TACLOBAN, Philippines- The devastation wrought by a magnitude 7.1 earthquake in late October 2013 and a typhoon in early November has left the Philippines reeling, searching for answers and scrambling to help survivors. The main island of Bohol was ripped apart by the quake like many other islands, exposing the population to landslides and the dangers of the old and crumbling infrastructure. Bridges and roads were rendered useless and literally days later, the massive typhoon Haiyan ravaged what was left. Accordingly, the global community has responded with aid and pledged to help the Philippines rebuild. However, the cost of helping are also weighing on the minds of many; the capital invested in cleanup for the Philippines is now in the spotlight.
In a traditionally poor nation composed of islands sitting atop the volatile Ring of Fire, natural disasters are to be expected in the Philippines. The islands have been met with typhoons annually for three years, with Haiyan being the deadliest by killing nearly four thousand and leaving another 2 million homeless. While preventing a typhoon or quake is impossible, the islands can be better prepared with stronger infrastructure and better construction, preferably in higher elevation. The Philippine Climate Change Commission (CCC), led by Lucille Sering, posits that the island group is disaster prone and that the latest round of such is only the beginning of something worse in the face of climate change. It has spurred something of a wakeup call for the national government with the CCC calling for a structural audit in Manilla to help prepare the major metropolitan area for large-scale disaster.
Haiyan affected about one-tenth of the Philippine population, according to Al Jazeera, and placed additional stress on disaster relief efforts already in full swing responding to the earthquake from the previous month. However, the Philippine economy may be at risk for a full on collapse as the disaster halted the agriculture and fishing industries with a projected loss of nearly $325 million. “Many fear that the typhoon’s impact could slow the entire Philippines economy, an economy that has been expanding at a rapid clip – 7.6 percent in the first six months of this year. The affected region accounts for 18 percent of GDP…”
The public sector will be slow to respond to helping people and infrastructure repair, according to an article in PolicyMic. Conversely, private sector aid, and tracking performance, will help more as opposed to bureaucracy. The hidden cost will be the economic output not generated by those tragically killed, “…the lower output due to the $15 billion in destroyed capital, and the resources employed to clean up and rebuild the region hit by this devastating storm are a drag on long-term economic growth.”
Kevin Kliesen, writing for the Federal Reserve Bank of St. Louis in 1994, explored the economic implications to disaster relief. Among his contentions is that in the immediate wake of disaster, economic losses in dollars do tend to be embellished for various reasons. Costs nonetheless are taken up to replace losses like infrastructure and loss assessment can be a risky and potentially arbitrary process:
“Despite these limitations, economists attempt to measure the total loss of a disaster by estimating two separate types of losses: direct and indirect. Direct losses are easier to estimate. For example, in an earthquake or hurricane, they would consist of the buildings or structures that are destroyed or damaged as a result of the actual force; in the case of a flood, they would consist of water damage to levees, crops or buildings. Indirect, or secondary, losses occur as a result of destruction to buildings, structures or bridges. These include lost output, retail sales, wages and work time, additional time commuting to work (reduced leisure), additional costs to business from rerouting goods and services around the affected area, utility disruptions, reduced taxable receipts, lost tourism or increased financial market volatility. Obviously, calculating indirect losses is the more difficult of the two.”
The US spent almost $100 billion in 2012 for natural disasters, according to the Natural Resources Defense Council (NRDC) and the UN Office for Disaster Risk Reduction (UNISDR). They’ve found direct losses to be understated by nearly half, with the true cost of direct loss in the last year to be close to $2.5 trillion, a huge disaster relief cleanup bill. While the dollar amount keeps rising, human capacity to deal with natural disasters must meet the challenge. Disasters are in no way preventable, however, smarter action by those in affected areas to help prevent loss is a great first step. In the Philippines, it means an infrastructural overhaul, especially in rural parts. Preventative action will help curb the cost, not the instance of disaster.
– Dave Smith