Measuring the Economic Impact of Disasters

1. Measuring the Economic Impact of Disasters E.C. Torrente and V.J. Bawagan

2. Outline • Ways of Measuring Disaster Impacts • Present damage assessment in the Philippines • The ECLAC Methodology • Quantifying economic losses - Assessing the impact on a per capita basis - Assessing impacts by targets and actual GDP - Assessing impacts the ECLAC methodology 5. Macroeconomic impacts of the typhoons 6. Lessons learned 7. Recommendations

3. Direct Costs • generally termed as “stock” • damages that usually occur during or right after the actual disaster • total or partial destruction of physical infrastructure (i.e. bridges, buildings) and economic installations (i.e., power, communication, transportation)

4. Indirect Costs • generally termed as “flows” • Costs due to the disruption to the normal flow of goods and services in the economy (reduced output, income and wage) • also includes human suffering, insecurity, psychological stress on victims but very difficult to identify and quantify

5. Secondary Effects • also called “macro-economic impacts” alterations or changes caused by disaster to the expected performance of the national economy • disaster has bearing on GDP, current account balance, public finances, gross investment, prices of commodities and employment

6. Important Macroeconomic Effects • Growth in Gross Domestic Product (GDP) • Current Account balance • Public Finances • Gross Investment • Prices of Commodities • Employment

7. The Present Damage Assessment in the Philippines Data and damage estimates are generally in terms of: • people affected, • infrastructure damages/losses • productive assets destroyed and • production losses.

8. Present Damage Assessment in the Philippines Department of Agriculture – (DA - R2) Upon receipt of weather advisory: - Determined vulnerable crop areas • Activated its Command Centers. • Prepared first or initial report on. • Estimated total area affected and productivity losses Within 24 hours of typhoon, prepared second report. • Nature and degree of typhoon • Estimated crop damage • - crops affected • - area affected • - volume loss • - value loss

9. The Assessment Method of the Department of Agriculture Production losses are based on: • value of crops lost per area at a certain growth stage as well as • the replacement values of damaged equipment, facilities, infrastructure and other assets.

10. Estimating Damages on Crops The Assessment Method of the Department of Agriculture

11. Estimating Damages on Crops The Assessment Method of the Department of Agriculture

12. Agricultural losses can be considered under the following The Assessment Method of the Department of Agriculture Just after planting. • considers the cost of investment put into the crops. • costs of seedlings, land preparation, labor, equipment rental, etc.

13. The Assessment Method of the Department of Agriculture Agricultural losses can be considered under the following Various stage of growth. • calculated based on the tables using the growth stage, wind speed and number of hours that rice and corn have been subjected to. • when crops are in their early stages, they are assessed by the valued of investments put into them

14. The Assessment Method of the Department of Agriculture Agricultural losses can be considered under the following Ready for harvest. • valued using their farm gate prices. • farm gate prices are the prevailing market prices which should consider the total amount of inputs, among others, in the crops. • again, the volume of damaged or lost crops is calculated based on the factors enumerated in the above tables

15. Present Damage Assessment in the Philippines • Within 36-72 hours of typhoon, prepared updated reports • Ten days after the typhoon, final report submitted. • Based on joint field validation of DA-RFU 02, BAS and LGU. • Prepared DA-LGU rehabilitation plan including counterpart funding scheme.

16. The Assessment Method of the Department Public Works and Highways Infrastructure losses estimated by the DPWH Report on Damages were categorized into three (3) priority groups: Priority I - Immediate rehabilitation of collapsed bridges, cut road sections, breached sea walls and dikes and other government buildings to quickly restore mobility and ensure the safety of the affected areas.

17. The Assessment Method of the Department Public Works and Highways Report on Damages were categorized into three (3) priority groups: b) Priority II - Ordinary repair works such as patching, potholes, resurfacing of washed-out and slightly destroyed Flood Control Structures. c) Priority III - Minor repair works to prevent further deterioration of damaged road sections.

18. Present Damage Assessment in the Philippines DPWH • Conduct ocular/an in-depth survey/investigation • Take photo on all angles of damages 3. Prepare the plans 4. Quantify the extent of damages

19. Present Damage Assessment in the Philippines DPWH 5.Prepare the detailed cost estimates for materials, labor and equipment 6. Prepare the program of work 7. Compute the total amount of damages 8. Submit the program of work and plan for approval. 9. The DPWH regional office validates the extent of damages as per plan and program of work. 10. Submit program of works and plans for appropriate funding.

20. The Present Damage Assessment in the Philippines The Department of Tourism uses a checklist that enumerates reservations cancelled, decline in occupancy of hotels and resorts, etc. However, the DOT is only limited to those tourism establishments that are accredited with their department.

21. Present Damage Assessment in the Philippines DSWD. Data analysis at the Field Office: • Number of affected families over total population • Families served inside and outside evacuation centers • Totally and partially damages houses. • Cost of assistance and capability of LGUs to respond. • Relief Assistance • Rehabilitation Services

22. Present Damage Assessment in the Philippines Department of Trade and Industry Monitors price movements and improves supply to avoid hoarding Department of Labor and Employment Monitors labor displacement and implements employment programs

23. Present Damage Assessment in the Philippines Regional Office of Civil Defense • Consolidates reports • Validates reports - Prepares summaries of damages - Forwards recommendation to the OCD and NDCC

24. Present Damage Assessment in the Philippines • Office of Civil Defense (OCD) • only direct costs are accounted • National Economic and Development Authority (NEDA) • needs added data on indirect damages to estimate long-term effects on the economy

25. ECLAC Methodology Direct & Indirect Impacts of Selected SectorsBased on ECLAC Study

26. Direct damages Repair or reconstruction costs of agriculture, cattle farming and fishing infrastructure, including tertiary level roads Damages or destruction of fishing fleet Damages or destruction of fish farming ponds and shrimp factories Agriculture production ready to be harvested Stocked agricultural produce and grains Losses in animal stock Indirect damages Reduced yields in future crops Not planting of future crops Reduced fishing Loss of employment Differential impact on women Damages to Agriculture, Cattle Raising and Fishing PRIMARY CONSIDERATION

27. Direct damages Repair of damaged housing Reconstruction destroyed housing Household furnishings and appliances replacement Repair or reconstruction of public buildings and facilities Indirect damages Temporary housing supply Relocation of housing in safe areas Cost of migration to families Damages to Housing and Human Settlements

28. Direct damages Repairs or reconstruction costs of roads and bridges Replacement cost of automotive stock Repair or reconstruction coast of railway tracks Rehabilitation costs of ports and airports Indirect damages Increased transport costs due to the use of longer alternate routes and/or roads in poor condition Relocation costs for telecommunication towers Income losses due to air transport reduction or cancellation Income reduction in waterways and canals due to reduced water level in the face of drought Damages in Transport and Communications

29. Direct damages Repair or reconstruction costs of infrastructure Repair or replacement cost of equipment and machinery Losses in finished production (stocks and inventories) Indirect damages Reduced production Temporary employment losses Differential impact on women Commerce, Industry and Services

30. Direct damages Repair or reconstruction costs of tourism infrastructure Repair or replacement cost of furniture and tourism equipment Damages to beaches and other tourist attractions Indirect damages Temporary fall in hotel occupancy and income of enterprises Negative effect in linked activities Cancelled future reservations and cost of promotion campaigns Unemployment Differential impact on women Damages to Tourism

31. Direct damages Repair or reconstruction costs of schooling facilities Furnishings and educational material’s replacement Rehabilitation of historical and cultural heritage Indirect damages Delay in school year Rent of temporary facilities Repairs to schooling centres used as shelters for displaced population during disaster Reduced income from damaged culture and historical centres (museums, etc.) Education and Culture Sectors

32. Direct damages Repairs or reconstruction of health infrastructure: hospitals, health clinics, etc. Replacement of equipment, furnishings and lost medicines and stocks Indirect damages Increased expenditure to provide medical attention Preventive campaign costs in the face of potential epidemics or infective diseases Relocation costs for moving health centres to safer grounds Health Sector

33. Direct damages (estimated indirectly) Repair costs of natural resources to their previous state: reforestation, land stabilization, protection against slippage, etc. Cost of alternative water sources Beach cleanup and replenishing Indirect damages Loss of environmental services Cleanup from spills of toxic materialsIndirect damages Loss of environmental services Cleanup from spills of toxic materials Environment

34. Impact on Women • Double burden on women • Effect on gender relationships

35. Quantifying Economic Losses Three ways to express and show impact of disasters: i. On per capita basis ii. As a percentage or fraction of total income or output iii. Total sum of direct and indirect costs (ECLAC Methodology)

36. Assessing the impact on a per capita basis • this method can be broken down by province, city, municipality or sector • the disadvantage is that this method does not include indirect damages to the economy Total assessed damages Damage per capita = Total population in the affected area

37. Assessing impacts by targets and actual GDP or GRDP

38. Assessing the impact on a per capita basis From Table of Damages and Population of Region II Damage per capita = PhP million (1,870 + 304 + 11.1) 2,978,000 persons = PhP 734 per person

39. Assessing the impact on a per capita basis • Agriculture damage per farmer = PhP 1,870 million 742,000 farmers = PhP 2,520

40. Assessing impacts by targets and actual GDP or GRDP • this method is more comprehensive than the direct damages method • however, there are also disadvantages (i.e., all factors are attributed to the disaster, presupposes target data is accurate, and time delay since economic data comes later after the disaster) Economic losses = Target GDP (or GRDP) - Actual GDP (or GRDP)

41. Assessing impacts by targets and actual GDP or GRDP Region II target growth in agriculture = 4.46% 2003 Actual GRDP growth rate = 0.4%

42. Assessing impacts by targets and actual GDP or GRDP • At constant 1985 prices, GRDP target – GRDP actual = PhP 1.832 B • At 2003 prices, using the implicit price index of 355.75/100 x PhP 1.832 B the damages of Harurot is = PhP 6.52 B or US$ 358.5 M • This is about 3 times the PhP 2.18 B direct damage estimate in the OCD report

43. Assessing impacts by targets and actual GDP or GRDP • The damages to agriculture per farmer is = Agricultural damages Total number of farmers

44. Assessing impacts by targets and actual GDP or GRDP Agriculture GVA at 1985 constant prices • Target GVA for 2003 = PhP 12.956 B • Actual GVA for 2003 = PhP 11.504 B Difference = PhP 1.452 B At 2003 prices, this is = PhP 5.17 B

45. Assessing impacts by targets and actual GDP or GRDP • The damage to agriculture per farmer is = Agricultural losses Total number of farmers = PhP 5.17 B = PhP 6,968 742,000 farmers This is almost 3 times the PhP 2,520 per farmer using the direct agricultural losses.

46. Using the ECLAC Methodology Harurot Damages

47. Estimated Direct Losses

48. Estimated indirect losses

49. Estimated indirect losses

50. Estimated indirect losses