Disaster risks threaten growth prospects
Developing Asia should not only be wary of slowing global demand and trade tensions as threats to its economic growth prospects. Disaster risk from natural hazards is a growing peril to the development and prosperity in the region, and the consequences tend to be more severe in developing countries affecting poor and marginalized people disproportionally.
New research produced as part of the Asian Development Outlook 2019 says developing Asia urgently needs to build its resilience before catastrophe strikes through better planning, setting aside government budget and encouraging insurance cover as the region faces ever-higher disaster risks.
The report focuses on disasters that emerge from natural hazards, including severe weather events, geophysical disturbances and epidemics. They can occur suddenly with little or no warning, or they can build slowly over the span of days, weeks, months or even years.
“Four out of every five people affected by natural hazards live in Asia,” notes ADB chief economist Yasuyuki Sawada. “Asia has led the way on disaster risk reduction efforts in recent years, but more action is needed to tackle both vulnerability and responses at the national and the community level.”
From 2000 to 2018, developing Asia was home to 84% of the 206 million people affected by disasters globally on average each year. With nearly 38,000 disaster fatalities annually in that period, the region accounted for almost 55% of 60,000 disaster fatalities worldwide, and it suffered 26% of the US$128 billion in economic damage. In Asia, 82% of disasters ensued from extreme weather events such as floods, storms and droughts.
The immediate impact of disasters on the local economic activity can be substantial. The report notes that new evidence on the economic impact of tropical storms in the Philippines shows that each of these events reduced the local activity in that year by 1.7% on average but by as much as 23% after the most severe storms.
On the one hand, rising incomes enable communities to cope with disasters. On the other, rapidly expanding coastal megacities, for example, create greater exposure to natural hazards. As the frequency and intensity of extreme weather events worsen because of climate change and associated sea level rise, coastal areas and island states across Asia face increasingly dire threats.
The report urged countries to continue to reinforce disaster risk planning. Climate-friendly and disaster-resilient infrastructure is particularly cost- effective in reducing future disaster-related losses. This could include better water resource management to deal with droughts, earthquake-safe community buildings and rebuilding mangrove forests to mitigate coastal erosion.
Developing Asia would also benefit if governments routinely set aside funds to be mobilized in case of disaster as well as increased use of credit and insurance, particularly through risk transfer products and re-insurance, to allow for a broader pooling of risk.
National efforts should be complemented by action at the community level since investments in the likes of community waste management can build resilience while the community is the first port of call for support and local knowledge after disasters strike.
The report also emphasizes the importance of having an insurance coverage. Across Asia, including Japan, just over 8% of catastrophe losses since 1980 were covered by insurance. Recent years have seen an increase in programmes that offer insurance coverage, especially across developing Asia.
New studies show that two-thirds of them offer micro-insurance to cover agriculture losses, and over 80% depend on subsidies or other financial support. The benefits of insurance are clear: pooling risk to preserve human welfare, facilitating investment by containing risk, and making post disaster support more predictable.