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Feature: Development, science and markets for disaster risk reduction

Natural disasters that occur when vulnerable communities are affected by droughts, floods, cyclones, forest fires, landslides, earthquakes or tsunamis are accompanied by tremendous suffering around the world. The Asia - Pacific region is especially vulnerable; nearly 90 percent of the people affected by natural disasters since 1970 live in this region. On average each year about 100,000 people are injured or killed in Asia by natural disasters, and over four million people lose their homes (data in this paragraph come from OFDA-CRED, 2006). Especially in poor rural areas, these disasters aggravate food insecurity and retard or even reverse the development process. People living on the margin cannot easily cope when disaster strikes, and they must often go into debt after selling or losing family assets. Once assets are stripped, food consumption declines. Mothers and children are usually the most severely affected, leading to malnutrition, disruption of cognitive development and increased child mortality. One-time events can thus create permanent problems.

Focus on the long-term fundamentals

A large number of committed government and non-government organizations, individuals and international agencies are involved in relief efforts when disaster strikes, contributing money, goods and/or time. However, it is important to remember that the first lines of defence against all types of natural disasters should be long-term poverty alleviation, improved infrastructure and investment in human capital. Wealthier people who are in better health and have financial reserves and more durable houses are obviously better able to withstand the effects of natural hazards, so reducing poverty is the most important step for reducing vulnerability to disasters.

Besides poverty reduction, adequate and durable infrastructure is also critical, both in terms of allowing relief supplies to arrive in disaster areas and in terms of accelerating the development process in order to reduce food insecurity and poverty. For example, an Oxfam report noted that the price of timber had tripled in Aceh a year after the tsunami, making it more difficult to build new houses to replace those destroyed by the tidal surges. This outcome could have been avoided with good infrastructure (possibly accompanied by temporary changes in trade policy) that allowed integration with other timber markets.

Furthermore, because agriculture is dependent on the climate and thus risky, it is also important that farmers diversify into non-farm activities that can provide income when households are adversely affected by droughts or floods. Studies have shown that farmers' ability to diversify their income sources is at least in part affected by educational levels (e.g. van de Walle and Cratty, 2004), so more and higher quality education is important for reducing vulnerability to natural disasters.

While it is difficult to overstate the importance of poverty reduction, infrastructure, education and diversification in the battle to reduce vulnerability to disasters, it will take many years to achieve these goals even under the most optimistic of scenarios. During this interim, many other short and medium-term measures are also critical in order to reduce the suffering associated with disasters. Emergency relief will always be needed to some degree, but there are many solutions that will reduce the need for emergency relief response.

Be prepared

One rupee of prevention is worth three rupees of cure

Preparation for the next tsunami, both technically and socially, is undoubtedly important. Nevertheless, it may be difficult to sustainably train local communities in disaster preparedness if the next tsunami is not experienced for several generations. Being prepared for droughts or floods, however, could be more successful (and more valuable) because these events recur with a much higher frequency.

Compared with geological (e.g. earthquakes, tsunamis) and biological (e.g. insect infestations) disasters, hydro-meteorological disasters (e.g. floods, droughts, windstorms) are by far the most frequent disasters in Asia, as in the rest of the world, and they account for most of the damage to the food and agricultural sector. Hydro-meteorological disasters also affect a larger percentage of the population in Asia than other types of disasters (UNISDR, 2006). For example, the 2002 drought in India caused a 19 percent drop in foodgrain production, compared with what was expected based on trends. More than 300 million people across 18 states felt its impact (IRRI, 2005). The June to August floods in Bangladesh in 2004 caused an estimated $7 billion in damages (OFDA-CRED, 2006).

Bihar, India's poorest state, contains eight river basins that cause major flooding every year in the monsoon season. Because of these rivers, Bihar contains more than half of the Indian population affected by floods. In Dharbanga District, the flooding has become worse during the past 30 years because of the construction of embankments to protect nearby towns. A project initiated by Tearfund and the Discipleship Centre, non-governmental organizations from the United Kingdom and India, respectively, has helped to reduce vulnerability by implementing a range of measures (Venton and Venton, 2004). Raised hand pumps were installed that stay above flood levels so as to safeguard water supplies and reduce repair costs after the floods recede. Boats were purchased for use in evacuations, and embankments that serve as evacuation routes were raised. Human capacity building was also enhanced by establishing disaster management teams, in addition to the creation of a village development fund. These simple measures were not able to reduce crop losses caused by the floods, but they were able to reduce livestock losses, in addition to many other benefits. Most important, even though some benefits were omitted because of difficulties in attaching monetary values to them, the benefit to cost ratio for the project exceeded 3 across a range of sensitivity analyses. This finding suggests that communities, governments and donors could usefully spend more money on disaster prevention.

Drought forecasting

Many have rightly recognized that a better tsunami warning system in the Indian Ocean could have saved tens of thousands of lives in December 2004. But recent scientific advances mean that better warning systems are also possible for other natural hazards, such as drought events caused by the El Niño-Southern Oscillation (ENSO) phenomenon. ENSO is a major cause of interannual climatic variability in much of Asia, and various studies have shown it to have large effects on food production in India, Indonesia, the Philippines and Sri Lanka, especially rice (Selvaraju, 2003; Naylor et al., 2001; Falcon et al., 2004; Zubair, 2002). Reasonably reliable forecasts of major events can now be made in advance of farmers' planting decisions, affording the opportunity for farmers to change cropping patterns, use varieties more tolerant of drought or purchase pumps to tap alternative water supplies such as groundwater. Water resources managers could use the forecasts to improve water allocation across competing sectors, for instance by defining better allocation rules that are contingent upon climate forecasts. Forecasts can also used to better plan for any necessary food imports. But for these coping mechanisms to improve people's lives, it is necessary to develop a national planning process that explicitly incorporates such forecasts (including their uncertainties) and effectively communicates the results to local decision-makers.

Utilize scientific knowledge in designing interventions

Land salinity and the tsunami

A solid understanding of scientific principles and facts is often important for designing effective disaster relief or prevention programs. For example, when the tidal surges of the tsunami brought seawater washing over the land, there were widespread alarmist reports regarding the impact of saltwater on the soil and how reclaiming the land would take many years. While it is true that reclaiming soils in arid countries that have become salinised because of irrigation practices or natural accumulation can take years, the situation is very different in the case of sea flash floods, where the nature and duration of flooding are very different. Further, in the tropical humid conditions prevailing in tsunami-affected areas, there was more opportunity for leaching of the salt by monsoon rains and/or irrigation with fresh water. Indeed, just a few months after the tsunami, FAO surveys showed that more than two-thirds of the affected arable land throughout the region had been cleaned of salt through precipitation and irrigation (FAO, 2005d). Such knowledge is clearly important for making sure that the massive funds generously provided by donors are used to help the tsunami victims in a cost-efficient manner. For example, better use of such knowledge would have directed money to areas where leaching and irrigation was less likely to be effective, with the funds being used for the development or repair of needed drainage systems.

Deforestation and large-scale flooding

As another example, many government decision-makers, international aid groups and media are often quick to blame large scale flooding on deforestation caused by small farmers and loggers. However, there is no scientific evidence linking such flooding to deforestation (FAO-CIFOR, 2005).[13] Such misguided views from well intentioned organizations have on occasions prompted governments to make life harder for poor farmers by driving them off their lands and away from the forests, or down the slopes into the plains, while doing nothing to prevent future flooding. For example, catastrophic floods in China, Thailand and the Philippines prompted logging bans that put many people out of work. While planting trees and protecting forests can have many environmental benefits (including minimizing runoff that causes localized flooding), preventing large scale floods is not one of them. Even at the local level, the flood-reducing effects of forests are heavily dependent on soil depth, structure and saturation levels, not exclusively on the presence of trees.

If deforestation was causing floods, the large amount of deforestation during the past century would be expected to create an increased frequency of major flood events, but the frequency of such floods has remained the same over the last 120 years, going back to the days when lush forests were abundant. The sharp increase in the economic and human losses attributed to flooding is caused not by deforestation but mainly by the simple fact that more people are living, working and generating more wealth in flood plains. Thus, many floods that previously would have been only minor events are now major disasters.

Policy-makers and development agencies have a responsibility to pursue solutions that are rooted in the best available science, and it is important to acknowledge that objective scientific research does not provide easy answers when it comes to understanding flooding. We need to stop blaming people who live and work in and around forests for floods that affect entire river basins and instead consider the effect of a wide variety of land-use issues, which can in some instances include poor logging techniques. For example, draining and developing wetlands and damming and altering stream flows can make floods worse. However, this is not to say that development of wetlands and dams are major causes of all floods, either. Every situation is different, and solid scientific theory and evidence must be considered in order to find efficient solutions that take due account of the multiple uses of river basins in specific contexts. An integrated approach to watershed and floodplain management combines land-use management in the uplands with land-use planning, engineering measures, flood preparedness and emergency management in the lowlands. Crucially, it considers the social and economic needs of communities living in both the mountainous watersheds and the river basins.

Breeding and improved crop management for abiotic stress

When Robert Chandler, the first Director-General of the International Rice Research Institute (IRRI), was asked about 40 years ago what was the best technology available for rainfed rice, he replied simply, "irrigation." While that statement is still true today, scientific and technological advancements now provide another potential set of answers as well, ranging from breeding better varieties to improved crop management.

Contrary to common perception, many advances in biotechnology are possible without transferring genes across species. New tools of biotechnology (e.g. marker-assisted selection, molecular breeding, deletion mutants) and new breeding strategies are allowing for the selection of varieties with improved drought tolerance that also give high yields under well watered conditions (many popular varieties are unable to perform well under both conditions). Rice breeders are also developing a new type of rice, aerobic rice, that combines the ability of some traditional but low-yielding varieties to grow in dry soils with the fertilizer responsiveness and yield potential of modern high-yielding varieties. Improved crop management can also help farmers to use water more efficiently. To give just one example, dry direct seeding, whereby the seeds are planted into non-flooded fields, can help farmers to avoid late season drought and also accelerate the cropping calendar, allowing for multiple cropping.

Problems of excess water are also amenable to solution using the tools of biotechnology. Scientists have recently used molecular markers to incorporate a gene for submergence tolerance into a popular Indian rice variety (Swarna). This new approach allowed the creation of a variety that is identical in all respects to the pre-existing variety, with the exception of one gene. This task would have proved difficult, if not impossible, using only conventional breeding approaches. Scientific research to develop techniques and products that turn unfavourable production environments into more favourable ones needs to be given more financial support.

Use markets when appropriate

Increased use of world food markets to stabilize food prices

While world commodity markets are subject to price fluctuations, they can also provide badly needed supplies in times of need. Increased use of world food markets can also save money by reducing the need for stockpiling large quantities of supplies that, if they are not needed to respond to a natural disaster, often deteriorate after prolonged periods of storage. Rice is the staple food of most Asians, and the world rice market, once the most volatile of world grain markets, is now much more stable than it was between the mid-1960s and early 1980s, primarily because of more stable production and an increased commercial orientation of major rice exporters (Dawe, 2002).

Against this backdrop, Bangladesh liberalized rice imports in April 1994 by removing non-tariff barriers and allowing the private sector to import subject only to a tariff. India also liberalized its rice trade in late 1994, relaxing its ban on exports of ordinary rice and allowing more private sector participation (Del Ninno and Dorosh, 2001). This pair of liberalizations paved the way for a surge of imports (about 2.25 million tonnes) by Bangladesh in 1998 in response to the "flood of the century." Most of these imports came in small shipments from India and were carried out by the private sector on both ends. The timely imports served to stabilize domestic prices; absent these imports, it has been estimated that rice prices in Bangladesh would have risen by 40 to 60 percent, which would have resulted in serious hardship and food insecurity for millions of poor people (Dorosh, 2001).

Many are sceptical that poor countries can rely on world markets for food, but the ratio of cereal imports to foreign exchange reserves is now typically 10 percent or less in Asia, much less than it was 40 years ago (when it often exceeded 100 percent). Thus, even in times of exceptional need, world market instability or lack of foreign exchange is unlikely to threaten the availability of supplies. International trade mediated by the private sector should today be a more prominent component of an effective policy to stabilize domestic staple food prices in the face of disasters.

Lower tariffs to promote irrigation

Bangladesh also provides an example of using good policies to stimulate the expansion of irrigation, which buffers farmers against the vagaries of the weather and can prevent a natural hazard (in this case, drought) from becoming a natural disaster. Before 1978, the Bangladesh Agricultural Development Corporation (BADC) monopolized all procurement, maintenance and installation of tubewells. By late 1988 however, after a process of gradual changes, the private sector could import and trade in pump sets for shallow tubewells (STW) at low import duties and without having to adhere to standardization requirements. As a result of these reforms, installation costs for STW fell substantially and the area irrigated by tubewells increased from 0.27 million hectares in 1981/82 to 1.98 million hectares in 1991/92 (62 percent of irrigated land), an increase by a factor of 7 in a decade. The rate of increase was particularly rapid in the latter half of the 1980s after the elimination of standardization requirements. Further, irrigation water prices declined substantially after liberalization for small and large farmers alike (for more discussion of these reforms, see Hossain, 1996).

It should be noted that irrigation has also had an important downside in Bangladesh (and other countries), viz. contamination of water supplies with arsenic. While this is a serious problem, it is not an argument against irrigation per se. It is an extremely unfortunate side effect that requires more research and action in order to eliminate threats to human health, as well as possible long-term threats to the productivity of the soil.

Weather insurance

Crop insurance programs have had a long and difficult history. Insurance is viewed as necessary to protect farmers from the inherent risks present in agricultural production, but there have been many problems in implementing effective programs. These problems include high transactions costs, moral hazard and adverse selection. Transactions costs are high because of the need to evaluate the losses suffered by farmers on an individual, case-by-case basis. Moral hazard is a problem because once insured, farmers have less motivation to manage the crop in a way that avoids losses. Adverse selection arises because risk levels vary from one farm to another and only the farmers most prone to risk want to buy the insurance, thus raising premiums to unaffordable levels. Or, if premiums are not raised to an actuarially fair level, then the program is often fiscally unsustainable. These problems typically lead to large financial losses; even in developed countries, crop insurance programs cost several dollars to deliver each dollar of insurance benefits.

Weather insurance is different from crop insurance in that it does not insure against specific losses, which vary from farm to farm. Rather, it pays out when specific quantifiable weather events do or do not occur. For example, in areas without irrigation, a weather insurance contract could pay if the rainy season starts late, or if rainfall during a specific part of the crop growth period is below some target level. Such a design of insurance contracts could substantially reduce transactions costs, moral hazard and adverse selection. Transactions costs are reduced because the insurer does not need to monitor large numbers of individual farms and make subjective judgments regarding crop losses (such judgments can also lead to corruption). Instead, it is only necessary to monitor a set of, for example, rain gauges. Moral hazard is reduced because the payout is not contingent upon a yield loss in the farmers' field. Thus, the farmer has more incentives to manage the crop properly in the event of a natural hazard such as drought. Adverse selection is reduced because all purchasers of the insurance pay the same premium and would receive the same payouts under all possible scenarios. In other words, no individual client or group of clients is more likely to receive payments than another.

Furthermore, weather insurance can be made available to all people who are affected by the weather, not only farmers. Because it is potentially available even to the very poor, it has been touted as an "insurance equivalent of microfinance." For example, a landless labourer might lose employment during the harvest period if there is no harvest because of drought. Or a retailer of clothes might suffer lost sales if farmers have no discretionary income with which to purchase clothing. While these individuals cannot purchase crop insurance if they are not farmers, they could purchase weather insurance.

To date, there are projects in several countries that are testing these types of insurance contracts, and they will provide some valuable lessons. Not surprisingly, weather insurance can have problems of its own. First, purchasers of the contract might suffer an actual loss but not be paid because the trigger event did not occur. For example, a farmer might suffer a yield loss because of water shortages, but not be compensated because rainfall as measured at the nearest rain gauge was above the minimum level stipulated in the insurance contract. Of course, the reverse could also happen; a farmer might get paid even without suffering losses. This phenomenon is known technically as basis risk, and if this risk is large enough (i.e. the correlations between rainfall across plots, or between measured rainfall and crop yields in different plots, are low enough), the contract ceases to function as an effective hedging mechanism and may become more akin to gambling.

A second problem is that a local insurance company providing weather insurance could become bankrupt if it had to make many simultaneous payments in the event of a severe region-wide drought. The solution to this problem is re-insurance with larger insurance companies that can spread risks over many different businesses, but large private international companies may not be interested in providing re-insurance if the volume of business from a particular area is too small. Thus, it may be difficult to test the viability of weather insurance with a small group of farmers to see how it works. Instead, it may be necessary to start with a large group of farmers. Alternatively, there may be a role for government to assume the re-insurance risks for an initial period of time in order to buy time and get the private sector interested. If this path is followed, it will be important to establish actuarially fair premiums from the start; government support should be necessary only in the event of a truly catastrophic event. It should not provide support on an annual basis, or else this will undermine the interests of the private sector to participate (the discussion in this section was based on Morduch, 2001 and Skees, Hazell and Miranda, 1999).

[13] As with large-scale flooding, the causes of localized flooding are complex. Localized flooding is not discussed here.

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