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Australia’s model of disaster funding useful for disaster-prone APEC countries

From the Philippine Institute for Development Studies

Session 3 of the APEC Study Centers Consortium Conference 2015

The increasing frequency and intensity of natural disasters could seriously hamper the efforts of economies gearing up for higher and sustained growth. Policy researchers who attended the APEC Study Centers Consortium Conference 2015 held on May 12-13 in Boracay Island underscored that it is time for governments to have provision for disaster funding.

Repeated disasters constrain public finances and contribute to the cycle of poverty in affected communities. A disaster-prone country like the Philippines has an average of 20 typhoons each year; five of these are likely to be devastating. The Philippine government has estimated that for the past 30 years, direct losses alone from natural disasters account for an average annual loss of 0.7 percent of gross domestic product, which can be mostly attributed to typhoon losses and damages. Located in unsafe urban settlements, the poor suffer the most. Disaster funding is therefore crucial for both poverty alleviation and sustained economic development.

During the conference session on building sustainable and resilient communities, policy researchers present agreed that regional cooperation through APEC is a useful mechanism to promote the development of financial systems to help reduce fiscal burden arising from disasters.

Alex Robson of Griffith University presented Australia’s innovative model in disaster funding. According to Robson,disaster relief payments in Australia are included in the federal budget along with other expenditure programs. While Australia does not have a formal natural disaster insurance scheme, disaster funding is financed by a combination of private insurance, government funding, voluntary charitable donations, and self-insurance.

Robson noted that the key strength of the Australian scheme is that expected costs are estimated and reported separately in the national budget.  Total expected expenditure under this arrangement for five years (2012-2016) has been estimated to be AUD 6.2 billion. In each annual budget, the Australian federal government also gives details of overall contingent fiscal liabilities in its “statement of risks”. This statement sets out risks on both the expenditure and revenue sides of the federal budget. Included are contingent liabilities, contingent assets, and other fiscal risks with a possible impact greater than AUD 20 million in any one year, or AUD 50 million over the next four years.

The Australian government also engages in self-protection activities. In the 2013-14 budget, the government directed AUD 100 million to natural disaster mitigation and to lower disaster risk and insurance premiums.

As APEC economies continue to commit to deepening regional integration, reducing vulnerabilities to shocks, such as natural and manmade disasters, has clear benefits for sustaining growth and productivity, and reducing poverty in the region.

The ASCC Conference was part of the Second Senior Officials Meeting (SOM2) and Related Meetings of APEC 2015. It was organized by state think tank Philippine Institute for Development Studies and the Philippine APEC Study Center Network in collaboration with the Ateneo de Manila University and the Asian Development Bank Institute. The annual conference provides academics and scholars from the different APEC study centers with a venue to discuss and exchange ideas on the APEC themes and to identify areas for research collaboration. The outputs of the conference may serve as inputs to the different APEC working group discussions and may be integrated in the Leaders’ statement.

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