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Bird flu has so far appeared to have had benign effects on
the Indonesian economy. But what would happen if the virus goes human
to human?
Over the past week, bird flu has again grabbed the headlines. Media
coverage has shifted from the missing Adam Air flight KI-754 towards
something even more elusive: avian influenza.
The beginning of the year saw bird flu-related deaths officially reach
60 since the virus first appeared in Indonesia three years ago. Renewed
efforts by the government to tackle the problem have also emerged, with
the ban on poultry in residential areas of the capital and the culling
of more than one thousand chickens, led by Jakarta's governor,
Sutiyoso, himself.
If one word could be used to described the country's media attention to
bird flu, it would probably be "occasional". This is in marked contrast
to the media coverage by the foreign press, which seems very concerned
about the many difficulties faced by Indonesia in tackling the disease.
From the perspective of many Indonesians, though, it seems reasonable
that bird flu be put way down on the list of problems requiring
attention. After all, the numbers killed per year while riding on
motorcycles (or even traveling on low-cost airlines) far exceeds the
average of 20 people per year killed by bird flu.
But how much attention does bird flu really deserve? How has bird flu
affected the economy and what potential damage could it unleash?
For the Indonesian economy, the most obvious effects of bird flu so far
are probably to be seen in poultry production and related industries.
Besides losses from the mass culling of poultry -- with compensation of
only US$1.40 per bird being paid -- the industry is faced by additional
pressure from the falling price of poultry. However, it must be
remembered, poultry production and related industries are very small in
size compared to the overall economy -- representing less than 1.5
percent.
Meanwhile, for the tourism industry, the 5 percent drop in foreign
tourist arrivals last year was accompanied by a drop in hotel revenues.
However, this may have had more to do with terrorist attacks than bird
flu.
So, as things stand at the moment, the impact of bird flu on the
economy has apparently been limited. Nevertheless, this is no excuse
for attaching little importance to the matter.
Scientists have long warned of the dangers of the H5N1 virus mutating
so as to be transmissible human to human. If bird flu goes unchecked
and such a mutation occurs, the economic consequences will be much more
profound.
Take the example of Hong Kong and Singapore, countries that were
significantly affected by the outbreak of airborne Severe Acute
Respiratory Syndrome (SARS) a few years ago. Tourist arrivals dropped
signicantly, and many people reduced non-essential travel and spending.
The wholesale and retail trades were also affected (though mildly),
while hotel and restaurant revenues contracted by a whooping 10 percent!
Luckily for Indonesia, tourism revenue only accounts for 2 percent of
GDP, half the level compared to Singapore and one-third the level
compared to Hong Kong. Furthermore, the revenues from trade, hotels,
restaurants and transportation combined represent less than 5 percent
of the economy -- not a very substantial figure.
Still -- although the statistics do not seem to suggest a particularly
devastating scenario for the economy in the event that bird flu goes
human to human -- it is important to remember that the trade, hotel and
restaurants sector provides jobs for almost 20 million people.
This represents nearly one-fifth of the country's labor force, with
those involved being mainly at the bottom end of the country's wage
scale. Layoffs caused by declining output from the sector could
substantially affect the incomes of those in the informal economy.
So, although a bird flu scare may not significantly affect the national
accounts statistics, the consequences on the ground are far less
certain. The have-nots, who are the majority but have a smaller share
of national income, usually bear most of the brunt of crises.
Accordingly, one should not underestimate the bird flu issue despite
the still modest number of fatalities. Recent rumors of bird flu among
cats and pigs show that we might just be a few steps away from human to
human transmission -- and the perils that lie ahead if bird flu remains
unchecked.
The the Jakarta provincial administration's move to cull and strictly
ban poultry from residential areas are encouraging developments.
However, it is not clear whether other regions around the country will
follow suit as this would probably be met by resistence. So, we will
now have to wait and see what local leaders and politicians fear most:
is it bird flu or being unpopular?.
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