Coping with Disaster Risk Management in Northeast Asia

Gregory Coutaz

• Publisher: Emerald Publishing Limited
• Year: 2018
• ISBN:
  9781787545076
• Topic: Betriebswirtschaft
• Subtopic: Wirtschaftsprüfung

Disaster risk management is of increasing significance in today's world. Every year, natural disasters cause tens of thousands of deaths and tens of billions of dollars' worth of losses. Northeast Asia holds a high propensity for natural disasters, including earthquakes, tsunamis, typhoons, floods and landslides. Countries in the region have a long history of natural disasters that have devastated populations, cities and their heritage. Restoring livelihoods and rebuilding social and economic infrastructures requires adequate political actions and financial resources, necessitating the implementation of a comprehensive strategy for the management of catastrophe risks.
Coping with Disaster: Risk Management in Northeast Asia provides an examination of the disaster risk management approaches and financing practices adopted in China, Taiwan, Japan and South Korea. The objective of this book is to provide the necessary information on hazards, exposures and vulnerabilities to assist policy development design to increase governmental preparedness for catastrophe risks. It addresses the traditional aspects of disaster risk management, but goes further to focus on the measures of financial protection required to secure post-disaster resources and strengthen budgetary discipline.
Written in an accessible and comprehensible manner, the book will appeal to a wide audience, but is of special interest to policy-makers, public officials, insurance managers and students eager to learn more about disaster risk management in one of the most exposed regions in the world.

Chapter 1

Introduction

Natural disasters have affected mankind since its very beginnings. They have influenced, shaped, and modified human behavior, changing the way people live with and respond to the environment around them. They are a global phenomenon that know no borders and can devastate entire countries overnight, leaving behind dramatic scenes of desolation and suffering. Images of wrecked bridges, half-submerged streets, and last-minute rescues of children trapped in collapsed houses have made their way to local media, as well as international headlines, and come to dominate the news cycle. Natural disasters have become part and parcel of our daily lives, requiring special actions and policies to reduce the severity of their negative effects.

Complex and diverse by their very nature, such disasters are extremely hard to predict and impossible to stop. Taking many different forms, their duration can range from an hourly disruption to months or years of ongoing destruction. Earthquakes, tsunamis, typhoons, floods, landslides, avalanches, extreme cold and heat waves, wildfires, and volcanic eruptions are usually categorized as rapid-onset disasters. The warning time for these can range from seconds, or at best a few minutes in the case of earthquakes and landslides, to several days in the case of most typhoons and floods. The physical impacts are immediate and high intensity. Slow-onset disasters, on the other hand, emerge gradually over time, often based on a confluence of different circumstances. Drought, desertification and deforestation, disease epidemics, and sea-level rise are common examples of slow-onset disasters. Their impact may not be felt for decades, although they are likely to create deep economic and social crises. The public view of natural disasters is that they are short-term occurrences. Real-time delivery and extensive coverage, for a relatively brief period, tend to reinforce the perception of a limited extent in time and space. Unlike sudden-onset emergencies, slowly unfolding events are recognized as disasters that can be mitigated by an appropriate response. If anticipation, early warning, and precautionary measures are fully functioning and operating, the longer lead time should allow local and national authorities to step in early enough to minimize loss of life and material damage. Unfortunately, the response to most slow-onset disasters resembles the response to rapid-onset disasters: a large influx of resources released without any budgeting plans.

Whether it is rapid-onset disasters or slow-onset disasters, there is no question that Asia has it all. The Asian continent has a long history of natural disasters that have devastated its populations, cities, and heritage. Recent events have only emphasized this vulnerability. The 2008 Sichuan earthquake, the 2009 Morakot typhoon, the 2011 Tohoku earthquake and tsunami, the 2011 Thailand floods, the 2013 Haiyan typhoon, and the 2015 Nepal earthquake are just a few examples among many. When compared to other regions of the world, people in Asia are four times more likely to be affected by natural disasters than those in Africa, and 25 times more vulnerable than those in Europe and North America. The United Nations Office for Disaster Risk Reduction (UNISDR) and the Belgian-based Centre for Research on the Epidemiology of Disasters (CRED) estimated that, from 1950 to 2011, 9 out of 10 people affected by natural disasters worldwide lived in Asia. The northeast part of the continent is among the most exposed areas. China, Taiwan, Japan, and South Korea have suffered, and continue to suffer from repeated disasters, requiring the implementation of a comprehensive strategy dedicated to the management of risks posed by the occurrence of such events. The question that needs to be asked is whether the governments of these countries will be able to cope with the impacts of future disasters, especially when it comes to financial preparedness and the handling of costs associated with restoring livelihoods and rebuilding social and economic infrastructures.

1.1. Addressing the Threat of Natural Disasters

Natural disasters annually cause tens of thousands of deaths and tens of billions of (US) dollars worth of losses.¹ The figures available from international agencies such as the International Federation of Red Cross/Red Crescent Societies (IFRC, World Disaster Report, Geneva, annual) and from major transnational insurance and reinsurance corporations meeting in Davos (Switzerland) every year under the World Economic Forum (WEF, annual reports on global risk) show that mortality has been fairly consistent, while the number of catastrophic events, and even more, the size of economic losses, have rapidly increased. In the 1980s, inflation-adjusted costs were on average about US$25 billion – a number which increased to US$95 billion per year in the 1990s. In the last 10 years, economic damage reached an annual average of US$130 billion (Swiss Re, 2013).

The substantial rise in economic losses is primarily due to economic development and population growth, a higher concentration of assets in exposed areas and increasingly climate change. However, the figures disguise the gap between the actual economic losses and the insured losses. A large part of the economic costs of natural disasters is not insured. For instance, the global reinsurer Swiss Re evaluated that of the estimated US$131 billion losses due to catastrophes in 2013, which was a regular year for catastrophe losses, only some US$37 billion were covered by insurance. In 2012, a much heavier year of losses, Swiss Re estimated natural catastrophe-related losses at US$188 billion, of which US$75 billion were insured, making 2012 the fourth most costly year on record (Swiss Re, 2014).² In 2014 and 2015, economic losses were down to US$104 billion and US$80 billion, respectively – below the average of the previous 10 years – with insurance losses of US$28 billion for each year (Swiss Re, 2016). In 2016, economic losses resumed their ascent, with losses estimated at US$170 billion, of which US$48 were insured. In 2017, an active hurricane season in the North Atlantic and widespread flooding in South Asia pushed global catastrophe losses to their highest level ever recorded in a single year: total economic losses were US$330 billion and insured losses were US$138 billion (Swiss Re, 2018).

Total damage estimates may differ from one source to another, mainly due to divergent definitions of the notion of “catastrophe,” but all sources come to the same inevitable conclusion: (i) economic losses have increased in recent history and (ii) this upward trend will continue into the future. Economic losses vary by country and by category of disaster. Over the past two decades, about 20–40% of losses were covered by insurance. Measured in premiums as a percentage of gross domestic product (GDP), average insurance penetration rates in the non-life sector reach only 2.9% in developing countries, far below the 8.1% seen in industrialized countries (Swiss Re, 2016). This means that the majority of economic losses fall back on governments, enterprises, and private households.

Natural disasters place a huge burden on the public sector, which not only shoulders the cost of relief and recovery efforts such as administering first aid, providing emergency supplies and clearing roads, but is also responsible for rebuilding damaged infrastructures. Since individuals and businesses are generally underinsured, the government is often expected to support private rebuilding efforts by providing transfer payments as well. Traditionally, most governments rely on so-called national disaster management policies and planning, which include or should consider post-disaster financing. This may include in the short run or in the medium term increasing national or local taxes, reallocating public funding from other budget items, or negotiating additional loans borrowed from the general public (special treasury bills) or from domestic and/or international financial institutions. This approach may raise several major problems: (i) it can divert funds from key development projects, (ii) it can be costly to raise new domestic debt in speculative capital markets, and (iii) it can further weaken fragile economies, especially in the developing world. There is substantial value in shifting to a post-disaster management approach that would accumulate preventive funds and implement positive actions for disaster vulnerability reduction before the next catastrophe occurs, particularly in disaster-prone countries.

The resilience of a country, or its ability to rebound from a natural disaster, not only depends on the severity of the catastrophe but also on available funding for relief, recovery, and reconstruction – which have different spatial and time spans. The faster a country can return to its normal state of affairs, the smaller the long-term impacts of the catastrophe. In many countries, however, total available funds are simply not enough to cover all the potential economic costs of natural disasters. Based on an estimate of country-wide risk for the 70+ countries most exposed to extreme events, the World Bank has identified a number of countries that are highly financially vulnerable and experience a resource gap, which means that net disaster losses exceed all available financing sources. Many of these disaster-prone countries already run into a financing problem for small- to medium-sized events (World Bank, 2010). In such cases, governments need to increase their efforts to alleviate the financial burden on the public sector and consider pre-disaster financing tools as an important component of disaster risk management. Prevention and mitigation are critical steps to dealing with natural disasters, but preparing for the financial aspects of catastrophe losses is a key element of any disaster-prone country or region.

1.2. Disaster Risk Governance

Large and more complex natural disasters demand the intervention of more participants. The effective reduction and financing of catastrophe risks compel a collaborative response involving the whole of society – from individuals, communities, businesses, and emergency management and support agencies to all levels of government. As frequency and costs rise, single players can no longer meet these challenges alone. No government can fully prevent damage from every imaginable event. The objective of reducing risks and controlling economic losses calls for adaptive governance.

The literature has embraced a range of novel concepts on the subject, including collaborative governance (Freeman, 1998), multilevel governance (Hooghe & Marks, 2003), collaborative ecosystem governance (Karkkainen, 2001), and new environmental governance (Holley, Gunningham, & Shearing, 2011), to name a few. Although divergent in their pedigree, these concepts are bound together through an engagement with forms of disaster policy that favor less rigid, less uniform, less prescriptive, and less hierarchical approaches to governing and incorporate more collective, decentralized decision-making approaches that devolve control to multistakeholder groups, envelop flexibility and multilevel arrangements, and pursue explicitly adaptive and arguably more adequate means of addressing catastrophe risks.³ Participation and collaboration favorably influence the capacity to design disaster preparedness and adaptation strategies. The pooling of knowledge, resources, and competencies from multiple actors can allow for valuable processes and better outcomes.

Global adaptive governance has made great progress since the UN International Decade for Natural Disaster Reduction (IDNDR) raised international community awareness on the need to move from reaction measures toward a more integrated disaster risk management.⁴ The importance of non-state actors and the notion of cooperation are now the defining features of the international agenda. However, the formation of international mechanisms on how to deal with these imperatives remains elusive. The lack of involvement from financial institutions and the persistent division between developed and developing countries have to be taken into account to comprehend the current absence of international regulation. Despite global financial assistance provided by the UNISDR, the International Monetary Fund (IMF), major development banks (e.g., ADB and the World Bank), non-governmental organizations (NGOs), and private market actors, there are still no international rules and procedures on how to move from disaster risk reduction to disaster risk transfer and f...