Earthquakes rattle economy far and wide

Earthquakes rattle economy far and wide

Amid the grief over the loss of more than 1,000 lives, the West Sumatra and Jambi earthquakes will mean enormous medium-term material losses with repercussions going beyond the borders of both provinces.

The cost of the losses will be in the trillions of rupiah, but the government says the real blow to the national economy will come from devastated infrastructure affecting availability of goods and services.

The State Ministry for National Development Planning has dispatched a team to verify the scale of the losses, starting with inventories needed to help those directly affected, as part of an emergency program.

“Emergency measures may take two months, then rehabilitation of infrastructure to get the wheels of the economy turning again,” Minister Paskah Suzetta said Friday.

Paskah said the government would launch a rehabilitation program that would include the erection of houses for those who lost homes in the quake. He said to rehabilitate a 30-35 square meter house would cost about Rp 1.5 million (US$156) per square meter, or about Rp 50 million per house.

“That is for an anti-quake house. Commercial buildings and hotels are not our responsibility but we will provide aid. We will prioritize people’s houses and infrastructure,” he said.

Under the 2010 budget law, the government is allowed to add up to Rp 24 trillion in spending for priority projects. The adjustment should be proposed to the House of Representatives within the first three months next year.

PT Asuransi Maipark Indonesia, an insurance company focusing on earthquake related insurance, estimates financial losses from destroyed buildings caused by the two earthquakes on Wednesday and Friday, both above 7 magnitude scale, could reach about Rp 2 trillion.

Maipark’s director Bisma Subrata said this only included the cost of destroyed buildings. The economic loss might be higher as Maipark’s simulation had yet to include the cost of destroyed infrastructure, bridges and power facilities, he said.

Bisma said that Jambi might have suffered higher losses than West Sumatra. “Based on our simulation, the economic losses in Jambi could reach Rp 1.2 trillion, while the losses in West Sumatra may reach about Rp 821 billion,” he said.

“Jambi suffered bigger losses because its position is closer to the epicenter of the quake ” Bisma said.

Provincial electricity distribution was severely disrupted in both provinces. Fahmi Mochtar, president director of state power utility PT PLN, said 220 transformers, 235 kilometers of medium voltage cables; 445 kilometers circuit of low voltage cables plus buildings and vehicles were destroyed or damaged.

“We estimate PLN’s total losses are Rp 169.9 billion,” Fahmi said.

As of Friday afternoon, PLN claimed that about 60 percent of its power generator facilities in Padang, the capital city of West Sumatra, were operating normally, but with repeated blackouts.

A cement plant belonging to PT Semen Padang has not been operating since Wednesday night due to power cuts. The factory needs up to 120 megawatt of power to produce 17.400 tons of cement per day.

The company said the factory would resume operations no later than 10 days after the quake, factoring in a commitment by PLN that it would channel power to the cement plant at the latest by Wednesday.

The company said the potential losses from the lost of production could reach up to Rp 120 billion.

Commodity traders says shipments of rubber and palm oil from Sumatra will be delayed for more than a week as access to the famous Teluk Bayur port in the city is disrupted, as well as plants, roads and buildings.

About 90,000 metric tons of palm oil set for October delivery is likely to be delayed, Bambang Aria Wisena, head of organizational affairs at the Indonesian Palm Oil Association, said as quoted by Bloomberg. Transport problems may delay delivery of 50,000 to 60,000 tons of rubber, Asril Sutan Amir, chairman of the Rubber Association of Indonesia, said. Indonesia is the world’s top producer of palm oil and second-biggest grower of rubber.

Financial services in banks are expected to be normal again on Monday, after days of disruption to the banking facilities in the city, the central bank said Friday. As part of its contribution, the central bank said it would restructure loans of debtors suffering from the quake.

BI deputy governor Muliaman D. Hadad said the restructuring was made possible by a regulation, issued in 2006, that allowed special treatment for debtors in disaster areas and affected by them.

As of August, loans in West Sumatra stood at Rp 15 trillion, or 1.1 percent of outstanding loans nationally. Savings reached Rp 16.2 trillion, or 0.9 percent of nationwide savings. The rate of non-performing loans (NPLs) in August stood at only 2.19 percent.

West Sumatra has 180 commercial bank branches and 227 rural bank offices.

DE Setijoso, president director of Bank BCA, said while some branches had problems with the conditions of their buildings, the bank had managed to shift operations to other branches.

“Internet banking and mobile banking are still working. Relatives in Jakarta can send money to families in Padang,” he said.

Bambang Setiawan, director of Bank Mandiri, said Mandiri had shifted human resources from damaged branches to other branches which did not suffer damage.

Sulaiman Arif Arianto, director of Bank BRI, said the bank was ready to restructure small loans.
“We are ready to restructure small loans. We expect it can improve the conditions.”

Rehabilitation costs Of previous earthquakes

Aceh & Nias (2004) : $2.1 billion
Yogya & Central Java (2006) : $560 million
Pangandaran (2006) : $200 million
Bengkulu & West Sumatra (2007) : —
West Java (2009) : $156 million

From various sources

Aditya Suharmoko and Alfian , The Jakarta Post , Jakarta

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