Disaster risk management supports sustainable green growth in Asia

East Asia is one of the fastest growing regions in the world. Poised to launch a common market next year, the ASEAN Economic Community comprises 600 million people and generates a combined GDP of almost USD 2 trillion. Renewed demand in Europe and the US after the financial crisis may spark growth rates in ASEAN countries of more than 5%.

Manila is the seat of the WEF's regional East Asia 2014 summit from 21-23 May. The Philippines itself has made an impressive economic comeback despite the unparalleled ravages of Haiyan. It's expected to come out the strongest performing South East Asian economy in 2014, with GDP growth surpassing 6.5%.

Despite the many gains of fast-paced economic growth, however, increased interdependence and unexpected natural disruptions create risks that could continue to challenge the region.

Resilient decision making: our focus at WEF

A recent report by Standard & Poors (PDF) says that extreme weather fuelled by climate change may become a relevant factor affecting sovereign ratings of vulnerable countries. Data shows that weather related losses have risen in all continents since the 1980s, with Asia and North America seeing costs increase more than fourfold. As the frequency and impact of extreme weather events continue to rise, agriculture, sanitation and infrastructure are also affected - in turn arresting the wheels of the economy.

Amongst the 600+ delegates attending the WEF summit in Manila, Martyn Parker, Chairman Global Partnerships and Ivo Menzinger, Head of Global Partnerships Asia Pacific, representing Swiss Re, will explore the opportunities presented by the evolving ASEAN Economic Community and the need for resilient decision-making in the face of unpredictable economic and natural disruptions.

Growing population, growing risk

The fact that half of the world's population lives in cities, generating about 80% of global GDP, is creating an unprecedented concentration of risk. Manila is among the 10 most heavily exposed urban centres in the world, vulnerable to earthquakes and storms. A typhoon of similar ilk to Haiyan would affect some 12.6 million residents in the metropolitan area of Manila alone, with massive disruption to the national economy. A recent Swiss Re study reveals that in terms of productivity losses from severe storms like this, Manila ranks no. 6 worldwide, and no. 1 from possible impact on the national economy.

Ivo Menzinger says: "The Philippine government recently invested considerably in strengthening capacity for forecasting and early warning systems. This helped to limit the loss of life in what is so far noted as the strongest storm in history. The damage to property, agriculture and infrastructure in the affected region was unprecedented." According to the Philippine authorities Haiyan caused economic losses of at least USD 12 billion, of which only USD 1.5 billion - including public infrastructure insurance - was covered.

Taking the long term view

Other countries in the region facing devastating economic risk in the face of a disaster include Jakarta, for example. A major earthquake or flood would cost the city USD 10 billion today - and triple that amount by 2023 - unless more active measures are taken to improve disaster preparedness.

"That is why we work so hard at convincing governments, city officials and regional officials to move from post-disaster response mode, to pre-disaster risk management planning, says Martyn Parker. "By transferring a portion of the risk to the international reinsurance and capital markets, a country spreads the risk on more shoulders, increasing the pool of solidarity. In case disaster strikes, fresh capital swiftly flows into the affected country, supporting relief and reconstruction and reducing the strain on budget and fiscal stability."

"Taking the long term view," Parker concluded, "it also contributes to spurring sustainable green growth. Better disaster preparedness also offers opportunities for investment and growth in areas like transportation, energy, mobile health, technology, financial services and agriculture."

Published 21 May 2014

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