Final draft nghieu's presentation on disaster mitigation in vn (in tokyo's workshop)
1. Dr. Bui Duong Nghieu
Institute of Financial Science
Vietnam Ministry of Finance
Tokyo, April 2009
November 10, 2012 1
2. According to a 2005
World Bank report,
approximately 89
percent of Vietnam’s
GDP is located in
areas at risk due to
Sea-level rise of 30
impacts of at least
centimeters to one
two types of natural
meter over the next
hazards (Flood and
100 years is
Storm).
expected, which is
projected to cause
capital value loss
every year of up to
US$17 billion if no
protective measures
are taken.
[In the year of
research, 1998, VNse’
s GDP is 27,8 billion
of USD]
November 10, 2012 2
3. Contents
Background
Actual measures for natural disaster
mitigation in Vietnam
Fund for Flood and Storm Prevention
Self Reliance Fund for Natural Disaster
Mitigation for Households
Conclusions
November 10, 2012 3
5. Damage in Vietnam 2008
Unit Total Only in
losses 2008 Hanoi
flood
Human deaths person person 474 20
Human missing 64
Human injured 404
Houses collapsed and washed away house 5,180
Houses flooded and damaged 338,476
School collapsed and washed away school 138
Schools damaged 1646
Hospitals collapsed and washed way center 6
Hospital damaged 151
Agriculture (areas of crops flooded) ha 473,403
Total estimated losses million 775 175
USD
November 10, 2012 5
6. Economic impacts
Direct losses: the value of capital destroyed (much of
this damage is public infrastructure) or damaged value
of loss of life.
Indirect losses: the loss of outputs and earnings,
including the value of agricultural crops destroyed.
Secondary impacts: the cost imputed to disruption of
development plans, loss due to foregone new
investment as damaged infrastructure is replaced,
increased indebtedness, etc.
November 10, 2012 6
7. Disaster Impacts
Natural disasters and climate change have:
negative consequences for economic growth, both in
the short term and the long term.
cause significant fiscal pressure.
Produce very negative effects to households,
especially to the poor (loss of house, assets, crops,
livestock, income, etc.).
Economic and fiscal costs may not be easily
visible. Normally, only the direct losses are
counted.
November 10, 2012 7
8. Actual measures for natural disaster
mitigation
State budget, including center and local government levels.
Expenditures by Annual Budget Plan
Expenditures by Contingent Liability: the maximum amount is 5% of total annual
budget, normally is lower than that.
Fund for Flood and Storm Preventions (FFSP)
Urgent money
Aid is also re-allocated for households, but it is:
Charity, random, irregular,
Lower than loss level
Tardy (the collection and the distributions take much time)
Credit
Formal credit (via banks, especially Agriculture Bank and Social Policy Bank)
Semi-credit (via civil institutions such as Woman’s Organization, etc.)
Informal credit (with terrible rate)
Insurance.
November 10, 2012 8
9. State Budget
Budget expenditures allocate to the ministries and local authorities
For public infrastructure (before and after natural disasters),
For non-infrastructure solutions (Weather forecast, disaster ‘s map.),
For disaster prevention (training, rehearsal, purchasing equipment for relief.)
or for support for losses (urgent relief).
Contingent Liability (a budget line) takes around 5% of total annual
budget expenditures.
Remarks:
All money allocated by State Budget for disaster mitigation does not go
directly to the households, excluding the money for support for losses as
urgent relief.
And always lower than the actual loss.
November 10, 2012 9
10. Relief
Charity money is from organizational and
individual donors, domestic and foreign.
It is:
very good for the households
very random
lower than loss level
always late.
November 10, 2012 10
11. Credit
Commercial banks don’t loan the money due
to high risk.
Several non-commercial banks do lend
money directly, but, the amount is very small.
Currently, the highest possible loan is less than 300 US
dollars.
Informal credit is terrible in terms of interest
rate.
November 10, 2012 11
12. Insurance
Vietnamese insurance company “Bao Viet”
piloted an agriculture insurance policy in
1982, 1997
French insurance company “Groupama”
offered an agriculture insurance in 2002 –
2003.
Both companies suffered losses.
November 10, 2012 12
13. Fund for Flood &Storm Prevention
(the FFSP)
Legal framework:
Created in 1993 by an Ordinance (by the Standing
Committee of National Assembly).
Activated in 1997 by a Government Decree for
establishment the FFSP
Independent of the State Budget
Non-profit.
Model organization
Administrated at the provincial and district levels,
Not at the community and central levels.
November 10, 2012 13
14. Central Executive Board of
Central level : No FFSP
FSP
Province-level FFSP
FFSP FFSP FFSP
District-level FFSP
Community-level: No FFSP
Current organization structure of FFSP in Vietnam
November 10, 2012 14
15. Contributions
Compulsory:
Enterprises and economic organizations located at the
areas (domestic and foreign)
Citizens
All Vietnamese citizens (males from 18 to 60 years old, and
females from 18 to 55 years old).
Voluntary:
Voluntary contributions of international, domestic
organizations and individuals (AID).
November 10, 2012 15
16. How much is the compulsory
contributions?
Citizens:
0.5 US dollar: Members of agricultural households.
1 US dollar: Members of non-agricultural households.
Enterprises:
0.02% of their total production and business capital
but not exceeding VND 5 million (USD280) per year.
Unnoticeable amount for the households and
the enterprises.
November 10, 2012 16
17. Exemptions
Who is exempted to contribute for the FFSP?
The members of the poor households.
The public interest enterprises.
The agricultural cooperatives.
The exemption policy of FFSP contributions are
irrational, unfair:
The FFSP covers all beneficiaries relating the natural disasters or
climate change. It’s irrational and unfair if there are someone
exempted to contribute for this fund.
Some have benefited from another policy (for exp. Health
insurance). So, it’s unfair to give them the exemption.
Due to the exemptions for the poor, there are many localities that
are not able to form FFSP (as most of them are poor communities
– for example Laichau province)
November 10, 2012 17
18. Activities
Patrolling, guarding dykes in flood and storm
seasons.
Public awareness course on safety measures
and reactions during floods and storms.
Purchasing necessary equipments for relief
and rescue to victims of floods and storms.
November 10, 2012 18
19. FFSP’s problems
No community representation;
Low contribution;
Not self sufficient;
No investment (unspent money unused);
No insurance;
No full time staff (the fund managed only by a
part-time staff).
November 10, 2012 19
20. Self Reliance Fund
for Natural Disaster Mitigation
for Households
(the SRF)
November 10, 2012 20
21. Research contributors
Contributing to the research are:
Mr. Landis Mackeller (UNDP consultant)
Mr. MacShall Silver (UNDP senior expert/disaster
mitigation)
Professor Jerry R. Skees (U. of Kentucky)
Mr. Luzi Hitz (Director, Dept. of Natural Disasters
Insurance Technique – Swiss Re)
November 10, 2012 21
22. Self Reliance Fund (SRF)
Communal;
Self financed;
Not-for-profit;
Self sufficient;
Correlates with market economy rules;
Households insured;
Specialization.
November 10, 2012 22
23. Central-level SRF Central SRF
Provincial Provincial Provincial
Province –level SRF SRF SRF SRF
District –level
Community –level SRF
Proposed structure of SRF for natural disaster mitigation
November 10, 2012 23
24. Insurance, Re-
insurance, Multual- Capacity
insurance building for
managing
disaster risk
Govt. &
Donors 5. Premiums 5. Compensations
1. Start-up capital
Financial
The SRF
Investment
Aid, 4.Urgent 6. Ivest. &
relief, money Revenues
charity,
2. Compulsory 2. Items-based
3. Govt. subsidy for
contributions reimbursements
poorest households
Awareness raising &
loans for strengthening Households Enterprises
capacity against disaster
November 10, 2012 24
25. Govt. &
Donors
1. Start-up capital
The SRF
Aid, 4.Urgent
relief, money
charity,
2. Compulsory 2. Items-based
contributions reimbursements
3. Govt. subsidy for
poorest households
Households Enterprises
November 10, 2012 25
27. Insurance, Re-
insurance, Multual-
insurance
Govt. &
Donors 5. Premiums 5. Compensations
1. Start-up capital
Financial
The SRF
Investment
Aid, rel 4.Urgent 6. Ivest. &
ief, cha money Revenues
rity,
2. Compulsory 2. Items-based
3. Govt. subsidy for
contributions reimbursements
poorest households
Households Enterprises
November 10, 2012 27
28. Insurance, Re-
insurance, Multual- Capacity
insurance building for
managing
disaster risk
5. Premiums 5. Compensations
The SRF
2. Compulsory 2. Items-based
contributions reimbursements
Awareness raising &
loans for strengthening Households Enterprises
capacity against disaster
November 10, 2012 28
29. Insurance, Re-
insurance, Multual- Capacity
insurance building for
managing
disaster risk
Govt. &
Donors 5. Premiums 5. Compensations
1. Start-up capital
Financial
The SRF
Investment
Aid, 4.Urgent 6. Ivest. &
relief, money Revenues
charity,
2. Compulsory 2. Items-based
3. Govt. subsidy for
contributions reimbursements
poorest households
Awareness raising &
loans for strengthening Households Enterprises
capacity against disaster
November 10, 2012 29
30. Representative system
Re-insurance
market
Multual
Insurance
House- Insurance
holds market
SRF
Agriculture Insurance schemes. Baoviet and Groupama
FAILED (1997, 2003-2004)
November 10, 2012 30
31. Financial sources
Start-up capital
VNse Government: 50% of seed money
Donors: 50% of seed money
Compulsory contributions:
Households
Enterprises
Voluntary contributions:
Aid
Relief
Government subsidy for poorest households
Revenues from financial investments
Insurance compensations
November 10, 2012 31
32. Compulsory contributions
SRF FFSP
Enterprises : 0.05% (uncapped) 0.02%
Not over 280 USD per
Tax deductable year
Households :
For the employed: One day of salary 0.5 USD
For street merchants and two USD per person per 0.5 USD
such year
For others (farm one USD per person per 0.5 USD
workers/unemployed) year
Subsidy from VNse-Govt Exemption for poor
33. Why to set-up the SRF?
The SRF can:
Strengthen capacity for households to respond any
natural disaster or climate change events (ex-ante);
Finance ex ante for reduction of vulnerability faced to
natural disasters or climate change hazards (ex-ante);
Provide modest but timely and crucial supports to re-
establish the household’s livelihoods (ex-post).
Compensate for the households loss with insurance.
In doing this, the fund will significantly reduce
poverty.
November 10, 2012 33
34. Efficient management
Random aid (avoid any type of overlap and
possible fraud).
Item-based assistance.
Insurance compensation.
Secure and low risk (e.g. CAT
bonds, governments bonds) investments.
November 10, 2012 34
35. Supreme guarantee
Agreement of SRF solvency in time of
extreme catastrophe (from Vietnamese
Government and donors).
There are two cases:
Catastrophes come in the setting up period (3 to 5
years).
Catastrophes come after setting up period.
November 10, 2012 35
36. Conclusion
As climate change exacerbates the frequency
and impact of natural disasters, governments
must learn to adapt and be self sufficient. The
SRF would be isolated, ensuring relief and
security to households. This, in turn, would
lessen the government’s workload during natural
disasters.
Our slogan:
You can give a man a fish, but it’s better to give him fishing
equipment.
November 10, 2012 36
37. Th a n k y ou for y our
a t t en ti on !
November 10, 2012 37
38. SRF - 3 levels
SRF
Central
SRF SRF SRF
Province Province Province
Community
Community
Community
Community
Community
Community
Community
Community
SRF
SRF
SRF
SRF
SRF
SRF
SRF
SRF
39. Central budget
State
budget
Local budget
Province-level budget Budget of Budget of Budget of
province B province C
province A
District-level budget
Community-level budget
Current model of State budget system in Vietnam
November 10, 2012 39
40. Central Steering Board of FFSP
Central Steering
board of FFSP
Province-level
steering board of FFSP Steering Steering Steering
board of board of board of
FFSP FFSP FFSP
District –level
steering board of FFSP
Community-level
steering board of FFSP
Organization structure of current Steering board of
Flood and Storm prevention (FSP )
November 10, 2012 40