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Economic Impacts of Disasters in SE Asia and the Pacific

Charlotte Benson of the Overseas Development Institute, London, is currently undertaking a study on the economic impacts of natural disasters in South East Asia and the Pacific, with financial support from the UK Overseas Development Administration. The study includes three case studies of Fiji, the Philippines and Viet Nam. A workshop to discuss the preliminary findings of the study was held at the Asian Disaster Preparedness Center (ADPC) on 2-3 December 1996.

The basic aim of the study is to improve the understanding of the economic impact of natural disasters and identify appropriate strategies to reduce such impacts. Economic costs of disasters are commonly categorised as 'direct' costs, 'indirect', costs and secondary effects. Direct costs relate to the capital cost of assets, including infrastructure and inventories of finished, intermediate and raw materials, destroyed or damaged on actual impact of a disaster. These costs are sometimes conflated with crop production losses. Indirect costs refer to damage to the flow of goods and services. They include lower output from damaged or destroyed assets and infrastructure, loss of income due to damage to marketing infrastructure such as roads and ports and the costs associated with the necessary utilisation of more expensive inputs following the destruction of cheaper normal sources of supply. They also include the costs arising from increased incidence of disease as well as injury and death. Secondary effects concern both the short and long-term impacts of a disaster on overall economic performance, such as deterioration in external trade and government budget balances and increased indebtedness as well as the impact of disasters on the distribution of income or the scale and incidence of poverty. They can also include shifts in government monetary and fiscal policy to, for example, contain the effects of increased disaster-induced inflation or to finance additional government expenditure. Indeed, from an economic perspective, natural disasters can be perceived as an exogenous supply-side shock.

In practice, due to the difficulties in analysing economy-wide flow impacts combined with a preoccupation with the financial - as opposed to economic - costs of disasters, most assessments of disasters concentrate on the more easily quantifiable direct or stock losses. This approach is valid to the extent that the resulting data are used as a basis for the design of appropriate relief and rehabilitation programmes. However, a problem occurs when they are also used to inform broader economic policy makers about the nature and scale of natural hazard risks, to influence decisions on investments in disaster prevention and mitigation measures or to design disaster vulnerability reduction policies more broadly.

Reflecting the incomplete and biased nature of most "economic assessments" of disasters and despite their potentially significant economic impacts, disaster prevention and mitigation measures have been largely concerned with technical solutions - for example, to improve forecasting methods and engineering structures. Meanwhile, broader economic impacts of disasters have been largely ignored. Even in more disaster prone countries, natural hazards are often not specifically identified as an obstacle to sustainable development in, for example, national economic plans. However, there is increasing recognition of the need to redress this imbalance as a step towards developing more comprehensive mitigation programmes.

The current ODI step hopefully represents a positive contribution to this process. The three case studies undertaken as part of the study focus on the disaggregated impacts of natural disasters on various sectors of the economy and government policy, a fruitful exercise in terms of identifying lessons for reducing the economic impacts of future disasters via more appropriate preparedness, mitigation and relief. The studies attempt to consider if and why economic vulnerability to disasters has changed over time, how the economic consequences of disasters can be mitigated and assess the attention attached to natural disasters in overall policy making and planning. They also attempt to analyse whether disasters represent less a temporary blip in the development process, as is commonly perceived, and more a fundamental obstacle to development.

- Charlotte Benson

Charlotte Benson is a Research Fellow at the Overseas Development Institute, London, and Co-Editor of 'Disasters: The Journal of Disaster Policy, Studies and Management'. She is currently undertaking research on the economic impacts of natural disasters in South-East Asia and the Pacific and has previously been involved in similar work on the macro-economic impacts of drought in sub Saharan Africa.