The ADB’s newly established disaster response fund shows the bank’s growing focus on the impact of natural disasters. However, the scale of the challenges means the private sector also has an important role to play.
When the ADB set up the Asia Pacific Disaster Response Fund, first approved in 2009, it marked a shift in focus from long-term reconstruction projects towards more immediate aid. Today, the fund has become an established tool in the bank’s range of financial resources, having already been deployed seven times to provide immediate assistance to countries that declared a major disaster.
The shift in focus, however, also hints at a far bigger challenge. Rather than responding after the fact, the ADB is working to convince Asian governments to step up preventative and risk-mitigation efforts. The fund sends a strong signal that the ADB is determined to do more to cushion the impact of natural disasters.
“It has proved helpful within the ADB, reinforcing the message for governments to do far more to address hazards and reduce risks. We have invested a lot of money in that long term,” said Neil Britton, principal disaster risk management specialist at the ADB.
The ADB already uses around 45% of its disaster risk budget for risk reduction, with the other 55% for post-impact funding, targeting longer-term rehabilitation or immediate reconstruction.
The disaster response fund is designed to provide immediate assistance while the international community’s funding arrangements are kicked into gear. Up to US$3m can be mobilised per event and made available in a very short term. Once a government has requested assistance, money can be shifted within days. For example, the Sri Lanka response took about 24 hours.
The seven deployments to date have covered floods, typhoons, volcanic eruptions and dzuds (Mongolian term for a weather pattern where a harsh winter follows a hot summer) in Samoa, Sri Lanka, Indonesia, the Philippines, Mongolia and Pakistan.
The ADB’s disaster response fund will add to the resources already available through the United Nation’s Central Emergency Response Fund and other vehicles. The ADB also has bigger tools at its disposal. It recently announced emergency assistance loans of US$650m to help Pakistan recover from last year’s devastating floods. The bank’s infrastructure and country teams are working to identify fast-track road and other infrastructure projects to help rehabilitate Sindh Province.
Even with those combined efforts, there are too many disasters for the resources available. Calls for the private sector to share that risk are growing, and the ADB’s Britton says private sector investment has become a major focus.
“In particular with the private sector, there is a lot of expertise in terms of risk assessment, access to funds and the ability to transfer the risk internationally. Insurance is one mechanism, but there are other mechanisms that can have a similar effect of spreading the risk and providing the resources necessary,” said Britton.
Integrated approach necessary
“If we can work with both the private sector and governments to allow more systematic approaches to reducing risk, that would be a tremendous step forward in the whole business of managing hazards.”
Private sector, including society groups, non-governmental organisations and others, were involved in the response to the Indian Ocean tsunami, especially in Indonesia’s devastated Aceh Province. Where governments struggle to provide rescue and reconstruction services, others may have the resources or equipment necessary.
However, private sector institutions, such as insurers, need to do more in Asia.
“The institutionalised approach to risk management - insurance and so on - requires further development in this region, where it is rather underdeveloped,” said Xianbin Yao, ADB director general for regional and sustainable development. “There, the broadly defined PPP is required with proper zoning. Otherwise, who is going to provide insurance for people still living on a flood plain? There needs to be a proper government policy and, at the same time, a proper insurance mechanism to ensure risks can be covered.”
Yao is leading the push for a longer-term approach to disaster risk management - a major change from the ADB’s earlier focus on reconstruction projects that necessarily came after the fact.
“We are evolving from the focus on post-disaster reconstruction to more of a help minimise the impact immediately after the crisis, and we are clearly linking our disaster risk programme with our climate change programme - focusing, especially for this region, on water-related disasters like drought or floods.”
“The whole disaster risk management programme is seen as very much part of the development financing operations,” said Yao.
Asia has had more than its fair share of natural disasters in recent years, and climate change may be making the region even more vulnerable. By linking disaster risk management with the bank’s wider mandate, Britton hopes the ADB can encourage Asia’s fast-growing member countries to increase their preparations for disasters yet to happen.
“Ironically, it is the medium-income countries that are now becoming more at risk because of their growing population. The diversity of economic activity and population density is growing, but, at the same time, the safety measures are not there. They’re not catching up quickly enough, so you have a growing vulnerability in countries that are becoming better off,” he said.
“This is why, it’s so important for disaster risk management to be seen in a wider context. It’s starting to become more apparent to politicians, but we still have a long way to go before it is second nature.”