English
Meeting the challenges
Countries in East Asia-Pacific have been advised to better prepare themselves for disasters following the earthquakes in Indonesia last month.
The annual meetings of the International Monetary Fund (IMF) and World Bank that took place earlier this month in Bali were held at an unfortunate time as Indonesia was just hit with two major disasters.
The earthquakes in Lombok and Palu, which together claimed more than 2,500 lives and thousands of injuries, have disrupted the economic growth of the two regions, notably Lombok, one of the main tourist destinations in Indonesia.
Being in a disaster-prone area, Indonesia and countries in the East Asia-Pacific region face the constant challenge of being hit with disasters. Having tools to cope better with them is therefore important for the region. In fact, World Bank’s vice-president for East Asia and the Pacific Victoria Kwakwa, described the need as “really critical”.
In an interview with Asia Focus after the meetings concluded, Ms Kwakwa said the meetings discussed how to help the countries strengthen their financial mechanisms in the wake of disasters. After all, those who suffer the most are often the poorest, most vulnerable and least privileged.
“[Countries] want to minimise the risks of such disasters and put in place a good financial response mechanism that allows people to cope better when a disaster strikes,” Ms Kwakwa said.
The economic losses caused by the deadly 7.4-magnitude earthquake that hit Palu in Central Sulawesi province on Sept 28 and the subsequent tsunami and landslides were estimated at 13.8 trillion rupiah. More than 68,000 houses were destroyed while 168 roads, seven bridges and numerous public facilities including schools and hospitals were damaged.
The earthquake in Lombok and Sumbawa near Bali caused 17.13 trillion rupiah in economic losses.
“The figures from Palu are just estimates and they could rise,” Sutopo Purwo Nugroho, a spokesman for Indonesia’s disaster mitigation agency BNPB, said.
As of October, Mr Nugroho said Indonesia was hit by 1,999 disasters. As the country is entering the rainy season when flash floods, typhoons and landslides are likely to occur, the number of disasters is estimated to rise until the end of the year. As many as 3,548 people were killed and declared missing this year.
Sitting on top of the Pacific “Ring of Fire”, the Indonesian archipelago is a seismically volatile region, which is hit in general by about 5,000-6,000 earthquakes per year, in addition to volcanic eruptions, drought, floods, forest fires and landslides.
Mrs Kwakwa, however, lauded the Indonesian government for quickly restoring the electricity grid in quake-stricken Palu, the capital of Central Sulawesi province.
“The government’s response has been robust. By restoring it sooner rather than later, the government can minimise the adverse impact and therefore helps the economy,” she said.
The World Bank also stands ready to help with rehabilitation and reconstruction efforts so survivors in Palu can quickly get back on their feet and the economy in the disaster areas can thrive again, she said.
In response to the disasters, the World Bank has pledged up to UScopy-billion financial assistance to the Indonesian government to support relief and reconstruction efforts in Lombok and Central Sulawesi and to bolster long-term resilience.
The pledge was made after World Bank CEO Kristalina Georgieva took some time off from her meetings in Bali to visit Palu with Indonesian Vice President Jusuf Kalla.
“It is humbling to see the devastation and hear the stories of those who have been affected,” Mrs Georgieva said.
“As we enter the reconstruction phase, we are making up to copy billion of comprehensive support available for Indonesia. The best memorial to those who lost their lives is to build back better,” she added.
The assistance could include cash transfers for at least six months to a year to 150,000 affected families who suffered the most or financing the reconstruction of public facilities and infrastructure such as hospitals, schools, bridges, roads, highways and water supply.
Sri Mulyani Indrawati, Indonesia’s Finance Minister and former World Bank managing director, said the government appreciates the support from the international community in times of disaster.
“Restoring the lives and livelihoods of the people affected by natural disasters is the government’s utmost priority,” Mrs Indrawati said, adding that the World Bank has the expertise to develop financial instruments that can manage risk and fiscal buffers to prepare for shocks.
“Indonesia aims to strengthen our resilience toward natural disasters,” she said.
Despite the risks that include natural and climate-induced disasters, uncertainties in the global environment and the trade tension between the United States and China, as well as its other major trading partners, which Mrs Kwakwa said countries in the region can’t ignore, the economy in the East Asia Pacific region remains resilient because the fundamentals are good.
“This is still a very dynamic region, growing fast, and contributing to global growth. For the region as a whole, growth will be about 6.3% in 2018. It will fall a little bit from 6.6% in 2017 as it also reflects the rebalancing that’s going on in China,” Mrs Kwakwa said.
Although several of the East Asia-Pacific countries are cushioned by strong reserves and fiscal positions while the external balances are not bad, countries in the region have to do more to protect themselves from shocks.
She also said the region needs to deepen its integration at the time of disintegration caused by trade tensions.
“The region has benefited significantly from trade integration. It’s been a major driver for growth so this is not the time for the region to abandon it,” she said.
She added the integration could continue to occur with the various platforms such as AEC (Asean Economic Community), RCEP (Regional Comprehensive Economic Partnership), as well as discussions around the Trans Pacific Partnership (TPP), although without the US.
“All of these are platforms that can be used and implemented to promote integration and deepen trade agreements,” she said.
Several of the countries have learnt the lessons from the Asian financial crisis in 1997 and therefore can take these risks, manage them prudently, and pursue structural reforms so that they are shielded from major adverse impacts if the risks were to materialise, she said.
Another potential hurdle is a technological disruption in several areas but Mrs Kwakwa said the challenge for countries was how to fully see the benefits of technology and address some of the challenges it brought.
The countries have to come up with ways to retrain people likely to lose jobs as a result of technological proliferation. “Everybody has to benefit maximally from technology,” she said.
Source: https://www.bangkokpost.com/business/news/1566294/meeting-the-challenges