Comments

Thank you Dan and Tess, It is great to hear stories of businesses getting back on their feet from those in Vanuatu. Thank you also for your efforts to publicise the impact of Pam - the various blogs written by Tess (one less than 24 hours after the cyclone hit), and photos taken by Dan that were featured by newspapers around the world (Dan's photo essay is available <a href="http://pacificpolicy.org/2015/03/cyclone-pam-in-pictures-2/" rel="nofollow">here</a>). Dan - just to clarify one possible misunderstanding: the RBV forecasts were made prior to Cyclone Pam and have not been updated. So I'm sure the RBV will also downgrade its estimates of future growth (as done by ADB), but those revised estimates have not yet been made public.

Hi Ilan, Thanks for the comment. Your points are well taken. I'm glad you emphasise the distinction between impacts on GDP and well-being It's an important point to make, as I intimated in the footnote. Your more specific argument, that spending on infrastructure reconstruction comes at the expense of spending in other areas, I think emphasises the important role that donors could play in supporting reconstruction. Even where funds are not directed specifically to reconstruction activities, broader support from donors to government - such as in the form of budget support requested recently by the Vanuatu Govt - can useful support reconstruction. We will have a better indication as to the resources Australia will provide in support of reconstruction in about a month when the 2015-16 Australian budget is released.

Dear Terrence, This is a very interesting piece. Notwithstanding what the reality may seem like, I think that there needs to be a more nuanced approach to understanding governance in developing countries , especially ones that have been subjected to conflicts. I am originally from Trinidad and Tobago , which is also the empirical focus of my phd work, and it is very difficult Sometimes to not see things as negavtive given the quantum of resources the country has and the present state of development. Deploying terms like 'good governance' and not scrutinizing their institutional and epistemological origins lead to the types of conclusions you've seemed to have drawn in this case. I can't help but sense the very paternalistic tone emerging from the writing; and the tenor seems very negative. I think this largely stems from the conceptual underpinnings of your examination of the Solomon Islands case. The term political economy seems to be used in a negative manner, whereas it actually represents the emoirical reality in all countries as they all have a political economy. Political economy in fact interrogates the historical, socio-cultural, political and economic processes that underpin their respective trajectories and it is neither negative or positive but just is the reality. If you would permit me to direct you to work undertaken by Mushtaq Khan, a professor of economics at SOAS, University of London, where I am currently doing my PhD. Khan is known for developing the concept "political settlements" defined as the distribution of organizational and political power between competing groups and classes. I think the problem emerges when one seeks to compare the empirical situation of a developing country with the criteria and requirements of the good governance. It is a serious mismatch and Khan and others outline why this is the case in their work. In fact along with Rodrik, their work suggest that "the evidence supports the claim that the most persistent types of state failure occur when institutions fail because of an inappropriate match between internal political settlements and the institutions and interventions through which states attempt to accelerate transformation and growth (Khan 1995; Rodrik, 2004)" (cited in Khan, 2004) It might be useful to take a look. I'm happy to discuss further and even explore our common interests in small island developing states. Best regards, Keston

Hi Tess, I agree that insurance is an underutilized part of the disaster risk management toolkit in the Pacific, and that PCRAFI is a useful experiment to look at the specific risk of emergency cash. It's not unheard of, however, for governments to consider blanket insurance coverage or protection schemes - although it is less prevalent in developing countries (Turkey has an earthquake insurance scheme; advanced countries like New Zealand's EQC and Japan's earthquake insurance scheme are also good examples where countries negotiate bulk re-insurance deals for blanket coverage). That said, that type of insurance is likely to be prohibitively expensive for small island developing economies, especially those in the Pacific, without some form of pooling, reinforcing your post's basic premise.

Tess, it is really is frightning to comprehend now figures are involved. Life is all about figures and thanks for sharing your analysis. I would very much hope the government take this much in depth analysis to their grasps. I would hate to think the countries future potentially appears to be shady for the economy. JB

Hi Sonja It is commendable of you to take time and deliberate a detailed response. You mention Rowan Callick's article at the end. Perhaps he should be alerted to your response so he can cross-check some of these facts that appear to be in dispute. Regards, Bal

Denis, I also look forward to reading your book. In 1997, with Bougainville slowly recovering from destruction and theft of property, I was involved in attempting to secure new two way radios for communities right across the region. Isolation, poor roads, lawlessness in some areas, challenged health and education services made the radios almost essential. Australian Aid, so we were told by officials, was not possible because the radios were to be placed in community headquarters which were church run institutions or parish centres. It seemed that there was a fear that the support would be used for evangelical purposes or at least might appear to be a contribution by Australia to evangelical endeavour. If there is a concern that the values of the religions, which provide communities with services, do not align with mainstream Western development values then there may need to be a review of Western development values. We have seen this throughout the history of PNG, officials or evangelists who see the need for local alignment with mainstream Western values as a prerequisite to receiving the cargo. There can be good reasons for this but when it is directed at a religion and not state it would seem unfair. If this principle were applied to secular institutions development workers would need to face the probability that they are providing support to institutions and officials showing very little practical signs of alignment with mainstream Western practice. Lawrence Stephens

Hi Matt, Thanks for producing this first assessment of the numbers involved. I think you rightly identified and highlighted a few key issues: (1) the disaster's financial damages will be very large; (2) aid is not going to be sufficient to plug the funding-for-reconstruction gap (if we can rely on past experience); (3) tourism sector is very vulnerable to both damage to infrastructure and changes in perceptions - experience seems to suggest the sector takes years to recover from similar shocks (see for example Christchurch in NZ or the Hawaiian Island of Kauai). You have included in your assessment the financial damage to stocks (the immediate destruction of assets), and flow (the decrease in GDP growth), but you have not included the direct impact on people, in terms of their well-being and livelihoods. As a classic example of the Broken Window Fallacy (from Bastiat's 1850 essay), disasters do result in short-term boost to economic activity during the period of reconstruction, but human welfare is clearly decreased by the need to spend precious resources on the reconstruction of physical assets. Research shows that in poorer countries and households this need usually comes at the expense of spending on non-food expenditure, such as education and health. As such, it can lead to long-term adverse impacts that can indeed "take Vanuatu back a decade of development." The key to preventing that, it seems, is externally-supported aggressive and rapid reconstruction. The Pacific Insurance Pilot Program (PCRAFI) and the mostly in-kind bi-lateral assistance from Australia and New Zealand are clearly vastly insufficient for that to occur. The international community's attention span is typically quite short, so it is also essential to speed up this process.

Hi Sonja, Thanks for taking the time to make this detailed response. I've fixed the typos you pointed out, and will leave the issues of substance to the author. Just a point not about this comment but to everyone considering contributing to this discussion: we very much welcome your comments, but, as per our blog and comments policy, we won't publish personal attacks. Regards, Stephen.

Thanks for this Matt, it is a thoughtful and important piece of work that will form part of the basis of what will need to be serious thought about the longer term future of economic development in this country. It is important that the people who actually know about Vanuatu contribute to this debate as it unfolds, not least so we can be of use to those people who don't have any understanding of the country's political climate, economic trajectory to date, cultural diversity, etc (a lot of whom seem to be here right now) but who are going to be making some very important decisions and seeking to advise and/or influence the Natuman government (and successive governments no doubt). Although the disembarkation of passengers from the cruise ship that docked in Vila on Wednesday was greeted with joy (by everyone even those of us who normally complain about cruise ships as we sit in gridlocked traffic) the impact on tourism more widely is already being felt. Staff at 2 of Port Vila's resorts have already been laid off - one of those properties will not reopen till December and the other has yet to disclose when it will reopen. Both Air Vanuatu and Virgin have revised their schedules, reducing the number of flights between here and Australia. There is a long road ahead.

Good write-up, Matt. Some people with a close view of the situation have suggested that we will move from about 2.5% growth to 'strongly negative'. As such, I suspect the RBV's prediction is too rosy, and the ADB's post-Pam estimate may be too modest. Govt. revenues are going to drop through the floor in part because of lower levels of activity, but also because of the tariff and tax holiday that GoV has announced on all materials and equipment needed for the rebuilding phase. A mitigating factor, however, is the speed with which the private sector has coped with the disaster. Digicel, TVL, UNELCO and other utilities/service providers are pretty much back in top gear, and retailers are benefiting from a short-term boom in hardware and related goods. Even wholesalers have benefited as GoV bought out pretty much the entire stock of foodstuffs in the country. None of this takes away from your point about the impact, but it will be interesting nonetheless to see how quickly the 'bounce' starts.

Thank you for the research about the number of foreigners coming to PNG to work and invest.