UNCLAS SECTION 01 OF 02 MANILA 004241

SIPDIS

SIPDIS

DEPT FOR EAP/EX AND EAP/MTS
STATE PASS USAID
STATE PASS USDA/FAS

E.O. 12958: N/A
TAGS: ECON EAID EAGR SENV SOCI RP
SUBJECT: Typhoon Aftermath: Assessing Economic Costs

REF: A) Manila 4162
B) Manila 4149
C) Manila 4144
D) Manila 4139

Summary
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1. The death toll from Typhoon Milenyo may surpass 200 and the
estimated damage to property and infrastructure exceeds $40 million.
Losses from power outages and other constraints on economic
activity raise the costs even higher. However, with electricity
almost fully restored and streets cleared of debris, the government
is downplaying the typhoon's impact on economic growth and expects
to meet agricultural production targets despite heavy crop losses.
We are suggesting to contacts that this experience should inspire
more advanced planning for the next disaster. End Summary.


2. Manila is returning to normal six days after Typhoon Milenyo
(called Xangsane internationally). Electricity is restored to 97%
of the city's 12 million residents and the streets are mostly clear
as work crews continue to remove fallen trees, power poles, and
other debris. The countrywide death toll is approaching 200, with
another 22 missing as rescue teams work their way to more remote
areas cut off by flooding and landslides. The Philippine Government
and the private sector are refining their assessments of the
typhoon's impact on the economy and individual sectors, but
estimates of damage to property and infrastructure exceed $40
million.

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Sector-by-Sector Damage and Cost Estimates
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3. Agriculture: The Department of Agriculture estimated costs at
$24 million, including crop losses (over $10 million), destruction
of fishery pens, cages, and ponds ($5 million), and damage to
livestock, and fruits and vegetables. The worst-hit region was
southern Luzon where farmers lost significant amounts of bananas,
coconut, mangos, and papayas.


4. Power: According to Energy Secretary Lotilla, the cost of
repairing government-owned transmission lines, generating stations,

and assets of electricity cooperatives may exceed $1 million.
Losses by privately-owned Manila Electric Company (Meralco) will be
higher, but no estimates are yet available.


5. Manufacturing: Firms reported cases of broken windows,
collapsed walls and torn off roofs that resulted in wet equipment
and rain-soaked inventory. For those firms in government-run
industrial parks, the electricity blackout was not a problem as
these parks have reliable back-up power. Companies outside these
zones had to use their own generators. While large firms generally
lost no more than one workday, smaller firms without generators
suffered up to five days of lost production.


6. Construction: The heavy winds damaged buildings and floodwater
washed out bridges. The National Development Corporation estimated
structural repair costs to infrastructure and facilities at $8
million, though this figure is rising daily with new discoveries.


7. Back-office Operations: Call centers and business process
outsourcing firms were relatively unaffected and remained in full
operation, using high-powered generators to make up for electricity
disruptions. Manpower only dropped by 20-25% the day after the
typhoon. Firms had to pay overtime because the government declared
two non-working holidays.


8. Telecommunications: Fixed line service suffered little
interruption and was fairly reliable throughout Manila. Wireless
operations, however, were spotty during and after the storm because
many cell sites became misaligned and damaged, disrupting voice and
data transmissions and causing big losses for wireless providers.


9. Energy: Caltex had to close over 100 gasoline stations for 3-4
days because of debris and damage to canopies. Business is picking
up quickly, however, as customers move to replenish diesel stocks
for their generators. Chevron lost millions of dollars in expected
revenue from natural gas sales during the power outage.

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Government Downplays Impact; Billboards Targeted
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10. The government is downplaying the impact of the typhoon on the
economy. The Agriculture Secretary expressed confidence the sector
will meet its overall growth target for the year. The Economic and

MANILA 00004241 002 OF 002


Planning Secretary told the press he did not expect to lower the
country's economic growth projections. Although the financial
market was closed for two days, it has fallen only marginally in
response to concerns over the impact on economic growth. The peso
continues to climb higher against the dollar, causing exporters to
worry about price competition.


11. The most immediate after-effect of the typhoon is widespread
outrage against large highway billboards. Winds felled 20 signs
along the South Luzon Expressway and many more in the city,
including one that sliced into a stalled bus, causing many injuries
and at least one reported death. Members of Congress, press
editors, and the head of the Manila Metropolitan Authority publicly
denounced these billboards. The Senate is considering a bill to
restrict or abolish their use in defined areas. Opponents of major
restrictions include local administration officials who garner
significant revenues from the ads, billboard owners, and private
companies who depend on highway signs for marketing products.


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Comment
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12. Although the damage was widespread, and locally severe in areas
south of Manila, the country was spared from more calamitous impact
if the typhoon had been Category Four or Five. We are suggesting
privately to government and business leaders that Milenyo be used to
spur review of disaster plans to enhance their preparedness for the
possibility of a more powerful direct hit in the future.

Kenney