Disasters, Climate Change, and Economic Development in Sub ... · DISASTERS, CLIMATE CHANGE, AND ECONOMIC DEVELOPMENT IN SUB-SAHARAN AFRICA 3 Figure 1.1: Number of Natural Disasters

Disasters, Climate Change, andEconomic Development

in Sub-Saharan Africa Lessons and Future Directions

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EvalBrief3-cover 6/27/07 1:27 PM Page 1

Disasters, Climate Change, andEconomic Development in Sub-Saharan AfricaLessons and Future Directions

Evaluation Brief 3

June 2007The World Bank

Washington, D.C.http://www.worldbank.org/ieg

©2007 Independent Evaluation GroupKnowledge & Evaluation Capacity DevelopmentThe World Bank1818 H Street, NWWashington, DC 20433 USAE-mail: [email protected]: 202-458-4487Fax: 202-522-3125http://www.worldbank.org/ieg

All rights reserved

This Evaluation Brief is a product of the staff of the Independent Evaluation Group (IEG) of the World Bank. The findings, in-terpretations, and conclusions expressed here do not necessarily reflect the views of the Executive Directors of The WorldBank or the governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denomina-tions, and other information shown on any map in this work do not imply any judgment on the part of the World Bank orIEG concerning the legal status of any territory or the endorsement or acceptance of such boundaries.

Rights and PermissionsThe material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permissionmay be a violation of applicable law. IEG encourages dissemination of its work and will normally grant permission to repro-duce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request withcomplete information to [email protected].

This Evaluation Brief was written by Ajay Chhibber and Rachid Laajaj.

v Abstract

vii Acknowledgments

1 Chapter 1 Introduction

5 Chapter 2 The Long-Term Economic Impact of Natural Disasters

11 Chapter 3 The Interactions Between Development and Vulnerability

15 Chapter 4 Case Studies

17 Chapter 5 Climate Change, Disasters, and Development

21 Chapter 6 Coping with and Preventing Natural Disasters

27 Chapter 7 Conclusions and Directions for Future Research

29 Bibliography

Contents

v

Abstract

This paper explores the links among naturaldisasters, climate change, and economicdevelopment. It attempts to outline a frameworkfor thinking about these links. The papersummarizes the limited knowledge of the long-term economic impact of natural disasters. It isnecessary to draw links among disasters,conflicts, resource management, and othertransmission channels to develop an appropriateresponse to natural disasters. The paper arguesthat African governments, along with their

development partners, need to develop a morerobust adaptation and response capability todisasters as part of their overall developmentplanning. The paper makes the case for moremarket-based financing mechanisms than havebeen used hitherto and for an emphasis onforecasting research. It also argues for morework on the links between climate change anddisasters and a new way of looking at disasterresilience as a continuum to developmentstrategies.

v i i

Acknowledgments

The authors of this paper are Ajay Chhibber,Director, Independent Evaluation Group-WorldBank, and Rachid Laajaj, consultant. The authorsare grateful to Kenneth Chomitz, Kristin Little,and Ronald Parker for thoughtful comments onthis paper and to Betty Bain and Yezena Yimer

for their assistance in its preparation. Theauthors are also grateful for comments receivedfrom Dr. Olu Ajakaiye and participants at theAfrican Economic Research Consortium (AERC)plenary session.

1

CHAPTER 1

Introduction

The Increasing Costs of Natural DisastersWorldwide, the risks linked to natural hazardshave increased sharply in recent decades. Inconstant dollars, the costs of natural disastersbetween 1990 and 1999 surpassed US$650 billionin material losses, which is more than 15 timeshigher than the cost from 1950 to 1959 (IEG2006). Over this period some 2 billion peoplewere affected by disasters in one way or another.Natural hazards are an increasing hindrance tothe development of many developing countries,especially but not exclusively in Sub-SaharanAfrica, and need to be addressed.

How much of the growing vulnerability todisasters is caused by human actions and howmuch is brought about by nature has been asubject of some debate. This paper argues thathazards are created by nature but disasters arelargely manmade, and that development anddisasters are closely interlinked. Moreover, whilegreat attention is given to very visible cataclysmicevents such as earthquakes, floods, andtsunamis, we must become more aware thatdisasters also often result from the slow buildupof human pressure on resources, which in turn isaffected by choices made in strategies foreconomic development.

Before going forward with the analysis, theconcept of vulnerability needs to be clari-fied. Vulnerability to natural hazard can bedecomposed into two main components:exposure to shocks and resilience. The degree ofexposure to shocks is a function of the frequencyand size of natural hazards that affect the popula-tion and the proportion of the populationaffected by the hazard; that proportion is, in part,determined by choices people make aboutwhere they live. The degree of exposure istherefore the result of the frequency and

intensity of natural hazards, which are mainlyexogenous, and where people choose to live. Insome cases the choice is voluntary—forexample, people prefer to live in coastal areas oralong riverbeds. In other cases the choices areinvoluntary, as when population pressure drivespeople to live in marginal areas. Resilience is thecapacity to cope with natural disasters, includingboth preparedness (land and building codes andbetter forecasting) and response to disasters(such as financing mechanisms and postdisasterrelief).

Therefore:

V = f (NH, P , R),

where V is vulnerability, NH is the number andintensity of natural hazards, P is the populationexposed to disaster, and R is the level of resilience.It is expected that NH and P increase vulnerability,while R reduces it. Note that in this framework,climate change can affect V by increasing theintensity and frequency of NH and by increasingthe proportion of the population that will beaffected by disasters.

There is also growing evidence of links amongconflict, security, and disasters, with thepressure on resources often leading to theincreased probability of conflict. Although muchfocus has been on the scramble for naturalassets—including diamonds, oil, and forestresources—as the source of conflict, conflict andinsecurity have also arisen from the slowbuildup of disasters that result from lack ofresources, and sometimes from the increasedvulnerability seen following a disaster. This isevident in some of the conflicts in Central Africaand more recently in the Darfur region of theSudan, where the rebellion began in the 1970s,

right after Africa’s greatest famine. Given themultiple interconnections among disasters,security, and economic development, a muchmore comprehensive view of the links is a keyelement to adapting long-term strategies.

Finally, Africa is being affected by choices madeby others on the nature of economic develop-ment through the impact of these choices onclimate change. Although Africa itself is not amajor contributor to climate change, it is one ofthe areas that is most vulnerable to its effects.There is now growing evidence of the linkbetween climate change and disasters. TheIntergovernmental Panel on Climate Change(IPCC) has issued some of the most consistentreports on the evolution of the climate. Accord-ing to that organization’s predictions, despiteconsiderable uncertainty, it is very likely thattemperatures and sea levels will continue to rise,thus increasing the frequency of extreme events.

The IPCC expects the following impacts ofclimate change to be seen in Africa: • Decreased grain yields • Affects on major rivers such as decreased av-

erage runoff and water availability• Exacerbated desertification• An increase in droughts, floods, and other ex-

treme events• Significant extinction of plant and animal

species• Coastal erosion and inundation caused by rises

in sea levels.

In a recent comprehensive review of the impactof climate change, Stern (2007) estimates aglobal impact on economic activity that is muchhigher than previously predicted, including bythe IPCC. According to Stern, in the long run,“business as usual” could result in a permanentreduction of global gross domestic product(GDP) of as much as 20 percent. Moreover, thereview states that poorer regions in Sub-SaharanAfrica and South Asia will be more severelyaffected than better-off areas. For Sub-SaharanAfrica, the review summarizes the impact asfollows:

Sub-Saharan Africa will be under severepressure from climate change. Manyvulnerable regions, embracing millions ofpeople, are likely to be adversely affectedby climate change, including the mixedarid-semiarid systems in the Sahel, arid-semiarid rangeland systems in parts ofeastern Africa, the systems in the GreatLakes region of eastern Africa, the coastalregions of eastern Africa, and many of thedrier zones of southern Africa (Stern 2007,p. 104).

The Stern review is the subject of intense debate.Some critics argue that climate change and itslinks to human activity are subject to widemargins of error and that Stern has taken themost extreme scenarios and low discount rates toestimate high costs in the future and to increasethe present value of very long-term benefits. Thisdebate will intensify in the coming years.Although the direct and incontrovertible linkbetween the increase in disasters and climatechange is still debated, the links between climatechange and certain categories of disasters, partic-ularly hydrometeorological events, are beingmore closely scrutinized. Even if we accept thatthe links between climate change and economicactivity are subject to wide margins of error, wecan observe that some of the changes in theincreased intensity and number of disasters havealready begun. A simple way to observe this is topay attention to the increasing number ofdisasters in Sub-Saharan Africa.

The aim of this paper is to highlight the interac-tions between development and vulnerability tonatural hazard in order to foster research thatwill improve future decision making.

The second section of the paper reveals thelimited knowledge of the long-term economicimpact of natural disasters. Based on recenttheory, a number of scenarios are proposed thatmay represent the long-term impact of a disasteron GDP. These scenarios have yet to be tested.The third section stresses the reciprocal influenceof development and vulnerability, highlighting

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E VA L UAT I O N B R I E F 3

the possibility of a vicious circle: a highly vulnera-ble poor country may suffer frequent disastersthat preclude development gains, and thusprevent improved resilience. The fourth sectionrelates three case studies that provide examplesof either poorly or well-managed disasters. Thefifth section provides growing evidence of thelink between climate change and disasters.

These cases, combined with theory and otherevidence, lead to the next section, which

discusses better mechanisms for coping withnatural disasters. The focus here is on betterfinancial mechanisms and better measures forpreparedness that have been overlooked.

Finally, we end with some ideas for furtherresearch on the topic. This research is needed tobetter develop some of the linkages identified inthis paper, along with country case studies to helpus better understand how development choiceshave led to differing levels of vulnerability.

D I S A S T E R S , C L I M AT E C H A N G E , A N D E C O N O M I C D E V E L O P M E N T I N S U B - S A H A R A N A F R I C A

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Figure 1.1: Number of Natural Disasters in Sub-Saharan Africa since 1975

0

20

40

60

80

100

120

140

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005

Year

Num

ber o

f dis

aste

rs

Source: The Center for Research on the Epidemiology of Disasters.

Note: Disasters include the following events between 1975 and 2005: drought, earthquake, flood, insect infestation, earth slides, volcanic eruptions, waves or

surges, and wind storms. For a disaster to be entered into the database, at least one of the following criteria must be fulfilled: 10 or more people reported killed;

100 people reported affected; a call for international assistance; or declaration of a state of emergency. Some but not all of the increase may be due to better

reporting. (The OFDA/CRED International Disaster Database, Université Catholique de Louvain, Brussels, Belgium.)

5

CHAPTER 2

The Long-Term Economic Impact of Natural Disasters

Several studies have evaluated the short-termcosts of natural disasters. An exhaustive assess-ment of these costs must include both directcosts (damage to buildings, crops, socialinfrastructure) and indirect costs (lost outputand investment, macroeconomic imbalances,increased indebtedness). The World Bankestimated that from 1990 to 2000, naturaldisasters caused damage representing between 2and 15 percent of an exposed country’s annualGDP (World Bank 2004). With such large costs—in many countries the total is much larger thantheir aid budgets, and in some cases the percent-age is larger than the country’s investment rate—it is important to increase the focus on theimpact of natural disasters, their relationship toeconomic development priorities and strategy,and better coping mechanisms.

There is little doubt that most natural disastershave severe short-term consequences for theeconomy. But very few studies have assessed thelong-term consequences of natural hazards. Thischapter outlines study findings, developingtheoretical as well as empirical analyses of thelong-term economic impact of natural disasters.

Theory and Alternate Scenarios

The Possibility of a Positive Impact on the Path of GrowthBecause natural disasters are frequentlysucceeded by higher growth rates, which seemto compensate for the economic impact of thedisaster, one could expect disasters to be atemporary disruption of the developmentprocess and to have no impact on the long-termdevelopment of the country. Aghion and Howitt(1998) provide a theoretical explanation for thisobservation with a Schumpeterian model ofendogenous growth. In the model, growth is

generated by technological change favored bythe capital replacement needed after thedisaster. As a result, a natural disaster could leadto a positive overall impact on the economy.

Some authors have tried to model the long-term effects of disasters. Using arguments ofeconomic linkage and substitution effects,Albala-Bertrand (1993a) constructed the firstmacroeconomic model of the economic impactof a natural disaster. In this model, a first step wasto set an upper limit on output for the impact ofa one-time disaster, assuming that all losses areto the capital stock, which is homogenous andirreplaceable in the short term. The basic resultis that the reduction in the output is propor-tional to the reduction in the capital stock. Theauthor then modifies some assumptions, consid-ering, for example, that loss is split betweencapital and output, that capital loss is estimatedat replacement cost, and that capital is heteroge-neous. The author now finds that there is a muchsmaller impact on output, which he considersmuch more realistic than the first result. Theimplication is that a natural disaster is unlikely tohave a long-term impact on growth. It explainswhy macroeconomic indicators improved duringthe years following the disaster, then quicklyreturned to their normal level.

Arguments for a Negative Impact on the Path of GrowthBenson and Clay (2004) come to the oppositeconclusion. They argue that resources used aftera disaster are not necessarily additional and canhave a high opportunity cost. They provide anumber of channels through which naturalhazard can influence the path of growth anddevelopment:• The stock of capital and human resources can

be damaged (through migration and death) or

their productivity reduced by disruption of in-frastructure and markets.

• Increased spending can lead to higher fiscaldeficits and cause inflation.

• Reallocation of expenditures may draw fundsfrom planned investments.

• Even when repair or recovery is funded by aid,this aid may not be entirely additional. Donorstend to advance commitments within existingmultiyear country programs and budget en-velopes. As a result, the amount of aid providedfollowing the natural disaster is diverted fromdevelopment aid flows.

• Consecutive natural disasters create an at-mosphere of uncertainty that discourages po-tential investors.

Another main channel that is absent from mostof the studies deserves investigation: theoccurrence of a natural disaster increases the riskof civil war through its economic and socialimpact. Using a panel of 41 African countriesfrom 1981 to 1999, Miguel, Satyanath, andSergenti (2004) found that a negative growthshock of 5 percentage points (caused by extremerainfall variations) increases the likelihood ofconflict by 50 percent the following year.

Some models have been developed that focusspecifically on one of these transmission channels.For example, the International Institute forApplied System Analysis modeled the potentialimpact of disaster on capital accumulation.Applying the World Bank’s Revised MinimumStandard Model projection tool to Argentina,Honduras, and Nicaragua, the results demon-strate that postdisaster financial resource gapsreduce future growth (Benson and Clay 2004).Cochrane (1994) explored the impact of disasterson a country’s indebtedness. Using a recursiveKeynesian growth model, Cochrane assumes thatthe recovery costs are entirely funded by externalborrowing, and hence generate an increase ininterest rates. The consequence is an increase indebt stock as well as a reduction of long-terminvestment and growth.

All these studies have been subject to somecriticism. Lavell (1999) points out that models such

as those presented here should be submitted to ana posteriori analysis and evaluation to comparereal with projected performance. Insufficientempirical work has been done on these issues.

Possible ScenariosA common problem in preparing an economicassessment following a disaster is the confusioncaused by mixing stock losses with changes inflows. A distinction is necessary: Physical andhuman capital and public debt are examples ofsuch stocks; they can be hit directly (for example,infrastructure and livestock can be destroyed) orindirectly. In the latter case, the variation of a flowcauses the variation of the corresponding stock.An increase in the public deficit (a flow) wouldadd to the public debt, or a diversion of invest-ments (a flow) to fund relief costs would reducethe stock of physical capital. In return, annualflows are dependent on stocks, and physical andhuman capital stocks are determinants of theGDP (a flow). These multiple and complexinteractions need to be considered in the evalua-tion of the economic impact of a disaster.

Because of contradictory effects, theory does notprovide clear-cut conclusions about the impactof natural disasters on a country’s long-termgrowth rate. It may be useful to outline differentscenarios that would then need to be tested (seefigure 2.1).

Disasters reduce the stock of capital, which leadsto immediate losses in annual production. Thisshort-term reduction in GDP can also be direct—for example, when a drought reduces agriculturalproduction. If a negative impact is commonlyobserved in the short term, the medium-termand long-term impacts of disasters are still subjectto debate. The scenarios in figure 2.1 representthe possible impacts of a disaster on the long-term growth rate of GDP. In scenarios A and B,the disaster does not influence the long-termgrowth path of income: The shock has a negativeimpact on the GDP, eventually followed by anexpansion during reconstruction, and theproduction level returns to its long-term state ofequilibrium. In scenario C, the disaster haspermanently reduced the stock of capital, and the

6


new long-term equilibrium is established at alower level of GDP. Finally, in scenario D, therestitution of capital brings with it technologicalchange that enhances the long-term growth rateof the economy.1 It should be noted that differenttypes of disasters could be associated with differ-ent scenarios. For example, an earthquake is mostlikely to be associated with scenario B or Dbecause it is generally followed by considerablereconstruction that may trigger an expansion and eventual technological change. Conversely,scenario A or C could represent a drought,because when the loss is generally restricted toannual production and household livelihood, it isunlikely to lead to greater production potentialunless it prompts major investments in irrigationor other drought-reducing technologies. Empiri-cal testing of these assertions would be useful.

Empirical EvidenceBecause of considerable methodological diffi-

culties, different studies have led to varyingfindings. No consensus has emerged about thelong-term consequences of natural hazard.

One of the first empirical evaluations of the long-term impact of disasters on the economy was byAlbala-Bertrand (1993b). In a statistical analysisof 28 disasters in 26 countries from 1960 to 1976,he found that the long-term growth rate andother key variables were not affected bydisasters. Benson and Clay (1998) have noted the lack of assessment of the nonagricultural or economywide macroeconomic impacts ofdroughts in Sub-Saharan Africa. Even if the directimpacts of droughts are the most easily observ-able, indirect and secondary impacts on thenonagricultural economy and the macroecon-omy should not be neglected. These effects areoften not examined as recurrent issues thatcould potentially affect the rate and pattern ofdevelopment.


7

Figure 2.1: Possible Long-Term Impact of a Disaster on GDP per Capita

Disaster Time Disaster Time

Disaster Time Disaster Time

GD

P/ca

pita

GD

P/ca

pita

GD

P/ca

pita

GD

P/ca

pita

Scenario A Scenario B

Scenario C Scenario D

Source: Authors.

Benson and Clay (1998) try to fill the gap despitethe considerable methodological difficulties ofestablishing a nondrought counterfactual toisolate a natural hazard’s effect. They find thatdrought shocks have a large economywideimpact, but that the extent of the impact variestremendously according to a number of factors.Among those factors, the level of complexity ofthe economy and increased intersectoral linkagesincrease the risk that a disaster will affect not onlythe agricultural sector, but the whole economy.

In a cross-sectional study including 115 countries,Benson (2003) found that the average growthrate from 1960 to 1993 was lower in countries thatexperienced more natural disasters. A maincriticism of this study was that the moredeveloped countries have experienced lessdisaster, and the results might therefore reflectthe finding of a polarization toward a bimodaldistribution (Quah 1993). Indeed, Quah ob-served a long-term divergence of incomebetween developed and developing countries.Hence, the lower long-term growth rate incountries with frequent disasters (mostlydeveloping countries) is not sufficient to drawconclusions about causality. It is generally difficultto isolate the impact of natural hazard from otherfactors that influence the path of growth anddevelopment, because countries with strongerinstitutions have a higher growth rate. They arealso better able to handle natural hazards.Therefore, they are better able to reduce theprobability of devastating disasters.

Given the difficulties of isolating the impact ofnatural disasters in macroeconomic studies,microeconomic results can provide valuableinsights concerning their long-term conse-quences. Using a panel data set from Zimbabwe,Alderman, Hoddinott, and Kinsey (2004) foundthat children between 12 and 24 months of ageduring the 1982–84 drought had a higherprobability of being stunted2 (a manifestation ofmalnutrition) during their preschool years thanother children. This group was found to be 2.3centimeters shorter and to have completed 0.4fewer grades of schooling 13–16 years later. Thisstudy highlights the long-term, irreversible

consequences of natural disasters on humancapital in poor countries. Dercon (2007) explainsthat this situation suggests the existence ofpoverty traps linked to human capital, resultingin a permanent state of low human capital andearnings.

Another issue that has received insufficientattention is that different types of natural disastershave different consequences. For example,Benson and Clay (2004) note the need for adistinction between geological and hydro-meteorological disasters. Geological events,which are less frequent but often morecataclysmic, are more likely to generateSchumpeterian innovation and stimulate postdis-aster growth, while hydrometeorological disastersare generally more frequent, creating anatmosphere of uncertainty that hurts the invest-ment climate and requires adaptation costs.Indeed, in Albala-Bertrand’s study (1993b), mostof the countries that achieved higher growth ratesin the two years following a disaster, comparedwith the two preceding years, had experiencedearthquakes. Other disaster events were mainlysucceeded by a lower postdisaster growth rate.

Using simulation-based econometric methods ina growth model applied to panel data from ruralZimbabwe, Elbers and Gunning (2003) foundthat risks associated with disasters reduced themean capital stock in the observed region by 46percent. The most innovative part of their workcomes from the distinction between ex post(observed directly after the shock) and ex anteeffects of risk (the costly behavioral response torisk, such as discouraging investment). Elbersand Gunning show that the ex ante effectrepresents two-thirds of the negative effects ofrisk, stressing the inadequacy of most of theexisting studies, which focus on the ex post effectof risk. This also explains how frequent disasterscan generate significantly different effects thanwould a huge, one-time disaster (which wouldhave no ex ante effect).

When estimating the overall cost of naturalhazard, too much attention has been paid tomajor events. Lavell (1999) stresses the impor-

8


tance of smaller-scale disasters. These are muchmore frequent than larger ones, but are notregistered in statistical databases because theyare small enough not to involve the centralauthorities and are typically handled by localgovernments. According to Lavell, “The cumula-tive losses associated with the ‘smaller disasters’may be as significant as [those] attributed tolarge-scale disasters.”

Moreover, many “progressive disasters” aroundthe world result in little action to address theproblem. This issue is different from vulnerabil-ity to natural disasters but is also accentuated byclimate change and human behavior. Althoughdifferent from vulnerability to natural disasters,progressive disasters such as land degradationand soil erosion are also accentuated by climatechange and human behavior, and have increas-ing consequences for the poor. In Uganda, forexample, the exposure to natural hazards has ledto land degradation and has accentuated theimpact of climate variability on crop output. Inthe most affected districts (Kabal, Kisoro, Mbale),which are also the most densely populated, witha density of more than 250 inhabitants per squarekilometer, between 80 and 90 percent of the areais estimated to be affected by soil erosion(Uganda National Environment Management

Authority 2002). Land degradation is a worldwideissue: a World Bank report (1997) estimated that80 percent of the poor in Latin America, 60percent of the poor in Asia, and 50 percent of thepoor in Africa live on marginal lands character-ized by poor productivity and high vulnerabilityto natural degradation and natural disaster.

Given the methodological difficulties linked toempirical analysis, several studies have focusedon qualitative evidence. Clay and Benson (2004)have provided a number of case studies thathighlight the long-term negative effects ofdisasters. For example, the Bangladesh govern-ment has recognized that “inadequate infrastruc-ture to deal with floods [has] been a constrainton investment in productive activities as well ason utilization of installed capacity” (Bangladesh2000). Similarly, the Philippines has faced tremen-dous difficulties in improving the country’stransport system and meeting the socialinfrastructure needs of the population because ofan extremely high exposure to natural hazards,mainly floods and wind storms. Dominica (1979)and Montserrat (1995–98) are examples of aconsiderable loss of human capital throughemigration linked to natural disasters. Clearly,more qualitative and quantitative work is neededto further explore these issues.


9

Notes1. Postwar reconstruction has also seen this type of

response, with the rapid recovery of countries thatwere devastated by the Second World War attrib-uted to, among other factors, new capital stockembedded with better technology.

2. A child is considered stunted if his or her height,given his or her age, is two standard deviationsbelow international norms.

1 1

CHAPTER 3

The Interactions Between Developmentand Vulnerability

Development Strategies and Their Impacton Vulnerability to DisastersHewitt (1983) and Blaikie and colleagues (1994)have made major contributions to the recent studyof natural disasters and development. They stressthe role of social structures in shaping vulnerabil-ity. Studies by Sen (1981) and Drèze and Sen(1989) are among the pioneering works in consid-ering famine not just as a natural disaster, but alsoas an avoidable economic and political catastro-phe. They show that the famines were caused notso much by lack of food as by lack of entitlement toresources based on access to economic, social, andpolitical power. All these works have stronglyinfluenced the concept of prevention and manage-ment of famines in the developing world and theidea that disasters are manmade or policy induced.

To pursue the analysis, it is crucial to understandthat a natural disaster is not a completelyexogenous event. What is often called a naturaldisaster is really a humanitarian disaster triggeredby nature. Or, as Wisner stated in a more provoca-tive manner, a natural disaster is a failure ofhuman development (Wisner 2003). As we willsee, natural disasters are the consequences ofnatural hazards, but they are also largely a reflec-tion of development flaws.

Determinants of Vulnerability to Natural HazardsEconomic development typically reducesexposure to natural hazards. A reduction of theproportion of the population working in theagricultural sector increases the resilience of thecountry, because the overall level of productionbecomes less sensitive to hydrometeorologicalconditions. Intersectoral linkages are anotherdetermining factor of resilience: countries with ahigh degree of dualism, with a large capital-intensive extractive sector, are less sensitive

to natural hazards. For example, droughts had a limited effect on the macroeconomies ofBotswana, Namibia, and Zambia, all of which drawmost of their resources from the mining industry.

The Financial System. Development is generallylinked to a better financial system, which allows awider diffusion of the impact of a disaster,especially when that system facilitates small-scalesavings and transfers. In Zimbabwe, for example,after the 1991–92 drought, a well-developedfinancial system facilitated transfers from urbanto rural regions. (Later we will discuss the roleand importance of microcredit.)

Trade Openness. More open economies havefewer exchange constraints. As a consequence,any increase in imports for relief and reconstruc-tion will not displace normal imports. Moreover,following a disaster, local inflation can becontained more easily in a more open economy.But, again, more study is needed on howopenness to trade helps or hinders recoveryfrom natural disasters.

Institutions. One of the most important factorsin determining the resilience of a country is thewillingness of the government to considerpreparedness for natural hazards a priority. Thisincludes a long-term commitment to mitigationand preparedness, even when no disaster hasoccurred during the preceding years. Inaddition, transparency, better reporting ofrelevant expenditures, and postdisaster realloca-tions are essential, as well as the enforcement ofappropriate land-use and building codes.

At the same time, the coincidence of a naturaldisaster and political instability can have dramaticconsequences. Such was the case during theviolent struggle for independence in Bangladesh

during the mid-1970s or the war in Mozambiqueduring the 1990s, which destabilized neighbor-ing Malawi’s transport system by provoking aninflux of refugees.

A more recent example is the case of Zimbabwein 2002. Angola, Lesotho, Malawi, Mozambique,Swaziland, Zambia, and Zimbabwe all sufferedfrom food shortages after three years of droughtcombined with flooding in some areas. However,Zimbabwe, which was considered the “breadbas-ket” of southern Africa a few years ago, becamethe most vulnerable country of the Region. Politi-cal violence fueled by inflation, unemployment,racial tensions, land reform issues, and soaringrates of HIV/AIDS greatly weakened thecountry’s capacity to provide effective relief. Thegovernment took control of the distribution of mealie meal (a basic food). Its objective was to ensure that mealie meal was supplied only tothe supporters of the ZANU-PF ruling party(Oborne 2003). Sen (1981) was the first toobserve that famines are the result of humanbehavior, stressing that they do not happen indemocracies, where a free press and free speechcreate excellent early warning systems. AlthoughSen provided Zimbabwe as an example of ademocracy that successfully prevented faminesdespite sharp declines in food output, herecognized that the country no longer qualifiedfor the exemption he had given it before.

Public Awareness. Only a population informedof the risks related to natural hazards andconcerned about them can create the appropriateincentives for the government to make sufficientinvestments in preparedness and mitigation. InTurkey, public awareness was very low despitefrequent events. The Marmara earthquake in 1999created a new level of public awareness, not onlybecause of the unprecedented scale of thedisaster, but also because it was mainly urban,making it difficult for the politicians, local munici-palities, building contractors, and civil engineersto ignore their responsibility (Özyaprak 1999).

Sen has also compared the response to droughtsin India and China. He argued that India avoided

famines because of its free press, whereas Chinasuffered a major famine in 1984 because thesystem was able to withhold information on thedrought and was unwilling to admit problems orseek assistance.

An Example of Vulnerability Caused by HumanFactorsIn 1972–73, the Sahel experienced a catastrophicdrought, during which thousands of people andmillions of animals died (de Waal 1997;Mortimore 1998). This catastrophe was the resultof both natural and human factors. The preced-ing droughts in the late 1960s and early 1970sincreased people’s vulnerability, especially in therural areas, by depleting their stock of physicalcapital (savings, grains, animals) as well as theirhuman capital through deterioration in health ormigration to urban areas. Indeed, the ruralcommunities were the most vulnerable becauseof a combination of socioeconomic factors: (i)isolation brought about by poor communicationand transport links; (ii) an urban bias in policymaking that was the result of poor rural represen-tation; (iii) a focus on short-term stabilizationrather than long-term economic development;and (iv) an emphasis on industrial investmentand the conversion of agriculture to cash crops atthe expense of the production of food for localconsumption (Baker 1987; Shaw 1987; Rau 1991).

The relevance of those human factors ishighlighted by the many droughts subsequentlyendured by the Sahel that were comparable tothose of the early 1970s. None of them, however,led to such a massive famine (Mortimore 2000). Ifnatural hazards have increased vulnerability in theshort term, in the long term the population hasdeveloped many strategies to cope with drought,such as agricultural diversification and migration.

In this case, the emphasis on industrialization,cash crops, and export earnings in countries thatare primarily rural—where most of the popula-tion cannot afford or lacks access to importedfoodstuffs—increased the region’s vulnerability.This example illustrates local-level adaptivecapacity and the danger inherent in a “top-down”

1 2


approach to development, especially when theapproach is based on global economic para-digms disconnected from the rural communities’reality (Pelling 2003).

The Complex Relationship BetweenVulnerability and DevelopmentConsiderable development effort can be wastedwhen vulnerability is not taken into considera-tion. In Honduras, after Hurricane Mitch in 1998,President Carlos Flores stated that his country’sdevelopment was set back 30–50 years. Indeed,from 70 to 80 percent of the transport infrastruc-ture was destroyed, including almost all bridgesand secondary roads. One-fifth of the populationwas left homeless; crops and animal losses led tofood shortages; and lack of sanitation led tooutbreaks of malaria, dengue fever, and cholera(U.S. National Climatic Center 2004).

Mohamed H.I. Dore and David Etkin (2003) pointout the importance of adaptive capacity at aninstitutional level. They define the necessaryconditions for adaptation by observing howdeveloped countries respond to current climaterisks. The authors observed six conditions:• Developed countries have the technical know-

how to understand climate.• They have resources to devote to research on

climate and its related risks.• They have developed the necessary technology

to cope with the effects of climate.• They share risks through both government

disaster-assistance programs and the insur-ance market.

• The insurance market mediates moral hazardproblems through mechanisms such as de-ductibles, rebates for minimizing damages, orpremium reductions for making no claims.

• Developed countries invest resources in emer-gency responses at all levels of government.

These six conditions are generally costly andrequire high-quality institutions and humancapital. It can be deduced that a country needs tobe relatively developed to meet the necessaryconditions for a high resilience to naturalhazards. At the same time, a vulnerable country

is highly exposed to disasters that would beharmful to its development process. Conse-quently, there is a risk that poor countries will belocked in a vicious circle—vulnerable because oftheir low level of development, and brought backto their initial level of development throughnatural disasters because of that vulnerability.

As represented in figure 3.1A, high vulnerabilitywould result in frequent large-scale naturaldisasters. Even if one disaster would generally nothave long-term effects (as represented in scenarioA of figure 3.1, for example), a succession ofdisasters would prevent the country fromreconstituting its capital or other productivecapacities. The result is high instability and discon-nection from the path of growth that would havebeen expected in the absence of disaster.

This could be the story of Ethiopia, for example.Ethiopia is particularly vulnerable becauseagriculture accounts for 41 percent of its GDP, 80 percent of the workforce, and 80 percent of exports.

Undoubtedly, vulnerability is only one of thenumerous factors that can explain the stagnationof a least-developed country. The role of vulnera-bility should be addressed, including its indirecteffects, such as discouraging private investmentsor increasing the risk of political instability.Although the establishment of a counterfactualwould be difficult, further work on the linkbetween vulnerability and development isnecessary.

To progressively emerge from this situation,highly exposed countries need to incorporatehow best to build resilience and reduce vulnera-bility into their development policy. Someauthors, such as Katrina Allen (2003), go evenfurther and argue that the distinction betweenresilience to natural hazard and development ismainly theoretical and has more meaning forgovernment bodies than for local communities.At a local level, both hazards and developmentare strongly related to a lack of livelihood.Similarly, humanitarian crises are extensively


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linked to a sociopolitical context. According toAllen, isolating vulnerability from the widersocial background creates a risk of treatingsymptoms rather than the cause. The last casestudy of chapter 4 illustrates how vulnerabilityand poverty can be tackled jointly.

If Stern’s projections (2007), which incorporate

the impact of more severe climate change, arecorrect, then we must also include the possibilityof a sharp drop in income and consumption.Figure 3.1B incorporates such a scenario withoutany prevention or coping action. This grimscenario would lead to a huge increase inpoverty, malnutrition, and even mass famines, aswell as serious disruption to development.

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Figure 3.1: Possible Long-Term Impacts on Income

D DD D D

Disasters Time

Trend withoutdisaster

Trend withoutdisaster

Trend with frequentdisasters

Trend with frequentdisasters

Trend with cataclysmicclimate change

Time

GD

P pe

r cap

itaG

DP

per c

apita

B. Severe climate change

A. Successive disasters

Source: Authors.

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CHAPTER 4

Case Studies

The Landslide of La Josephina In 1993, a huge landslide occurred in La Josefina,which is located in the mountainous southernregion of Ecuador near the city of Cuenca. Thelandslide covered the entire valley and dammedthe river, impounding it for 33 days. During thistime 1,000 hectares were flooded. In all, about 200persons were killed by the flood and 14,000displaced. There was severe damage to land andbuildings. The costs to agricultural lands, factories,and residential infrastructure reached severalmillion dollars.

This case is a good example of a natural disastercaused by a combination of human and naturalfactors. The area had a permanent danger oflandslide; below the 1993 landslide site, there areabout 35 scars of past slides. But this should notmask the human responsibility. The area has adense rural population. After land reforms, landswere divided into excessively small plots, workedby farmers with little experience using overlyintensive agriculture. Monocultivation of maizein rows following the slope was a frequentpractice, although this leads to heavy erosion.

After the disaster and during the 33 days of flood,47 nongovernmental organizations were criticizedfor their lack of effective assistance, and theprovincial government for its passivity. Codevilla(1993) argued that there was an excess of asisten-cialismo from the locals (that is, they werepassively waiting to be helped). No structure inplace at the time was able to handle the disaster.

A solution recommended by Morris (2003) is topromote a soft rather than a hard engineeringapproach—that is, making low-energy adapta-tions rather than trying to match the power ofnature. This suggestion springs from Abramovitz’srecommendations (2001), which advocate a

greater control over land use, the limitation ofintensive farming, and the development offorestry in critical zones. This strategy implies twothings: (i) recognition of the significant riskslinked to natural hazard, which cannot be totallycontrolled, and (ii) the acceptance of a tradeoffbetween the higher short-term productivity ofintensive farming and the long-term benefits ofmaintaining a more resilient ecosystem.

A Successful Disaster Recovery in MozambiqueIn a vulnerable country, one disaster can set backhard-won development efforts. Mozambique isone of the poorest countries in the world, with69 percent of the population below the povertyline. In 1992, a peace agreement put an end to 17years of civil war. From 1992 to 2000, the growthrate of GDP per capita averaged 6 percent. Thencame the flood of 2000. It killed 700 people,displaced 650,000, and affected 4.5 million (aquarter of the population). It devastated 140,000hectares of crops and their irrigation systems;350,000 livestock were lost or seriously injured;6,000 fishermen lost at least half of their boatsand gear; and about 500 primary and 7 second-ary schools were destroyed.

However, the long-term economic conse-quences of a disaster largely depend on thecapacity of the country to handle the recoveryprogram. Mozambique’s recovery seems to havebeen generally effective. Recovery programshave provided opportunities for investments toupgrade services and infrastructure (ValidInternational and ANSA 2001). Many affectedpeople have been assisted, and the rehabilitationand the rebuilding of schools and health facilitieshas encouraged the development of new socialstructures, such as associations and communitycommittees.

This success can be explained by a number offactors, including the creation of the NationalDisaster Management Institute in 1999; develop-ment of a culture of prevention; provision ofimmediate and massive flows of aid; and, above all,the determination of the government to establisha recovery program aimed at strengtheningnational reconstruction and development policies.The government’s objective was not simply torestore the previous level of development but togenerate the social and economic improvementsthat would increase the country’s resilience tofuture disasters. A clear sign of progress is that theUnited Nations Children’s Fund (UNICEF 2002)noted significant improvements in responses tothe flood in 2001. Preparedness measures hadbeen taken, including the preplacement of food,boats, and other relief materials. Neighboringcountries had been contacted to coordinate thedisplacement of affected populations.

One of the key elements to the success of thereconstruction was the extraordinarily high levelof donor response—around $450 million by May2000—and a commitment from the governmentto maintain macroeconomic stability. These aidflows dampened the negative impacts of thedisasters, allowing a rapid return to high levels ofgrowth. Therefore, the 2000 and 2001 floodswere not considered to have had a lastingnegative economic impact. A recent World Bankreport (2005) on the case of Mozambique hasoutlined the following reasons for the successfulrecovery:• Intensive labor-based infrastructure works for

disaster mitigation• Where possible, the use of local rather than in-

ternational contractors

• Increased levels of accountability and trans-parency through the use of independent re-views and evaluations of recovery works

• Good practice guidelines to ensure that gen-der issues were addressed and that adequateattention was paid to land tenure issues, stan-dards for housing, and recovery of complexlivelihoods

• Emphasis on building capacity for disaster man-agement at the district level and sharing infor-mation on budget and planning for disasters.

Combining Reduction of BothVulnerability and Poverty Instead of thinking of disaster response anddevelopment as two separate activities, can wethink of programs and projects that combinethem? An example of a successful projectcombining vulnerability and poverty reductioncomes from Niger, one of the poorest countriesin the world. The project was implemented bythe Small Rural Operation in Niger. It took 11years (1988–98) and targeted an area with achronic food deficit. The project’s aim was toreduce drought vulnerability by intensifying off-season crop production through widespread useof existing, simple, low-cost technologies.Approximately 35,000 farmers benefited fromthe strong increase in production resulting fromhigher cropping intensities, cultivation of higher-value crops, and diversification toward noncropactivities. In this case, the two objectives ofpoverty reduction and food security could nothave been achieved separately, because they areboth strongly linked to the livelihood of the ruralpopulation. More such combined approachesare needed to break the vicious cycle of disastersand low-level development.

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CHAPTER 5

Climate Change, Disasters, and Development

Climate Change: A Growing Risk to Sub-Saharan AfricaThe Intergovernmental Panel on Climate Change(IPCC) has provided some of the most reliablereports on the observation of actual climatechanges and forecasts of future changes andtheir consequences. These predictions areunavoidably marked by uncertainty, but there areapprehensions that Sub-Saharan Africa andSouth Asia will be the most severely affectedareas of the world. Because Africa is a verydiverse continent, any statement on the impactof climate change can hardly be applicable to theentire continent. Unless specified, informationprovided in this section is extracted from IPCCreports (1996, 2001).

Despite its tiny contribution to climate change,Sub-Saharan Africa is one of the most adverselyaffected regions in the world. Indeed, thecontinent is highly exposed to climate change,and its structural weaknesses result in lowerresilience. With 40 percent of its populationliving on arid, semi-arid, or dry subhumid areas(UNDP 1997), Africa is one of the areas of theworld most exposed to global warming. It hasexperienced a warming of approximately 0.7°Cduring the past century, and the temperature isexpected to increase by between 0.2°C and 0.5°Ceach decade. Moreover, Hulme and Kelly (1997)note that in the preceding 25 years, the declinein rainfall observed in the Sahel was the mostsubstantial and sustained recorded anywhere in the world since instrumental measurementbegan.

A high proportion of Africans live in coastal areas:one-quarter of the population resides within 100kilometers of a seacoast (Singh and others 1999).Because of the combination of increased climatevariability and rising sea levels, this population

will be increasingly exposed in the next decades.Nicholls, Hoozemans, and Marchand (1999)found that the sea level rise could increase thenumber of people in Africa affected by floodingfrom 1 million in 1990 to 70 million in 2080(assuming the predicted a 38-centimeter globalrise in sea level during this period).

Africa’s Low Capacity to Cope with Climate ChangeNot only is the African continent a highlyexposed area, but it also faces structural difficul-ties that aggravate the consequences of climatechange and limit its capacity to manage effectivesolutions. First, more than half of the Africanpopulation is rural, which implies high vulnera-bility to natural hazard and a strong dependenceon per capita food production. That productionhas been declining in Africa for the past twodecades, contrary to the global trend. Populationgrowth, which will put more pressure on thelimited amount of land available for cultivationor cattle farming, is also a main concern. Africancountries are highly vulnerable not only toclimate shocks, but also to economic (forexample, terms of trade variability or aid volatil-ity) and political shocks. The conjunction ofdifferent shocks has cumulative effects andundermines countries’ ability to cope with crisis.To these weaknesses must be added theHIV/AIDS pandemic, which increases the burdenon public resources and erodes human capital.

Nevertheless, Africa’s high vulnerability to theexisting prevalence of disasters and to thepossibility that their frequency may increasemust be addressed. This will require not onlylocal initiative but also international help,because much of the continent will need torespond to effects induced by climate changecreated by actions taken largely in the developed

world. In other words, Africa suffers fromdevelopment enjoyed elsewhere in the world,and Africa is a major recipient of the disastrouseffects.

Main Concerns for the FutureAmong the problems that will be exacerbated byclimate change, particular attention should bepaid to the highly interrelated issues of desertifi-cation, food security, and water supply. Any one ofthese can have dramatic consequences for thepoor.

DesertificationDesertification contributed to the death of250,000 people in the Sahel drought of 1968–73(UNCOD 1977). By progressively reducingagricultural and livestock yields, drought reducesthe land’s capacity to support people, while thepopulation keeps increasing rapidly. The totalpopulation of Africa has increased almost fivefoldsince 1950. During this period, desertificationhas reduced the productivity of one-quarter ofthe continent’s land area by 25 percent, encour-aging an exodus toward urban areas.

Desertification also has feedback effects that cancreate vicious cycles through, for example, therelease of CO2 or higher susceptibility to winderosion, which may reduce the soil’s water-retention capacity. Wind erosion (or loss of infiltra-tion capacity caused by loss of vegetation or bysoil compaction) intensifies the effects of climatevariability on crop failure. Measures need to betaken to limit the extent of irreversible changes.

Food SecurityThere is a wide consensus that climate changewill worsen food security in Africa throughcontinuous climatic shifts, as well as an increasein extreme events. Hunger is not a sporadicepisode in Africa: nearly 200 million of its peopleare undernourished, and 33 percent of Africanchildren are stunted, underweight, or wasted(FAO 1999). A combination of factors (notedpreviously) explains the reduction and uncer-tainty of crop, livestock, and fishery yields. Thesefigures undeniably hide sizeable disparities. Forexample, although recurrent conflicts have

shrunk food availability in Burundi, considerableprogress in Ghana was triggered by higheragricultural productivity.

Water SupplyExcept in the equatorial region and coastal areasof eastern and southern Africa, the continent isdry subhumid to arid. Global warming will resultin a reduction in soil moisture in subhumidregions and a reduction in runoff, because hightemperatures enhance evaporation. Africa has thelowest conversion factor of precipitation to runoffin the world (15 percent), and the situation isworsening rapidly. There has been a reduction inrunoff of 17 percent in the past decade. Indeed,Arnell (1999) finds that the southern Africa regionwill experience the greatest reduction in runoffby the year 2050, increasing the number ofcountries included in the water stress category(using a per capita water-scarcity limit of 1,000cubic meters per year).

Likewise, Sharma and others (1996) estimatethat between 2000 and 2025, the number ofAfrican countries enduring water stress will risefrom 8 to 18 and the population affected willdouble, reaching 600 million. This relativescarcity of water is also the consequence of rapidpopulation growth. Poor people will be the mostaffected, because they have the most limitedaccess to water resources, but the scarcity willhave consequences for the whole economy—even industrial activity is threatened by thescarcity of water. In Ghana, the unprecedenteddrought of 1982–83 compelled electricityrationing until 1986, which stresses the need todevelop alternative sources of energy.

Water-Related ConflictsAs an additional threat to African development,access to water is likely to be the source of anincreasing number of conflicts in the future(Stern 2007). National as well as cross-borderconflicts motivated by water access have beenobserved already. For example, in the 1970s and1980s, droughts in Mali forced many semino-madic Tuareg to migrate; their troublesomereturn to their native lands was the basis for theSecond Tuareg Rebellion in 1990. Along the

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Senegal River the building of dams provoked aclash between Senegalese and Mauritanianpopulations during the late 1980s and early1990s (Niasse 2005). Western Africa has alreadyexperienced a decline in its rainfall during thepast three decades of between 10 and 30percent. This raises many concerns for theforthcoming decades: cooperative mechanismswill be required to prevent the commencementof additional water-related contentions.

Adaptation to Climate ChangeIssues raised in this section often progressivelyaugment the vulnerability of a country, a situationthat is often revealed only when an extreme eventoccurs. Increasing the resilience to natural hazardimplies a permanent effort to tackle the diverseconsequences of global warming. Desertification,food security, water supply, and other climate-related issues are strongly integrated, and effortsto provide solutions should be combined.

An essential first step is improved resourcemanagement. There is much room for improve-ment in this field. Low-cost technologies forcontrol of wind erosion exist. Access to creditcould stimulate the use of windbreaks, mulching,ridging, and rock embankments (Baidu-Forsonand Napier 1998). Agricultural production can beenhanced by appropriate rainwater manage-ment, as in Morocco, where scarce rains are usedvery efficiently for farming. As another example,South Africa has started to develop strategies tooptimize the use of water through pricing anddemand management tools.

Given that access to water is an increasinglychallenging issue and most of the major rivers ofAfrica flow through several countries, inter-national river basin management protocols arenow fundamental to precluding water-relatedconflicts. Such protocols have been fairlydeveloped during the past decade and need tobe encouraged by strengthening of their financialand human resources and establishing a legal

framework that will ensure equity and efficiencyin the management of water supply.

In the medium term, the development of betterforecasting technologies would facilitate adapta-tion to climate change and preparedness forextreme hydrological events. For example, cropmodels could be used to make adjustments if theyprovided information about the probability ofsuccess of resource diversification or intensifica-tion. Development of data and local skills isnecessary to enhance research and offer morepractical solutions for dealing with such changes.

Finally, strong synergies can be identifiedbetween the reduction of vulnerability and globalwarming. Forest maintenance would mitigateboth flooding and climate change. New opportu-nities in carbon trading are emerging that Africacould exploit (this section draws on World Bank2006a). For example, in the European Unionmarket, firms are willing to pay as much as US$20per ton for sequestration. On the assumption thata hectare of dense tropical forest will emit some500 tons of CO2 when it burns or rots, its interna-tional market value could be as high asUS$10,000. Conversion of tropical forest tofarming gives high returns to the farmers, butthese returns are often small compared with theinternational carbon trading options that arebecoming available. For example, Tomich andothers (2005) have shown that the net presentvalue (using a discount rate of 10 percent) for onehectare cleared in Cameroon yields a return ofabout US$283–$623 for food crops, US$424–$1,409 for cocoa, and US$722–$1,458 for palm oil.Even if the carbon sequestration price were aslow as US$3 per ton, it would give better returnsto Cameroon than the farming options would.This does not include quantification of any otherbenefits of preserving tropical forests, such asbiodiversity. Yohe, Andronova, and Schlesinger(2004) have argued that an internationalagreement on carbon sequestration would beviable even at US$2.70 per ton.


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CHAPTER 6

Coping with and Preventing Natural Disasters

Financial MechanismsWhen governments do not resort to higher fiscaldeficits to fund relief and reconstruction costs,they generally turn to international aid or realloca-tion of expenditures. However, other solutions areavailable for spreading risks. This section discussesthe strengths and weaknesses of each solution.

Current ApproachFiscal Deficits. When a government issubmerged by a sudden overflow of emergencyneeds, higher expenditures, leading to largerfiscal deficits, are easy answers. Nonetheless, thelong-term costs of indebtedness are well known,and make this choice the last resort for a govern-ment. Benson and Clay (1998; 2004) found noimpact of natural disasters on the overall budgetdeficit except in drought-affected Sub-Saharaneconomies. In this Region, five of six case studiesshowed a noticeable increase in governmentborrowing following the drought.

Reallocation of Expenditures. One of the mostcommon ways to cope with the urgent needs of apostdisaster situation is to reallocate budgetaryresources. This solution provides a rapid sourceof funding while keeping domestic credit andmoney supply under control. However, it stilldiverts funds from planned investments, and thushampers development. A main concern is thatreallocation of funds after a disaster should followa formal process rather than proceeding based onemergency decisions, so that funds would not bediverted from projects essential to the long-termdevelopment of the country. This is often not thecase, and vital long-term development is affected.

International Aid. International agencies play amajor role in helping countries that have limitedresources to cope with the disaster. However,Benson and Clay (2004) suggest that postdisas-

ter aid flows are not additional. In three casestudies (Bangladesh, Dominica, and Malawi)they observed that disasters had little impact onthe overall level of aid. Donors bring forwardcommitments, and thus reduce the availability ofaid during the subsequent years. The IEG reporton natural disasters (IEG 2006) confirms thatdespite the existence of an Emergency RecoveryLoan, loan reallocations are the most frequenttype of response to disasters in highly vulnerablecountries; such reallocations often do not lead togood outcomes.

Another important issue in aid-based relief andreconstruction is that considerable flows of aidfrom different donors raise management difficul-ties for the receiving country. The country has tosubmit to different conditions from the donors,which can take time and limit its sovereignty. Thisdiminishes the government’s ability to deter-mine the allocation of reconstruction funds andset its own priorities.

Increasingly, countries are taking greaterownership over donor coordination during therelief and recovery period. But where institu-tional capacities are limited, coordination canalso be provided by one of the donors. After the1989 drought in Sudan, the World Bank workedwith other donors to organize the relief andavoid unnecessary overlaps in coverage. Specialattention is required from the internationalcommunity when a natural disaster occurs in apolitically unstable country or in a country withweak institutions.

Benson and Clay (2004) denounce excessivereliance on international aid in cases of disasters.Natural disasters often substantially increase thegap between commitments and actual aiddisbursements. In an emergency, small delays

can result in severe social and economicconsequences. Moreover, as we look into thefuture, aid flows might not be able to cope withthe rapid increase in the annual cost of disasters.There is a need to begin to look at other options.And if natural disaster management must be seenas part and parcel of economic development,then special funding mechanisms for disastersmay actually lead to avoidance of the morefundamental choices countries must make tobuild disaster management into their develop-ment strategies.

Financial Risk MechanismsInsurance. In the world’s poorest countries,currently less than 1 percent of the losses fromnatural disasters are formally insured (Freemanand others 2002). This financial risk mitigationmechanism could certainly be developed furtherto reduce aid dependency in managing disasters.The expansion of insurance, however, has beenlimited by its high cost: catastrophe insurancepremiums can be several times higher than theactuarially determined expected losses (Froot1999). Furthermore, to manage insuranceschemes, strong institutions are required: regula-tion must ensure that insurance companies aresufficiently cautious and big enough to diversifythe risk or be reinsured. Moreover, clear andagreed triggers are needed for insurancepayouts, which are often difficult to agree on.

Because the risks are highly covariant anddifficult to estimate, insurance industries alwaysface considerable difficulties in providinginsurance against natural hazard. When the riskis too low, agents have very few incentives to paythe insurance premiums. Conversely, in the mostexposed regions, soaring risk discouragesinsurance companies from offering coverage. Acloser look at the developed countries showsthat, in most cases, the insurance market is notfully private and the government plays a majorrole, generally by providing catastrophe reinsur-ance to the companies. As a consequence, agentsare encouraged to adopt risky behavior, knowingthat they would not bear the full costs in case ofa disaster. To limit the moral hazard, insurancecan be provided conditionally—that is, on the

implementation of loss-reduction measures andappropriate building and land-use zoning codes.In that way, insurance companies can contributeto the national effort for preparedness andmitigation by creating appropriate incentives.

A second drawback to the government serving asa backstop facility is that this does not eliminatethe risk, but instead transfers the risk from thelocal to the national level. A rich country’sgovernment generally has the ability to absorbthe costs, but a poor country would not have thesame capacity. To handle the additional pressureon its budget, the poor country’s governmentwould need to resort to other sources offunding, such as international aid.

Determination of a Parametric InsuranceTrigger. A possible solution would be to establishan insurance system in which payouts would betriggered by parametric observations such asextreme rainfall. Disbursing without followingdamage-assessment procedures can acceleratetransfers and reduce transaction costs, but it iscurrently difficult to find simple instruments thatare strongly related to economic costs. Bothfurther agrometeorological research and goodhistorical data are necessary for the insurancecompanies to be able to calculate accuratepremium rates. Good institutions are alsorequired—for example, the myriad difficultiesrelated to landholding titles would surge if thesewere not well defined.

Because of the difficulties of implementation,there are currently few examples of insurancewith a parametric trigger. Windward Islands CropInsurance (WINCROP), which covers the exportof bananas in Dominica, Grenada, St. Lucia, andSt. Vincent and the Grenadines, has a verificationsystem similar to a parametric trigger (Bensonand Clay 2004). Evaluation of losses is easybecause the insurance covers one crop againstone hazard. When a disaster occurs, a 5 percentphysical survey of affected growers reveals theproportion of damaged plants, which avoidslengthy damage assessment procedures. Thebenefit is calculated on the basis of the averagedeliveries during the preceding three years.

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Premium payments are assured because thefunds are directly deducted from exportrevenues. However, the scheme faces somedifficulties, such as the high covariance risk,premiums that are too low but cannot be raisedfor political reasons, and the long-term declinein banana prices. So far, WINCROP has beenunable to extend the insurance scheme to othercrops because of legislative restrictions andextremely high reinsurance rates.

In January 2006 the World Bank initiated thepreparatory studies for the establishment of theCaribbean Catastrophe Risk Insurance Facility(CCRIF). CCRIF will allow governments of theCaribbean Community and Common Market(CARICOM) to have access to insurance coverageat a lower rate than each state could haveobtained on its own, for three main reasons: 1. Participating governments will pool, and thus

diversify, their risk. 2. Donor partners will contribute to a reserve

fund to reduce the need for international rein-surance.

3. The use of a predetermined parametric triggerwill reduce transaction costs and moral hazard.Parametric triggers will allow immediate cashpayment following a major earthquake or hur-ricane, which will help governments fund im-mediate postdisaster recovery while mobilizingadditional resources (World Bank 2006b). Ahigh exposure to natural hazard has encour-aged Caribbean country governments to lookfor creative solutions. African countries needto pay particular attention to such initiatives andconceive their own solutions.

Instruments for Spreading Risks Directly tothe Capital Market. Instruments such as“catastrophe bonds” could reduce postdisasterpressure on fiscal and external balances. Theprinciple is very simple: the owner of the bondwould receive regular payments. However, if the catastrophe occurs, an amount is taken fromthe principal or interest of the bond. Thismechanism can provide immediate and timelyavailability of funds, but because of the hightransaction costs, this solution is twice asexpensive as insurance (Swiss Reinsurance

Company 1999). Compared with postdisasterassistance, which is generally highly conces-sional, it is not surprising that the demand forrisk transfer mechanisms in the private market isvery low in developing countries. But incountries with repeated disasters, one couldconsider using part of the aid flows to invest inmarket-based risk-spreading options such asinsurance, with part of the aid being used as abackstop facility. Turkey has developed such ascheme for earthquake insurance.

Microcredit Institutions. Microcredit institu-tions can help cushion the impact of the disasterfor a part of the population that is highly vulnera-ble and not often reached by other institutions.Natural disasters have a profound impact onhouseholds, including human losses, but also lossof housing, livestock, food stores, and productiveassets such as agricultural implements. Thedisaster-affected population has to replace homesand assets and meet basic needs until individualsare able to recommence income-generatingactivities. In the absence of microcredit institu-tions, poor households are forced to rely onmoneylenders, who charge considerably higherrates of interest.

However, special attention needs to be paid tomicrocredit institutions, which are highlyexposed. In Bangladesh, after the 1998 floods,considerable refinancing from the BangladeshBank prevented many microcredit institutionsfrom falling into bankruptcy. The governmentbackstop is essential because, once again, thehigh covariance risk would result in the microcre-dit agencies facing problems during a disaster. Toavoid repercussions for the users of microcredit,a constant contingent liability from the govern-ments or donors will be required. A risk-poolingarrangement with microcredit institutions fromdifferent parts of the world could be anotherprospect for diversifying risk.

Increasing the Flexibility of Aid Disburse-ments. The term “moral hazard” has often beenused when accusing the governments of poorcountries of not doing enough for disastermitigation as part of their development strategy


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because they expect to be able to count onexternal assistance for postdisaster recovery.However, the cost of insurance can be so highthat it could have long-term economic effects bydiverting capital from investment or any otherspending with a high opportunity cost. In thiscase it is rational to rely on international aid, notonly at a national level, but also at a collectivelevel, because international assistance would bethe solution that minimizes the long-termnegative economic impact of natural disasters. Itis likely that a country’s capacity to handle therisks linked to natural hazard without interna-tional assistance will depend heavily on its stageof development. For this reason, insurance andinstruments for spreading risk that are linkeddirectly to the capital market—such as catastro-phe bonds—might be accessible mainly tomiddle-income countries. However, in the least-developed countries, where the insurance indus-try is reticent because it is risk averse, the onlysolution might be intervention: aid flows mustbe adapted to address the urgent and massiveneeds following a disaster.

The limits of aid mentioned previously (such asthe delays or the lack of coordination) areessentially caused by the tendency of the donorcommunity to be reactive rather than proactive.Guillaumont (2006) suggests that aid couldprovide a guarantee to countries that agree tofollow some predefined rules of shock manage-ment. This shift from ex post to ex anteconditionality could considerably reduce bothdelays and moral hazard. Disasters occur everyyear in the world, with increasing frequency. Weknow disasters will occur, we just do not knowexactly when and where. One option would beto think of a regional or global disaster facility.

Based on recent recommendations from anevaluation (IEG 2006), the World Bank has takenthe lead in establishing a pilot Global DisasterFacility with a fund of US$5 million to encouragemitigation activities. If the procedures for the useof the facility are agreed upon up front, such afacility (once scaled up) would also reduce theproblems of donor coordination often seen inpostdisaster reconstruction programs.

Another solution that deserves more attention,although it has already been implemented, is theuse of debt relief to rapidly reduce financialpressure on the country where the disasteroccurred. Debt relief circumvents regular delaysrelated to fund release from the donors. Thissolution is particularly appropriate for highlyindebted poor countries, where debt service canrepresent a serious burden, crowding out otherimportant uses of scarce resources. For example,after the flood of 2000 in Mozambique, the WorldBank approved accelerated debt relief worthUS$10 million to the Mozambican governmentto cover 100 percent of International Develop-ment Association (IDA) debt interest over thenext 12 months.

Can Disaster Preparedness Be Improved?

The Predictability of Natural HazardsMost natural hazard risks are foreseeable, in thesense that it is possible to predict where events aremore likely to occur in the near future, yet they arerarely included in country development strategies,even in highly vulnerable countries (IEG 2006).

Accurate prediction of exactly where and when anatural hazard might strike is difficult—but datacovering past events can reveal which countriesare more vulnerable to disasters. Some of themost advanced countries in Africa—such asSouth Africa—spend about US$5 million yearlyfor the economic cost of natural hazards, whichare estimated to cost US$1 billion yearly. Ifforecasting research can make even a smallcontribution to better public decisions aboutmitigation of recovery costs, preparedness, andcrisis management, it would justify sustaining theeffort in research on climatic forecasting. Invest-ments in early warning systems for flooding,tsunamis, and hurricanes can also help savethousands of lives, and even reduce the financialcosts of disasters. There is much room forimprovement in climate forecasting in Africa: thedensity of weather watch stations is eight timeslower than the minimum level recommended bythe World Meteorological Organization, andreporting rates there are the lowest in the world(Washington, Harrison, and Conway 2004).

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Planning the Relief and ReconstructionIt is possible to identify a number of countriesthat are highly exposed to natural hazards. Forexample, figure 6.1 shows the countries of Sub-Saharan Africa where at least 10 disastersoccurred between 1996 and 2005.

In figure 6.1B, the number of disasters and thenumber of people affected are represented foreach kind of disaster for each country. Floodsand droughts are the most frequent types ofdisasters in Sub-Saharan Africa, followed by windstorms. However, droughts tend to affect a muchlarger number of people. In countries with sucha history, the probability that another disaster willoccur during the next decade is very high.

Given the huge impact of disasters on povertyand economic outcomes, it would be expected

that special attention would be paid to naturalhazards in these countries’ development strate-gies. However, among all the countriesrepresented in the figure, only two have incorpo-rated aspects of hazard risk management in theirPoverty Reduction Strategy Papers (PRSPs).

A more ambitious agenda would involve preven-tion or reduction in the frequency of naturaldisasters through the design of developmentapproaches and strategies that reduce people’svulnerability. Of course, development itself, byreducing exposure of the population to agrocli-matic conditions, reduces vulnerability. But morespecific actions can be taken as well, among thembetter water and land management, betterinfrastructure and housing, and more carefulattention to actions that increase people’svulnerability to natural hazards.


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Figure 6.1: Most Exposed Countries in Africa

0 5 10 15 20 25 30

Ethiopia

Nigeria

South Africa

Mozambique

Madagascar

Kenya

Tanzania

Uganda

Somalia

Angola

Burundi

Malawi

Mauritania

Niger

Mali

Zaire/Congo

Senegal

Coun

trie

s

Coun

trie

s

Number of disasters

flood drought wind storm insect infestation earthquake slides

0 10,000 20,000 30,000 40,000

KenyaSouth Africa

EthiopiaMozambique

NigerZimbabwe

MalawiMadagascar

ZambiaTanzaniaSomalia

Eritrea

UgandaChad

SwazilandMauritania

MaliRwanda

Number of people affected (thousands)

A. Number and types of disasters (1996–2005) B. Number of people affected (1996–2005)

Source: The Center for Research on the Epidemiology of Disasters.

Disasters must be anticipated if rational choicesare to be made, even in emergency situations. Inhighly exposed countries, governments shouldprepare a clearly defined policy framework tomeet urgent needs as well as to minimize thelong-term negative consequences of disasters.The policy should include a system of prioritiza-tion of individual development projects andprograms to ensure that any budget reallocationwould not harm those projects with the highestdevelopment impact for the country.

The Stern report (2007) also recognizes develop-ment as a key to long-term adaptation to climatechange. Moreover, it points out some particularareas of development that are essential to foster-ing a country’s adaptation to climate change:• Income and food security

• Education and health systems• Urban planning and provision of public services

and infrastructure• Gender equality.

The cost of adapting to climate change in thedeveloping world is difficult to estimate, but itwill be in the tens of billions of dollars. The costsof inaction, however, will be far greater. Firmmeasures to strengthen adaptation include theintegration of climate change impact in allnational, subnational, and sectoral planningprocesses and macroeconomic projections.Designating a core ministry, such as finance,economics, or planning, as accountable for main-streaming adaptation would be an undeniablesign of government commitment (Sperling2003).

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Number of disasters Number of countries including (1966–2005) Number of countries a discussion of disasters in the PRSP

21–29 7 1 (Mozambique)

11–19 6 1 (Malawi)

1–9 18 1 (Ghana)

Total 31 3 (10%)

Note: Only Sub-Saharan countries that have a PRSP are included.

Table 6.1: The Negligence of Natural Disasters in Development Strategies

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CHAPTER 7

Conclusions and Directions for Future Research

The objective of this paper is to draw attention tothe growing impact of natural hazards on long-term development, as well as the reciprocaleffect of development on vulnerability. After areview of the existing literature, many areas haveemerged that will need further investigation.

First, there is currently no consensus about thelong-term economic impact of natural disasters.Some authors argue that although a subsequentnegative impact is observed during the year ofthe shock, it is generally followed by anexpansion, allowing a rapid return to the long-term equilibrium. Other authors object, notingthat the reduction of human and physical capitalcan hinder the long-term development of thecountry, especially when the disasters arefrequent. Because of technical difficulties, fewprevious studies have provided compellingempirical evidence to confirm either perspec-tive. Both theoretical and better empirical workare needed.

Second, further theoretical and empirical studiesof the long-term impact of natural disasters willhave to go into greater detail in disaster analysis.It is very likely that the impact will differ accord-ing to the type of disaster, its frequency, thecontribution of international aid, and thesocioeconomic conditions of the country.Pooling all natural disasters together would failto consider the vast range of possible effects, andcould be misleading.

Third, the link between conflict and naturaldisasters and vulnerability needs more attention,especially in parts of Sub-Saharan Africa, wherepopulation pressure is being exacerbated andland degradation and desertification are increas-ing rapidly.

Fourth, management of Africa’s forest resourcesand the potential for using carbon tradingmechanisms to pay for their preservation opennew areas for further research.

Fifth, the role of alternative funding mechanismsneeds more research, whether they are marketbased, such as insurance and bonds; locallyfunded, such as microcredit schemes to reducevulnerability; or globally or regionally prearrangedfunding mechanisms. Research should include afocus on how such funding mechanisms could beexpanded and how the inherent moral hazard andcovariance could be reduced.

Sixth, more work is also needed on adaptation toclimate change. The focus has largely been ontechnical issues; much less attention has beengiven to the economic costs and benefits ofdifferent adaptation mechanisms.

Seventh, why do current development plansappear to ignore disaster risks? Is there a lack ofincentives because of limited public awareness?Much more attention is needed on howeconomic development plans and strategies canbuild in disaster risk mitigation more visibly andcentrally through PRSPs and national plans.

This paper has shown the importance of naturaldisasters to African development and the linksbetween disaster management and economicdevelopment. The large costs of disasters,sometimes larger than aid inflows; the evidencethat the intensity of disasters is determined bychoices countries make on economic develop-ment; and the need to stop considering naturaldisasters as one-off events are highlighted in thispaper. We find that despite the frequency ofdisasters in many African countries, the PRSPs of

only three countries discuss them. Finally, aftershowing that while Africa is a very small contrib-utor to the factors causing global warming andclimate change, it is likely to be the continent

most adversely affected, and the paper offerssome options for adaptation. We hope the paperwill stimulate more discussion, more research,and better solutions to this issue.

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Disasters, Climate Change, and Economic Development in Sub ... · DISASTERS, CLIMATE CHANGE, AND ECONOMIC DEVELOPMENT IN SUB-SAHARAN AFRICA 3 Figure 1.1: Number of Natural Disasters