Economics of mitigation

Perhaps the greatest difference likely to be encountered between the various countries served by UNDP and DHA, and between the various societies threatened by disasters, is the budgetary constraints on spending for mitigation. The Japanese Government spends over $2 billion a year on disaster mitigation and preparedness. This is more than the total annual government revenue of half the world's nations.

In most of the developing nations threatened by disaster, capital for investment is at a premium. Investment in agricultural irrigation projects or in industrial manufacturing capability has a demonstrable effect in increasing economic output. Investing in disaster mitigation is likely to mean fewer resources left for irrigation projects, industry or hospitals. And yet not spending on disaster mitigation means that the investment in irrigation projects, industry and hospitals will be wasted if they are destroyed in a future occurrence of a hazard. The spending of a few percent extra on a new facility to build it a little stronger and protect it against a future threat is usually seen as prudent. Mitigation investment has to be seen in terms of the price of protecting existing and future infrastructure.

The level of investment that is justified to protect society, its economic activities and its built environment is a matter of political decision making, and the economics of risk. Choosing an appropriate level of safety for building codes, for example, is a matter of considerable debate in the engineering profession. The cost of providing safety is considerable and the stronger a building is, the more it costs. Structural resilience standards written into code requirements in United States, where GNP per capita is about $20,000 may not be directly applicable in countries with income levels of $1,000 GNP per capita, but the attitude to safety that the code espouses is applicable. Appropriate levels of investment in safety need to be defined for each country.

Decision making on appropriate levels of investment in disaster mitigation depends on how likely the hazard is to occur, and what would be the impact of the hazard if it does occur. The assessment of risk and use of vulnerability evaluation in decision-making is covered in the module on Vulnerability and Risk Assessment.

The costs and benefits of alternative investment strategies need to be carefully evaluated. In a number of evaluations of disaster mitigation projects, it has been demonstrated that well-targeted investment will repay itself several times in the event of a disaster in reduced levels of direct damage cost. It will also have the additional benefits of saving life and reducing consequential losses to the economy and the costs of emergency operations. The use of a systematic framework of risk assessment to establish which hazards are most likely to occur and the probable effects will help define the priorities of a mitigation program - whether to build flood protection barriers or to establish a public information campaign for cyclone-resistant housing, for example.