Economic valuation of Economic valuation of the cost of disastersthe cost of disasters

ECLAC/CEPALECLAC/CEPAL

Distance Learning ProgrammeDistance Learning Programme

Distance Learning ProgrammeECLAC

The losses:The losses: Lives (due to the physical collapse of infrastructure and the collapse of Lives (due to the physical collapse of infrastructure and the collapse of

services and equipment, instruments, medical attention) services and equipment, instruments, medical attention) Infrastructure and supplies (Investment, capital, medicines)Infrastructure and supplies (Investment, capital, medicines) Attention and response capabilitiesAttention and response capabilities

With mitigation you save:With mitigation you save: Lives (by maintaining services and the resilience of infrastructure)Lives (by maintaining services and the resilience of infrastructure) Investment capacity (you do not lose the opportunity cost of new Investment capacity (you do not lose the opportunity cost of new

investment which must be channelled to reconstruction)investment which must be channelled to reconstruction) Prevention capacity in contrast to passive curative interventionsPrevention capacity in contrast to passive curative interventions

Is there any positive outcome of disasters?Is there any positive outcome of disasters? Increase resilienceIncrease resilience Provide an opportunity for reduction of vulnerability in the face of Provide an opportunity for reduction of vulnerability in the face of

menaces and riskmenaces and risk

What is the impact of What is the impact of disasters, both positive and disasters, both positive and negative?negative?

Distance Learning ProgrammeECLAC

Save Lives Save infrastructure (investment)

Maintain function (services operating)

High priority High priority High priority

Priority Priority Priority

Low Priority Low Priority Low Priority

Incorporated in function

Incorporated in function

Incorporated in function

Mitigation Criteria that have to Mitigation Criteria that have to be negotiatedbe negotiated

Distance Learning ProgrammeECLAC

Maintain function (remain operational)

Save infrastructureSave lives

Supply side health response

Supply side health response

Supply side health response

Demand oriented response

Demand oriented response

Demand oriented response

Overall policyOverall policyOverall policy

Specific instrumentsSpecific instrumentsSpecific instruments

Management procedures

Management procedures

Management procedures

Financial resourcesFinancial resourcesFinancial resources

Requirements to Requirements to fulfillfulfill objectives objectives (systemic character of disaster mitigation)(systemic character of disaster mitigation)

Distance Learning ProgrammeECLAC

DEMAND SIDEDEMAND SIDE•BeneficiariesBeneficiaries

Service providersService providers

SUPPLY SIDESUPPLY SIDE-MultidisciplinaryMultidisciplinary

- Academics and scholarsAcademics and scholars- Technical and professional Technical and professional

associationsassociations- Policy and decision makersPolicy and decision makers

FINANCIALFINANCIAL-PublicPublic-PrivatePrivate

- International NGOsInternational NGOs

MITIGATIONMITIGATION

Actors: may be public or Actors: may be public or private, central or localprivate, central or local

Distance Learning ProgrammeECLAC

Include in project formulationInclude in project formulation

Incorporate in the profitability analysis (economic and social benefit)

Incorporate in the profitability analysis (economic and social benefit)

Maintain services operational (disaster prevention)

Maintain services operational (disaster prevention)

Incorporating mitigation in Incorporating mitigation in the project cyclethe project cycle

Distance Learning ProgrammeECLAC

INDIRECT EFFECTSLoss of services:

Supply / demand mismatch Imbalance, inadequacy / resilience

Rehabilitation and reconstruction stagesEmergency cost estimates (evacuation, field hospitals,

alternative facilities / services)Impact analysis

(duration of evacuation and / or use of Alternative facilities vs. opportunity /cost,

Cost/benefit, costs / profits)

INTERVENTION:Prevention and mitigation plan

Operational phase, an evaluation:Updating, revision, prevention reinforcement

and mitigation (update and maintenance of technological edge)

Technical criteriaManagement criteria

Assessment of health network(sanitary system)

DIRECT DAMAGEGoods, equipment,

Budget changes(cost / investment)

Preparation of technical dossier

Operational maintenanceTraining in use of methodology

conservationPredictionPrevention

Restoration of service

Impact assessment

Distance Learning ProgrammeECLAC

Design: evaluationDemand / Supply balance

Maintain operational services / resilience

Pre investment and investment phase:Calculate mitigation investment requirements

Impact analysis (opportunity cost,Cost-benefit, cost-profit)

Implementation phase:Prevention and mitigation plan

Operational phase, an evaluation:Updating, revision, prevention reinforcement

and mitigation (update and maintenance of technological edge)

Technical criteriaManagerial criteria

Assessment of the health network (sanitary system)

Goods, equipment, Budget changes

(cost / investment)

Preparation of technical dossier

Operational maintenanceTraining in use of methodology

conservationPredictionPrevention

Restoration of service

Mitigation

Distance Learning ProgrammeECLAC

Some things are easier to Some things are easier to measure than othersmeasure than others

IT IS DIFFICULT TO DETERMINEIT IS DIFFICULT TO DETERMINE The value of lives lost or affectedThe value of lives lost or affected The opportunity cost, cost-benefit or investment / profitability. This The opportunity cost, cost-benefit or investment / profitability. This

is associated with the lack of adequate base lines that assess the is associated with the lack of adequate base lines that assess the level, quality and efficiency / efficacy of health services providedlevel, quality and efficiency / efficacy of health services provided

The value and quality of services provided (both curative and The value and quality of services provided (both curative and preventive) preventive)

The duration of the transition / emergency phase (when field The duration of the transition / emergency phase (when field hospitals and evacuation processes are operational)hospitals and evacuation processes are operational)

IT IS EASIER TO DETERMINEIT IS EASIER TO DETERMINE The amount of investment required for reinforcement vs. The The amount of investment required for reinforcement vs. The

potential losses in equipment and inventories potential losses in equipment and inventories The cost of reinforcement as compared to the reposition cost of The cost of reinforcement as compared to the reposition cost of

affected infrastructureaffected infrastructure The alternative cost of providing services when infrastructures The alternative cost of providing services when infrastructures

collapsecollapse

Distance Learning ProgrammeECLAC

Determine the situation caused by the disaster

Stemming from sector valuations assess the value-added changes expected for every sector in the short term and for a medium-term period to be agreed (3-5 years or more)

Supported by input-output tables or sector weighing factors determine the projection of damages of one sector to the others

A damage scenario is built (taking into account the measured losses at replacement value) : variations in the main economic gaps is highlighted: external sector, fiscal deficit, internal equilibrium (prices, exchange rate, etc.)

Distance Learning ProgrammeECLAC

FUTURE DEVELOPMENTS VULNERABILITY AND DEVELOPMENT (1) Subject of analysis: relation of size, development and

vulnerability: “resilience” (strengthening and preparedness) in the face

of: shocks (internal, environmental, climatic, external) Dependency and diversification Integration and productive/competitive linkages Analytical-mathematical formulation

Global (trans border, regional) impact of disaster Economic, social, environmental Effects on the donor/relief community Effects on private sector (trans national corporations, FDI,

financial markets, etc.)

Distance Learning ProgrammeECLAC

FUTURE DEVELOPMENTS

VULNERABILITY AND DEVELOPMENT (2) Lessons from Mitch, droughts and earthquakes in 2001,

climatic variability and 30 years of disaster valuation: “revisit” and appraise reconstruction process

Broadening methodology to social and environmental valuation

Enhance current methodology with consideration of prospective alternative scenarios and macroeconomic models

Train national authorities in the areas of economics and planning

Promote mitigation and risk managements policies beyond prevention and response

Distance Learning ProgrammeECLAC

Disasters, conflict and crisis management

How to approach the different interventions required: conceptual aspects, definition problems and purpose of the interventions

Are they different sides of the same coin: crisis managements associated with disasters and / or conflict? Conceptual quagmire

Methodological problems: needs assessments vs. Causal analysis

Operational problems: setting priorities and differentiating emergency from urgency: simultaneity and sequencing

Policy problems: positive vs. negative intervention; resource allocation vs. policy change promotion

Distance Learning ProgrammeECLAC

Internal policies:Internal policies:Include vulnerability reduction as Include vulnerability reduction as an objective of development plans an objective of development plans alongside goals of:alongside goals of:•Competitive growthCompetitive growth•Equitable developmentEquitable development•Sustainable and sustained Sustainable and sustained developmentdevelopment•Social participationSocial participation

External policies:External policies:Introduce risk Introduce risk management as part management as part of the regional of the regional international agenda, international agenda, alongside:alongside:•External competitive External competitive insertioninsertion•Benefiting from the Benefiting from the globalization processglobalization process•Inclusive regional Inclusive regional insertioninsertion

Sectoral components:Sectoral components:•Monitoring, analysis and climate Monitoring, analysis and climate forecasting, including forest firesforecasting, including forest fires•Contingency plans in key sectors, for Contingency plans in key sectors, for example:example:

•Agriculture, cattle raising, Agriculture, cattle raising, •rural poverty, rural poverty, •energy and baselinesenergy and baselines•Water and healthWater and health

•Interconnected systemsInterconnected systems•Regulation of basic services with Regulation of basic services with sponsorship of private enterprisesponsorship of private enterprise•Focalized plans for vulnerable groups, Focalized plans for vulnerable groups, including employment, food availability including employment, food availability and nutritionand nutrition•Education to reduce vulnerabilityEducation to reduce vulnerability•Diagnosis and monitoring of Diagnosis and monitoring of vulnerability at the local levelvulnerability at the local level

Proposed Proposed courses of courses of actionaction

Restore economic and Restore economic and social fabricsocial fabricRestore and strengthen Restore and strengthen productive linkages productive linkages (upstream/downstream) (upstream/downstream) Reduce internal / external Reduce internal / external vulnerabilityvulnerability

HANDBOOK FOR HANDBOOK FOR ESTIMATING ESTIMATING SOCIO-ECONOMIC AND SOCIO-ECONOMIC AND ENVIRONMENTAL EFFECTS ENVIRONMENTAL EFFECTS OF DISASTERSOF DISASTERS

Coordination: Focal Point for Coordination: Focal Point for the Evaluation of Disastersthe Evaluation of DisastersSubregional Headquarters in Subregional Headquarters in MexicoMexico

www:eclac.cl/mexicowww:eclac.cl/mexico

Economic valuation of Economic valuation of the cost of disastersthe cost of disasterswww:eclac.cl/mexicowww:eclac.cl/mexico

Issues in Economic Analysis for DCPP chapters and Chapter Issues in Economic Analysis for DCPP chapters and Chapter GuidanceGuidanceRicardo Zapata-Martí (UN México)Ricardo Zapata-Martí (UN México)DISEASE CONTROL PRIORITIES PROJECTDISEASE CONTROL PRIORITIES PROJECTPERSONAL HEALTH SERVICES WORKSHOPPERSONAL HEALTH SERVICES WORKSHOP23 – 25 JULY 200323 – 25 JULY 2003CHURCH HOUSE, LONDON, UKCHURCH HOUSE, LONDON, UK

Economic valuation of Economic valuation of the cost of disastersthe cost of disasterswww:eclac.cl/mexicowww:eclac.cl/mexico

Issues in Economic Analysis for DCPP chapters and Chapter Issues in Economic Analysis for DCPP chapters and Chapter GuidanceGuidanceRicardo Zapata-Martí (UN México)Ricardo Zapata-Martí (UN México)DISEASE CONTROL PRIORITIES PROJECTDISEASE CONTROL PRIORITIES PROJECTPERSONAL HEALTH SERVICES WORKSHOPPERSONAL HEALTH SERVICES WORKSHOP23 – 25 JULY 200323 – 25 JULY 2003CHURCH HOUSE, LONDON, UKCHURCH HOUSE, LONDON, UK