use of billions of dollars in reconstruction funds, for example, individual donors may need to surrender the kind of control and conditionality they typically demand of projects they finance.

This will in turn require "extraordinary mechanisms" to ensure transparency and accountability.

A separate as yet unpublished study by Mr Cavallo and other economists indicates countries hit by disasters on this scale suffer an economic setback that can take decades to reverse.

In several such countries, investigators found that even with big inflows of outside aid, GDP per capita was up to -30% lower 10 years after the disaster than it would have been if the country had been spared.

"Of course this does not necessarily mean that aid does not work, perhaps the negative growth effect would have been even worse if aid had not increased," the study said.

"However, this does underline the challenge ahead for Haiti and for the international community attempting to support the country.


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