Some months ago the headline for this column read ‘Could
things get any worse? This was after the Bali bombing and
SARS and I suggested that while things could hardly get worse
than they were at the time there was always the possibility
of a further calamity such as a volcanic eruption, major earthquake
or tsunami. Well, the great earthquake and tsunami have come,
although mercifully this time Bali was spared. The purpose
of my original question was not to create undue concern but
to remind readers of the importance of planning and of being
prepared for all eventualities.
What if the Tsunami had hit Bali?
The immediate consequences hardly bear thinking of. Those
living close to the coast and in low-lying areas may not have
survived. While survival and humanitarian concerns are uppermost
in our thoughts the concerns of this column are the personal
financial implications of such a disaster. On this score how
would you have fared?
Would you have been protected?
Let’s say you survived but were seriously injured. If
medical evacuation were critical would you have insurance
cover to fly you out? If you have medical insurance it may
be worth checking the small print to ensure there is no clause
that would exclude you from cover in this instance but the
chances are you would have a better chance of making it to
safety than if you had no insurance. Expats in Bali who were
killed or injured in the Bali bombing were in fact covered
by their insurers in all the cases I am aware of. If there
is a massive international aid effort you may get out under
their auspices but you could still be faced with a huge bill
when the dust has settled.
What if you did not make it?
If you did not survive and you are the family breadwinner,
what would have been the financial impact on your family?
Do they have sufficient assets to live comfortably for the
rest of their days? If those assets are in Bali would they
still be worth what they were before the disaster? If the
answer is no, then only significant assets outside the country
or a substantial amount of life insurance would ensure your
family would have a future without severe hardships. Getting
life cover for expats in Indonesia and other parts of Asia
is becoming more difficult, by the way. Several offshore international
life companies have stopped accepting new applications. Friends
Provident is the latest. If you already have cover with one
of these companies however, the policy is likely to continue
to be honoured. If you do not have any life cover then it
would be wise to act soon.
Would your business have survived?
Many of you I know have businesses close to the seafront in
Kuta and Sanur. As in Phuket there would have been nothing
left after a similar tsunami. Even if you had resources to
rebuild, how long would it be before the tourists came back?
If the Bali bombing or SARS is anything to go by you would
be looking at a couple of years. Even if your business suffered
no physical damage, if you rely on tourism for your income
you would be faced with the same problem.
Could you fall back on your offshore assets?
It is at times like this that it becomes so essential to have
some assets outside the country. If Indonesia is in distress
you may find that once you are out of the country having a
bank account here or a local credit card is of little use.
During the time of the Asian financial crisis and the Jakarta
riots I recall a client telling me his Jakarta-based Amex
card was refused in Singapore. Having an offshore bank account
and related credit or debit card is a must for all expats.
How much do you need to open a typical account? At least US$5,000,
preferably more. You would also need to provide a reference
from your existing bank and prove your residential address.
But once you have such an account you can normally access
it anywhere in the world, including via the Internet.
Do you need to review your strategies?
Indonesia and particularly Bali has taken many severe knocks
over the past seven or so years. Like many of you I have lived
through them and survived. We don’t give up easily,
but to be able to carry on we must have strategies in place
to protect us against the unexpected. Insurance is a must.
Having an offshore bank account is a must. So is avoiding
the temptation to put all eggs in one basket. The island of
Bali offers great business opportunities. But if things go
wrong it is comforting to know that our risks are insured,
that we have access to funds outside the country and ideally
are building up financial assets such as pension plans in
jurisdictions where we know our hard-earned savings are safe.
As I write this I am actually on holiday in the UK, watching
the tragic events in Asia unfold on all the TV news channels.
I am sure those of you in Bali right now must be thinking
how fortunate you are that the tsunami spared the island.
Could it happen to Bali? The geologists will tell us it could;
the same fault line that spawned the tsunami extends way to
the south. It could break again, affecting Java and Bali.
When? No-one knows; it could be this year or it could be in
a hundred years. It may not happen in our lifetime and we
should not let such concerns rule our lives. But we should
still plan so we are reasonably prepared for the unexpected!
Colin Bloodworth is a Senior Consultant with Financial Partners
International. The views expressed are his own. If you have
any questions you are free to contact him at Colin.Bloodworth@financial-partners.biz
