Vanuatu advised to redirect development funding
An academic at the Australian National University says the Vanuatu government will need review existing development projects to cater for the massive rebuild costs.
An academic at the Australian National University says the Vanuatu government will need to review existing development projects to cater for massive rebuild costs.
Matthew Dornan says official damage estimates from Cyclone Pam are still being finalised but some guidance can be taken from Samoa's Cyclone Evan in 2012 which saw damages equivalent to 30% of that country's GDP.
Mr Dornan says based on these figures it could cost up to 250 million US dollars in Vanuatu.
He told Koroi Hawkins it's an amount the country does not have and cannot afford to borrow.
MATTHEW DORNAN: Well I have been looking at the economic impacts of Cyclone Pam and in doing so I have been interested in the cost of recovery to government. The fiscal implications to the government and the extent to which it is likely to need to borrow from overseas in order to fund reconstruction.
KOROI HAWKINS: And what have you found, does the Vanuatu government have too much of a task on their hands?
MD: Well it has a very considerable task. It's very difficult at the moment because the official damage estimates are still being finalised. So really what I have reported are estimates only and very, very rough estimates. But if you look at past experience in the region, Cyclone Evan in Samoa for example, damage in that instance was equivalent to around 30 percent of gross domestic product. So if you take that as a guide and I think there is good reason to, cyclone Pam was an extreme event and affected most of Vanuatu. And so if you take cyclone Evan as providing guidance for what the impact will be in the case of Vanuatu. You can reach an estimate of around 250 million US dollars. Now obviously a lot of that damage bill is being absorbed by households and businesses but the Vanuatu government is also funding considerable reconstruction of schools, health clinics and government administration buildings. So it has a very big task ahead.
KH: And so going back to the figure 250 million US dollars. Where would you go to as a Prime Minister or a government to ask for that kind of money?
MD: Well typically the government would need to borrow those funds. Ideally on concessional terms. Again though I don't see the government being able to borrow that amount of money. Hence Vanuatu's predicament.
KH: And it is now going on almost towards the second month since the end of the cyclone. Obviously the international attention has shifted to Nepal at the moment and as other disasters happen or events happen throughout the year. Do you think Vanuatu will be mostly left to its own devices now, to try and deal with what the situation is. And basically be set back by however many years its being set back and just have to start rebuilding from there?
MD: Well I sincerely hope not, one of the issues is that to date most of the relief efforts from development partners have not involved direct support to the Vanuatu government. So most of the assistance from Australia from World Bank and so forth has been to fund reconstruction but on a project basis. Now what I was looking at was the fiscal impact so the impact on the government coffers. And the Vanuatu government is going to find this a very, very expensive exercise and I think it will take probably decades for Vanuatu to recover completely.
KH: And for in terms of the longer term view of disasters in the region and we saw with this cyclone Pam there were actually four cyclones circling at the time. In the case of a major disaster on a scale of lets say three or four Pacific Island countries being hit at the same time and even with Pam there was Tuvalu and Kiribati as well. Is there enough support out there in the world to help the Pacific region in terms of facing increasing impacts of climate change?
MD: No I don't think there is and while I welcome initiatives such as the insurance disaster scheme that has been established with support from Japan and from the World Bank. The pay out to Vanuatu was very small I think it was 1.9 million US dollars. Beneficial still because that funding went directly to the Vanuatu government but completely insufficient for the task at hand. So I think those sorts of initiatives should be looked at in more depth but at the moment we simply haven't we simply haven't gone far enough in terms of their establishment. This is also an issue for private sector households. I suspect that in the coming years businesses and households in Vanuatu will find it very difficult to find disaster insurance or insurance for disasters. Cook Islands had that experience and now if you have a house in Cook Islands it is basically impossible to get insurance for your house. Simply because of the risk of cyclone damage. So this is an issue not just for governments but also for households and is something that needs to be addressed.
KH: Any final recommendations or thoughts going forward from your report for Vanuatu.
MD: Well one of the problems for Vanuatu. For the government that is. Is that it finds itself in a position where it is unable to borrow significant amounts in a responsible manner because of prior commitments to infrastructure projects. What I would be recommending is that the government look very carefully at those infrastructure projects particularly the ones that are not so well advanced and look to either modify them so that they incorporate elements of reconstruction or potentially postpone them altogether. In doing so it will have to be very careful because in many cases it would have signed contracts with private sector companies. Businesses have invested in machinery and so forth in anticipation of those projects. So it needs to be careful not to damage the private sector in postponing or canceling such projects. But there really is a need to free up funding in order to fund other reconstruction.
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