|Cost-Benefit Analysis for Natural Disaster Management - A Case-Study in the Philippines (Centre for Research on the Epidemiology of Disasters, 1998, 100 p.)|
The European Commission Humanitarian Office (ECHO) has identified prevention, preparedness and mitigation as key to long term and sustainable approaches to reducing the need for emergency assistance in the world. Among the various ways to promote these approaches, economic evaluations tend to be central to decision makers in government planning department. Therefore convincing arguments and easy methodologies need to be developed for promoting investment in disaster preparedness and prevention. Within this context, CRED (Centre for Research on the Epidemiology of Disasters) has undertaken a study, at the request of ECHO, that reviews the main methodologies used for cost benefit analyses of disaster prevention projects and selected one to apply to Philippines as a case study.
The objective of the study is to examine cost/benefit evaluation models of natural disaster preparedness, mitigation and prevention measures in relation to the costs of the relief and the rehabilitation operations. The report aims at providing a simple methodology for practical decisions on the prevention and reduction of natural disasters by international, national, regional and local authorities. The most appropriate models should define whether an investment is justified.
Many conceptual ambiguities are inherent in this exercise. For instance, benefits of a preventative or preparedness project can only be assessed through the costs of the disaster it is supposed to prevent. Furthermore, costs of a disaster include not only economic costs but value of human lives lost. In addition, further discrepancies can be introduced according to the time limit placed on the disaster effects. Indirect effects are many and varied as are the time frame of their impact. There is the problem of data availability and reliability. Although cost/benefit analysis faces a number of problems and drawbacks, it is preferred because it is intuitively transparent and its data requirements are relatively low.
In the first part, the study undertakes a short critical overview on the current thinking of cost/benefit evaluations for natural disaster preparedness, mitigation and prevention measures Three approaches have been examined here, in terms of their ease of application and appropriateness for policy decisions. One of these is retained for further development and application. In the second part, the selected model is expanded and applied to a case-study in the Philippines to assess the practical applicability of the model in the field and with real data constraints. In the final part, the results, data and methodology are evaluated and recommendations are made for future applications of the model prepared.
Brussels, January 1998
Prof. Debarati Guha-Sapir