The negative externality caused by the contamination of water in China

In September 2008, according to Chinese state agency, about 50 000 children had fallen ill because of drinking contaminated milk and four of them died. The cause of this terrible accident was the industrial chemical melamine in the milk which probably, came from water that was contaminated by industry waste of metal company. The scandal resulted in a recall of many Chinese milk products. The Chinese state agency claims that ill can be cured in about 15 days.
The negative externalities seem to be obvious. The sickness of the children must had engaged their parents in their houses, which had decreased the amount of labour and made the production more expensive. The other negative externality is the fact that the government has to pay for the medical treatment of the sick. The poisoning might also had some negative effects that will be reveal in the future, the problems with health might be permanent and might cause more externality costs. The torrential rain caused waste water, polluted nearby ponds and wells which might also create more externality costs.
What in my opinion the Chinese government should do is to organize free hospitalization for the poisoned people from the money that it gains from the companies whose irresponsibility caused the contamination of water. It should also invest some capital to the milk companies that used unintentionally the poisoned water, to save them from bankruptcy.
The government should also take a lesson from what happened and create more restrict laws that are going to regulate what should be done with dangerous industrial waste. If they already exist they should be executed in some better way.

JB