PAKISTAN | National Briefing

Target 3

Economic losses from disasters

March, 2015

This briefing note provides information relevant to the agreement of target (ii) of the draft Post-2015 Framework for Disaster Risk Reduction (DRR) for national monitoring , which reads: [Substantially] reduce direct disaster economic loss [by a given percentage] in relation to GDP by 2030.

Context

In recent years, Pakistan has been hit by a series of natural disasters. In October 2005, there was a 7.6 magnitude and earthquake in 2010, 2011 and 2012 there was severe flooding. These disasters had a massive cumulative effect on the economy.

In 2010 alone the monsoon rains caused massive floods which killed nearly two thousand people, affected more than 20 million and made at least 7.8 million people food insecure and inflicted over US$ 16 billion in economic loss.

Trends

Disasters damage the human and physical capital, leading to short-term reduction of GDP in Pakistan, for example, prolonged drought brought 50 percent reduction in GDP growth during 1998-2001 and floods in 2010 cost Pakistan 10$ billion (5.7 percen of GDP). While this is a negative impact in the short term, the impact of disasters over the medium and long term is difficult to establish due absence of reliable data

EM-DAT disaster data (2000-2013) and World Bank population statistics for the same period, reveal that on an average, the direct economic losses due disasters are 1.16 percent of national GDP, tough the data is skewed due to heavy losses in 2005 earthquake and 2010 floods. Direct losses are not reported for less intense disasters or disasters with slow onset due to poor data collection infrastructure.

ECONOMIC LOSS: The term 'economic loss' encompasses changes in wealth caused by damage to structures or other physical assets. These can be direct (those resulting from building and infrastructure damage) or indirect (those that follow on from physical damage). These can be reflected in market effects (e.g. loss of income owing to disaster-caused destruction) as well as non-market effects (e.g. loss of leisure time owing to longer commutes as a result of a disaster).

Measurement Note

On an average 80 percent of the disasters are climate related. The climate-only disaster losses are measured at 1 percent of GDP for the period 2005-2013. Since 2010 flood, Pakistan is consistently ranked among top 10 countries that have been most affected by the impacts of weather-related loss events (storms, floods, heat waves etc.).

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Agriculture accounts for 21 per cent of Pakistan's GDP, 45 per cent of employment and 60 per cent of exports. This disaster resulted in a loss of 7.5 million tons of sugarcane, 2.5 million tons of rice, 0.7 million tons of cotton and 0.3 million tons of maize.

§ Asian Development Bank and World Bank (2010). Pakistan 2010 Floods: Preliminary Damage and Needs Assessment.http://gfdrr.org/gfdrr/sites/gfdrr.org/files/publication/Pakistan_DNA.pdf

§ DesInventar Disaster Information Management System. Available at http://www.desinventar.net/index_www.html§ EM-DAT. The International Disaster Database. Centre for Research on the Epidemiology of Disasters (CRED). Available at

http://www.emdat.be/§ Global Climate Risk Index Reports (2006-2015) Available at http://germanwatch.org/en/cri.§ Guha-Sapir, D., I. Santos and M.E. Alexandre Borde. (2013). The Economic Impacts of Natural Disasters: Oxford University Press, USA.§ Klieson, K.L. (1994) 'The Economics of Natural Disasters', http://bit.ly/18hkWdM§ The Express Tribune. March 22, 2012. http://tribune.com.pk/story/353606/climate-change-at-its-current-trend-could-cost-pakistan-14-

billion-a-year/

Sources

Key Challenges

Most often, accurate data on disaster losses is not available for and the limited available data only refers to direct measurable monetary losses (direct use values).

Methodologies for monetising indirect losses are crude and are in early stage of sophistication.

The “Desinventar” database for Pakistan is supposed to have 16 standard indicators of direct damage proposed in the UNISDR disaster loss collection methodology. However, the economic damages information are not available in this dataset.

The NDMA has regularly reported that the disaster data is incomplete, scattered across various organizations, most often inaccessible, and sometimes suffers from lack of reliability.

Disaster damage and loss information are not systematically brought together to monitor hazard patterns, occurrence, vulnerability, magnitude and severity. These gaps limit the possibility of assessing relative impact of disaster hazards as well as any meaningful forecasting.

The accumulated losses do not cover small-scale, highly frequent and localised disasters and the available statistics are solely based on major disasters.

Recording and measuring economic losses

Measuring disaster losses requires the normalisation of data for key variables, like population or GDP, to allow the comparisons between time periods and among subnational units.

Keys Issues in setting up a baseline

Documenting disaster statistics are essential for DRR policy making, recovery and rehabilitation as these are fully dependent on understanding of risk profiles and severity of the disaster impact.

There are limitations on disaster data that have been pooled so far by national and subnational agencies. Information on disaster occurrence and impact is often collected by different national and international agencies for relief fundraising rather than statistical purposes. The lack of standardized methods and definitions diminishes the ability to set an accurate baseline for monitoring disaster impact and losses.

The lack of damage reporting leads to underestimation of the true economic costs arising from disasters, especially for remote areas.

The lack of standard methods to measure impact on economy or humankind seriously compromises comparison across time and space. Progress in disaster risk reduction becomes difficult to measure in the absence of national and subnational benchmarks.

Among indirect losses, deaths occurred due to natural disasters affect the GDP as they reduce the number of labor force involved in production process.

Damage to houses and assets force households to divert their resources from productive sectors to the reconstruction and rehabilitation of their houses.

Due to high level of poverty, after disasters, many children are forced to drop out the school in order to compensate for the income reduction by their participation in labor market.

Among business units SMEs are most vulnerable and take longer to recover from disasters than larger businesses; a good majority of SMEs do not survive high impact disasters.

Economic growth projections show that although real GDP is likely to be impacted by a major disaster event, investments in disaster risk reduction could significantly control this trend.

Implications for monitor reporting in the post-2015 framework for DRR

The proposed target of reducing economic losses from all disasters by 20% (per unit of GDP) by 2030 will require Pakistan to limit its economic losses at 0.93 percent (per unit GDP). This is a very ambitious target considering Pakistan’s vulnerability and risk level. It is estimated that climate change only could cost the economy $14 billion a year due to natural disasters and other losses, which is almost 5% of the GDP.

Trends in the economic losses are highly influenced by single extreme disaster events. A roboust DRR statistics system must accurately monitor direct losses for disasters with various magnitudes and slow onset like drought as well as indirect losses.

Different provinces/regions present different disaster profiles and national databases should reflect these variations to accurately monitor disaster economic impact.

PAKISTAN | National Briefing

21995-2015

Years ofLeadership

Leadership for Environment & Development (LEAD) Pakistan

Written by: Nadeem Ahmad, Public Policy Analyst Reviewed by: Hasan Akhtar Rizvi, Khizer Farooq Omer

LEAD House, F-7 Markaz, Islamabad. Pakistan. Tel: +92 (51) 2651511, Fax: +92 (51) 2651512 Email: main@lead.org.pkWeb: www.lead.org.pk