Apec meets cover disaster preparedness
WHENEVER a calamity or natural disaster hits, the economy also suffers.
When Supertyphoon Yolanda (international name: Haiyan) flattened central Philippines in November 2013, it also left local economies—livelihood, food supply, shelters, infrastructure—ruined, on top of many lost lives.
According to the Post-Disaster Needs Assessment of the Office of Civil Defense, “Yolanda” inflicted P89.6 billion worth of damage and P42.8 billion in losses across the economic, infrastructure and social sectors in central Philippines.
To rehabilitate the areas damaged by “Yolanda,” the government has to shell out a total of P150 billion in projects—a huge amount of money that should have been spent on new infrastructure, more social services, only if the country was more prepared for disaster.
Just like the Philippines, most of the 20 other member-economies of the Asia-Pacific Economic Cooperation (Apec) are also prone to disasters, as most lie on the “Pacific Ring of Fire” and are often hit by strong typhoons, later on affected by flooding.
Finance Undersecretary Gil S. Beltran said disasters cost 1.1 percent of the country’s annual gross domestic product (GDP); for other countries, 0.6-0.7 percent of their economies are lost to disasters.
Beltran noted that in general, the economic cost of disasters would usually be a “large” figure, as well as “affects mainly the poor and vulnerable.”
If disaster risks would not be mitigated, the poor would be pushed “deeper into poverty,” Beltran pointed out.
Acknowledging the impact of natural disasters on the regional economy, the Philippines-shepherded the Cebu Action Plan to put in place measures that would allow individual members and the region as a whole to immediately bounce back after calamities strike.
As a whole, the Cebu Action Plan—a 10-year road map approved by Apec’s finance ministers last September—aims to integrate the region’s financial sector while enhancing resiliency, fiscal transparency and infrastructure development.
The Cebu Action Plan, which will be pitched to Apec leaders this week, has four pillars, namely: promoting financial integration; advancing fiscal reforms and transparency; enhancing financial resiliency; and accelerating infrastructure development and financing.
For ordinary citizens, implementing the various measures under the Cebu Action Plan would let small businesses have easier access to financing, ensure that financial markets are secure and transparent, allow the rollout of more infrastructure that would foster mobility and facilitate trade across markets, and also make economies resilient, or at least ready for inevitable natural disasters.
Specifically, the effects of calamities and natural disasters in Asia-Pacific—a huge part of which lies on the Pacific Ring of Fire—are seen tempered by financial resilience mainly through disaster risk financing and insurance mechanisms.
“In a region where more than 60 percent of the world’s disasters strike with costs of damages reaching $1.2 trillion in the past decade alone, economies committed to enhance financial resilience by building deeper financial markets,” Apec said.
At the end of a two-day Disaster Risk Finance-Apec Roadmap for Resilient Economies meeting held in Bacolod City last May, top finance officials agreed to establish a risk pooling mechanism to shield economies as well as the poor from the effects of natural disasters to livelihood.
The proposed regional mechanism would transfer and pool risks to reduce the impact on individual countries, Beltran explained.
On the sidelines of the Bacolod meeting, World Bank disaster risk financing specialist Richard Poulter noted in a press conference that risk pooling across member-economies by tapping the international reinsurance market, which has a lower premium than local markets, would generate savings that could be spent on other sectors such as health and education.
Poulter said they have proposed to conduct a feasibility study to determine if the risk pooling mechanism would be appropriate for Apec countries. “Risk pooling needs to be taken in stages,” he said.
Apec member-economies also agreed to create a platform showing data on insurance coverage of public assets, establish a catalogue that shows risk exposures of each member, and also engage the private sector more into disaster risk financing.
“The Apec region serves as a growth driver for the world economy. Given that the region is prone to natural disasters, collective efforts to boost disaster resiliency are vital in ensuring that our region continues to have significant contributions to global growth,” Beltran said.
Aside from disaster resiliency, the three other pillars of the Cebu Action Plan put in place measures to ensure that Apec economies would be resilient to financial shocks as well as would sustain the economic growth being enjoyed now.
For one, it supports the move toward more liberalized financial services and capital accounts across Asia-Pacific.
A more integrated financial sector across the region wherein there are freer flows of funds is seen to withstand downturns.
In terms of fiscal transparency, Apec noted that “regional cooperation on taxation and governance reforms will help ensure that available fiscal space are dedicated toward growth-inducing investments,” hence “finance ministers agreed that fiscal transparency and reforms figure in optimizing public investments across the region.”
Infrastructure development is also seen crucial amid expanding economies in order to attract investors as well as connect urban and rural areas.
“Finance ministers looked forward to the development of an Apec PPP [public private partnership] knowledge portal in collaboration with the Global Infrastructure Hub to serve as an online repository of PPP infrastructure projects. Finance ministers also noted how developing quality infrastructure as an asset class for institutional and long-term investors in the Apec region can facilitate the mobilization of regional savings into long-term investment pools,” according to Apec.
While the roadmaps being approved by Apec member-economies, including the Cebu Action Plan, are non-bonding, the Apec Business Advisory Council (Abac) believes that it is in the best interest of members to implement them.
For instance, the financial resiliency pillar of the Cebu Action Plan is crucial amid the flurry of disasters hitting the region, Abac 2015 chair Doris Magsaysay-Ho said.
“Access to financing for the massive infrastructure needed, disaster financing—these have become very real. A lot of these initiatives will happen become there really is a major demand,” Ho said.
“The world is changing. One megatrend is disasters, and at some point businesses will see the need and there will be such a demand for disaster financing to happen. Policies sometimes come from demand,” she noted.
Ho cited that the Cebu Action Plan was demand-driven, hence will “get something going.”
The Cebu Action Plan addresses the needs of micro, small and medium enterprises, and their ability to bounce back through microinsurance disaster risk financing.”
