68743 The World Bank East Asia Pacific and South Asia Regions Present A Workshop on Disaster Risk Reduction and Risk Transfer: Toward Concrete Action in South Asia & East Asia and the Pacific Summary Report 1 Table of Contents FOREWORD ................................................................................................................................................ 4 1. BACKGROUND ................................................................................................................................. 5 2. DEFINING DISASTER RISK REDUCTION.................................................................................. 5 2.2.1 RISK IDENTIFICATION ....................................................................................................................... 6 2.2.2 RISK MITIGATION ............................................................................................................................. 6 2.2.3 RISK FINANCING ............................................................................................................................... 6 3. OPPORTUNITIES FOR SAR & EAP IN DRR............................................................................... 8 4. DISASTER RISK REDUCTION IN PRACTICE: CASE STUDY EXAMPLES & LESSONS LEARNED .................................................................................................................................................... 9 4.3 RISK REDUCTION IN GUJARAT LESSONS FROM EARTHQUAKE EMERGENCY RECOVERY PROJECT .... 9 4.4 MAINSTREAMING DRR IN BANGLADESH – LOCAL GOVERNANCE SUPPORT PROJECT .................... 11 4.5 VIETNAM NATURAL DISASTER RISK MANAGEMENT PROJECT........................................................ 13 4.6 KEY FINDINGS AND RECOMMENDATIONS FOR INTEGRATING DRR IN SAR & EAP........................ 15 5. THE THREAT OF CLIMATE CHANGE: HOW CAN DRR HELP?........................................ 17 5.3 DRR AND CLIMATE CHANGE ........................................................................................................... 17 5.3.1 ANDHRA PRADESH (INDIA) CLIMATE CHANGE ADAPTATION CASE STUDY .................................... 18 5.4 AVENUES FOR COLLABORATION AND OPPORTUNITIES FOR SCALING-UP ......................................... 20 6. THE ROLE OF RISK FINANCING............................................................................................... 22 6.1 BUILDING THE NEED FOR DISASTER RISK FINANCING .................................................................... 22 6.2 DISASTER RISK FINANCING FRAMEWORK ....................................................................................... 22 6.3 RISK FINANCING COUNTRY CASE STUDIES ..................................................................................... 25 6.3.1 DEVELOPMENT OF A COMMON RISK INFORMATION DATABASE FOR CHINA ................................... 25 6.3.2 CARIBBEAN CATASTROPHIC RISK INSURANCE FACILITY ................................................................ 26 6.3.3 MONGOLIA LIVESTOCK INDEX INSURANCE .................................................................................... 28 6.3.4 MICROINSURANCE APPLICATION IN INDIA ...................................................................................... 30 6.4 ISSUES AND CHALLENGES IN DEVELOPING RISK FINANCING .......................................................... 30 6.5 RECOMMENDATIONS ....................................................................................................................... 31 7. DEVELOPING REGIONAL DRM STRATEGIES FOR SAR & EAP....................................... 32 7.1 RATIONALE FOR DEVELOPING REGIONAL STRATEGY....................................................................... 32 7.2 DISASTER RISK MITIGATION FRAMEWORK ..................................................................................... 33 7.3 LESSONS FROM LATIN AMERICA AND THE CARIBBEAN (LAC) ....................................................... 34 7.4 LESSONS FROM PAKISTAN............................................................................................................... 36 7.5 REGIONAL STRATEGY FOR SAR ..................................................................................................... 38 7.6 REGIONAL STRATEGY FOR EAP...................................................................................................... 41 8. RECOMMENDATIONS & WAY FORWARD............................................................................. 44 8.2 POLITICAL WILL AND LEADERSHIP .................................................................................................. 44 8.3 CENTRAL COORDINATION MECHANISM & LOCAL CAPACITY BUILDING ........................................... 44 8.4 ABILITY TO DELIVER SPEEDY IMPLEMENTATION ............................................................................. 44 8.5 STRENGTHENING FORECASTING AND EARLY WARNING SYSTEMS .................................................... 44 8.6 DEVELOPING BETTER DISASTER DAMAGE AND LOSS ASSESSMENT TOOLS ....................................... 45 8.7 FASTER DISASTER RECOVERY AND RECONSTRUCTION .................................................................... 45 8.8 INITIATING PRIVATE RISK TRANSFER MECHANISMS ......................................................................... 45 8.9 BENCHMARKING PROGRESS IN MANAGING DISASTERS .................................................................... 45 2 Figures FIGURE 1. GRAPHIC OF POVERTY HEADCOUNT IN THREE AFFECTED AREAS IN PAKISTAN BEFORE AND AFTER THE EARTHQUAKE. .......................................................................................................................................... 7 FIGURE 2. GRAPHIC OF EPICENTER IN CHAUBARI VILLAGE, NORTH OF BHACHAU, KUTCH GUJARAT INDICATING SEVERELY AND MODERATELY AFFECTED TALUKAS..................................................................... 9 FIGURE 3. REPAIRING A DAMAGED ROOF IN VIETNAM. ................................................................................. 14 FIGURE 4. HOME IN BANGLADESH SURROUNDED BY FLOOD WATER. ............................................................ 17 FIGURE 5. 2006 RATES OF POPULATION DENSITY ACROSS ALL REGIONS COUPLED WITH 2004 POVERTY RATES. ........................................................................................................................................... 18 FIGURE 6. MAP OF ANDHRA PRADESH DROUGHT AFFECTED DISTRICTS. ....................................................... 19 FIGURE 7. DISASTER RISK FINANCING FRAMEWORK .................................................................................... 23 FIGURE 8. STRUCTURE OF THE CCRIF .......................................................................................................... 27 FIGURE 9. DISASTER RISK MANAGEMENT FRAMEWORK ............................................................................... 34 FIGURE 10. KEY COMPONENTS OF LAC DISASTER RISK MANAGEMENT FRAMEWORK ................................ 35 Annexure ANNEX A: TRAINING AGENDA ...................................................................................................................... 46 ANNEX B: LIST OF PARTICIPANTS ................................................................................................................ 50 3 Foreword The harmful social and economic impacts of natural disasters are increasing exponentially not just in the South and East Asia Pacific Regions but worldwide. This rise in the cost of disasters is primarily driven by the growing concentration of assets and population in highly disaster prone areas. This makes natural disasters more complex to handle with increased human vulnerability in terms of loss of lives and livelihoods due to excessive population growth, expansion of human settlements, and encroachment of economic activity and development into marginally suitable areas. This effect is exacerbated by lack of appropriate environmental policies, land use planning, building codes, and weak institutions. In addition, climate change data indicates a trend towards rising global warming which will only aggravate the negative consequences on human populations at the lowest income brackets. Within this context, the South Asia Region and the East Asia Pacific regions of the World Bank jointly hosted a training workshop from April 28-30, 2008 for Bank staff on the importance of disaster risk reduction and risk transfer including major concepts, models, and various applications of disaster risk reduction around the globe. The workshop was a collective effort of the World Bank East Asia Pacific and South Asia Regions to systematically promote implementation of a comprehensive framework that integrates risk assessment, emergency preparedness, disaster prevention, and catastrophe risk financing with the objective of reducing client countries’ economic and social exposure to natural hazards on an ex ante basis. The event was crucial in facilitating learning, cross-sectoral experience sharing and providing an environment for generation of new ideas among staff particularly in the wake of several major events that have devastated these two regions within the last five years. This report represents an analysis and summary of the main presentations made during the course of the workshop. It provides a comprehensive assessment of the major points of discussion and an overview of the salient issues that emerged during the event. Specific policy recommendations are also outlined here which will serve as an important instrument for relevant Bank projects and client governments facing issues of how to mainstream disaster risk reduction practices into development initiatives. Overall, the workshop was an excellent opportunity to share experiences and know-how from both regions and to identify strategic priorities in our efforts to pro-actively advance the disaster risk mitigation agenda in our Asian client countries. A special thanks goes to Margaret Arnold and the ProVention Team for their support. Secondly, many thanks to all of the presenters and participants for their valuable inputs and insights which enabled this workshop to be a truly engaging and substantive learning experience. In addition, we would like to thank Arish Dastur, Ranu Sinha, and Zoe Trohanis who were instrumental in organizing the workshop and preparing this report. Furthermore, we would like to express our appreciation to the East Asia Vice Presidency (EAVP) and the South Asia Sustainable Development Department (SASSD) for their generous sponsorship of staff participants. Christoph Pusch Dean A. Cira South Asia Regional Coordinator Disaster Risk Management Coordinator, EAP Disaster Risk Management East Asia and Pacific Urban Unit (EASUR) The World Bank The World Bank 4 1. Background 1.1 The Disaster Risk Reduction and Risk Transfer: Toward Concrete Action in South Asia & East Asia and the Pacific Workshop was organized by the South Asia and the East Asia Pacific Regions of the World Bank and ProVention Consortium. It involved the participation of over 40 Bank staff from the country offices in South Asia Region (SAR) – India, Nepal, Pakistan, Bangladesh, and Sri Lanka as well as the East Asia Pacific (EAP) region – Indonesia, China, Philippines, and Vietnam specializing in environment, energy, infrastructure, rural and social development sectors. In additional, representatives from AusAid and the regional Bangkok office of the United Nations International Strategy for Disaster Reduction (UNISDR) were also present. The workshop was conducted in Bangkok, Thailand from April 28-30, 2008. 1.2 The rationale for the workshop was to provide Bank staff members the opportunity to further develop their skills and knowledge in Disaster Risk Management (DRM), mainstreaming Disaster Risk Reduction (DRR), catastrophe risk financing as well as understanding how various models of DRR are being developed in SAR, EAP and LAC. Key inputs and salient issues identified during the workshop will serve to advance the risk mitigation agenda in both EAP and SAR. It was envisioned that such an exercise will provide a multi-sector initiative for catalyzing the discussion on mainstreaming DRR in all Bank development activities in the medium and long-term. 1.3 This workshop also provided participants a forum in which they can share experiences, lessons, and provide feedback to colleagues in their respective units and country offices on how task teams can engage client countries in a dialogue on promoting or strengthening disaster risk management policies and capacities, and on adapting these to increasing threats resulting from climate change. 1.4 This summary report provides an overview of the presentations made during the workshop as well as highlights the relevant points discussed. The purpose of this report is to capture and further disseminate the key themes and highlights of the workshop to a wider Bank audience. The views and ideas presented here are solely that of the presenters and participants of the workshop and do not necessarily represent the views of the World Bank Group or any of its client governments. 2. Defining Disaster Risk Reduction 1 2.1 While there is no global consensus on the definitions related to disaster risk management or disaster risk reduction (DRR), DRR can be broadly understood as the development and application of policies, strategies and practices to do everything possible before a disaster occurs to protect lives, limit damage and strengthen the capacity of communities and society to recover quickly. 1 From presentation on Disaster Risk Reduction: concepts, components and points of entry by Margaret Arnold. 5 2.2 The activities that comprise DRR can be organized several ways, one simple way is to divide them into three main pillars: 2.2.1 Risk Identification: The first step is to identify and understand the problem. This can include the creation of hazard maps, community vulnerability and capacity analysis; risk modeling, understanding direct and indirect as well as secondary effects of disasters. This also includes quantifying the social and environmental impacts of a particular hazard ex ante. 2.2.2 Risk Mitigation: This pillar comprises activities that reduce potential impacts ex ante, including those geared towards preparedness and pre-disaster recovery planning. This can include a wide range of structural and non-structural mechanisms interventions such as land use planning, structural design and construction practices, building codes, public education, early warning systems and preparing response plans. 2.2.3 Risk Financing: This includes mechanisms to deal with the economic and financial shocks caused by hazard events. They include mechanisms for all levels, from individual household level to national and regional levels. Examples are self insurance, informal community based mechanisms, safety nets, insurance and reinsurance, catastrophe bonds, contingency financing, and calamity funds, etc. 2.3 Disasters are now globally recognized as a potential threat to sustainable development, poverty reduction and the achievement of the Millennium Development Goals. Thus, viewing DRR as an integral component of national and sectoral development planning, country programming and in the design of all development projects in hazard-prone countries is essential. 2.4 It is important, therefore, for the Bank to develop a shift in mindset, and that its policies and practices reflect that disasters are not one-off events that interrupt development processes from time to time, but rather natural hazards are “normal� phenomena of the biosphere that must be considered in the design and implementation of development investments. For the Bank this means supporting a more strategic response to disaster emergencies and promoting the integration of disaster prevention and mitigation efforts into the World Bank’s overall development framework. 2.5 The recent IEG study points out that although the Bank has been involved in disaster – related lending for over 20 years and is one of the largest investors in disaster reconstruction and development, engagement in disaster risk management has not been approached strategically as other sectors have 2 . Rather, disaster response has traditionally been approached in an ad hoc manner, and little to no attention has been paid to integrating hazard risks into sectoral investments. 2.6 While the Bank has recently revised its policies and procedures on emergency recovery assistance, and has taken steps to promote disaster prevention and mitigation among borrowers, it still has limited capacity for effective emergency response and has 2 Hazards of Nature, Risks to Development. An IEG Evaluation of World Bank Assistance for Natural Disasters. The World Bank. 2006. 6 invested precious little core resources to integrating disaster risk reduction into its development operations. 2.7 The IEG review also noted that this slow uptake has been mirrored with clients, since borrower governments’ demand for investments in risk mitigation and emergency preparedness has been weak. 2.8 However, the failure to devise and execute disaster risk reduction policies can actually stifle socioeconomic growth in developing countries since negative impacts from each natural disaster can significantly increase the vulnerability of poor segments of the population, exacerbate poverty levels, deepen indebtedness of households and reduce existing livelihood opportunities. 2.9 The figure below indicates poverty figures in various affected areas of Pakistan before and after the Kashmir earthquake in 2005. Figure 1. Graphic of poverty headcount in three affected areas in Pakistan before and after the earthquake. 2.10 Thus both SAR and EAP regions and all the country offices within them have a collective responsibility to make sure DRR considerations are taken into account at all stages of the project development cycle. 2.11 All efforts towards relief, rehabilitation and reconstruction should aim at contributing to the reduction of vulnerability as it reduces risk, saves lives and livelihoods in the short and long term. 7 3. Opportunities for SAR & EAP in DRR 3.1 Both SAR and EAP are extremely vulnerable to multiple hazards, including drought, earthquake, flooding, storm surges, volcanic eruptions and tsunamis. In EAP, since 1990 natural disasters have caused more than US$473 billion in damages and affected more than 2 billion people. The Natural Disaster Hotspots study ranks SAR as highly vulnerable to natural hazards with the recent 2004 Asian tsunami causing the displacement of 1.2 million people, over 50,000 people dead or missing and significant losses in three South Asian countries affected – India, Maldives, and Sri Lanka – which accumulated to approximately US$ 2.5 billion. 3.2 It is therefore critical in both Regions that the Bank utilize available points of entry to promote proactive disaster risk reduction. At the strategic level, the Bank can engage in an informed policy dialogue on how DRR relates to the failure or achievement of the development objectives identified by clients, and how DRR can be incorporated into the CAS and PRSP processes to support those goals. 3.3 In terms of lending, a major area of Bank investment related to disasters continues to be post-disaster reconstruction and recovery. Lessons from past recovery efforts indicate that the Bank does better at reconstructing damaged infrastructure and housing than it does in reducing vulnerabilities and addressing their root causes. In addition, the Bank needs to focus more on rebuilding livelihoods from the earliest stages of engagement in order to support more rapid and effective recovery. 3.4 The post-disaster window can also provide an important opportunity to promote disaster risk reduction. At a minimum, measures should be taken to ensure that infrastructure and other assets are rebuilt to higher standards of disaster resilience (“building back better� rather than rebuilding vulnerability). Reconstruction and recovery operations can also be opportunities to plant the seeds for further progress in advancing disaster risk reduction. However, it should be recognized that DRR is a long-term investment and there is a need to be realistic in considering what can be achieved in the context of an emergency operation. 3.5 Stand alone investments in DRR (e.g., early warning systems, retrofitting, dike construction, planting mangroves, capacity building for disaster management, community disaster risk management programs, public awareness and education, etc.) can support critical investments and raise the profile of DRR at the country level. 3.6 Finally, and most importantly, the Bank’s contribution to DRR and sustainable development can be substantially enhanced if disaster risk would be considered as a matter of standard procedure in the design and implementation of all development investments in high risk areas. While improvements are being made, much more work is needed. The IEG study found that of 65 projects in the transportation, urban, and water and sanitation sectors (approved between 2000 and 2004 in countries identified as in the Natural Disaster Hotspots study), the documents for only 3 include any detailed description of how a natural disaster might affect the project and any cautionary actions to be taken. Nine mentioned disaster risk in passing. 8 4. Disaster Risk Reduction in Practice: Case study examples & lessons learned 4.1 The applications of disaster risk reduction provided in this section are drawn from three case studies that were presented during the workshop on DRR investments and projects currently underway in EAP and SAR. 4.2 Risk reduction in Gujarat, local governance support program in Bangladesh, and details of the Vietnam natural disaster risk management project are all examples of initiatives that had an impact in improving lives of the marginalized communities within these countries with the usage of DRR techniques. These case studies can act as examples for governments and others of what can and should be done to mainstream DRR across development programs in SAR and EAP. 4.3 Risk Reduction in Gujarat Lessons from Earthquake Emergency Recovery Project 3 4.3.1.1 Gujarat Earthquake – January 26, 2001: Quick Facts • Earthquake of magnitude 6.9 on Richter scale • Struck Chaubari in the Kutch district • One of the worst earthquakes in last 180 years • Reported lives lost 13,805 • 167,000 persons injured • Over 10 million people affected by calamity • More than 7,600 villages of 19 districts were partially or fully affected. • Colossal damage caused to private houses, public buildings, roads, power supply systems. Figure 2. Graphic of epicenter in Chaubari village, North of Over 1.2 million houses damaged Bhachau, Kutch Gujarat indicating severely and moderately and more than 200,000 collapsed affected Talukas. completely. 4.3.1.2 A joint assessment was carried out by the World Bank and the Asian Development Bank which estimated US$ 2.1 billion in asset losses (requiring US$ 2.3 billion in improved standard reconstruction), between US$ 491 to US$ 655 million in loss of output for one year, and the impact on the fiscal deficit to be US$ 2.2 billion in aggregate over three years. 3 From the presentation on Disaster Risk Reduction in Gujarat by Shyamal Sarkar. 9 4.3.1.3 Gujarat Emergency Earthquake Reconstruction Program (GEERP): The GEERP was launched with the Government of Gujarat (GoG) as a large- scale rehabilitation and reconstruction program costing about US$ 1,765 million with funding and assistance from the Government of India (GoI), World Bank, Asian Development Bank, the Netherlands Government, European Commission, among other organizations. 4.3.1.3.1 The GEERP was designed as a comprehensive multi-sector program, aimed at rehabilitation of the people through provision of housing, social amenities, infrastructure, livelihood support based on sustainable economy and environment, and preparing them to face disasters through community participation and multi hazard preparedness programs. 4.3.1.3.2 Objectives: The key objectives of the program included a) achieving balanced & sustainable recovery in the affected areas particularly across 19 out of 25 districts; b) participative process where citizens and private participation are encouraged to be part of the reconstruction efforts; c) utilization of a multi-hazard approach; d) developing sustainable capacity building, training and awareness creation; e) transparent processes; and, f) having a long-term vision for development of risk reduction, response and recovery. 4.3.1.3.3 Various technical, legal, structural and non-structural measures were taken to sustain the disaster risk reduction initiatives in key sectors like housing, public infrastructure, community participation and disaster management capacity building. 4.3.1.4 Major DRR Initiatives: The Gujarat State Disaster Management Policy was framed and the Gujarat State Disaster Management Act, 2003 was enacted. 4.3.1.4.1 The Policy focuses on capacity building, education and communication ensuring better preparedness. The Act provides statutory powers to the Gujarat State Disaster Management Authority (GSDMA), and the regulatory framework to institutionalize disaster management mechanisms in Gujarat. 4.3.1.4.2 In addition to the Policy and the Act, other institutional initiatives include establishment of Gujarat Institute of Disaster Management, to improve overall awareness and professional capacity development for disaster management. 4.3.1.4.3 Capacity building measures included an owner driven housing reconstruction model, public private partnership with NGOs on a cost sharing basis with the government, strengthening the emergency response system and developing a hazard risk and vulnerability atlas for the State. 10 4.3.1.5 Challenges faced in mainstreaming DRR: 4.3.1.5.1 Scale of the Project: The scale of damage caused by earthquake was unprecedented. 19 out of total 25 districts were affected. As a result, the number of beneficiaries was also very large. Proper management of a project at such a large scale was a formidable challenge. 4.3.1.5.2 Availability of Trained Masons & Engineers: While undertaking the restoration of approximately 1.2 million houses, adequate availability of trained masons and engineers was critical. Therefore, a massive program for training masons and engineers was taken up at a large scale. Till date, more than 29,000 masons and more than 6,000 engineers were trained in multi-hazard resistant construction and retrofitting of buildings. 4.3.1.5.3 Coordination with large number of agencies: The scale of reconstruction and rehabilitation program was such that it needed empowered single point coordination with the line departments, NGOs, district authorities, expert institutions and many other voluntary agencies coming from all over the country and outside. It increased the complexity, and in response to this challenge, the GSDMA was created with an immediate objective of coordinating, facilitating and monitoring the program and giving a long term vision of disaster management capacity building. 4.3.1.5.4 Technical Support: For the reconstruction program, providing technical assistance to the housing beneficiaries was a huge challenge. This acquired a yet higher dimension because the housing restoration was designed largely as an owner-driven program. As mentioned above, a large number of masons were trained in hazard- resistant construction and this, together with technical assistance in the form of engineering support and easy availability of quality construction materials, ensured by the GoG, enabled the owner-led housing reconstruction program to succeed. 4 4.4 Mainstreaming DRR in Bangladesh – Local Governance Support Project : The following case study details how DRR approaches are being integrated into the World Bank’s Local Governance Support Project in Bangladesh. 4.4.1 Project Description: Though the Government of Bangladesh has established a multilayered system for disaster management, consistent support of effective decentralization and shared decision making as well as implementing disaster management policies and programs in an effective manner is weak, particularly at the local levels. 4.4.2 The overall Local Governance Support Project (LGSP) which has been designed to support both local government capacity and accountability offers a way to bring together the central government, donors and NGOs into a framework to 4 From the presentation Bangladesh and Disaster Risk Reduction by Steve Commins. 11 implement prevention, preparedness, response, and recovery phases of disaster risk management. 4.4.3 Project Objectives: 4.4.3.1 Provide a framework for better understanding of how local governments and communities can play effective roles in disaster risk management, and what role communities can play in this context to hold the local government accountable. 4.4.3.2 Disseminate a DRR/LGSP framework to policy makers in Bangladesh to enhance their ability to influence policy and institutions which can strengthen local governments and communities in disaster-prone areas to effectively manage and reduce disaster risks. 4.4.3.3 Based on dialogue with various stakeholders, develop a handbook or series of risk assessment tools that would support local communities and local government in developing contextually adapted disaster risk management and disaster risk reduction priorities that can be integrated into the LGSP framework. 4.4.4 Strengthening the local capacity and accountability of local government bodies is one of the key tenets of the Bangladesh CAS and PRSP both of which highlighted decentralization and disaster management as key themes. 4.4.5 The lowest tier of government, the Union Parishads (UP), have limited resources, little revenue raising authority, and almost no influence on how the central government uses its resources in their areas. Given this context, the central government has started the process of strengthening local governments. 4.4.6 The disaster risk management work has been designed to integrate and thus sustain disaster risk and mitigation efforts into UP communities, especially those that are identified as having a high level of risk. 4.4.7 The long term ability of communities to implement disaster risk management measures is directly related to the work of the LGSP in building up the capacity and accountability of local governments. The capacity and resources for the local government within the wider national policy frameworks have an impact on how disaster risk management efforts can be integrated and then implemented within LGSP work. 4.4.8 Institutional challenges and obstacles: The DRR project had difficulty gaining traction within the LGSP process due to a number of challenges faced during 2007. 4.4.8.1 Donor incentives that by-pass government through funding NGOs due to a lack of confidence in local government systems prevented the project from gaining traction among donors. 4.4.8.2 There is a lack of coordination amongst NGOs, and there were significant problems in terms of the UN’s coordination role in disaster response. The 12 current systems of government, donors and NGOs emphasize disaster response not risk reduction. 4.4.8.3 Changes in relevant government ministry that slowed the initial process of support for decentralization. 4.4.9 Results: The DRR work sought to identify organizational solutions to the obstacles of moving forward within the project, and to identify innovations by agencies that would contribute to the project goals. 4.4.9.1 One of the goals of the LGSP/DRR approach is to work with local community members in ways that identify specific NGOs that provide a supporting and facilitating role. 4.4.9.2 Annual DRR processes have been developed, which are based on the work of partner organizations, which have been both implemented and assessed. 4.4.9.3 The overall approach has the potential to improve the local capacity of communities and UPs to both invest in DRR and to act immediately when a disaster occurs. 5 4.5 Vietnam Natural Disaster Risk Management Project : This case study provides insight into Vietnam’s vulnerability to natural disasters as well as current mechanisms in place within the project that are helping the government to better manage current and future threats. 4.5.1 High levels of vulnerability: Vietnam is one of the most natural disaster-prone countries in the world. Its major natural hazards are typhoons, floods, droughts, landslide, and saltwater intrusion, followed by occasional earthquakes and the possibility of tsunamis. 4.5.1.1 Disasters triggered by typhoons and floods are by far the most frequent and severe natural hazards. With around 70 percent of the population living in lowland areas, in the Red River and Mekong River deltas or along the 3,200 km-long coastline, these disasters often result in human casualties, important economic losses, and environmental damage. 4.5.1.2 Disasters represent a major risk for the poor and wipe out development gains and accumulated wealth. Recognition is growing in Vietnam that natural disaster risk must be addressed as a development issue rather than one strictly of humanitarian assistance. 4.5.2 Historical Context: Vietnam has a long history of striving to manage and reduce the damage risk from natural hazards that goes back over centuries ever since natural disasters have been seen as one of the “four biggest dangers to mankind� (i.e. water/ floods, fire, robbers and invaders). Dykes and river embankments to control floods have been constructed in Vietnam for centuries. 4.5.3 Project Objectives: The Natural Disaster Risk Management Program (NDRMP) aims to establish and implement a comprehensive risk management framework 5 From the presentation World Bank Vietnam: Natural Disaster Risk Management Program by Severin Kodderitzsch. 13 for natural disaster prevention, preparedness, mitigation and recovery in Vietnam. Figure 3. Repairing a damaged roof in Vietnam. 4.5.4 Phase I: The project is designed to support Vietnam through the entire disaster management cycle. 4.5.4.1 Prevention and Mitigation: This component provides support for priority prevention and mitigation of medium-scale investment subprojects designed to reduce disaster risks and strengthen prevention capabilities in areas affected by floods and storms. 4.5.4.2 Community-based Disaster Risk Management: This component aims to build the capacity of the most vulnerable populations to carry out risk reduction measures and reduce vulnerability to disasters. The component supports the scaling-up of CBDRM innovative approaches in selected communes (approximately 30) by preparing and beginning implementation of SCPs. 4.5.4.3 Post-Disaster Reconstruction Support: This component finances post-disaster reconstruction of small-size public infrastructure, supporting fast recovery and reducing the diversion of limited public investment resources from new development investments into reconstruction. 4.5.4.3.1 Specifically, under this component the project finances (a) a rapid disbursement facility to provide funding for post-disaster reconstruction of eligible public infrastructure, helping to address a recurrent annual financing gap for this purpose; and (b) institutional strengthening to support the improvement of the damage assessment process and the efficiency and effectiveness of public resource utilization for post-disaster reconstruction. 14 4.5.4.4 Project Management and Institutional Strengthening: supports an efficient project management organization and strengthen government institutions to ensure better coordination and integration among the agencies and different levels responsible for prevention, response and recovery, including: 4.5.4.4.1 Strengthening the project management and implementation capacity. 4.5.4.4.2 Strengthening institutions and mechanisms for disaster mitigation, and response and recovery. 4.5.4.4.3 Enhancing institutional capacity to identify, analyze, assess and treat natural disaster risks through improvement of the risk management methodology and tools, including establishment of reference systems, risk-mapping and risk loss models, strengthening of search and rescue capability and contingency planning. 4.6 Key Findings and Recommendations for Integrating DRR in SAR & EAP: 4.6.1 During the reconstruction operations for the Gujarat earthquake and the disaster risk management programs in Vietnam and Bangladesh, various lessons were learned which describe some of the inherent challenges present today in both SAR and EAP towards mainstreaming DRR. 4.6.2 The following points describe some of the challenges identified from the case studies and discussions during the workshop: 4.6.2.1.1 Paradigm shift in disaster management: The most important lesson learnt was the need of changing attitudes towards disaster management. There should be an immediate and radical shift of approach from a traditional relief orientation to a culture of disaster risk management which includes disaster prevention, mitigation and preparedness. 4.6.2.1.2 Political Economy: Political will is essential for governments to treat risk reduction as a priority area since after the initial attention paid to relief, recovery, and reconstruction government interest invariably wanes, therefore strong commitment of the Government at all levels is necessary for DRR initiatives to be sustainable and effective. In Gujarat, for example, much of the successes achieved in DRM were driven by upcoming elections in the State. As a result, there was tremendous commitment from the Chief Minister and high level government officials. 4.6.2.1.3 Legal framework for disaster management: In carrying out disaster management activities during the emergency period as well as normal circumstances, it is necessary to clearly define the roles and responsibilities of various stakeholders as well as provide legislative and institutional support for all DRR activities. Mainstreaming (disaster risk assessment of public and private investments) is to be achieved through consensus building among the stakeholders, and backed by legal and legislative actions. 15 4.6.2.1.4 Institutionalization of disaster management: It is important that disaster management activities do not remain as ad-hoc practices. It needs to be institutionalized through various structural and non- structural measures with the government’s overall organizational make-up. 4.6.2.1.5 Central Coordination Mechanisms: It is widely accepted that a strong central agency is key in a disaster management system. The limited ability of the authorities to date to consistently respond fast and efficiently to impending disasters, calls for a stronger coordination of disaster risk management and technical support efforts. This is also key to providing a strong central mechanism for implementation and facilitation of DRR initiatives. 4.6.2.1.6 Developing better disaster damage and loss assessment tools: Faster implementation of disaster recovery is often hampered by an absence of credible damage and loss assessments. Better assessments would provide for improved decision making in terms of resources needed and targeting. Credible assessments are also instrumental in mobilizing international funding in the case of larger damage events. Improving damage and loss assessments requires a coordinated effort across ministries and agencies, both central and provincial. 4.6.2.1.7 Integration of disaster management with development planning: One of the most important learning’s from the workshop is the linkage between disaster management and development planning. Disaster management can not be seen as a separate activity parallel to on- going development plans. The elements of disaster mitigation and preparedness are to be incorporated in all the development activities being carried out by the government. 4.6.2.1.8 Role of NGOs: The involvement of NGOs can contribute to greater transparency and accountability, through support of both public consultations and information sharing as well as provision for an enabling role in disaster risk management processes over time, so that the government’s role is strengthened through partnerships with community members and local organizations. In countries with chronic disasters, there are also innovations amongst governments, donors, NGOs, and research organizations that can be mobilized and gathered to contribute to changes in approaches to disasters. 4.6.2.1.9 Community Participation: Drawing lessons from the early experience from the reconstruction, Gujarat took several initiatives to get community members involved in rebuilding their homes. 80% of the housing was built by the owners themselves in Gujarat. Communities felt empowered as they built based on their own designs with the assistance of trained engineers. This also facilitates a multi-hazard approach where people are trained in earthquake safety, evacuation techniques as well as first aid skills. 16 5. The Threat of Climate Change: How can DRR help? 5.1 It is clear now that there is a pressing need to recast disaster mitigation as an ongoing long-term process, however, this is largely stemming from the realization that traditional patterns of disasters are also shifting; forcing regions already prone to disasters to become more vulnerable to the forces of climate change. In other words, issues of climate change are closely linked to increasing vulnerability of developing countries to natural hazards. 5.2 Data indicates that two thirds of South Asia’s disasters are climate-related, and global warming will increase the frequency, severity and unpredictability of disasters caused by the weather. Scientists have concurred that the ferocity and frequency of hazard events such as cyclone, hurricanes, and earthquakes have increased. This can already be seen by the spread and intensity of the SAR drought and flood patterns. In addition, a rise in temperatures beyond two degrees Celsius will cause sea levels to rise, risking coastal flooding and salt-water infiltration into drinking water. Figure 4. Home in Bangladesh surrounded by flood water. 5.3 DRR and climate change: The workshop provided a unique opportunity for staff from SAR and EAP who are specifically working on climate change and in the environment unit to come together and share experiences and projects focusing on adaptation currently being undertaken at the State level with DRM counterparts. One of the key case studies presented during the workshop provides a perspective on adaptation strategies at the micro level to reduce vulnerability from drought in Andhra Pradesh. This example provided an opportunity to connect themes of DRR with adaptation solutions for climate change issues. 17 5.3.1 Andhra Pradesh (India) Climate Change Adaptation Case Study 6 : 5.3.1.1 Climate change is exacerbating vulnerabilities in SAR as existing natural resources come under greater stress, high population density and poverty lead to low levels of resilience to climate risks particularly in rural areas. 350 45 300 40 35 250 30 200 25 150 20 15 100 10 50 5 0 0 ECA LAC High AFR MENA EAP SAR incom e Population Density (ppl/sq km) Poverty Rate(% of population living under $1 per day) Figure 5. 2006 rates of population density across all regions coupled with 2004 poverty rates. 5.3.1.2 As a result, the mitigation of the impacts of drought has been a key area of focus of the Government of Andhra Pradesh (GoAP), since the failure of monsoons continues to have a disastrous effect on the agricultural sector as well as the increasing human and social costs continue to be devastating. 5.3.1.3 Drought in Andhra Pradesh: Long-term Impacts and Adaptation Strategies: The study which was recently completed points to a growing gap between growing vulnerability of the state-wide economy to drought and continued devastation to farmers/rural communities in rains-shadow areas of the state. The findings indicate a need for intensified efforts at the micro levels (i.e. at the level of a group of villages or a watershed). 6 From the presentation Andhra Pradesh (India): Climate Change Adaptation Study by Priti Kumar. 18 Figure 6. Map of Andhra Pradesh drought affected districts. 5.3.1.3.1 The impacts of drought vary significantly at small geographic scales due to the natural variability in weather patterns, differences in soil types and water availability, access to markets and social circumstances. 5.3.1.3.2 Responses to drought need to be planned at the micro-level with local, district and state governments facilitating the effectiveness of the planning and implementation process and taking into account both short-term and long-term effects of drought management strategies. 5.3.1.4 Study Objectives: The objectives of this study are to enhance existing initiatives with a long-term assessment of drought impacts and adaptation measures as well as assist with the development of a pro-active strategy for adapting to frequent drought events. 5.3.1.5 Types of Adaptation Measures: Adaptation is a combination of processes and measures to reduce vulnerability and increase resilience against climate variability and extreme events. This includes micro (farm, community, and district) level adaptation and macro (state-wide economy) measures. Examples include the following: 5.3.1.5.1 Irrigation infrastructure to reduce vulnerability to rainfall variability 5.3.1.5.2 Irrigation expansion that fully takes into account technical and economic constraints, completive water uses, and increasing water stress 5.3.1.5.3 Framework for community driven action planning 5.3.1.5.4 Institutional models to support the process of planning and implementing agreed plans 5.3.1.5.5 State level policy framework for supporting drought adaptation in rain shadow areas (legislation and regulation to protect natural resources) 5.3.1.5.6 Innovative financing mechanisms (e.g. drought adaptation insurance, drought adaptation credit facility) 19 5.3.1.5.7 Capacity building (bottom up approach) 5.3.1.6 GoAP’s Drought Adaptation Initiative (AP DAI): AP DAI aims to develop, test and evaluate drought adaptation mechanisms and institutional models – at the state, district and local level - for a more effective delivery of assistance to drought-affected communities through better coordination, integration, packaging and enhancing of various programs, currently delivered by different departments/institutions in a fragmented manner. 5.3.1.6.1 To support these objectives, the DAI pilot phase will: (i) identify gaps and missing links in the on-going drought – related programs and activities in AP; (ii) facilitate institutional integration at state, district and community levels for delivering drought-related assistance; (iii) design and test the innovative methods and instruments for helping selected communities to adapt to drought, targeting different groups within these communities (e.g. medium farmers, marginal/small farmers, landless and poorest); and (iv) improve awareness on drought adaptation options and approaches and disseminate the results of the pilot efforts in order to build support and demand for wider replication. 5.3.1.6.2 Lessons: Key lessons from the pilot phase are expected to be applicable to other states in India with drought prone areas. Bank support for scaling up the DAI approaches and models in AP and elsewhere can be provided through the next generation of rural poverty/water management/land management projects. 5.3.1.6.3 Expected Outcomes: Main outcomes of the pilot project include demonstration of the benefits to farmers/communities from diversification/drought adaptation measures; workable models of coordinated, properly packaged service delivery to drought affected communities; specific recommendations for a state level policy framework and financial incentives/assistance schemes conducive for drought adaptation and improved (ground) water management. 5.4 Avenues for collaboration and opportunities for scaling-up: 5.4.1 Case for collaboration: Climate change adaptation measures attempt to address the underlying issues and causes of the threats to poor people’s lives and livelihoods from major natural disasters (hydrometerological, geological, etc.) by understanding what is causing the catastrophes and then taking steps to lower human impact and reduce casualties. 5.4.1.1 DRR is a way for countries to prepare ex ante, teach, train, build institutions, develop policies that are ready and can be mobilized once a disaster strikes albeit it remains difficult to convince government to invest in these measures without the occurrence of a disaster. 5.4.1.2 The more climate change findings and data reveal the growing threat of natural disasters; the stronger the case for investing in DRR approaches since 20 the estimates can clarify the extent of potential disasters that are likely to strike a country. This requires more collaboration between these two sectors. 5.4.2 Breaking out of silos: The major institutional challenge within the Bank results from the fact that the climate change agenda is being driven out of the Environment unit while Disaster Risk Management is housed in a separate unit. 5.4.2.1 This has led to weak collaboration among these units in tackling intrinsically intertwined issues leading to divergence in approaches and treating solutions for client countries in DRR and climate change as two distinct areas. 5.4.2.2 The issue now remains is how to break these silos and merge the two agendas under one umbrella so that the policies and interventions identified to tackle these enormous problems are managed in a more collaborative manner. 5.4.2.3 This can begin to bring together adaptation strategies and DRR strategies in a cross-sectoral experience sharing platform that has not really occurred to date. It is important, therefore, to use the climate change agenda to promote the DRR agenda. 5.4.2.4 Knowledge management needs to be bolstered which can begin to bridge gaps in understanding of risk assessments, issues around climate change, risk exposure, impacts of a variety of events. This process can begin to build engagement at a multi-sectoral level. 5.4.3 Risk mitigation and climate change: A major step towards further collaboration and reducing difficulties in merging different agendas is to identify and agree on a set of principles and approaches at a macro level; essentially a combined strategy on how to tackle mainstreaming DRR and climate change in SAR and EAP. 5.4.3.1 Data: Clear and accurate data is needed on climate change threats and consequences both at the local and national levels to provide incentives for governments to invest in adaptation, mitigation and risk preparedness interventions. 5.4.3.2 Institutions: Ministries of Finance should be taken on board to develop an understanding that external shocks to the system will end up affecting the public finances of the government. The impact of the climate change or disaster event should be reflected on the overall budget of the government which will incentivize governments to invest in appropriate DRR mechanisms and prioritize adaptation measures. This will go a long way towards mainstreaming adaptation and DRR into policy and economic planning and building awareness among top government officials of the need to act. 5.4.3.3 Terminology: It is important to combine climate change adaptation terminology with DRR terminology that reduces confusion and divisive thinking leading to reduced turf wars for funding. This will also help assist clients to develop a better understanding of these issues. 21 5.4.3.4 Risk Financing: Comprehensive risk financing strategies will assist in driving both DRR and climate change adaptation agendas forward by inclusion of financial sector products and insurance schemes. 6. The Role of Risk Financing 6.1 Building the Need for Disaster Risk Financing: Since natural disasters have enormous costs and can pose a significant burden on affected governments, there is a critical need for access to liquidity in view of the typical shortage of funds post a major catastrophic event. 6.1.1 Average annual losses over 1977-2001 amounted to 7.1% of GDP according to Geo Risks Research, Munich Re. 6.1.2 The social and economic toll of natural disasters is expected to rise with climate change and growing urban density. 6.1.3 Only 3% of potential loss is currently insured in non-OECD countries in comparison to 45% in OECD. 6.1.4 Though the international community participates in disaster relief, funds are slow to mobilize (it can take up to 4-12 months) and are not conducive to catastrophe planning. 6.1.5 As long as countries continue to borrow in order to meet their cash needs, it adds to their debt burden. 6.2 Disaster Risk Financing Framework: Governments should determine the mix of risk financing instruments based on desired coverage, available budget and cost minimization. 6.2.1 There are several risk financing instruments most suited to specific types of risk, these tools include disaster reserve funds, traditional catastrophe insurance, disaster contingent loans, catastrophe bonds, weather derivatives, etc. 22 Figure 7. Disaster Risk Financing Framework 6.2.2 The Bank assists borrowers in the design of their disaster risk management programs and works with them in defining a risk financing solution most adapted to their needs. 6.2.3 IBRD Contingent Loans: Enhancements of the Deferred Drawdown Option: As part of its engagement strategy with MICs, new enhancements have been approved for the IBRD Deferred Drawdown Option for Development Policy Loans (DPL DDO), and introduced a new instrument, the Catastrophe Risk DDO (CAT DDO). These contingent loans provide borrowers with flexibility in funding their financing requirements (DPL DDO) and enable rapid response to natural disasters (CAT DDO). 6.2.3.1 DPL DDO: Under the DPL DDO, the borrower may defer disbursement of a DPL for up to three years, renewable for an additional three years. The loan proceeds may be drawn down at any time during the three year drawdown period unless the Bank has notified the borrower that one of the drawdown conditions (adequate macroeconomic framework and satisfactory program implementation) are not being met. It is intended to provide an immediate source of financing to borrowers as well as a formal basis for continuing a policy-based engagement with the Bank when no immediate need for funding exists. 6.2.3.2 DPL DDO Highlights: 6.2.3.2.1 Provides immediate liquidity when the borrower needs it, however, an adequate macroeconomic policy framework must be in place (client will be notified if non-compliant) 23 6.2.3.2.2 Satisfactory program implementation will also be monitored by the bank 6.2.3.2.3 Full loan amount is available any time within three years, renewable with RVP approval 6.2.3.2.4 Volume limit is equivalent to indicative fast-Disbursing CAS envelope 6.2.3.2.5 The client can choose among the same conversion options (interest rate, currency) that are available for IBRD loans 6.2.3.2.6 Repayment terms can be determined at the time of commitment or drawdown and the repayment schedule will commence from date of drawdown 6.2.3.3 CAT DDO: The CAT DDO is a catastrophe financing instrument that is available to assist borrowers with immediate liquidity following a natural disaster. Funds can be drawn down in the event of a natural disaster resulting in a declaration of a state of emergency. Funds may be drawn down over a three-year period, renewable up to four times for a total drawdown period of up to fifteen years. The loan proceeds may be drawn down at any time during the three year drawdown period unless the Bank has notified the borrower that the disaster risk management program is not being properly implemented. It is meant to serve as a bridge financing, while other sources of financing are mobilized. 6.2.3.4 CAT DDO Highlights: 6.2.3.4.1 Provides immediate liquidity after a natural disaster resulting in a declaration of a state of emergency. 6.2.3.4.2 The borrower is expected to implement a disaster risk management program, which the Bank will monitor. Client will be notified if non-compliant and funds will not be available for drawdown until back in compliance 6.2.3.4.3 Full loan amount is available any time within three years, renewable up to four times with RVP approval, for a maximum drawdown period of 15 years 6.2.3.4.4 Amounts repaid during the drawdown period will be available for subsequent drawdown 6.2.3.4.5 Maximum size of 0.25% of GDP or USD 500 million, whichever is smaller (exceptions possible for small countries on a case-by-case basis) 6.2.3.4.6 The client can choose among the same conversion options (interest rate, currency) that are available for IBRD loans 24 6.2.3.4.7 Repayment terms can be determined at the time of commitment or drawdown and the repayment schedule will commence from date of drawdown 6.2.3.4.8 Counted against CAS at drawdown 6.2.4 Risk Financing Through CAT Bonds: Catastrophe-linked-securities are risk financing instruments which allow buying insurance through the capital markets by raising funds from investors which are used to make payments against claims under the insurance contracts. 6.2.4.1 Catastrophe Bonds are the most common type of catastrophe-linked- securities and are targeted to a very wide investor base (money managers, hedge funds, pension funds, and insurers and re-insurers) . 6.2.4.2 Investors face no credit risk since insurance payouts are collateralized. 6.2.4.3 The Bank assisted Mexico in issuing a catastrophe bond designed to transfer earthquake risk to investors. The government would not repay the bond principal in case of an earthquake of specified minimum intensity in the specified region. 6.2.4.4 Multi-country CAT Bond: The multi-country CAT Bond is structured to allow member countries to pool risks across different perils, reducing the cost of insurance via diversification through capital markets and collateralized coverage. 6.2.4.4.1 It provides a multi-year coverage at fixed rates, resulting in lower cost volatility and less "renewal" risk. 6.2.4.4.2 Enables rapid access to capital post event based on specific coverage triggers (parametric insurance) and eliminates any incremental leverage as funds do not need to be repaid. 6.2.5 Other Macro-Level Contingent Finance Products: Some of the Bank’s other financial products that are designed to address immediate liquidity needs of clients and help manage and transfer catastrophe risks include: a) insurance- linked securities; b) sovereign budget insurance; c) property catastrophe insurance programs; d) agriculture insurance programs; e) specialist index reinsurer; and, f) weather derivatives. 6.3 Risk Financing Country Case Studies: The following country examples provide brief details of various types of risk financing schemes the Bank has developed in China, the Caribbean, Mongolia and India. 6.3.1 Development of a Common Risk Information Database for China 7 : Several catastrophe models have been developed by modeling and reinsurance companies 7 From the presentation The Role of Risk Analysis: Development of a Common Risk Information Database for China by Wang Jun. 25 in China but these have been in place for business use. However, the lack of a comprehensive exposure database limited the development of the catastrophe insurance scheme. 6.3.1.1 Strategy for Catastrophe Risk Management and funding system building: The design of a Catastrophe Risk Management (CRM) and Funding Mechanisms in China for Key Urban Production Centers was a key component of this project. The project development objective is to assist China in creating an integrated, efficient and effective catastrophe risk management and funding system. 6.3.1.2 Main activities envisioned in the first phase are: 6.3.1.2.1 A baseline survey of hazard risk data (such as catalogued frequency and severity of catastrophic events) and pertinent information availability in China (including government and academic studies and risk models in use) for such key perils as earthquake, flood and typhoon for the selected 4 provinces. 6.3.1.2.2 The development of a comprehensive risk exposure database with the capacity to mobilize, collect, maintain, and provide information to both public and private users on the monetary value of housing and government infrastructure at risk. 6.3.1.2.3 A survey of the current public funding sources for natural disaster (both at the central and local government levels) and private disaster risk insurance instruments and practices (including the estimates of catastrophe insurance penetration for homeowners and the type of insurance products (e.g. terms and conditions of coverage and premium rates) offered by private insurers in the market. 6.3.1.2.4 Creation of an-open source catastrophe risk model for China for key catastrophic perils (based on the outcomes of the above mentioned 3 studies), that would be made available to the public (along with the underlying risk data). 6.3.1.2.5 The development of a proto-type funding strategy to hedge the Chinese economy against extreme and rapid onset of natural disasters, based on the preliminary findings of the abovementioned studies. The strategy should contain executable proposals for risk funding mechanisms, which will be implemented on a pilot basis in Phase 2 of this project (not covered in detail by this CN). 6.3.2 Caribbean Catastrophic Risk Insurance Facility 8 : The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is a joint reserve mechanism designed to provide participating countries with short term liquidity immediately after a disaster. 8 From the presentation Caribbean Catastrophic Risk Insurance Facility by Maricarmen Esquivel. 26 6.3.2.1 The CCRIF relies on the innovative use of parametric insurance instruments. It is the world’s first regional insurance facility for governments. The CCRIF provides governments with the necessary liquidity to begin emergency operations after an adverse event. 6.3.2.2 For a number of reasons, small island states have difficulty absorbing the financial impacts of disasters: (i) limited budgetary capacity prevents them from establishing sufficient financial reserves; (ii) cross-regional subsidization of recovery efforts is generally impossible due to their limited size and economic diversification;( iii) high debt levels limit their access to credit after disasters; and (iv) they have limited access to catastrophe insurance due to the high transaction costs resulting from the relatively small level of business brought into these markets. Disasters have a disproportional impact on the poor. 6.3.2.3 Main Features of the CCRIF: • The Caribbean Catastrophe Risk Insurance Facility (CCRIF) allows Caribbean governments to purchase insurance coverage to finance immediate post-disaster recovery needs. • The Facility acts as a “risk aggregator,� allowing participating countries to pool their individual risks into a common and better diversified portfolio. Figure 8. Structure of the CCRIF • The Facility transfers the risks it cannot retain to international financial markets through reinsurance or other coverage instruments (e.g. catastrophe swaps). To be able to face major losses, the CCRIF leverages its reserve pool to purchase reinsurance in bulk and where it is most efficient. • The accumulation of reserves lessens the Facility’s dependence on outside risk transfer. This should help smooth the pricing cycle experienced in catastrophe reinsurance markets. • Claims payments depend on parametric triggers. Parametric or index-based insurance instruments pay claims upon the occurrence of an event, rather than on the ground assessments of actual losses. Confirmation that a policy has been triggered is made by an independent agency allowing for transparent, low settlement costs and quick disbursing contracts. 27 • As of June 1, 2007, 29 policies have been issued to 16 countries (16 hurricanes and 13 earthquakes). Hurricane exposure to the Facility is limited to US$365 million and earthquake exposure is US$ 130 million. • The Facility currently maintains financial protection to survive a 1 in 3,500 year event that could occur anytime in the next 10 years. This level of security is significantly better than similar risk pools around the world. • Insured countries pay an annual premium commensurate with their specific risk exposure. The coverage price is based on each country’s individual risk profile. Annual premiums vary from US$ 200,000 to US$ 4 million, for coverage ranging up to US $100 million. 6.3.3 Mongolia Livestock Index Insurance 9 : The commercial insurance sector in Mongolia is at an early stage of development and does not have the technical resources to develop an innovative product. Therefore, the insurance to be piloted under this project is highly innovative. It combines self-insurance, market-based insurance and social insurance. Herders retain small losses that do not affect the viability of their business (self-insurance), while larger losses are transferred to the private insurance industry and only the final layer of catastrophic losses is borne by the government. 6.3.3.1 Project Description: The objective of the project is to ascertain the viability of index-based livestock insurance in Mongolia to reduce the impact of livestock mortality of herders. 6.3.3.1.1 This would be achieved through the piloting of index-based livestock insurance in three provinces of Mongolia. 6.3.3.1.2 Two products would be introduced in the pilot provinces: the Base Insurance Product (BIP), offered by private insurance companies and the Disaster Response Product (DRP), a social safety net product financed and provided by the Government. 6.3.3.1.3 The central activity would be the piloting of index-based livestock insurance (IBLI) in the three aimags of Bayankhongor, Uvs and Khenti for three consecutive seasons (2006/7, 2007/8 and 2008/9). 6.3.3.1.4 Offering the insurance over three seasons and over three aimags provides a strong chance that the BIP would be triggered (in some locations). 6.3.3.1.4.1 Key Indicators: Key indicators of the project are a) whether the insurance sector indicates its intention to continue to offer IBLI products beyond the lifetime of the project and b) whether government commits to continuing the DRP after the lifetime of the project. 9 From the presentation Mongolia Livestock Index Insurance by Nathan Belete. 28 6.3.3.2 Importance of Agricultural Risk Financing: Agricultural risk financing is an integral part of agricultural risk management that is often underestimated but brings an economic perspective on risk through price discovery. In addition, it structures efforts of governments, insurers, and farmers to reduce risk thereby encouraging pro-active risk management. 6.3.3.2.1 Risk financing is not a panacea largely because it deals only with the residual production risks that cannot be managed using cost effective mitigation measures. Additionally, insurance is not an income substitute. 6.3.3.3 International Experiences in Agricultural Insurance: Based on the Bank’s experiences internationally with designing agricultural insurance markets the following key design principals are important ingredients for successful programs: 6.3.3.3.1 Public/private partnerships are common for financing agricultural insurance 6.3.3.3.2 Product development requires accurate data 6.3.3.3.3 Risk assessment is critical for premium rates and understanding extreme risk exposure 6.3.3.3.4 Many agricultural insurance programs are linked to credit 6.3.3.3.5 Extensive technical and public awareness is critical 6.3.3.3.6 Multiple peril crop insurance is among the most complex products to develop and rarely offered without significant government resources 6.3.3.4 Types of World Bank Support: The examples below provide a brief outline of the key areas of World Bank support for development of the agricultural insurance markets in developing countries. 6.3.3.4.1 Technical assistance for the insurance industry • Product development • Underwriting/loss assessment/ratemaking • Portfolio risk management 6.3.3.4.2 Institutional capacity building • Data management • Knowledge transfer/training/extension services • Legal/regulatory framework 6.3.3.4.3 Public-private partnership in the financing of catastrophic risk • Provide affordable and effective insurance to farmers/herders • Protect the domestic insurance industry against catastrophic losses • Limit the government fiscal exposure • Facilitate local risk retention and access to international reinsurance 6.3.3.4.4 World Bank financing • Contingent debt facility 29 6.3.4 Microinsurance application in India 10 : Recent tsunami and the earthquake in Gujarat revealed once again that it is often the poor who are affected the worst but also who have the least means to recover from the impact of these disasters. In 1999, the Government of India made an effort, slowly and gradually, for the insurance companies to provide a percentage of their coverage for the poor. Yet the poor are not well informed or organised enough to access this scheme. For the insurance industry insuring the poor is too much effort for too little returns. The problem was how to access the poor to ensure insurance in the face of ever increasing disaster risks due to climate change, poor urbanisations and rapid population increase in high risk areas. 6.3.4.1 All India Disaster Mitigation Institute (AIDMI): All India Disaster Mitigation Institute (AIDMI) acted in Gujarat as both a facilitator and an intermediary to bring together disparate groups of poor communities and commercial and public insurance companies to develop a policy (Afat Vimo) to cover holders against 19 disasters at an annual premium of US$ 5 (app. four days of wages). Through this scheme AIDMI has been piloting how to facilitate the convergence of micro-finance tools and disaster risk reduction strategies. 6.3.4.1.1 The states covered under this initiative include- Gujarat, Tamil Nadu and Jammu & Kashmir. 6.3.4.1.2 Total of 18,325 students have been covered under student safety insurance. 6.3.4.1.3 AIDMI has received many demands from other organisations to share its model and expertise in the area of community driven risk transfer practices. 6.3.4.1.4 The Afat Vimo initiative has also led to many emerging areas of advocacy such as corporate social responsibility, opportunity to influence the draft micro finance bill by the Government of India, and influencing INGOs to help their partners develop similar models to raise penetration levels. 6.3.4.1.5 The renewal rate is currently 88%. The real impact of this policy is on disaster-induced debt reduction. Currently, AIDMI is working on designing an Asia wide client impact study to create evidence base to advocate the need for more such policies in low-income communities of developing countries. 6.4 Issues and Challenges in Developing Risk Financing: While financial instruments can help limit the impact of adverse natural events, they should not be thought of as a panacea. Though insurance can replace credit to cushion the impact of disasters, it remains a buffer only for the relatively wealthy. Since private firms tend to avoid rural markets with apparent high levels of risk. This section highlights some of the challenges and lessons learned from the workshop on risk financing. 10 From the presentation Microinsurance overview and application in India by Margaret Arnold and Yasemin Aysan. 30 6.4.1 Underdeveloped markets: Insurance markets in the majority of developing countries are undeveloped, and coverage for natural disasters is extremely limited. Where hazard coverage exists, it is usually limited to major industrial and commercial properties, and some wealthier households. The demand for risk transfer instruments in emerging markets is often constrained by market gaps, lack of regulatory frameworks, lacking data on disaster risk, a lack of a culture of risk financing, and the reluctance of large reinsurance market players to invest in the development of small risk markets. 6.4.2 Not a stand alone solution: One of the main outcomes of the workshop identified that risk financing is not a stand-alone solution but must be coupled with DRR efforts. Territorial planning systems can be improved and building codes must be enforced. Infrastructure should be built to withstand adverse natural events and emergency preparedness should be strengthened because it is risk mitigation that will eventually reduce the amount governments pay for annual insurance premiums by saving lives and reducing losses. 6.5 Recommendations: 6.5.1.1 Microinsurance: Microinsurance can help provide low-income households, farmers, and businesses with rapid access to post-disaster liquidity, thus protecting their livelihoods and providing for reconstruction needs. 6.5.1.1.1 As insured households and farms are more creditworthy, insurance can also promote investments in productive assets and higher- risk/higher-yield crops. In addition, insurance has the potential to encourage investment in disaster prevention if insurers offer lower premiums to reward risk-reducing behavior. 6.5.1.1.2 Micro disaster insurance can cover sudden-onset events, such as earthquakes, floods, and cyclones, as well as slow-onset events, such as droughts. 6.5.1.1.3 Traditional microinsurance programs have consisted of indemnity insurance, which pays claims based on actual losses and requires an extensive network of claims adjusters who assess individual losses following an event. 6.5.1.1.4 Indemnity schemes include those in India offered by NGOs in conjunction with insurance companies in two states. These schemes build on microinsurance arrangements for independent risks, such as unemployment, fire and accidents, by extending cover to loss of life, property or livestock due to natural disaster events. 6.5.1.1.5 Coverage for property losses due to floods, earthquakes, cyclone and other natural calamities is offered to groups such as women with a minimum group size of 250, or to community groups for managing the impacts of disasters post-event. Clients can also engage in risk reduction training for a small fee. 31 6.5.1.2 International Donor Community: The international donor community can play an important role in ensuring the financial robustness of developing country insurance providers. By providing technical assistance and financial support to help make these instruments affordable to the poor, both the donors and the recipients stand to gain, especially if the instruments can be designed to encourage preventive measures. Pre-disaster assistance would leverage limited disaster aid budgets, free recipient countries from the vagaries of post-disaster assistance, increase funds for disaster recovery, and (possibly) provide incentives for risk reduction. 6.5.1.3 Public Private Partnerships: Public-private partnerships in the financing of catastrophic risk provide affordable and effective insurance to farmers/herders. This can protect the domestic insurance industry against catastrophic losses and limits the government’s fiscal exposure. This can facilitate local risk retention and access to international reinsurance in conjunction with the Bank’s contingent debt facility. Involving private insurers with access to the international reinsurance market under the supervision of public regulators will be important to provide protection to individuals and owners of private property. 6.5.1.4 Tailored solutions: Risk financing measures to protect livelihoods have to be carefully tailored to individual regions and their specific problems. One size does not fit all. Indiscriminate livestock restocking in a drought to restore livelihoods may prove to be counter-productive. Rain-fed agriculture and fisheries are the most vulnerable to droughts and floods and require investment in the development of resilient strategies. 7. Developing Regional DRM Strategies for SAR & EAP 7.1 Rationale for developing regional strategy: The analysis of natural disasters in SAR and EAP reveals that every disaster dampens levels of development and growth by increasing the number of casualties, damaging infrastructure, weakening communities and worsening overall poverty within a country. 7.1.1 However, experts and policy makers now realize that the damage wrought by disasters is not inevitable or “natural� but can be greatly reduced with preventive measures ex ante. 7.1.2 Disaster risk management issues, therefore, need to be addressed not only at the country levels in SAR and EAP but also at the regional level since hazards and catastrophes do not always obey political boundaries of nation states. 7.1.3 Strategies at the regional and country levels in both SAR and EAP should be developed in a holistic manner so that disaster risk reduction can be integrated with vulnerability reduction and climate change adaptation measures. A strategy can help to prioritize how Governments should engage in risk mitigation 32 investments, outline an engagement plan for member countries and enhance the overall understanding of the region’s vulnerability to changing climate and related catastrophes. 7.1.4 A strategy can be used as a model for CAS, identifying common regional challenges and stimulating regional cooperation in meeting defined vulnerabilities. Also, it provides a platform for developing a roadmap for the promotion of proactive disaster risk mitigation and climate change adaptation approaches as well as to systematically up-grade existing country capacities for risk reduction and recovery. This can also assist client countries in developing an implementation plan for risk mitigation investments. 7.2 Disaster Risk Mitigation Framework: The Bank’s proposed hazard risk management framework is based on the five basic pillars outlined below which are key areas where countries in SAR can gradually and systematically invest in upgrading their existing systems in disaster risk management. Therefore, in order to develop an affordable and efficient disaster risk management strategy, the following basic questions need to be addressed: 7.2.1 Pillar 1: Risk Identification and assessment – What is the country’s hazard exposure? What are the economic and social losses? What is the probability of loss exceedance? Where is the risk concentrated? 7.2.2 Pillar 2: Risk mitigation – What structural and nonstructural measures are suitable and affordable to mitigate physical damage? What are the priorities for intervention, considering risk to lives, livelihoods, and the need for emergency facilities? How best can these measures be financed and sustained? 7.2.3 Pillar 3: Emergency preparedness – Is the country sufficiently prepared to respond to emergency situations organizationally as well as technically? Does the existing coordination and response mechanism function under stress? How efficiently are public, nongovernmental, and bilateral and international aid institutions integrated in the emergency response system? 7.2.4 Pillar 4: Catastrophe risk financing or transfer – What is the country’s financial capacity to absorb catastrophic events? Is there a funding gap? What are the most suitable financial instruments with which to address the funding gap? 7.2.5 Pillar 5: Institutional capacity building – What is the country’s capacity to manage risk at different levels of government? Is an institutional framework and coordination mechanism in place that allows strategic planning and decision making at the central, regional, and local levels? Are technical, social, and economic 33 considerations integrated adequately in the investment decision process? Figure 9. Disaster Risk Management Framework 7.3 Lessons from Latin America and the Caribbean (LAC) 11 : Major disasters (e.g. Hurricane Mitch in 1998) shifted the region’s approach to disaster risk management from a reactive one to viewing DRM as a development problem leading to a comprehensive strategy in tackling vulnerability from natural hazards. In the event of a disaster, LAC works with client countries not just to develop emergency response measures but reduce risk and prepare the government to tackle the next event in a holistic manner. 7.3.1 Confluence of Factors: The high “at risk� ranking for natural disasters that LAC has been given is a function of their exposure to geophysical and meteorological hazards coupled with population and infrastructure density, high incidence of poverty, environmental degradation and weak institutional capacities. 11 From presentation on Disaster Risk Management in Latin American and the Caribbean by Maricarmen Esquivel. 34 Figure 10. Key Components of LAC Disaster Risk Management Framework 7.3.2 LAC DRM Framework: The LAC DRM framework displayed above indicates that the majority of DRM activities in LAC focus on risk identification, risk reduction, risk financing, and disaster preparedness. 7.3.3 LAC has ongoing operations to support vulnerability reduction, for example those in Nicaragua and Honduras. Both projects support the strengthening disaster risk management at national and municipal level through the institutional strengthening, risk assessments, and the implementation of mitigation works. A small project is also ongoing to increase the information and coordination capacity of CEPREDENAC (the regional HRM agency). 7.3.4 Achievements and Successes: The Bank’s involvement in the region in likely to increase over the coming years. Emergency operations are currently under way for Bolivia and Haiti and are under preparation for Dominican Republic and Nicaragua. Various technical assistance programs funded by the Global Facility for Disaster Reduction and Recovery (GFDRR) will begin implementation in the coming year, including the Central American Probabilistic Risk Assessment that will create a risk map of the region that will permit the evaluation of the potential impact from natural disaster on the country’s finances by 35 analyzing the financial resources available and the potential liquidity gap. 7.3.5 Interest in Risk Financing: The Bank received a request from the Central American Council of Ministers of Finance last year to support the establishment of a risk financing or insurance mechanisms for the region. A Bank team is assessing how the experience acquired in the establishment of the CCRIF and the opportunity provided by new loan instruments such as the CAT DDO could be used to support such initiative. It is also working with the governments on the Central America Probability Risk Assessment (CAPRA). 7.3.6 Sustainability and Replicability: 7.3.6.1 High demand/successive disasters in client countries which led to several ERLs. 7.3.6.2 Allowed critical mass in terms of staff and budget as well as increased awareness from the client, however, the dialogue evolved (slowly) from an emergency approach to a more comprehensive disaster risk management approach and larger risk mitigation projects. 7.3.6.3 Since traditional DRR institutions tend to have short capacity without long term vision, LAC worked with existing institutions including the Ministry of Works, Ministries of Governance and Finance. Disaster agencies were just one component. 7.4 Lessons from Pakistan 12 : Over the next five years the Government of Pakistan has determined nine key themes and priorities as part of a comprehensive DRM framework. These include: a) institutional and legal arrangements for DRM; b) hazard and vulnerability assessment; c) training, education and awareness; d) disaster risk management and planning; e) community and local level programming; f) multi-hazard early warning system; g) mainstreaming disaster risk reduction into development; h) emergency response system; and, i) capacity development for post-disaster recovery. 7.4.1 Phased approach: A phased approach to DRM has been proposed by the Bank DRM Team in Pakistan which includes three overall phases. These are described below: 7.4.1.1 Phase I: Current and planned activities are: 7.4.1.1.1 Risk Assessment: Multi-hazard mapping in 9 earthquake affected 12 From the presentation Pakistan Turning Disaster into an Opportunity by Raja Rehan Arshad and Ayaz Parvez. 36 districts, and preparation of district- level disaster risk management plans (Initiated through ERRA, 2008-09). 7.4.1.1.2 National Level Multi-hazard vulnerability and risk mapping – macro-mapping (initiated through NDMA, 2008-09). 7.4.1.1.3 GFDRR activities include Hazard and Economic Risk Modeling and Microzonation of Karachi City as well as other institutional capacity building initiatives such as knowledge sharing, preparation of an operational toolkit, and development of post-disaster livelihoods cash transfer mechanisms. 7.4.1.1.4 Emergency preparedness which includes financing SOPs for National Emergency Operations Center and Response. 7.4.1.1.5 In Phase I, a study on the potential of catastrophe risk financing in Pakistan has also been taken up including an assessment of Pakistan’s insurance sector. 7.4.1.2 Phase II: Phase II includes activities in risk assessment, institutional capacity building and risk mitigation investments. 7.4.1.2.1 Vulnerability and Risk Assessment: Taking the macro-mapping to a micro level in the high risk areas. 7.4.1.2.2 Institutional Capacity Building: Capacity building of NDMA and PDMAs. Also including reinforcing district and local capacities – to include brick and mortar investments. 7.4.1.2.3 Risk Mitigation Investments: Early warning systems for cyclones and flash flooding in coastal regions, flood and cyclone protection infrastructure through a pilot 37 project, and preliminary work on climate change adaptability. 7.4.1.3 Phase III: This phase includes exploring the potential for catastrophe risk financing and launching a DDO or other suitable financing instruments in Pakistan. Preparatory work should commence on DRM actions and reforms leading to a DDO – provided the macroeconomic situation allows. 7.4.2 Prioritization of the Work Program: All aspects of the future DRM framework are not completely finalized in Pakistan. As a result, there are several elements of the program that were identified as key priorities for development of the future practices of DRR in Pakistan. These include the following topics: 7.4.2.1 Regional emergency response centers 7.4.2.2 Existing response capacities and local coping mechanisms need to be mapped and factored-in in the risk assessment model 7.4.2.3 Risk mapping should be institutionalized to make it sustainable – a central agency with streamlined data links with various departments 7.4.2.4 A study on review and enforcement of building codes, with an urban focus 7.4.2.5 An implementation work plan needs to be developed by NDMA on various donor activities – could be facilitated through a workshop 7.4.2.6 Need to initiate dialogue and build ownership on CAT financing DDO with PREM and Ministry of Finance 7.4.2.7 There should be focused analytical and research work on climate change scenario development and subsequent adaptation interventions where the Bank can jumpstart the coordination across departments (where required) and leverage NDMA 7.4.2.8 Similarly, sectoral ministries should take the lead on specific disaster related issues, while NDMA should take more of a coordination role on specific issues (such as water issues, food security) 7.4.2.9 Pakistan should benefit from regional cooperation and ongoing regional work on GLOF 7.5 Regional Strategy for SAR 13 : The increased demand in SAR and worldwide for disaster assistance clearly demonstrates the need for countries to factor hazard and vulnerability considerations into their development policies, strategies and 13 From the presentation Developing a Regional DRM Strategy for SAR by Christoph Pusch and Ayaz Parvez. 38 plans. Economic losses, human suffering and loss of life from disasters can be reduced through a systematic approach to planning and preparing for disasters and mitigating their impact. 7.5.1 Thus far there are no clear-cut regional policy or program interventions which look at disaster risk reduction in conjunction with hazard risk mitigation from a regional and national perspective, besides some limited initiatives that have been introduced by the South Asian Association of Regional Cooperation (SAARC). 7.5.2 The World Bank serves as a natural facilitator and forum to facilitate the development of strategic priorities for regional disaster risk reduction among the SAR countries. 7.5.3 Objectives and scope of the regional study: The objectives of this study are i) to enhance understanding of the region’s vulnerability to natural hazards by examining regional risks, hot spots for disasters and economic and social impacts, ii) to identify common regional challenges and stimulate regional cooperation in meeting these challenges, iii) to develop a roadmap for the promotion of proactive disaster risk mitigation and climate change adaptation approaches, as well as to systematically up-grade country capacities for risk reduction and recovery, and iv) to prepare an implementation plan for risk mitigation investments and programs within a robust monitoring framework. 7.5.4 Task Description: The content of the strategy report is divided into five main tasks which are presented below: 7.5.4.1 Task I Assessing Vulnerability of Natural Hazards in South Asia: This task will develop a comprehensive understanding about the vulnerability of SAR countries to natural disasters. It will primarily serve to illustrate the size, likelihood and impact on populations and economies of the occurrence of various hazards on the SAR countries. This entails the following: a) overview of the regional setting including main sub-regions, history, and ethnic groups; b) description of the physical environment such as area, geology, climate patterns, etc.; c) hazard overview of the causes, geographic concentrations, hot-spots and regional vulnerability maps for each hazard; and, e) the risks of present and future vulnerability of the region from climate change factors and resulting change in frequency and magnitude of related disasters. 39 7.5.4.2 Task II Drawing Lessons Learned from Bank Emergency Reconstruction Programs: This task aims to draw lessons learned from Bank reconstruction operations that can be synthesized into policies for disaster response across the region. These issues range from developmental policies, disaster mitigation concerns, governance, as well as highlight specific interventions that worked well to reduce long-term vulnerabilities in the region as well as those that failed to achieve their intended outcomes. In addition, the task will incorporate the findings from recent reviews and impact assessments focusing on sector specific instruments such as the use of livelihood support instruments in the post- disaster environment, as well as the comprehensive review carried out by the Bank’s Independence Evaluation Group on emergency recovery loans and disaster related lending. 7.5.4.3 Task III Developing Strategic Priorities for Risk Reduction in South Asia: The formulation of the strategy report will focus on close cross-sectoral coordination with input sought from various sectors to obtain relevant information from all key stakeholders. This work builds on risk mitigation strategies that have already been formulated in some of the SAR countries and incorporates sector work and analytical studies that have been completed by Bank staff and other reputable partners. This task will articulate strategic priorities in cooperation with concerned government authorities, expert disaster risk community members, as well as selected representatives from donor agencies, NGOs, and regional bodies with experience in disaster management (i.e. SAARC). The development of strategic priorities at the regional level will be informed by the identification, collation and comparative analysis of common DRM-related issues, experiences and themes at the country-level. These key themes include the following: 7.5.4.3.1 Adapting to Climate Change (Regional and Local Implications) 7.5.4.3.2 Strengthening Institutions towards Effective Management of Disaster Risks 7.5.4.3.3 Building Disaster Resilient Communities 40 7.5.4.3.4 Developing Approaches for Risk Financing in SAR 7.5.4.4 Task IV Preparation of Country Risk Profile and Implementation Plan: Recognizing that the risk mitigation framework has to be led, financed, and implemented on a national and local level, a risk profile with corresponding implementation plan of mitigation investments shall be prepared for each country following the five pillars of the Hazard Risk Management Framework. This would include an assessment of the countries capacity for emergency response, preparedness, recovery and a review of the institutional and legislative framework, risk management strategies, warning and monitoring systems, building code enforcements, financial capacity to absorb catastrophic events, etc. 7.5.4.5 Task V – Outlining Bank’s Role and Activities: The Bank clearly recognizes the need to promote a more proactive and planned approach in SAR client countries to manage natural hazards. Thus the objective of this task is (i) to present the evolving role of the Bank towards risk mitigation, and (ii) to develop a set of specific actions to assist SAR countries in their efforts to better manage natural hazards with the ultimate long term goal of reducing vulnerability in the region; losses which can be prevented through effective management of natural hazards. 7.6 Regional Strategy for EAP: 7.6.1 EAP DRM Context: The East Asia and Pacific (EAP) region is highly vulnerable to the impacts of natural disasters, ranging from earthquakes to floods to drought. Since 1990, natural disasters in the region have caused more than $473 billion in damage and affected more than 2 billion people (CRED – EM- DAT database). Disaster risk poses a significant constraint to sustainable economic development, and undermines the investments of billions of dollars of assets (major infrastructure, housing, etc.) – and natural disasters often significantly impact the GDP of many countries. From FY04-07, the World Bank provided financing (or managed trust fund resources of) about $1.5 billion in the EAP region to support primarily post-disaster interventions in response to floods, typhoons, earthquakes, and the 2004 Asia tsunami. Many of these reconstruction programs focus on rebuilding infrastructure systems that were damaged or destroyed by disasters; examples of sectors targeted include: water supply networks, roads and bridges, telecommunication systems, and ports. 41 7.6.2 The Draft Business Plan: The region is now taking a more strategic approach to disaster risk management, shifting from focusing on post-disaster recovery and reconstruction to supporting clients to address ex ante disaster risk management efforts and policies. The Disaster Risk Management team within EASUR has prepared a draft business plan to outline and develop its key points of engagement, on a country by country basis, as well as on a regional basis. 7.6.3 Country Level Risk Assessments: One key recommendation of the business plan is that more in-depth strategy development for risk reduction and mitigation is required at the country level; some countries have explicit strategies for DRM, but many in EAP do not. Development of a regional strategy that includes country level risk assessments and prioritization of interventions would be useful to guide future programs implemented by the national governments, the Bank, and other development partners. 7.6.4 Country level strategies would utilize a 5 pillar framework of risk identification, risk reduction, risk financing, institutional capacity building and emergency preparedness. It would include country-level risk profiles for target countries: Cambodia, China, Indonesia, Laos, and Mongolia, the Philippines, and Vietnam; the profiles would include potential loss curves to illustrate the projected impacts of disasters on the population and economy. Focus would be given to potential impacts of natural disasters on infrastructure development and actions that may be taken to reduce vulnerability of key infrastructure. 7.6.5 Under each of the five pillars, some uniform indicators will be developed and agreed upon across countries for comparability, and to benchmark the progress of DRM activities over time. The framework paper will be done jointly with Governments, and will serve as a good guidance note for the Bank and the Government. 7.6.5.1 Proposed indicators would include benchmarking in: • Emergency Preparedness o Emergency response planning o Public Awareness/information strategy and systems o Technical emergency response capacity • Institutional Capacity o Decentralized emergency management systems o Community based preparedness systems o Legislative framework o Training, education and knowledge sharing 42 o International cooperation • Risk Mitigation o Early warning and monitoring systems o Hazard mapping and land use planning o Code refinement and enforcement o Hazard specific risk mitigation • Catastrophe Risk Financing o Ex ante financing arrangements o Insurance o Budget reserves o Contingent capital o Comprehensive catastrophe risk financing plan 7.6.6 Objectives: The objectives of the EAP Disaster Management Strategy are to: (i) raise awareness and understanding of the exposure of countries in the region to natural hazards, (ii) model potential economic losses at the country level, and (iii) assist governments to identify key investments and programs to reduce their vulnerability to hazard risks. It is also anticipated this strategy will support the development of business lines that provide a common framework for risk mitigation efforts. 7.6.7 Development of country level risk profiles for the target EAP countries will help the governments, stakeholders and the Bank systematically develop recommendations for each country as per the five pillar DRM framework (risk identification, risk reduction, risk financing, institutional capacity building and emergency preparedness) and will be used as a basis for developing a longer-term program of Bank support focused on mainstreaming risk management into our lending portfolio in each country. This will contribute to sustained economic growth through improved infrastructure, reducing future economic and capital losses due to catastrophes. 7.6.8 In some cases there will be no need for new analysis, but the task will comprise of putting all of the existing information together into one coherent framework paper. Existing GFDRR resources (Philippines, Indonesia, and Pacific Islands) can be used to do this. 7.6.9 Execution of Activity: The study will be executed by the Bank. Consultation with key stakeholders, including national government agencies, regional partners and bilateral agencies will be conducted on a regular basis by the task team. Country level consultations would be held to inform, collect and validate information, with appropriate government counterpart participation in each country. This will be facilitated through the existing strong dialogue in each country, supported through the GFDRR. The task team will work with UN/ISDR and GFDRR to leverage partnerships and encourage collaboration. 43 7.6.10 Audience: The primary audience for the ESW is national governments of target EAP countries, especially the ministries of finance, planning, infrastructure and disaster management. The strategy can be disseminated at a regional workshop and via the World Bank’s website. 8. Recommendations & Way Forward 8.1 The workshop and this subsequent report have addressed several of the major themes in disaster risk management practices in three key regions of the Bank; SAR, EAP and LAC. The solutions and recommendations highlighted in this report represent a broad outline of potential policies that will accelerate mainstreaming of DRR practices into current and future development strategies for governments in SAR and EAP. However, the recommendations provided in this report are just a wide framework for countries. These policies will have to be prioritized by each region and country according to their specific needs. The following points below highlight some key recommendations for client governments 14 : 8.2 Political will and leadership: A holistic approach to disaster risk reduction is necessary since multiple hazards require the involvement of multiple ministries and agencies at the regional, national and provincial levels which requires consensus and political will among a nation’s top decision makers and institutions. 8.3 Central coordination mechanism & local capacity building: Disaster risk management is a core function of government at every level. While there seems to be no single best organizational structure for that purpose, it is widely accepted that a strong central agency is key in a disaster management system. The limited ability of the authorities to date to consistently respond fast and efficiently to impeding disasters, calls for a stronger coordination of disaster risk management and technical support efforts. However, in conjunction to coordination and leadership during times of emergency, this also needs to be coupled with local authorities having strong capacity, authority and sufficient resources at the local level. Promoting local community participation is crucial to this process because most initiatives related to risk reduction will only be sustainable if driven and owned at local levels. 8.4 Ability to deliver speedy implementation: The ability to implement fast both during the response, recovery and reconstruction phase as well as in preparing for disasters is a key element of successful disaster risk management. Yet preparation, approval and implementation of structural and non-structural public investments would make provinces more resilient to natural disasters are cumbersome with little sense of urgency on the part of concerned authorities. These investments (or subprojects) are often not integrated into a broader national strategy and plan. 8.5 Strengthening forecasting and early warning systems: will ensure that vital time is available for citizens to evacuate and bring their families to safe grounds. Forecasting, 14 From the briefing note by Severin Skodderitzch 44 disaster modeling and early warning technology for this has improved considerably. Implementing and operating such systems requires strong leadership as well as clear institutional structures. 8.6 Developing better disaster damage and loss assessment tools: Faster implementation of disaster recovery is often hampered by an absence of credible damage and loss assessments. Better assessments would provide for better decision making in terms of resources needed and targeting. Credible assessments are also instrumental in mobilizing international funding in the case of larger damage events. Improving damage and loss assessments requires an coordinated effort across ministries and agencies, both central and provincial, which GSO is likely to be best placed to coordinate. 8.7 Faster disaster recovery and reconstruction: Fast mobilization of contingency funds either on the part of Government or international partners is one important step. Allocation and transfer to provinces a second step. The ability of provinces to use these funds quick and in compliance with fiduciary standards will then make the difference to bringing back normality to affected communes, public institutions and individual families. 8.8 Initiating private risk transfer mechanisms: involving private insurers with access to the international reinsurance market under the supervision of public regulators (Department of Insurance) will be important to provide protection to individual farmers vulnerable to flooding but eventually also to owners of private property. 8.9 Benchmarking progress in managing disasters: is one important tool to learn lessons to improve the countries ability at reducing the risk of an ever increasing vulnerable economy and population faced with increasing range of hazards. As Vietnam moves towards middle-income status, its institutions should be able to improve their ability to manage risks considerably and the economy should be able to afford better protection, response and recovery. 45 Annex A: Training Agenda Disaster Risk Reduction and Risk Transfer: Toward Concrete Action in South Asia & East Asia and the Pacific April 28-30, 2008 Grand Hyatt Erawan Hotel, Bangkok, Thailand AGENDA Monday: April 28, 2008 8:00 – 8:30 Registration 8:30 – 10:00 Overview of training objectives and program Dean Cira and Christoph Pusch, World Bank (7 minutes) Participant introductions, icebreaker (20 minutes) Disaster Risk Reduction: An Overview Margaret Arnold, ProVention Consortium (15 minutes) From Emergency Response to Ex Ante Risk Reduction: Lessons from LAC Maricarmen Esquivel, World Bank (15 minutes) Questions and clarifications Facilitator: Steve Commins, ProVention Consortium 10:00 – 10:30 Coffee break 10:30 – 12:00 Case Studies on DRR Investments and Entry Points: Risk Reduction in Gujarat: Lessons from Earthquake Emergency Recovery Project Shyamal Sarkar, World Bank (15 minutes) Mainstreamed DRR in Bangladesh: Local Governance Support Program Steve Commins, ProVention Consortium (15 minutes) Vietnam Natural Disaster Risk Management Project Severin Kodderitzsch, World Bank (15 minutes) 15 minute question and answers on the cases 30 minute group work on cases and DRR entry points Session Facilitator: Margaret Arnold 12:00 – 13:30 Lunch 46 13:30 – 15:00 DRR and Climate Change - Additional Case Studies: Andra Pradesh (India): Climate Change Adaptation Study Priti Kumar, World Bank (15 minutes) Group Exercise: Case Study: Coastal Cities Drainage Project Dean Cira, World Bank (15 Minutes) 30 minute discussion on DRR investments and merging the DRR and Climate Change Adaptation agendas. Session Facilitator: Yasemin Aysan, ProVention Consortium 15:00 – 15:15 Introduction to Working Groups Yasemin Aysan, ProVention Consortium (10 minutes) 15:15 – 15:30 Coffee break (bring coffee to WG) 15:30 – 17:00 East Asia and Pacific’s DRM South Asia’s DRM Business Plan: Business Plan: Challenges and Challenges and Issue to be Issues to be Addressed Addressed Dean Cira, World Bank (15 Christoph Pusch, World Bank (15 minutes) minutes) WG1: Developing a Regional WG2: Developing a Regional DRM DRM Strategy for EAP Strategy for SAR Resource person: Dean Cira, WB Resource person: Christoph Pusch, Facilitator: Zoe Trohanis, WB WB Facilitator: Steve Commins, ProVention 17:00 – 17:30 Report Back: Interim discussions on Working Groups 19:30 – 21:30 DRM Online Tools Demo by Zoe Trohanis/WB and Maya Schaerer/ProVention ProVention DRR Film Festival (see Annex for Playlist) Coffee and Desserts Served Tuesday, April 29, 2008 9.00 – 10:40 Introduction to Risk Financing and Transfer Overview of Risk Financing and World Bank Instruments (including CAT DDO) Issam Abousleiman, World Bank (30 minutes) Q&A 10 minutes The Role of Risk Analysis: Development of a Common Risk Information Database for China Wang Jun, World Bank (15 minutes) Modelling Cat Risks in India 47 Satya Priya, RMSI (20 minutes) Q&A 10 minutes. Session Moderator: Margaret Arnold, ProVention Consortium 10:40 – 11:00 Coffee break 11:00 – 11:45 Group Brainstorming on how to Incorporate Risk Financing Approaches into the Tasks of the Working Groups Facilitator: Steve Commins, ProVention Consortium 11:45 – 13:00 Risk Financing/Transfer Case Studies Regional Level: Caribbean Catastrophic Risk Insurance Facility Maricarmen Esquivel, World Bank (15 minutes) Country Level: Mongolia Livestock Index Insurance Nathan Belete, World Bank (15 minutes) Microinsurance Application in India Yasemin Aysan, ProVention Consortium (10 minutes) 30 minutes discussion of cases. Session Moderator: Margaret Arnold, ProVention 13:00 – 14:30 Lunch 14:30 – 16:15 WG1: EAP Strategy WG2: Pakistan Earthquake: Resource person: Dean Cira, WB Turning a Disaster into an Facilitator: Zoe Trohanis, World Opportunity Bank Resource person: Raja Rehan Arshad Facilitator: Steve Commins, ProVention 16:15 – 16:30 Coffee break (bring coffee to WG) 16:30 – 17:45 Open Discussion on Key Issues Opportunity for Working Groups to continue to prepare presentations and for participants to raise any issues or questions on previous sessions. Facilitator: Steve Commins, ProVention Consortium 09:00 – 11:00 Group Presentations and Peer Feedback 15 minutes presentation and 15 minutes of feedback for each Working Group. Facilitator: Steve Commins 11:00 – 11:30 Coffee break 11:30 – 12:15 Wrap-Up and Next Steps Pull together lessons learned and priorities indicated by participants over past two days. How might these lessons now be integrated into country and regional strategies to increase the Bank’s engagement with client countries 48 on these issues? Facilitators: Dean Cira and Christoph Pusch 12:15 – 13:00 Training Evaluation 13:00 – 14:30 Lunch and Group Photo Special Presentation: Launch of Disaster Reconstruction and Risk Reduction Global Information Database Wolfgang Fengler and Jock McKeon, World Bank 14:30 Event Concludes 49 Annex B: List of Participants Disaster Risk Reduction and Risk Transfer: Toward Concrete Action in South Asia & East Asia and the Pacific April 28-30, 2008 - Bangkok, Thailand Name Organization Unit Title Location Abla, Ilham World Bank EASIS Operations Officer East Asia Jakarta, Indonesia Abousleiman, Issam World Bank BDM Lead Financial Officer/Head of Banking Products HQ South Appalarajugari, Harinath World Bank SASDN Environmental Specialist Asia New Delhi, India Bald, Andre World Bank EASIS Infrastructure Specialist East Asia Aceh, Indonesia Belete, Nathan World Bank SASDA Senior Rural Development Speciallist East Asia Beijing, China South Christensen, Asger World Bank SASDS Lead Social Development Spec. Asia New Delhi, India Esquivel, Maricarmen World Bank LCSUW Junior Professional Associate HQ Fahmi, Ahmad Zaki World Bank EASPR Research Analyst East Asia Jakarta, Indonesia Fengler, Wolfgang World Bank EASPR Senior Economist East Asia Jakarta, Indonesia Figueroa-Geron, Carolina World Bank EASRE Senior Operations Officer East Asia Manila, Philippines Gu, Lixin World Bank EASIS Sr. Infrastructure Specialist East Asia Aceh, Indonesia South Iqbal, Md. World Bank SASDE Sr. Energy Specialist Asia Dhaka, Bangladesh Kariuki, Mukami World Bank EASUR Program Coordinator East Asia Manila, Philippines South Keicho, Toshiaki World Bank SASDU Sr. Urban Environment Specialist Asia Colombo, Sri Lanka South Khan, Zahed H. World Bank SASDU Sr. Urban Specialist Asia Dhaka, Bangladesh Kim, Hoonae World Bank EASVS Sector Manager East Asia Hanoi, Vietnam Kodderitzsch, Severin L. World Bank EASVS Country Sector Coordinator East Asia Hanoi, Vietnam 50 South Kumar, Priti World Bank SASDN Sr. Environmental Specialist Asia New Delhi, India Leitmann, Josef Lloyd World Bank EASIS Lead Environment Specialist East Asia Jakarta, Indonesia McKeon, Jock World Bank EASPR Consultant East Asia Aceh, Indonesia Melgaard, Lasse World Bank EACVF Special Assistant East Asia Hanoi, Vietnam South Narayanan, Shankar World Bank SASDS Sr. Social Development Specialist Asia New Delhi, India South Olesen, Asta World Bank SASDS Sr. Social Development Specialist Asia New Delhi, India South Parvez, Ayaz World Bank SASDU Consultant Asia HQ Pham, Cuong Hung World Bank EASVS Senior Operations Officer East Asia Hanoi, Vietnam South Pittaluga, Fabio World Bank SASDS Sr. Social Development Specialist Asia Dhaka, Bangladesh Planitz, Angelika UNISDR Programme Officer - Asia/Pacific Bangkok, Thailand Priya, Satya RMSI Dehli, India South Ranjitkar, Shyam Sundar World Bank SASDA Sr. Irrigation Engineer Asia Khatmandu, Nepal South Sarkar, Shyamal World Bank SASDU Sr. Sanitary Engineer Asia New Delhi, India South Shreshta, Silva World Bank SASDE Research Analyst Asia Khatmandu, Nepal Sitorus, Djauhari World Bank EASFP Financial Sector Specialist East Asia Jakarta, Indonesia Staruszkiewicz, Lisa AusAID Disaster Risk Reduction Policy Officer South Sultana, Reefat World Bank SASDT Project Analyst Asia Dhaka, Bangladesh Velasquez, Jerry UNISDR Senior Regional Coordinator Bangkok, Thailand Virtucio, Felizardo World Bank EASRE ETC East Asia Manila, Philippines Wang, Jun World Bank EASFP Sr. Financial Sector Specialist East Asia Beijing, China South Zhu, Da World Bank SASDU Economist Asia HQ 51 Organizers Arnold, Margaret ProVention Head, ProVention Secretariat Geneva, Switzerland South Arshad, Raja Rehan World Bank SASDU Lead Operations Officer Asia Islamadab, Pakistan Aysan, Yasemin ProVention Independent Consultant Geneva, Switzerland Cira, Dean World Bank EASVS Sr. Urban Specialist HQ Washington, DC Commins, Steve ProVention Independent Consultant Los Angeles, USA Dastur, Arish World Bank EASUR ET Consultant HQ Washington, DC Pusch, Christoph World Bank SASDU Lead Specialist, DRM New Delhi, India Schaerer, Maya ProVention Officer, ProVention Secretariat Geneva, Switzerland Sinha, Ranu World Bank SASDU ET Consultant New Delhi, India Trohanis, Zoe Elena World Bank EASUR Infrastructure Specialist HQ Washington, DC wb320774 C:\Documents and Settings\wb320774\Desktop\Disaster Risk Reduction Report\Final version DRM report May 29, 2008.doc 05/30/2008 4:37:00 PM 52