Examination of Witnesses (Questions 220-235)
MR DAVID
PEPPIATT
6 JULY 2006
Q220 Joan Ruddock: So where you build
on coasts is obviously an issue, and it seems to me not to have
that built into the thinking now, when we know about it, really
is some dereliction of duty?
Mr Peppiatt: This is being addressed,
particularly in the context of small island developing states.
I know in the context of the Pacific that there is a real effort
to integrate NAP, climate adaptation international development
planning, and there are real efforts by a number of small island
developing states in the Pacific and the Caribbean very much on
land-use planning, on coastal planning, and so there are efforts
underway. I just hope we do not have a growing community of climate
change funds and climate adaptation NGOs and policies and the
same on disaster reduction.
Joan Ruddock: Precisely.
Q221 Ann McKechin: You have criticised
the PRSP strategies for failing to automatically incorporate disaster
risk reduction. To what extent has the World Bank seized on the
problem? Do they recognise it is a problem, is it something which
they are trying to tackle, or is DFID just a lone voice at the
moment saying, "You need to do something"?
Mr Peppiatt: The World Bank certainly
recognises the problem and is even benefiting from a little bit
of DFID support to address that problem, and I think generally
within the IFIs, the development banks, there is a recognition
that development financing needs to really tackle disaster risk,
hazard risk management. Where I see a real concern and, if you
like, a dilemma—I think that this is a critical issue—is
that the relief reconstruction and recovery industry is a booming,
bustling business with more actors, not just the DFIDs and the
NGOs and the humanitarian sector but the private sector, the military,
and, as a result, I believe we are creating perverse incentives
for many developing countries towards relief and reconstruction.
I would perhaps challenge the view of the previous speakers. I
think many of the poorest high risk countries do not have sufficient
financial economic political incentives to invest in mitigation.
The proof is that they do not borrow for it. If it was a priority,
they would borrow money for it, but they do not. They do not invest
in it. They do not see there are sufficient incentives.
Q222 Ann McKechin: And they do not
really tend to insure their properties anyway, because otherwise
the insurance market would insist.
Mr Peppiatt: I believe the international
development system, particularly development banks, have a responsibility
to provide more upfront financial incentives, whether that is
better rates of development assistance, rewards for investment
in mitigation, and so forth, just as there are incentives for
insurance, and I think we need to look at a way, because at end
of the day a poor country that is having to make tough development
choices, long-term mitigation and prevention is seen as an unaffordable
luxury.
Q223 Chairman: I do not dissent from
what you are saying, but it is true, is it not, that not all prevention
mitigation costs money, so there would be some value in advising
countries on things that are either low-cost or no cost. In Pakistan,
clearly rebuilding with steel reinforcement in buildings costs
money and is more expensive. Using lighter weight materials or
changing a flat roof to a pitched roof does not necessarily cost
any more money. Is there not some useful role in providing that
kind of advice? If I take the tsunami or floods or whatever it
maybe, saying, "Why do not you not build a little higher
up and do your farming and your fishing at that level but do not
live there", or whatever. Those do not cost money.
Mr Peppiatt: Yes, and we need
to provide more incentives like that. We also need to recognise,
and I think it came about from some of the points in our earlier
discussion, that a real challenge is that a lot of disaster risk
reduction, the problem is it is a series of non events, it is
not the high profile, high visible television capturing projects
that will reward politicians, it is the long-term investment into
reducing risk, and often that is very invisible, but we need to
find, as a result, other incentives for politicians to really
invest and take that responsibility for the safety of their own
population.
Q224 John Battle: I really want to
follow up this thing about how to build in the whole business
of investment in risk reduction. I am minded to reflect on the
fact that in my constituency there is a prison; in real terms
it is more expensive than the five-star hotel in the middle of
the city per week for the people that are in there and I wonder
whether we will ever get politicians, the process of political
institutions, to invest in crime prevention, not as we usually
use that term but investing in people to make sure they never
end up in prison in the first place. Thereby, in the long-term,
we would save money. Applying that analogy to risk reduction,
if it is seen as a cost and not as an investment to get engaged
in the whole business in anticipation to front-end load the money
for the long-term, without it being spectacularly unpopular, how
can you incentivise governments, political economic incentives,
if you like? Do you see any way through that to gear up the systems?
Mr Peppiatt: I think it goes back
to what we were discussing earlier. We need to perhaps rethink,
re-jig the way we do development to ensure that the proactive
management of risk is factored into development, and we have to
shift from reactive response in the way we deal with disasters
to much more proactive prevention, and in that sense moving it
away from the sort of disaster event to really factoring into
development planning, into coastal planning, where people live,
the way we manage natural resources. These are very much standard
development practice, and I think you have to shift it away from
the sort of disaster event which makes us more reactive in post.
Q225 John Battle: Again, it is perhaps
a rather anecdotal example, but there was a meeting in my constituency
a few weeks ago of older people at which 60, 70 people, mainly
over 75, were most worried about knives, because that was the
headlines. I asked at that meeting, "Has anybody got any
evidence? Has anybody ever been stabbed in this neighbourhood
in the last 10 years?" Nobody knew of anybody that had been
stabbed. A person at the meeting, a gentleman—there were
only five gentlemen but many older ladies—said, "No,
you are absolutely right. We have to get real about risk assessment
and realise", and he turned to a whole group of older women
and said, "You must understand that you have got a bigger
risk of getting HIV/AIDS round here than you have of ever being
stabbed with a knife!" I simply say to you that our assessment
of risk so is far out, so skewed, do we ever get to the basics,
and have you any evidence where development is starting to shift
the agenda, can you give me any examples at all, to move the agenda
on?
Mr Peppiatt: No, there are. You
talk about risk assessment. I think there is a greatly improved
practice in assessing and identifying risk. Most disasters are
foreseeable, and that is a very important fact, and if disasters
are foreseeable, and most risks globally are concentrated in particular
parts of the world, but also in terms of slow-onset, we know where
many slow-onset disasters are occurring and will occur. If it
is a fact, that disasters are foreseeable, they can be calculated
for and factored into development. Going back to your point, there
are countries that have acted on that. We can cite Bangladesh
as an example of a country that has been very proactive over the
last 25 years to really look at the way that development is planned
and that risks are managed, even within impossible situations,
with 30 million people living on the coastal belts in high-risk
areas that will be flooded year in year out, but still taking
proactive strategies to minimise the losses and protect the livelihoods
within that situation. I also think, in your example, having a
much better understanding and awareness of risk is a very important
one. I think the practice of assessing and analysing risk is very
well applied in the business sector, and I think we need to really
improve the way we identify, analyse risk and then, if you like,
take a much more prognosis approach to dealing with disasters
rather than waiting always for the impact and then diagnosing
the malnutrition or the damaged school. We need to have a much
more prognosis way in the way we deal with assessing risk.
Q226 John Battle: Where in Bangladesh
is it getting bedded into the system? Is it among popular participants'
groups, people's groups on the coastline, is it in the structures
of the bureaucracy, and I do not mean that pejoratively, is it
in the institutions of government, local and national, is it in
the minds of politicians and the leaders of departments and ministers?
Where is it bedded in?
Mr Peppiatt: I think the two signs
of encouragement are particularly the coordination between line
ministries, and this area of disaster risk reduction is not just
the responsibility of the Disaster Management Authorities or the
Ministry of Planning, it is very much across department. I know
that UNDP and DFID and a number of other international development
actors are very much focused on trying to improve that coordination
between line ministries. Then civil society is particularly strong
at working at the local level. Where there is a gap is in the
middle at local government and provincial state level, and I think
across the board on many of these countries that is where we have
not really made much impact and that is where so many of the decisions
are made, within municipalities of major cities, within local
governments, and there is a big challenge there.
Q227 Mr Hunt: You started to answer
what I was going to tackle you on, which is that if we are going
to address having proper risk reduction strategies, you are talking
about reaching essentially civil servants in really quite difficult
places, the environment part of the state government in Brazil
or the coastal agency in Kerala in India. I wonder whether ProVention
has actually had success in reaching those kinds of people, what
lessons you have learnt about the best way to reach them and what
lessons the international community could learn about how to get
the message through?
Mr Peppiatt: To clarify, we are
not an operational agency; we are a consortium and just provide
a function as a global partnership involving the World Bank and
other IFIs, a number of international development organisations,
the private sector and academic institutions of whom perhaps many
are acting at that level. So, I cannot say that ProVention has
been at work at a country level with governments, but we support
the work of the World Bank or the Red Cross and others who do.
One interesting thing is the deliberate decision within the financial
institutions to particularly target ministries of finance. I think
for a long time in the subject of managing disasters we have tended
to work with disaster management authorities and said, in terms
of institutional building and civil servants, those are the ones
we should target, but actually the key decisions are made within
ministries of finance to prepare and plan potentially for disasters,
and I think there needs to be a much more across the board approach.
In the Americas there are some very encouraging success stories
of the way the Inter-American Development Bank has worked with
a number of countries, similarly across Bangladesh, as I cited,
South Africa but beyond that in Africa I would really struggle.
I think that an absolute priority is supporting the institutional
building and good governance on disaster risk structure in Africa.
It is a very alarming situation, the lack of progress on dealing
with disaster risk in Africa. Yet, if we look at the last five
years alone, the number of people affected by disasters has doubled
from the previous five years, and that is set to escalate.
Q228 Chairman: Ann McKechin made
reference to insurance, or the lack of it, in poor countries.
Certainly when we were in Pakistan, obviously we witnessed people
who had had their houses destroyed and nobody had any insurance,
and then there was a kind of, "Well, who would then be responsible
for helping us?" The Government, probably not unreasonably,
said, "We will give you all a bit of money and you can go
back and build your own houses." They felt that would give
people a focused resource. We met, for example, one gentleman
in the camp who said, "I think the Government should build
the house. I am not going back unless they build me a house."
We tried to explain to him that that was not government policy.
It raises the issue that, if there is a cost plan in it anyway,
governments should be doing more about individuals who are poor
actually getting into that kind of provision, because you might
also, of course, make them a little bit more willing to pressurise
their governments to build at that end if they are having to pay
for it. Do you think that there is potential in this? We have
information on the World Food Programme announcing that AXA Re
has got the insurance contract, which I find rather intriguing.
It says it is a $930,000 contract providing seven million dollar
contingency funding to provide coverage in cases of extreme drought
during Ethiopia's 2006 agricultural season. I am not an actuary,
but that sounds like quite a risk. I wonder how successful it
might be as a pilot scheme, but also how you think these things
could work or could develop.
Mr Peppiatt: I think insurance
and risk transfer mechanisms can play, and particularly in transition
economies already are playing, a very key role. In Mexico, Honduras,
Turkey there have been a number of international support initiatives
which have been very successful. The Turkey catastrophe insurance
pool in response to the earthquakes is seen as a good example
of an insurance solution to addressing seismic or earthquake risk.
The real challenge for me on risk transfer schemes is in poor
countries, where insurance is simply unaffordable. You will remember
that in low developing countries less than 1% of households have
insurance and less than 3% of businesses have insurance. The coverage
at the moment is extremely low, so insurance schemes, or risk
transfer schemes, need subsidising. However, it is interesting,
seeing some of the experiences coming out of India on micro-insurance,
where there has been very high uptake, and also across the Philippines,
directly related to insurance for natural disaster losses, and
I believe that insurance does have a key role to play. It is an
area that the World Bank is investing in heavily in the Caribbean
through an insurance pool. It is very complex when you start doing
them regionally, but there are some success stories out there
and it is one very obvious way to engage the private sector, who
is an actor that we desperately need in this area of reducing
and minimising risk.
Q229 Chairman: Do you happen to know
about this in Ethiopia?
Mr Peppiatt: I know a little.
Q230 Chairman: Who is paying the
premium? Is it being paid for by individuals?
Mr Peppiatt: Donors, bilateral
donors.
Q231 Chairman: Donors are paying?
Mr Peppiatt: Yes.
Q232 Chairman: What they are really
saying—in a sense they are almost covering their own liability—"If
there is a drought, we will have to fund out money, but actually
by paying this premium the international insurance market will
pay for it and we can use the money for other things"?
Mr Peppiatt: It is a smart way
of dealing with a predictable financial aid burden on an annual
fiscal basis. I do not know how successful. I could not comment
on its success rate.
Q233 John Battle: I am picking up
that there are insurance schemes that have operated in Turkey,
which you have said is a model one, and also in Mexico and Honduras?
Mr Peppiatt: Honduras.
Q234 John Battle: Micro or macro?
Mr Peppiatt: Those are more macro.
On micro-insurance there are many emerging projects. A lot of
these are recent developments in the last five years which have
very much come from demand mainly on micro-finance institutions
to extend their services to micro-insurance.
Q235 John Battle: We could get information
on that because it has been supported by the World Bank. They
are funding that?
Mr Peppiatt: Yes.
Chairman: Thank you very much indeed.
I think it has been an interesting aspect, which, if I am honest,
was not at the front of my mind when we started this inquiry,
but that is why you conduct inquiries, to increase your knowledge.
I know you have come here especially to give evidence and so thank
you for doing that. If you feel you have any further comments
to make, please feel free to get in touch with the Committee.
We certainly value your input. Thank you very much for answering
our questions.
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