NCPA - National Center for Policy Analysis

An Emerging "Disaster Industry"

May 5, 1999

Every year, governments and international organizations spend tens of billions of dollars on both long-term relief projects and emergencies. A whole new industry is emerging dedicated to selling to relief and development agencies.

Some are specialized procurement brokers that for a commission of 5 percent to 20 percent will search for items needed by relief groups -- such as surplus field kitchens, bulletproof vests and concertina wire. Others, such as drug manufacturers, will donate surplus drugs nearing their expiration date, rather than paying to destroy them.

  • Much of the fragmented industry sprang up in Europe -- where it is still largely concentrated -- 25 years ago among companies focused on relief supplies to Africa.
  • An official of Tri-Med of Britain -- a procurement outfit which has its roots as a nonprofit -- says his company "has offices in 13 places in the world that are at the absolute bottom of everyone's tourist list."
  • In addition to sometimes giving away drugs, some drug manufacturers will sell to relief agencies at 12 percent to 30 percent of production costs -- about half what would be charged to commercial wholesale buyers.
  • During fiscal years 1992 to 1998, the U.S. spent $1.7 billion on disaster relief in the Balkans -- the chief trouble spot getting relief aid.

The United Nations estimates that three million people in the Balkans will need $625 million in aid this year.

Source: Barry Meier, "Supplies-Side Economics," New York Times, May 5, 1999.

 

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