60414 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise MARCH 2011 ˇ Number 52 NE 010 ˇ Numbe 18 It Is Time to Factor Natural Disasters into Macroeconomic Scenarios Vinod Thomas Over the recent year, humanity has faced natural disasters of unprecedented magnitude and impact. However, governments and international aid organizations do not systematically plan for preventing and mitigating the effects of natural disasters, and macroeconomic scenarios seldom take into account the results of their increasing incidence, damages, and costs. Using evaluative lessons from the World Bank's and others' experience, this note highlights the urgent need to invest in climate change mitigation, disaster preparedness, early response, and postdisaster reconstruction. In the past year, the world has suffered natural disasters of ex- take into account the effects of their increasing incidence, dam- traordinary magnitude and impact. Devastating earthquakes in ages, and costs. Meanwhile, evaluative lessons from the World Japan, Haiti and Chile, and floods in Pakistan, West Africa, Sri Bank's and others' experience confirm the urgent need to invest Lanka, Brazil, and Australia have caused enormous human suf- in climate change mitigation, disaster preparedness, early re- fering and losses. Some 2.6 billion people have been affected by sponse, and postdisaster reconstruction. natural catastrophes over the past 10 years, compared with 1.6 Climate Change Mitigation billion in the previous decade. According to the International Monetary Fund, the costs of damages are now 15 times higher The frequency of hydro-meteorological disasters--especially than they were in the 1950s (IEG 2006a). 0ne estimate sug- floods and droughts--has dramatically increased over the last gests that the economic losses of the earthquake in Japan will two decades. Compared with some 150 disasters per year in the reach some 15 trillion yen ($183.7 billion) or 3 percent of Ja- 1980s, that number increased to more than 370 in the late pan's GDP. 2000s. The floods in Australia, China, Pakistan, Sri Lanka, and Despite the recurring nature of natural disasters, govern- West Africa and the heat waves in the Russian Federation dur- ments and international aid organizations do not systematical- ing 2010­11 wreaked havoc on lives and livelihoods. The ly plan for preventing and mitigating their effects. For example, World Bank estimated that $1 billion worth of crops were lost almost half of the countries borrowing from the World Bank in Pakistan, which paralyzed the country. for disaster response did not mention disaster prevention in Remarkably, using the same measurement criteria, the their development plans. Macroeconomic scenarios, even in number of nonclimatic--mainly geophysical--disasters report- countries that are regularly hit by natural catastrophes, seldom ed has not increased much during the same time. This notable 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise difference in trends does not seem to be the result of better re- governments need to adopt policies that reward people living in porting of floods today. One would expect any underreporting places that are less prone to disasters. Having poorly construct- to affect mainly the less severe disasters. However, the propor- ed housing further jeopardizes people's safety. For instance, tion of less severe flooding events (10­100 deaths) reported earthen houses fail after floods because they absorb water and within the total number of flooding events has remained prac- dissolve. Building houses with reinforced concrete, cinder tically constant during 1985­2008, at about 55 percent. block, or fired brick can protect walls from dissolving. A Canadian study in the journal Nature analyzed the in- Investing in early warning systems and actively using data crease in heavy rainfall globally from 1951 to 1999 and for the generated from such systems are critical to lessening and pre- first time matched observations with climate simulations, venting the effects of natural disasters. In Tajikistan, many peo- while also including the effects of man-made greenhouse gas ple live in areas particularly vulnerable to natural disasters. One emissions (Min and others 2011). Another paper, also pub- such area is around Lake Sarez, where inhabitants struggle with lished in Nature, forged a link between man-made climate landslides and floods. It is estimated that flooding caused by change and extreme floods in Britain in 2000, suggesting a dou- landslides could affect up to 5 million people living in sur- bling of risk (Pall and others 2011). Stott, Stone, and Allen rounding areas. In 2000, the World Bank financed the Lake (2004) reviewed data since 1851 and found that human influ- Sarez Risk Mitigation Project, which was designed to prepare ence has at least doubled the risk of a heat wave as bad as the and protect vulnerable settlements in the event of floods, mud- deadly European heat wave of 2003, which was at the time the slides, rock falls, and avalanches. The project installed a moni- hottest summer in at least 500 years. toring system and an early warning system, which are essential The growing evidence of the link between climate change to prevent a catastrophe. The system collects hydrological, me- and natural disasters stresses the need to address the root causes teorological, and seismological data in the lake area and enables of climate change. In this environment, approaches and solu- the monitoring of the most rock slide­prone bank and of the tions offered by economists can be highly influential. But dam on the lake. Because it is an automatic system, it reduces mainstream economic advice must stop seeing environmental response time and enables appropriate decisions and timely protection as a cost to growth and see it instead as an aid to sus- alerts to be made in the event of an emergency (IEG 2010a). tained growth. Growth models are also silent on subsidies pur- Early Response portedly used to speed growth, which include farm subsidies of some $150 billion a year and subsidies to fossil fuels of $650 Providing early response during an emergency is critical. How- billion a year worldwide, all of which encourage energy inten- ever, recent natural disasters have shown that development sity, emissions, and waste. agencies and governments are not fully prepared to face these Lessening the Impact disasters or ensure effective emergency response. In Haiti, Chile, and other countries, potable water could not be provid- Particular attention needs to be paid to environmental restora- ed to victims in a reasonable time, and emergency medical fa- tion. Environmental degradation is a man-made problem that cilities dropped offline just when they were needed most requires urgent action, both by policy makers and international (Thomas 2010b). This includes responding to basic needs, pro- aid organizations. For instance, wetlands provide a buffer against viding access to financial resources, and involving local commu- disasters, but 50 percent of wetlands worldwide have disap- nities and leadership. peared over the past century. Similarly, forests, which are impor- Responding to Basic Needs tant in preventing flash flooding and landslides, are shrinking. The World Bank has implemented a number of projects that In the immediate aftermath of disasters, relief efforts should target environmental restoration. A good example is the Viet- focus on responding to victims' basic needs, such as providing nam Coastal Wetlands Protection Project. The Independent food, water, and safety. Access to emergency supplies, potable Evaluation Group's (IEG) evaluation found that the project water, and safe shelters is key to restoring country capacity successfully balanced reforestation with the livelihood needs of and helping victims. For an orderly distribution of emergency the affected communities, which led to a reduction in coastal aid, it is important to involve local communities and govern- zone erosion by 40 percent and increased the coastline accre- ments, ensure there are no gaps in coverage, and enhance so- tion area by 20 percent. In total, 370 million trees have been cial cohesion. replanted along 460 kilometers of coast (IEG 2010a). Very basic help such as providing access to shelters and en- Special attention should also be paid to the allocation of hu- suring the safety of the affected population are vital and can man settlements and construction of higher-quality, durable have a major impact on the recovery process. IEG's evaluation buildings. Population growth and the tendency of people to live of the World Bank's support to natural disasters found that the close to economic centers exacerbate the effects of natural di- Bank has taken several approaches to providing shelter in emer- sasters by raising the numbers of casualties and victims. Thus, gencies, from building shelters and relocating victims to safer 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise areas, to facilitating self-help construction of temporary shelter Another way to provide victims with access to financial re- while simultaneously preparing to house the homeless with sources is to put in place income generation schemes through housing reconstruction components. One of the lessons employment initiatives, revising trade policies, or supplying learned from that evaluation is that, where possible, projects seeds and planting material. In Bangladesh after the 1998 should avoid setting up expensive temporary shelters, because floods, the Bank's project to give farmers vegetable seeds and people can help build shelters from the debris for a nominal tree seedlings helped restore the livelihoods of the survivors. fee. Also, using disaster-resistant construction techniques while Strengthening Local Capacity building the shelters can be not only safer for the displaced people, but may also set up a best practice that in the long term The manner in which relief distributions are managed either can affect people's construction choices (IEG 2006b). enhances community involvement in reconstruction or con- Another key factor during early response is the ability to de- strains it, fostering dependency and other undesirable conse- ploy experienced relief staff as early as possible. Historically, quences, such as the use of force, looting, rioting, and the firing there has been no clear procedure for ensuring that the right of weapons, which are much harder to quell after the fact than staff are assigned to lead such operations. The World Bank has to prevent in the first place. recently begun to develop a cadre of experienced disaster pro- Using local communities to manage early response and the fessionals. Additionally, it is important to ensure country own- postdisaster rehabilitation process has been effective. Besides ership over projects that target disaster relief and mitigation, in providing access to cash and credit lines to affected people, it is order to stimulate local governments and organizations to en- important to involve the communities in rebuilding to ensure hance their capacity to implement such projects. that local governments take responsibility for reconstruction efforts. A Harvard University study found that when relief is Setting a Realistic Time Frame for Recovery and Relief Efforts handled in a developmental manner, that is, building on local Governments, donors, and international relief agencies need to capacities, it has a significant positive impact on the recon- be realistic about the time it may take in any given country to struction process that follows (Anderson and Woodrow alleviate the initial effects of a disaster. It is not uncommon to 1989). reconsider the time frames initially envisioned for projects and IEG's evaluation found that allowing homeowners to re- programs, specifically if they stipulate postdisaster, long-term build their own homes rather than engaging contractors measures. For instance, during the response to the Gujarat works better. Positive outcomes of this approach were ob- earthquake, the United Kingdom's Disasters Emergency Com- served in World Bank projects in India and Turkey. In India, mittee increased the fund disbursement period from six most of the people who received funds to restore their houses months to the maximum of nine. Even then, the committee's after the floods were able to economize to build new ones on evaluation criticized this period as being too short and suggest- their own. Also, the houses that they built were well adapted ed a doubling to 18 months (ALNAP 2008). One successful to each family's requirements. Evaluation also found that proj- example of a long-term mitigation project is the China Loess ects that dealt with postdisaster housing were effectively and Plateau Project, which aimed to reduce vulnerability after the economically supervised by builders and masons rather than flood by building check dams, planting trees and greenery, con- engineers, at least regarding owner-built structures (IEG trolling gullies, constructing terraces, and so forth. This was a 2010b). successful project, but it took eight years to complete (World Bank 2003). Postdisaster Operations Providing Access to Financial Resources Postdisaster projects and operations need to include measures During the disaster recovery process, providing financial re- that reduce long-term vulnerability. Ensuring that govern- sources for affected people can positively affect their livelihoods ments think through and put in place effective mitigation plans and improve the overall economic situation of the affected area. is important for future responses. Evaluative lessons show that Cash support, emergency loans, and credits allow people to it is critical to reach an agreement on mitigation measures with- solve their immediate problems, survive the initial days and in the first three months, because the situation is still on the months after the disaster, and have a sense of safety and securi- political agenda. It is also better if the financing mechanism for ty. However, it is important that providing access to financial such measures is defined and locked in during the early negotia- resources does not negatively affect poor households in the long tions stage (IEG 2010b). term by heavily indebting them. IEG's evaluation found that Another important postdisaster effort involves solving the Bank project that aimed to help the victims of the Marmara land ownership issues. Where possible, land titles should be earthquake in Turkey proved successful because it mainly pro- regularized, and where such measures are not possible, alter- vided cash transfers for rent support, death compensation, and native means need to be put in place to ensure that land business compensation (IEG 2005). claims are not misused. The Bank's 2001 El Salvador Earth- 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise quake Reconstruction Project encouraged writing the names References of both men and women on land titles. A beneficiary survey ALNAP. 2008. "Responding to Earthquakes 2008: Learning from Earthquake of that project, conducted by IEG in 2006, found some com- Relief and Recovery Operations." http://www.alnap.org/pool/files/AL- munities where 50 percent of respondents reported that a NAPLessonsEarthquakes.pdf. woman was one of the legal homeowners and that, overall, 37 Anderson, Mary B., and Peter J. Woodrow. 1989. Rising from the Ashes. Boulder, CO: Westview. percent of the homes were wholly owned by women (IEG IEG (Independent Evaluation Group). 2005. Turkey Emergency Earthquake Re- 2006b). covery Project. Project Performance Assessment Report, Washington, DC. In Pakistan, the 2010 floods opened the door for land re- http://imagebank.worldbank.org/servlet/WDSContentServer/IW3P/IB/20 form. IEG's evaluative note highlights that the government of 05/07/15/000160016_20050715144818/Rendered/PDF/326760TR.pdf. Pakistan has a unique opportunity to consider reforms in the ------. 2006a. "Facts & Figures on Natural Disasters." http://www.worldbank. org/ieg/naturaldisasters/docs/natural_disasters_fact_sheet.pdf. existing land rights system and address the relationship be- ------. 2006b. Hazards of Nature, Risks to Development: An IEG Evaluation of tween landowners and the patwari, the local revenue official World Bank Assistance for Natural Disasters. Washington, DC. http://ln- who maintains land records at the village level (often the only web90.worldbank.org\oed\oeddoclib.nsf\DocUNIDViewForJavaSearch\ records) and the land and water rights nexus around landlords F0FCEB17632CB93485257155005081BE\$file\natural_disasters_eval- uation.pdf. and tenants (IEG 2010c). ------. 2010a. An Evaluation of World Bank Support 1997­2007: Water and De- velopment, Volume 1. http://siteresources.worldbank.org/INTWATER/Re- Conclusion sources/Water_eval.pdf. With the worsening effects of natural disasters, countries are ------. 2010b. "Responding to Floods in West Africa: Lessons from Evaluation." http://siteresources.worldbank.org\EXTDIRGEN\Resources\flood_note.pdf. paying a high price financially and in human suffering. Thus, ------. 2010c. "Response to Pakistan Floods: Evaluative Lessons and Opportu- finding solutions to climate change effects and establishing nity." http://siteresources.worldbank.org\EXTDIRGEN\Resources\ieg_ disaster mitigation plans should be seen as a part of growth pakistan_note.pdf. policies, not as an added cost. It is becoming crucial to focus Min, Seung-Ki, Xuebin Zhang, Francis W. Zwiers, and Gabriele C. Hegerl. not only on how to provide relief efforts in the immediate af- 2011. "Human Contribution to More Intense Precipitation Extremes." Nature 470: 378­81. http://www.nature.com/nature/journal/v470/ termath of a disaster, but also on understanding how to make n7334/full/nature09763.html?WT.ec_id=NATURE-20110217. the early response more effective, how to include long-term Pall, Pardeep, Tolu Aina, Dáithí A. Stone, Peter A. Stott, Toru Nozawa, Arno G. reconstruction plans in disaster relief efforts, and how to J. Hilberts, Dag Lohmann, and Myles R. Allen. 2011. "Anthropogenic streamline prevention and mitigation measures in national Greenhouse Gas Contribution to Flood Risk in England and Wales in Au- tumn 2000." Nature 470: 382­85. http://www.nature.com/nature/jour- policies. nal/v470/n7334/full/nature09762.html. Stott, Peter A., D. A. Stone, and M. R. Allen. 2004. "Human Contribution to About the Author the European Heatwave of 2003." Nature 432: 610­14. http://www.na- ture.com/nature/journal/v432/n7017/full/nature03089.html. Vinod Thomas is Director-General and Senior Vice President, Inde- Thomas, Vinod. 2010a. "Make Relief Networks `Disaster-Resilient.'" Miami pendent Evaluation Group at the World Bank Group. He reports Herald March 15. http://web.worldbank.org/WBSITE/EXTERNAL/EX- to the Board of Executive Directors and directs evaluation of TOED/EXTDIRGEN/0,,contentMDK:22501138~menuPK:4422727~ the activities of the World Bank, the International Finance Cor- pagePK:64829573~piPK:64829550~theSitePK:4422635,00.html. poration, and the Multilateral Investment Guarantee Agency. ------. 2010b. "Why Aren't We Ready for Natural Disasters?" The Huffington Post August 31. http://www.huffingtonpost.com\vinod-thomas\not-ready-for- Since August 2005, he has led IEG with a new mandate, natural-disasters_b_698799.html. strengthening the organization's independence as well as its en- World Bank. 2003. China--Loess Plateau Watershed Rehabilitation Project. Im- gagement with the World Bank Group's directions. plementation Completion Report. Washington, DC. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduc- tion and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise