------------ I 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