Asian economies most at risk from natural disasters

Some of Asia's emerging economies, including the Philippines and India, face the greatest financial risk from natural disasters, a study concludes. Another argues sustainable and clean tech development will help them.

Bangladesh, the Philippines, Burma, India and Vietnam are among the 10 countries with the greatest proportion of their economic output exposed to natural hazards, says Maplecroft's second Natural Hazards Risk Atlas.

Their cities and trading hubs are open to events such as flooding, earthquakes and tropical cyclones and they have a poor capability to recover from a significant event.   This means, according to the study, supply chains are hit hard and markets disrupted.

The report comes as the Asian Development Bank releases another study saying that Asia must act now to pave the way for green, resource-friendly cities or face a bleak and environmentally degraded future.

In a special chapter of its flagship annual statistical publication, Key Indicators for Asia and the Pacific 2012, ADB examines the challenges and opportunities associated with the region’s breakneck urban boom. It also details measures needed to turn cities into environmentally sustainable, inclusive growth centers.

It too points to the dangers of natural disasters as having potentially catastrophic effects on population centers. Rising urban populations mean that over 400 million people in Asians cities may be at risk of coastal flooding and roughly 350 million at risk of inland flooding by 2025.

Unless managed properly, these trends could lead to widespread environmental degradation and declining standards of living, the ADB says.

Urbanization

Since the 1980s, Asia has been urbanizing at a faster rate than anywhere else, with the region already home to almost half of all the world’s city dwellers. In just over a decade, it will have 21 of 37 megacities worldwide, and over the next 30 years another 1.1 billion people are expected to join Asia’s already swollen urban ranks.

As climate change continues, extreme weather conditions are becoming more common resulting in a greater threat to economies and populations.

Maplecroft’s research also showed that it could exacerbate other risks like societal unrest, food security, corruption and rule of law even leading to increased political risk.

The ADB says conservation and efficiency improvements will help. It points to countries diversifying their energy sources to include renewables and investing in energy-efficient buildings and sustainable transport systems. Imposing congestion and emission charges, as in Singapore, and removing inefficient fuel subsidies, as in Indonesia, can make prices more fully reflect social costs. 

The ADB says much more is needed, including the development and mainstreaming of new green technologies. Early examples are waste-to-energy conversion plants, as in the Philippines and Thailand, or “smart” electric grids.

Resillience

But Maplecroft points out that it's not only emerging economies in Southeast Asia that are at threat. Japan, China and Taiwan have the highest economic exposure to natural hazards in absolute terms.

The ranking of these economic heavyweights comes as no surprise, especially in the wake of one of the costliest years ever for insurers. Economic losses for 2011 are estimated at USD380 billion by Munich Re, with the March 2011 earthquake and tsunami in Japan accounting for approximately 55 percent of the total.

However, huge economies such as Japan have the capacity to recover relatively quickly from natural disasters due to entrenched resilience factors including: economic strength, strong governance, established infrastructures, disaster preparedness and tight building regulations — factors that are, according to Maplecroft, largely ineffective in many of the emerging growth economies.