Recuperation of economy after volcanic eruption in Mt. Merapi, Indonesia: a multiregional input-output analysis

Indonesia is in one of the disaster-prone points, the ring of re, which frequently suffer from natural disasters. Mt. Merapi volcanic eruption in 2010 was one of the catastrophic natural disasters, which caused the approximate economic damages of 3,628 trillion Indonesian rupiah. To recover the loss of different sectors of the economy, the central and regional governments allocates special budget for recovery and reconstruction. We assess the induced economic effects of Mt. Merapi eruption recovery scal support by using a multiregional input-output (MRIO) model. We utilize the state level data of the 2005 Indonesian interregional input-output table (IRIO) and the 2011–2013 volcano eruption restoration. Our results indicate that the effect of 2010 recovery budget for Mt. Merapi eruption contributed to the economy of the hazard-affected Yogyakarta Special Region. In addition, the forestry sector, other services sector, and construction sectors have a signicantly beneted from the induced output by scal support.


Introduction
The ring of re is one of the most natural disaster hotspots in the basin of the Paci c Ocean. The region formed 40,000 km (25,000 miles) horseshoe-shaped basin from South America to North America through New Zealand to the Bearing Strait, Japan. There are frequent occurrences of various kinds of disasters, such as earthquakes, tsunamis, volcanic eruptions, oods, droughts, landslides, and forest res. There are 452 volcanoes through the ring of re length, 75% of which are inactive (De Boer & Sanders, 2012).
Indonesia is located in the ring of re region with the world's most active volcanoes (United Nations, 1982). In this island nation, the number of volcanoes is around 147, of which 76 are active. The volcanoes are scattered along the Sumatra, Java, Celebes, and the Lesser Sunda islands. The volcanic eruption is one of the most alarming disaster in Indonesia and this eruption further tracked by massive damage to infrastructure and shifts in social organizations as well as long-term nancial impact (United Nations, 1982).
In Indonesia, the contemporary and one of the most devastating volcanic eruption, named as the Mt. Based on the appraisal results of the Regional Disaster Management Agency, Yogyakarta Special Region Province, the eruption of Mt. Merapi has caused damage and losses of 3,628 Trillion rupiah (Faturay, Lenzen, & Nugraha, 2017). Moreover, Regional Disaster Management Agency of Yogyakarta Special Region (Faturay et al., 2017) explained that as the impact of damage and losses exist long, the estimated total government particular budget, both central and local government, requirements for rehabilitation and reconstruction after the disaster of Mt. Merapi eruption in Yogyakarta Special Region Province amounted to 772.90 billion rupiah. This particular total budget allocated from 2011 to 2013.
Given Indonesia's geographical appraise and economic varying qualities, it is fundamental that economic, social, and natural assessments make utilize of regionally abrasive and comprehensive information. Therefore, it is necessary to estimate the induced output effect from the recuperation budget of the post-Mt. Merapi eruption and its interaction with other provinces and sectors in Indonesia using the multiregional input-output (MRIO) table of Indonesia 2005. The MRIO assessment as a helpful instrument for multi-regional and multi-sectoral effect assessment can de ne the regions as provinces and industries that play a key role in other elds and sections or in the nancial structure of Indonesia. The MRIO model is implied in this research in estimating the induced impact of the speci c government budget on the eruption of Mt. Merapi's rehabilitation and reconstruction (recovery).
Several earlier studies focus on the analysis of the catastrophe using the input-output model (i.e. Koks and Thissen, 2016; Li et al., 2013;Hallegatte, 2008), mostly assessing short-term or long-term disaster damage and losses. Koks and Thissen (2016) explained that most of the neighboring regions gain from the ood due to increased demand for reconstruction in the affected region. In other words, around 25% of the total increase in production is caused by disaster import which is the direct increase in production demand for the non-affected regions. Meanwhile Li et al., (2013) in their paper mentioned London's economy would recover approximately 70 months by applying some proportion ratio scheme assumption. Policies in transportation and health care are effective proportion scheme to recover economic condition after post-disaster.
Only a few types of studies that evaluate the post-disaster budget for rehabilitation and reconstruction.
Haque and Jahan, (2015) investigate expenses and failures, as well as investments in consumer spending and public/private investment to assist restore Bangladesh from the ood disaster. In addition, Haque and Jahan, (2015) found that induced loss has a large share for agriculture, manufacturing, construction, and housing services sectors. Consumer spending and public/private investment have a large impact on the manufacturing and construction sectors to recover from oods damages, while agriculture and housing services struggled to recuperate.
In this study, we evaluate the post-disaster budget for rehabilitation and reconstruction by identifying the induced output by this scal support. In Sect. 2, we describe the background on Mt. Merapi eruption and government recuperation budget 2011-2013. In Sect. 3, we explain the methodology and data in detail. In Sect. 4, we report the results and analysis, which containing outcomes for the natural disaster from the induced output of government restoration budget. We conclude and suggest the policy implications in Sect. 5.

Background
Page 4/26 2.1 Mt. Merapi eruption 2010 and government special budget for rehabilitation and reconstruction Mt. Merapi, 25-30 km north of the Yogyakarta Special Region's metropolitan area, and the surrounding area is home to approximately 1.6 million residents (Jousset et al., 2012). Figure 1 represents the geographic location of Mt. Merapi. It is located on latitude 7 o 32′30′′ South and longitude 110 o 26′′ 30′′ East and situated in a seduction zone between the Indo Australian and Eurasian plates. The volcanic activity in Sumatra, Java, Bali and Lesser Sunda guided by this disposition. It is known as the world's most active volcano with pyroclastic streams created by the collapse of the magma arches (Hariyono & Liliasari, 2018). The early warning system at Mt. Merapi is the same as at all volcanoes in Indonesia and based on the analysis of instrumental and visual observations. It includes four forewarn steps: Level I: It indicates the activity of the volcano is in the normal phase, with no indication of increasing business, even though poisonous gasses may threaten the area close to the carter.
Level II: set when visual and seismic data indicate that activity in level I is increasing.
Level III: This level de ned when a trend of increasing unrest is continuing, and there is a concern that a dangerous eruption may occur.
Level IV: established when the initial eruption starts (i.e., ash/vapor erupts, which may lead to a more massive and more dangerous outbreak).
During the four levels of the explosion, the cautious in level IV was set before the rst explosion and remained at IV through the end of the crisis. The vigilant level announced to the public through the National Agency of Disaster Management (BNPB) and the local governments (Jousset et al., 2012). Chronology of the eruption of Mt. Merapi based on the institute for investigation and development of mountainous technology, the CVGHM listed in Table 1. Based on the Law number 3/2007 concerning disaster management in chapter III about responsibility and authority, article 5 states that "The government and local government are responsible for the implementation of disaster." Hence, post-disaster subscriptions need to be done immediately to restore the condition of the community and the environment caused by the disaster that has occurred. According to the regional disaster management agency of Yogyakarta Special Region (Regional Disaster Management Agency of Yogyakarta Special Region, 2011), the Mt. Merapi eruption has caused damage and losses of 3,628 trillion Indonesia rupiah. In addition, the budget requires for rehabilitation and reconstruction estimated at 77,290 billion Indonesia rupiah -the rehabilitation and reconstruction (recovery) budget for this natural disaster allocated from central and local government.

Multiregional Input-Output (MRIO) Analysis
The MRIO analysis can be used to study the interrelationship between sub-national regions within a country and, initially, the theoretical basis of the interregional I-O model was developed by Isard, (1951) for the subnational level. Compared with recent developments of MRIOs at the international level, however, the number of up-to-date subnational MRIO tables and applications are much smaller (Többen & Kronenberg, 2015

Data
There are two kinds of data used to estimate the impact of the reconstruction and rehabilitation budget for Mt. Merapi eruption in 2010. First is the Interregional Input-Output Table of Indonesia 2005, which includes 30 provinces and 35 sectors, collected from Directorate of Regional Development of the National Development Planning Agency, (not published). Table 2 represents province name in Indonesia and Table  3 shows the sectors' classi cation of the MRIO table of Indonesia 2005.  Second is the recovery (reconstruction and rehabilitation) budget from both central and local (Yogyakarta Special Region) government 2011-2013. This budget is a particular budget that the government allocated to restore the condition after the eruption, where the data have been collecting from the regional disaster management agency of Yogyakarta special region (Regional Disaster Management Agency of Yogyakarta Special Region, 2011). Table 4 depicts the recovery budget 2011-2013 from central and local government which allocated by sectors after it aggregated into sectors' name in MRIO table. We got amount of the recovery budget from central and local governments respectively by items from 2011 to 2013. Each recovery budget is an accumulated amount over three years. Central government recovery budget is placed in the 3rd column in Table 4 and Yogyakarta government recovery budget is in the 4th column, and the nal column shows the total one. According to the MRIO sector classi cation, 35 sectors, some items in the budget should be combined into certain sectors. The 1st column represents sector names in the MRIO, Indonesia (2005) and the 2nd column shows items included in corresponding sectors. Two rows at the bottom show total amount of each budget and the each share to total recovery budget, meaning that about 90% of recovery budget came from the central government. This total amount of the budget, about 773 thousands million rupiah, is more than 5 times of Yogyakarta's local government investment in 2005. In addition, we can see that a large amount of central government budget, roughly 266 thousand million rupiah, went to Forestry (Environment (National Park)) and much of Yogyakarta government budget, about 54 thousand million rupiah, was spent in Land Transportation.   Table 5 is an independent ( nal demand) vector to be given for calculation of induced output in allover Indonesia that we want to get as direct and indirect impact of the recovery budget from Mt. Merapi eruption.

Results And Discussion
Mt. Merapi located in the Yogyakarta special province, and it erupted in 2010 after the alert of level IV was an announcement before the rst eruption. The eruption caused several damages and losses in many sectors. Due to this catastrophic, central and local government, in this term Yogyakarta special region government, attempt to recover the condition of the community and the environment caused by the disaster that has occurred by allocated particular budget to the natural disaster. This budget allocation by sector, as an independence vector of nal demand is adjusted to the sectors in the MRIO Table of Indonesia 2005, as mentioned in Table 5.
Calculating the induced output by the Eq. (1), we got Table 6 and Table 7. In Table 6, we show top 20 of the induced output over Indonesia by the recovery budget for the Mount Merapi eruption. In Table 7, we show the induced output in Yogyakarta province by the recovery budget for the Mt. Merapi eruption. In this table, the total impact by the recovery budget is 1,298,701 million Indonesian rupiahs. It increases the total output of the Yogyakarta Special Region province approximately 2.33% after the disaster occurred.
The highest induced appears for the forestry sector (21.66%), followed by other services and construction sectors, which are 17.75% and 10.41%, respectively. These three sectors' large results are reasonable because the allocation of budget was relatively large as Table 5 shows. For example, the substantial budget for these sectors is required for reforestation, repair facilities, and infrastructure that damaged around the Mt. Merapi area due to its lethality.
According to the Regional Disaster Management Agency of Yogyakarta Special Region (2011), forest restoration or reforestation is more centered on forest regeneration in the National Park Area of Mount Merapi, which has been impacted by vegetation damage events, animal migration (long-tailed monkeys, birds, tigers, pig forests, etc.) in the National Park Area, and ecosystem harm. This is because in balancing the wider regional ecosystem, the Mount Merapi National Park Area plays a signi cant role.
This region of approximately 6,000 hectares is a protected forest area where approximately 4,000 hectares is a vegetated area (approximately 1,128 hectares) destroyed by warm clouds, covered by volcanic ash, and burned during Mt. Merapi eruption.  Sectors like land transaction, and electricity, gas and clean water are infrastructure related sectors, which are necessarily required for the recovery. Interestingly, among many agricultural goods, animal husbandry is frequently traded goods for farmers in Yogyakarta. Trade, hotel and restaurant are also seen as necessary activity for their daily life.
This induced output from a particular government budget for Mt. Merapi eruption in 2010 has a prominent contribution not only for Yogyakarta special region province but also for other regions nearby, for instance, Central Java, West Java, Jakarta, and East Java. And has contribution in many sectors i.e. metal products industry sector in West Java, transportation and its repair industry sector in Jakarta, oil re nery sector in Central Java, and also plantation crop sector in East Java equal to 1.68%, 1.51%, 0.84%, and 0.61% respectively. petrochemical products and re nery oil to Yogyakarta as well as Jakarta provides transportation and its repairing, nancial services and trade services. Interestingly, not only neighboring areas of Yogyakarta but also some remote areas are connecting through the trade (Fig. 2). Papua and South Sumatera are geographically far from Yogyakarta, but they are playing important role of supply base of coal and rubber respectively. East Java also provides plantation crops and cement products to Yogyakarta. Our main ndings are, rstly, to recover Yogyakarta region from the disaster, Indonesia's central and local government put the recovery budget of totally about 773 thousand million rupiah over 2011 to 2013. This magnitude was more than 5 times comparing with Yogyakarta's local government investment in 2005 MRIO, Indonesia. Secondly, Forestry, Other services, and Construction sectors have received a signi cant share of induced effects (totally around 50% to the total effects) from the particular government budget to recover from the calamity because allocation of recovery budget was mainly concentrated into these sectors. Since forestry is a valuable natural resource in Yogyakarta and construction is necessary cost to recover from the disaster, this result would be reasonable. Finally, the induced effect of this budget also has the effect to other provinces, which has relatively strong connection with Yogyakarta Special Region province through their supply chains. For instance, nearby Central Java province, which supply re nery oil, and remote Papua province, which supply of coal and rubber, bene ted from this budget allocation.
Our ndings guide several key policy implications regarding the impact of the induced output of scal support in developing countries. The induced effect of the recovery budget is essentially bene cial for the damaged region. In addition, the supply chain network also induced potential bene t to nearby trading regions. However, this policy implications need to be evaluated scienti cally by taking the actual case study from other developing countries.
Our calculation in this research is based on the MRIO, Indonesia 2005 as mentioned above, but the recovery budget for Mt. Merapi eruption in 2010 was accumulated amount from 2011 to 2013. The economic structure change during the study period can create some inaccuracy in our results. However, the signi cance of this research is to show the magnitude of interdependency of disastrous region with other areas through their transaction. As we told above, an important policy implication is that not only nearby region of the ground-zero area but also some remote areas linking with there would receive unintentional repercussion effects from the recovery from the disaster, which might lead other regions' economic development. Our results are the typical example of the case and future study can focus on the impact of the induced output by scal support in developing countries. Figure 1 Study area in Indonesia