Methodological considerations of disaster damage assessment World Bank/ECLAC Workshop on Natural Disaster Evaluation René A. Hernández Washington, D.C April, 2004

Contents Purpose and usefulness of a general assessment − Economic − Social − Environment Assessment criteria − Private and shadow prices − Constant and present value − Replacement cost − Reconstruction investment − Mitigation investment Direct, indirect and macroeconomic effects Sources of information

Purpose Provide a set of consistent guidelines for the socio- economic and environmental assessment of disasters Provide a multi-sectoral and multidisciplinary quantification method for disaster affected sectors Provide standard sectoral procedures that allow comparability of results Policy instrument for the decision making process Conceptual improvement for measuring aspects not included in national accounting and assessing specific vulnerability Provide a tool for reconstruction, mitigation and planning resilience

Benefits Provides additional criteria for simulation analysis as well as economic forecasting Allows to determine the country’s absorption capacity to face reconstruction tasks Contributes to estimate the financial gap Facilitates training in damage valuation and formulation of mitigation strategies Facilitates coordination of affected population with civil protection authorities, emergency and relief organizations Reveals the systemic nature of the development process and the interaction and interdependence amongst sectors and stakeholders

Assessment criteria In terms of economic impact, a disaster may be considered the opposite of an investment project − Initial investment (disinvestment) − The lifetime of the project (the period in which markets are disrupted) − The flow of costs and benefits (the impact on prices and quantities on the flow of goods and services)

Assessment criteria Economic assessment of changes in the flow of goods and services involves comparing the “non-disaster situation” and the “disaster situation” rather than the “pre” and “post” disaster situation Private assessment takes market prices whereas social assessment uses shadow prices (include indirect effects and externalities)

Assessment criteria Measuring the damage gap (delta) Non-disaster conditions (ex ante) Expected performance (without disaster) 3-5 years Disaster impact (ex post) 3-5 years The measure Of direct and indirect damages Upon the non-disaster situation (sector by sector baselines) is aggregated into the national accounts and determines the resulting disaster- caused scenario, as the gap over the expected performance prior to the event. Several scenarios may be outlined, based on the assumptions made for the reconstruction process

Private and Shadow prices Private and shadow prices differ when the project under assessment: − Generates public goods − Implemented under market imperfections − Implemented under taxes, subsidies, quotas − Implemented with the existence of externalities Shadow prices: foreign currency, labour, social discount rate The use of private prices appears to be more practical given the complexity of estimating shadow prices

Damage assessment options Depreciation value (book value) Replacement cost − Includes mitigation elements − Technological advances Replacement cost − With original design − Without deducting depreciation

Damage assessment options Production sectors − Producer prices Interrupted service production − Fares paid by the consumer Costs and prices must be considered in “real” terms (financing costs are not included) Calculations should be made in local currency

The stock-flow concept Direct effects Impact on capital stock (public/private) Impact on capital stock (public/private) − Infrastructure − Machinery − Inventories Occur immediately during or after the phenomenon that caused the disaster Occur immediately during or after the phenomenon that caused the disaster Indirect effects Impact on flows Impact on flows − Production − Reduced income and increased expenses Occur after the phenomenon, for a time-period that can last from weeks to months Occur after the phenomenon, for a time-period that can last from weeks to months

The stock-flow concept Indirect effects sometimes produce major benefits that can be estimated and must be deducted from the total damage estimate Some indirect effects may be difficult to identify and impossible to quantify Indirect effects such as higher operational costs, diminished production or service provision are normally estimated in monetary terms

 D = Va – Vb Where Va es the initial condition expected for a variable (sectoral, weighed) and Vb is the discounted effect of the disaster.  K = Ka – Kb Measures the capital (assets) lost, estimated by compiling direct damages computed sector by sector.  Y = Ya – Yb Measures the production/income losses The capital/income-production ratio is generally assumed not to vary substantively as a result of the disaster

THE “PERVERSE EFFECT” OF DISASTERS ON GROSS CAPITAL FORMATION IN A SMALL ECONOMY Adapted from Mora, “El impacto de los desastres, aspectos sociales, polítifcos económicos, ambientales y su relación con el desarrollo de nuestros países (BID, 1999) * GROSS CAPITAL FORMATION TIME DEVELOPING COUNTRIES INDUSTRIALIZED COUNTRIES *DISASTER

THE EFFECT OF SUCCESSIVE DISASTERS ON CAPITAL FORMATION Adapted from Mora, “El impacto de los desastres, aspectos sociales, polítifcos económicos, ambientales y su relación con el desarrollo de nuestros países (BID, 1999) y su relación con el desarrollo de nuestros países (BID, 1999) * * * * TIME GROSS CAPITAL FORMATION DEVELOPING COUNTRIIES INDUSTRIALIZED COUNTRIES *DISASTER

Macroeconomic effects Identify the key development factors of the economy Identify the key development factors of the economy Define the economic outlook at the time of the disaster: growth path, business cycle, investment level, fiscal stance, domestic savings, FDI flows, current and capital account balances, external sector, aggregate demand and supply Define the economic outlook at the time of the disaster: growth path, business cycle, investment level, fiscal stance, domestic savings, FDI flows, current and capital account balances, external sector, aggregate demand and supply Collect macroeconomic data from national authorities, academia and private sources Collect macroeconomic data from national authorities, academia and private sources Find existing input-output tables, SAMs or weighing factors that indicate intersectoral linkages Find existing input-output tables, SAMs or weighing factors that indicate intersectoral linkages

Macroeconomic effects Based on all available sources, design the possible scenarios or short and medium term projections before the disaster Based on all available sources, design the possible scenarios or short and medium term projections before the disaster Build a price table at current value for the disaster period with at least five year projections. There may have been more than one pre-disaster scenario for the main economic variables Build a price table at current value for the disaster period with at least five year projections. There may have been more than one pre-disaster scenario for the main economic variables Build a constant-value (real magnitude) serie for the main variables (using the country’s base year, either in local currency or US dollars Build a constant-value (real magnitude) serie for the main variables (using the country’s base year, either in local currency or US dollars Select the rate of exchange that will be used for the valuation Select the rate of exchange that will be used for the valuation

Future Scenarios − 1 st. Scenario: damage assessment and event’s impact, without including reconstruction actions − Alternative reconstruction scenarios Taking into account no longer the replacement but the reconstruction costs Taking into account no longer the replacement but the reconstruction costs Emerging reconstruction priorities, sector by sector Emerging reconstruction priorities, sector by sector The emerging reconstruction strategies in the immediate weeks after the disaster The emerging reconstruction strategies in the immediate weeks after the disaster The economy’s absorption capacity of foreign resources The economy’s absorption capacity of foreign resources The economy’s capacity to execute projects The economy’s capacity to execute projects The performance of key economic variables in the face of an increase or impending reorientation of resources for reconstruction: interest rates, indebtedness, inputs and production means availability (raw materials, capital goods, domestic saving, labour force, etc.) The performance of key economic variables in the face of an increase or impending reorientation of resources for reconstruction: interest rates, indebtedness, inputs and production means availability (raw materials, capital goods, domestic saving, labour force, etc.)

The situation after the disaster From sectoral valuations assess the value-added changes expected for every sector in a short term/medium-term period (3-5 years or more) Based on input-output tables, SAMs 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) and variations in the main economic gaps, GDP, BOP, public finances, prices and inflation, employment and gross investment

Sources of information Strategic sources The press Maps Verification visits Surveys − Quick appraisal − Household surveys − Expert’s quick appraisal Secondary sources − Census − National or regional reports Interviews Remote sensing data Sistemas de información geográfico

Presentation of the ECLAC methodology General considerations General considerations Valuation as a tool for reconstruction, mitigation and planning resilience Valuation as a tool for reconstruction, mitigation and planning resilience Usefulness of historical records Usefulness of historical records Methodological considerations Methodological considerations − Definitions: risk, vulnerability, mitigation recurrence, etc. − Basic concepts: direct (assets/capital), indirect (flows/economical, financial, fiscal) − Valuation criteria − Sources of information: remote, statistical, direct observation, surveys, second hand, etc.

Social sectors Infrastructure and services Productive sectors Environment Dynamic interaction between sectors and activities with natural occurrences: Vulnerability and mitigation Mudslides and silt deposits Landslips, avalanches and erosion Groundswells, sea surges and high waves Flooding and rain

Vicious circle: Man, Environment, Disasters Human actions progressively deteriorate the environment Human actions progressively deteriorate the environment Natural phenomena affect the environment (positively / negatively) Natural phenomena affect the environment (positively / negatively) Impact of disasters tends to increase Impact of disasters tends to increase NATURALPHENOMENA HUMANACTIONS ENVIRONMENT

* SOCIAL STABILITY SECURITY (Reduced Vulnerability) GOOD GOVERNANCE ECONOMIC RECOVERY BREAKING THE CYCLE OF CONFLICT AND RESUMING THE PATH OF DEVELOPMENT The World Bank’s Conflict Prevention and Reconstruction Team, SDV

SEQUENCE OF EFFECTS PHENOMENON: Characteristics (physical description, typology and context) EFFECTS:directindirect LINKAGES Menace Vulnerability Risk Impact/Benefit of reconstruction (global, by sector)  Reduce vulnerability  Synergies for reconstruction: “appropriation” of risk by affected/menaced population (community, social group, sector, country)

SOME DEFINITIONS IN DISASTERS PREVENTION PREVENTION the “before” actions the “before” actions Actions (programmes, projects) with the objective of anticipating and counteract the negative consequence an event may have (hydro-meteorological, climatic, seismic, tectonic, geological, even technological, industrial or “complex” Actions (programmes, projects) with the objective of anticipating and counteract the negative consequence an event may have (hydro-meteorological, climatic, seismic, tectonic, geological, even technological, industrial or “complex” It implies namely operational and organisation actions, training of potentially affected groups and population to face a disaster’s consequences. It implies namely operational and organisation actions, training of potentially affected groups and population to face a disaster’s consequences.

SOME DEFINITIONS IN DISASTERS (2) MITIGATION MITIGATION encompasses actions “before”, “during” and “after” encompasses actions “before”, “during” and “after” Actions (programmes, project) with the objective of counteracting (reducing the negative impact) of an occurrence. Actions (programmes, project) with the objective of counteracting (reducing the negative impact) of an occurrence. Includes allocation of resources to reinforce structures, redesign or alter existing elements to reduce vulnerability in addition to training and organisation (including at the community level) Includes allocation of resources to reinforce structures, redesign or alter existing elements to reduce vulnerability in addition to training and organisation (including at the community level)

SOME DEFINITIONS IN DISASTERS (3) VULNERABILITY VULNERABILITY calculation made on the basis or recurrence and severity of disastrous events calculation made on the basis or recurrence and severity of disastrous events Risk factors or exposure to danger of existing physical structures (buildings, houses, etc.) and basic infrastructure (lifelines, transportation and communications, etc.). Risk factors or exposure to danger of existing physical structures (buildings, houses, etc.) and basic infrastructure (lifelines, transportation and communications, etc.). Conditions of human settlements and localisation of productive activities (primary, industrial,l tertiary or services) and their linkage among them and with the environment. Conditions of human settlements and localisation of productive activities (primary, industrial,l tertiary or services) and their linkage among them and with the environment.

SOME DEFINITIONS IN DISASTERS (4) DISASTER REDUCTION DISASTER REDUCTION encompasses actions “before”, “during” and “after” encompasses actions “before”, “during” and “after” Actions (programmes, project) with the objective of reducing vulnerability and exposure to risk in the face of the interaction between human action and natural foreseeable or recurrent events. Actions (programmes, project) with the objective of reducing vulnerability and exposure to risk in the face of the interaction between human action and natural foreseeable or recurrent events. Implies the use (design and enforcement) of construction codes, land-use regulation, space planning, institutional arrangements and community involvement Implies the use (design and enforcement) of construction codes, land-use regulation, space planning, institutional arrangements and community involvement

SOME DEFINITIONS IN DISASTERS (5) RISK MANAGEMENT RISK MANAGEMENT (actions to be carried out “before” with consequences “during” and “after”) (actions to be carried out “before” with consequences “during” and “after”) Pro-active strategy (in contrast to re- active response) to reduce vulnerability and counteract risk factors Pro-active strategy (in contrast to re- active response) to reduce vulnerability and counteract risk factors Its objective is disaster reduction Its objective is disaster reduction Is not a sector action but a global set of actions encompassing all sectors, beginning with sound environmental management Is not a sector action but a global set of actions encompassing all sectors, beginning with sound environmental management Is not a conservation policy per-se but requires sustainability criteria both in terms of natural resources and human intervention. Is not a conservation policy per-se but requires sustainability criteria both in terms of natural resources and human intervention.

SOME DEFINITIONS IN DISASTERS (6) DISASTER MANAGEMENT DISASTER MANAGEMENT actions to be carried “during” and the immediate (short- term) “after” actions to be carried “during” and the immediate (short- term) “after” The response strategy (re-active strategy) to, after the occurrence of a disaster, intends to counteract its more immediate negative impact and prevent more severe effects in the short term. The response strategy (re-active strategy) to, after the occurrence of a disaster, intends to counteract its more immediate negative impact and prevent more severe effects in the short term. Includes emergency actions (search and rescue, immediate assistance, shelter, sanitary and health campaigns, rehabilitation of lifelines, assessment of emergency needs and first appraisal of reconstruction requirements. Includes emergency actions (search and rescue, immediate assistance, shelter, sanitary and health campaigns, rehabilitation of lifelines, assessment of emergency needs and first appraisal of reconstruction requirements.

Type of damage associated with type of disaster Hurricanes Hurricanes More frequent and predictable More frequent and predictable Reinforcement and mitigation are less costly Reinforcement and mitigation are less costly Earthquakes Earthquakes Hard to predict with precision Hard to predict with precision Monitoring is costly Monitoring is costly Adequate reinforcement technology is available Adequate reinforcement technology is available

Type of damage associated with type of disaster Landslides, mudslides, avalanches, slippage Landslides, mudslides, avalanches, slippage Fires Fires Effects are “secondary”, associate with other events Effects are “secondary”, associate with other events Preventable by reinforcement and security measures Preventable by reinforcement and security measures Have severe impact on infrastructure and environment Have severe impact on infrastructure and environment Are related to man’s intervention Are related to man’s intervention

Type of damage associated with type of disaster Tsunamis or sea-swells Tsunamis or sea-swells Less frequent, associated with earth movements or hurricanes or cyclones Less frequent, associated with earth movements or hurricanes or cyclones Flooding Flooding Very frequent, occur seasonally in recurrent manner during rainy season and are made more severe by other natural phenomena (both meteorological or seismic-volcanic) Very frequent, occur seasonally in recurrent manner during rainy season and are made more severe by other natural phenomena (both meteorological or seismic-volcanic) Are preventable through better land use and planning and by proper defence works (embankments, barriers and others)

Type of damage associated with type of disaster Volcanic activity Volcanic activity Tornadoes Tornadoes Recurrent phenomena of a cyclical nature Recurrent phenomena of a cyclical nature Hard to predict Hard to predict Require construction and land use codes Require construction and land use codes Adequate evacuation plans are necessary Adequate evacuation plans are necessary May be “tourist attraction” in themselves May be “tourist attraction” in themselves

Type of damage associated with type of disaster Droughts Droughts Pests and epidemiological threats (vectors of infectious diseases) Pests and epidemiological threats (vectors of infectious diseases) Associated with other events, namely meteorological Associated with other events, namely meteorological Require prevention and close control and monitoring Require prevention and close control and monitoring Affect production cycles (in agriculture) and affect natural environment, flora and fauna, and their cycles Affect production cycles (in agriculture) and affect natural environment, flora and fauna, and their cycles Multisectoral, multidisciplinary actions are required Multisectoral, multidisciplinary actions are required

THE PROCESS OF DISASTER EVALUATION

Sector by sector valuation methodology Social Sectors Social Sectors − Housing − Health − Education, culture, sports Infrastructure Infrastructure − Transport and communications − Energy − Water and sewerage Productive sectors Productive sectors − Goods: agriculture, industry − Services: commerce, tourism, etc. Global impact Global impact − On the environment − Gender perspective − Employment and social conditions − Macroeconomic assessment