The Economic Impact of Natural Disasters in the South Pacific With
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THE ECONOMIC IMPACT OF NATURAL DISASTERS IN THE SOUTH PACIFIC
WITH SPECIAL REFERENCE TO FIJI, WESTERN SAMOA, NIUE AND PAPUA NEW GUINEA
The South Pacific Programme Office of the United Nations Department of Humanitarian Affairs and the United Nations Department for Development Support and Management Services acknowledges the assistance of the consultant, Dr Te'o I.J. Fairbairn in preparing this study for the South Pacific Disaster Reduction Programme (RAS/92/360)
June 1997 The Economic Impact ~fNatural Disasters In the South Pacific
CONTENTS
List of Tables and Charts 2 Acronyms 3
Acknowledgements 4 Preface 5 Executive Summary 7
1. Introduction and Background 15 1.1 Regional Context 15 1.2 Previous Analysis and Contributions 16 1.3 Methodology 17 1.4 Country Case Studies 17
2. Natural Disasters and their Economic Impact: A Technical Analysis 19 2.1 Risk Assessment 19 2.2 Economic Vulnerability 20 2.3 Supply-Side Effects - A Simple Model 23 2.4 Possibilities for Economic Recovery 24 2.5 Concluding Remarks 25
3. Fiji: The Economic Impact of Cyclone Kina 27 3.1 Background 27 3.2 Disaster Vulnerability 28 3.3 Cyclone Kina 30 3.4 Sectoral Impact 31 3.5 Economic Impact of Cyclone Kina 33 3.6 Macroeconomic Aspects 40 3.7 Disaster Insurance 43 3.8 Prevention and Mitigation Aspects 45 3.9 Concluding Remarks ...... •...... 47
4. Western Samoa: The Economic Impact of Cyclone Val 51 4.1 Background ...... •...... 51 4.2 Damage Assessment 52 4.3 Some Early Responses and Intentional Assistance 55 4.4 The Productive Sectors 56 4.5 Macroeconomic Impact 62 4.6 Other Macroeconomic Aspects 65 4.7 Economic Growth 67 4.8 Mitigation Issues 68 4.9 Concluding Remarks 70
5. Niue: The Economic Impact of Tropical Cyclones and Drought 73 ~:;~~~7~~~~.:::::::::::::~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::~~ 5.3 Economic Aspects 78 5.4 Macroeconomic Impact 80 5.5 Drought 82 5.6 Concluding Remarks 83
6. Papua New Guinea: Recent Major Disasters 85 6.1 Background 85 6.2 Rabaul Volcanic Eruptions 85
1 The Economic Impact of Natural Disasters in the South Pacific
6.3 Landslides 92 6.4 Floods and Damage to Bridges 93 6.5 Coastal Inundation and Erosion 94 6.6 Concluding Remarks 95
7. Concluding Comments 97 7.1 Economic Growth and Stability 97 7.2 Some Lessons of Experience 98 7.3 Disaster Insurance 99 7.4 External Assistance 99 7.5 Mitigation Aspects 99 7.6 Policy Implications 100
References 102 Appendix I Routes of Cyclones through Fiji 104 Appendix II Tropical Cyclone Damage Chart 105 Appendix III List of Persons Consulted 106 Appendix IV Terms of Reference 110
LIST OF TABLES AND CHARTS
Tables 3.1 Summary of TropicalCyclones, 1972-95 28 3.2 Assessed Damage to Agriculture from Cyclone Kina by Main Sub-Sectors 31 3.3 Redeployment of Government Expenditure in Response to Cyclone Rehabilitation Needs, 1993 34 3.4 Fiji Budget Deficitand Financing, 1990-96 36 3.5 Gross Domestic Product by Sector,1990-96 39 3.6 Exports by Commodity, 1990-96 40 3.7 Balance of Payments Summary, 1990-96 : 41 4.1 Cyclone Val Damage Cost Estimates - SectoralSummary, 1992 52 4.2 Cost of Damage to Agriculture from Cyclone Val,1992 53 4.3 Indicators of Agricultural Production, 1988-95 57 4.4 Exports by Commodity, 1988-95 59 4.5 Financial Operations of the Government, 1987-93/94 63 5.1 TropicalCyclones and their Impact on Niue 74 5.2 Infrastructure Facilities- Estimates of Cost of Repair,1990 76 5.3 Assessed Damage to the Agricultural Sector,1990 78 5.4 Export, Import and Trade Balance,1988-93 81 6.1 Estimated Cost of Replacing Infrastructure, 1994 87 6.2 Volume of Cocoa and Copra Produced in East New Britain, 1990/91-94/95 88
Charts
2.1 Vulnerability Assessment - BasicAnalytical Framework 20 2.2 Framework for Assessing Economic Vulnerability/Losses 21 2.3 Economic Collapse due to Cyclone Devastation 23 2.4 Possible Economic Recovery Scenario 25 3.1 Budget Expenditure, Revenue and Capital Expenditure, 1990-96 31 3.2 GOP (at Factor Cost) and Agricultural Component, 1985-94 37 3.3 GDP Growth, Actual and Fitted Growth Assuming a No-Disaster Scenario, 1983-9L 44 4.1 Agricultural Production, 1988-95 58
2 The Economic Impact of Natural Disasters In the South Pacific
4.2 TotalExport Earnings, 1988-96 ,...... •...... 60 4.3 TourismArrivals into WesternSamoa,1989-95 61 4.4 Government Revenue,Expenditureand Overall Deficit,1987-95/96 64 4.5 Trade and Current AccountDeficits,1988-95 65 4.6 Gross International Reservesand Import Coverage,1989-95 66 4.7 Annual Inflation, 1988-94 66 4.8 Growth in Real GOp'1982-95 67 5.1 Number of TouristArrivals, 1988-95 79 5.2 Export and Import Flows,1988-93 80 5.3 Government Expenditure, 1989-93 81 6.1 Export Volume- Cocoa,Copra and CoconutOil, 1988-95 87
ACRONYMS
ADB Asian Development Bank AIDAB Australian International Development Assistance Bureau AusAID Australian Agency for International Development CPI Consumer Price Index DISMAC Disaster Management Committee DP7 Seventh Development Plan 1992-1994 EEZ Exclusive Economic Zone ELCOM Electricity Commission EPC Electric Power Corporation EU European Union FADS Fish Aggregating Devices FAO Food and Agriculture Organisation GDP Gross Domestic Product GNP Gross National Product GRA Gazelle Restoration Authority HDI Human Development Index ICDC Industrial Centre Development Corporation . IDA International Development Association IFAD International Fund for Agricultural Development JICA Japan International Cooperation Agency NCAP Niue Concerted Action Plan NDC National Disaster Committee NDMC National Disaster Management Committee NGOs Non-Government Organisations ODA Official Development Assistance PSIP Public Sector Investment Programme PWD Public Works Department SOPAC South Pacific Applied Geoscience Commission SPC South Pacific Commission SPDRP South Pacific Disaster Reduction Programme SPPO South Pacific Programme Office SPREP South Pacific Regional Environment Programme UNDDSMS United Nations Department of Development Support and Management Services UNDHA United Nations Department of Humanitarian Affairs UNDP United Nations Development Programme WHO World Health Organisation
3 The Economic Impact of Natural Disasters in the South Pacific
ACKNOWLEDGEMENTS The wri ter owes a considerable debt to a large valuable was the assistance received from a number number of people who helped bring this study to of people during fieldwork. In particular, my thanks fruition. Particular thanks are due to Vladimir are extended to Leith Anderson, CBE, ED, OMT, Skendrovic, Technical Advisor UNDDSMS, New Director General, National Disaster and Emergency York and Joseph Chung, Chief Technical Advisor, Services, Department of Village Services and South Pacific Programme Office (SPPO), United Provincial Affairs, Port Moresby; Danial Raku, Nations Department of Humani tarian Affairs Deputy Secretary in the same Department; and Neil (UNDHA), Suva, for the valuable advice and Adams, Chief of Police, Niue Police Department, guidance provided throughout the study. At the Alofi. Thanks are also due to Col. Eric Ani, OBE, initial stages of the project, valuable insights and Assistant Director General, National Disaster information relating to natural disaster issues were Emergency Services, Department of VillageServices gained from discussions with Ian Rector, Disaster and Provincial Affairs,Port Moresby and to S.Talagi, ManagementAdvisor, andAtu Kaluomaira, Disaster Niue's SOPAC representative, Suva. Hedy Mitigation Advisor, both of UNDHA-SPPO; and Dr. Fairbairn's assistance in the editing and preparation Charlotte Benson, Research Fellow, OOl. Equally of the final draft is also greatly appreciated.
4 The Economic Impact of Natural Disasters in the South Pacific
PREFACE
This study is concerned with the economic impact planning, and to promote greater public awareness of na tural disasters in selected Pacific island of natural disaster issues and requirements. It is also countries - hitherto, a relatively neglected aspect of clear that, in these and related areas of disaster development in the South Pacific region. Anyone management, external assistance from donors will familiar with the development history of Pacific continue to playa vital part in supporting national island countries can readily appreciate the high state efforts to strengthen preparedness and mitigation of disaster vulnerably, particularly to tropical capabilities. cyclones, faced by many, if not most, of these countries, and the enormous social and economic This study should be looked upon as an exploratory costs that can follow. It is sobering, for example, that effort, for it is patently clear that much more work as the study shows, Fiji is subject to an average of needs to be done in this field - including studies of around 10-15 tropical cyclonesper decade -of which other vulnerable Pacific island countries and more at least two are major cyclones - and that, in the case in-depth analysis at the community and sectoral of Western Samoa, the damage caused by Cyclone levels. Nonetheless, it is hoped that the results of the Val (1991)was assessed at a cost equal to more than present study will serve a useful purpose, if for no twice gross domestic product! The direct damage to other reason, than to spur Pacificisland countries to a country's productive base and associated become more active than in the past in the areas of macroeconomic instability can deal a substantial disaster preparedness, prevention and mitigation. blow to ongoing efforts by these countries to achieve . . . longer-term sustainability and improvements in ThISstudy also serves to further the objectivesof the living standards. International Decade for Natural Disaster Reduction (IDNDR1990-2000)in that it increases the awareness Dr. Fairbairn's analysis clearly highlights the need of the feasibility and economic rationale of disaster for Pacific island countries to take more vigorous reduction. action to enhance their capabilities to cope with natural disasters, and 'to reduce the economic losses ~. from these events. The study shows that, almost ~ without exception, the countries reviewed need to strengthen their institutional and organisational structures for disaster management purposes, to . . , incorporate adequate disaster risk and preventative P~zllppe Boulle . and mitigation measures in national development Director, IDNDR Secretariat
5
The Economic Impact of Natural Disasters In the South Pacific
EXECUTIVE SUMMARY
T~s stud~ deals with the econo~ic ~mpactof na~al variety of factorsincluding the degree of dependence disasters In the cOI~textof P~ClfICIsland countries, on agricultural production, the level of structural almost all of which are, In varying degrees, diversification achieved, resource endowment and vulnerable ~osuch hazards. T~e st~dy foc~ses on the level of disaster preparedness. Limited economic the economic co~t of recent maJo~dI~ast~~~In four diversification, combined with a high agriculture- of these cou.ntnes - Cyclone KIna In FIJI(1993), GDP ratio prevalent among many of the smaller ~ycl?ne Val In Western Samoa (1991): Cyclo~e O~a Pacific island countries, makes them particularly In NIUe(1990), a~d the Rabaul volcanic eruptions m exposed to disaster devastation and considerable Papua New GUInea (1994). Such a focus allows economic losses. greater depth of analysis which is particularly valu~b.l~~ identifyin~ appropriate mitigation policy possibilities. The four Island countries selected were judged to ~~b~oadly ~epresen.tativeof the countries 1. Disaster Vulnerability of the PaCIfIcIn relation to SIze, with Papua New Guinea being the largest country in the region, Niue .... . one of the smallest, and Fiji and Western Samoa FIJI,with a p~pUlation of arou.nd800,000, ~ lan~ area respectively falling in the upper and medium-level ?f 18,3~0km sprea~ over 320 Islands (150 inhabited), categories. IS subject to a WIde range of natural disasters including tropical cyclones, drought, floods and The study pays particular attention to the extent of landslides. Recent major catastrophes include the damage to each country's productive base and Cyclone Oscar (1985), a prolonged drought (1983), basic social and economic infrastructure as well as Cyclone Nigel (1985), Cyclone Kina (1993) and to the cost of emergency relief and rehabilitation Cyclone Gavin (1997).Tropicalcyclones are the most ~easures. A major focus is given to the impact of freque~t and the mo~tdestructive event, historically disaster events on key economic aggregates such as averag.Ingbetween eight to 15onslaughts per decade gross domestic product (GDP), employment and of which at least three were classified as major trade, and macroeconomic aspects, including cyclones. Cyclones normally follow a path from the government finances, monetary policy,inflation and north-west to the south-east and occur during the the level of international reserves.Appropriate policy 'cy~lone season' lasting from October to August. and institutional responses necessary to minimise WhIle they can affect the entire country, the Eastern the extent of disaster damage and economic losses and Western Divisions seem to be the most exposed, are highlighted, as is the important role that donors and they are capable of inflicting heavy damage on can play in providing assistance for relief and agriculture, housing, school buildings, roads and rehabilitation purposes. infrastructure. The economic costs of disaster . damage can be enormous and can have significant Natural disasters such as tropical cyclones consequences for government finances and the (hurricanes), prolonged drought, flooding and longer-term growth capacity of the Fiji economy. earthquakes are common occurrences in Pacific island countries, and can be viewed formally as Western Sam~a, physically much smaller than Fiji, e~o~~nous but internal shocks with potentially has a pOP2ulahonof arou~d 16?,00~ and land area of significant economy-wide effects, both short and 1,934 km . The country IS pnmanly vulnerable to long term. In the short to medium term the tropical cyclones, other hazards not posing major destruction of standing crops, physical infrastructure threats in recent times. Over the last decade, Western and housing can be severe, calling for a substantial Samoa has been struck by two highly destructive relief and rebuilding effort. GDP can decline sharply cyclones - Cyclone Ofa in 1990 and Cyclone Val in and remain depressed for some time and with the 1991- and at least three less damaging cyclones. The likely consequence of considerable macroeconomic two major cycloneseach caused Widespreaddamage, instability. In the longer term, damage to productive resulting in the loss of at least 14lives and substantial assets can lead to serious loss of output and reduced damage to agriculture, buildings and infrastructure. economic growth and living standards. The extent The heavy destruction of major export crops, notably of the destruction and economiclosses that can result, coconut and cocoa, resulted in a sharp decline in both immediately and over time, depends on a exports and a prolonged period of negative economic growth.
7 The Economic Impact of Natural Disasters in the South Pacific
As a very small island country with a population of GOp' with agriculture alone accounting for F$64 around 1,500 and land area of 259 krn", Niue is million (U5$45 million); roads, bridges, particularly exposed to tropical cyclones and telecommunications and power sectors up to $30 drought. The historical records indicate that, on million (U5$21million); and housing F$20 million average, Niue experiences one cyclone every four (U5$14million). years and a major cyclone every nine years. It also has had to face several droughts over the last 20 The cyc~one had a significant impact on leading years, with the 1982-83drought one of the worst in economic aggregates. Largely because of cyclone memory. Regarding recent major cyclones, the most damage, sugar - Fiji's leading export crop - failed to destructive have been Cyclone Tomasi (1983)and reach its targeted level of 480,000tonnes (a shortfall Cyclone Ofa (1990) -both wreaking substantial of 8%),but nonetheless recorded a slight increase in damage to buildings, coastal infrastructure and production over 1992.Coconut oil, cocoa and, to a standing crops. lesser extent ginger, slumped dramatically and remained depressed for at least two years. With a landmass totalling 463,000 km2 and a Manufacturing and tourism appear to have been population close to four million, Papua New Guinea relatively immune from serious damage, both is the largest island country in the South Pacific. recording modest expansion in 1993. Despite the Papua New Guinea's considerable physical and slump in coconut and cocoaproduction, total export geographic diversity together with its size and earnings recorded a modest increase in 1993,largely location make it particularly vulnerable to a wide due to offsetting expansion in earnings from other array of natural disasters including volcanic export items, notably garments, fish products and eruptions, landslides, floods, drought, coastal sugar. inundation and erosion. Of the recent major disasters, the most dramatic has been the Rabaul Tomobilisethe necessary resources forfundingpost- volcanic eruptions (1994)in the Gazelle Peninsula, cyclone rehabilitation and reconstruction needs, the New Britain Province - a disaster which caused government chose to rely predominantly on the enormous damage to houses, commercial buildings redeployment of funds budgeted for 1993. This and infrastructure and rendered Rabaul virtually involved the mobilisation of F$46 million (U5$33 inoperative as a major town and commercial centre. million), mainly from the capital budget - an option Other recent major that helped avert the need for government to resort to external borrowing. Nonetheless, the cyclone hazards include a series of landslides in highland created significant pressures on government regions (usually triggered off by heavy rains and finances, reflecting a rise in total government earthquakes), flooding on the extensive plains areas expenditure on the one hand (in some degree due to between Lae and the Highlands regions (causing the effectsof a public service wage increase that took heavy damage to buildings and roads), and coastal place at that time) and a weaker revenue situation erosion and inundation on a large number ofoffshore on the other (in turn due to cyclone-related factors). islands such as are found in the Manus Islands Theend result was a rise in government deficit (from Province. These disasters - but in particular the 2.5%to 4.0%of GOP)which had to be financed from Rabaul volcanic eruptions and landslides in domestic sources - an outcome that would have highlands regions - have elicited a substantial contributed in some degree to financial instability. response on the part of government, both national and provincial, assisted (in the case of the Rabaul The balance of payments effect was fairly strong disaster) by considerable donor assistance. resulting in a marked deterioration in Fiji's external financial position. Imports rose strongly largely due to a rise in the cyclone-induced demand for foodstuffs, and despite higher export earnings, a 2. Cyclone Kina - Fiji substantial ~urrent account defi~it resulted (as compared with a surplus recorded In 1992).In turn, . .. this contributed to a significant enlargement in the CycloneKInastruck on 2-3January 1993and Inflicted overall balance of payments deficit and contraction damage to all major sectors, including agriculture, in the co ntry's stock of external reserves. roads, bridges, school buildings and other u infrastructure facilities.Much ofthe damage was due Regarding other macroeconomic aspects, Cyclone to heavy rains causing overflow of rivers, flooding Kinadoes not appear to have been a significantfactor and landslides. The cost of destruction was assessed in influencing monetary policy. At the time, the at F$153 million (US$109million) or 7 per cent of monetary authority was preoccupied with
8 The Economic Impoct ofNatural Disasters In the South Pacific
implementing policies to combat a situation of excess code. It is also apparent tha t cyclone-proofing liquidity in the economy but, nonetheless, remained measures have made considerable headway among vigilant in relation to the potentially destabilising many government departments and agencies as well effects of the cyclone. as a number of private sector bodies. Notable examples of cyclone-proofing include the designing The domestic price level surged in 1993,reflecting a of bridges, the installation of underground cables in sharp rise in the price o~many locallyproduced fresh the telecommunications sector,the taking of selected food products as supplies were curtailed by cyclone measures to diversify agriculture, and a growing damage. Inflationary effects were contained interest on the part of industry to take up adequate somewhat by the imposition of a temporary ban on insurance cover,Nonetheless, Fijistill has a long way the export of agricultural products (other ~hanthose to go in the strengthening its disaster management already under contract) and the effectof pnce control and mitiga lion capaci ty. Particularly crucial are on certain food items. Domestic prices eased only measures needed to: slightly during the year as supplies improved, suggesting that cyclone-induced price rises tend to • promote more effective integration between be permanent. disaster mitigation strategies and programs and national development planning; The reallocation of government budgetary funds in 1993in response to the cyclone,reduced government • foster greater communi ty awareness of disaster spending on capital formation, but whether this prevention and mitigation possibilities,including resulted in a fall in total investment expenditure is efforts to revive traditional mechanisms for not known as data on private sector investment is reducing the cost of disasters at the grass-roots not available. The rate of economic growth in 1993 level; was lower than that for years immediately before and after the cyclone, but it is difficult to judge how • furt~er iu:plement integrated natural resource much of this can be attributed to Cyclone Kina. (A projects In the areas of land use, water separate study on the economic impact of natural cons~r~ation, flood prevention and drought disasters on Fiji (by Benson 1996)showed that over alleviation: the period 1982-94, cyclones and other natural ith ff h i t . " , .." • persevere WI e orts to ac leve grea er disasters significantly reduced FIJIs average growth economicic dirversiticationif , me, Iudimg those aimeimed rate-toaroundanaverageof2.4percentperannum duci h h d' d I , at re ucmg t e eavy epen ence on cyc one- as opposed to a corresponding 4.8 per cent under a f d . di t di t ' ) prone crops, as a means 0 re ucmg isas er no isas er scenano. vulnerability; In coping with the immediate post-cyclonereliefand k d . ,. encourage property owners to ta e up a equate emergency needs, valuable assistance was provIded, , , isati Th msurance cover agamst natural disasters as a by externaI donors and voIuntary orgarusa ions, e f duci , k value of this assistance was estimated at F$7million means 0 re ucmg rrs ; (US$5 milli?n), ,the bulk of which ~as pro~id~d in • enhance Fiji's financial capacity to deal with the f~rm o~in-kind food and matenal contributions. natural disasters by observing sound The fmancI~1burden on property own:r~ was eased macroeconomic policies and strategies, while b~ t~e p~y~ng out of around F$47 million .(US$22 giving serious consideration to the establishment ml~hon)m msuranc~ payments, most ?f which was of a relief reserve fund to facilitate the meeting paid by overseas reinsurance compames. of immediate post-disaster needs; and
Given its high susceptibility to natural disasters, • continue to seek the assistance of donors in e~pecially tropical ~yclones,it is not ~urprisir:g t~at developing adequate disaster mitigation policies FIJIhas ~ad~ considerable p~ogress In establ~shmg and in strengthening the country's disaster an organisational and planning framework In the mitigation capability. area of disaster management. In this, a key aim has been to reduce the socialand economiccostof natural disasters through ensuring adequate preparation and ~e establishment of basic mitigation m:asures. 3. Cvclone val - Western Samoa Particularly notable have been the completion of a , Natural Disaster Management Plan, the. , establishment of a Natural Disaster Management Cyclone Valstruck Western Samoa over the period Committee and the passing of a national building 6-10December 1991- 21 months after Cyclone Ofa- , and proved to be one of the most destructive in the
9 The Economic Impact of Natural Disasters in the South Pacific coun try's recen t his tory. The cyclone caused reserves.Theserious and persistent shortage of many exceptionally heavy damage to the country's local fresh food items created strong inflationary productive base - agriculture, roads, residential and pressures which was particularly apparent in 1992. commercial buildings, schools,and natural resources - exerting great pressure on government budgetary Cyclone devastation triggered a period of economic resources and causing macroeconomic imbalance. decline that contrasted with an extended period of The total damage was assessed at over $700million above-moderate growth (averaging 2.4%per annum) tala (U5$280million), equivalent to more than twice that occurred from the mid-1980s. Growth during the country's GDP. Particularly heavy losses were the cyclone-affected period (1990-93)averaged -0.5 recorded in agriculture which was assessed at $201 per cent per annum, implying a significant fall in million tala (U5$130million) and buildings at $330 levels of per capita GDP.The resulting loss of income million tala (U5$130 million). due to cyclone damage is estimated at $80 million tala (U5$32million), approximately equal to 50 per Destruction of agricultural crops, particularly tree cent of GDP around the 1991period. crops, was severe. Major export products, notably coconut oil and cocoa,were virtually wiped out, with The enormous social and economic damage caused dramatic impact on export earnings. The industrial by Cyclone Val and its debilitating effects on sector was less affected but still suffered significant economicgrowth and sustainability has help confirm losses due to disruption to power and water supplies in Western Samoa the need for action to combat the and the loss of vital raw materials. Tourism activity effects of natural disasters. In practice, significant fell away sharply, particularly as a result of advances have been made in certain areas. These significantly reduced numbers of tourist arrivals. include the establishment of key institutional However, investment spending - both government mechanisms such as the National Disaster Council and private - rose markedly, reflecting the sharp as a national agency to coordinate disaster expansion in capital expenditure associated with management efforts. It also includes the adoption of cyclone reconstruction and rebuilding. a building code to raise building standards, and the implementation of useful cyclone proofing Government took several major initiatives in procedures by many government departments and response to the post-disaster emergency and state-owned enterprises. rehabilitation needs. These included the reallocation of budgeted funds in favour of rehabilitation Nonetheless, it is apparent that considerable scope requirements, a reduction in departmental spending, existsfor improving the basicinstitutional and policy a deferral of some new development projects, and framework for coping with natural disasters and for efforts to mobilise donor assistance. The vital need reducing economic loss. Among key requirements to rebuild basic infrastructure, notably roads and are efforts to: power facilities, made it necessary to resort to heavy .. . ." borrowing from international organisations such as • finaliset~eprepar~ti~n of a natio~al disaster plan the World Bank andADB, with the consequence of a a~ a basis for g~IdIng the. ~ah?nal effort on significant build up in the level of external debt. dls~ster preparation a~d mitigation both at the Government expenditure, underpinned by cyclone national and community levels; rehabilitation" " .needs, rose.. substantially. . and. resulted. • streng th en th e I'Inks between na tilOnaI In the mcurring of significant fiscal deficits which deveIopmen t pI'anmng an d na tid'ura isas ter rose to. as high as 18 per cent of GDP in 1993.The managemen t panning;I . magnitude and persistence of these deficits were critical factors in causing significant macroeconomic • enhance the domestic capacity to meet disaster- instability over several post-cyclone years. related emergency and relief needs through the · '1 d establishment of a disaster emergency fund; Monetary po IICYwas temporan y ease as a deliberate move to facilitate access to credit for • establish a small working unit to assist the reconstruction - ~mo~e t~at w0.u.ldhave contributed National Disaster Committee in undertaking to a degree of financial instability, On the external ongoing tasks associated with disaster front, imports rose sharply and, given the collapse management planning and mitigation; in export production, led directly to a major increase in the current account deficit which rose to a high 34 • continue to encourage the establishment of per cent of GDP in 1993.In turn, this caused a marked effective collaborative links with donors and deterioration in the overall balance of payments Non-Government Organisations (NGOs) (both situation and a heavy fall in the level of external domestic and external) as a means of
10 The Economic Impact al Natural Disasters in the South Pacific
strengthening the country's mitigation capacity rehabilitation needs. This expansion was largely and ability to deal with emergency needs; and underpinned by generous external aid grants, , , especially from New Zealand and Australia, thereby • mak~ a stronger effor,t to enlist t~e coop~ratIon avoiding the need forborrowed funds or for a major of, ~Ill~ge leaders In, pro~ohng dI~aster reordering of budgeted government expenditure. mitigation approaches, including the revival of This meant Niue was able to avoid serious fiscal traditional coping practices, imbalance (and higher debt levels), while allowing it to maintain development expenditure at budgeted levels. Government's traditional commitment to a , N' policy of fiscal prudence and successful structural 4,C.yc Ione 0 10 - lue adjustment measures that had been undertaken a few years earlier were also positive factors in dealing Cyclone Ofa, which struck on 4 February 1990, with the financial pressures generated by Cyclone proved to be one of the most powerful cyclones to Ofa. have hit Niue, Most of the damage was caused by ,. . high winds and wave action, the worst affected DomesticprIcesfor a few locallyp~duced Items,rose location being the west coast area where the main asares,ultofthecyclonebu~suc~ns,eswererelatlvely administrative facilitiesare located. The most serious short-lived as the supply SItuationImproved, In any damage was inflicted on buildings (including a hotel event, th~ overriding predominance of im~orted and the national hospital), port facilities (including products m local ~ark~ts w~s a fac~or tendmg to a bulk fuel depot), commercial tree crops and to reduce the potentIally inflationary Impact of the nearshore coral environment. Housing was largely cyclone. immune due to cyclone-proofing undertaken, . in the A'SIn F'"IJIand lAlvves tern Samoa, N'rue has taken some past. The assessed cost of repaIrIng dam.a~ed vital steps to improve its capacity to deal with Infrastructure amounted to over NZ$4 million ' " . (US$2.6 ml'11'IOn) and agncu' IturaI rehabiliI itation to, disasters and reduce, econorruc loss., A National over NZ$l rru'II'IOn(US$O.6 rru'11'IOn.) The f'ma1 repair' Disaster Committee has' been established, and ,each . . of the country's 13Villageshas set up mechanisms, and reconstruction costs for damaged Infrastructure ' I di 'II di tIt .d InC U Ing VI age isas er pans, 0 provi e alone., was equal around 50-60per cent of, GDP.All gUIideI'mes on diisaster preven tiIOn and rruitiIgatiIOn things. , considered, the cyclone.dealt a major blow to, actiVIitiies. Cyc1one-proofmg m housmg' IS, a1so weII NIUe s long- term effort to achieve greater econorruc dId N th IN' ld b fit If liance and sustai bili eve ope, one e ess, iue cou ene I se ore lance an sustama I Ity considerably from taking further action to strengthen Commercial crops, mainly passionfruit, lime and its mitigation capacity. Major requirements include: coco~uts/ sUffere~heav~ destruction - as did maj?r • further efforts to develop adequate building Su~sIstencecrops Including bananas and breadfruit, standards and identify protected locations ThIS appears to hav.e forced many farmers to suitable for the erection of major structures; abandon these crops In favour of other less risky undertakings. The tourism industry - regarded as • the establishment of a reserve fund for post- having major growth potential - was adversely disaster emergency purposes; affected by damage to the main hotel and unfavourable images of the country projected in the • the development of more hardy crop varieties, overseas media. especially in relation to commercial crops; and
Niue's external trade situation deteriorated • efforts to encourage property owners to take up markedly. Reflecting cyclone rehabilitation needs, adequate insurance protection against major imports rose substantially while exports declined, natural disasters. with the result that the trade gap widened significantly, Lower volumes of vegetables and The economic effects of prolonged drought that coconuts were responsible for the fall in export struck Niue in 1982-83are a~o outlined. T~isdro~ght earnings, while much of the enlarged trade deficit had severe effects on agnculture, causIng serIOUS was largely offsetby grant funds from New Zealand food shortages and sharply increased dependence and other donors. on imported foodstuffs as well as a major dislocation to the export production of coconut products and In relation to public finance,government expenditure vegetables. Current efforts to reduce the extent of rose sharply in both 1990 and 1991,predominantly drought vulnerability need to be persevered with. as a result of cyclone-related emergency and. These include the provision of water reservoirs in
11 The Economic Impact of Natural Disasters In the South Pacific the main farming areas and experiments with the to ha~e been little affected,largely.because the main development of more drought resistant crops. growing areas were located some distance a,:ay from the danger zone. The effect of the slump In export supply on the country' sbalance of payments appears to have been negligibte - largely on account of higher 5. The Rabaul\t>lcanic Eruptions - commoditypricesan increased earnings from other export products. Papua New Guinea The provincial government budget was subjected to . strong pressure as a result of reduced revenues (e.g. The volcanic eruptions that occurred In the Ra?a~l from lower receipts from an export levy) combined area of the Gazelle Peninsula, East New Bnt31~ with increased spending necessitated by disaster Province, commenced on 19 September 1994.This emergency needs _a situation that was eased only disaster was, undoubtedly, one of the most when assistance was received from the national destructive to have struck Papua New GUi.neain government. Inflationary effects were apparent but recent times. The damage to Rabaul township was short lived and largely felt within the Gazelle enormous - particularly in relation to housing, Peninsula. The disaster would have brought about commercial buildings, and infrastructure items, and a severe decline in income and employment in the principally caused by the effects of ash falls, falling Rabaul area, but the impact of this on the economic rocks and scoria and (when combined with heavy life of the wider Gazelle Peninsula appears to have rains) ash and mud flows, and flooding. The been offsetto some degree by the buoyant economic commercial lifeof Rabaul came to a virtual standstill, activity associated with the restoration program in and a large-scale evacuation effort had to be Kokopo. The effect of the disaster on GDP is not undertaken. apparent from national income data. The cos t of rep lacing damaged infrastructure Other natural disasters faced by Papua New Guinea facilities - both national and provincial government include landslides, flooding, coastal inundation and - was estimated at around K100 million (US$85 erosion. Landslides _ normally triggered by million) - equal to twice t.helevel of the provincial earthquakes and heavy rains _are common in Papua budget. The loss to the pnvate sector was ass.ess~d New Guinea's vast highland region and can wreak also at K$180million (US$153millio~)~resulting in heavy damage to village communities by way of loss a total estimated cost of K$280 million (US$238 of life and destruction of property and gardens. For million) - the equivalent of approximately five per the government authorities, the cost of rescue and cent of the country's GDP at the time. evacuation operations, providing for the subsistence . . needs of evacuees, and eventual resettlement, can The enormity of the physical an~ economic damage be onerous. Landslides can also lead to downstream inflicted on the Gazelle .Penmsul~ forced the siltation that can damage roads, bridges and other government t? launch a major restoration program, structures. Appropriate prevention and mitigation largely.focusmg on the development of Kokopo strategies need to focus on efforts to discourage township - 45 kn: ~outh.-eastof Rabau~- as a new settlement on vulnerable areas, improve access to government administrative and sub-regional ce~tre. exposed communities, and compile information on The restoration program involves the expenditure th most dangerous areas. of around K$118million (US$100million) up to the e year 2003,and the impleme~tation ~fover 5.0~rojects Flooding has caused major damage to bridges and aimed at providing essential services, building up roads in the Lac-Highlands and Lae-Madang basic social and economic infrastructure, and highways which are major arteries in Paua New coordinating the orderly development of Kokopo. Guinea's transport network. Such disasters can The bulk of funding for the restoration program is seriously disrupt the commercial life of the affected being provided on concessionary terms by external regions and entail heavy costs to both g?vernm~nt donors, notably, the World Bank, the EU, Japan and authorities and the private sector. Coastalmundation Australia. It is envisaged that Rabaul's future role and erosion pose serious problems for coastal will largely that of a port servicing centre. communities, especially in Papua New Guinea's . . numerous off-shore island communities. Associated The volcanic eruptions had a f~irly marked imp~ct with changing weather patterns, such disasters on coc?nut and .cocoa production .- both of whic~ appear to be causing increasing damage in terms of are major crops In the Gazelle Pemnsula - and this loss of foreshore lands, destruction of coastal served to depress export supply for at least two years. structures and adverse impact on coral ecology.Such Vegetables and other agricultural products appear
12 The Economic Impact ofNatural Disasters in tile South Pacific effects can seriously undermine the viability of disasters can wreak exceptionally heavy damage to vulnerable communities and may call for eventual a country's productive capacity, create considerable evacuation. Other costs include the possible loss of demand for financial resources for post-disaster agricultural production and costof evacuation. Major emergency and rehabilitation purposes (which, for counter-measures that should be considered for the small countries, usually means turning to implementation include the provision of more external donors for assistance), cause a significant government assistance to local communities to fall in expenditure on capital investment (as funds undertake coastal protection and reclamation work, are reallocated for rehabilitation purposes), cause action to identify vulnerable areas, and the significant delays in the implementation of major undertaking of scientific analysis to enhance development projects vital for long-term growth. understanding of underlying causes. Natural disasters can also generate potentially serious financial and macroeconomic instability. Given its exposure to an unusually wide range of These and related outcomes effectively act as major natural disasters that have the potential to cause shocks to the economy,with detrimental effects on a enormous economic damage, Papua New Guinea country's capacity to achieve longer-term needs to persevere - at all levels - with efforts to development and sustainability. strengthen its capacity to cope with and mitigate against the effects of these disasters. Key The designing of appropriate policies and strategies requirements are to: for alleviating the economic effects of natural disasters is a major challenge for these island • ensure that the National Disaster Authority is countries. Adequate attention needs to be given to adequately resourced to enable it to effectively the range of mitigation strategies that will help carry out its mandate; reduce the extent of physical damage to productive . . . . I. k assets and associated economic losses. Appropriate • Improve plann~ng and co.ordInatIO~ In s macroeconomic approaches are also vital in betw.ee~ the national plann~ng au~honty ~nd cushioning the invariably destabilising impact of provincial and local community bodies as a VItal natural disasters. Major requirements include re~~isi~e for effective disaster prevention and adherence to prudent fiscal and monetary policy in mitigation management; the face of pressure on the available financial • establish a natural disaster relieffund for meeting resources created by post-disaster needs, urgent post-disaster emergency needs: encouragement of property-owners to take up , insurance as a means of spreading risk; the creation • improve the database on the social and economic of a disaster relief reserve fund to facilitate a quick consequences of natural disasters over time; post-disaster response; and a continued commitment to maintaining strong macroeconomic fundamentals • encourage property insurance as a means of (including a healthy external reserves position) as a mitigating against economic losses from natural general buffer against disaster-induced crises. disasters; in this regard, the provision of some form of financial incentive, including tax At a broader level, it is apparent that much needs to concessions, may be of value; and be done to strengthen the prevention and mitigation capacity of the four island countries reviewed - an • improve collaborative links with external donors observation that, no doubt, also applies to many who can make a valuable contribution in the other Pacific island countries. A major task is to designing of appropriate mitigation strategies improve the overall policy and institutional and strengthening the local institutional capacity framework for dealing with disasters and, more in vital areas of disaster management and specifically,for implementing particular mitigation mitigation. measures. Certainly a major requirement is to promote a clearer understanding among policy makers ..and the general public - of the often severe economic consequences of natural disasters and of 6. Mitigation Policy Issues how these events can seriously undermine longer- term growth prospects. Another key challenge is to The evidence presented in this study confirms that ensure that disaster management issues are the economic consequences - and costs - of major integr~ted within the overall national deve~opment natural disasters for Pacific island countries can be planmng framework to ensure, for one thing, that substantial and long lasting. It is apparent that such disaster risks are properly accounted for in the designing of major development projects.
13 The Economic Impact of Natural Disasters in the South Pacific
Other major requirements for enhancing a country's coping practices as a means of achieving greater mitigation capability include mechanisms to: community self-reliance in dealing with disasters; • strengthen the institutional and organisational framework - both at national and community • facilitate the post-disaster recovery of the private levels - for managing and coordinating disaster- sector through, for example, the provision of tax related issues; and related financial incentives;
• adopt appropriate procedures for the monitoring • strengthen the database on the social and and assessment of disaster events, especially in economic aspects of natural disasters - as a relation to analysing social and economic potentially valuable tool for planning and consequences of these events over time; management purposes;
• develop comprehensive and integrated land use • promote greater uniformity throughout the and water management approaches capable of region in the methodology and techniques used alleviating flooding and promoting water in assessing the economic costs of disaster conservation and environmentally sound and damage -both direct and as they occur over time; sustainable land use practices; and
• diversify agriculture through, for example, the • establish effective mechanisms for enlisting the encouragement of hardy crop varieties, early support of external donors aimed at maturing crops as well as a range of traditional strengthening disaster mitigation capacities and root crops; assisting with post-disaster relief and rehabilitation needs. • encourage the use of traditional mitigation and
14 The Economic Impact of Natural Disasters in the South PacifIc 1.INTRODUCTION AND BACKGROUND
The basic aim of this study is to provide information erosion. Thesenatural disasters can have devastating on the economic impact of natural disasters in the effectson the socialand economiclifeof Pacificisland Pacific islands. Among other things, this task countries as manifested in the loss of life and serious involves an examination of the economic costs of damage to physical infrastructure, housing, natural disasters caused by the destruction of, or productive assets, and the country's overall capital damage to, a country's capital stock, social base. Such damage can result in substantial costs to infrastructure, standing crops, natural resources and national governments in terms of emergency relief, the environment and the consequential impact on rehabilitation and rebuilding efforts. In turn, damage production, trade, employment, economic growth to a country's economic base can have major and related macroeconomic aggregates. Particular repercussions for export earnings, employment and attention is given both to the cost ofemergency relief ultimately, economic growth and living standards. and rehabilitation efforts and the extent to which Moreover, such disasters can have strong natural disasters affect economic stability, and to destabilising effects on the local economy as management policy issues in the area of disaster commonly reflected in high and unsustainable fiscal mitigation and alleviation. To lend greater depth to deficits,foreign trade imbalances,increased inflation, the study, the analysis focuses on recent disaster reduced foreign reserves, and increased foreign debt. events in four Pacific island countries, notably Fiji, These economiceffects,both direct and indirect (and Western Samoa, Niue and Papua New Guinea - their associated secondary or multiplier effects),can countries which, in broad terms, provide a belongstandingand pose majorchallenges to policy- reasonably representative picture of disaster makers in the region. vulnerability among the many island countries of the South Pacific region. Given the geographic extent of the region, the degree of vulnerability - in terms of both the range and From a practical viewpoint, the study can be severity of natural disasters - differs enormously particularly useful in promoting a clearer between countries. The vulnerability of individual understanding of the economic consequences of countries largely depends on such factors as location, natural disasters in the South Pacific and the scope physical size, geographical configuration, climatic for improving preventative and mitigation strategies characteristics, economic structures, and the existing and measures to reduce economic losses. The results policy framework including the level of disaster can contribute toward the adoption, within the preparedness. Thus Pacific island countries that are region, of more balanced approaches to disaster situated within the main tropical cyclone zone - i.e. management and planning activities so as to give the oceanic zone around Guam and the Northern greater attention to mitigation aspects and the inter- Marianas in the North Pacific and those around relationship between natural disasters and economic Tonga,Fiji,Western Samoa and Vanuatu in the South development - aspects which, in the past, have Pacific - are particularly exposed to periodic and generally been disregarded as opposed to often highly destructive tropical cyclones (or preparedness, response and recovery issues. The hurricanes). The importance of size combined with results can also help in designing more the physical diversity of the landmass is clearly comprehensive and systematic disaster management demonstrated in the case of Papua New Guinea strategies, and in adequately assessing the cost and which, being both large and physically diverse, is benefits of mitigation measures at the macro-level. vulnerable to the whole gamut of national disasters including volcanic eruptions, floods, landslides, drought, frost and coastal inundation. This contrasts • with the situation of the very small low-lying coral 1.1 Regional Context islands such as are found in Tuvalu and Kiribati, where (apart from the longer-term danger of rising The South Pacific region, which contains over 20 sea levels) tropical cyclones and prolo~ged drou?ht IS. Iand coun tnes. and ternitones. spread over a vast are the main threats. In these countries, a tropical f . f th t I bl . cyclone can devastate the whole country and cause ~rea 0 ocean, ISone 0 e ~os vu nera e r~gIO~s severe and wides read loss. In the world to natural disasters. The regIOn IS p exposed to a wide range of natural hazards including Ce tainly over recent years the incidence of a tropical cyclones, tsunamis, earthquakes, volcanic r b f' . tid' te . th S th P .fi . ... num er 0 majorna ura isas ers In e ou aCIIC eruptIons, floods, landslIdes, coastal mundatIonand region bears ample testimony to the highly
15 The Economic Impact of Natural Disasters in the South Pacific destructive natu.re of these even.ts. In th: case of 1 2 Previous Analysis and Papua New GUinea, the volcanic eruptions that • occurre~ i~ 1994 ~n the Ga.zelle Penins~la of East Contributions New Britain province provide a dramatic example of such destruction. These eruptions caused enormous damage to government and private sector In the South Pacific region, a number of attempts buildings, physical infrastructure and major has been made to study and analyse the relationship commercial crops such as cocoa and copra. A major between natural disasters and economicactivity (and restoration program is currently under way at a cost development) - a situation that appears to apply to of over US$100million - a program which involves developing countries in general. The most notable the development of an alternative site to Rabaul as contributions have been made by John Campbell the main administrative and sub-regional centre. (1984)in a book dealing with cyclone disasters in Fiji;W.Nick Carter,Joseph M.Chung and Satyendra Several other Pacific island countries have recently P. Gupta (1991) in a paper (published in an ADB suffered heavily from the effectsof tropical cyclones. book) reviewing disaster-related and mitigation Cyclone devastation in Western Samoa during the issues in the context of Pacificisland countries; and 1990-91period is particularly notable. The damage Charlotte Benson (1996)in a report on the economic inflicted on crops, housing, infrastructure and the consequences of natural disasters in Fiji over the productive sectors was estimated at around US$300 recent period. (The ADB book noted above also million - an amount equal to several times the value contains chapters on severalAsian countries, notably of GDP at the time. Such devastation caused Philippines.Bangladesh and Nepal.) considerable economic instability and led to an extended period of negative economic growth. For the present purpose, each of the above contributions has been valuable, particularly from a Many other Pacific island countries have recently methodological viewpoint. Especially relevant are suffered similar cyclonic devastation, although, in Campbell's analysis of the social and economic costs relative terms, probably not as severe as that of hurricanes and the economic impact of such experienced by Western Samoa. Thus, over the last disasters on the main productive sectors (agriculture, ten years, highly damaging cyclones have occurred tourism, industry and commerce). Campbell in Fiji,Solomon Islands, Vanuatu, Tonga and Niue. provides an informative account of the costs of post- For many of these countries, these disasters have hurricane recovery with particular attention to meant a loss of life, heavy destruction to property housing, schools and related structures, and he and economic assets, macroeconomic instability,and concludes with policy suggestions that are deserving a significant setback to efforts to achieve sustainable of close attention. growth. The contributions by Carter, Chung and Gupta and In each of the above cases, the extent of disaster by the ADB are particularly useful in emphasising damage was such as to impose a heavy demand on the importance of risk and economic vulnerability government finances (usually supported by assessment in suggesting a framework for classifying substantial donor contributions) in order to carry out the various economicvulnerability effectsby specific the necessary post-disaster relief, rehabilitation and components (see P: 10 of the present study). Carter, rebuilding measures. Significant pressure was also Chung and Gupta also examine various social and exerted on the business and the household sectors economic dimensions of disaster events, including as well as on rural populations who often suffered financial, structural, institutional and human heavily from the loss of cash income stemming from resourcedevelopment issues.Adiscussion of disaster the destruction of standing crops. All in all, the management requirements and the role of vulnerability of small Pacific islands countries to international agencies in disaster relief, mitigation destructive natural disasters raises key policy issues and recovery efforts is particularly useful. relating to their capacity to cope with these events. In particular, it underscores the need for policyaction Benson's longitudinal analysis of the economic directed at enhancing the degree ofpreparedness and impac~ of natural disasters in. Fiji is ba~ed on ~n developing effective measures to mitigate the analytical app.roachdeveloped In ~er ~arher studies potentially destructive social and economic impact of the economiceffectsof droughts InZimbabwe and of these disasters. several other African countries (Benson 1994).Her Fijistudy focuses on the impact of natural disasters on the main productive sectors, particularly
16 The Economic Impact o/Natural Disasters In the South Pacific agriculture (including sugar, forestry products and on an analysis of a recent major disaster in each of fishing) and infrastructure. She also highlights these countries rather than attempting a more financial and monetary aspects, external sector comprehensive and historically-oriented survey. The implications, and donor responses. Benson's analysis analysis therefore, focuses predominantly on the points to the implications of post-disaster recovery economic impact of Cyclone Kina in Fiji (1993), efforts for structural adjustment programs, and Cyclone Valin Western Samoa (1991),Cyclone Ofa concludes with a number of policy proposals. in Niue (1990)and the Rabaul volcanic eruptions in Papua New Guinea (1994).Such a focus is useful in that it allows greater depth of analysis and seemed feasible from the viewpoint of data collection and 1,3 Meth 0d0Iogy time constraints. The selection of these four countries was undertaken In line with the above contributions, the present with some care. An important criterion was the need study focuses on the impact ~f natural disa.sters on to ensure that, as far as possible, the four selected the economic life of Pacific Island countries. The countries were broadly representative of the range ~mJ?hasisis on the extent and severity of the damage of countries found in the region from the viewpoint inflicted on the national economy, the costs of post- of size geographical diversity. stage of economic disaster relief and rehabilitation, the effects on d vel~pment and the like.' Other important production, the macroeconomic impact, mitigation coi sider tions were whether or not a country had issues, and policy implications. Specifically,the study re~ntly :xperienced a major natural disaster of one highligh~s the n:ajor economic consequences of kind or another and whether detailed information natural disasters m terms of: might be available.
• :he damage to basic social and. e~onomic Against such considerations, the selection of Papua tf~~s~ucture and the cost of rebuilding such New Guinea was based on the fact that it is the aCIIlles; region's largest country, both in terms of physical • the cost of relief and rehabilitation measures' size and population. It is also exposed to a wide , range ofnatural disasters and, over the last few years, • the damage to the prod uctive base and the value has suffered severely from the effects of volcanic of lost production; eruptions, flooding and landslides -problems which are still being addressed. Fiji is physically the next • financial and monetary implications; largest country (apart from Solomon Islands) and, in a similar way to Papua New Guinea, is vulnerable • overall GDP aggregates and employment effects; to a wide range of natural disasters, with the threat of cyclones being the most common. • donor responses; and ...... Western Samoa represents the middle-level Pacific • mitigation requirements and policy implications . I d t ' d hi h lth h bi t t ISan coun nes an one w IC ,a oug su jec 0 Throughout the analysis, an attempt is made to a narrower rang.eof disasters, is ~on~theless heavily highlight major aspects of the recovery process in expos:d t~ tropical cyclones which, m recent year;" terms of both the leading productive sectors and, have m.fhcted s~vere damage on the co.untry s data permitting, the national economy as a whole. ecor~.offilc~ase. NIUerepresents the extrem~ m.terms Particular attention is given to those effects that may of ~Ize bemg one ?f the smallest countn.es m the have long-term - and even permanent _ economic regIOn, both physically and demographically, As consequences as opposed to those where recovery with many ?f its small. island nei?hbours, Ni~e ~s takes place fairly quickly. prone to serious cyclonic devastation and periodic drought.
For the collection of data, field visits were made to ' Fiji, Western Samoa and Niue over a four week 1,4 Coun try Case Studles period during February-March 1996,and to Papua New Guinea for one week in April of the same year. As noted, four Pacific island countries were selected These visits proved particularly valuable in for detailed analysis - Fiji,Western Samoa, Niue and providing the opportunity to obtain information Papua New Guinea. In this, it was decided to focus from those directly involved in disaster-related work
17 The Economic Impact of NaturaJ Disasters in the South Pacific
as well as government officials in related areas and under the auspices of national disaster coordinating representatives of the private sector, including authorities and donors. In this regard, the official NGOs. The opportunity was also taken to collect reports on cyclone disasters in Fiji and Western relevan t reports and papers, published and Samoa, and an Australian government report on the unpublished, and to visit sites of recent disasters as Rabaul volcanic eruptions proved particularly well as a number of development projects that had valuable. been seriously disrupted by recent disasters. The four case studies on Fiji, Western Samoa, Niue As will be clear from what follows, this report has and Papua New Guinea are presented in Chapters relied heavily on the results of discussions with 3-6 of this report. These are preceded, in Chapter 2, personnel in the four countries under review (see by a short discussion of certain technical and Appendix III for a list of persons interviewed). Such theoretical aspects that appear helpful in setting the an approach was largely dictated by the relative stage - and the formal framework - for the analysis scarcity, in all four countries, of written material on of the economic aspects of natural disasters in the natural disasters. The availability of reports dealing four countries in question. The final chapter (Chapter with the economic aspects of natural disasters proved 7) highlights the main conclusions and suggests a particularly problematic. range of preventative and mitigation measures that merit serious consideration as possibilities for Nonetheless, a number of official reports provided reducing disaster losses among countries of the valuable background information on particular region. natural disasters. These included those compiled
18 The Economic Impact of Natural DIsasters In the South PacIfic 2. NATURAL DISASTERS AND THEIRECONOMIC IMPACT: A TECHNICAL ANALYSIS
On the demand side, heavy damage to commercial over the last ten or so years appears to have reduced crops can result in a significant loss of cash income the average rate of economic growth by around 50 for farmers and with it, loss of purchasing power per cent (see Chapter 3). with consequent adverse effects on the overall level of demand for goods and services. Disruption to That economic growth among small Pacific island industrial activity caused by damage tobasicservices countries is being seriously compromised by natural such as power and transportation, can lead to disasters, particularly tropical cyclones,now appears reduced levels of employment and income and, in to be gaining increasing recognition. With this has tum, aggregate demand. (However, higher spending come a timely recognition of the need to re-orientate on relief and rehabilitation measures during the post- disaster management activity toward mitigation and disaster period will tend to boost demand and this related development dimensions as opposed to may - at least for a while - offset the induced decline merely meeting emergency relief, rehabilitation and in demand to a significant degree.) Any diminution recovery needs. It is also becoming more apparent in the level of demand will tend to reinforce supply- that there is a need for more systematic efforts to side effectson the level of economicactivityand GDP. more firmly integrate mitigation measures into the national planning process, and to develop more Further analysis of supply-side shocks and their satisfactory tools for promoting a clearer effect on productive capacity and aggregate output understanding of mitigation requirements and will be undertaken later in this chapter. In so far as a approaches. formal analysis of possible measures for mitigating disaster effects is concerned, several recent The development of appropriate mitigation contributions point to the importance of an adequate measures calls for an analysis of disaster vulnerability and risk assessment effort. This vulnerability and, in particular, an assessment of risk. emphasis is most apparent in studies by Carter, Riskcan be defined as the probability that a disaster Chung and Gupta (1991) mentioned previously. will occur, while risk assessment involves "... an evaluation of all the elements that are relevant to an undertaking of existing hazards and their effect on a specific environment" (ADB 1991, p. 31). 2.1 Risk Assessment Knowledge of hazards and an understanding of vulnerability in its physical, social and economic Ad' h di h d as will b dimensions is thereforeessential for determining the s note. In t e prec.e Ing c. apter - an as .WI e degree of risk expressed in terms of probabilities. shown In the foll0w.In~sections - natural disasters Such information on hazards is vital in highlighting can have a substantial Impact on the economic life the ature location and scale of the risks to society of Pacifi~ island countries and can seriously affect and~ts as;ets and, ultimately, for framing effective economic growth and development potential mitigation policies and risk reduction measures gene~ally. Real ec?nomic los~es can occur.through (ADB 1991, p. 31). The essential framework for the direct destruction of standing crops, capital stock vulnerabili ty assessment as a basis for the ~nd other productive assets. ~osses are ~lsoi~curred development of effectiveprevention and mitigation In the form of the opportunity cost of financial and measures is shown in Chart 2.l. related resources channelled into post-disaster relief and rehabilitation as commonly reflected, for Hazard assessment deals with the physical example, in much reduced investment activity in properties of a natural hazard (cyclones, floods, projects that are potentially more productive. The volcanic eruptions etc. ), particularly in terms of combined effects of such losses on economic growth severity and frequency, the most exposed areas, and can be striking. A notable example is Western Samoa the time and duration of impact. In this assessment, where, in the wake of two highly destructive cyclones a first step is the collection of data on the potential during the 1990-91 period, at least four years of hazard - a task that involves drawing on a variety of negative growth were experienced (see Chapter 4). possible sources including scientific data (from Similarly for Fiji, a succession of natural disasters meteorological, hydrological and related areas),
19 The Economic Impact of Natural Disasters in the South Pacific historical records, socio-economic and agricultural the elderly and single parent family groups. The surveys and even folklore.The next step is to analyse socialimpact of hazards will tend to depend on such the available data, focusing particularly on such factors as the extent of public awareness programs, aspects as the intensity or severity of the particular the degree of poverty, and community-wide hazard. Here, the use of hazard mapping, depicting perceptions of risk (as determined, for example, by for example, cyclone paths, flood inundation and the frequency of repeated hazards). Economic wide velocity aspects, can be a valuable analytical vulnerability attempts to measure the risk of hazards tool. A final step is to derive information on causing losses to economic assets and processes and probabilities -essentially highlighting the probability can be analysed in terms of the nature and severity of an event of a certain severity occurring over time of such losses. (ADS 1991,p. 32).
Vulnerability analysis is concerned with the process used to identify.the level of expo~ureof persons a~d 2.2 Economic Vulnerability property to vano us hazards. ThISnormally entails an analysis of the main sectors at risk - physical . f . 1 . . . . structures and social and economic aspects _as well The aim 0 econorruc vu nerability analysis IS to as the type of risk involved. Physical vulnerability assess the economic risks associated with natural relates to the potential losses caused to building, disasters a~d the extent of the damage (and losses) infrastructure (transport, utilities and to economic assets and related aspects (ADS 1991,P telecommunications) and agriculture, including 3~).For the pur~ose, the analysis fo~uses.on~hethree fisheries and forestry. (See Appendix II fo kinds of potential losses, namely direct, indirect and classifica tion of physical damage calused b; second.ary (or "knock-on") (C.hart2.2). Direct loss cyclones.) It also focuses on the risk facedby critical potentIa.l refers to .that resultI.ng.from damage or services and facilitiessuch as health, drinking water destruction of physical and SOCIalinfrastructure and and transport linkages. Socialvulnerability analysis its repair and replacement c~sts. It also covers crop focuses on high risk groups that may require special damage and loss of productive assets. attention, for example, those living in remote areas,
Chart 2.1 Vulnerability Assessment - Basic Analytical Framework.
Tropical cyclones Earthquakes Drought ,- Coastal erosion Hazard Flood Assessment ~ Landslides Tsunamis Volcanic eruptions
Pre~red.nessl Risk Mitigation ~ Measures Assessment Physical
Vulnerability I Analysis -- Is· oCla
1_[ Economic I
20 Indirect loss potential relates to the impact on lost attributable to a particular disaster from earlier production, vital services, employment and various damage and weakness (e.g. damage carried over income-earning activities. Secondary effects apply from previous disasters and pre-disaster weaknesses to losses in terms of inflation and other due, for example to inadequate maintenance of macroeconomic aspects, income disparities and assets). epidemics. For purposes of practical policies, estimates of direct and indirect losses can be used to Loss assessment also needs to account for external design possible disaster alleviation measures, taking assistance and its contribution toward offsetting into account the estimated cost of relief and recovery economic losses from disasters. However, in most action and mitigating measures required (ADB1991, cases, the level of such assistance is such that it does p. 37). not completely offset disaster losses, so that the damage inflicted by the disaster results in a net loss The possible sources of data for the estimation of of economic resources. As pointed out in the ADB economic loss potential inelude those showing report (1991,p. 36),the replacement of such resources damage and casualties suffered in earlier disasters "... requires a reallocation of resources which might as well as information contained in hazard maps and otherwise have been used to further the development physical and social vulnerability studies. In general, process". It is, therefore, the opportunity cost in relation to productive ventures, direct losses incurred that is important in measuring the impact arising from damage to buildings, plant and stocks of disasters and against which the benefits of of raw material and products, will be easier to asses mitigating programs should be judged. than indirect losses. On the latter, the assessment of losses due to say, loss of markets and the effects of In designing a disaster mitigation program, it is interruptions on production, can present difficult essential to set the assessed costs against the potential measurement problems. Other possible difficulties benefits associated with such a program. Risk relate to such issues as the degree of attainable analysis provides the basis for assessing potential precision and the problem of isolating the losses losses, both direct and indirect, as well as the
21 The Economic Impact of Natural Disasters in the South Pacific
"benefits" that are expected to accrue over time. Such of crops, inshore fisheries, forests and a range of basic benefits will be equal to the value of the net infrastructure facilities. Economic collapse can be reductions in losses resulting from the application significant while cyclone damage can virtually wipe of mitigation measures over time as against the losses out much of an economy's export base. Although that would have occurred under the "do nothing" certain areas of agriculture recover quickly, the option. From an operational viewpoint, and rebuilding of the capital base of the economy takes assuming budgetary constraint, the investment of time, and this will tend to impede the process of resources in mitigation measures will be justified, economic recovery. The loss of production can result financially, if the value of expected net benefits over in a significant decline in community welfare. time exceed those from alternative projects' . The case studies presented in the next few chapters For the purposes of the present study, the basic provide ample evidence of economic collapse as a schema outlined above provides a useful framework result of the destruction from natural disasters of for the analysis of the economic impact of disaster capital stock, standing crops and other productive events. As noted in the previous chapter, a key aim assets. This can usually be seen in a significant slump of this study is to examine the nature and extent of in the level of export activity, GDP and declining disaster damage and associated relief and living standards over an extended period of time. rehabilitation costs. The indirect impact of disasters, For example, in Western Samoa, as a direct result of particularly in relation to the productive economy, severe cyclone damage over the 1990-91 period, is also highlighted as are the secondary, economy- export earnings collapsed dramatically to levels that wide repercussions. On the latter, however, the were less than half immediate pre-cyclone levels, present analysis gives greater attention than is while heavy damage to major commercial crops, perhaps usually done, to the macroeconomic aspects roads, power, port facilities and buildings of natural disasters especially in their capacity to substantially affected the country's capital base and engender serious financial and economic instability. eventually attracted approximately $150 million (US$60 million) (equal to more than half GDP) in the form of external assistance for emergency and • • rehabilitation purposes (Chapter 4). Substantial 2.3 Supply-Side Effects - A Simple budgetary (and Official Development Assistance (ODA)) funds had to be redeployed for rehabilitation Model expenditure resulting in a significant rise in overall investment expenditure (from round 26% to over It will be apparent from what has been said so far 40% ofGD~between 1989 an~ 1991/92). The i~pa.~t that, for small resource-poor island economies on production was refl~~ed In a mar~e~ de~hne In susceptible to natural disasters, the economic losses real GDP - from $180 mllh?~ (US$78 mllh?~) In 1989 of cyclone devastation can be enormous. In the case to levels of around $167 million (US$70 million) over of major cyclones, for example, the damage to the the .next thr~e years. The over~ll loss of real GDP productive base of these economies can be dunng t~e.dlsaster-affec~e~ penod was of the order substantial, particularly through heavy destruction of $80 million (US$32 million), For Western Samoa,
I In terms of formal cost-benefitanalysis,net benefit from investing in a mitigation activity is given by:
n n
~ ~ - ~ ~ = ~~~fu 1=1 (ltOt t=l (ltiy where B, = benefits in each year (in terms of reduced disaster losses) C, = cost of mitigation measures in each year t :: 1, 2,..., n n = number of years i = interest (discount) rate
22 The Economic Impact of Natural Disasters In the South Pacific it has taken up to five years to show any significant production function, where output is a function of recovery from these cyclonic disasters. factor inputs". In the case of the subsistence good, . . . . " production is assumed to be a function only oflabour For Illustrat~veanalysis, Itmay be useful to highh?ht input. Further assumptions are that population (and the econo~c consequen~es of cyclone devas~ahon the labour supply, N) remain unchanged and on small Island econorrues by means of a simple technical change is absent. production model such as shown in Chart 2.3.Such a model shows how a small economy can collapse In Chart 2.3, the aggregate production function is from severe cyclone damage to production (e.g. of represented by the curve EFG which shows rising crops) and the capital base (e.g. power). Tofacilitate levels of output (but at a diminishing rate) with the analysis, the model relies on a number of increasing capital input (assuming constant labour Simplifying assumptions. Thus, it is assumed that input, , and no technical change). This production the island economy comprises two sectors - a function is derived by superimposing the production monetary sector producing a single commercial crop function applying to the monetary sector to that for and a non-monetary component producing a single the non-monetary economy (shown by the line EE - subsistence product. The production function for the which is perfectly inelastic to a change in capital commercial product is assumed to be a conventional stock).Assuming an initial capital stock of K1 on the one, such as represented by the Cobb-Douglas K axis, and given the aggregate production function The Economic Impact of Natural Disasters in the South Pacific
(EFG), the resulting level of output (or income) is effect on the local population, and involve a shown by Y, on the vertical axis. Y, represents total significant welfare loss. income that K1 is capable of producing, and results in a level of per capita income equal to Y /. It is possible for a devastated economy to languish t at the lower levelof income-point B- for an extended Suppose now that the economy is devastated by a period of time. While several crops (e.g., taro, tropical cyclone as damaging as those recently bananas and breadfruit) can regenerate quickly, this experienced Western Samoa and other small Pacific is not true of other agricultural staples such as island countries. This will result in economiccollapse coconut and cocoa,which arebasic export crops that for (conceptually) two main reasons, namely loss of take several years (as many as five) to recover. output potential on the one hand and destruction or Reflectinga heavy dependence on agriculture, export damage to capital stock on the other. The loss of activity will be slow to recover. As well, the output takes place in both the monetary and non- rehabilitation of infrastructure and the overall capital monetary sectors, with the overall loss represented base is likely to be a slow process, especially in the by a downward shift of the aggregate production absenceofsignificantexternal technical and financial functionshownbycurveABCD.Asmaybeseenfrom assistance. A critical constraint is the lack of a Chart 2.3, other than at the origin, the extent of the domestic savings base to support the rehabilitation collapse of the aggregate production function (as of the capital stock. In light of such possible measured by the vertical distance between the two constraints, the process of economic recovery (from production functions) is greater than the distance point B to point F in Chart 2.3), and with it the between points E and A on the vertical axis restoration of per capita income,can be a long drawn representing the extent of the collapse in subsistence out process with a heavy cost in terms of output , production. Set against the initial capital stock Kt foregone. the new production function would result in reduced output, equal to Y . This would also result in lower The economic plight of these countries can be levels of output p~r capita (Y / that capital stock is reduced to say, K2 on the K axis, the rate of growth of population) for income per then, given the (collapsed) curve ABCD, the new capita to exceed that originally associated with Y,. level of potential output is given by Y3on the vertical. . .. axis. As can be seen from the figure, the combined PreVIOUSmodels on the collapsibility of small effect of a loss of output and reduced capital stock resource-poor island countries, for example those of (OK - OK), results in a significant collapse in the Kakazu (1994)and Tisdelland Fairbairn (1985)show j economy, specifically from point F to point B,and a that deleterious effects on the economy of a loss of decline in output equal toY, -Y Atpoint B,the level an export market or. the depletion of a major non- 3 of per capita income is significantly less than had renewable resource IS permanent. By contrast, the prevailed at the pre-cyclone level of output - that is damage to the economy through natural disasters is to say,Y) 2 4 Possibilities for Economic In p.r~ct~ce,there are f~ctorsensuring that these small • PaCIfIcIsland countnes have been able to recover Recovery reasonably well from cyclone damage to their economies.Acriticalfactorhas been firm government commitment to economic rehabilitation and An important aspect of the above model is that the restoration as recently illustrated by Western Samoa. movement from point F to point Bis instantaneous. A major factor has been the willingness to reorder Economiccollapse can take place virtually overnight, government spending priorities in favour of depending on the duration (and movement) of a economic rehabilitation. Another critical factor has particular cyclone.This,in turn, will have a traumatic been a substantial aid response to cyclone 24 The Economic Impact of Natural Disasters in the South Pacific devastation in the form of technical assistance, felt.Thecomponent DEFofthe overall income curve, finance, food and related items. Generous donor BCDF,represents a hypothetical economic recovery support has been particularly instrumental in the scenario under favourable conditions, notably an rebuilding of the capital base, and hence productive adequate external aid response (here, year-to-year capacity. Other favourable factors have been a fluctuations in income levels are ignored.) As may substantial upsurge in construction activity - be noted, the pace of recovery accelerates somewhat commercial, infrastructural and residential - around years two and three as crop regeneration and associated with cyclone reconstruction in some capital rehabilitation take effect. By year five, the considerable measure, underpinned by aid- economy is back at the pre-cyclone level of income supported projects. The relatively quick recovery of and, in the absence of further natural disasters, will a number of food crops, as noted above, also then continue to grow. contributes to overall recovery (including the, , restoration of price stability), However, WIthoutadequate external assistance, the recovery process will take a lot longer. The latter Economic recovery will, therefore, greatly depend scenario is depicted by the broken segment DEG, on both domestic measures and the international which, in this hypothetical situation, shows a lO-year response. Where government policy and recovery period. This recovery scenario largely international assistance have been responsive and reflects the slow rebuilding of capital stock and well directed (and in the absence of other external infrastructure and points to the vital role played by shocks), the process of economic recovery can take external assistance in the overall rehabilitation place relatively quickly. The regional experience process. suggests that, under reasonably favourable conditions (with favourable aid-support particularly critical),the economy can return to pre-cyclonelevels • of income within a period of five to six years. This 2.5 Concluding Remarks implies a restoration of the capital stock and output potentia,l (but not nec~ssaril~ income,per ca'pita if In this chapter, an attempt has been made to show population has grown in the mtervemng period). that risk assessment and vulnerability analysis are . ,. " vital pre-requisites for the designing and An Illustrative time path for economic recovery IS . I t ti f dl b d iti ti given in Chart 2.4 which shows an economic Imp emen a IOn 0. sou~ Y: ase mI,lga IOn , , ,measures for reducmg social and economic losses recovery over a four to SIXyear penod followmg f Idi t I h fth di , economic collapse at point C. romna~a Isas,ers. nt ecour~o ,e Isc,usslOn, the physical, SOCIaland economic dimensions of It is assumed that the economy collapses from a base vulnerability analysis were highlighted along with year (real GDP for that year equals 100)by around 5 a schematic frame~ork for analysing the dire~t and per cent, that is, from point C to D in Figure 2.4.The related ,effectsof disasters on the economy..t:sImple economy will linger for some time at the collapsed theoretical model ~~s ~lso presented,showmg tha,t, level of income D, and may even decline further as among small PaCIfIcIsland count,nes, e~On?mIC the after effects of cyclone damage continue to be collapse can occur as a result of disaster-inflicted Chart 2,4 Possible Economic Recovery Scenario, r-» The Economic Impact of Natural Disasters in the South Pacific damage to capital stock, standing crops and other preparedness. Economic recovery can be a long- productive assets. The extent of economic collapse standing process but a firm officialcommitment to in the stock of productive assets,real GDp,and living the rehabilitation process combined with well- standards will largely depend on the severity of the directed external assistance can playa vital role in disaster shock as well as the level of disaster determining the speed of recovery. The Economic Impact of Natural Disasters in the South Pacific 3. FIJI: THE ECONOMIC IMPACTOF CYCLONE KINA Of all Pacific island countries, Fijiis one of the most Vanuatu in the west. Fiji's central location in the vulnerable to natural disasters, especially in the form south Pacific has given it an important standing in of tropical cyclones (hurricanes) and flooding. Over the region with regard to shipping, airlines and the last 12 years (1985-96), Fijihas recorded as many telecommunications. 13 cases of tropical cyclones and storms as well as periodic incidence of other natural disaster such as Fiji is characterised by considerable physical floods and drought. At least two of these cyclone diversity. The large islands are quite mountainous, wrought severe damage to infrastructure, of volcanic origin, and rise fairly abruptly from the agriculture, other productive sectors and private coast to impressive heights (with several peak above dwellings, not to mention the loss of many lives. The 1,000 metres) (Douglas 1994, P: 163). On the south- frequency of these natural hazards and the east or windward sideofthese islands, the vegetation destructive nature of many of them has constituted is characterised by dense tropical forests which a major constraint to economic development in Fiji contrast with areas of light forest, grass and reeds to (World Bank 1993, P: 1). be found in the more north-western locations. The smaller islands, as found for example, in the Lau This chapter examines the economic impact of Group, comprise both high and low islands with the natural disasters in Fiji in recent years. The analysis latter mainly coral-based structures normally lying begins with an account of disaster vulnerability in no more than a few metres above sea level. Among Fijiand implications for economic development. The the larger islands, there is a sharp demarcation in analysis then focuses on Cyclone Kina- the economic rainfall between the wet windward side and the impact on basic infrastructure, productive sectors, more dry leeward side. The large islands are also private dwellings and natural resources of the generally well watered with frequent rains feeding cyclone which struck Fiji in early 1993 and proved streams and rivers which make for severallarge river to be one of the most destructive cyclones on record. systems as, for example, the Rewa, Sigatoka, Nadi This is followed by an examination of some of the and Ba in Viti Levu. While the smaller outlying major economic consequences of Cyclone Kina, islands enjoy more equable climatic conditions, they particularly as reflected in government finances, are no less immune to storms during the wet season monetary policy and the balance of payments. The (October-April) and periodic drought. chapter concludes with a discussion of mitigation issues and observations on possible strategies for Th~ ec~nom?, is heavily dependent on. agricult~re alleviating the potential economic costs of natural (WIth f1she~lesand forestry) and tourism, while disasters in Fiji. manufacturing, led by garments, has recently grown in importance. Agriculture contributes around 22 per cent to GDP (at factor cost) and over 60 per cent of . export earnings (Government of Fiji1995, pp. 57 and 3.1 Background 63). Sugar alone contributes around 12 pe~ cent ~f GDP and close to 40 per cent of export earmngs. It IS ... ., estimated that as much as 60 per cent of the total FIJI,WIth a population ~f ~round 800,000 and ~ total population engages, to some degree, in agricultural landm~ss?f 18,376 km, Is.~ne of.the la~gestI~land activity. Value-added from manufacturing countnes In t~e South PacI!lc.regIOn.It ISa Widely contributes round 12 per cent of GDP and is ~cattered. archipelago conslstIn~ of mo~e than 320 dominated by garments which, alone, account for ~slan~s, Islets and reef~ of which ~50 Islands are close to 25 per cent of export earnings. Tourism has Inhabited, and an exc21us~".eeconomic z~n~ (EEZ)of grown strongly, particularly since the setback around .1,2:0,000 ~m . Viti Le".u,wherein ISl~ated suffered from the military coups of 1987, to become the nation 2S capital (Suva), IS the largest Isla~d a substantial earner of foreign exchange. Service (1?,390 km ) ~ollowed by Vanua Levu (?,538 km ), activities are responsible for around 66 per cent of ~Ith Taveum and I<:~d.avuothe~ relatively large GDP, with tourism, trade, government Islands (see map). FIJIIS approximately 2,120 km administration and transport, dominant. north ofAuckland and 3,160 km north-east of Sydney with its closes island neighbours being Tonga and Fiji's gross national product (GNP) is currently Western Samoa to the east and north-east and around $2,790 million (US$2,OOO million) or $3,500 27 Tlte Ewnomic Impact of Natl/rat Disasters in lite SOl/tit Pacific (US$2,500) per capita'. This is one of the highest in Table 3.1 shows the number of tropical cyclones that the South Pacific region and places Fiji in the category Fiji experienced between 1972 and 1995. According ofthe middle-income group of developing countries. to the table, as many as 31 cyclones of varying Fiji is also favourably placed in relation to social intensity occurred during this period, of which at services, with high literacy rates (86%), high levels least 19 reached hurricane intensity (with wind speed of school enrolment, and low infant mortality rates. above 63 knots or 117 km per hour). This means that For these and related reasons, Fiji has achieved a Fiji has experienced an average of 12 cyclones and relatively high Human Development Index (HOI) just over three major cyclones (hurricanes) per ranking (0.787), putting it among the top 25 out of decade-suggesting a very high state of vulnerability. 127 developing countries for which such data are However, the severity of any given major cyclone available (UNDP, 1994, p. 94). Table 3.1 Summary a/Tropical Cyclones, 1972-95. 3.2 Disaster Vulnerability .... ff d b f 1 di Name Date Intensely Drainage FIJI IS a ecte y a range 0 natura isasters, including tropical cyclones, drought, floods, I Bebe 23-29 Oct 1972 Hurricane Severe earthquakes and tsunamis. Of thes~ hazards, 2 Henrietta 02 Feb 1973 Storm Moderate cyclones have been the most frequent - :-Vlt~as many 3 Julietta 03-04 Apr 1973 Storm Medium as 10-15 cyclones per decade occurring in recent L ' 09-10 De 1973 Hurricane Moderate I , d h f h h iest d . 4 otue c - times - an t e cause 0 t e eaviest estruction 5 Tina 26 A r 1974 Gale Minor (Campbell 1984, p. 8). Cyclones are commonly" Pb 97 H' S " .. 6 val 23 Jan - 2 Fe I 5 urncane evere associated with severe floodmg which can cause H ' M d . " 7 Betty 05-06 Apr 1975 urncane 0 erate serious damage to crops and infrastructure. Major H' M d 8 Anne 25-26 Dec 1977 urncane 0 erate droughts are not common but when they do occur , hi hl d . f 1 h d h f 9 Bob 04-05 Jan 1978 Hurncane Moderate can be Ig y amagmg or examp e, t e roug to S M' . . 10 Ernie 18-19 Feb 1978 torm mor 1983 (june-November) had a major Impact on crops S M d . . II Fay 29-10 Dec 1978 torm 0 erate and caused a substantial loss of sugar production. - H' S While earthquake tremors are frequent, none in 12 Meli 26-28 Mar 1979 urn cane e,vere recent years have done major damage but they 13 Peni 02-05 Jan 1980 Hurncane Minor remain however, a serious threat particularly in the 14 Tia 24 Mar 1980 Storm Moderate highly concentrated commercial and port areas of 15 Wally 03-05 Apr 1980 Gale, Severe Suva. Tidal waves have not - at least since the 1950s 16 Arthur 13-15 Jan 1981 Hurncane Severe _ been a major threat. Possibilities of increasing 17 Hettie 23 Jan 1982 , Minor incidence of unsettled weather associated with 18 Oscar 28 Feb - 2 Mar 1983 Hurncane Severe changing global weather patterns and EI Nino effects 19 Sarah 25-27 Mar 1983 Storm Moderate are present, possibly bringing more frequent 20 Eric 17-18 Jan 1985 Hurncane Minor cyclones, drought and floods which are pose a 21 Nigel 19-20 Jan 1985 Hurncane Moderate particular threat to coastal zones and low lying areas. 22 Gavin 04-07 Mar 1985 Storm Moderate 23 Hina 16-17 Mar 1985 Hurricane Moderate The major impact of tropical cyclones on Fiji arises 24 Keli 09-11 Feb 1986 Hurricane Minor from the frequency and strength of these events and 25 Martin 11-13 Apr 1987 Hurricane Moderate the consequent widespread destruction to life and 26 Raja 24-30 Dec 1987 Hurricane Moderate property that some of these cyclones have caused. 27 Bola 03-05 Mar 1988 Storm Severe Cyclones normally occur between October and April 28 Sina 26-29 Nov 1990 Hurricane Moderate - the so-called 'cyclone season' - with most striking 29 Fran 06-08 Mar 1992 Storm Moderate in the December-April period. Cyclones can affect 30 Joni 06-13 Dec 1992 Hurricane Moderate the whole country - and the majority of them have 31 Kina 26 Dec 1992 _ 5 Jan 1993 Hurricane Very Severe in fact done so - but the Western and Eastern 32 Tomas 23-26 Mar 1994 Storm Moderate Divisions (which include the many islands of the Lau (1995 nil) Group), are the most exposed. Source: UNO?, South Pacific Disaster Management Program, 1996, Suva. 3 As at the end of 1993, the Fijian dollar was worth approximately U5$O.65 and at the time of writing (August 1996),U5$O.71. 28 The EconomIc Impact o/Natural DIsasters in the South Pacific depends on a variety of factors including the caused by these two cyclones.These cyclones, which duration, areal extent, direction and movement and followed the traditional path from the north-west to whether it resulted in serious drainage or flooding the south-east, caused Widespread destruction, problems. Table 3.1 indicates that about eight major killing 27 people and severely damaging dwellings, cyclones were severe (one very severe) from the sugar production and other crops, government viewpoint of flood devastation, so on this basis, Fiji buildings, and power and hotel facili ties. The experienced an average of 2.5 severe cyclones per locations most affected were on the island of Viti decade over the period 1972-95. Levu, especially the densely populated areas of the . . Western Division, but some of the most severely T~e ~Ist~ncal reco~d of cyclones sho,:s that the affected areas were those lying between Nadi and distribution of tropical storms and hurricanes over Ba in the west, the Keyasi area in Nadroga Province time is highly irregular. On the basis of records and the islands of Viwa, Waya and Naviti in the ~o,:ering one hundred ye~rs from 1~80to 1980, the Yasawas.Apreliminary estimate of the monetary cost incidence of cyclones vaned from eight to as many of cyclone damage was put at $51 million (U5$45 as 17 per decade (Campbell 1984,p. 17). However, million), or 5.7 per cent of GDP (Chung 1985, the evidence also shows that roughly one-third of Attachment B). the cyclone seasons have been cyclone-free, while on other occasions, for example 1964/65 and 1985, Cyclone Kina is the major concern of the present as many as four cyclones occurred. Table 3.1 gives chapter. The economic consequences of this cyclone an indication of the uneven distribution of cyclones have been extensively commented upon by Benson in the more recent period. (1996)in a study recentlyconducted on the economic aspects of natural disasters in South-East Asia and The destruction caused by some of the major cyclones the Pacific. Benson's analysis of Fijiwill be referred that have struck Fijiover the last 20 years or so - and to frequently throughout the present analysis. their economic impact - has been documented in some detail by a number of observers. Campbell, in It may be noted, that at the time of concluding the his book Dealing with Disaster: Hurricane Response in present study, Fiji was again ravaged by another Fiji (1984), examined the damage and cost major cyclone - Cyclone Gavin which stuck Fiji at implications caused by Cyclone Bebe in 1972 the beginning of March (1997). This cyclone, on (October). Cyclone Bebe, which also resulted in preliminary information, resulted in a death toll of heavy flooding, brought aboutthe death of20 people 26 persons and caused damage assessed at $33 and inflicted heavy damage to root crops, million (U5$26 million), mostly due to severe infrastructure and government assets, especially in flooding. the Western Division. The cost to government of cyclone and associa ted flood damage, including Apart from cyclones,the economic impact of a severe extraordinary expenditure by the Public Works drought which occurred in 1983(following Cyclones Department and road repair, was estimated $2.6 Eric ~nd Nigel) has b:en highlighted in a number of million (U5$2.3 million) Campbell 1984, p. 166). s~dies. Thus, acc~rdmg to Campbell ~1984,p. 166), Comparable figures for damage to the non- this drought, which lasted fr.omApril to ~ctober, government sector were not available. caused heavy damage to agriculture and Imposed great hardship on a large section of the farming Campbell also examined the destructive impact of community. The sugar harvest was halved, total Cyclone Oscar which struck Fijiin March 1983,and export earnings were expected to fall by $70 million was almost immediately followed by Cyclone Sarah (U5$63million),while the tourism and the industrial and, later, by a prolonged drought. While cyclone sectorssufferedsignificantlosses. The costof drought Oscar was particularly severe in the Western damage directly falling on the government was Division, it also inflicted considerable damage in the estimated at $2.6million (U5$2.3million) (Campbell Northern and Eastern Divisions and resulted in the 1984,P: 166). loss of nine lives and inflicted enormous damage to . .. . . housing, schools, crops, pine forests and the sugar It ISapparen~:.:ve~ from the limited eVIden:e CIted crop. Estimates of damage to the country indicated above, ~t FIJIIS~Ighlyexposed to natural ~hsasters. a loss of at least $80 million equivalent to around In relation to tropical cyclones, most of which travel 7.0 per cent of GDP (Campb~1l1984,P: 165). from the north-west toward the south-east, it is apparent that the most susceptible regions are the Chung, in a report on Cyclones Ericand Nigel which Western and the Eastern Divisions (Appendix I). It struck Fiji between 17th and 20th January 1985, is also clear that the most vulnerable sectors are provided a sector-by-sector analysis of the damage agriculture (including sugar), housing, school I The Economic Impact of Natural Disasters in the South Pacific buildings, bridges, roads and other infrastructure with regular dredging operations. The project has items. entailed a heavy capital outlay (seawalls cost around $75,000(US$53,000)per km and floodgates between In sum, Fiji'soverall vulnerability to natural disasters $40,000(US$31,000)and $80,000(US$62,000)each). is exacerbated by the high frequency of tropical While donor assistance has been important, most of cyclones and by the fact that in any given cyclone the cost has been borne by government. season as many as four cyclones may be experienced - an outcome that exert create enormous pressure on Another notable example that came to hand is the the economy and government resources in particular. delivery ofwater to drought-affected areas under the The overall effect of disasters will be all the more auspices of the Department of Regional serious if, as in 1983, major cyclones are quickly Development. Over the last few years, the provision followed by drought or other hazards. Another major of emergency water has become a fairly regular aspect is the relatively high incidence of major service, especially to communities in the north-west cyclones; as noted above, such an event appears to districts, including Nadi and the islands of the occur at least twice in any given decade. A further YasawaGroup. The cost of such a service is around aspect that may be noted relates to the financial $1 million annually, which is not insignificant. burden on government imposed by natural disasters. Respondents in the Department of Regional The cost involved in providing emergency reliefand Deve lop men t indica ted tha t this con tin uing post-cyclone rehabilitation and reconstruction involvement suggests that the problem of drought assistance can be very high. But apart from these is perhaps becoming more persistent in certain costs, Fiji's exposure to a succession of cyclones and locations. flooding has meant that certain prevention and mitigation activities have had to be carried out more ~r Ie~s ~n an ongoing basis, with significant cost 3 3 Cuc.lone Kina Implications for government. • , Several examples of ongoing projects resulting from Cyclone Kina struck Fijiover the period 2-3January natural disasters came to my notice during fieldwork 1993,two weeks after Cyclone [oni - a relatively mild in Suva. A notable example is the dredging work storm. Awarning was first received four days earlier being undertaken by the Ministry of Agriculture when the cyclone was about 450 km north-west of Fisheries and Forestry. The main focus is the Rewa Nadi, allowing the country tobe on full alert. Cyclone and Ba Rivers where a succession of recent cyclones Kina had been moving from the east but changed and floods have caused serious siltation. The cost of direction as it approached the Yasawas, from where dredging in these two rivers is in the order of $3.0 it travelled south-east passing between the two main million (US$2.3million) annually - a heavy burden islands of Viti Levu and Vanua Levu (Appendix I). on the Ministry's capital budget (excluding forestry The cyclonewas relatively slow moving (5-10knots) activity)of $5.0million per annum. Such expenditure with winds averaging up to 80 knots and gusting to has meant that other important, and possibly more 120knots. productive capital works projects have had to be sacrificed. It was reported that the desilting of the Cyclone Kina brought prolonged heavy rains and Rewa River alone will take at least another six years. the resulting overflow of major rivers caused serious (This situation underlines the importance of efforts flooding which, in some areas, was the worst in over to minimise flooding, especially through upstream 60 years. (Cyclone [oni, which occurred two weeks flood control and land planning measures.) earlier, brought heavy rain leaving the soils on Viti Levu saturated, later resulting in massive flooding Another major involvement concerns drainage work from Kina's rainfall. It was the closeness of the two being carried out in the Rewa delta, Nausori district, cyclones as well as the volume of water brought under the auspices of the same ministry. The project down by Kina which considerably exacerbated the covers a fairly extensive area most of which has been flooding.) Serious landslides also occurred in the cultivated under a range of cash and subsistence interior of Viti Levu, cutting access to settlements crops. However, as a low lying area (a large part of and making reliefoperations difficult. The combined which was previously under swamp and mangrove destructive effectsof the cyclone were most evident forests), it is vulnerable to flooding and sea water in the northern and eastern part of Viti Levu and intrusion. The aim of the project, which has been in some islands in the Lomaiviti Group and southern progress for nearly a decade, is to control these Lau. The cyclone caused widespread and heavy hazards by a system of flood control involving the damage and the loss of six lives. construction of sea walls and floodgates combined 30 The Economic Impact of Natural Disasters in the South Pacific As an immediate response to the cyclone threat, the or around 40 per cent of the total assessed damage national Disaster Management Committee (Table 3.2). The most vulnerable sub-sectors were (DISMAC) was activated (29th December 1992)as sugar and tree crops such as coconuts, cocoa and were the divisional and district DISMACsto prepare bananas and since the recovery period for crops such for the emergency relief activities that would arise. as coconuts and cocoa takes several years, their A National Task Force was set up immediately impact on overall agricultural production (and following the cyclone to make a preliminary exports) was more long-lasting. Root crops and assessment for Cabinet on the cyclone impact and vegetables (which tend to recover fairly quickly) are the required response. The TaskForcewas to provide also vulnerable to strong winds, heavy rain and an overall picture of the extent of the damage, the flooding and can sustain heavy losses but root crops monetary value of such damage, and to identify in particular tend to be more resistant to such priority areas for assistance (Government of Fiji1993, hazards. p.3). Sugar, Fiji's most important crop, suffered damage In its report, the National TaskForce confirmed that estimated at $25 million (US$17million), occurring all major sectors suffered damage from CycloneKina. mostly on the main sugar producing areas such as Agriculture, including the sugar industry, was Sigatoka, Nadi, Lautoka, Ba, Tavua and Ra. A large severely affected. Bridges, roads and certain other proportion of the assessed cost was due to major infrastructure areas suffered heavy damage as did damage to transport facilities(tram lines and bridges) schools, and housing. A preliminary assessment of and other infrastructure areas. There was also the cost of cyclone destruction indicated a total loss extensive damage to two mills - with the one at of $154 million (US$100million),equal to around 7 Rarawai suffering from heavy flooding - but this had per cent of GDP (Reserve Bank of Fiji 1995,p. 63. no effects on processing operations as the milling season (April to December) was over. Regarding sugar cane production, cyclonicwinds dislodged and l Impact flattened crops and caused cane to break while in 3•4 Sectora some areas, further damage arose from sea water intrusion and the effects on drainage systems AgricUlture (Benson 1996,p. 18).Considerable losses arose from flooding and water logging on low lying areas, for Agriculture (including forestry and fisheries) example, in the Ba, Rewa a~d Nadi areas. suffered most severely from Cyclone Kina. Total . . thi t ti t d t $64 'IIi Extensive damage was caused to other crops m all damage t0 ISsec or was es rma e a rru on .. areas affectedby Cyclone Kina. In certain areas, such in Rewa, Serua, Tailevu, Ra and the Lau Group, up to 90 per cent of all crops were damaged. Coconuts were particularly severely affected through the loss of immature nuts and loss of trees - affects which Table 3.2 Assessed Damage to Agriculture from Cyclone were particularly serious in the islands of the Lau Kina - by Main Sub-Sectors; Group and the Northern Division. Cocoa also suffered heavily mainly through wind damage. Rice was exposed to flooding and, in certain locations, Valueofdamage the crop was wiped out, but overall this crop suffered Sub-sector ($ million) relativelymodest losses.The main root crops, notably dalo (taro), yams and cassava, were less affected S~gar. 24 (exceptwhere there was heavy flooding) and, in any Fisheries 3 event, can recover quickly. Crops 17 Livestock 5 Significant losses occurred in the livestock sector, Forestry 8 especially to commercial dairying, poultry and Drainageandirrigation 5 piggery operations in the Central Division. Much of Researchfacilities 1 the damage was due to flooding in affected areas Total 64 and the effect on farm buildings, equipment and pastures. Source: Government of Fiji, Tropical Cyclone Kina and Severe Rezardi fi heri h . d d b Flooding in Fiji - A Preliminary Report by the Minister for egar mg. IS enes, t : n,tam amage c~use . y Fijian Affairs and Regional Development, 1993,Suva. Cyclone Kina was to bUIldmg structures, mcludmg 31 Tile ECOIIOIIIIC Impact of Natural Disasters in tile Soutll Pacific office facilities and refrigeration plants, hatcheries, well away from the main tourism areas (notably the and fishery research facilities and equipment. Coral Coast in the Western Division) there was little Extensive areas of coastal reef systems and fresh direct damage. Although some cancellations water fisheries were damaged by wave action and invariably took place, the actual number of tourist sedimentation, although the overall effect on visitors rose strongly in the January period. Apart nearshore catches was mainly short term. Power from repair work on damaged structures, another interruptions to canning operations (there are two possible major cost to Fiji related to re-marketing major canneries) led to stoppages for a week or two. costs incurred to boost visitor interest in the Total damage to the fisheries sector was estimated aftermath of the cyclone. at $3 million (US$2million), including lost earnings by the canneries. Forestry experienced heavy devastation with pine Infrastructure plantations alone recording damage of around $8. . million (US$5.2million). High winds and, in some Cyclone ~ma caused heavy damage to .bndges ~nd cases landslides, affected natural forests and roads,mamlyfromtheeffectofheavyrams,floodmg hardwood plantations but the overall destruction and erosion. A number of major bridges.were either was considered relatively modest. The pine industry, completely des~royedor suffered extensn:e damage. controlled by the FijiPine Commission, reported the Of the major bridges, Ba and Korevou Bndges w~re destruction of 5-10 per cent of Fiji's 45,000 ha of ",:ashed aw.ay and needed to be replaced, while standing pine - a cost of $7.5million (US$5million). Sigatoka Bndge was partly washed away and a~so Plantations on Bua, Tailevu, Ra, and Lomaiviti were needed to be replaced. (Itshould be noted that, pnor most affected through the snapping of older trees, to Cyclone Kina, provision ~ad be~n made for the and fallen trees, while the delay in planting programs replacement of these bndges. In 4-5 years.) was a further cost. Additional losses to the industry Temporary causeways ~ad to ~e mstalled but the were associated with damage to roads, living ov~rall cost of rep~aCl~g.major stru~t~res w.as quarters and other facilities. estimated at round $_6million (US$17million), with the EU expected to provide substantial assistance. In so far as bridge rehabilitation was concerned, T. • government outlays totalled $10 million (US$6.5 IndUStryan d ioursm million). Cyclone Kina's main impact on manufacturing Largeportions of roads throughout the country were resulted from temporary interruptions (a week or either washed away or blocked by landslides, fallen two) to power supply and, in some cases, from trees and debris, with the heaviest damage recorded damage to plant, equipment and supply of inputs. in the Central and Eastern Divisions. Flood damage (However, as pointed out by Benson (1996, p. 23), was particularly apparent throughout the Queens the impact on the pattern and level of consumption and Kings Roads. The cost of road rehabilitation was and on national demand may also have been estimated at $6 million (US$4.1million), although a important. Regarding garments - which dominates full program of road rehabilitation and the industrial sector and is a leading export product reconstruction was expected to cost around $36 - a number of manufacturers were heavily affected million (US$24million). by flooding which damaged materials and fabrics as well as toilet and related facilities. (One company Telecommunications facilities were extensively reported a cost of around $1 million (US$0.7million) damaged from the effects of flooding, broken due to damage to stock of materials from flooding.) branches and fallen trees caused by high winds. Total Many enterprises were also adversely affected by cost of repair and rehabilitation works was estimated disruption to national transport (especially because at close to $3 million (US$2.1 million), and was of damage to bridges), increased absenteeism, and mainly associated with repairing broken lines and higher cost operations (e.g. because of overtime) poles and damaged satellite dishes and other made necessary to catch up with production lost equipment. Regarding power supply, damage to through the cyclone. power lines was widespread with the most severely affected areas being Suva and Nausori. Here, power On tourism, the fact that most resorts in Fiji are failures were common for about a week (a factor located along sensitive coastal areas makes this which also affected water supply which relies on industry vulnerable to cyclone and other natural electricity-driven pumps to fill reservoirs). The cost disasters. However, as Cyclone Kina followed a path of rehabilitation was estimated at $6 million (US$4.1 32 The Economic Impact of Natural Disasters 111 the South Pacific million). Problems over the supply of water and borne by the national government. Here, a major task sewerage arose from damage to pipes from flooding was to secure the necessary financial resources for and in the large urban centres, from the effect of such work -both from domestic and external sources. power stoppages on pumping stations, Aparticular An effectiverehabilitation program was essential for concern was the need for a quick restoration of the restoring basic services, to facilitate the recovery of water supply and quality in order to avoid a serious the major productive sectors, and to minimise the outbreak of water-borne diseases such as choleraand potentially destabilising effects of cyclone typhoid. However, the overall cost of rehabilitation destruction. was a modest $1 million. Jetties, navigation aids and airports appear to have suffered relatively little from the cyclone. Government Finances . . The substantial damage to infrastructure, social SOCial services services and the productive sectors caused by Cyclone Kina placed a heavy pressure on Cyclone Kina wrought considerable damage to the government finances. To mobilise the necessary education sector. A substantial number of schools - funds for post-cyclone rehabilitation and as many as 380- were completely destroyed or badly reconstruction, the govern ment chose to rely damaged with schools in the Central and Western predominantly on the redeployment of funds Divisions most severely affected. The need to carry budgeted for 1993 - an option that, in turn, had out restoration work led to the extension of school significant budgetary implications. This course was holidays by two weeks. The cost of reconstruction chosen largely because government did not wish to of schools and the replacement of equipment and resort to external borrowing for rehabilitation books came to over $8 million (US$5.5million). In purposes, while it was recognised that external the health sector, there was extensive damage to assistance of the scale required was unlikely to be hospitals, dispensaries, nursing stations and health forthcoming. clinics. Major damage mainly as a result of flooding, occurred in the Central Division, especially to The redeployment option called for government hospitals in the town areas of Navua, Nausori and budgeted expenditure, especially the capital Wainibokasi. The cost of repairing damaged items component, to be reprioritised for emergency and was estimated at $1.5 million (US$1.1million). rehabilitation purposes. Individual ministries and departments undertook to identify projects that Housing was severely affectedwith as many as 5,500 could be deferred or suspended until the structures either completely destroyed or heavily rehabilitation requirements had been met. damaged. The total cost of devastation was in the Accordingly,government was able to mobilise a sum order of $20million, although government assistance of $40million (US$28million) which, together with for rehabilitation came to just over $5 million. an additional provision for housing assistance and Apparently, the extent of the damage caused by school rebuilding, made for a total of $46.7 million Cyclone Kina was lessened by significant cyclone (US$32million) (Table3.3). proofing that had occurred since the 1985cyclones .. (Ericand Nigel) and the adoption of abuilding code. As Table3.3 shows, major reallocations were made by the Ministry of Public Works for the repairing of damaged roads, bridges and jetties; by the Ministry 'I t f C I of Agriculture and Forests for the rehabilitation of 3,5 Economlc mpac 0 yc one crops, livestock, drainage and irrigation and by ' 'Miscellaneous Services' agency for meeting the cost KIna of emergency food and housing assistance. The Department of Youth and Sports also reallocated The serious devastation brought on by CycloneKina relativelylarge amounts for the rebuilding ofschools. called for a major effort to provide emergency and The redeployment of these funds was largely made relief assistance and undertake the necessary at the expense of capital works for upgrading rehabilitation and reconstruction work. While buildings, provision of equipment, construction of external donors and voluntary groups (both within new school buildings and training facili ties, and outside Fiji)played a key role in the provision constructionofnew roads, and lessurgent dredgingl of emergency assistance, the main burden for flood protection works. carrying out rehabilitation and reconstruction was 33 The Ecor.omic Impact of Natural Disasters in the South Pacific Table 3.3 Redeployment of Government Expenditure in Response to Cyclone Rehabilitation Needs, 1993 (F$Y'. Ministry/Department Amount Deployed Initially Located Reasons Home Affairs $710,000 Repair and upgrading of Tomeet cost of officebuilding police buildings and and institutional quarters for construction of new quarters the police Fijian Affairs $600,000 Purchase of equipment and To meet cost of food ration "dollar to dollar" grant and housing assistance Miscellaneous Services $10,730,000 Poverty Target Projects and To meet cost of food ration Interest Free Loan to Fijian and housing assistance Affairs Board Regional Development $2,048,500 Self Help projects upgrading Government housing of non-PWD roads assistance Women & Culture $31,000 Development Opportunity Government housing Program assistance Indian Affairs $500,000 Community Development Government housing assistance Education $2,230,000 Construction of schools, Rehabilitation work to purchase of building grants schools Youth & Sports $3,770,000 Training, building, Rehabilitation work to construction, upgrading of schools sporting ground and facilities Health $2,000,000 Construction of buildings, Repair to damaged facilities, purchase of equipment replace't equipment and drugs Housing & Urban Development $200,000 Upgrading of township Repair to damaged facilities, roads replace't equipment and drugs Ministry ofAgriculture & Fisheries $5,200,000 Drainage/flood protection, Rehabilitation of crops, agriculture / aquaculture livestock, fisheries, drainage, develop't projects, facilities, irrigation and research equipment etc. Infrastructure, $10,600,000 Construction of roads, Repair to damaged roads, Public Works, Maritime bridges, jetties; upgrading of jetties, bridges, water roads, urban & regional sewerage and buildings water supply and sewerage schemes Marine $300,000 Extensionof pout-fitting jetty Repair to damaged jetties and dredging Road Transport $1,290,000 Construction of building Repairtodamagedroadsand complex and purchase of buildings vehicle testing equipment Total $40,209,000 "As noted, in 1993, one Fijian dollar was equal to U5$O.65. 34 Reflecting the reallocation of funds, government to a budgeted figure of$680million (US$442million) expenditure on capital works declined from a - a shortfall of $26million (US$17million) or 3.8per budgeted level of $126 million (US$82 million) in cent (Government of Fiji 1994, p. 55). Mainly 1993 to actual expenditure of $82 million (US$53 responsible for this outcome was a lower than million) - a difference of 35 per cent (Government of expected revenues from the value-added tax (VAT) Fiji 1994, p. 52). Against this fall, government due, in large measure, to reduced purchasing power operational expenditure, boosted by cyclone after the impact of the cyclone (Government of Fiji rehabilitation spending, rose from a budgeted figure 1994, p. 55). (Several other sources of revenue of $649 million (US$420 million) to an actual $680 exceeded budgeted figures, including Customs duty million (US$442 million) - or by 6 per cent. These which benefited from higher imports associated with changes in the composition of expenditure roughly Cyclone Kina.) balanced each other and so made little difference between budgeted and actual aggregate expenditure. The overall outcome was a fairly significant rise in Actual expenditure totalled $819 million (US$530 the fiscal deficit (net of loan redemption) from a million), only slightly above the budget allocation budgeted figure of $56million (US$36million) to $87 for 1993 (Government of Fiji 1994,p. 52). million - a rise of 55 per cent (Government of Fiji 1994,p. 52).As a proportion of GDp, this was equal As may be noted from Table 3.4 and Chart 3.1, to a rise from 2.5per cent to 4.0 per cent - effectively aggregate government expenditure for 1993 posing a challenge for the fiscal authorities which significantly exceeded the corresponding figure for were committed to achieving a zero deficit by the 1992 - a difference of 13 per cent. The higher year 2000.As Table 3.4 shows, the financing of the expenditure level recorded in 1993, as explained fiscal deficit relied on domestic funding sources, above, can largely be ascribed directly to Cyclone including the sale of government securities to local Kina,but is also due to some extent to increased levels institutions and the public. of operational expenditure associated with a public service salary increase that took place in 1993. Thus, Cyclone Kina's potentially destabilising effects on the economy appear to have been kept to a The impact of Cyclone Kina on the main budget minimum by government's decision to rely on the aggregates is more apparent in the case of reallocation of budgeted funds. However, cyclone government revenues. Revenue collections in 1993 events seem to have been a major factor in lowering totalled $654 million (US$425 million) as opposed government revenues and, in turn, enlarging the 35 The Economic Impact of Natural Disasters In the South Pacific Table 3.4 Fiji Budget Deficit and Financing, 1990-96 (F$ m). 1990 1991 1992 1993 1994 1995 1996 (est.) (est.) Budget Expenditure 597.7 669.5 732.4 818.9 804.1 827.8 893.8 Operating 500.7 551.0 602.1 688.9 664.0 692.2 713.6 Capital 90.2 108.3 95.1 82.0 88.8 82.6 137.4 Capital loans 6.8 10.2 9.5 12.4 17.9 11.7 13.6 Value-added tax 16.7 35.6 33.4 41.3 42.8 Budget Revenue 551.2 526.4 60:2.5 654.0 697.8 693.8 737.3 General 539.2 563.8 589.0 645.7 689.0 683.8 723.8 Capital 13.0 12.6 13.5 8.3 8.8 9.9 13.4 Budget Deficit 46.5 93.1 120.9 164.9 106.3 134.0 156.6 Less: Loan redemption 48.5 63.2 52.2 77.4 67.2 72.0 64.3 Net Deficit (2.0) 29.8 68.7 87.5 39.2 61.9 92.2 Net deficit as a % of GOP (0.1) 1.5 3.3 3.9 1.7 2.5 3.6 Net Financing by Source: Overseas (net) (5.5) (20.5) (14.7) (12.0) 8.3 3.7 17.4 Borrowing 20.4 22.7 11.3 11.8 31.1 28.0 36.6 Repayment 25.9 43.2 26.0 23.8 22.8 24.3 19.2 Domestic 3.5 50.4 83.4 99.5 31.0 58.2 74.9 Lf( Memorandum: GOP @ current factor cost 1,859 1,955 2,098 2,224 2,338 2,418 2,538 Source: Ministry of Finance, Sliva; and Gavemment of Fiji, Supplement to the 1994 Budget Address, Suva 1996, p.52. fiscal deficit, with the potential for creating a degree for post-cyclone emergency needs was estimated at of macroeconomic instability (e.g. via pressure on nearly $7 million (US$4.5million) (of which aid-in- local capital markets and interest rates). The deferral kind accounted for around $5 million (US$3.2 of certain capital project, too, may have had million» (Government of Fiji 1993,P' 38). significant adverse effects on productive capacity, with possibly major implications for economic Among donors, the United Kingdom shipped in growth. BaileyBridges as temporary bridges to replace those seriously damaged as part of the emergency Nonetheless, it should be noted that pressure on response. Australia assisted in the rehabilitation of government financial resources, particularly for school buildings, while the EU undertook to rebuild providing emergency relief, was significantly more permanent structures to replace the four main alleviated by outside contributions. Fiji's traditional bridges destroyed by Cyclone Kina - an undertaking donors, such as the European Community,the United that was to be funded out of allocated but unspent Kingdom, Australia, New Zealand and Japan made project funds totalling around $14 million (US$9 large contributions, mainly in the form of in-kind million). aid such as food, blankets and clothing. A generous response was also made by voluntary organisations both within an~ outside Fiji,such as the Red ~ross Productive sectors and the Salvation Army, as well as the business community and individuals. (A donation of $20,000. . .. . (US$13rru'11')IOn was rnadeyeb th Forum Secretariecre anat As previously...,. noted, Cyclone Kina significantly. its R' ID' t F d t bli hed i 1973) affected FIJI s productive base and supporting aut af I eglona isas er un es a IS in ...... d id-i ki d . d infrastructure WIthdetrimental effects on economic Th I f h d eva ueo cas onations an ar -111- 111 receive performance dunng. the post-cycIone peno.. d The 36 The Economic Impact of Natural Disasters in the South Pacific effects on such major agricultural products as The impact of Cyclone Kina on the production of coconut products, cocoa and forestry products, were coconut products and cocoa is not easily measured. particularly notable. However, despite exposure to While both crops are highly vulnerable to cyclone cyclone devastation, value-added from sugar and damage, they are also subject to many other factors tourism - the two leading industries - increased that can significantly affect production in any given marginally. year.These factorsinclude problems relating to weak . . price incentives and, in the case of coconuts, a high Inthecaseofsugar,somewmddamageandfloodmg proportion of low-productivity senile trees. in a number of low lying areas adversely affected However, it is apparent from the production records cane prod uction. These factors were largely that both crops suffered heavily from Cyclone Kina. responsible for the failure of the sugar industry to reach its production targets for the 1993 season. As Primarily as a result ofhigh wind damage associated against a target of approximately four million tonnes with the cyclone, copra and coconut oil prod uction of cane production and around 480,000 tonnes of fell sharply in 1993 and again in 1994. From a level sugar, actual production levels were recorded at 3.67 of 16,400 tonnes in 1992, copra output fell to 10,600 million tonnes of cane and 442,000 tonnes of sugar - tonnes in 1993, or by 18 per cent (Government of Fiji a shortfall of around 8 per cent. Nonetheless, 1996, p. 15). Coconut oil dropped in much the same production levels for 1993 marginally exceeded those way - from 9,200 tonnes in 1992 to 5,500 tones in attained in the previous year - 3.53 million tonnes of 1993, and to 3,900 tones in 1994. Equally, cocoa cane and 426,000 tonnes of sugar. production slumped sharply - from 327 tonnes in 1992 to 154 tonnes in 1993 - a fall of 53 per cent. The Cyclone Kina's impact on sugar production has overall effectwas a steep decline in export earnings therefore to be looked at in terms of a failure to from these crops despite higher prices. The achieve targeted production levels (which had destructive effects of the cyclone continued to be felt largely been set on the assumption of favourable for several years and it was not until 1995 that any weather conditions). The fact that Cyclone Kina real signs of recovery were apparent (Government struck at the beginning of the growing season when of Fiii 1996, pp. 15-16). the industry was less vulnerable to wind damage J (Y0w:'-gcanes are less prone to snapping or flattening Of the other major agricultural products, reflecting by wind) helped reduce the extent of crop damage. to some extent the effects of Cyclone Kina, ginger The Economic Impact o/Natural Disasters III the South Pacific production declined in 1993 (from 3,413 to 2,900 Regarding tourism, data on tourist arrivals suggest tonnes or by 15%) as did dairy output and (in 1994) that Cyclone Kina had relatively little effect on the rice. The national fish catch increased slightly but industry as a whole. In 1993, total arrivals rose from timber output fell marginally. a level of 278,500 in 1992 to 287,460, equivalent to an increase of 3.2 per cent (Reserve Bank of Fiji 1995, In aggregate terms, the agricultural sector as a whole p. 67). The number of visitors from major source appears to have performed reasonably well in 1993, markets, such as New Zealand, the UK and Japan, implying that the negative impact of Cyclone Kina was up, the only exception being Australia (where a on certain crops was more than compensated for by decline in numbers had been occurring since 1990 expansion in other agricultural products. As Table as Australians chose to travel elsewhere). Gross 3.5 and Chart 3.2 show, value-added from tourism expenditure rose from $328 million (U5$209 agriculture, forestry and fisheries rose from $184 million) in 1992 to $368 million (U5$239 million) in million (U5$118 million) in 1992 to $191 million 1993,orbyllpercent. (U5$133 million) in 1994, or by 3.3 per cent, with . almost all agricultural components expanding. Such an outcome sugg~sts that the physical damage (Subsistence production was the main exception.) wro~ght by Cyclone Km~ on hotel. and resorts was This overall performance compares with a growth rela tively hght and/ or quickly repaired, and that the rate of 1.8 per cent for total GOP. bad publicity overseas had less effect than may have been expected. Industrial production expanded fairly strongly in ... 1993 despite the effect of cyclone damage to a number ~onetheless, one has to allow for the POSSI~Ihty th~t, of manufacturing operations. Available indices of in the absence of cyclones, th: growth I~ tourist industrial production (1986=100) indicate that ~umbersmayhavebeenmuch~Igher. The difference industrial output increased from a level of 129.4 in in the actual rate of 3.2 per cent in 1993 and the trend 1992 to 142.5 in 1993 or by 10.1 per cent (it increased rate of 6.5yer cent aC.hIeved b:tw~en.1987 and 1992 further to 149.3 the following year) (Reserve Bank m.ay pr?vIde s~methmg of an I~dIcahon of Cyclone of Fiji 1995, p. 69). Excluding sugar production, the Kina s Impact.m terms of slowmg down the rate of corresponding figures were 122.5 and 137.4 _equal growth of the mdustry. to a 9.9 per cent expansion. Underlying these changes was a fairly significant growth in three of the country's largest industries - sugar (13% increase), Export activity garments (40%) and cement (8%), suggesting relative immunity from extensive cyclone effects. (In the case Direct damage to the export sector from Cyclone Kina of sugar, this was largely due to the use of reserve was largely limited to coconut products, notably stocks in addition to increased production.) Several coconut oil, and to a lesser extent, ginger. As already industries recorded sharp declines which can be noted, the wind damage to coconutwas quite severe largely attributed to the cyclone-induced disruptions and affected production for several years. The to normal production activity arising from such resulting slump in export production of coconut oil factors as interruptions to the power supply and the together with lower unit prices led to a significant curtailment of raw material supplies from the decline in export earnings - from a level of $5.7 primary sectors. Among the industries that were million to $3.7 million (U5$3.7 to U5$2.4 million), or affected in this way were those concerned with the by 35 per cent, remaining at the latter level for several manufacturing of coconut oil, biscuits and soaps. years (Table 3.6). In the case of ginger, despite much However, as a result of cyclone effects, several stronger prices, the significant decline in production industrial activities suffered heavy falls in production (from 3,412 to 2,900 tonnes), resulted in a marked during the first quarter following Cyclone Kina. fall in export earnings ($2.4 million to $2.0 million Examples are milk, flour, biscuits, electricity and (U5$1.6 to U5$1.3 million» (Government of Fiji 1996, wood-related products. p. 17). In relation to its overall contribution to GOp' the Export earnings from other major exports, including manufacturing sector recorded value-added of $103 sugar (but not molasses), fish, and garments, all million (U5$66 million) in 1992 and $108 million recorded modest gains. In the case of sugar, the (U5$70 million) in 1993, a rise of 4.9 per cent (Table higher export earnings in 1993 were due to increased 3.5). This is well above the growth rate (1.7%) volume as export prices were materially lower (Table achieved by GDP as a whole for 1993. 3.6). 38 Both coconut oil and ginger constitute a small 36M . A t proportion of export activity so that their impact on • acroeconomlc spec s total earnings was relatively small. Thus, as a result of the performance of the main export items, The effect of Cyclone Kina on the overall balance of especially sugar and garments, total export earnings payments appears to have been fairly significant, and for 1993 rose from $667 million (U5$450million) to particularly apparent on the import side. Totalexport $692 million (U5$426 million), or by 3.7 per cent earnings rose by 8 per cent, primarily due to (Table3.6). increased sugar (which drew on supply reserves), timber and gold exports (Tables 3.6 and 3.7). In contrast, imports rose substantially - from a level of 40 - The Economic Impact of Natural Disasters in the South Pacific changes, the result was a worsening in the credit (13.0%)which was largely offset by a decline merchandise trade account - from a balance of -$285 in the value of net foreign assets (-11.0%). million in 1992to -$439million in 1993(-US$182to- US$285million)- a rise of 54 per cent (Table 3.7). While many factors could have influenced the rate of inflation in Fiji,there can be no doubt that Cyclone A notable expansion in receipts from services and Kina contributed to the surge in inflation that private financial flows, particularly tourism and occurred in 1993.According to the consumer price reinsurance receipts, helped offset the trade gap, but index (CPI), the domestic price level rose by 5.2 per nonetheless, there was a significant deterioration in cent in 1993as against a corresponding 4.9 per cent the current account component of the balance of in 1992(Government of Fiji1995,p. 54).Underlying payments, with the deficit recorded at -$112million this result was a sharp rise in food prices (which carry (-US$73 million) (or -$30 million (-US$20 million) a weight of roughly 33%in the CPI)particularly fresh excluding the aircraft) against a surplus recorded in vegetables and root crops, as a result of short-term the previous year (Table3.7).The capital account was reductions in market supply caused by cyclone somewhat stronger, but its contribution was devastation (Government of Fiji 1994,p. 43). (Food insufficient to offset the current account deficit. The prices rose by 7.9% in January and by 8.9% in result was a severe worsening of the overall balance February before easing offas a result of higher levels which was recorded at-$61 million (-US$40million) of imported supplies.) For the year as a whole, food as compared with $97 million (US$62million) the prices rose by 6.8 per cent as against a rate of -0.4 previous year (Table3.7) - an outcome that, in turn, per cent in 1992.Withimproved supplies, food prices implied a contraction in the country's external fell only slightly (-0.2%) in 1994, suggesting that reserves. cyclone-induced price rises tend to be somewhat permanent (Benson1996,p. 33).This fall contributed The impact of Cyclone Kina on monetary policy is to lower overall inflation of 1.2per cent in 1994. not easy to assess although the monetary authority (the Reserve Bank of Fiji) was well aware - and Regarding other factors that may have affected watchful - of the potentially destabilising effects of domestic price changes in 1993,two appear to have the cyclone. A primary concern of the Reserve Bank had a moderate influence. The first was a at the time was to combat a situation of excess governmentbanimposedontheexportoffoodcrops liquidity largely stemming from high external except those under contract (Benson1996,p. 34).The reserve levels (partly resulting from favourable trade aim of this move was to divert available supplies for results in 1992) combined with little government domestic consumption (and to minimise price borrowing. Above all, this monetary stance was effects). This ban was removed in May 1993 when based on the need to protect the balance of payments the supply situation had become more stable. A and external reserve levels, to contain inflationary second influence was official price control which pressure (running at 5%per annum), and to maintain applied to a range of products, including certain food Fiji's competitive position - all essential ingredients categories and building materials. Another possible for achieving financial and economic stability and major influence, the impact of imported inflation, longer-term sustainable growth (Government of Fiji does not appears to have been substantial with 1995, p. 57). In an attempt to cope with excess inflation among Fiji's main trading partners liquidity and to restrain the expansion of domestic averaging less than 3 per cent per annum. credit, the Reserve Bank relied heavily on open market operations (the sale and purchase of Reserve ~ank notes and securities).and appropriate changes Investment and growth in statutory reserve requirements and other asset ratios as well as interest rates. As detailed information on investment activity in Fiji In the event, Cyclone Kina does not appear to have ~snot available, it is .difficu.ltto assess precisely the been a significant factor in influencing monetary Impact of ~~cl?ne Kina on investment e~pen?Iture. policy.In so far as the major monetary variables were However, ItI~likely that ~hecyclonehad little Impact concerned, the expansion in the money supply (M2) on agg~gate m.ves.tt:nentin 1993although, as al~eady in 1993was recorded at 6.4percent - well below the noted, It had sI~mfIcant effe~tson the alloc.ahonof 14per cent growth in M2 that occurred in 1992- and government capital funds. WIththe cyclone-induced a change that was roughly in line with the increase red~ployment. of government budgeted funds, in GDP (Government of Fiji 1995,p. 59). Implicit in ca~I~alexpendItu~e ~ellfrom a level of aroun~ ~120 this, however, was a fairly marked expansion in the million to $8~ million (US$78 to, US$S3. ml~hon), level of domestic credit (11.7%)and private sector thereby reducmg the government s contrIbutIOn to 42 The Economic Impact of Natural DiSlisters In the South PaCIfic the country's gross investment rate. (No data is This is well above the average growth rate of 2.4per available on investment spending on state-owned cent actually achieved, implying that natural enterprises.) Regarding the private sector, disasters (but including military coups effects) cost investment spending rose by nearly 8per cent in 1993 the economy an average of 2.4 per cent annually in (equal to a real increase of around 2.6%) - a result terms of economic growth. On the face of it, this that was associated mainly with a rise in expenditure represents a significant loss. Benson's analysis also on commercial officebuildings and small resorts and shows that under a no-disaster situation, the rate of hotels (Government of Fiji 1994,P: 8). No reference growth turned out tobe considerably smoother than could be found on the possible adverse consequences the actual pattern of growth. Admittedly, these of Cyclone Kina on private sector investment. In any results need to be treated with some caution (they event, such an increase contrasts with the fall in are no more than preliminary results), but, for what government investment, but the net impact on the they are worth, they certainly point to natural gross (aggregate) investment rate cannot be hazards as a fairly powerful constraint to the process established with certainty. of economic growth. Real GDP (atfactorcost) grew by1.8 per cent in 1993 - a performance that implied Virtually no change in 3 7 0' t I the level of per capita income. The growth rates , Isas er nsurance recorded for the year immediately prior to (1992)and after (1994) the cyclone were significantly higher - The cost of insuring property against natural 3.2per cent and 4.5per cent respectively (Chart 3.2). disasters can be substantial but such insurance can The relatively modest growth in real GDPachieved be a valuable mechanism for cushioning the effects in 1993 took place against a slower than expected of disaster devastation. As noted by Benson (1996, expansion in agriculture and, to some extent, tourism p. 40), disaster insurance provides a means of and manufacturing activity.However, it appears that transferring risks, can help stimulate recovery, and the crucial factor underlying this performance was foster investment in high-risk activities, and, where a Significant decline in value-added from the extensive use has been made of overseas external construction sector and virtually unchanged levels markets, it can significantly ameliorate pressure on of activity in a number of areas, notably community the balance of payments and external reserves. Such and social services, transport and communications insurance can also be used as a basis for improving and electricity and water. Developments in these building standards. j, sectors appear to be little related to cyclone disturbance in any major way. Property insurance in Fiji currently provides cover for fire and earthquake but not for volcanic eruptions A useful perspective on the impact of natural disaster or floods (nor for crop damage except for a scheme on economic growth in Fijiis provided by Benson in offered by the Fiji Sugar Corporation to cane her study noted earlier (Benson 1992,pp 7-8).Using producers). Insurance cover for cyclones can be a simple auto-regressive linear model", Benson obtained separately, but an engineer's certificate is derives a no-disaster growth scenario for the period required. There are currently six licensed non-life 1982 to 1994. The results, as shown in Chart 3.3, insurance companies in Fiji only one of which is a indicate that the non-disaster scenario would have domestic company, and there are also six insurance resulted in an average growth rate for Fijiof 4.8 per brokers (who act as insurance agents). Insurance cent per annum during the 12-year period. premiums have risen to fairly high levels over the last ten years, predominantly reflecting world-wide 4In this model, GOP at factor cost in year t was regressed on GOP at factor cost in year t-L and the cyclone/drought and coup dummies: y, = a + [Jy'.1 + ]"C, + oCp, + c, where y, is real (constant prices) GOP at time i, C is the cyclone/drought dummy and Cp is the coup dummy. The regression coefficients were then used to estimate the level of GOP assuming no disasters (i.e. setting all values of the cyclone dummy to 0). (Benson 1996, p. 7). 43 trends as well as domestic risk factorsthat have made The Fiji Sugar Corporation and Fiji Pines have for high pay-outs after major cyclones. As a recently established special funds as additional consequence of Cyclone Kina, the cost of cyclone mitigating measures against financial losses from insurance rose markedly (by an average of around future natural disasters. The FijiSugar Corporation 15%)while the deductibility threshold increased by has been setting aside approximately $2.2 million around 50 per cent. Premiums have recently eased annually from gross revenues to build up such a somewhat, largely due to increasing competition fund. This corporation is also investigating (there have been two recent entrants to the industry) possibilities of setting up, with other interested and signs of improving profitability. companies, a group insurance scheme to provide additional, and possiblymore cost-effective,property In relation to Cyclone Kina, the insured damage insurance cover against natural disasters. Heavy amounted to around $50million (US$33million), of losses from natural disasters in the past have also which $42 million (US$27million) was insured on prompted Fiji Pines to establish a special fund as a international markets (Government of Fiji 1993,p. cover against uninsured property losses (and 35). The total insurance pay-out amounted to damage to trees) from disasters. approximately $47million (US$31million),ofwhich $40million (US$26million) was paid from overseas Given the potentially valuable role that insurance reinsurance companies. (It is estimated that the covercan play in copingwith disaster risks,adequate payment to the Fiji Sugar Corporation alone came attention needs to be given to ensuring a degree of to $26million (US$17million).) While such a payout stability in this industry. Here the prudential role of is significant in helping to ease the financial burden the Insurance Commission is particularly vital, on property-owners arising from cyclone damage, especially in matters affecting premium levels, this payout was relatively modest compared with licensing and reviewing the financial position of much larger payments as a consequence of Cyclone individual insurance companies. Furthermore, Oscar (1983)and CyclonesEricand Nigel (1985)with stronger efforts should be made to encourage payments totalling around $88 million (US$78 property-owners to take up insurance policies. The million) and $80million respectively (US$71million) scope for this is particularly great for households as (Benson 1996, p. 43). (Cyclone-proofing measures opposed tobusinesses.Forexample, the factthat only undertaken since the mid-1980s helped reduce around 18-20per cent of the urban population and damage to structures from Cyclone Kina - a factor 7.8 per cent of the total population presently have that helped to prevent much higher cyclonedamage.) cyclone insurance cover gives an indication of the 44 The Economic Impact of Natural Disasters in the South Pacific potential for expansion. It is believed that up to 90 vital links between the central organisations and local per cent of businesses have cyclone insurance cover, communities in the disaster management and but it is uncertain whether this applies only to larger coordination areas. businesses (versus the small business sector, including those operating informally). The formulation of a National Building Code has been a positive step. This Code, which was prepared in the wake of the destructive cyclones of 1982/83, ' d M't' t' was designed as a means of reducing the damage to 3,8 PreventIon an Ilg.a Ion building structures from natural disasters by enhancing cyclone resistance of such property Aspects (Benson 1996, p. 42). The Code lays down basic standards for building structures and materials Given its high susceptibility to natural disasters, where there is a high risk of damage, notably especially tropical cyclones, it is not surprising that dwellings, public buildings and group dwellings. Fiji has made some considerable progress in While this initiative is a valuable vehicleengendering establishing an organisational and planning cyclone proofing, the evidence suggests that its framework in the area of disaster management. In adoption remains largely confined to urban areas, this, and particularly with reference to addressing still leaving rural communities vulnerable (Benson disaster preparedness and post-disaster emergency 1996,p. 41). response issues, Fijiappears to be well ahead ofmany other Pacific island countries. At the agency level, some government departments and agencies appear to have made considerable An important initiative was the publication, in 1995, headway in implementing cyclone proofing and of a disaster management plan (FijiNational Disaster related mitigation procedures. A few examples that Management Plan). The plan contains national policy came to my notice may be cited. In response to recent statements relating to disaster management and heavy cyclonedamage, the PublicWorksDepartment outlines a set of strategies and arrangements for the has taken steps to change the design of bridges to control and coordination of disaster-related activities better withstand heavy flooding and roads to make in Fiji. As well, the plan lays out the roles and them less amenable to storm damage. The responsibilities of specific agencies for disaster Department ofEducation is committed to improving management - all designed to ensure a quick and building standards and ·encouraging local appropriate response to disasters, reduce potential communities to take appropriate measures to protect losses, and facilitate post-disaster recovery. schools and equipment against cyclones. The Health Department has prepared a social welfare plan for A National Disaster Management Committee disaster management to facilitate emergency (NDMC) has been established to be responsible for responses to disasters, while the Port Authority is in the overall coordination of disaster operations. This the process of preparing a port emergency plan Committee, which is directly responsible to Cabinet, particularly directed at coping with a major has set up three units concerned with the main areas earthquake. of disaster management - an Emergency Committee, a Preparedness Committee, and a Mitigation and Regarding the primary sector, the present emphasis Prevention Committee. The NDMC is supported by on agricultural diversification - especially away from the Department of Regional Development which has sugar - is potentially valuable as a strategy for overall responsibility for implementing national reducing sectoral vulnerability to natural disasters". disaster management strategies relating specifically However, in practice, much more needs to be done to prevention, mitigation, preparedness, emergency to translate this strategy into reality. Possible operations, reliefand rehabilitation. Operating under examples are the need to encourage the growing of the auspices of NDMC, and linked to the winter crops outside the cyclone season, early Department of Regional Development, are so-called maturing perennials, and diversifying back to Emergency Operations Centres at national, traditional roots and tubers (Benson 1996,p. 59). In divisional and district levels. These Centres provide the case of forestry, satisfactory approaches need to "Greater diversification away from sugar is generally justified by the need to reduce the degree of vulnerability to natural disasters that comes,for example, from a too heavy dependence on a single crop and to cope with uncertain market prospects, especially with the erosion of the preferential treatment of sugar up to the year 2001 as a result of the Uruguay GAIT agreement. 45 The EWn0I111C Impact of Natural Disasters in the South Pacific be worked out for dealing with the heavy destruction closer links in these areas is also acknowledged in of commercial pine forests from various disasters, the national disaster plan. but the main thrust of present forest development policy is to encourage the growing of cyclone Secondly, a stronger effort needs to be made to resistan t trees, especially mahogany and other promote greater public awareness of prevention and hardwood varieties, and to refrain from planting in mitigation possibilities for reducing the economic vulnerable slope areas. and social damage from disasters at the community level.The need for greater commun:~~wareness has Other cyclone proofing measures that came to my become all the more important as y traditional notice include action taken by Telecom (a techniques for coping with natural disasters appear government-owned enterprise) to lay more power to have broken down, leaving localcommunities not lines underground, to use fibre optic cables when only more vulnerable to these events but also replacing old cables, to install standby generators, increasinglydependent on outside relief.An effective and to protect satellite dishes by grid tightening public awareness effort needs to provide essential methods. Various financial measures taken by the information on mitigation possibilities and Sugar Corporation to protect its financial position procedures, and should also emphasise the value of in the advent of a major disaster are also notable. reviving some of the traditional coping mechanisms These include adequate insurance cover for assets, that have a potential for reducing losses from the establishment of a special reserve fund for disasters. These could include traditional methods emergencies (involving laying aside $2.2 million of food preservation, multi-cropping agricultural (US$1.7million) annually), and moves to establish a practices, housing design (traditional houses are group insurance scheme with other interested usually safer and more easily replaced if damaged), companies. In the case of tourism, the Fiji Tourism and simple agricultural procedures, such as cutting Authority is involved in promoting greater public leaves of certain root crops before a cyclone and the awareness of the need for appropriate prevention planting of wind barriers to protect crops. and mitigation efforts among tourism operators, and to ensure better building standards. Thirdly, current project activities aimed at water conservation and flood prevention deserve The measures taken so far to establish key national continuing support. These include dredging and institutional and planning mechanisms for more draining work under the Rewa Improvement Plan' effectively dealing with natural disasters are and a pre-feasibilitystudy of water and flood control important steps in enhancing Fiji'scapacity to reduce possibilitiesin VitiLevu under Japanese government the social and economic costs of these disasters. assistance. The latter project could, in time, lead to Equally, cyclone proofing and rela ted disaster the development of a comprehensive water strategy prevention and mitigation measures taken by many involving the protection d:£witalcatchment areas, government departments and agencies are valuable drainage, dredging of rivers and proper catchment contributions. However, it is clear - as confirmed in area management. The benefits that could arise from field discussions and by -reference to published such a project are potentially huge, particularly in expert studies - that Fijihas still some considerable terms of water conservation, flood prevention, way to go In strengthening its disaster management drought alleviation and reduced dredging costs. capabilities. This is especially so in the key areas of Majorbenefits for the agricultural sector can also be disaster prevention and mitigation. While a detailed expected. analysis of major gaps is beyond the scope of this chapter, it is possible to point to a few key areas that Fourthly, a continuing effort is needed to develop need particular attention. new strategies for promoting greater economic diversification - a processwhich can, in some degree, In the first place, there is a need for a comprehensive serve to reduce natural disaster vulnerability. It national strategy for incorporating disaster appears that the process of economic development management activitiesinto the national development that has taken place in Fiji over the recent period planning process. This is particularly vital in the area has tended to increase the country's vulnerability to of disaster prevention and mitigation which has been natural disasters, with potentially significant social neglected to some degree. Successive national and economic costs. Thus, as some of the cash crops development plans have acknowledged the existing (other than sugar) such as ginger and flowers, that hiatus but have generally not faced up to the task of have been encouraged in recent years, are somewhat devising ways for achieving effective integration vulnerable to natural disasters, it has made the Fijian between disaster mitigation strategies and programs economy all the more exposed to these hazards. The and national development planning. The need for results of the regression analysis carried out by 46 The Economic Impact of Natural Disasters in the South Pacific Benson (1996/p. 59)show that agriculture as a whole, The EU/s recent study of possible methods for and the sugar industry and manufacturing activities incorporating risk assessment factors in planning is in particular, have allbecome increasingly vulnerable also noteworthy and potentially valuable. Anumber to natural disasters over time - implying that the of donors also maintain emergency disaster funds national economy has become more susceptible to from which Fiji and other Pacific island countries risks associated with these disasters. can benefit for disaster relief purposes. Facilities established by Japan (Emergency Relief Program Fifth, taking out of insurance policies to transfer risk under Japan International Cooperation Agency and to cushion the impact of natural disasters on GICA»,New Zealand and Australia (under AusAID) households and producers should be further are particularly relevant. These facilities and encouraged. Insurance against such risks can programs of assistance - particularly in relation to facilitate recovery, while reinsurance payments can disaster preparedness and mitigation - are valuable help alleviate pressure on the balance of payments complements to Fiji's own efforts to cope with and external reserve levels. Scope for extending natural disasters and to reduce their economic and cyclone insurance cover, particularly among social costs. Such cooperation merits continuing households, is great given that only around 10 per support and encouragement. cent of household in Fiji are presently insured (as opposed to close to 90% for businesses). (Benson 1996/p. 41.) A further broadening of self-insurance 3 9 C I d' R k schemes initiated by some businesses, for example, ' one U 1n9 emar S the Fiji Sugar Corporation and Fiji Pines, as a contingency fund against cyclone damage should This chapter has attempted to assess the economic also be considered. To encourage the uptake of impact of Cyclone Kina on Fiji - an island country insurance policies by households, the tax which is one of the most vulnerable in the South deductibility of insurance premiums should be Pacificregion to natural disasters, including tropical considered in the same way as is done for business cyclones,flooding and drought. Cyclone Kina,which property insurance. struck Fijiin early January 1993/proved to be one of the most destructive hazards to have hit Fijiin recent Sixthly, government needs to examine various times. Severe damage was inflicted on agriculture, aspects of economic policy and strategies .capableof especially tree crops, bridges and other enhancing the national capacity to cope WIthnatural infrastructural items, school buildings and housing. disasters and to miti.gate damage to ~e economy. According to official estimates, the assessed value Here a crucial need IS to attend to baSICeconomic of the damage to infrastructure, agriculture and fundamentals that are vital for sustaining a strong related sectors amounted to around $155 million, economy.These include e~fortsto.maint~ina~equate equal to 7per cent of GDP.Such estimates tend to be external reserves, a sustainable fiscal situation, and somewhat on the conservative side (for example, low inflation. Continuing effort~ to m~intain the they usually grossly under-state the destruction of quality of governme~t assets, including ~oads, village-based housing, standing crops and through adequate maintenance .and upgrading of productive assets) and it is quite likely that the actual standards are among other possible measures that cost was considerably higher. could play an important part in limiting disaster damage. Analysis of cyclone impact on the main productive sectors shows that the loss of agricultural production Finally,it is necessary to acknowledge the important was most serious in relation to coconut products, role played by donors in improving Fiji's ~~nd~e cocoa and ginger, and that, although sugar region's as a whole) preparedness and mitigation production rose somewhat, actual production was capacity to cope more effectively with na tural well below target levels. Manufacturing and tourism disasters. Reference has been made in this chapter were relatively immune to major damage from the to the EU/s assistance in the replacement of Fiji'sfour cyclone despite some interruption to normal main bridges with z.noredurable st~uctures, and operations. Export performance was adversely Japan/s involvement 10 a study of a major watershed affectedby cyclonedevastation ofcoconut and cocoa, management project on Viti Levu. Other nota~le but overall export earnings increased moderately as contributions that may be highlighted areAustralian a result of expansion in other export areas. Largely assistance in the formulation of a building code and reflecting cyclone effects,real GDP rose by a modest disaster management training and New ~ealand and 1.7per cent in 1993- a rate well below the immedia te the ED efforts to upgrade cyclone warnmg systems pre-disaster trend _ implying a significant loss in in the region and to improve meteorological services. terms of potential income foregone. 47 The Economic Impact of Natural Disasters in the South Pacific Cyclone Kina had significant effects on the addressed if Fijiis to further enhance its capacity to macroeconomic situation, forcing major adjustments cope with natural disasters, especially in relation to to government financialpolicy and generally causing the management of prevention and mitigation a degree of financial instability in a number of areas. responses. This study has proposed a number of Rehabilitation and reconstruction needs placed areas which merit further consideration. Thus, considerable pressure on government finances, particular attention needs to be given to developing resulting in a major redeployment of budgeted appropriate strategies for more closely integrating capital funds for rehabilitation purposes, with disaster management and response activities with probably significant implications for the overall rate national development planning; for improving of investment and economic growth. Imports rose public awareness of prevention and mitigation strongly in response to cyclone-related needs, and possibilities; for implementing national water contributed to a deterioration in the balance of conservation and flood control projects; and for payments and external reserves. Monetary policy fostering greater economic diversification, especially appears to have been little affected, but the shortage away from disaster-sensitive crops (including sugar). of many local agricultural products as a result of Appropriate measures are also needed to encourage cyclone destruction contributed to a temporary surge more households to take up insurance policies as a in inflation. However, in general, though the adverse means of alleviating financial losses from natural effects of Cyclone Kina on the macroeconomic disasters. As well, in recognition of the benefits that situation were readily visible - and quite significant a strong national economy can have in better coping in some cases - the overall impact appears to have with the economic consequences of natural hazards, been pretty much dissipated by the end of the year a continuing commitment to economic policy (1994) - an outcome perhaps indicative of the fundamentals is urged. Here, the maintenance of inherent resilience of Fiji's economy as well as the sound and prudentfiscal policy and a strong external effect of good economic management. reserves position is particularly vital. Finally, donor assistance to complement Fiji's own efforts in the Fijihas already achieved much in establishing a basic disaster preparedness and mitigation areas should organisational framework for dealing with natural be further encouraged. disasters. However, major gaps exist that need to be 48 The EconomIc Impact of Natural DIsasters In tile SOlltil Pacific 49 The Economic Impact of Natural Disasters in the South Pacific 4. WESTERN SAMOA: THE ECONOMIC IMPACT OF CVCLONEVAL Western Samoa has been devastated by at least five processing, remains fairly modest in size. A major tropical cyclones over the past eight years. This feature of Western Samoa's overall economic chapter examines the impact of major cyclones on structure is the large contribution from subsistence the economy of Western Samoa, with a major focus production - especially that which takes place within on Cyclone Val. The damage caused to agriculture, the framework of the extensive rural village sector. infrastructure and other major economic sectors is . .. highlighted along with estimates of the cost of ExportaredorrunatedbycoconuJOIl,aut~motIvecar repairing and replacing damaged structures and com~on~nts and coconut cream, with ~seful related assets. An analysis of the economic aspects contributions f~oma number of manufact~red Items. of cyclone destruction is then undertaken, with Taro - the leadmg export pr~duct at the t~meof t~e particular attention given to production and trade two cyclones - no long~r figures pro.mme~tly in effects and to fiscal, monetary and other exp~rts due to destruction from ~ viral disease. macroeconomic aspects. Major policy implications Rerruttancetransf~rs f~m ove~seaskmsmen - at $450 are then presented by way of conclusion. (US$180)per capita - ISa major source of personal income and foreign exchange, while, WesternSamoa, in common with many other developing Pacific island countries, is a major aid recipient with grant 4.1 Background aid aloneequal to around $360 (US$150)per capita. In addition to tropical cyclones, Western Samoa is Western Samoa is a relatively compact archipelagic exposed to natural disasters in the form of drought, island group occupying a fairly central position in earthquakes, tsunamis, landslides, fires and the South Pacific. It consists of two large islands, volcanoes (National Disaster Council 1986,p. 6) but Upolu and Savaii and seven smaller islands, with a these potential hazards have not posed major threats total land area of 1,934 km2 and an EEZ of 120,000 in recent times (e.g. there have been no volcanic 2 km - one of the smallestin the South Pacific region. eruptions since the early 19OOs).Droughts occur Both Upolu and Savaii have central cores of volcanic periodically and can seriously affect agriculture and peaks, which in Upolu form a chain running east- the welfare of rural populations in particular. A west, surrounded by lower hills and coastal plains. drought that occurred in the early 1970s and which Western Samoa is about 3,700 km south east of lasted up to five months in Upolu - and caused heavy Hawaii and 2,900 km north west of Auckland, and damage to crops - appears to have been the last severe its closest neighbours are American Samoa, Tonga, drought on record. Earthquakes also occur fairly and Wallis and Futuna. frequently, with the most recent being in 1995, but .. these rarely cause substantial damage. The last The resident population currently numbers around serious incidence of a major bushfire occurred in 165,000 (but an estimated 100,000 reside overseas) Savaii in 1983. and is growing slowly due to persistent and heavy emigration. GDP per capita is around $2,700 Of the array of possible disasters, tropical cyclones (US$l,lOOO)which places Western Samoa among the have been the most frequent and destructive events upper range of the low income group of developing in recent times. Over the past decade, Western Samoa countries". Economic life is dominated by agriculture has been visited by a total of five cyclones - Fiji and (with fisheries and forestry) which contributes Gina in 1989,Ofa in 1990,Valin 1991,and Lynne in around 40 per cent to GDP, with government 1993.Except for Cyclone Ofa and Cyclone Val,these administration and tourism next in importance. cyclones caused only modest damage to Manufacturing, which is dominated by coconut infrastructure and other economic assets. The two 6 Unless otherwise indicated, values are in Western Samoan tala which, at the time a/writing (July 1996) was approximately equal to US$0.40 and Aust$O.53. 51 The Economic Impact of Natural Disasters in tile South Pacific major cyclones (Ofa and Val),however, each caused and high wave action. The damage caused by the widespread destruction, resulting in the loss of life high winds was all the more severe because of the (11 in the case of Ofa and several for Val) and duration of the cyclone and the shifting wind substantial damage to existing infrastructure, direction as the cyclone passed through the island agriculture, buildings, housing and natural group. Thedestructiveforceofthewinds-alongwith resources. wind-borne debris - wreaked heavy damage to crops, natural vegetation, buildings and related structures. As will be shown below, the combined effect of these Heavy rains led to rising rivers and streams which two major cyclones on the national economy was damaged the natural environment and dramatic. Essentially, the destruction caused by these infrastructural facilities, including roads and dams. cyclones resulted in an immediate and sharp decline High waves generated by the cyclone did in GOP which was followed by an extended period considerable damage to coastal zones and structures of negative growth. It also resulted in considerable located therein, with most severe damage recorded macroeconomic instability, particularly as reflected in the south coast of Upolu and the south and west in government's fiscal situation, the balance of coasts of Savai'i. payments, and international reserves. This outcome contrasts strikingly with the country's economic A preliminary assessment of the damage brought performance over the immediate pre-cyclone period. about by Cyclone Val, prepared by the National Here, predominantly as a result of a series of Disaster Council (NDC) a week after the cyclone economic reforms implemented in the mid-1980s struck, confirmed the highly destructive effects of together with generally sound economic the cyclone (National Disaster Council 1992). The management, Western Samoa was able to achieve assessment identified particular locations that had sustained, albeit modest, growth along with suffered the greatest damage as well as priority areas significant macroeconomic stability. Regarding for emergency action and rehabilitation. An attempt growth, from 1985 to 1989, real GOP rose by an was also made to assess the cost of cyclone damage average rate of 2.6 per cent per annum - a much which, when subsequently finalised, was estimated improved performance over the early 1980s when at just over $700million (US$287million) - an amount the economy was in a state of chronic stagnation equal to more than twice GOP (Table 4.1). It is (AIDAS 1994. p. 77). Table 4.1 Cvcione Val Damage Cost Estimates - Sectoral 4.2 Damage Assessment Summary, 1992. Cyclone Valdevastated Western Samoa over a. period 5ecIor EsimaI' Idee osI of four days - 6-10 December, 1991 - approximately (WS$m) 21 months after Cyclone Ofa. Acyclone warning was first received in the early morning of 6 December Roads 31 when the cyclone was approaching Western Samoa Majorbridges 3 from the north west. Cyclone Val was unusual not Watersupply 5 only for its duration but also for its intensity, its Apiasurfaced~ainageproject minor irregular path and slow but shifting speed (National Coastalprotectionworks 6 .. Buildingsanddwellings 330 Disaster Council 1992, p. 1). The cyclone changed A' t 3 direction several times (moving northward after p~;;sors 18 nearing Savaii then passing over Upolu in a south Seatransport 1 east direction), and remaining virtually stationary Powersupply 11 over Upolu for at least six hours. The cyclone Postalandtelecommunications 4 sustained winds of 90 knots, gusting up to 130knots Primaryindustry,(agriculture,fisheries& forests) 201 during the four day onslaught. All in all, it was Education 13 considered the most destructive tropical cyclone to Health 20 strike Western Samoa in the last 100 years (National FEireservices k d 652 . nvironrnen,part san reserves Disaster Council 1992, p. 1). A state of emergency Tola1 713 was declared on 10 December and continued until the end of january 1992 Source: Government ofWest~rn Samoa, Cyclone Val Infrastructure , . Rehabilitation Needs Assessment Report, 1992(a), Apia, p. 26. Note . that, in 1992, when these estimates were made, one Western Samoan The destruction caused by Cyclone Val was tala was worth approximately US$0.41. associated principally with high winds, heavy rains 52 The Economic Impact of Natural Disasters in tile South Pacific apparent that Cyclone Valwas far more destructive affected short-term performance and longer-term than Cyclone Ofa. Leaving aside the loss of life, the prospects. An immediate consequence was a severe assessed cost of damage from Cyclone Val can be shortage of fresh foodstuffs, including taro, bananas, compared to a corresponding figure of $300million yams and vegetables, and a heavy reliance on (US$120million) for Ofa. However, compared with imported substitutes. This situation persisted for Val, it appears that the very high seas generated by about 6-8 months - by which time the supply of Ofa caused more severe damage to coastal zones, locally-grown foods had substantially recovered. The and specifically road systems, buildings and other damage to coconuts and cocoa had a dramatic effect structures sited therein. on exports, processing activity and, ultimately, employment and rural incomes. As opposed to the staple root crops, both coconut and cocoa are slow ' It recovery crops, normally requiring 3-4 years. Agncu ure Loss of livestock appears not to have been too heavy The damage to agricul ture, fisheries and forestry was although, in some areas, losses were estima ted at 50 extremely severe, Savaii in particular suffering heavy per cent of existing stock. Piggeries and chicken losses. The immediate impact of Cyclone Val on appear to have been the most affected. agriculture was an extensive defoliation of most .. . . standing crops and considerable structural damage In flshefle~, damage t~ structures such as fls.hmg and uprooting of trees including indigenous forests boats, equipment and infrastructure was relatively (Government of We;tern Samoa 1992(a), p. 14). light. !10wever, the cyc1o~e caused signi.fic~nt Damage to the main food staples _ taro, bananas, alteration to. coral-reef environments and f~sh~ng breadfruit and yams as well as vegetables _was of grounds, which would adversely affect the fishing the order of 90 per cent. Of the commercial crops, catch for up to. t,:o years. The loss of ~Iza. (a cocoa was most severely affected, with most trees ca.tamaran-type fishing vessel) was modest, WithflV.e completely defoliated crops destroyed and many alia out of a total fleetof 83regarded as beyond repair trees blown over. Well over 60 per cent of coconuts and anothe~ 17 suffering substantial b~t rep~irable were similarly affected with a large proportion of damage (this equates to a total loss of 6 Yo of alia fleet old trees blown over. A~Table4.2 shows the cost of as against a corresponding 33% in the case of Ofa). damage to food and tree crops accounted for a large ~ignificant shortages. of fresh fish w~re experienced component of the total cost of $201 million (US$80 m the. short to medium term, but It appears. th~t million) estimated for agriculture. supphes were more or less back to normal within two years. The cyclone dealt a serious blow to the country's . . attempts to develop agriculture and significantly Forestry was amongst the hardest hit by the disaster. , Around 90 per cent of plantation forests (totalling approximately 3,280 ha) was assessed as 'extensively' damaged, although 47 per cent was salvageable, with older trees (over 3 years old) most Table 4.2 Cost of Damage to Agriculture from Cyclone severely affected (Government of Western Samoa Val, 1992. 1992,p. 15). Regarding indigenous forest, as many as 90 per cent of trees were defoliated with 40 per cent suffering critical damage or were blown over. Sub-sector Cost (WS$m) The heavy damage to agriculture highlighted the ------importance of factoring in cyclonic risk when TFoodcrops 44.2290 deSlgnmg.. agncu. Itura I deve Ittopmen stra egles.. ~eectroPks 12:5 Recent policy initiatives in agricultural development LlVesDC h hi . . b . . Fisheries 1.2 suggest t at t IS requirement IS emg given Forestry 107.0 ~ncreasing attention. Thus in relat~on t~ crops, Other(inc!.departmentalstructures& nurseries) 7.1 increased efforts are being made to diversify away from highly vulnerable tree crops such as cocoa, to Total 201.0 foster continued cultivation of hardy, quick-growing root crops, and to promote appropriate food storage Source: National Disaster Council, FinalDamage systems at the household level. In forestry, major As~essmentReportforCycloneVal,6-9 December1992, emphasis isbeing given to the planting of more wind Apia, pp. 24-25. resistant varieties (e.g.mahogany, red cedar, teak and 53 The Econ~~lic Impact of Natural Disasters in the South Pacific poumuli) and to concentrate development on cost of cyclone damage to the international airport favourable locations (affordingsome wind protection was estimated at $2.5 million (US$1million) (there and allowing deep rooting). Livestockoperations by was an additional $0.5 million (US$O.1million) village households are also being encouraged as a damage to the three domestic airstrips). means of reducing cyclonerisks generally associated with large-scale commercially-oriented projects. b) lower High winds caused substantial damage to power Infrastructure Roads and Coastal facilitieson both Upolu and Savaii.Transmissionand Protection distribution systems were damaged by the uprooting of poles, breakage of conductors and insulators, The destruction of roads (approximately 2,000 km whi.le buildings and raceways of hydro-electric of road network), most of which run along the coast, statI0.nsw~re also.affected.~evere damage .was also was substantial. Virtually all roads were damaged sustained m relation t~ major power statlO~s and to some extent, includingsecondary, plantation and large hydro-po~er stations under cons~ruction. At rural access roads. The greatest damage occurred on least on~ maJor. hydro-power project und~r the north coasts of Upolu and Savaii which were the cons~ctIon e.xpenenced ~elays of up to a year m most exposed to a combination of severe wave relation to proJ~t comp.letIonon ~ccou~t of.cyclone damage, high winds and flooding. At least 15major damage. associated WIth flooding, SIltation and bridges suffered significant damage, mainly due to destruction of access roads and related structures. flooding. In many cases, the destruction took place (H~wev~r,such delays may also have been rel~ted on vulnerable sections of road (e.g.those on the north to financial factors, for example, the need to redirect coast ofSavaii and the east coast ofUpolu) that were budgeted de:elopment funds to more urgent in the process of being repaired from damage by Ofa. emergency rehef and emergency measures.) The cyclone severely damaged coastal protection The damage billI was assessed at $11rru'II'Ion (US$5 structures, that had., been erected after Ofa, Coastal. mi'11')Ion, WIith ADB and the Hlvvor ld Bankid'p e gmg ~roslO.n was ser.lOus In a number of 1.0catIons, substantial support for the rehabilitation effort. In including. the Apia... area, and threatened. Important the actitua recons ructiion process, care was taken t0 infrastructure, including buildings and roads. redesign buildings tobetter withstand strong winds, The cost of damage to roads, bridges and coastal while more effort. was put into pl.acing lines protection structures was assessed at $40 million underground. The Issue of adequate insurance of (US$16 million) (Table 4.2). The repair and assets was also addressed. reconstruction effort attracted heavy support from The 1oss 0f power (iin many areas for up t0 a week) the World Bank and would take several years to d th f t t th t f II d th implement. an e. requen power cu. s .. a 0 ~we . e restoration of power had significant disruptive effectson the economic life of the country, especially in Apia. Power stoppages led, in many cases, to a a) FUrtsand airport complete cessation of operations with resulting . , .. adverse effects on economic efficiency and output. The ~.am. port In ApIa: which was under These cuts also damaged electrical machinery and rehabilitation after extensive damage from Ofa, equipment resulting in higher repair and sustained further destruction. Major damage was replacement costs. sustained to the main officebuilding, storage sheds, the telecommunications system, the ferry terminal building and breakwater. The total cost of the) . , damage was estimated at $18million (US$8million), C Telecommunications most of which was for the rehabilita tion ofApia Port Damage to telecomm unica tions buildings and as each of the three main wharf facilities located equipment was relatively modest, and costed at $4 outside Apia incurred only modest damage. million (US$1.6million).Up to 80per cent of external . . . , facilities on Upolu sustained damage, especially in Regarding the international airport, the most affected the form of broken wires and cable faults - caused wer,e the. terminal building, control tower and mainly by fallen trees - and, in the case of vanous Items of equipment. The runway and underground cables, from flooding and erosion. taxiway suffered only minor damage. The overall Considerable damage was also inflicted on 54 The Economic Impact of Natural Disasters In the Soutll Pacific microwave radio link equipment, satellite earth some damage. An estimated 60 per cent of school station equipment, and rural exchanges. Donor buildings were damaged beyond repair and 45 per assistance from New Zealand, ADB and the World cent of schoolfurniture and 50per cent of equipment Bank helped restore basic services fairly quickly.An and teaching material were lost. The assessed important element in the rehabilitation effort was damage to schools under government auspices (as that more attention was payed to cyclone proofing opposed to private - mainly mission-owned schools) techniques, such as underground cabling, stronger was estimated at $13 million (US$5.2million) (but insulation of cables and improving access to satellite as high as $19 million (US$7,6million) allowing for facilities. the replacement of furniture, equipment and books). For all schools, including private mission and village schools, the cost of rebuilding and rehabilitation was d) Water estimated at $30-40 million (US$12-16 million). , .. Regarding the rehabilitation effort, a major emphasis Water sup~lIes were senously disrupte~ f?r at le~st was given to the construction of stronger buildings a week mainly due to damage to transmission mams as a major form of cyclone proofing. and pipes and siltation of weirs. In the Apia area, the damage related to the treatment plants, intakes, In the case of health, the destruction sustained to transmission mains and reticulation pipes. The major facilities, including the national hospital in damage to the transmission of water was mainly Apia and district health services, varied widely - caused by fallen trees, landslides (on elevated areas) from 20 per cent damage to as high as 80 per cent. and, on coastal zones,by damage topipelines in areas The loss of equipment and medical supplies was also washed out by storm waves. The overall damage was considerable - the result of water leakages and direct an estimated $5 million (US$2million), and the near exposure to rain. Assessed damage amounted to $20 full restoration of the water supply took about one million (US$8million). month. BUildings and Dwellings The Natural Environment and Reserves ildi d d II' Western Samoa's natural environment was severely Damage to bUl mgs an we mgs was very severe .. . h 90 t fb ildi S" d 80 affected. The cyclone proved highly destructive to WIt up to per cen 0 UI mgs on avan an .' , .. forests - mainly as a result of trees being blown over per cent on Upolu suffenng major damage. The d d f I' ti ( ti t d 85 95°1 f tIt ...... an e 0 Ia on an es Ima e - /0 0 rees os destruction was mainly due to high wind intensity; ,. , . d f d . d M h f th their foliage). On coastal zones, reefs and live coral sustame over a our- ay peno. uc 0 e . . suffered extensive damage, while watershed areas damage related to the loss or damage to roofs, leaks ff t db' ddt t ti d .. . . were a ec e y win amage 0 vege a IOn an to the interior of dwellings and electrical damage. 'It t' t d bId lid L f ildlif ...... SI a IOngenera e y an s 1 es. oss 0 wnuure The cost to private dwellings (including private tuari I t bl d b f . . . sane uaries was a so no a e an anum er 0 dwellings, churches, VIllage community halls, . . " factoriones andb' usmess bUIildings)mgs was estirnatea.d t reserves and national parks suffered significant '11' (US$132 '11' ) hi h damage to vegetation and structures. The assessed an enormous $330 ffil IOn mI IOn - w IC , cost of damage to the natural environment and was equal to.around 45 per cent of the assessed total reserves was estimated at $65rru'11'IOn(US$26rru'11'Ion) damage attributed to Cyclone Val (Table 4.2). The f hi h b f th 1 t t f th . 0 w c y ar e arges componen was or e correspondmg cost of damaged government .,. ildi (i 1 di t ffi d rehabilitation of forests and related ecosystems. bUI Ings Inc u ing governmen 0 Ices an residential housing) was an estimated $16 million (US$6.4million). The overall assessed cost for both government and private buildings therefore came 4.3 Some Early Responses and to $346 million (US$138 million) - the highest • • incurred for any individual sub-sector. International ASSistance The severe destruction of the country's productive Education and Health base and private property called for a substantial and timely response on the part of the government The cyclone took an extremely heavy toll of supported by the international donor community. educational facilities, with every school sustaining The basic challenge lay in meeting the immediate 55 Tile Economic Impact of Natural Disasters In tile Sou til Pacific emergency relief needs and in mobilising the Government also convened a me~ting of int~r~~t:d necessary resources for rehabilitation and donors in Apia ~inJuly .1992)to dIS~~SS~ossIbIhh~S reconstruction purposes. A further challenge was to for external assistance In the reh~bIhtahon of b~SIC ensure that the economic rehabilitation effort, once infrastructure and related econorrucsectors. Drawing under way, was conducted in such a way as to avoid upon the WO:ldBank needs assessr.nentreport, t~e contributing to further macroeconomic instability. meeting reviewed the areas considered to be In greatest need, the required size and composition of A key initiative taken by the government was the the PSIP from the viewpoint of rehabilitation and passing, by the National Parliament, of a growth,andscopeforraisingadditionalfinancesfor supplementary budget approximately two weeks sustaining the PSIP (i.e. apart from normal donor after Cyclone Val.This budget provided $11million assistance and the savings from a rearrangement of (US$4.4 million) for the restoration of essential ongoing multilateral projects). Exacerbating the services (e.g. health, water) and infrastructure - a pressure for additional finances was an expectation large part of this fund coming from a reduction in of a significant drop in recurrent revenue induced budgeted development expenditure. Thebudget also by the cyclone-related decline in GDP.In the event, outlined a series of measures for accessing loans the meeting concluded that the shortfall in finances funds from the commercial banks and other non- forthe PSIPwas likelytobe ofthe order of$55million monetary financial intermediaries for recovery,and over the period 1992/93 -1994/95 - a shortfall that a scheme for the government to purchase food for would require external assistance. (Firm offers of localdistribution. Also, as a means of sustaining local assistance made by some of the donors present at food supplies, government imposed a ban on the the cyclone rehabilitation meeting, came to around export of taro to all destinations except American $13 million (US$5.2 million) - Government of Samoa. Western Samoa 1992(a),p. 32.) Government emergency measures were The World Bank took a leading part in providing complemented by substantial overseas relief aid, assistance, principally via soft-term loans for the both official and private. Large quantities of food, rebuilding of roads and power facilities. In this, it building materials, equipment and other disaster was able to redeploy existing International supplies were provided by a large number of donors Development Association (IDA) credits (of US$14 and voluntary groups for distribution by the million) for emergency road rehabilitation following National Disaster Council and by NGOs. By May Cyclone Ofa, plus an additional US$10-15million. 1992, the value of such relief and special Japan provided substantial assistance over a period rehabilitation assistance distributed by the National in the form of grant aid which it channelled into key Council alone came to over $20 million (US$8 areas such as the Apia wharf and harbour, coastal million)- with the New Zealand government protection, hospital construction and education. contributing a substantial share. Japan's total commitment to cyclone rebuilding totalled between $60 and $80 million (US$24 and Another major response was the preparation of.a US$32 million). Loan funds from ADB were damage assessment report f~r Cyclone V~l In channelled into repairing and improving power December 1991under the auspices of the ~ahonal facilities and agricultural development. New Disaster Council (1992). This report provided the Zealand aid focused on education, specifically the basis for a subsequent infras.tructure needs rebuilding of junior secondary schools, health assessment?y the World Bank- ass.Istedb~ADBand (hospital repair) and telecommunications;Australian the Austrahan government - which ~evIewed the assistance on education (primary schools) and roads; impact of the cyclone on the economy,Infrastructure and International Fund for Agricul tural and major sectors (Government of Western Samoa Development (lFAD)on the rehabilitation of village 19~2(a». The report also assessed the ?~m~ge and primary schools and agriculture. Vitalcontributions estimated the necessary cost of rehabIht.ahon and were made by various other donors, including rebuilding over the immediate and medium term, UNDP.EU FAa and the United States. and identified priority projectsfor rehabilitation. The " report's findings provided the basis for the formulation of a public sector investment program • S t (PSIP) for the infrastructure sector to address 4.4 The Productive ec ors rehabilitation needs (Government of Western Samoa 1992(a». ::.. The combined effects of Cyclones Ofa and Val had a dramatic impact on agriculture (with fisheries and forestry). Agricultural production dropped sharply, 56 The Economic Impact of Natural Disasters in the South Pacific remained depressed for a prolonged period of time, As Table 4.3 shows, the overall impact of cyclone and contributed significantly to a decline in real GDP. destruction on the major tree crops was particularly The manufacturing sector was severely affected, sharp, with production falling steeply followed by a particularly with the loss of agricultural raw recovery phase covering several years. Thus, copra materials for processing. Export activity, which is - a major export and a source of raw material for the heavily dominated by primary sector products, was manufacture of coconut oil- fell sharply in 1990and sharply curtailed, while tourism development was then reached virtually zero levels over the next few severely dislocated. years, with recovery in production apparent only in 1995.Of the other commercial tree crops, cocoa and passionfruit suffered much the same fate except that, at least up to 1995, there is no evidence to suggest A . It that these crops were on the road to recovery. gncu ure Bananas is another highly vulnerable crop but, . . because of its quick growing nature, has been able As noted, the n;o cyc~onesproved hIg~lyd~str.u~tIve to recover fairly quickly. (Further extensive damage to the country ~ agncult,:ral ~as: With significant to bananas was inflicted by Cyclone Lynne in 1993 short- and medium-term implications. The damage (January) and this would have had the effect of to tree crops, such as cocoa and coconuts, was slowing down the recovery that was already in train.) particularly severe and long-lasting, while a range of root and vegetable crops, which generally recover Taro - a major commercial and subsistence crop is, more quickly, was also significantly affected. On the along with various other ground crops, less basis of surveys at the time, it was estimated that vulnerable to cyclone devastation. This is borne out agricultural production (including fisheries) by production figures shown in Table4.3 - the fall in dropped by 21 per cent in 1990 following Cyclone production in 1990(as a result of Cyclone Ofa) was Ofa , and by a further 13 per cent in 1991 (with a only modest, as was also true in 1992(Cyclone Val), marginal rise in 1992),following Cyclone Val(Table after which there was substantial recovery until the 4.3 and Chart 4.1). As the largest individual sector crop was devastated by a leaf blight disease in the in the economy, this performance underpinned the latter part of 1993. (Since then, taro has virtually cumulative decline in real GDP that took place over collapsed as an export crop and there are few signs the post-cyclone period (AIDAB1994,p. 77). of a major recovery.) Detail on the production of other major root crops, such as ta'amu (giant taro), importance of this sector in overallGDP - from 38 yams and cassava is lacking but it is likely that as per cent to 30per cent. Furth~rmore, the gro~th r,ate with taro, production levels were little affected by of -8per cent recorded by agriculture over ~s peno,d the cyclone. stands in marked contrast to agriculture s performance during the pre-cyclone period (say, The fish catch dropped sharply in the aftermath of between 1982and 1989)when an annual growth rate Cyclone Ofa as a result of damage or loss of many of 2.3per cent was achieved. This difference is quite alia fishing boats and reduction in the number of fish marked and gives some indication of the cost of aggregating devices (FADs) as well as damage to cyclone damage in terms of agricultural production marine habitat and life.The strong recovery that was foregone. apparent from 1992,suggests that these problems were, by and large, fairly quickly overcome. Regarding the livestock industry, it appears that the • two cyclones did not have significant effects on Export Earnings production. Agriculture's vulnerability to the cyclones was The decline in agriculture's contribution to aggregate sharply reflected in export activity (and in the real GDP was quite marked, falling from a level of balance ofpayments-see below) which is dominated $68 million (U5$31 million) in 1989 to $50 mill~on by primary-based products. (Up to 90% of export (U5$20 million) i~ 1992 (the la~est ye~r for ~hlch earnings normally originate from agriculture.) The real GDP sector figures are available), implying an loss of export production from cyclone damage average decline of 8 per cent per annum (AIDAB resulted in a steep decline in export earnings - from 1994, P: 77). This compares with a decline in total a level of $30million (U5$14 million) in the 1988-89 GDP of $180million (U5$78million) to $167million period to a low point of $14million (U5$5.4million) (U5$65 million) during the same period - equal to - in 1992- a decline of 53 per cent (Table4.4 and Chart 2.3 per cent per annum. The sizeable decline in G~P 4.2).As Table4.4 shows; the cyclones had the most from agriculture significantly reduced the relative dramatic impact on such leading products as 58 by coconut products but, at the time of writing, total $54million (US$23million) in 1990- a fall of 4.4 per export earnings are still below pre-cyclone levels, cent, recovering marginally in 1991 but was still attesting to the severity of cyclone vulnerability. below the 1989level. Industrial production remained stationary for an extended period up to 1995when the value of production rose markedly to $67million •• (US$28 million). The decline in production can be Industnal Production attributed to the collapseof coconut-based processing activities, particularly coconut oil milling and, to a Western Samoa's fledging industrial sector was less lesser extent, coconut cream. For most of the period, vulnerable to cyclone destruction than the primary overall production levels were maintained mainly sector but nonetheless suffered significant losses. by increased production of electricity (following a Such losses stemmed largely from damage to cyclone-related decline in 1990)and paints, both of structures and equipment and interruptions to which were largely responsible for offsetting the normal operations due to loss of power and, in some decline in coconut processing activities. The five or cases, problems over the water supply. Regarding so years of relative stagnation was relieved only by processing activities, the loss of raw materials the strong recovery in coconut processing which disrupted production and, in the case of oil milling began in 1993and reflected in the production figures and copra meal, meant a complete stoppage for for 1994and 1995. several years. For many individual enterprisers, these disruptions caused a significant loss of output, reduced employment, loss of markets and possibly 'I: • a considerable loss of profit. .ounsm Reference to the available indicators of production Tourism grew steadily during the 1980sbut suffered shows clear evidence of cyclone effects on industry a major setback as a result of the two cyclones.Tourist during 1990 and 1991 (Central Bank of Samoa 1996, arrivals (including business and family visits but not p. 60). Thus, the value of industrial production fell cruise passengers) reached a new peak of 54,000 in from a level of $57million (US$25million) in 1989to 1989 but then fell away in the next three years to 60 reach 36,000in 1992 - following Cyclone Val (Chart improved building standards and judicious siting of 4.3). The subsequent recovery which began in 1993, resorts), and adequate insurance coverage to counter has been slow, with pre-cyclone levels not attained the somewhat negative image generated by cyclone until 1995- five years after the cyclones. vulnerability. Largely accounting for the sharp decline in tourism numbers during the immediate post-cyclone period t was the heavy destruction of hotel facilities, Invas mant especially in Savaii, and somewhat exaggerated . . . overseas media reports of cyclone destruction. Investment activity -both pnvate and government- Nonetheless, the decline cannot be attributed entirely appears to have been significantly affected by the to the cyclones, as tourism numbers also appear to tW? ~yclones. Such ac~ivity is ~ key element in have been affected by recession in some of Samoa's building up the productive capacity of the economy source markets such as New Zealand and Australia through investment in machinery, equipment, (World Bank 1993,p. 11). buildings, land development and the like - elements which ultimately determine the growth potential of Tourism is viewed as a major growth industry and an economy. The available data show that the level basis for achieving greater economic diversification of investment in Western Samoa rose markedly over in Western Samoa (Government of Western Samoa the post-cyclone period from a level of 26 per cent of 1992(b), p. 42). Such a view is based on the many GDP in 1989 to 34 per cent in 1990 - following attractive features, both physical and cultural, that Cyclone Ofa - and to 40-42 per cent in 1991/92 - Western Samoa can offer tourists. However, following Cyclone Val (World Bank 1993, p. 3). continuing perceptions, reinforced by Cyclones Ofa According to the World Bank (1993,p. 3), the main and Val,of high cyclone vulnerability at certain times underlying reason for this increase was the rise in of the year, remain something of a handicap. The capital expenditure that took place after the two challenge is to promote appropriate cyclone cyclones. In turn, such expenditure reflected mitigation efforts in this sector (for example via substantial increases in government development 61 The Economic Impact of Natural Disasters in the South Pacific expendi ture associated with the cyclone to obtain savings from within their existing budgets rehabilitation effort (see p. 69). by freezing staff recruitment, overtime work, and overseas travel, and by rigid control of overall expenditure. Departments were also asked to defer 'oeconom'lc Impact some of their development projects and to reallocate 4 ,5 Mac I the resulting savings toward priority rehabilitation activities.This mainly affectedthose projects that had The two cyclones had a highly destabilising impact not yet reached the point of implementation - on the macroeconomic situation - an impact which examples being a number of forestry projects, the presented difficult policy challenges and which, to construction of new roads and the refurbishment of some extent, is still being felt. Cyclone rehabilitation health and education facilities. (According to the needs called for a substantial increase in government supplementary budget noted above, reductions in expenditure (relative to revenues), which led to the prior budgeted development expenditure were incurring of large and unsustainable fiscal deficits. estimated at $4.1 million (US$1.7million) out of a Monetary policy was, for a short term at least, eased total $10.9 million (US$4.4 million) available for to facilitate accessto credit for reconstruction - a move cyclone relief / rehabili tation - Government of that impacted adversely on the trade balance and Western Samoa 1991,p. 3.) international reserves. The balance of payments situation deteriorated significantly, above all An indication of the impact of Cyclones Ofa and Val reflecting the substantial increase in cyclone-related on the budgetary and financial operations of the import demand, while domestic inflation surged government is given in Table 4.5 and Chart 4.4. As largely in response to a shortage of locally produced Table4.5 shows, against generally modest increases food staples. in total revenues during the post-cyclone period, government expenditure in 1990,following Cyclone Ofa, increased by 24 per cent and this was followed , by further rises of 13per cent and 18per cent in each Government Finances of the next two years, reflecting the combined effects of both cyclones. Against the trend in revenue, this The need for emergency relief,the restoration ofbasic outcome gave rise to substantial and unsustainable services and economic activity, and longer-term fiscaldeficitswhich were equal to 13per cent of GDP rehabilitation, put enormous pressure on in 1991/92, a peak of 18 per cent in 1992/93 and 10 government finances. This necessitated a substantial per cent in 1993/94. These deficits are predominantly increase in government expenditure (against a the result of a substantial rise in development generally static revenue situation). A key challenge expenditure associated with the rehabilita tion effort. was to raise the required financial resources from From 1993/94, deficit levels were much lower both domestic and external sources and to adjust reflecting a considerable easing in rehabilitation budgeted expenditure so as to release funds for expenditure, but are still too high from the viewpoint cyclone rehabilitation and reconstruction. of financial stability and sound macroeconomic management. In the event, the government was fortunate in having access to considerable donor support - multilateral, Reliance on external finances was particularly high bilateral and private voluntary sources (see p. 60). in the aftermath of Cyclone Val- $34million (US$14 For rehabilitation purposes, and particularly in million) in 1991/92 and around $40 million (US$16 relation to infrastructure and education, donors million) in each of the following two years (Table provided valuable assistance by reallocating funds 4.5).This has resulted in a significant burgeoning of within their aid programs and providing additional the external debt which rose from a level of $213 funds. Such assistance proved critical in the million (US$89 million) in 1990 to around $350 rehabilitation of vital services such as roads, power, million (US$133million) in 1993 and then to $416 and port and education facilities. million (US$162 million) in 1994 - a 95 per cent increase over this period (Central Bank of Samoa Internally, adjustments to existing departmental 1994 (March), p. 52). Even though the bulk of the budgets were also vital. Government pushed new debt is contracted under soft-term conditions, through measures to reduce departmental budgets higher debt levels mean an increase in future debt and reallocate funds to meet part of the repayment obligations - a burden that could create reconstruction needs at the departmental level. considerable pressure on future government According to the supplementary budget introduced budgets. soon after Cyclone Val,individual departments were 62 Pol' with an expansionist fiscal stance put a special OI~uS Monetary ICy on the monetary authorities to use monetary policy As in the case of Cyclone Ofa, the monetary as the mainI b I instrument for achieving internal and authorities (essentially the Central Bank) relaxed externa a ance. monetary poli~y following Cy~~on7Val in support In response to Cyclone Val, the government of government s cyclone rehabilitation effort. At the introduced (in December 1991) the so-called same time, the monetary ,author~tiesw~re mindful Emergency Credit Arrangement scheme, ,granting of the need for caution, gI.v~n Its overall approval to the commercial banks to provide lo~ns responsibility to pursue policies c~pabl: ,of needed for rehabilitation and reconstruction sustaining ongoing financ~al~~d economic stabIlity. purposes over and above the prevailing credit In this, the emergence of significant macroeconomic guidelines (Central Bank of Samoa 1992,p. 49). This instability as a result of the two cyclones coupled scheme was to run for sixmonths with priority given 63 The Economic Impact o/Natural Disasters in the South Pacific to private rehabilitation efforts in agriculture, authorities have, on-a number of occasions, relaxed manufacturing, building, stock replenishment and monetary policy so as to facilitate the cyclone export financing activity. These measures were recovery process. Examples include the lowering of complemented by the provision of easier lending interest rates in 1992 and a relaxation of credit terms by a number of government-owned non- conditions in the same year. banking financial agencies such as the National Provident Fund and the Housing Corporation. The impact of the easier monetary conditions Under the emergency credit scheme, private sector immediately following Cyclone Valis not apparent credit expanded rapidly - by around $6.4 million from data on the money supply (i.e, M2 or broad (U5$2.6million) - up toApril (1992).The scheme was money which includes savings and time deposits). terminated in April as it was feared that if this In fact, M2 fell from level of $121 million (U5$52 expansion in credit was allowed to continue it would, million) in 1990 to $118million (U5$47 milliop) in among other things, lead to serious deterioration in 1991 (although it rose by 20% in 1990 following the balance of payments and international reserves, Cyclone Ofa) and remained at that level for the next and fuel inflation. three years (AIDAB1994/p. 82).However, following a large increase in 1990(when it rose from $42million In an attempt to restore financial stability, the (U5$18million) to $59million (U5$23million) or by monetary authorities relied heavily on the 40%)/ private sector credit continued to expand application of a deposit-linked credit expansion steadily;rising to $63million in 1991and $71million formula to control bank lending. Under this formula, (U5$28million) in 1992.However, the impact of this the lending activities of the commercial banks were expansion on M2 was largely offset by government tied to savings and term deposits and the length of drawdowns on deposits with the banking system. maturity of such savings. However, over time and On balance therefore, Cyclone Val appears to have as the financial situation permitted, the monetary had little effecton the overall money supply. The Economic Impact of Natural Disasters in the South Pacific 'lc 20 per cent in 1991,peaking at 34 per cent in 1993- 4•6 Other Macroeconom extremely high and unsustainable levels (AIDAB Aspects 1994,p. 77).Lower current account deficits recorded for 1994, predominantly reflect reduced import demand with the considerable easing in the Western Samoa's international trade and financial rehabilitation effort. position deteriorated markedly as a result of Cyclones Ofa and Val. There was a sharp fall in Largely due to official aid flows, the balance of export earnings as a result of severe damage to the payments sustained regular overall surpluses up to country's export base, while imports rose 1991(albeit a very small surplus in that year) which dramatically reflecting higher levels of demand allowed Western Samoa to build up its stock of associated with cyclone rehabilitation and international reserves. However, with a further emergency needs, These events put considerable widening of the current account deficit, this changed pressure on the balance ofpa.YI!!ents and led to a in 1992when, for the first time for some years, the significant erosion of international reserves. balance of payments recorded an overall deficit. These deficits, which areequal to a reduction in net The Widening trade gap following the two cyclones foreign-assets, prevailed up to 1995 when a strong is reflected in the current account deficits in the recovery in export earnings contributed to an overall balance of payments. These deficits rose from a level surplus. / of $10million (US$4.4million) in 1989to $27million (US$12million) in 1990,and then climbed steeply in The impact of the two cyclones on the balance of each of the next three years to reach a peak of $134 payments is mirrored in the country's international million (US$51 million) in 1993 (Chart 4.5). This reserve balances.Thus the level of gross international meant that, as a proportion of GDp, the current reserves grew slightly in 1991 - from $161 to $166 account deficit rose from approximately 3 per cent million (US$67to US$68million) - but then declined of GDP in 1989to 8 per cent in 1990and then to over sharply in 1992and continued to fall to a low point The Economic Impact o/Natural Disasters in the South Pacifk of $115 million (U5$45 million) in 1994 (Chart 4.6). cyclones and, to some extent, the effects of a tight Underlying this trend was a significant reduction in monetary policy. the level of import coverage for the country - from , , ,. d izht ths i 1990to around five months in Improved supply conditions and low importe over eIg mon SIn, . d k f I infl ti 1994 - a level below the 6-7 months coverage inflation conspIre . to ma e or ow In a,lOr: over normally considered appropriate for small countries the more recent pen~d, but a sha~ re~uctlon In tthhe sueh as lvvesternA, 5amoa. supply of taro - a major consumption Item - an. d 4e introduction of a valued-added tax (100/0rate) In 199 Regarding inflation, it is apparent that the cyclones again led to a steep rise in prices. had a significant - if not dominant - influence on the domestic price level, particularly through their impact on the availability of domestically produced • G th food staples and materials. The high inflation 4.7 Economic row recorded in 1990and 1992- 8.3 per cent and 6.8 per cent respectively - can be mainly attributed to the BothCyclone Ofa and Valhad a sharp and prolonged effect of cyclone-induced shortages of loca.By impact on the growth of real GDP and, in turn, on produced food items (Chart 4.7).(Note that the high the living standard of the population. Predominantly inflation recorded ,in 1989 had l~ttle to do wit~ as a consequence of the first cyclone, GDP fell from variations in the pnces of domestic products as It the 1989level of $180million (U5$78million) to $169 was predominantly due to strong increases in the million (U5$70million), or by 6.5per cent (Chart 4.8). prices of imports.) However, in 199~,the eff~ctsof Following a modest recovery, the advent of Cyclone an easier monetary policy and an Increase In the Valled to a further decline - from $173million (U5$73 .prices of a number of products subject to price contr?l million) to $167million (U5$68million) or by 3.4per appear also to have contributed to the surge It;! cent. The economy recovered well in 1993 before inflation. Bythe same token, the much lowe~inflation slumping in 1994 mainly for non-cyclone-related recorded in 1991and 1993largely reflected Improved reasons (primarily due to the collapse of the taro food production as agriculture recovered from the The Economic Impact of Natural Disasters in the South Pacific industry from a viral disease). Preliminary GDP its capacity to cope with natural disasters, especially projections for 1995 - five years after Ofa- indicate tropical cyclones. A vital step was the formation of that GDP will rise to around $178 million (US$70 the National Disaster Council as the main million)-primarilyasa resultofa continued recovery governmental agency responsible for the from the cyclones - but even so, GDP remains coordination of the national effort in dealing with somewhat below the pre-cyclone level. national disasters - preparedness, emergency relief and rehabilitation efforts. The Council operates as a Cyclone devastation triggered a period of economic unit directly under the Prime Minister's Office and decline that contrasts sharply with an extended is chaired by the deputy prime minister. Other key period of above-modest growth that began from the institutional mechanisms include the Puienu'u mid-1980s. Thus, between 1985and 1989,real GDP Committee which provides a link between the grew by an average of 2.6 per cent per annum - a National Disaster Council and rural communities, performance that contributed to a growth in realGDP and local village councils which are in a position to per capita of around 2 per cent per annum. Against undertake natural disaster work at the village leveF . thisperformance,growthduringthecyclone-affected A number of voluntary organisations - the period (approximately 1990 to 1993) averaged -0.5 representatives of whom form a Disaster Support per cent per annum, which translates to a growth in Organisation which act as a sort of plenary realGDPpercapitaofaround-1percentperannum. coordination body - also playa vital role in the Apart from a loss in growth momentum, this implies natural disaster area. A leading NGO is the a Le a substantial loss of income that would have been Siosiomaga Society Inc. which has been active in realised in the absence of cyclone devastation. An liaising with village groups in attempts to foster extrapolation of GDP growth over the cyclone- greater disaster awareness and preparation. affected period, based on the pre-cyclone trend, indicates that real GDP foregone is of the order of The institutional mechanisms that have been I $80 million (US$32 million) (Chart 4.8). As a established are positive steps but these need to be somewhat crude measure, this amount complemented by other measures capable of further approximately equates to 50 per cent of GDP for a enhancing Western Samoa's capacity to undertake : (recent) given year, and to around $500(US$195)per effective mitigation and rehabilitation work. A capita. particularly vital need is to establish a more cohesive policy framework as a foundation for dealing with Regarding the sectoral-level impact, as expected, natural disasters in their various aspects. In this cyclone devastation had the greatest effect on GDP regard, it is essential that the task of completing the originating from agriculture (Chart 4.8).For the non- National Disaster Plan be completed as a basis for agricultural component of the economy, the main coping with natural c:lsasters at both national and effect appears to have been to inhibit the attainment community levels. A first draft of such a plan was cf faster growth as overall GDP from this source actually adopted by Cabinet in 1986, but largely recorded little change during the post-cyclone because of perceived deficiencies in a number of period. The exception was manufacturing whose areas (for example, the institutional framework contribution to GDP fell by around 30 per cent proposed was thought to be overly decentralised), between 1989 and 1992 - a fall that was due to the plan has not been put into operation. Given the dislocations in the area of agro-processing. The importance of a central plan framework for impact of this decline on overall non-agricultural providing basic guidelines for disaster preparedness, GDP was offset by modest expansion elsewhere reliefoperations and mitigation purposes, it is urged within that general group. that a special effort be made to finalise the Plan as a matter of priority. To further strengthen institutional capacity, • • • consideration should be given to establishing a small 4.8 MItigation Issues permanent unit responsible for coordinating ongoing work in the natural disaster field. Possibly operating Sincethe onslaught of Cyclones Ofa and Val,Western under the. auspices of the Prime ~.i~ist~r' s O~i~e, Samoa has made notable progress in strengthening such a umt would act as an administrative facility 7A Pulenu'u is a government/village liaison officer elected by the village council. 68 The Economic Impact of Natural Disasters in the South Pacific for discharging a variety of tasks including ambulances, radio and speed boat) for emergency undertaking public awareness programs, training in work as well as training and workshop activities - relevant skills, liaising with the Public Works for which funds are being sought from the EU. The Ministry in the enforcement of the building codeand, department has also been involved in strengthening generally, to promote practical measures for hospital structures and in liaising closely with improving disaster preparedness and mitigation District Health Committees to develop appropriate capabilities. strategies for coping with disaster emergency in the health sector. The gap presently existing between national development planning and natural disaster The electric power authority (Electric Power mitigation efforts also needs to be addressed. The Corporation) has been active ill a number of areas. latest development plan - the Seventh Development These include the designing of new hydro-power Plan 1992-1994 (DP7) - recognised the enormous facilitiesto better withstand cyclones,the greater use damage caused by Cyclones Ofa and Val and of underground lines (50% of lines in Apia are acknowledged the importance of integrating national already laid underground), and the provision of development planning more closely with national more adequate insurance coverfor the corporation's disaster planning (Government of Western Samoa, assets (valued at over $300million (US$120million)). 1992(b),p. 1V).Hence among the key objectiveslaid Cyclone proofing is also evident in the case of the out in DP7, is the need to reduce the vulnerability of education department through, for example, the the economy and infrastructure to natural disasters, reinforcement of school buildings (including that in particular cyclones (Government of Western carried out by village school committees), and by the Samoa 1992(b),P: 34).However,in relation to specific local water authority in the areas of flood control strategies or practical suggestions on how such an (e.g. UNDP-funded projects in the Vaisigano and integration might actually be achieved, the Plan has Fuluasou areas) and protection of water catchment very little to say. areas under the framework of a master plan which this authority is in the process of implementing. Nonetheless, it has to be acknowledged that considerable progress has, in fact, been made in The tourism authority has been encouraging local promoting cyclone proofing measures as a means of enterprises to strengthen hotel buildings and to reducing the extent of economic damage to the insure assets. A predominantly government-owned country. A notable example is the adoption of a brewery has also taken steps to reinforce buildings building code aimed at raising building standards and related structures, install adequate standby to better cope with cyclones. The building code power, and ensure adequate insurance cover (this applies to new structures, is administered by the enterprise received over $1 million in insurance Public Works Department, and was designed with payment as a result of Cyclone Val). New Zealand and Australian technical assistance. Other notable examples include the strengthening The response by various non-governmental agencies of the port facilitiesinApia and completion of coastal has also been positive. Thus, among the NGOs, the protectionworksinanumberofvulnerablelocations OLe Siosiomaga Society has produced a Disaster including the Apia foreshore area. Roads have also Contingency Plan (1991) designed to enhance its been rehabilitated or rebuilt to higher standards as ability to provide assistance to village communities have various other major structures including hydro- in the advent of a natural disaster. South Pacific power stations. It is also apparent that recent cyclone Regional Environment Programme (SPREP), a devastation has had the effect of raising the level of regional agency concerned with environmental awareness of the value of having adequate insurance pro.tection and developmen~ is~ues and bas,ed in cover for vital productive and personal assets. Apia, has recently upgraded Its Involvement In the fieldof meteorologyaimed at improving the capacity Cyclone proofing by a number of government to predict weather patterns, and in vulnerability departments and state-owned enterprises has been studies of coastal areas threatened by the effects of impressive. Efforts in agriculture, forestry and projected climatic changes. The results that will telecommunications have been referred to in eventually come out of these projects could be very previous sections (see pp. 56-58). Other notable useful to individual countries and regional bodies examples include the Health Department which, for mitigation and damage reduction purposes. assisted by WHO, has produced its own strategic . .. . , , plan aimed at significantly enhancing its capacity to The above Initiatives are promising but much scope deal with disaster emergencies. The plan provides exists for carrying the process further. It is apparent for a significant upgrading of equipment (including that in the caseof a number of government agencies, 69 The Economic Impact o/Natural Disasters in the South Pacific cyclone proofing has still some way to go. Where all been completed and the process of economic this is true, the strategic approach adopted by the recovery from the two cyclones seems to be well Ministry of Health, as noted above, offers a possible advanced. model. Particularly following Cyclone Val, there has evidently been a growing appreciation in Western · d' R k Samoa of the need for effective mitigation measures 4,9 Cone Iu rng emar S to reduce the economic costs of natural disasters. In this regard, significant advances have been made on Western Samoa has, in recent years, proved highly several fronts. These include the establishing of key vulnerable to cyclone devastation. Cyclones Ofa and institutional mechanisms, including the National Val,which struck within a period of 21month of each Disaster Council, for coordinating the national other,were particularly destructive, with CycloneVal response to natural disasters, the adoption of a alone causing an estimated $700 million (US$287 building code to raise building standards, and the million) damage - equal to more than twice the implementation of useful cyclone proofing country's GDP.The combined effects of both major procedures by many government departments and cyclones wrought particularly heavy damage on the state-owned enterprises. However, despite these county's agricultural base, roads, school buildings, initiatives, a more vigorous effort is needed to plug private dwellings and forestry resources. The impact a number of gaps that presently exist. Foremost is on the overall economy was dramatic, substantial the need to improve the overall policy environment and long lasting. Real GDP declined sharply and for the tackling of natural disaster preparedness and remained depressed for an extended period of time mitigation tasks. For this, a vital requirement is the (roughly up to 1994), with significant adverse finalisation of the Natural Disaster Plan as a basis consequences on real GDP per capita. The cyclones for providing guidelines and the overall planning also caused significant macroeconomic instability as framework for coping with disasters. The reflected in the balance of payments, international establishment of a small unit to be responsible for reserve levels, government finances, and domestic carrying out various ongoing tasks that are necessary price levels. for an effectivedisaster preparedness and mitigation effortshould alsobe considered. Furthermore, efforts The severity of these natural disasters elicited a are needed to achieve more meaningful integration substantial response by the government in the area between national development planning and natural of cyclone rehabilitation and reconstruction. Amajor disaster issues - a link that is presently very weak. initiative was the reordering of government Finally, attention should be given to building up a budgetary expenditure in favour of priority reasonably large pool of funds for natural disaster rehabilitation projects. In mobilising the necessary emergency and rehabilitation purposes. Such a financial resources, Western Samoa was fortunate in facilitycan be particularly valuable not only as a basis having access to substantial support from for allowing a quick response to emergency needs international donors, including the World Bank, but also to lessen the need to depend on external ADB,Australia and New Zealand. As at the time of resources which, among other things, can result in wri ling, major rehabilitation projects have virtually the accumulation of high debt and repayment levels. 70 The Economic Impact of Natural Disasters in the South Pacific 71 The Economic Impact of Natural Disasters in the South Pacific 5. NIUE: THE ECONOMIC IMPACT OF TROPICAL CYCLONES AND DROUGHT 5 1 Background coastline. The soil, consisting mainly of residue of • weathered limestone, is fertile but not abundant. · . . High soil porosity largely accounts for the lack of NIUe IS vulnerable to tropical cyclones and, to a running water, giving rise to a heavy dependence so~ewhat lesser extent, droughts. The ~os~ recent on the underground water table. While vegetation major cyclone - Cyclone Ofa - struck NIUe In early on most of the island is scrub-like, there are small 1990, causing heavy damage to buildings, stands of rainforest in the interior. infrastructure, and agriculture. The cost of replacing government-owned buildings and infrastructural Though Niue's economy is dominated by the facilities alone was estimated at close to $4 million government sector (accounting for at least 35% of (US$2.5million) - equal to approximately 40per cent total formal employment), agriculture still plays a ofGDP!!. For a very small country, meeting such costs vital role. To some degree, almost all Niueans are could have imposed an enormous burden on the involved in traditional subsistence activities, notably government - a burden that would have created thegrowingofrootcropsandfishing.Amajorfeature significant economic instability. However, as a result of the economy is the heavy dependence on external of considerable financial support from donors, Niue aid, especially from New Zealand, which currently has been able to cope reasonably well with post- amounts to around $7.5 million (US$5.5million) or cyclone rehabilitation needs. As far as drought is $3,200 (US$2,300 million) per capita - one of the concerned, Niue faced a major drought in the 1982- highest levels of aid in the world. There are a few 83period which inflicted heavy damage to crops and local industries and exports are limited to a number generally undermined longstanding efforts to of primary products with taro by far the leading strengthen and diversify the country's agricultural product (atjust over $1minion (US$O.7million) , taro and export base. exports currently account for over 90%of total export . . receipts). GOP is estimated at around $11 million In this chapter, an attempt IS made to assess the (US$8.4million) or $4,400(US$3,300)per capita. impact of tropical cyclones on Niue's economy. The major focus is on the economic impact of Cyclone From the late 1980s, Niue has been involved in a Ofa - the most recent major natural disaster to strike major structural adjustment program designed to Niue - particularly in relation to damage tobuildings, Significantlyreduce the size of the civil service, foster public amenities and standing crops. A short private sector development, and lessen the assessment will be made of the economic impact of dependence on New Zealand aid. By 1990, when major droughts - focusing on the 1982-83drought - Cyclone Ofa struck, Niue was well on the way to before the major conclusions and policy implications achieving significant transformation of its economy. are highlighted. A major achievement over the 1991-93period was a · . . . reduction in the number of established posts in the N~ue IS one of.the smallest countries In the world public service from around 600to300and a reduction WItha population of around 2,500and a land area of in the amount of budgetary aid from New Zealand 259 km", It occupies a fairly central position in the from an average level of $11.0million to $7.3million South Pacific, 480 km east of Tonga and 560 km (US$6.8to US$5.4million) annually. south-east of Samoa. It is an uplifted coral island which takes the shape of two terraces, the lower one Niue is located at the edge of the cyclone belt in the lying around 27metres above sea level and the upper, south-west Pacific so that major cyclones are not as saucer-shaped plateau, rising to 65metres. The island frequent as in the more western Pacific island is characterised by rocky and rugged terrain, with a countries such as Fiji and Vanuatu. With the coral reef encircling a precipitous and broken exception of drought, exposure to other kinds of 8 Niue uses the New Zealand dollar as its official currency. In 1990 one New Zealand doUar was equal to approximately US$O.62 and, at the time of writing, was equal to US$0.74 and Aust $0.89. 73 The Economic Impact of Natural Disasters in the South Pacific natural disasters is limited, probably attributable to damage. The data also reveal that, since 1959,Niue Niue's small physical size and geographic location. has faced at least five major cyclones, with the most Niue has been free of destructive earthquakes over recent occurring in 1983(CycloneTomasi)and 1990 its recent history, while there are no signs ofvolcanic (Cyclone Ofa). This means that, on average, one eruptions. Tsunamis have not been a problem and major cyclone occurs every nine years. in any event, Niue is protected by its elevated position. For Niue, the main dangers connected with major cyclones relate to wind inflicted damage to Weather data dating from 1905,show that Niue is structures, crops and natural resources such as hit by a cyclone once every four years on average forests. Another by-product of strong winds is the (Table 5.1). (The main cyclone season is from generation of high seas and wave action which not December to April, with January to March showing only directly damage coastal structures but can also the most frequency.) However, most of these throw up boulders and coral aggregates which cyclones are minor (officiallycategorised as "strong damage buildings and other structures standing winds" or "storms" with wind speeds not exceeding along the coastline. The effect of salt-laden sea 63knots) that normally do not inflict a great deal of sprays, blown inland by the winds, can cause Table 5.1 Tropical Cyclones and their Impact on Niue. 1. Tropical cyclones and hurricanes during the period 1941-1968and their impact on Niue: 1941 02 March Moderate to severe 1944 30 March Moderate 1946 18 January Minor 26 December Moderate 1948 11 December Minor 1956 01 January Minor 17 February Minor 1957 06 February Minor 1959 26 February Severe 1960 18 January Severe 1968 09-10 January Severe 2. 'Iropical cyclones and intensities which passed close to Niue during the period 1969-1979: Hurricane = greater than 63 knots Storm = 48-63 knots Gale = 34-47 knots 1970 20 February . Storm passed about 80 miles northeast of Niue 1973 03 January Gale passed about 100 miles west of Niue 07 November Gale crossed close to Niue 1974 27 April Cyclone Tina (gale) passed about 90 miles southwest of Niue 1977 16 March Cyclone Pat (storm) passed about 120miles southwest of Niue 1977 27 December Cyclone Anne (stonn) passed about 120miles southwest of Niue 3. Tropical cyclones during the period 1979-1994and their intensities: 1979 10-13 December Cyclone Ofa (storm) 1981 31 Jan - 03 Feb Cyclone Betsy (gale) 1983 29 Mar - 03 Apr Cyclone Tomasi (hurricane) 1989 02-07 January Cyclone Fili (stonn) 1990 30 Jan - 07 Feb Cyclone Ofa (hurricane) Note: The aboveis a list of the documentedtropicalstormsand cycloneswhichaffectedNiuebetween 1940-1993.Thelist is divided into threeparts correspondingto differentsourcesofinformation. '. The Economic Impact of Natural Disasters in the South Pacific considerable damage to standing crops and, if not rubble and boulders. The residential housing sector protected, to installations inside buildings such as was not badly affected (only two houses suffered electrical equipment, radios and power generators. major damage, with one being washed away) - . thanks largely to past efforts at cyclone proofing in Major droughts can lead to water shortages this area (especially following the 1958-59and 1966 ~altho~ghless s~ in the case of drinking water which cyclones). Although the damage was severe, it is IS ~amly obtained from underground sources), possible that the damage actually suffered could which can cause heavy damage to crops. Droughts have been even worse had Niue not received timely can also lead to bush fires that have the potential to warning of the approaching cyclone. To this has to seriously da~age for:ests,~ild life habitats and food be added the fact that Niue was relatively well- crop plantations, while their effectson pastures may placed in planning for such events (each of it 14 lead to.a seve.re~~ortage of natural animal feed with villages has its own natural disaster plan) an~ in ~otentIally significant adverse effects on the local carrying out an element of cyclone proofing, such as livestock mdustry. in housing. 5.2 Cyclone Ofa Infrastructure Damage Cyclone Ofa, which struck Niue early Sunday Cyclone Ofa wreaked fairly extensive damage to morning 4th February 1990, was one of the most infrastructure, particularly port facilities,the national severe cyclones ever experienced by Niue, with hospital and a government-owned hotel. Despite the winds gusting between 100and 140knots at its peak. fact that basic infrastructural services were quickly The cyclone was first reported on 25 January (1990) restored, the cyclone nonetheless significantly by radio from New Zealand and American Samoa affected government operations and private sector when the cyclone was several hundred kilometres activity.A major task that still has to be faced is the north-west of Niue. A tropical cyclone alert was relocation of several facilities to less vulnerable received from the Nadi (Fiji) Weather Forecasting locations. Centre on 3 February when Ofa was bout 450 km north-west of Niue. Travelling as it did from the north-west, the cyclone inflicted the most severe a) Fbrt Facilities damage on the west coastof Niue, including the main . residential areas of Alofi the administrative and Extenstve damage was done to a number of town centre, and Aliluki. A state of emergency was ~truct~res situated in the main port area in Alofi, declared and was maintained until 23 Februa y including the bulk fuel depot, the Customs shed, a (1990). r wharf, derrick and the main officeof the Department of Fisheries. (However, there was no structural Cyclone Ofa was associated with particularly high damage to the.w~arf and f~el tanks.) The damage wave and sea action that appears to have been the was caused principally by high seas and waves and cause of the main damage. Extremely high waves included the destruction of the access road to the uplifted boulders and other debris above the high w~arf and fuel tanks, the destruction of the Fisheries and rugged cliffs, causing severe damage to office,and severe damage to sea walls protecting the buildings and other structures sited close to the cliff fuel depot above. The cyclone also led to a pile up of edge. These conditions also generated salt-carrying coral rubble and boulders around the wharf that had sea sprays which adversely affected crops and trees to be removed to restore the serviceability of the (the damage was exacerbated by the dry spell that wharf. followed). The high winds, although less destructive than the high seas and waves, also damaged Temporary r~pairwor~ on the wharf and accessroad structures and standing crops. was d?ne quickly (takmg about two weeks), thereby restormg normal port and bulk fuel operations, while Major damage was inflicted on buildings situated major upgrading followed and was completed in close to the coast, wharf facilities,a hotel, and access 1992under technical assistance from UNDP and the channels to the sea. Agriculture, especially the more Australian government. However, further upgrading exposed tree crops, also suffered heavy damage from of t~ewharf is planned under Australian and UNDP high winds and sea spray. Much of the live coral ~sslstance. (':he wh~rf suffered struct~ral damage along the west coast was destroyed, while m~urred while the fIr:>tphase of repair work was considerable areas of reefs were covered with coral bemg undertaken.) It ISalso planned to relocate the 75 The Economic Impact of Natural Disasters in the South Pacific fuel depot inland to avoid future dislocation. These Roads escaped major damage (although many fallen planned works will entail a considerable cost, most trees had to be cleared), but on the west coast, the of which is to be provided by donors. three main access tracks to the sea were heavily damaged and required fairly costly repairs. Other facilitiesthat, to some degree, were affected included b) The Hosp·t I the cultural centre, government housing and a I a number of Public Works Department (PWD) Niue's only hospital suffered extensive damage from structures. Many government houses in the Fualahi waves and debris and from sea spay reaching the area suffered minor damage while private housing inside of the building necessitating the evacuation generally escaped major devastation. As with the of patients for a short period. The cyclone destroyed main roads, the airport was also little affected. the TB block, the geriatric ward and the operating ...... theatre and damaged septic tanks, making toilets Damage to pnvate b~l~ess premIses and facilities inoperable. Sea spray damaged anaesthetic was generally s.uperfIclal and, by and large, the machinery and other equipment. The final cost of nec~ssary repau. work ~as und.ertaken by the repair work was estimated at $0.5 million (US$0.4 business sector Wlt~OUtdirect assistance from the million). The original estimate for the building of a government. No e:ldence came t~ hand to sug~est new hospital was $3 million (US$1.8 million). thatany local business had taken Insurance against However, present plans are to relocate the hospital- cyclones. a move that is expected to cost up to $1.0 million (US$0.6 million). Soon after Cyclone Ofa struck, an attempt was made to assess the cost of the damage to the county's infrastructure - an exercise which was also intended Th H t I to help determine priority areas for rehabilitation. C) . e 0 e The results of the assessment, which was undertaken The hotel suffered heavy destruction with the by a New Zealand civil engineer, show that repair accommodation wing (20 rooms), located closest to and restoration of infrastructure facilitieswould cost the cliff-top, the most seriously affected. The approximately $3.5 million (US$2.2million) (Table reception and service areas were also extensively 5.2).Asmore informa~on came to hand, t.hisestimate damaged. The hotel had to be closed for repairs w~s.subsequently r~~lsedupwards to a figure of $4.2 which took over a year to complete. The total cost of million (US$2.6million), roughly equal to 40 per repair was an estimated $1 million (US$0.6million). cent of GDP. As this was Niue's only hotel at the time, the . destruction and closure of the hotel impacted However, It is likely that the eventual cost of full negatively on the country's fledgling tourist industry. re~tora~on of ~rvices ~il~ significantly exceed even this revised figure. This ISbecause the above cost estimates appear to have under-estimated the likely d) Other Structures The cyclone had only a minor effecton power supply which was switched off for several hours as a matter Table.5.2Infrastructure Facilities - Estimates of Cost of of precaution. There was little damage to basic Repair, 1990. structures (aided by the fact that 90% of lines were located underground), making it possible to resume F 11 . F' I . normal services. . in a matter of days. Regarding aci'l'tyI emporaryrepair ma repaii telecommunications, some damage was caused to $m $m above ground lines and from salt water affecting telephone lines in Alofi but overall, there was little Wharfaccess 0.36 0.60 disruption to normal services. (Attention to pre- Hospital 0.26 0.50 cyclone preparations, following cyclone warnings, Hotel 0.55 1.00 helped minimise the damage to equipment.) Seaaccess 0.02 0.03 CulturalCentre 0.06 0.06 Water supply was little affected although many Other 0.75 1.30 households were inconvenienced by the . . Total 2.00 3.49 contamination of tank water from salt water spray. (As noted above, wells are the main source of drinking water.) Source: New Zealand High Commission Office, Alo/i. 76 The Economic Impact of Natural Disasters in the South Pacific cost ?f upgrading the.w~arf, the relocation of the government-sponsored study carried out in 1995) hospital, a~d. the rebuIl~mg of sea acce~stracks. A s~ggests that lime is not a financially viable crop for more. reahst~c ac~ountmg for these Items (and NIUedue to a variety of factors, including intense allowing for m~~tion up to 19~5~,would probably competition from other regional suppliers, high add up to $2 million (US$1.3million) to the revised transport costs, and high labour costs figure noted above. This would mean a total cost of around $6 million (US$4million) for the repair and Passionfruit also suffered heavily from cyclonic reconstruction (including relocationof some services) winds and salt. Exports - mainly in the form of pulp of damaged infrastructure - equal to 50-60per cent and juice to New Zealand - had ceased in the mid- of GDP. 1980s,following a serious drought, but passionfruit was still viewed as a potentially major export crop. Since Cyclone Ofa, interest in this crop has • diminished - a situation that probably reflects,among Productive Sectors other things, longstanding difficulties over external markets, high levels of input (labour, materials and Cyclone Ofa dealt a severe blow to Niue's pollination procedures) as well as an obvious agriculture, especially in relation to key commercial vulnerability to natural disasters. These factors are crops such as limes and passionfruit. The cyclone likely to remain key obstacles to the recovery of significantly affected agricultural output for over a passionfruit as a major export industry. year and appears to have been an important factor in undermining the morale of many local farmers. C~conuts were heavily affected on the west coast All in all, cyclone damage proved to be a further WIthas much as 75 percent of trees totally stripped source of frustration to Niue's longstanding efforts of fruits (and leaves) and with many old trees to achieve its agricultural potential, particularly destroyed. In othe~affec~e~areas, aroun~ 25.per cent through strengthening import substitution and of trees suffered m a similar way, while m many diversifying exports (Government of Niue, 1994(a), locations the uprooting of young trees (2-4years old) p. 4). Since the cyclone, the traditional commercial was common. Such damage resulted in considerably crops have experienced a slow recovery while the lower co~onut output and reduced local sharp expansion in taro exports - traditionally a consumption and the export of coconuts. (No leading subsistence crop - is noteworthy. processingactivityhas taken place since the cessation of coconut cream production in the mid-1980s.) . Taro is both a major subsistence and an export crop a) Agnculture which has recently taken offas Niue's leading export As noted, commercial crops suffered heavily from (Niue has benefited from improved market the cyclone, with significant adverse effects on the conditions in New Zealand following the collapse overall economy as reflected, for example, in exports o~the ~aroindustry in Samoa from the effects of a (see Table5.3).Cyclone impact on subsistence crops VIraldisease.) As a ground crop, taro suffered little varied widely with more vulnerable standing crops, damage from the cyclone (inflicted mainly by salt such as breadfruit and bananas, suffering the most spays) and, in any event, is a crop that is capable of severe damage. Ground crops, including root making a quick recovery, The immediate post- vegetables such as taro, yams and sweet potatoes, cyclon~ period, however, witnessed some shortage suffered relatively minor losses. of taro m the local market. Limes, one of Niue's traditional export staples (both Regarding other predominantly subsistence crops, fresh and as juice), were severely affected. An the evidence indicates that in the cyclone affected appraisal of the industry, made under the auspices areas, ~ananas suffer~d a 90 per cent loss in of the National Disaster Council, indicated a crop production and breadfruit 50 per cent. On the other loss as high as 80-90 per cent in the main growing hand, ground crops such as yams, cassava and sweet areas (Vaipapahi and the airport area). It was also potatoes recorded minimal losses. reported that there would be no exports until the end of that year (1990).The damage to limes can be The effecton livestockwas relatively minor but some mainly attributed to the effects of high winds and problems arose as a result of ~a~age to feed crops wind-borne salts. Interest in the crop has declined (e.g. paw paws). However, NIUes only commercial considerably, but the extent to which this can be poultry farmer r~ported t~e incidence of serious ascribed to cyclone destruction is not clear.However storm stress to chickens which caused them to stop SoNote'T'. the available evidence (including an Australian' 1aymg. for three months, resu1"ting most1 productiuction urce. valued at over $12,000(US$7,OOO).The loss of feeding - 77 The Economic Impact of Natural Disasters in the South Pacific Table 5.3 Assessed Damage to the Agricultural Sector, the damaged structures, including sea access tracks 1990. and boat landings. As in the case of infrastructure, an attempt was made by the National Disaster Committee to assess the CropsIsectors Cost RepIacement . . (present) cost extent of the damage to agnculture. Such an $ $ assessment - even more so than for infrastructure - needs to be treated with some caution, but Crops 175,000 195,000 nonetheless, it does give some indication of the cost Livestock 1,000 31,000 of cyclone damage in this sector.The results, shown Fisheries 191,000 746,000 in Table 5.3, indicate that the loss was substantial: Forestry 7,000 28,000 around $0.4million (US$0.3million) in terms of lost Structures 19,500 production and $1 million (US$ 0.6 million) for replacement costs which, in total, is equal to Total 403,500 1,000,000 approximately 15 per cent of GDP. Source: NationalDisasterCouncilrecords,Alofi. Cyclone Ofa appears to have had an important influence on agricultural strategy, especially in accentuating the need for greater efforts to reduce the potential damage to agriculture and the primary sector in general. Examples of "cyclone proofing" in material, notably the nectar source in various thi~ s~ctor include current :fforts to develop ~lant flowering trees etc., also appears to have had varieties that ~an better wlthstan~ cyclone winds. detrimental effects on the local hone . d t In the case of limes, attempts are being made to graft y m us ry. existing plant varieties with a local lemon to strengthen the rooting system. Localgrowers are also being encouraged to consider the merits ofbackyard b) Forestry growing systems rather than undertaking more Damage to forests was minimal but it appears that extensive and more risky operations. Regarding the cyclone played a part in the launching of a major passionfruit, experiments are being conducted with reafforestation project under New Zealand aid. The a more hardy self-pollinating variety (King 7) main objective of this initiative is to promote forestry introduced from Rarotonga. Vanilla beans are also developmentfor export and for meeting localneeds. being experimented with as a possibility for Particular attention is given to the growing of trees promoting diversification in Niue's commercial (such as mahogany and Australian red cedar) that crops. As also noted, current reafforestation efforts are resistant to strong winds. Trial plots have been are emphasising the growing of trees that are not developed at Vaipapahi Farm and other localities to only quick growing but also displaying greater test various species for their ability to withstand resistance to strong winds. Such changes can be strong winds and to suffer damage. Theses trials valuable in reinforcing Niue's capacity to minimise have confirmed that the most suitable varieties are damage to its agricultural base from natural mahogany and the Australian red cedar. disasters. C) Fisheries 5.3 Economic Aspects This sector was fairly severely dislocated as a result of damage to fishing outriggers (20 canoes were Cyclone Ofa had a decidedly adverse impact on reported lost), dinghies, small boat landings, and sea Niue's embryonic tourism industry (Government of tracks. (Apparently no fishing aggregating devices Niue, 1995,p. 2). The destruction of the Niue hotel (FADs)were lost.) There was extensive damage to (which took a good part of 18months to restore) and live coral (assessed as 100% loss from Alofi to unfavourable perceptions about the extent of cyclone Hikutavaka) and reef coral and fish habitats with damage (and possible risks) - including that inflicted probably significant long-term effects on inshore on places of natural beauty and recreational value - fisheries. Fresh fish supplies were tight for around would have discouraged many potential visitors two weeks but were then relieved by supplies from from travelling to Niue. To a degree, the damage to the east coast and by fish caught in deeper waters. the industry meant a loss of momentum that is likely Donor assistance is being sought to repair some of to take many years to overcome. The setback to the 78 The Economic Impact of Natural Disasters in the South Pacific industry is, however, not apparent from the official Niue's private sector is very small and dominated statistics of tourist arrivals (including Niueans by trade. Information on cyclone damage is limited visiting family and friends). As Chart 5.1shows, the but what is available suggests that the cyclone had number of tourists rose fairly markedly in 1990(1989 relatively minor effects.Trading activity would have was a poor year due to limited capacity of the aircraft picked up during the immediate post-cyclone period (Samoa Air) which served Niue.), although tourist as a result of more buoyant demand for imported numbers were still below those recorded in 1988.In products, and the shortage of local produce. (As light of further strong rises that took place in 1991- pointed out by S.Talagi,"...the immediate days after and over the next two years - it would appear that a cyclone are not usually a time of great need for the real loss relates to a possibly larger number of food - the most critical period is usually a month or people who could have visited Niue in 1990 but so afterwards when the fruits of the trees are decided against it because of Cyclone Ofa. For Niue, exhausted and the root crops recovering".) At the this would have meant a loss of income which such same time, the increased availability of emergency people would have generated throughout the local relief food and related items would have tended to community. reduce the demand for many trade goods. Tourism is a key element in Niue's development As expected,Niue's external trade balance worsened strategy, and considerable efforts are presently being as a consequence of the cyclone. As Chart 5.2 and made to improve accommodation, strengthen air Table 5.4 show, export earnings slumped over the transport and undertake overseas promotions. Such 1990-91 period - reflecting the dislocations to the an emphasis has evolved out of a need to build a country's agricultural base - while imports rose more diversified economic structure as a basis for sharply, giving rise to an enlarged trade gap. The achieving greater self-reliance and sustainability. In decline in export earnings (equal to 11per cent) that part, this emphasis can be ascribed to agriculture and occurred in 1990can be attributed to cyclone-related its demonstrated vulnerability to natural disaster effects on the export supply of ripe and fresh devastation. coconuts and a variety of root crops, including taro. Imports expanded by a large 34 per cent in 1990 government finances was considerably eased by which largely reflected higher levels of import generous donor support, especially from New demand for primary foods and industrial supplies Zealand. Cyclone Ofa struck at a critical time when (processed). Niue was still heavily committed to the implementation of a major structural transformation Niue's capacity to sustain an enlarged trade deficit program initiated in the mid-1980s aimed basically was made possible by increased flows of officialaid, at enhancing public sector efficiency and boosting notably from New Zealand, in response to disaster private sector development as a basis for attaining needs. Tourism receipts and personal remittances greater self-reliance and sustainability". In the face from overseas relatives may also have played a part of increased pressure arising from cyclone but the extent of such flows is difficult to assess rehabilitation needs, government was resolved to because of lack of data. maintain the thrust of its approved development program and to keep a lid on recurrent expenditure. • Government's response was also shaped by a 5.4 Macroeconomic Impact longstanding commitment to the principle of fiscal prudence and discipline in the conduct of fiscal The post-cyclone rehabilitation needs had the policy. In thi~, a ,:ital .co~s~deration. was potential to be highly disruptive in terms of govemmen~s.wlsh to hve within its mea~s m ~he government fiscal situation but, in fact, pressure on sense of avoiding the need to resort to debt financing 9 The basis of the structural adjustment program was the so-called Niue Concerted Action Plan (NCAP) which was signed in 1986 between Niue and the government of New Zealand. The trUlinfocus of the ~CAP was to reduce the size of the public sector, stimu,late private sector'invest~ent and reduce t~e degree of dependence on New Zealand as a source of official ald. Under the NeAP framework, by the early 19905, NIue was able to make consIderable progress In the implementation of these basic aims. 80 The Economic Impact of Natural Disasters in the South Pacific Table 5.4 Export, Import and Trade Balance, 1988-93 (NZ$ '000). 1988 1989 1990 1991 1992 1993 Exports(fob) 91.3 89.5 80.0 80.0 185.8 543.2 Imports (cif) 4,011.0 5,236.0 7,006.0 5,863.0 7,221.0 6,962.0 Tradebalance -3,919.7 -5,146.5 -6,926.0 -5,783.0 -7,035.2 -6,418.8 Source: Niue's Statistical Unit, Premier's Office,Aloft. as a means of funding fiscaldeficits. (However,even significantly affected by the cyclone. Total ifgovernment was prepared to borrow,it would have government expenditure rose sharply in both 1990 to face many practical difficulties not the least of and 1991-by30percentand22percentrespectively which was the problem of accessing potentially (Chart 5.3) (Government of Niue 1994(a),p. 42). A interested lenders.) In the event, given generous notable feature of this expansion was a sizeable donor support, Niue was able to avoid significant increase in capital expenditure roughly of the order fiscal imbalance while simultaneously maintaining of 42 per cent in 1990(but falling off thereafter) with budgeted levels of development activity with only much of this increase due to cyclone rehabilitation minor modifications. expenditure. Recurrent expenditure rose only slightly in both 1990and 1991before easing off. Data on government expenditure and revenue are somewhat fragmented, but what information is The increase in government expenditure over the available shows government expenditure was 1990-91 period was predominantly funded from The Economic Impact of Natural Disasters in the South Pacific donor grants (other than the annual budgetary grant Domestic prices also appear to have been little from New Zealand). These totalled $600,000 affected by the cyclone. Admittedly, prices for some (US$370,000)in 1990but rose strongly to a level of local products rose during the post-cyclone period, $4 million (US$2.5million) in 1991.However, there but any such increases would have been short-lived was also a notable increase in receipts from local and would have had limited impact on overall prices government revenues, particularly import duties, for the added reason that the local market for fresh which would have contributed in some degree to the produce is very thin. In fact, domestic prices increase in govemment expenditure. Overall, largely increased by around 5 per cent in 1990- a rate that because of substantial donor support, Niue was able appears to have been domina ted by price changes to avoid major fiscal imbalance (and it actually in New Zealand - the major source of imports - and, achieved small fiscal surpluses in both 1991 and to some extent, by the effectof price control applying 1992). to a wide array of imported goods. New Zealand played a leading role in providing cyclone rehabilitation relief assistance and by the end 5 5 OlO ght of 1990, the New Zealand government had • I U committed nearly $2 million (US$1.2 million) for rehabilitation purposes. Most of its contributions In common with many other very small low-lying were drawn from a special fund (the Emergency and island countries in the South Pacific, Niue is Disaster Relief Fund) and directed at assisting the particularly prone to serious droughts-aneventthat housing and hotel sectors. (Modest amounts were normally occurs during the dry season which, in also distributed to a few localbusinesses to help them Niue, runs from May to November. The effects of cope with repair work.) While Australia provided drought are exacerbated by the lack ofrunningwater approximately $500,000(US$310,000)for repair work and by Niue's thin soil with poor moisture retention on the wharf, the produce market and the capacity and if prolonged, droughts can eventually broadcasting building, contributions were also made affect the supply of (mostly drinking) water drawn by several other donors, including UNDP and the from underground sources. Over the past 20 years, EU. With the rebuilding task (including major Niuehasexperiencedatleastthreeseriousdroughts upgrading and relocation works) yet to be - 1977-78,1982-83and 1987.The droughts of 1977- completed, significant donor support will continue 78 and 1987 each lasted several months but the to be needed. drought of 1982-83persisted for 18months and was one of the worst on record. In sum, thanks largely to this substantial donor support, Niue was able to sustain significantly high The economic damage that a major drought can levels of cyclone-related expenditure without having cause can be both severe and long-lasting. Droughts to curtail vital development projects (or significantly can inflictheavy damage to crops and lead to serious modify its structural adjustment program). Nor did shortages of fresh produce for localconsumption and it have to divert funds away from budgeted projects for industrial and export use. They can result in the or to resort to debt financing. As a result, generally drying up of pastures and a shortage of animal feed Niue was able to pull through the worst of the post- with potentially serious effectson the local livestock cyclone period with relatively minor adjustments to industry. Droughts also create conditions for the fiscal policy and its financial position basically outbreak ofbushfires that can do serious damage to sound. forests. Damage to a country's agricultural base . . could have serious repercussions on external trade, The Impact ~f cyclone destruction on other employment and eventually,real GDP.As with major ~ac.roeconormc ~reas appea~s to hav~ been rath~r cyclones, droughts can lead to a loss of interest in lImited: Certaml~, the ~Izeable mcr~~se. m farming and this could have potentially significant expenditure assocl~ted With the ~e~ablhtatIon long-term effects on agriculture and prospects for program (underpmned by additional done economic growth in general. contributions) would have had the effectof boosting the level of economic activity (as it did imports). The 1982-83drought lasted from mid-1982 to well However, these developments had no relevancefrom into 1983 and caused considerable damage to all the viewpoint of monetary, exchange rate and crops. Lossof coconuts and the killing offof old trees balance of payments policies. Since Niue is part of resulted in a much diminished supply of fruits for the New Zealand monetary system, she is not in a both local consumption and local processing position to actindependently in these areas. purposes (for the export production of coconut cream). Passionfruit and lime - the two' 'leading The Economic Impact a/Natural Disasters in the South Pacific commercial crops at the time - suffered heavy Cyclone Ofa inflicted heavy damage to a number of damage. Staple crops for subsistence, including taro, major structures, including port facilities, the tapioca and yarns, suffered less but still significant national hospital and hotel, as well as to agriculture, damage. Pastures dried up, giving rise to a serious including several major export crops. The shortage of local feed, forcing the Department of Widespread damage to commercial crops, notably Agriculture to slaughter around half of its 600head lime, passionfruit and coconuts, not only impacted of cattle. adversely on exports but also affected prospects for developing possibly viable processing activities. The drought resulted not only in reduced exports Damage to Niue's only hotel at the time probably but also to a stronger demand for imports, especially had significant adverse effects on the country's of foodstuffs. Taro and other fresh produce had to embryonic tourism sector. The cost of repairing the be shipped from Samoa, ripe coconuts from Tonga damage to infrastructure alone was assessed at for processing purposes, and increased quantities of around $4million (US$2.6million) - equal to roughly animal feed also had to be imported. The drought 40 per cent of GDp, while the cost of rehabilitating was a major factor in forcing the closure of the fruit agriculture was placed at well over $1 million (US$ processing plant (and its relocation to the Cook 0.6 million). Fortunately, generous donor assistance Islands) - a major setback to ongoing efforts at was forthcoming as Niue by itself,given its restricted economic diversification. Damage to livestock was budgetary base, would not have been able to cope a key factor in prompting the Department of with the cyclone-related rehabilitation needs. All in Agriculture to change its strategies toward the all, largely through donor support combined with development of the livestock industry, specifically prudent financial management, Niue appears to be in favour of encouraging household-based coping well with the rehabilitation effort - and operations as opposed to large-scale pasturing without suffering major dislocations to its ongoing systems. development program or significant macroeconomic instability. The severity of the 1982-83drought impressed upon the government the need to take more positive steps Niue appears to have made notable progress in toward combatting the effects of droughts on certain area of cyclone mitigation (e.g. in relation to agriculture. Among the main initiatives that have cyclone proof housing) but other possibilities need been taken to date are measures to provide water to be explored. Thus, attention needs to be given to storage facilities in the more concentrated farming developing adequate building standards (and to the areas; to foster small-scale livestock activity; and to location of major structures) and to the possibility of encourage farmers to continue the cultivation of establishing an adequate reserve fund for disaster hardy root crop varieties. Regarding forestry,efforts emergency purposes which would allow a quick are being made to clean areas around trees as a way response to rehabilitation needs and reduce the of reducing damage from bushfires. degree of dependence on donors. In the field of agriculture, present attempts to develop more hardy varieties of crops should be maintained. 'ing Remarks Consideration should also be given to possibilities 5,6 Co..nclud. for establishing appropriate facilities for ensuring against natural disasters and for providing some As the above analysis has shown, over the last 15-20 form of post-disaster assistance to the business years, Niue has suffered heavily from the effects of community to help it get back on its feet. several major natural disasters with the cyclone of 1990 (Ofa) and the prolonged drought of 1982-83 In so far as droughts are concerned, the drought of particularly severe. Given Niue's small size, such 1982-83demonstrated the serious damage that can disasters can affect the entire country and cause be caused to the national economy, particularly serious and widespread damage to the country's through the effects on agriculture. Current efforts economic and natural resource base. The scale of aimed at reducing the extent of drought damage to destruction - and the associated rehabilitation effort the national economy would appear tobe on the right - can be such as to deal a major (and possibly track and should be continued. In this, efforts to irreversible) blow to a country's efforts to achieve provide water reservoirs in the main farming areas greater self-reliance,sustainability and other national and experiments with the development of more development goals. disaster resistant crop varieties are particularly important. 83 The Economic Impact of Natural Disasters in the South Pacific 6. PAPUA NEW GUINEA • RECENT MAJOR DISASTERS 6 1 B k d This chapter attempts to assess the economic impact I ac groun of a number of majordisasters that have struck Papua New Guinea over the recent period and which have Papua New Guinea is the largest country in the South imposed, or threatened to impose, a heavy cost on Pacific with a land area of 463,000 km2 and a the community. These disasters are the Rabaul population of close to four million. It shares a volcanic eruptions, landslides in the Finisterre common border with Indonesia (bordering the region, damage to bridges from flooding and province of Irian Iaya) and comprises numerous sedimentation, and coastal inundation and erosion offshore islands including New Britain,New Ireland in the Manus Islands. The analysis is based mainly and Bougainville. The main island is dominated by on information collected during the writer's visit to massive and rugged mountain ranges stretching Papua New Guinea. 2,500km from one end of the island to the other,but interspersed with numerous fertile valleys.Afeature of the mainland is the presence of many wide, well- 6 2 Rbi "'''I I Erupt"ons watered valleys extending from the headwaters of I a au vu camc I the Markham River to the western extremity of the island on both sides of the mountain divide. The The Rabaul volcanic disaster was one of the most population is marked by great ethnic diversity and damaging natural events experienced by ~apua New over 700 different languages are spoken. Guinea over its recent history.The eruptions caused severe damage to the social and economic base of The economic life of Papua New Guinea is the Gazelle Peninsula with particularly heavy dominated by agriculture (with ~orestry a~d damage to infrastructure and buildings, and affected fisheries) - both commercial and subsi~tence -."":ith a large proportion of the peninsula's population, as much as 85 per cent of the population deriving estimated at 100,000 at the time. The effect on some degree of subsistence from it. However, the agriculture was also significant resulting in a sharp mining of minerals, notabl,Y gold, copper and slump in the production of copra, cocoa and, to some petroleum, has become a major component of the extent, subsistence crops. The impact of volcano- economy, while manufacturing, although still.small, related damage on the provincial economy has been has grown to a useful size. Exports are dormnated considerable but, largely because of the size and by mineral products, followed by a range of primary diversity of the country's economy,the overall impact sector products such as forestry products, coffee, at the national level has been relatively subdued. copra and palm oil. Very little growth in real GDP Donor response proved highly positive, especially has occurred since 1993 (when GDP rose by 16%) in providing funding assistance for the restoration primarily due to a decline in mining activity. work now under way. The advent of the disaster . . .. prompted the government to build up Kokopo Largely because of its Size,geographical location and township 45 km by road south-east of Rabaul, as physical diversity, Papua Ne~ Guinea is vUI~erable the main' administrative centre and hub for sub- to a wide rang~ of natural ~isasters. These Include regional trade and related activities. volcanic eruptions, landslides, floods, drought, coastal inundation and erosion, locust infestation, TheRabaul disaster commenced early in the morning and frost (in highland areas). Other disasters (partly of 19September, 1994with the almost simultaneous man-made) are shark attacks and people l?st at sea. eruption of two _Tavurvur and Vulcan- of the three Many of these disasters can have a severe impact on main volcanoes on the Gazelle Peninsula. This event the social and economiclife of affecte? areas and.can was preceded by over 24 hours of strong and have significant carry-over effects Into the ~lder fluctuating seismic activity. The two eruptions provincial and national levels. They can be hig~ly produced hot pyroclasticflows,ash, rocks,scoria and destructive of infrastructure, hOUSIng,commercial hot gases. Ash clouds reached heights of around property, agriculture and natural resou~c.es,and 60,000feet, while huge quantities of pumice were impose a heavy cost on local communities and distributed widely over Rabaul, including Simpson govern men t au thori ties. They can also have Harbour. Eruptive activityremained strong for about significant destabilising effects on the broader a week and then moderated, with Vulcan becoming macroeconomy as reflected in changes in the fiscal dormant by the first week of October. Activity on situation, monetary policy, the balance of payments Tavurvur ceased briefly in late 1994, but from and domestic prices. 85 The Economic Impact of Natural Disasters in the South Pacific February 1995, this volcano began emitting ash Employment - affecting a total workforce estimated clouds to heights of up to four kilometres, and at 7,000 in Rabaul - fell away dramatically. continues to do so today. Commercial activities in Rabaul are presently largely . . restricted to those connected with port and wholesale The eruptions caused almost total devastation to the trading, retail trading and hotel operations (the Rabaul township, sited on the north-eastern tip of Hamamas Hotel opened as soon after the volcanic the island of New Britain. Particularly severe was activity as it was deemed safe to do so). While the destruction of infrastructure and buildings, Rabaul's resident population totalled up to 18,000 including commercial structures, public utilities and before the eruptions, the residents now number only houses, as well as roads. It was estimated that about a few hundred. 80 per cent of houses in Rabaul were either totally destroyed or will require major reconstruction with Nonetheless, some efforts are being made to attract most of the remaining 20 per cent requiring at least business back into the Gazelle area and to boost some repair work (AIDAB 1994(b), p. xii). The ash economic activity. The Industrial Centre falls damaged roofs causing buildings to collapse, Development Corporation (ICDC), in response to while ash flows, brought on by periodically heavy requests to provide industrial land for rains, damaged the inside of buildings, furniture and manufacturing and other commercial activities for office equipment. Flooding, mud flows and flash disaster affected businesses and new ventures, is in floods ensued as a result of the rains. Roads were the process of building an Industrial Centre atUlavo severely damaged by the ash falls and the effects of at a cost of around K17million (US$15million). This flooding and run-off. Damage arising from corrosion facility is expected to be completed in 1998. was also a major problem due to the sulfureous nature of much of the volcanic fallout. Regarding agriculture, damage to crops was largely a result of Damage to Infrastructure ash falls and associated acids which destroyed foliage and fruit. . As noted, the eruptions caused severe damage to The disaster elicited an immediate and substantial infrastructure and public utilities which, in turn, have response. A state of emergency was declared (which had ~jor economic and financial consequences. The was subsequently lifted in April 1995); a major repaIr and ~eplac~ment of damaged assets have put evacuation program was undertaken involving up a hea~~ financial burd~n on the government to 18,000of Rabaul township's permanent residents; authorities (~lthough ~eavtly supported by donors). care centres established; workers (mostly non-Tolai) The destruction of private sector stru~tures ~nd the repatriated; and government administrative loss of ~utput as a resul~ of th~ ~~sruphons of operations relocated at Kokopo. Food, shelter and productive ~nd commercial a.chVItIes have. also water had to be provided by the PNG government Imposed major costs on the business community for ~heaffected population in the Gazelle Peninsula From the available evidence, it appears that damage (estimated at up to 100,000).As schools were forced to roads airport and post and telecommunications to close, school children had to be. reloca ted buildings and facilities was most severe. All three elsewhere. Measures were taken to acqUIreland for main roads leading to Rabaul suffered major resettlement purposes (mostly around Kokopo), damage while some north coast roads were wiped ~hile ~fforts were made .to mo~ilise the necessary out. On: accessroad to Rabaul (Namanula Hill Road) fmancial. resources, including those from till . losed. An ass ssment by n AIDAB . . l azenci th h bili s remams c e a mternationa. agencies, to support ere a. I itation (now AusAID) sponsored team, which carried out and rest~ration work. Ot~er.key ~easures ~ncluded its investigations in late 1994, estimated that the the appom.trnent ~f a Provincial DIsas~erUnit headed replacement cost of damaged roads would be around by a full-time o~cer, and ~he establishment of the K15 million (US$13 million) (Table 6.1) (AIDAB Gazel~eRestoration Authority (GRA).to manage and 1994).Lakunai Airport and its associated facilities coordinate the post-disaster restoration program. were completely destroyed with the runway buried The commercial life of Rabaul now bears little under two metres of volcanic ash. The full upgrading resemblance to what it was prior to the disaster. ofTokuaAi~port,45kmsou.th~eastofRabaul,.w~uld While many businesses have relocated in Kokopo, cost an estimated K10 million \l!~$8.5 million), or are in the process of doing so, many have chosen Damage to post and telegraph facilities was caused to move away from the Gazelle Peninsula altogether. by the collapse of the telephone exchange and post office building, broadcast studio and extensive 86 The Economic Impact of Natural Disasters in the South Pacific damage to equipment. The cost of relocating these Table 6.1 Estimated Cost of Replacing Damaged facilities at Kokopo is an estimated K15 million Infrastructure, 1994. (US$13 million)" . di th b ildi (b th .. 1 d Facility/Service Kmillion Regar mg 0 er Ul mgs 0 provmcla an ~ational govern.ment),. those that were ?estroyed Roadrepair 15.0 included the pohce station and barracks, fire station, TokuaAirportsystem 10.0 library, provincial government administration Waterandsanitationsystem 3.0 buildings, and schools (up to technical school level). Electricity 8.6 Disruption to the supply of electricity was caused Telecommunications 14.5 by damage to transmission and distribution lines, Education.. 10.7 although the main power generation equipment Health(buildings) 2.4 'T' 1 1 .. Lawandorderstructures 80 were una f.fected . lata rep acementcost. in education E'mergencyservices 2'0. and e~~tnc power sectors were es~~ated at K1~and Provincialgovernmentassets 4.2 K9 million (US$9,4and US$7.6million) respectively Nationalgovernmentbuildings/otherinfrastructure 21.6 (Table 6.1). Th~ WM Several infrastructural facilities stood up well to the disaster and were little affected. Thus the wharves Source: AlDAB, Rabaul\blcanicDisasterNeedsAssessmentMission in the port area suffered no structural damage FinalReport,1994,Canberra. although operations were disrupted for some time ------by the pumice raft on the harbour and by siltation. Water and sewage systems were not badly affected and only water tanks suffered major damage. the Rabaul eruptions came to around K60 million (US$51million) (Blong and McKee 1995,P: 39).As a As assessed by the AIDAB team (noted above), the reasonable approximation, it also assumed that the total estimated cost of replacing (and upgrading in value of uninsured losses was K120million (US$102 some cases) damaged infrastructure came to million) - double the insured losses. Total private approximately KlOOmillion (US$85 million) (Table sector losses therefore amount to around K180 6.1). (This team had identified around 84 priority million (US$153 million) which when added to projects for possible implementation.) This figure government losses, results in a total direct loss of applies to both national government and provincial K280million (US$240million). government assets and, if anything, probably errs on the low side. (The evidence supports that certain The above estimates cannot be regarded as either a damaged facilities in the education and tourism complete o~ accurate indication of the destruction sector were inadequately taken into account.) caused to infrastructure and related sectors. An Nonetheless, the fact that the assessed cost of K100 important gap, for example, would appear to be the million (US$85 million) was equal to roughly twice lack of data on losses suffered by the village sector - the provincial budget at the time gives some principally houses, furniture, working tools, and perspective to the severity of the damage inflicted ~tanding crops. Damage to the natural environment on infrastructure. IS also excluded. These and other aspects of the disaster losses could amount several million Kina. Damage to private sector facilities, including commercial buildings, equipment and houses, was In any event, the above estimates are useful in also heavy. Detailed assessment of the damage provi~ing an indication of the heavy toll that these caused by the eruptions are not available but rough eruptions have brought on the Rabaul area and of estimates of the order of magnitude are contained in the post-disaster restoration and rebuilding needs. a report published by the Insurance Underwriters As mentioned above, the K100 million (US$85 Association of Papua New Guinea Inc. (Blong and million) cost to government, both central and McKee 1995).Based on information provided by the provincial, is equal to twice the budget for the entire Insurance Commission of Papua New Guinea, this province, and around 6 per cent of total expenditure report showed that the total claims resulting from (including net lending) by the central government lQ These values are based on ~osts as at end-1994;.current values ofthe assessed damage would be significantly higher because ofthe inflationary effectsof the recent droaluatwn of the Kina. Note that In 1994, the Kina was equal to approxImately U5$O.85 and Aust$1.09 and at the time of writing (June 1996) was TOughlyequal fo the Australian dol/ar. 87 The Economic Impact of Natural Disasters in the South Pacific in 1994 (Government of Papua New Guinea 1995). eruptions. The value of lost output for the year The aggregate figure of K280 million (US$240 following the disaster, based on prevailing million) cited above (which comes to approximately commodity prices (fob),would be in the order ofK5.5 K336million (US$265million) at end-1995prices) is million (US$4.6million) for cocoa, and K4.5million equal to five times the provincial budget, and 5 per (US$3.7million) for copra - substantial amounts. cent of the GDP for the whole country. The loss of output can be attributed to damage to crops caused by ash which can effect output for up Productive Sector Impact to 6-12 ~onths. T~e repatriat~on of labour, a large proportion of which was agncultural labour, was . , also a major factor. Other contributing factors were The er~phons destr~yed much of. Rabaul s the dislocation to shipping which brought export prod uC~lV.ebase and Impac.ted heavily on ~he activity to a halt for up to three months and the forced econormclifeof the Gazelle Perunsula,not tomention stoppage of copra oil milling for export. the province as a whole and the New Guinea Islands Region. Many businesses were destroyed while the The effectsof lower output of cocoa and copra in the commerciallife of Rabaul came to a virtual standstill. Gazelle Peninsula are apparent in Papua New Workers were laid off, resulting in a loss of income Guinea's export performance for 1994 and 1995. and a sharp rise in unemployment (forcing a major According to Kaivovo (1995): exodus of workers from the Gazelle Peninsula). While some businesses have decided to quit the "...prirr;arily as a result of the eruptions, Papua New Gazelle Peninsula altogether many others have Gumea s export of cocoa/ell from an expected 8,000 . .' . tonnes to 500 tones during the last quarter of 1994 moved. then opera t~ons to. Kokopo and this with an estimated value of K8 million. The lost value reestablishment of businesses m Kokopo and other of copra oil export for the same period isestimated at centres has helped relieve unemployment and K4 mil/ion (US$3.4 million)." contributed to significant economic recovery. As at . . the time of writing, the process of recovery appears ~ll ~~ all, the~e l.osses clearly contnbuted to a to be accelerating, stimulated by the restoration slgnIf1cantdeclmem.t~evolumeofexportsofcocoa, effort. The growth of the construction and transport copra and coconut Ol.l.mboth 1994~nd 1995 (Chart sectors appears to be at the forefront of thisrevival. 6.1). Based on prevailing export pnces, the loss of . export earnings for the two years is estimated at K240 Damage to agriculture has been relatively modest, million (US$204 million) for cocoa, K70 million with the main agricultural areas - in north-east (US$6 million) for copra, and K130 million for Gazelle - some distance away from the main danger coconut oil. areas. Nonetheless, the eruptions had significant . .. . effectson the export production ofcocoaand coconut Fortunately, strong commodity pnce increases m products of which East New Britain is a major both 1994and 1995~ore than.compe~sated for the producer (the province normally accounts for around lower export production associated WIththe Rabaul a half of the country's cocoa exports, a large disaster. but the ~igher prices also implied a proportion of copra, and two-thirds of coconut oil). sUb~tantial loss of income tha~ would ha~e been The impact on other marketab Iecrops was probably ~eahsed had there. been. no disaster ..N~tionall y, also significant. In relation to cocoa and copra, Table Improved C?mmodity pnces resulted m increased 6.2 shows a sizeable slump in production - a drop export earnmg.s f~om cocoa ~nd coconut J;roducts that can be largely attributed to the effects of the and a notable nse in total earmngs from agncultural products as a whole. Consequently, the potentially adverse impact on the overall balance of payments and international reserves did not eventuate. Table 6.2 Volume of Cocoa and Copra Produced in East New Britain: 1990/91 - 1994/95 ('000 tonnes). Economic Aspects 1990/91 1991/92 1992/93 1993/94 1994195 From the above, it will be apparent that the eruptions had a traumatic impact on the social and economic Cocoa 18.9 19.9 18.7 15.7 13.2 life of the Gazelle Peninsula, with significant Copra 37.4 44.3 45.1 28.4 30.2 implications for the province and the country as a .' whole. The disaster has forced government Source: Department of Agriculture and Livestock, Port Moresby. authorities to take major decisions regarding the 88 future role of Rabaul, the development of Kokopo were largely mitigated by improved export prices as the main administrative and business centre, and and a relatively quick recovery. In the case of the the launching of a major post-disaster restoration business sector,to some degree losseswere alleviated program. A key feature of the restoration effort is by insurance payouts and by financial support from the involvement of several major donors who, as a head offices.Dislocation to business combined with group, will be responsible for funding the bulk of labour repatriation schemes resulted in a sharp drop the restoration projects. in employment which only began to improve as the relocation process began to take effect. Prices for As noted, the eruptions devastated Rabaul/s many local produce rose markedly as a result of the infrastructure, housing, public utilities and disaster but tended to ease fairly quickly as supplies productive base. The cost of replacing damaged arrived from non-affected areas. Housing rents also infrastructure has been estimated at around K100 rose sharply and have tended to remain high due to million (US$85million),while the damage to private the continuing shortage of accommodation. sector assets comes to an additional K180 million (US$153million). The financial implications of these The disaster exerted considerable pressure on the figures pose considerable challenges for the budgetary resources of the provincial government. government authorities at both provincial and Taxrevenue fell from a normal level of around K8 national levels and in the absence of donor support, million (US$6.8 million) to K2 million (US$1.7 these costs would have represented an extremely million) in 1994,in the main reflectinglower receipts heavy burden on government resources and from sales tax and export levies. At the same time, probably significant delays in reconstruction work. emergency and relief-related expenditure, including that associatedwith the establishment and operation The impact on the productive sectors was equally of care centres, expanded. A total of K5 million severe with the heavy destruction of business (US$4.2 million) was spent by the provincial premises and damage to major export crops and government for such purposes during the emergency other agri,cultural prod~cts. Significant losses were period. Pressure on the provincial budget will recorded In the production of cocoa and copra - the continue, especiallyin the funding ofland purchases two main commercial crops - although these losses for relocation purposes (as many as 18 villages in 89 The Economic Impact of Natural Disasters in the South Pacific the worst affected areas are to be resettled on land in addition to the emergency relief provided during purchased by the provincial government}. the early stages of the disaster. Following consultations with government in late 1994to work One of the mo.stsignificant initiatives eme~gingfrom out a program of assistance, the participating donors the Rab.aul disaster has been the launc.h~ngof the pledged over K100million in the form of soft loans restoration program under the supervISIon of the and grants for restoration. The World Bank will GRA - a body under the auspices of the national allocate US$25 million (US$21 million) from four government but with major provincial government unutilised loans for short and longer-term projects involvement. The main. tasks of th~ GRA ar.e to including those in civil aviation, fire services, oversee the development.Imple~entatio~ ofproJec~s education and police. The EUwill provide a package needed to restore essential services, build up basic of K10.8 million (US$9 million) to restore and social and. economic in~astructure, coordinate the improve education - up to technical and business c~nstructlOn of a business centre near the new college level- as well as K4 million (US$3.4million) airport, and generally to ensure an orderly from funds for agricultural development and K2 dev~l~pm~nt of the Ko~opo area as the new million (US$1.7 million) for rural water supply. administrative and sub-regional centre. (An Urban AusAID has offered around K32 million (US$27 Plan for Kokopo has been developed for t~is million)for the rebuilding of roads, schoolsand other purpose.} .Fo~the purpose, the GRA IS~evelo:rIng facilities and JleA has pledged grant funds of over and coordinating a total of around 50major projects K14 million (US$12 million), mainly for the for implementation up to the year 2003.Theseproject upgrading of Tokua Airport. categories relate mainly to the rebuilding and provision of roads, civil aviation facilities, land These contributions - as with funds provided by the acquisition and development, and education and provincial and central governments - are not without health areas. The total development program has possibly Significanteconomicand financialcosts. For been costed at around US$100 million (US$85 one thing, donor contributions in the form of soft- million), the bulk of which is to be provided by term loans, while virtually free of interest costs, lead international donors. The planned program ofworks to an increase in government's international debt will provide a strong stimulus to the local economy, which eventually has tobe repaid. For another, funds with significant spin-off effectsfor the private sector. so used have a cost in the sense that they could have been used for funding alternative development The restoration program under the supervision of activities that are capable of enhancing productive the GRA addresses immediate needs including the capacity and the rate of economic growth. upgrading of Tokua Airport; the acquisition of land for the resettlement of displaced villagers; the Although traumatic at the local level, the impact of finalisation of the Kokopo town plan to enable the the Rabaul disaster on the national economy appears relocation of the administrative centre and to have been relatively mild. This is understandable commercial activities; the development of industrial given the considerable size of the Papua New Guinea blocks in the Kokopo area; and the relocation of economy and the relative diversity of the country's education and health facilities (Kaivovo 1995).Such economic base, both monetary and subsistence. A activities will help promote the realisation of basic further alleviating factor was the much improved longer-term objectives, including the establishment terms of trade which more than offset the lower of Kokopo as the main administrative centre; the disaster-induced volume of output. elevation of Tokua Airport as the principal airport in the Gazelle Peninsula; the restoration of damaged On the budgetary front, the main task that fell on infrastructure; and the development of essential the central government was to assist in the services and utilities in the town of Kokopo. emergency relief work and the mobilisation of the necessary financial resources for the restoration As at the beginning of 1997,around 30 projects had program. Up till now, the central government has been undertaken under the supervision of the GRA. paid out around K12 million (US$9.6million) for These included 11 basic infrastructure projects emergency and restoration work - funds which were (principally under World Bank support, including partly raised by delaying a number of projects and training); four essential services (including utilities); partly fromcutting current expenditure. Fortunately, 14 social service projects (education, health and government was able to enlist substantial donor safety); and two economic service projects. support, thereby reducing the financial burden on itself. Overall, central government support for the The donor community has committed substantial restoration work is unlikely to exceed K30 million resources for rehabilitation and restoration activities (US$26 million) which is fairly modest when 90 The Economic Impact of Natural Disasters in the South Pacific considered against its annual spending Estimates provided by the Disaster Unit in Madang commitments. indicate that the cost to government authorities of . coping with a major eruption in one of the many The Impact of lower cocoa and copra output on the offshore volcanic islands could amount to many balance of payments appears to have been negligible millions of Kina. Thus in the case of Karkar Island, owing principally to the effect of favourable which has a population of 25,000, the cost of commodity prices and substantial increasesin export evacuation and emergency relief could be as high as earnings from other export crops (notably coffee)and K500,000 (US$400,OOO),and the provision of care minerals. In fact, export earnings from agriculture facilities for, say, a period of three months, another rose substantially inboth 1994and 1995,contributing K400,OOO(US$300,OO).Rehabilitation costs, incurred toward a much stronger balance of payments when the evacuees return to their home villages or situation. Thus, 1994saw a significant reduction in are relocated, can cost as much as K800,OOO the overall deficit in the balance of payments and, in (US$660,OOO),while the cost of rebuilding schools, 1995, a large surplus was recorded which, in tum, roads, water and health facilities could amount to boosted international reserves. several million Kina. As Karkar Island produces . .. considerable quantities of copra and vegetables, the Inflationary effects, transmitted mainly through value of lost production would also be large. higher prices arising, fr~~ supply shortages, only Assistance from the central government would be appear to have bee~ significant ~t the local level and, forthcoming, but it can be expected that the cost to eve~ so, were relatIve~yshort~lIved. Consequently, local and provincial authorities would still be very the Impact on the national pnce level would have high and would invariably call for sacrifices in other been barely perceptible. Regarding changes in fiscal, categories of expenditure. monetary and exchange rate policies, the evidence suggests that the disaster had little consequence. Similarly, the impact on the country's GDP is not at . • all obvious. Available data show that real GDP rose Concluding Observations moderately in 1994- a result that was underpinned by agriculture, mining and community services. Coping with natural disasters of the magnitude of Projected GDP data for 1995 indicate a more than the Rabaul eruptions would pose severe challenges modest decline in GDP but this was due to activities for any country regardless of how well it is prepared. (e.g.petroleum and, community services) which had Nonetheless, it is clear from the Rabaul experience no direct links with the Rabaul disaster. In sum, the that much more can be done to mitigate the personal overall macroeconomic effects of the disaster were and economic losses resulting from such eruptions. hardly visible. Obviously, a full assessment of possible mitigation measures needs to be undertaken, but based on the present analysis, a number of key issues are ~ I D A deserving of Closer consideration, both at the Potenlla anger reas provisional and national government level. These ' f h f h issues relate to the need for strong efforts to: Papua New Gumea aces treats rom many ot er volcanoes that have the potential of inflicting heavy • increase public awareness of national disaster damage on the local economy and the incurring of threats and of measures that local communities substantial costs to government authorities. This is themselves can take to minimise the damage to particularly true of several volcanoes which are life and property; presently emitting smoke and ash, for example, at Mariam Island which lies a short distance offshore • improve insurance facilities relating to volcanic from Madang, and Lou Island, one of the southern eruptions so as to reduce the element of risk for islands of the province of Manus Island. As with the both the general public and commercial groups Rabaul volcano, major eruptions in these locations (including state-owned enterprises); would involve substantial efforts in relation to the need for evacuation, emergency care, and eventual • ~rovi~e adequate .and appropriat~ .forms of rehabilitation. In many cases, as with Manam Island incentives for the pnvate sector to facilitate post- and Karkar Island on the Madang coast, any major disaster reconstruction and rebuilding efforts - eruptions could also have significant effects on poss~bili~e.s.includefiscal incentives and easier agriculture, notably in the production of copra and credit facilities: vegetables. • establiISh a nationa. 1diisaster reI'ieff und at a 1evel 91 The Economic Impact of Natural Disasters in the South Pacific sufficient to allow a quick and effective response the most vulnerable. Landslides can have severe to rehabilitation and restoration needs; and effects on villages and can involve substantial costs to both provincial and central governments. Many • strengthen the institutional capacity at all levels lives may be lost; whole villages may be wiped out of government to cope with disasters, with such or badly damaged; gardens and village infrastructure strengthening to apply to all phases - destroyed; large village populations displaced; and preparedness, emergency relief and significant loss of agricultural production can result. rehabilitation. Furthermore, sediments washed into river systems ...... can cause severe flooding, damaging roads and Another major mitigation pos~lblhty re~ates to.the bridges with potentially serious adverse effects on establishment of feeder ports m strategic locations road traffic and commerce. around Rabaul on the Gazelle area. These should result in lower cost and faster evacuation. Theseports One of the most vulnerable areas in Papua New would also facilitate effective delivery of relief Guinea is the Finisterre Range region which is one supplies to specific disaster affected areas. The of the highest mountain ranges running from the Department of Commerce and Industry, along with interior of the Morobe and Madang Provinces up to the Harbour Board and ICDC are planning to the border of Enga Province. The most recent establish feeder ports in the Kerevat area, Kabakaul landslides occurred in 1993 as a result of extensive and possibly Vunapope (via upgrading of existing seismic tremors accompanied by heavy rains and led port facilities) to cater for this need. to the displacement of a large number of villagers . . . . and a heavy financial cost to government authorities. Regarding Insurance, as earher noted, total claims It is worthwhile to focus on some of the social and resulti~~ from the Ra~a.uleruptions came to around economic aspects of these landslides, drawing upon K60rmlhon (US$48rmlhon) - a modest amount when information provided by the Disaster Officer of the compared with estimates ofprivate sector uninsured Madang Province. losses. The high level of risk in the Gazelle area has meant very high insurance premiums, while some The Finisterre landslides of 1993occurred in October insurance companies have refused involvement in and were most severe on the southern side of the insuring against volcanic damage. Because of the range from Madang to Bundi on the border of Enga high level of risk, possibilities for further future Province. A total of 29 villages along the Madang increases in the insurance premiums are always side was affected,with around half being completely present, with potentially significant effectson the cost destroyed. As many as 9,500 villagers had to be of living and inflation. evacuated and flown to safely by helicopters. Two . . care centres for these villagers were established on On the last dot point, It may be noted that the national government land in the vicinity of Ramu Au~trali~n. government has develope~ a ,Proposal Sugar _one at Gusap and the other at Ranara (three entItle~ DIsaster Manag~me~t ProJe:t dIrected. at care centre were also set up by the Morobe Province). enhancm? Papua New G~e~ s c~pacltyt? d.ealWIth At these centres, the villagers were provided with na~ral ~lSa~tersthrough InstItutIon~lb~l1dmg.The food, water, health services, tents, and other basic mam objectives of the proposal, which ISpresently items. under discussion, are to assist the host government in this area through the provision of practical advice, By mid-1994, many villagers had returned to their training, technical assistance, and the preparation of villages but, at the time of writing, the majority of basic data and analysis that might be useful for villagers are still dependent on the care centres, improving disaster management. The project is to awaiting relocation and rehabilitation. be implemented over a five-yearperiod, and is costed . at around K10 million (US$8million), with funding The direct financial cost to the government in the by Australia and several other donors. provision of emergency and rehabilitation assistance has been high. So far, rough estimates of the cost of evacuation and care for the evacuees total close to 'd K3million (US$2.4million) including approximately 6,3 LandSII es !K2 million (US$1.6 million) for the hiring of helicopters (a cost borne mainly by the central Landslides occur in Papua New Guinea's vast government), K400,000 (US$330,OOO)for food and highlands region and are normally triggered by K200,OOO(US$l60,OOO)for tents. (In the cas: of the earthquakes and heavy rains. Steepsettled areasthat Morobe Province, the cost of. :vacua tion by have been cleared of trees for gardening tend to be helicopters in relation to the same dIsaster was K1.7 92 The Economic Impad of Natural Disasters in the South Pacific million (US$1.4~illion).) These costs do not allow Much more thought needs to be given to possible for the value of Input by government officials who ways of effectively coping with landslides and to provided assistance during the emergency nor do design appropriate mitigation measures. In this, a they allow for the value of contributions of food and starting point will be to encourage villagers not to other items made by outside organisations. The cost build or to farm in vulnerable areas, improve access of providing basic services for those villagers still roads to facilitate evacuation, and to build up dependent on care centres remains an ongoing one information and awareness of highly vulnerable for the provincial government. zones. The government authorities (but mainly the provincial government) has already paid out over K5~0,0?0 (US$410,OOO!to assi.st villagers return to 6.4 Floods and Damage to their VIllages.The mam costs Involved relate to the cost of ~ork to.ols (axes, bush .knives and. c~nvas) Bridges and assistance inthe construction or rebuilding of access roads, schools and aid posts and, in some . cases, airstrips. These costs will continue to mount Over recent years, Papua New ~ume~ has suffered as the process of rehabilitation and relocation heavy damage to bridges on VItal highways as a progresses. ~esultof floods an.drelated causes that, in turn, have involved substantial costs to government and serious At the community level, the cost of landslides can disruption to commercial activity.Particularly heavy be extremely heavy.Even for those villagers that have damage has been caused to major bridges on the Lae- suffered only partial destruction, the losses Highlands Highway and the Lae-Madang road associated with housing, infrastructure, gardens, and which are vital transport arteries serving these standing crops can be substantial. In the case of the regions. The main factors behind the damage are Finisterre landslides, all forms of agricultural activity floods and the build up of river beds due to debris carne to a standstill for up to a year with resulting carried down by rivers from landslides and related loss of employment, cash income and subsistence phenomena (including erosion caused by tree-felling production. The loss of supply from the affected and indiscriminate land clearing). In the Ramu area villages would have meant shortages in adjacent alone, the accumulation of sediments from landslides markets and possibly higher produce prices. The has resulted in the beds of many rivers rising by 10- effect on agricultural production is likely to persist 15metres, thereby placing bridges in danger ofbeing as many villagers have still to be relocated while, washed away as well as causing damage in other for those who have returned to their village, the first ways. harvest for certain crops (e.g. coffee) will not take .. . place for many years after replanting. Several key bridges m the Lae-Highlands-Madang road system have suffered heavy damage from The Finisterre landslides also caused considerable floods and the accumulation of sediments. These damage to major roads and bridges through flooding include M'Buke Bridge, Umi Bridge and Bambu and the build up of river beds through Bridge. M'Buke and Umi in particular are vital in sedimentation. At least two bridges - Bura and Gusap linking Lae with the Highlands hinterland - a large - in the Ramu Valleywere severely damaged. Repair and expanding market for trade goods, both work on these bridges was not only costly but also consumer and industrial - and a major source of took some weeks to complete, during which the flow agricultural produce destined for both domestic and of traffic between Lae and the Ramu region was export markets. Any disruption to road traffic can severely disrupted. Damage to roads has have a major impact on the cornrnerciallife not only substantially increased the need for maintenance of the affected areas but also at the national level. work which, up till now, has been difficult to . . undertake because of government financial The collapse of UmI Bridge, located at the upper constraints. reaches of the Markham Valley,caused considerable disruption to the business and economic life of the What has been said above concerning the Finisterre affected regions. The immediate damage was done landslides gives an indication of some of the social when a truck hit the bridge causing it to collapse and economic consequences of these kinds of but, in fact, the bridge was already highly vulnerable disasters in Papua New Guinea. Clearly, they can to heavy flooding due to the substantial rise in the cause heavy damage to the affectedcommunities and river bed that had already taken place. The road was involve substantial costs to government authorities. completely closed to traffic for two weeks, and even 93 The Economic Impact of Natural Disasters in the South Pacific when opened, for several weeks, only a limited flow A large number of other bridges throughout the of trafficwas permitted. While the bridge was under country have been similarly damaged or threatened repair, many businesses hired helicopters to deliver by the accumulation of sediments and flooding - goods to the other side of the river but at very high implying a considerable financial burden to cost (up to K2,000[US$1,600]an hour), In some cases, government and a potentially large loss of income goods were hand carried across the river. Repair to the commercial sector and local communities. work took six weeks to complete at a cost of over K1 (Also, many, if not most, bridges have suffered million(US$0.8 million). (Local companies assisted serious deterioration because of lack of proper in setting up temporary facilities - at an estimated maintenance in the past - a factor that adds to flood value of around K300,000 [US$250,000]). The vulnerability.} In recognition of the importance of installation of a new bridge would cost at least K2 bridges in facilitating economic development in the million (US$1.6million). country, the Australian government has developed a project aimed at providing assistance to the The disruption to traffic had a considerable impact rebuilding 100 bridges (PNG has around 3,000 on the level of economic activity in the affected bridges) that need replacement. The project also regions. Business houses in Lae lost sales to seeks to provide funding and technical support to Highlands clients, while the flow of products localauthorities to undertake necessary maintenance normally shipped to Lae, including mineral work on existing bridges. As proposed, the project products, virtually ceased. Estimates by the Road is to provide funding assistance of up to K35million Transport Association PNG indicate that the value (US$28 million), spread over a three-year of 'lost business' totalled around K60million (US$50 implementation period. The Department of Works million). The loss of coffee shipments alone - at a will determine the scope of the project and the time of very buoyant prices - was estimated at K36 number of bridges which are to be replaced and/ or million which, among other things, would have repaired. meant a considerable loss of cash income to the rural population. In Lae, a number of industries laid off labour, while the disruption of normal traffic from 6 5 C t II d t' d the Highlands Significantlyreduced export activity , 005 a nun a Ion an with adverse effectson the country's export earnings. E ' It also reduced the supply of fruit and vegetables roslon from the hinterland to local markets which appears to have had significant inflationary effects(pricesfor Another major hazard faced by Papua New Guinea some fresh produce in Lae more than doubled). relates to coastal inundation and erosion apparently Disruption to the delivery of vital material, caused by changing weather patterns and sea level equipment and fuel to the Highlands also changes. While this has become a serious concern in significantly affected industrial and commercial the Manus Islands Province with its numerous low- activities and, in some cases, led to temporary lying 'offshore' islands, it is also a major problem in closure. (A halt to the delivery of animal feed many otherregions of Papua New Guinea, including virtually wiped out the poultry industry in the Milne Bay area. Over time, coastal inundation Highlands regions.) and erosion can result in a considerable loss of land, " , . .. reduced agricultural production and ultimately, may M Buke Bridge, located in th~ Nawai dIst,nct of necessitate the displacement of large sections of the Morobe, was wa~hed away in 1994 and It also affected population _a process that could be costly appears to have Imposed a heavy cost on both and may pose difficulties in acquiring land for government and the private sector. The bridge was resettlement. closed for 2-3 weeks although alternative routes - including 'wet crossing' by vehicle on shallow parts In the Manus Islands, there is ample evidence of the of the river - were found to facilitate a limited flow loss of foreshore land resulting from changing of traffic. Nonetheless, there would have been weather and sea patterns. This phenomenon is considerable dislocation to road transport which, in reported to have become particularly noticeable over turn, would have had a significant impact on the last few years. The most seriously threatened economic activity. The establishment of temporary areas are the small offshore islands such as those on facilities cost around K400,OOO(US$330,OOO)while the north coast of the main island of Lorengau, for the cost of replacing the bridge is expected to be at example, Ponam, A'Hus, Andra and Hauwi as well least Kl million (U5$0.8million). as those on the westemside such as Kali, Hermit 94 The Economic Impact of Natural Disasters in the South Pacific and Ninigo. Some of these islands, including Kali underlying reasons for the observed changes in sea and Ninigo, are heavily populated and produce large level patterns could also be very useful. quantities of commercial crops, notably copra and vegetables. Not only are these islands suffering serious coastal 6.6 Concluding Remarks erosion, but flooding of coastal villages at high tide has become common. Evidence from Pam Islands, As the above analyse has shown, Papua New Guinea on the south-east of Lorengau, indicates that since is vulnerable to a range of potentially highly 1990,the sea level has risen by around 500cm. (One destructive natural disasters that can impose a heavy might also recall that in the 1950s, a large part of cost to government authorities, heavy losses on the Kaster Islands, south of Lorengau, was washed away, private sector, and severely reduce the country's and the entire population relocated.) productive capacity and growth potential. .. . Particularly in the case of the Rabaul volcanic The loss of ~andaSSOClate~ with sea-rel~ted dlsast~rs eruptions and landslides in highlands regions, the can, over time, substantially undermine the social social and economic impact on local communities and economic viability of coastal communities. In has been traumatic. Furthermore, the consequences the Manus Islands province, the bulk of the for the wider provincial and national economy can population - up to 85 per cent -.Jive?n coastal zones also be significant, particularly as reflected in S?.that any lo~sof land - espeCla~lyIn the context of government fiscalpolicy,monetary policy,domestic rISIngpopulations - can severely Impact on the space price levels and the balance of payments. available for residential and related purposes. Such disasters can also have a major impact on the The economic consequences ofthe Rabaul eruptions production of copra which has traditionally been an have been particularly dramatic. The cost of important crop in the Manus Islands region. Pressure replacing damaged infrastructure and private sector on these coastal communities can reach a point where property has been estimated at K280million (US$240 the evacuation of part or all of the population million) - roughly equal to 5 per cent ofGDP (1994). becomes necessary - an outcome that can not only Additional costs relate to the loss of production in be socially disruptive but also can involve a heavy agriculture and other productive sectors caused cost to the government authorities. directly and indirectly by the eruptions. Macroeconomic effects were fairly significant, as So far, official action aimed at addressing thi~t~reat illustrated by the incidence of local inflation, much in the Manus Islands has been somewhat limited. reduced volume of commodity export, and severe Government a~thorities have ~~de small.gr~nts to pressure on the financial resources of the provincial a number. of VIllage communities to assist I~ the government. A major restoration program has been construction of sea walls; the EU has provided launched involving the expenditure of up to US$100 modest funds (estimated at K120,000(US$98,000» million over a period of time, a program that has, for reclamation and the building of retaining walls fortunately, attracted strong donor support. on Pam Islands; and the South Pacific Commission has a reclamation project in the M'Buke and The analysis of recent landslides in the Finisterre Rambuyto areas. In the recent past, the provincial region highlighted the substantial cost of evacuation government unsuccessfully submitted a project for and caring for the large numbers of the affected coastal reinforcement to the central government populations as well as the heavy loss of village requesting funds of over K800,000(US$650,000). property, including gardens and infrastructure. These landslides have - under conditions of heavy In view of the serious social and economic rains _contributed significantly to the incidence of implications of coastal inundation and erosion, a flooding and sedimentation which have damaged much stronger effort on the p~rt of both the bridges, roads and other infrastructure items. The provincial and central government ISneeded to meet destruction or damage to key bridges in certain this. threat. Adequate res~~rces nee~ t? be m~de highlands locations has involved a heavy cost to available to local communities ~oassist In carr~ng government by way of repair and replacement out the necessary coastal protection and rec~amatIon expenditure, while in the case of the private sector, works. An effort should be made to lI~crea.se the resulting dislocation of business life has often community awareness of the problem and to Identify meant a significant loss of business. In many parts the most vu.lner~~lezones'.Moreover, an attempt, of Papua New Guinea, coastal inundation and through sCIentIfIc analysIs, to understand the erosion is bringing about a loss of valuable land and, 95 The Economic Impact of Natural Disasters in the South Pacific unless this process is arrested, may necessitate the life of local communities and, in turn, the national displacement oflarge village populations with heavy economy, and the need to more closely incorporate social and economic costs. disaster risk elements in national development planning. Consideration should be given to the The analysis has touched upon numerous issues that establishment of a national disaster mitigation fund merit close attention in efforts to strengthen Papua at a level sufficient to allow a quick and effective New Guinea's capacity to reduce the economic cost response to post-disaster rehabilitation and of. natural disasters. Foremost is the need for restoration needs. As well, an attempt should be adequate preparation and mitigation arrangements made to establish an effectivemechanism for liaising at the local, provincial and national levels - for with major donors in this field as, in the event of example, through training, public awareness major disasters, the support of these donors will campaigns, the formulation of disaster management almost invariably be needed. Other important issues plans for the various forms of natural disasters, and deserving of attention include the need to improve improved coordination mechanisms between local the data base on social and economic aspects of and provincial-based disaster units and central natural disasters, strengthen disaster insurance government. At the national level, there is a crucial arrangements, and develop appropriate post- need to recognise the potentially powerful effectsthat disasters forms of financial assistance for the private natural disasters can have on the socialand economic sector to boost the recovery process. 96 The Economic Impact of Natural Disasters in the South Pacific 7. CONCLUDING COMMENTS This study has attempted to assess the economic growth and declining living standards. For Niue, impact of natural disasters on four Pacific island national income data are lacking, but it is probable countries - Fiji,WesternSamoa,Niue and Papua New that GDP declined as a result of the destruction Guinea - all of which, in varying degrees, are highly Cyclone Ofa caused to the principal export products vulnerable to various forms of natural disasters. The and the tourism industry. Similarly, detailed GDP focus has been on the analysis of recent major data are not available for Papua New Guinea, but disasters in these countries - cyclones Kina in Fiji, there can be no doubt thatthe physical and economic Val in Western Samoa and Ofa in Niue, and the destruction caused by volcanic eruptions, landslides Rabaul volcanic eruptions in the Gazelle Peninsula and flooding would have had a significant in Papua New Guinea. From the analysis, it is depressive effects on economic growth, apparent that natural disasters, most commonly in the form of tropical cyclones, have been major At the macroeconomic level, significant financial constraints to economic development and instability was particularly notable in the cases of sustainability in these island countries. The direct Fijiand Western Samoa but was also evident in Niue destruction of a country's productive base can be and Papua New Guinea. In both Fiji and Western severe, giving rise to enormous emergency and Samoa, government finances were put under rehabilitation needs that can impose a considerable considerable pressure as a result of major increases financial burden on a national government. Such in expenditure needed for post-cyclone emergency costs may amount to a large proportion of GDP (in and rehabilitation purposes - a situation that led to the case of Western Samoa, the cost of destruction significant and unsustainable rises in fiscal deficits by Cyclone Valwas assessed at over twice the value and, especially for Western Samoa, indebtedness of GDP). Other less direct, secondary costs can also (despite considerable external assistance). A major be very high, especially in terms of macroeconomic element in the a~justment of government finances instability, lost production in agriculture and other was the reallocation of budgeted development funds productive sectors and, generally, in terms of high (large proportions of which were aid-funded) for opportunity costs of resources channelled into relief rehabilitation purposes. Regarding the external and rehabilitation work. All these costs can be situation in these two countries, the disaster events particularly severe for the small island countries (e.g. led to substantial rises in imports which contributed Niue) and those which are subject to repeat disasters to a marked deterioration in the current account (notably Fiji). component of the balance of payments and, for Western Samoa, a dramatic fall in the level of international reserves. While monetary policy was little affectedin Fiji,for WesternSamoa, officialcredit 7.1 Economic Growth and policy was temporarily relaxed to facilitate the process of cyclone recovery - a move that probably Stability contributed in some degree to financial instability. In both countries, inflation surged during the .. . ,immediate post-disaster period but subsequently Precise estimates of the Impact of natural disasters I II d ff I I k t I" d . eve e 0 as oca mar e supp ies Improve . on the overall economy - and economic growth in general - could not be made because of the lack of Niue appears to have averted serious deta~~~dnatiOI~alincome data. However, in the c~se macroeconomic instability largely because of a of FIJI, the eVI~ence s~ggests that Cyclone Kina prompt and relatively substantial aid assistance from caused a slump in GDP in 1993equal to at least 2 per the New Zealand government. This helped to avert cent. Additional evidence indicates that as a result major fiscalimbalance and allowed budgeted capital of a succession of na,tural disasters (but mainly works programs to proceed with only minor cyclones) over the penod 1982 to 1993/the average modification. In the case of Papua New Guinea, the growth in real GDP was as much as 2 per cent below destabilising effects of the volcanic eruptions were whatitwouldhavebeenhad there been no disasters. largely confined to the regional level (the Gazelle For Western Sa~oa, the da~age ca~sed by Cyclone Peninsula) although the effect on export earnings, Val(compoundmg that associated WIthCycloneOfa) of lower regional output of cocoa and coffee, was resulted in an extended period of negative economic apparent. 97 The Economic Impact of Natural Disasters in the South Pacific The analysis of Fiji,Western Samoa and Niue throws failure to adequately incorporate disaster risk considerable light on those economic sectors most elements in national development planning and vulnerable to cyclonic hazards. In this, the extent of appreciate the importance of proper land-use and cyclone damage to the economy of these countries resource conservation planning for longer-term depends predominantly on the characteristics of the economic sustainability and mitigation against the particular cyclone and on the degree of preparedness effectsof flooding, drought, soil erosion and the like. and mitigation levels achieved by the affected It is also apparent that efforts to increase public country. However, it is apparent that physical awareness of natural disaster issues and mitigation infrastructure, particularly roads and bridges, possibilities are inadequate, as are efforts to improve proved highly vulnerable, especially from exposure the availability of basic data on the social and to high rainfall, flooding and water run-off that are economic consequences of major disasters. commonly associated with cyclones.High winds and wave action can be highly destructive to coastalroads On the institutional front, the importance of an and other structures as was the case in Western effectivelyfunctioning natural disaster management Samoa. Regarding agriculture, tree crops, including body needs to be firmly recognised. Such a body coconuts and bananas, are highly vulnerable to wind should carry out its responsibilities on an ongoing (and salt sprays) but root crops less so (and have the basis and develop effective mechanisms for linking advantage of a fairly rapid recovery). The impact on up with relevant bodies, including NGOs, at the coconut production can be particularly severe (with regional and community levels. The value of a recovery in production normally taking from three national disaster plan, especially in providing to four years) with potentially significant carry-over opera tiona I guidelines and clarifying areas of effectson exports and employment. Sugar,Fiji'smain responsibility,is apparent from the experience of the export crop, is subject to damage from wind, flood countries reviewed. Other than a national disaster and spray. Buildings, including housing, are also plan, these countries should, as Niue has done, strive highly vulnerable as are forestry, inshore reef to develop plans covering major government fisheries and other natural resource areas. departments and agencies as well as village communities. It is also clear that - particularly in the case of the very small Pacific island countries - external donors can playa pivotal role in providing 7.2 Some Lessons of Experience post-disas~errelief and rehabilitation assistance a~d augmentmg local efforts to strengthen mam . f th f P ifi . I d . prevention and mitigation capabilities. The expenence or e our aci lCISan countnes, outlined in the text, offers a f~w less~~ ~hatcou~d Other potentially valuable lessons relate to specific be of value to ot~er developu:g PaCIfIcIslands in mitigation possibilities. These include the scope for efforts t~ cope wl~h natural disasters and red~ce extending insurance coverage on property as a eco~omlc losse~.It ISaJ;>parentthat all fou~~ountnes means of spreading risk; the extension of cyclone reviewed are, m varymg ~egrees: be~efI.tmgfrom proofing procedures in relation to building and adv.ances already made. m key m~htuh0n.al and infrastructure items; the value of setting building pohcy areas. Th.e creation of n~tlOnal disaster standards through the adoption of officialbuilding mana.gement bodies ~nd the ~stabhshment of early codes;the advantage ofpromoting greater structural ~arnmg systems against tropical cyclones a~d other diversification and other mitigation measures in disaster are ~xamples. However, th~ expenence of agriculture; and the need to develop appropriate these countnes suggests that considerable scope measures of assistance to the business sector ~xi~ts ~or improving the over~ll policy ~nd (including the highly vulnerable primary industry institutional framework. Thus, WIth the possibly export sector) to facilitate post-disaster recovery. exceptions of Fiji and Niue, the extent to which disaster threats and mitigation issues are understood The study has highlighted the need for measures to by policy-makers is stillvery much at the elementary minimise the potentially destabilising impact of a stage. Basic weaknesses relate to a failure to grasp major disaster on government finances and the the full significance of the impact of major disasters macroeconomic situation in general.Above all, there on economic activity and prospects for longer-term is a need to avoid incurring unsustainable fiscal development; and to address the potential benefits - deficits and debt levels through the implementation both short and long term - that can be realised from of appropriate policy measures supported by the taking of appropriate mitigation measures (as external donor assistance. Complemented by opposed to merely responding to relief and monetary policy,fiscalpolicy should aim, above all, emergency situations). Further shortcomings are a at maintaining financial stability and ensuring 98 The Economic Impact of Natural Disasters in the South Pacific external balance over time.A key consideration is to with cyclone Valin Western Samoa and the Rabaul avoid a major slump in government capital volcanic eruptions in Papua New Guinea were expenditure which plays an important role in probably modest (no detailed information is on fostering longer-term economic growth. The hand), while for Niue, the undeveloped nature of experience of these countries also points to the the insurance sector suggests that payments for importance of maintaining strong economic cyclone damage were negligible. In general, it fundamentals (including a healthy level of appears that considerable scope exists for international reserves) which can be valuable in encouraging individual producers and property mitiga ting the macroeconomic impact of major owners to take up insurance against natural disasters disasters. to mitigate financial losses. As well, there may be opportunities for improving localinsurance facilities It is apparent, too, from the study that Pacificisland through the introduction of appropriate government countries invariably find it difficult to access funds incentives including tax concessions. Even in Fiji, that can be devoted to meeting immediate emergency major gaps exist in the household insurance sector needs arising from a major disaster. Efforts to (asopposed to the corporate sector) and in insurance mobilise donor assistance and to identify domestic against crop and flood damage. sources of funds normally take time. In this regard, the value of establishing an Emergency ReliefFund by individual island countries may have an appeal. S~cha fund would fac~litatea quic~res~~nseto post- 7,4 External Assistance disaster needs pending the availability of more substantial forms of assistance. The study has shown that external assistance The experience of these four Pacific countries also provided by both official and voluntary groups has makes clear that both donors and the disaster- played a crucialrole in facilitatingpost-disaster relief affected countries are viewing relief assistance as an and recover~, and in easing the pressure on avenue for promoting development goals. This g.ov~r~ment finances ..For ~ number of donors, a stance is normally facilitated by the availability of significant part of this assistance was made from relief funds and by the opportunity to make needed special funds set up specifically for providing development policy changes at such times. This disaster relief among developing countries. For transition - from a preoccupation with short-term WesternSamoa,donor assistance for emergency and. one-off relief to longer-term development needs - is infrastructural rehabilitation purposes, following one that should be further encouraged and, in a Cyclone Val, was substantial, with concessionary sense, is a positive side of a disaster event. loans from the World Bank and grants from the Japanese government particularly prominent. The use of relief assistance to improve roads and Equally substantial was donor assistance to Niue for other infrastructure facilities (e.g. Western Samoa) post-cyclone reconstruction, and to Papua New and to develop less vulnerable crops (e.g. Niue) are Guinea for a major restoration program in the wake examples that can result in a significant betterment of the Rabaul volcanic eruptions. External assistance of the pattern of development. to Fiji was more modest but still vital, particularly in the rebuilding of majorbridges and schools.Given present vulnerabilities and limited national , capacities to cope with major natural disasters, 7.3 Disaster Insurance Pacificisland countries will continue to need external assistance,particularly to restorebasic infrastructural Insurance against natural disasters can be a valuable services,an.dm~re generally to ~acilitatethe recov~ry mechanism for spreading risk, mitigating financial process.ThIsbeing so, the cl~sell~volvement~fmajor losses and expediting recovery. However, from the donors (and voluntary ~odIes) m.t.he~lanmng and evidence presented here, the process of taking up developme~tofpreventi~nand mitigation progra~ insurance against the various forms of natural at both national and regional levels seems essential hazards remains undeveloped and uneven. A and should be further encouraged. possible exception is Fijiwhere, as a result of Cyclone Kina, a considerable amount (totalling $47 million (US$31 million» was paid out by insurance 7 5 M't' t' A t companies against claims for property damage - an ' 1 Iga Ion spec s amount roughly equal to 30 per cent of the total assessed damage. Insurance payments associated The study has pointed to various areas where - in all 99 The Economic Impact of Natural Disasters in the South Pacific four countries - some notable progress has been made national planning and policy frameworks, and to in implementing cyclone proofing and related encourage collaboration in disaster planning at the disaster prevention and mitigation measures. At the micro-level among government agencies, local institutional level, these include the establishment government bodies, village groups, and NGOs of natural disaster management and coordinating (Benson 1996, P: 61). The evidence presented also bodies (and associated mechanisms for linking up points to the need to further strengthen the with rural-based and other community groups), institutional and organisational frameworks for national disaster management plans (yet to be disaster management and coordination and in this, completed in Western Samoa), and regionally- such institutions should be adequately supported sponsored early warning systems (e.g. the Fiji to allow them to operate on a continuing and MeteorologicalService,Nadi), Buildingcodes aimed responsive basis. at raising building standards have been widely adopted although often not well implemented, while Other major possibilities for enhancing the disaster especially in Fijiand WesternSamoa, much has been prevention and mitigation capabilities of Pacific done to enlist the assistance of NGOs in assisting island countries have been touched upon. These community groups to prepare and deal with natural include the need for appropriate action to: disasters. • encourage the taking up of disaster insurance Important advances have also been made in specific against property damage adopt appropriate sectoral areas as well as by individual agencies (and measures to further diversify the range of private corporations). In Fiji, these include a range disasterinsurance servicesand options available; of cyclone and flood proofing measures that have been taken in the field of telecommunications (e.g. • promote greater agricultural diversification the use of underground lines), the sugar industry through, for examp~e,the encou~a~ementofmore (e.g. improved insurance coverage), and physical hardy, early ~~turmg crop varieties as well as a infrastructure, especially improvements in road and range of traditional root crops; brid,ge desi?n. In W~stern Samoa, much has ~een • adopt longer-term procedures for the monitoring achIeved. In relation, ~~ coastal protectI~n, and assessment of disaster events, particularly ~trengthenmg of port facilities,~mergency'plan.n~ng so as to more adequately monitor the social and m the government health services, and in raIsmg economic consequences of these disasters' building standards in schools and other public ' buildings. In the case of Niue, there are plans to • develop effective collaborative mechanisms for relocate vulnerable government buildings (e.g. the coordinating external assistance for post-disaster national hospital), to strengthen wharf structures, relief and rehabilitation, especially where major and to improve rural ~ater storage facilities as a infrastructural rebuilding and rehabilitation counter to drought. In relation to the Rabaulvolcanic projects are involved; disaster in Papua New Guinea, the development of a new administrative and sub-regional centre at • develop comprehensive water and land use Kokopo is viewed as a major initiative designed to approaches capable of alleviating flooding and reduce the degree of vulnerability to volcanic promoting water conservation and eruptions. In this country too, there appears to be a environmentally sound and sustainable land use growing recognition of the need for more concerted practices; action to address problems arising from other . natural hazards such as flooding, landslides and • ensure that economic fun~ament~ls are strong coastal erosion. (e.g. by means of sound fiscal policy, adequate levels of international reserve, and maintenance of assets) and so enhance the country's financial capacity to cope with disaster devastation and 7.6 Policy Implications post-disaster recovery; • establish a special fund for disaster emergency In all four countries reviewed, more vigorous action and rehabilitation purposes which, among other is needed to increase the level of public awareness things, would allow a quick response to disaster of natural disaster issues and of prevention and needs and so reduce the dependence on external mitigation possibilities at the community level. It is resources; and apparent, too, that in all these countries, there is a need to more effectively incorporate disaster risk in 100 The Economic Impact of Natural Disasters in the South Pacific • encourage the revival of traditional mitigation On the quantitative front, considerable benefits can and coping mechanisms as a means of achieving arise from efforts to improve the database on the greater community self-reliance in dealing with socialand economicaspects ofnatural disasters, and disasters. to achieve greater uniformity throughout the region in the methodology used in assessing and costing The analysis has alsopointed to the need for possible disaster damage. government measures, including selected taxation relief measures, to facilitate the recovery of the Finally,Pacific island countries should do more to business sector and to foster intra-regional turn adversity to advantage by using reliefassistance cooperation where feasible and beneficial. Here, to promote longer-term development goals as existing regional programs, such as those carried out opposed to short-term relief efforts. Such a shift in under the auspices of the UN Department of strategy can be beneficial not only in reducing Humanitarian Affairs' South Pacific Programme disaster-related losses but also in enhancing the Office, Suva, can playa vital role in promoting quality of development and, ultimately, growth regional cooperation and activities on these issues. prospects. 101 The Economic Impact of Natural Disasters in the South Pacific REFERENCES ADB, 1991. Disaster Mitigation in Asia and the Pacific, , 1994. Supplement to the 1994 Budget Manilla. Address, Suva. AIDAB, 1994(a). The Western Samoan Economy - Paving the , 1993. Assessment of Drought Problems in Way for Sustainable Growth and Stability (prepared by Fiji - Final Report (prepared by the Ministry of Fijian Te'o Fairbairn and Kolone Vaai), International Affairs and Regional Development and the UN Development Issues No. 35, Canberra. Department of Humanitarian Affairs South Pacific . Programme Office), Suva...... , 1994(b). Rabaul Volcamc Disaster Needs Assessment Mission Final Report, Canberra. Government of Niue, 1996. Statement of Appropriation for · I . I D d f N' I D' Year Ending 30th June 1995(Ministry of Finance), Austra IIan nternationa eca e or ationa isaster Al fi Co-ordination Committee, 1995. Third IDNDR Pacific 0 • Regional Disaster Reduction Meeting - Report, Canberra. . , 1995. Niue Economic and Social Review (Planning and Development Unit), Alofi. Benson, CharIotte and CIay,.E 1994. The Impact aif Drought on Sub-Saharan African Economies: A Prelim i- , 1994(a). Niue Strategic Development Plan nary Examination, Overseas Development Institute, (Planning and Development Unit), Alofi. London. .. , 1994(b). Annual Abstract of Statistics 1993 Benson, Charlotte, 1990. The Economic Impact of National (The Niue Statistical Unit), Alofi.. Disasters in South-East Asia and the Pacific - Case Study , " 1: Fiji, Overseas Development Institute, London. . , n.d. Disaster Plan for the VIllage of Aloft South, Alofi...... , n.d, Drought and the Zimbabwe Economy, ...., 1980-1993, Overseas Development Institute, London. Gove~ent of FIJI,1993. Tropical Cyclone Kina and Severe Flooding, January 1993- Final Report (Department of Blong, Russell and McKee, Chris, 1995. The Rabaul Regional Development), Suva. Eruption 1996 - The Destruction of a Town (prepared for ., Underwriters Association of Papua New Guinea) Government of Papua New Gumea, 1995. Economic and Sydney. I , Development Policies (Vol.1) (Minister for Finance), Port Moresby. Campbell, John R, 1984. Dealing with Disaster - Hurricane . , Response in Fiji (East-West Centre), Honolulu. . , 1987. Manam Volcamc Disaster Manage- ment Plan, Port Moresby. Carter, Nick W., Chung, Joseph, M. and Gupta, Satyendra P., 1991 South Pacific Country Study" in Government of Wester~,Sa~oa, 1992 (a). Cyclone Val ADB Disaster Mitigation in Asia and the Pacific, pp. Infrastructure Rehabilitation Needs Assessment Report 255-308 . (prepared by the World Bank, ADB and AIDAB), Apia. Central Bank of Suva, 1996. Bulletin (March 1996),Apia. .. , 1992 (b). Western Samoa Seventh ...... , 1994. Bulletin (March 1994), Apia. Development Plan 1992-1994,National Planning Office, Apia ...... ,1992. Annual Report and Financial Statements, 1992, Apia. .. , 1991. Statement on the 1991/92Second Supplementary Estimates (by the Minister of Finance), ...... , 1990. Annual Report for 1990, Apia. Apia. Chung, !~seph, 1985. Cyclone "Eric" and "Nigel" Report Kaivovo, Ellison, 1995. The Gazelle Restoration Programme (Pacific Islands Development Program), Honolulu. (address to Society of Professional Engineers), Douglas, Norman and Ngaire (eds), 1994. Pacific Islands Rabaul. Yearbook (17th Edition), Sydney...... , 1996. GaUI'Ie Restoration'P rogramme: Fairbairn, Te'o. 1.J., 1995. Pacific Economies: Some Executive Brief· Prepared for Prime minister of Papua Observations on the Economic Consequence of Natural New Guinea, Right Honourable Sir Julius Chan, Disasters (Islands and Small States Institute, Founda- CMG, report as at 10th January 1996, Rabaul. tion for International Studies), Valletta. Kakazu, Hiroshi, 1994. "Trade Diversification in the Fairbairn, Te'o 1.J. and Worrell, DeLisle, 1995. South South Pacific Islands" in Sustainable Development of Pacific and Caribbean Island Economies: A Comparative Small Island Economies, pp. 37-54, Westview Press, Study (Foundation for Development Cooperation), Boulder. Brisbane. Lokinap, R I., 1994. 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Suva. 103 TIre Economic Impact of Natural Disasters in the South Pacific ApPENDIX III LIST OF PERSONS CONSULTED FIJI (SUVA) Shiro Kinouchi Resident Representative, Dr. Charlotte Benson JICA Research Fellow, Overseas Development Institute (UK) Kaliti Mate Principal Administration Office, Karunesh Bhalla Ministry of Finance Deputy Resident Representative, UNDP Michael J. Moriarty Budget Advisor, Dr. Asinate Boladuadua Pacific Financial Technical Assistance Centre Director Primary and Preventive Health Services, Ministry of Health Adriu Nabora Principal Forestry Officer, TImothy Brown Ministry of Forests Divisional Manager, The Fiji Sugar Corporation Anita Nair Chief Economic Planning Officer, Sekope Bula Ministry Finance and Economic Development Deputy Conservator of Forests, Ministry of Forests Savenaca Narube Senior General Manager, Joseph Chung Reserve Bank of Fiji Chief Technical Advisor, UNDHA-SPPO Somsey Norindr Resident Representative, Laisiasa Corerega UNDP Senior Health Inspector, Ministry of Health Captain Malcolm Peckham Port Master, Dr. Julie Delforce Port Authority of Fiji Economic Adviser, South Pacific Forum Secretariat [ai Hind Prasad Manager, Raymond Dunstan Network Division Executive Director, Fiji Post and Telecommunications Fiji Textile Clothing and Footwear Institute Ian Rector Ponswamy Gounder Disaster Management Advisor, Senior Assistant Secretary, UNDHA-SPPO Ministry of Finance Roberto Rensi Dr. Malcolm Hazelman Economic Adviser, Manager (Agriculture), Delegation to the European Commission for the Pacific SPC Phil Rogers Russell Howorth General Manager, Training Coordinator, Queensland Insurance (Fiji)Limited SOPAC Apisalome Rokobaro Takayuki Jimbo Estate Officer; Assistant Resident Representative, The Fiji Sugar Corporation Ltd. JICA Apisalome K. Rokotuivuna Atu Kaloumaira RegionalDevelopmentOfficer, Disaster Mitigation Advisor, Ministry for Regional Development UNDHA-SPPO 106 The Economic Impact of Natural Disasters in the South Pacific Muliagatele Georgina M. S. Bonin Dereck Rooken-Smith National Professional Officer (Programme), Counsellor, UNDP Development Cooperation Australian Embassy losefo Bourne Manager, John Scott Research and Statistics Director General, The Central Bank of Samoa Fiji Red Cross Society Bill Dobbie Lorraine Seeto Second Secretary, Deputy General Manager, New Zealand High Commission Reserve Bank of Fiji Taulealeausumai Eti Enosa Abdul Shamsher Director General. Planning Officer, Ministry of Health The Fiji Sugar Corporation Ltd. Tupae Esera Tony Slatyer Director, Deputy Secretary General (Policy and Services), Education Department South Pacific Forum Secretariat Leiataua Dr. Kilifoti Eteuati Janos Somogyi Secretary to Government, Project Coordinator, Office of the Prime Minister Pacific Financial Technical Assistance Centre Toluono Feti leremia Tabai, GCMG General Manager, Secretary General, EPC South Pacific Forum Secretariat Fiti F.Fiti Sailosi V.Taka Marketing Manager, Tailevu Provincial Counsellor Western Samoa Breweries Ltd. Saimone Tuilocala John F.Fitzgerald Principal Fisheries Officer, Assistant Secretary Accounts, Ministry of Agriculture and Fisheries Treasury Department Vula Vakacegu Dr. ViiiA. Fuavao Deputy Secretary Operations, Director, Ministry of Public Works, Infrastructure and Transport SPREP Sakenaga Varea H.E. Mr. Peter Heenan Senior Assistant Secretary, New Zealand High Commissioner, Ministry for Regional Development New Zealand High Commission Lasarusa Waqa H.E. Mr. David Hegarty Acting Principal Education Officer, Australian High Commissioner, Ministry of Education Australian High Commission Tadahiko Yamaguchi Sonja Sianiusami Hunter Second Secretary, General Manager, Embassy of Japan Western Samoa Visitors Bureau SeveT.lmo WESTERN SAMOA Deputy Director, Ministry of Agriculture, Forests and Fisheries Asamu E. Ah Sam Assistant Director, Latu Sauluitoga Kupa Post and Telecommunications Department General Manager, Water Authority DionAle Assistant Programme Officer, Pisaina Leilua Lei-Sam o Le Siosiomaga Society Inc. Assistant Secretary Finance, Treasury Department 107 The Economic Impact o/Natural Disasters in the South Pacific Salimalo Pali Liu Allan Culling Assistant Director, Poultry and Pig Farmer Department of Lands, Surveys and Environment Hima Douglas Laavasa Malua Director, Acting Environment Planning Officer, Niue Broadcasting Corporation Department of Lands, Surveys and Environment Richard S. Hipa Dr. David Parkinson Director, WHO Representative for Western Samoa, Cook Islands, Telecom Niue Niue and Tokelau, WHO Gael Laing Director of Tourism, Anthony R. Patten Niue Tourism Office Resident Representative, UNDP Rt. Hon. Frank Lui Premier, Isikuki Punivalu Government of Niue Director, PDW Ataloma Misihepi Chairman, Ariya C. Randeni Niue Tourism Authority General Adviser, Central Bank of Samoa Tom Misikea Acting Director, Penelope Ridings Department of Agriculture New Zealand High Commission Officer, New Zealand High Commission John Orsman Financial Secretary, Aiono Mose Sua Ministry of Finance Secretary; Ministry of Foreign Affairs Bradley Punu Secretary; Koroseta 1.To'0 Department of The Prime Minister Director, o Le Siosiomaga Society Inc. H.E. Mr. Warren Searell High Commissioner, Faamausili Leinafo Tuimalealiifano New Zealand High Commission Director, Department of Lands, Surveys and Environment Dr. Fuiava Sipeli Director, Feti Tuluono Health Department Assistant Manager, EPC Sisilia Talagi Secretary for Foreign Affairs, Kai Yanaka Department of the Prime Minister Resident Representative, IlCA Billy Thkutaine Director, Public Works Department NIUE Stan Vandersyp Neil Adams Director, Chief of Police, Ministry of Finance Niue Police Department Hon. Terry D. Coe PAPUA NEW GUINEA Minister of Finance, Public Works, Agriculture Forestry and Fisheries, Post and Telecommunications, and Kila Ai Broadcasting, Director, Department of the Premier National Planning Office Trudy Culling Leith Anderson, CBE, ED, OMT Meat Retailer Director General, 108 The Economic Impact of Natural Disasters in the South Pacific Disaster and Emergency Services, George Mosusu Department of Village Services and Provincial Affairs Acting Director, Export Crops Col. Rauka Eric Ani, OBE Ministry of Agriculture and Livestock Assistant Director General, National Disaster and Emergency Services, Joe Pagelio Department of Village Services and Provincial Affairs Assistant Secretary, Ministry of Education Joseph Bariamu Chief Engineer, Berry Palaso ELCOM Finance Officer, Department of Finance John Brown Coordinator, Norman Philemon Lands Department, Coordinator, East New Britain Province Surveillance and Emergency Services Department VillageServices and Provincial Affairs Chris Carter General Manager, Danial Raku Transport Operations Deputy Secretary General, National Disaster and Emergency Services' Pam Carter Department of Village Services and Provincial Affairs Company Secretary, Transport Operations Ainea R. Sengero, OBE Secretary, Mark Collins Department of Morobe First Secretary, Development Cooperation, Ted C. Sitapai Australian High Commission Deputy Secretary TechnicalServices, Department of Agriculture and Livestock Andrew Dollimore Third Secretary, Lawrence Solomon Development Cooperation Executive Manager, Australian High Commission ELCOM Philip D. Franklin Stephen Southern Manager, General Manager, Reckitt and Colman Astrolabe Pty. Ltd. Joe Hilavai Buraik Tatek Coordinator, Executive Manager, Emergency and Disaster Services (Manus) National Fisheries Authority Lahui Itana Geof Thompson Superintendent Safety, Planning Officer, ELCOM Ministry of Education Ellison Kaivovo, OBE Hosea Turbarat Manager, Administrator, Gazelle Restoration Authority (Project Implementation East New Britain Provincial Government Unit) Martin Veisame Jack Karo Executive Manager, First Assistant Secretary, TelecomNetwork Operations, Roads Engineering Telecom Department of Works Simoen Malai Secretary, Department of Manus Province 109 The Economic Impact of Natural Disasters in the South Pacific ApPENDIX IV TERMS OF REFERENCE Under the general supervision of the Division for disasters, including anticipatory measures that could Environment Management and SocialDevelopment substantially mitigate future destruction and loss. (DEMSD), Department for Development Support This includes areas where donors can playa vital and Management Servicesof the United Nations and role in disaster rehabilitation efforts. under the direct supervision of the Chief Technical Adviser of the project South Pacific Disaster Reduction Programme the consultant will undertake O' . the below-indicated study assignment: bJectlve The objective of the study is to provide information on ~~eeconomic impact of natural disaster in the Background Pacific Islands. Almost, if not all, Pacific Island countries are vulnerable to natural disaster in the form of cyclones (hurricanes), drought, floods and volcaniceruptions. Scope of the Study Recent examples include cyclones in WesternSamoa and Fiji,fl~ds in Papua New Guinea, and prolonged The Stud will consist of the followin arts: droughts in a number of atoll countries. Such y g p disaster can be highly destructive, inflicting severe 1. An overall broad macroeconomic impact review damage on agriculture, social and physical of disaster damage to the economies of Pacific infrastructure, housing, utilities and natural Islands, based upon existing, data and evidence over resources. Their impact on the economy takes many at least lO-year period; particularly emphasis will forms, including the effecton a country's export base, be given to: domestically produced food supply, the balance of payments, industrial production, tourism activities, (a) the incidence of disaster over time; and government's fiscal and monetary situation. (b) the nature and extent of disaster damage; Serious macroeconomic imbalances can result with (c) economic consequences - sectoral and potentially major distortionary effects on the macroeconomic aspects; economy, while the cost in terms of GDP foregone (d) the nature of the disaster response and may be substantial. Recovery can be both a slow rehabilitation; and and costly process and may never be complete. (e) policy implications. The study relies on a case study approach, and 2. A detailed analysis and assessment of 3-4specific addresses disaster damage at both the recent disasters in the South Pacific and their macroeconomic and community levels. Following economic consequences, with a particular focus on: a review of recent disasters that have occurred in the South Pacific, the study focuses on 3-4 specific (i) the ~is~ste~ ev.ent itself and the overall recent disasters and their economic impact, e,~onoffilcsitu,ationimpacted upon;, particularly in relation to key productive sectors and (ii) eCOnOI~llCe~fects (both pnm~ry and macroeconomic disturbances. A detailed secondary), including damage to standing crops examination of disaster impact on several major (both,monetary and subsistence), infrastructure development projects will be undertaken, and an housing, export base, and effects on macro- analysis made of the lesson from experience and economic stability, fiscal and monetary policy, policy implications. The proposed study can yield aDA flo,:s a~d r:sou~ce allocation, and the valuable results, particularly in giving a clearer e~~ernalfinancial Situation;. picture than hitherto of the nature and extent of the (iii) effect on aggregate income (GDP) and economic and social damage caused by disasters. It e,mployment, ~nd overa~lgrowth po~entiali . can also be valuable in pointing to the kind of policy (IV) ~ommun~ty-~~vel effe~ts, pa.rhcularl~ in and institutional responses need to cope with relation to availability of basic services, housmg, 110 The Economic Impact of Natural Disasters in the South Pacific food, economicactivities,sourcesof cashincome, purposes and its effectiveness in delivering such and village-based response to disaster assistance to particularly vulnerable groups devastation and rehabilitation needs; (including outer island communities); (v) external aid response and rehabilitation planning, resource allocation,and programming, 5. An analysis of lessons learned and policy and and institutional implications; and (vi) disaster rehabilitation and follow-up measures. 6. Conclusions and recommendations. 3. A review of 3-4 selected development projects, Case studies which may be t~ken.into consideration with an analysis of the impact that one or more are rec~~t cyclo~e d~vastahons In Weste:n Samoa disasters have had in terms of: and FIJI; flooding In Papua New GUInea and droughts in a coral atoll community. Specific (a) project implementation; development projects for analysis will be selected (b) costs and financing; fromwithin key sectors,including agriculture, social (c) completion schedule; services and infrastructure. (d) impact on other sectors; and ., .. .. . (e) overall development impact. There ISa pOSSIbIlItyof staging In-country seminars as a means of disseminating project findings and 4. An assessment of the mechanisms used to recommendations. These seminars are not included distribute aid for emergency and rehabilitation in the scope of these Termsof Reference. 111