Disaster Risk Management

The Philippines by virtue of its geographic circumstances is highly prone to natural disasters, such as earthquakes, volcanic eruptions, tropical cyclones and floods, making it one of the most disaster prone countries in the world. These hazards cost the Government an average of P15bn per year in direct damages, or more than 0.5% of the national GDP, and indirect and secondary impacts further increase this cost. In addition, to this significant economic cost, there are also substantial social and environmental impacts. This high level of risk is what prompted the Bank and the Government to mount an informal study to: document the impacts of natural disasters on the social and economic development of the Philippines; assess the country’s current capacity to reduce and manage disaster risk; and identify options for more effective management of that risk. The primary audience of this report is the Government, at all levels, the donor community and stakeholders involved in disaster management. The report is also of interest to the Bank primarily as it provides a good basis to determine where its assistance could best be used.
The frequent disasters hinder the Philippine Government’s efforts to reduce the incidence of poverty and reduce the number of people and assets vulnerable to these hazards. There are indications of close linkages between poverty and vulnerability to natural disasters and of their mutually re-enforcing effects. The poorer communities tend to be the most vulnerable. Data show that at the household level, poverty is the single most important factor determining vulnerability. This situation is exacerbated by rapid urbanization, environmental degradation and the increasing risk of environmental disasters, whether as a result of direct human impact and or from climate change.
The Philippine institutional arrangements and disaster management systems tend to rely on a response or reactive approach, in contrast to a more effective proactive approach, in which disasters are avoided, by appropriate land-use planning, construction and other pre-event measures which avoid the creation of disaster-prone conditions. There is a widespread emphasis on post-disaster relief and short-term preparedness (forecasting, evacuation, etc.) rather than mitigation or post-disaster support for economic recovery, such as livelihood regeneration or tax breaks to affected businesses. This much shorter term focus does not adequately emphasize natural hazards as a potential obstacle to long-term sustainable development.
To evolve to this more proactive role, it is important that a national framework for comprehensive disaster risk management be prepared and implemented. The framework would provide for political leadership and policy support at the highest levels, while facilitating the active engagement and implementation of all relevant stakeholders at the national, local, and household levels. The actors should include public agencies, the private sector, and civil society. The framework should incorporate the essential steps of integrated risk management, which include risk identification, risk reduction, and risk sharing/financing. The study identified some specific areas under these key themes that would need to be addressed to improve the current system and these are briefly presented below.
Risk Identification. In this area, the fundamental requirements are reliable data on the type and amount of Philippine economic activity at risk which if not available complicate planning and risk reduction and risk sharing activities. To achieve this, high quality comprehensive hazard and vulnerability maps for major natural hazards would need to be produced or updated. In addition, there is scope for knowledge enhancement and understanding of the nature and scale of impact of disasters and forms of vulnerability. This, in turn would aid the implementation of good risk management practices, including greater consideration of hazard-related issues in broader sustainable development and poverty reduction policies and programs as well as of appropriate, cost-efficient post-disaster relief and rehabilitation efforts. As part of the strategy to reduce risk, it will be important not only to increase the focus on mitigation, but also on post-disaster support for economic recovery, such as livelihood regeneration or tax breaks to affected businesses.
Risk Reduction. Once the risk has been adequately identified, measures would need to be taken to prevent, mitigate and reduce the inherent risks. The type of risk reduction measures to be implemented must be supported by appropriate institutional arrangements, including legislative and policy changes, as needed. The disaster management system in the Philippines is based on a decree that has not been updated in the last
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20 years, and to create an enabling environment for a comprehensive disaster management strategy, it will be essential that the governing decree is updated. Changes proposed will need to take into account evolving roles of the central and local governments and directly bring the private sector, specifically utilities, into both emergency management strategic decision-making and operational contexts, while promoting the sustainable management of hazards and risks in a way that contributes to the well being and safety of the public and property. However, before this work can be carried out, a more detailed review of institutional arrangements and capacities for disaster risk management to identify gaps and priorities must be carried out.
Changes in the roles and responsibilities of the various actors will need to be accompanied by adequate coordination and implementing capacity in agencies involved in disaster management. In keeping with the shifting focus to a more proactive role, the type of coordination needed should be less of a top-down oversight function to one that is more participatory. Greater organizational, management and task synchronization would be prerequisites at both national and international levels. As risk reduction also requires that the resilience of the most vulnerable communities to hazard impacts be enhanced to help them cope with the hazards when they occur, the approach taken must emphasize a bottom-up approach with participation of all stakeholders. The Philippines system tends to be more of a centralized top-down administrative system than a community-based system and there are few incentives for local level initiatives. The system needs to be strengthened to encourage some local government units (LGUs) to initiate sustainable development practices just as much as it is to encourage other LGUs to continue along this path, often against bureaucratic obstacles. With very few exceptions, local level systems are response-driven –there is no obvious effort to initiate proactive hazard management/risk reduction coordination.
Risk Sharing/Financing. The study found that presently the Government of the Philippines and individual households bear the majority of costs caused by natural disasters. More effective options for financing disaster risk and relieving the burden of disasters from the public sector should be explored, including the idea of a catastrophe insurance pool, and/or contingent credit facilities. As a start, the fiscal vulnerability of the federal and local governments to natural disasters can be reduced significantly by introducing institutional incentives1 for better risk management and institution building. To reduce the funding gap and the vulnerability of the poorest segments of the population and critical infrastructure to natural disasters, the existing national system of financing disaster losses could be redesigned to provide strong fiscal incentives to LGUs for more proactive risk management. More effective than diverting funds from ongoing development projects, a more efficient option for catastrophe risk financing would be the use of contingent credit facilities. The contingent credit facility could be extended to the National Calamity Fund to finance disaster management activities at the LGU level, Federal Government level as well as support an insurance pool. The credit facility could be designed to disburse quickly on an as-needed basis, triggered by the occurrence of a disaster of magnitudes agreed to by the Government and based on agreed criteria. If drawn down, the lending facility backing the National Calamity Funding could then be replenished without any major costs for the Bank or the Borrower. This funding approach for natural disasters would enable the Government to switch to a proactive mode of financing natural disasters by replacing multiple ex-post future emergency lending operations with a single line of credit, and to obtain access to immediate liquidity to meet reconstruction needs in the aftermath of a disaster.
The study found that despite the high hazard risk in the Philippines, the insurance coverage for catastrophic perils for residential dwellings is almost non-existent. In addition, there is a limited risk bearing capacity of the domestic insurance market and an over-dependence on international reinsurers for claims paying capacity. In this regard, the idea put forward by several local insurers to create a Philippines Catastrophe Insurance Pool warrants serious attention. A Working Group would need to be created to explore the establishment of a Philippines Catastrophe Insurance Pool.
1 The level of post-disaster funding to the LGUs is based more on the size of disaster losses and the local economy. The current system does not provide incentive for those LGUs that may have taken proactive steps in risk reducing method.

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