DISASTER RISK MANAGEMENT SERIES NO . 2 Manag'ing Disaster Risk in -Emerging Economies 20738 | - 1 June 2000 I Edited by v/Jcilw Kreimer a1d Jlaifg/i/ret Arnol/d The \World RanIfk . ,. vo S - ; 4- Recent Disaster Risk Management Series 1 lManaging Disaster Risk in Mexico: Market Incentives for Mitigation Investment 2 .Managing Disaster Risk in Emerging Economies 3 Inundaciones en elArea Metropolitana de Buenos Aires (forthcoming) Disaster Risk Management Series No. 2 Managing Disaster Risk in Emerging Economies Edited by Alcira Kreimer and Margaret Arnold The World Bank Washington, D.C. Copyright © 2000 The Intemational Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing June 2000 1 23404030201 00 The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and should noL be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and will normally grant permission promptly. Permission to photocopy items for internal or personal use, for the intemal or personal use of specific clients, or for educational classroom use is granted by the World Bank, provided that the appropriate fee is paid directly to Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, U.S.A., telephone 978-750-8400, fax 978-750-4470. Please contact the Copyright Clearance Center before photocopying items. For permission to reprint individual articles or chapters, please fax your request with complete information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the World Bank at the address above or faxed to 202-522-2422. Photo credits: Cover, Turkey earthquake, 1999, photographer, Catherine Stevens; page xiv, workers after Turkey earthquake, 1999, photographer, Catherine Stevens; page 8, street flooded fromHurrican Mitch, Nicaragua, 1998, photo, PAHO/WHO page 52, reinforcing a building with sheer wall and cladding, Vanadzor, Armenia, 1996, photographer, Eric N. Patterson; page 100, fallen freeway due to Kobe earthquake, Japan, 1995, photographer, Fouad Bendimerad. ISBN 0-8213-4726-8 ISSN 1020-8135 Cover design by Communications Development Incorporated. Library of Congress Cataloging-in-Publication Data Managing disaster risk in emerging economies / Alcira Kreimer and Margaret Arnold, editors. p. cm. - (Disaster risk management series) Includes bibliographical references. ISBN 0-8213-4726-8 1. Emergency management-Economic aspects-Developing countries. 2. Emergency management-Developing countries-Planning. 3. Disaster relief-Economic aspects-Developing countries. 4. Disaster relief-Developing countries-Planning. I. Kreimer, Alcira. II. Arnold, Margaret, 1965- 111. Series. HV551.5.D44 M35 2000 363.34*-*09172<->4-dc21 00-035920 Contents Acknowledgments v Acronyms vii Contributors x Introduction 1 Part I Risk Identification 1. Developing Countries and the Economic Impacts of Natural Disasters Charlotte Benson and EdwardJ. Clay 11 2. Economic Aspects of Floods: The Case of Argentina Hector Sejenovich and Guillermo Cock Mendoza 22 3. Floods in Buenos Aires: Learning from the Past Hilda Maria Herzer and Nora Clichevsky 32 4. Climate, Change, and Disasters Maxx Dilley 45 Part II Risk Reduction 5. Infrastructure, Natural Disasters, and Poverty Paul K Freeman 55 6. Flooding Issues: The Case of the United States Juan B. Vald6s 62 iii iv Managing Disaster Risk in Emerging Economies 7. Cultural Heritage and Natural Disasters: Incentives for Risk Management and Mitigation June Taboroff 71 8. Single-family Housing: The Window of Opportunity for Mitigation Following Natural Disaster Ronald S. Parker 80 9. Women and Children Facing Disaster William A. Anderson 85 10. Climate Change from a Development Perspective Maarten K van Aalst and Ian Burton 91 Part III Risk Transfer and Finance 11. Risk and Insurance by the Poor in Developing Nations J. G.M. (Hans) Hoogeveen 103 12. Financing Disaster Mitigation for the Poor Krishna S. Vatsa and Frederick Krimgold 129 13. Moral Dimensions of Risk Transfer and Reduction Strategies T homas W Dunfee and Alan Strudler 154 14. Risk Transfer and Finance Experience in the Caribbean Jan C. Vermeiren 166 15. Incentives for Mitigation Investment and More Effective Risk Management: The Need for Public-Private Partnerships Howard Kunreuther 175 16. Catastrophe Insurance and Mitigating Disaster Losses: A Possible Happy Marriage? Robert E Litan 187 Acknowledgments This volume presents papers connected to several to share knowledge and connect and leverage resources events organized by the World Bank's Disaster Man- to reduce disaster risk. By involving all stakeholders, agement Facility (DMF). The events focused on creat- the Consortium intends to promote innovative solu- ing strategic partnerships to reduce the impacts of tions for reducing disaster risk. It focuses on synergy disasters on developing countries. The first event was and coordination, so that efforts, and benefits, are a June 1999 consultation of the international com- shared. munity and private sector on how to collaborate on The Disaster Management Facility (DMF) team ex- disaster risk management. The second event comprised presses its thanks to UNDP for its cosponsorship of workshops connected to the DMF's Market Incentives the launch of the ProVention Consortium, and to the for Mitigation Investment (MIMI), which explores Government of Norway for the leadership it has dem- public-private partnerships to provide incentives for onstrated in the initiative. Thanks go also to the other disaster mitigation investment. The third occasion was governing members of the ProVention Consortium. A a February 2000 workshop cosponsored with the full listing of the governing members of the ProVention United Nations Development Programme (UNDP) to Consortium can be found at www.worldbank.org/dmf. explore microfinance instruments to help the poor The editors also would like to thank all of the contrib- manage disaster risk. uting authors to the volume for their careful consider- These events and related initiatives led to the Feb- ation of the topics. ruary 2000 launching of the ProVention Consortium. The DMF team would like to express special thanks The Consortium is a global coalition of governments, to several members of the World Bank staff who pro- international organizations, academic institutions, vided essential support to the goals of the Facility. private sector, and civil society organizations aimed at These include President James Wolfensohn; Nemat reducing disasters in developing countries. The Con- Talaat Shafik, Vice President for Private Sector Devel- sortium is based on two premises: (1) we all must take opment and Infrastructure; Manuel Conthe, Vice Presi- responsibility to make this new millennium a safer dent of the Financial Sector; David de Ferranti, Vice one, and (2) it is the intersectoral links-for example, President for Latin America and the Caribbean; among the scientific community and policymakers, Eduardo Doryan, Vice President for Human Develop- and among the private and public sectors-that will ment; Ian Johnson, Vice President for Environmen- facilitate risk assessment, risk reduction, and risk edu- tally and Socially Sustainable Development (ESSD); cation activities in developing countries. The Jean-Francois Rischard, Vice President for External ProVention Consortium is an international network Affairs, Europe; Frannie Leautier, Director of Infra- v vi Managing Disaster Risk in Emerging Economies structure; John Flora, Sector Director for Transport; lands Environment Program. The World Bank's Disas- Robert Watson, Chief Scientist and Director for ESSD; ter Management Facility thanks the Netherlands for Andrei Raczynski, Director of Infrastructure, Interna- its generous support. These two chapters were trans- tional Finance Corporation; Jeffrey Gutman, Sector lated from Spanish by Aracely Barahona-Strittmatter, Manager for Transport in the Latin America and Car- with additional editing by Melanie Zipperer. Alicia ibbean Region; Anthony Pellegrini, Sector Director of Hetzner was editorial consultant for this volume, and Urban Development; and Nicholas Van Praag, Princi- Gaudencio Dizon was the desktop publisher. The edi- pal External Affairs Officer for ESSD. tors express their gratitude for their professionalism Partial funding for the two chapters on the Argen- and excellent work. The editors also extend their tina case study was provided by the Government of thanks for the support provided by Livia Mitchell and the Netherlands, as part of the World Bank/Nether- Maria Eugenia Quintero. Acronyms ASCAs Accumulating Savings and Credit Associations AHPS Advanced Hydrologic Prediction System (U.S.) ALERT Automated Local Evaluation in Real Time AWIPS Advanced Weather Interactive Processing System BRAC Bangladesh Rural Advancement Committee CARICOM Caribbean Community CAS Country Assistance Strategies (CASs) CAT catastrophe bond CBO Congressional Budget Office CDMP Caribbean Disaster Mitigation Project CEA California Earthquake Authority CGE computable general equilibrium CHF Cooperative Housing Foundation CRED Center for Research on the Epidemiology of Disasters DHA now OCHA DMRS disaster mitigation and relief strategies EMA Emergency Management Australia ENSO El Nifno and the Southern Oscillation EU expected utility FEMA Federal Emergency Management Agency (U.S.) FIA Federal Insurance Administration (U.S.) FIFMTF Federal Interagency Floodplain Management Task Force (U.S.) FIRM Flood Insurance Rate Map (U.S.) FPC Federal Power Commission (U.S.) GCI Getty Conservation Institute GCM General Circulation Models GDP gross domestic product GHG greenhouse gas GIS Geographic Information System GoT Government of Turkey vii viii Managing Disaster Risk in Emerging Economies ICCROM International Center for the Study of the Preservation and Restoration of Cultural Property ICOM International Commission on Monuments ICOMOS International Council on Monuments and Sites IDNDR Intemational Decade of Natural Disaster Reduction IFI international financial institutions IFM Integrated Fire Management IFRC International Federation of Red Cross and Red Crescent Societies IGM Instituto Geografico Militar (Argentina) IIASA International Institute for Applied Systems Analysis IIPLR Insurance Institute for Property Loss Reduction IPCC Intergovernmental Panel on Climate Change ISCT Integrative Social Contracts Theory ISO Insurance Services Office ITFPMRC Interagency Floodplain Management Review Committee (U.S.) LFWS Local Flood Warning System (U.S.) MEGS Maharashtra Employment Guarantee Scheme MIMI Market Incentives for Mitigation Investment NFIP National Flood Insurance Program (U.S.) NOAA/OGP National Oceanic and Atmospheric Administration, Office of Global Programs NGO nongovernmental organization NRC National Research Council (U.S.) NRDF National Research and Development Foundation (St. Lucia) NWC National Water Commission (U.S.) NWS2000 National Weather Service improved forecast systems (U.S.) OCHA United Nations Office of the Coordinator for Humanitarian Assistance OECS Organization of Eastern Caribbean States OFDA/USAID Office of Foreign Disaster Assistance of the U.S. Agency for International Development OTA United States Office of Technology Assessment PML Probable Maximum Loss RMM risk mitigation measure ROSCA rotating savings and credit association SCS Soil Conservation Service (U.S.) SFH Special Flood Hazard Area (U.S.) SPREP South Pacific Regional Environment Program SPPO South Pacific Program Office SUC Standard Unit Contract TFFFCP Task Force on Federal Flood Control Policy (U.S.) TVA Tennessee Valley Authority (U.S.) UIC UNITED Insurance Company (Barbados) UNDHA United Nations Department of Humanitarian Affairs UNDP United Nations Development Programme UNEP United Nations Environment Programme UNESCO United Nations Educational, Scientific and Cultural Organization UNFCCC United Nations Framework Convention on Climate Change Acronyms ix USACE United States Army Corps of Engineers USAID/OFDA United States Agency for Intemational Development, Office of U.S. Foreign Disaster Assistance USBR United States Bureau of Reclamation USGPO United States Government Printing Office WRC Water Resources Council (U.S.) WRDA Water Resources Development Act (U.S.) XOL excess-of-loss Contributors William A. Anderson Edward J. Clay Senior Advisor Senior Research Associate Disaster Management Facility Overseas Development Institute World Bank Portland House, Stag Place 1818 H Street, NW, Room 4K-270 London SWlE 5DP Washington, DC 20433 United Kingdom USA Tel.: 44-1273-723-101 Tel.: 202-473-6495 Fax: 44-207-393-1699 Fax: 202-522-2125 E-mail: e.clay@odi.org.uk E-mail: wanderson@worldbank.org Nora Clichevsky Charlotte Benson Architect Senior Research Associate Instituto de Geografia Overseas Development Institute Universidad de Buenos Aires Mulberry House Argentina Station Road Tel.: 54-11-4772-9775 East Sussex TN31 6QA, Fax: 54-11-4833-2488 United Kindgom Email: noraclic@satlink.com Tel.: 44-1797-252-954 Fax: 44-1797-252-954 Maxx Dilley E-mail: cbenson321@aol.com Geographer Disaster Management Facility Ian Burton World Bank Consultant 1818 H Street, NW, Room F 4K-264 72 Coolmine Road Washington, DC 20433 Toronto, Ontario USA CANADA M6J 3E9 Tel: 202-473-2533 Tel: 416 739 4314 Fax: 202-522-2125 Fax: 416 739 4279 Email: mdilley@worldbank.org Email: lan.Burton@ec.gc.ca x Contributors xi Thomas W. Dunfee Tel: 703-538 8366 Kolodny Professor of Social Responsibility Fax: 703-538 8383 The Wharton School, University of Pennsylvania Email: krimgold@vt.edu 3620 Locust Walk Philadelphia PA 19104-6369 Howard Kunreuther USA Cecilia Yen Koo Professor of Decision Sciences Tel.: 215-898-7691 and Public Policy Fax: 215-573-2006 The Wharton School E-mail: dunfeet@wharton.upenn.edu University of Pennsylvania Philadelphia, PA 19104-6366 Paul K. Freeman USA Senior Research Scholar Tel.: 215-898-4589 International Institute for Applied Systems Analysis Fax: 215-573-2130 (IIASA) E-mail: kunreuth@wharton.upenn.edu A-2361 Laxenburg Austria Robert Litan Tel.: 43-2236-807-471 Director, Economic Studies Program, Fax: 43-2236-807 466 and Cabot Chair in Economics E-mail: freeman@iiasa.ac.at The Brookings Institution 1775 Massachusetts Ave. N.W Hilda Maria Herzer Washington, DC 20036-2188 Professor and Researcher USA Instituto Gino Germani Tel.: 202-797-6120 Facultad de Ciencias Sociales Fax: 202-797-6184 Universidad de Buenos Aires E-mail: rlitan@brook.edu Argentina Tel. 54-11-4542-8543 Ronald S. Parker Fax: 54-11-4382-7040 Senior Evaluations Officer Email: centro@datamarkets.com.ar Operations Evaluation Department World Bank J. G. M. (Hans) Hoogeveen 1818 H Street, NW Vrije Universiteit Washington, DC 20433 De Boelelaan 1105 USA Room 4A-29 Tel.: 202-473-1688 1081 HV Amsterdam Fax: 202-522-3123 The Netherlands E-mail: rparkerl@worldbank.org Email: hhoogeveen@econ.vu.nl Hector Sejenovich Frederick Krimgold Consultant Director of Joint Center for Disaster and Risk Management Economia y Ambiente Virginia Polytechnic Institute and State University Uriarte 2462 5 A - 6 A Northern Virginia Center Argentina 7054 Haycock Road Tel/Fax: 54-1 773-4653 Falls Church, VA 22043-2311 Email: hsejenovich@sion.com USA xii Managing Disaster Risk in Emerging Economies Alan Strudler Maarten K. van Aalst Professor, Legal Studies Department Institute for Marine and Atmospheric Research 2204 Steinberg - Dietrich Hall Utrecht (IMAU) The Wharton School, University of Pennsylvania Utrecht University Philadelphia, PA 19104 PO Box 80005 USA 3508 TA Utrecht Tel.: 215-898-1221 The Netherlands Fax: 215-573-2006 Tel.: 31-30-253-7760 E-mail: strudler@wharton.upenn.edu Fax: 31-30-254-3163 E-mail: M.K.vanAalst@phyuu.nl June Taboroff Cultural Resource Specialist Krishna S. Vatsa and Consultant Consultant, World Bank, World Bank and Department of Engineering Management 526 Fulham Road George Washington University, Rm. 707 Staughton London SE5 8EA 22nd Street, NW United Kingdom Washington, D.C. 20052 Tel.: 44-207-736-8212 USA Fax: 44-207-736-0784 Tel: 703-812 3966 E-mail: jtaboroff@worldbank.org Email: vatsa@gwu.edu Juan B. Valdes Jan Vermeiren Professor and Department Head Chief, Caribbean Region Department of Civil Engineering Organization of American States and Engineering Mechanics 1889 F Street, NW The University of Arizona Washington, DC 20006 Tucson AZ 85721-0072 USA USA Tel.: 202-458-3006 Tel.: 520-621-6564 Fax: 202-458-3560, 3168 Fax: 520-621-2550 E-mail: jvermeiren@oas.org Email: jvaldes@u.arizona.edu ; (: dS; aX S t; 0 0 . 0 S 0 ;;' AdAt Ait Ai Ad; Si;t S S i ,;t tiCE S; tAd ti- j g f 00 0 jiS jly 0 0 j 0 S wow z r \ 0 0 ti 0 d 0. 0 2 i HE a 0; ;0rS== U ! ! -e a<"St0EdaS;nEStSES00?SSiilaS C6., 1 f E '5;u;Ze'c' \SE : 1 - 02:: Z: \§l ;A@Sxt I _t j ;t,00kT;g;'@>&¢' _kE l _ j SE Z } j t; ;;|t i$t ;t 009000;<;000 iS 0e d t d ,; S iss 5 -_ _m_ ghXC;Q0XEf :DaiflS::SS;:XQlXlX << 00)e \Xi)t 0: aVAa AL;E X -; - Qu j_ d00, _ 00;00000000 ::: t000. l. ii.S -\ S