Haiti reconstruction cost may near $14 billion: IADB

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Tue, Feb 16 2010

By Pascal Fletcher

PORT-AU-PRINCE (Reuters) - The cost of rebuilding impoverished Haiti after last month's catastrophic earthquake could reach nearly $14 billion, making it proportionately the most destructive natural disaster in modern times, economists at the Inter-American Development Bank said on Tuesday.

Their study, which takes into account the magnitude of the January 12 disaster, the number of fatalities and Haiti's population and per capita GDP, raises previous damage estimates from the quake to between $8 billion and $14 billion.

The IADB economists said the Haitian earthquake was especially destructive when viewed in relation to the Caribbean country's population of nearly 10 million and to its already weak and impoverished economy.

The quake also struck the capital city Port-au-Prince, the center of the country's commerce, government and communications, destroying or damaging the presidential palace, the national cathedral, churches and government buildings.

In the IADB study, economists Andrew Powell, Eduardo Cavallo and Oscar Becerra calculated a base estimate of $8.1 billion in damages estimated for a 250,000 dead-or-missing toll.

But they estimated this figure was likely to be at the low end and concluded that an estimate of $13.9 billion damages was within the statistical margin of error.

The IADB study said the Haitian government had reported 230,000 dead as of February 10.

"While the results are subject to many caveats, the study confirms that 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," the IADB economists said.

They added that in this respect, the Haitian quake was much more destructive than the Indonesian Tsunami of 2004, whose damages were estimated at just over $5 billion, according to the study. Haiti's disaster also caused five times more deaths per million inhabitants than the second-ranking natural killer, the 1972 earthquake in Nicaragua, the study added.

But a detailed accounting of the cost of Haiti's reconstruction still had to be drawn up, it said.

"RETHINK" HAITI

The IADB study did not include in its comparison Hurricane Katrina in 2005, which slammed into the U.S. Gulf Coast, flooding New Orleans, killing about 1,200 people and inflicting heavy industry and property losses.

The U.S. National Hurricane Center estimated losses from Katrina at around $75 billion, but in comparison to

U.S. population and economic power, Haiti's earthquake hit a country that was already by far the poorest in the Western Hemisphere.

Led by the United States and Canada, foreign governments, multilateral institutions and private groups have been channeling tens of millions of dollars of aid into Haiti to help with its recovery. The IADB study said excellent coordination would be required for its most efficient use.

"Unfortunately, past experience suggests despite higher aid inflows after disasters, the growth impact of major disasters remains highly persistent," it said.

The study added that if not properly managed to avoid bottlenecks and distortions, the foreign aid inflow could hurt Haiti's private economic activity and export sector, which it said had significant growth potential.

"The international community will need to consider how best to support private activities to ensure the negative growth impact is minimized and to ensure sustainable growth once reconstruction activities start to diminish," it said.

Haitian President Rene Preval said on Monday after holding talks with visiting Canadian Prime Minister Stephen Harper that his government was discussing the creation of a common fund for Haiti's recovery to be managed in partnership with donors.

Dominican Republic President Leonel Fernandez has estimated this fund could total $10 billion over five years, although other leaders say a decade will be needed for rebuilding.

"We have to take this opportunity, not to reconstruct Haiti, but to rethink and remodel it," Preval said, adding any recovery program should bring development to rural areas.

Preval said care should also be taken to ensure that the huge influx of foreign aid did not compete with locally produced goods. It should be channeled toward the creation of jobs in activities like the clean-up of roads, so that people can earn money to buy the things they needed, he added.

(Additional reporting by Tom Brown in Miami; Editing by Philip Barbara)