Country Paper

Professor Khanal
Econ-412
4/26/17
By: Ryan Patev and Zack Hamel
Introduction
Natural Disasters have crippled the growth in the parts of many countries all across the

world. One region that is affected most by these occurrences is the Asian Pacific. Some of these

countries that are constantly affected by environmental problems include, Japan, Thailand, and

China. Looking deeper into these countries, it is clear that these events have hindered their

economies and slowed down their growth. Although unavoidable, if these events never

occurred, these economies could be very different because they would have had more money

to use to further grow their economies, rather than spending it on the rebuilding of

infrastructure. In this paper we will talk about how these events have impacted not only the

involved countries economies, but the global economy as well.

Japan
The first country we are going to cover is Japan. Japan was once the second largest

economy in the world. It was recently surpassed in the middle of the 20 th century by China, who

is still currently second. The reason for Japan's lack of growth is due to a series of natural

disasters that they have faced over time. An example of one would be the earthquake that

happened in 2011. It was on March 11, 2011, where a magnitude 9 earthquake hit Fukishima,

Iwate, and Miyagi. This earthquake was known has the Tohaku earthquake. After the

earthquake subsided, a massive tsunami hit the Fukishima Nuclear power plant. This led to a

level seven nuclear meltdown. In 2013, there was still 300 tons of nuclear waste being leaked

into the Pacific Ocean. In 2014-15, nuclear waste was still being found in their sea water. It also

led to hundreds of thousands of residents being moved from their homes due to the nuclear

waste. In 2015, there were still 250,000 people that were still living in temporary housing. The
estimated cost of damages was around $300 billion dollars which is around $25 trillion yen. This

makes in the most costly natural disaster to date, costing $250 billion more than hurricane

Katrina. The reported deaths was 15,891, but is upwards of almost 20,000 because of the

amount of people that were still considered missing at the time. There was also 332,395

buildings destroyed, 2,126 roads destroyed, 56 highways, and 26 railways. The infrastructure in

Japan was completely destroyed in the parts affected. And to this day they are still rebuilding

from this disaster.

Economically speaking, Japan was hurt pretty hard. Shortly after the earthquake that

same year in 2011, their economy was in recession and was slowly recovering. From the

earthquake stemmed many issues that affected the Japanese economy. The first was that, since

the power plant was put offline, there was a lot of power cuts throughout. 40% of their power

generation was stopped. This stunted businesses and their growth. Secondly, firms had to deal

with disruptions with their everyday activities. This was not only Japanese firms but also global

firms as well. They had to cope with a contaminated water supply, disruptions to their supply

chains, and transport. This caused companies like Honda, Toyota and Nissan to have to halt

production of their factories. Having contaminated water also led to farm areas being

contaminated so badly that the food could not be eaten. Milk and other vegetable products

were detained when trying to enter the use and were testing immediately for radiation. Other

industries such as tourism would be affected as well. The Japanese tend to travel to Hawaii on

vacation since it is so close by. Having no access to roads and railways meant that traveling in

and out of the country was almost impossible. Many people were also without a source of

income for quite some time because of these things. One of the largest reasons for Japans
economic struggle was that the demand for their exports will decline drastically. With a

damaged infrastructure, a broken supply chain, and weakness in Western Markets, Japan found

it hard to manage to stay competitive in global markets because of its currency appreciation.

Countries would simply look elsewhere for cheaper goods. With all of this money being spent

on Japan in disaster relief funds, it will be likely that the country will more than likely

experience a fiscal crisis soon enough. Of course, this will have a severe effect on their

economy. The government ran a fiscal deficit equivalent to 8.3% of GDP in 2011 and was a

forecasted 6.8% of GDP in 2012. Japan's public debt is expected to rise to over 225% of GDP by

the end of 2016. With this debt increase its no surprise that Japans economy dove.

Now in 2017, Japan has recovered from the earthquake and has returned back to its

growing ways. This is because of Shinzo Abes economic policies. Under his policies he has

managed to lower borrowing costs, weaken the yen and lift share prices. Despite all of the good

things, Japan has some issues that need to still be dealt with. For one, Japan's core workers

cannot easily be fired because their skills and status in a firm are not transferable elsewhere,

which limits their bargaining power. Having one dimensional employees is a problem. A flexible

workforce is key to having a successful economy. Secondly, corporate tax rates are too low.

Corporations are hoarding their large sums of profits and pocketing them. The last problem is

that real wages have declined. Some employees feel like they are being paid too little for how

much work that they do, leading to other issues. If these issues are solved sometime within the

near future, barring that nothing terrible like the Tohaku earthquake happens again, the

Japanese economy should be on the upswing.

 Looking at this chart, it shows Japans annual GDP growth rate. In 2011-12 when the

earthquake struck, you can clearly see that their growth rate was hurt. It went from around 4%

annually to -1%. Although there could have been other driving factors, it is clear that the

economy saw a decline in 2011-12 after the earthquake happened. This decline is due to the

lack of trade that Japan could have done because of the destroyed infrastructure. Because of

these events, Japan could have been passed by China, the next country we are going to look at.

China

There have been many countries that have risen to great economic power, China being

one of the fastest growing economies in the world. Although China has the second largest

economy in the world, that doesnt necessarily mean China is perfect. China and much of the

other Asian countries like Japan and Thailand, are faced with environmental impacts that
greatly affect their economies, as well as natural disasters such as Typhoons, Earthquakes,

Tsunami, and massive floods.

China has faced some horrific natural disasters that destroyed land, killed thousands,

displaced millions, and had a great impact on China's economic growth. When these incidents

happen its affecting millions of people since Asia has the largest human population of any

continent, there is no wonder these natural disasters have claimed more lives and done more

damage than any other around the world. China experienced a serious famine that hit northern

China during the years of 1876-79. This famine came on after a serious drought, The provinces

of Henan, Shandong, Shaanxi, Hebei, and Shaanxi all saw massive crop failures and famine

conditions. Nearly 9 million people died due to the lack of crop production as well as to the

famine that came with it. China experienced a massive flood in 1931 named the Yellow River

Floods, this massive flood resulted in 20 million acres of farmland being destroyed making the

agriculture industry, and China's economy to take a massive hit. The Yellow River was one of

China's worst floods that killed nearly 4 million people, it was caused by overuse of farmland

which lead to the soil not being strong enough to hold the weight of the Yellow River at bay,

not only that but the soil in the river basin was baked hard after years of drought.

Not only has Chinas economy been affected by things such as drought, famine, and

massive floods, its also taking its fair share of devastating earthquakes. China's most

devastating earthquake was that of Shaanxi Earthquake, it killed nearly 830 thousand people, it

was said to be the deadliest earthquake to ever be recorded. Many of the victims lived in

underground homes (yaodong), tunneled into the loess; when the earthquake struck, most

such homes collapsed onto their occupants. The city of Huaxian lost 100% of its structures to
the quake, which also opened vast crevasses in the soft soil and triggered massive landslides.

Modern estimates of the Shaanxi Earthquake magnitude put it at just 7.9 on the Richter scale -

far from the most powerful ever recorded - but the dense populations and unstable soils of

central China combined to give it the largest death toll ever. This earthquake killed many of

Central Chinas labor force when it happened, causing China's labor production to go down,

which caused businesses to leave China and find other countries that could provide cheap

labor. This wasnt the only destructive earthquake China has faced thats affected its economy

in such a way, there was the Tangshan Earthquake back in 1976 in Northeastern China which

killed around 700 thousand people, displacing thousands of more. The bustling industrial city of

Tangshan, pre-earthquake population 1 million, was built on alluvial soil from the Luanhe River.

During the earthquake, this soil liquefied, resulting in the collapse of 85% of Tangshan buildings.

As a result, the Great Tangshan Earthquake was one of the deadliest quakes ever recorded.

With China's over population forcing its people to build literally on top of one another and with

poor building standards it can lead to devastating result which affect the emerging market in

drastic ways. The city of Tangshan as stated above was a bustling industrial city for China

creating good such as steel, railway development, it was also heavily devoted to mining.

China's capital city Beijing became hazardous, when its air quality became so bad that it

was actually poisonous. This was a wakeup call for the Chinese government, but was it too late

to do anything? The damage had been done, and it was going to cost China big. The World Bank

estimated in 2007 that, the pollution caused Chinas GDP to drop by 5.8% due to premature

death, health care costs, and material damages. It was estimated that the air pollution in Beijing

killed at least 700 thousand people per year. A 2012 MIT study estimated that air pollution in
2005 cost the Chinese economy $112 billion in lost labor and healthcare costs, roughly five

times higher than it was in 1975. Not only has there been air pollution thats because

premature deaths as well as drastic effects to the economy theres also, water pollution, and

soil pollution. According to the Chinese vice minister of environmental protection, the water

quality in five of the nine bays along Chinas coast was extremely poor. The Chinese

environmental protection agency put out monitoring stations along major rivers, showing that

40% of the rivers along with 55% of all underground water supplies to cities were heavily

polluted, on top of that 300 million rural residents dont have access to clean water. With the

lack of clean water, it's causing the soil that crops are being grown on to be infertile causing the

agricultural industry to yet again take a massive hit bringing down China's GDP and ability to

compete in foreign trade. With China's air quality being so poor in its major cities including its

capital its affecting the labor force as mentioned before and causing premature deaths cutting

down the working force.

China has always developed organic agriculture and it has rapidly increased within the

past decade, this this comes many issues with crop failure. Now that we are in the 21 century,
st

weve be able to access technologies that will allow crops to grow almost anywhere, grow fast,

produce greater amounts, etc. China's organic crops loss yield were assumed to be 10-15% of a

loss in their GDP, the decrease in production was a $320 million monthly impact. The Chinese

government believes its a good idea to cut farming inputs by another $518 million each month,

thats an annual loss of over $10 billion in just the agricultural industry alone. Chinas

environmental protection agency says The economic loss associated with the decrease in crop

yield from organic agriculture was valued at 1019.2 million USD, or 880 USD per ha. China's
biggest agricultural money maker is grain, the grain in dusty has taken one of the biggest hits

due to all the environmental issues from the floods, earthquakes, to high levels of pollution.

With an increasing number of people taking notice of whats going on with China's agricultural

sector with its stringent environmental regulation, there is also much concern about how these

regulations are going to affect China's growth of external trade.

With this graph above that shows Chinas annual GDP growth rate. You can see the direct

correlation between the natural disasters previously talked about. For example, in 2005 with

the air pollution in major cities being so bad, it killed 700 thousand people yearly which had a

major impact on their labor sector, which you can see a dip in their GDP growth during this

crisis, which lasted all the way till about 2012 when it was finally dealt with.

Thailand

Looking at recent occurrences in Thailand, the most recent one that had the most

impact was the flooding in 2011-2012. This massive flood took place in Central Thailand. The

floods were a result of a lot of rainfall that took place earlier in the year, which caused the Chao
Phraya River to flood. The flood affected a total of 60,000 kilometers (8,100 sq. miles) of land,

including 65 providences and affected 13.6 million people. The estimated cost of damages was

a total of $45.7 billion dollars. This flood not only affected Thailand, but it also affected global

supply chains. This is because of the fact that there was very little access to transportation at

the time, which meant that goods could not enter nor leave the country.

Thailand is infamous for having massive amount of flood damage, as well as being

affected by tsunamis. There was another massive flood incident that happened in 2010, in

Northeast, Central, and Southern Thailand. This time it was a flash flood due to massive

amounts of rain water flowing into the Bay of Bengal, and overflowing of the Chao Phraya

River, catching millions off guard. The massive amount of rain water that flooder the bay area

as well as the surrounding rivers, was caused by a tropical depression and the La Nia

monsoon. With this flood came the destruction of 25,000 villages, displacing 7 million people,

with total damages as high as $2 billion.

 The chart above shows Thailands annual GDP growth rate, and you can see the direct

correlation between these floods and Thailands GDP dropping. Thailands GDP is mainly built

around their agriculture, service, and tourism industry. When these massive floods come

through it affects all these sectors. Agriculture is affected due to the crops being displaced by

the high flowing water, and the pollution drought downstream. Their tourism sector is affect

from these floods since most of their high-end resorts are ocean side, or placed near these

rivers since they can be breath taking sights, not only that but it is also affected by the

destruction of crops, if you cant supply these resorts with food how can you expect to properly

feed your guests.

Conclusion

After analyzing all of these Asian-Pacific countries, it is evident that natural disasters

have had a severe impact on their economies. With Japan, the infrastructure was completely

destroyed from the tsunami. China had to deal with intense pollution. Thailand went through

massive amounts of flooding. All of these events left these economies stunted for quite some

time, some worse than others. When comparing events, the economy that was affected the

most was Thailands with a 7% decrease in their annual GDP growth. This is because the

flooding affected a larger area than the other disasters. This had a large effect on farming fields,

affecting their agricultural sector, which is a huge portion of exports in the country. Despite

this, Japan still had the natural disaster that costed the most out of these three countries.

However, their strong economy was able to bounce back after the event almost immediately. In

conclusion, natural disasters have a drastic impact on not just countries in the Asia Pacific but

any countries that they occur in. These disasters not only affected local economies but the
global economy as well because it hurts imports and exports. If better measures against natural

disasters were implemented, there could be the avoidance of the after effects.
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