The economic impacts of natural disasters at provincial level of vietnam 2012 2016

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN QUYNH NGA THE ECONOMIC IMPACTS OF NATURAL DISASTERS AT PROVINCIAL LEVEL OF VIETNAM: 2012-2016 MAJOR: PUBLIC POLICY

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY

NGUYEN QUYNH NGA

THE ECONOMIC IMPACTS OF NATURAL DISASTERS AT PROVINCIAL

LEVEL OF VIETNAM: 2012-2016

MASTER'S THESIS

Hanoi, 2018

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY

NGUYEN QUYNH NGA

THE ECONOMIC IMPACTS OF

NATURAL DISASTERS AT PROVINCIAL

LEVEL OF VIETNAM: 2012-2016

MAJOR: PUBLIC POLICY

SUPERVISOR:

Prof Dr MORITO TSUTSUMI

Dr NGUYEN NGOC HUY

Hanoi, 2018

ACKNOWLEDGEMENTS

After nine months of work on my master thesis, I would first like give the sincerest thanks to my supervisors, Morito Tsusumi and Huy Nguyen Their guidance and support have made this thesis possible Tsutsumi sensei has supported

me all the time in Japan and also when he visited Vietnam while Huy sensei has given me the opportunity for fieldwork in Hoi An, Hue this year

I would like to thank Central Steering Committee for Natural Disasters Prevention and Control for providing the database on natural disasters impact in Vietnam Besides that, the Vietnam General Statistic Office also is a help for me on collecting data

Finally, I would like to say thank to my family, friends and all of whom supported me and encourage me to finish the writing when I felt so struggling with the thesis, especially the VJU, JICA, University of Tsukuba

ABSTRACT

By using the panel data from 2012-2016 at provincial level of Vietnam, an adjusted generalized moment of method model is estimated to find the relation between the damage caused by natural disasters and the provincial economic growth The database is collected from the Ministry of Agricultural and Rural Development, the Vietnamese General Statistics Office and Vietnam Chamber of Commerce and Industry The hypothesis is tested is the creative destruction effect which means that the damage caused by natural disasters in current year would lead to a negative impact on the economic growth in current year while the the damage caused by natural disasters in previous year would encourage the economic growth in current year However, the hypothesis is rejected in this study The negative effect of natural disasters on the economy still remains in the short-run

TABLE OF CONTENT

LIST OF FIGURE i

LIST OF TABLE ii

LIST OF ABBREVIATION iii

ACKNOWLEDGEMENTS i

ABSTRACT ii

CHAPTER 1: INTRODUCTION 1

1.1.Research background 1

1.2 Problem statement 2

1.3 Purpose of the study 3

1.4 Objective of study 3

1.5 Research questions 3

1.6 Research method 3

1.7 Significance of the study 4

1.8 Limitation of the study 5

1.9 Structure and overview of the thesis 5

1.10 Summary 7

CHAPTER 2: LITERATURE REVIEW 8

2.1 Contextual Review: Natural disasters impacts in Vietnam 8

2.1.1 Current status of natural disasters in Vietnam 8

2.1.2 Current status of the natural disasters prevention and control policy 14

2.2 Academic review: the impact of natural disaster 24

2.2.1 Natural disasters and related concepts 24

2.2.2 The Macro-economic impact of natural disaster 27

2.2.3 Other impact of disaster: Creation Destruction 29

2.2.4 Model on Evaluation the economic impacts of natural disaster 29

2.3 Research gaps 34

2.4 Conclusion 35

CHAPTER 3: METHODOLOGY 37

3.1.Overall Quantitative Analysis and the Econometrics 37

3.2 Regression Model 38

3.3 Index calculation 40

3.4 Generalized Method of Moments (GMM) 41

3.5 Hypothesis 43

3.6 Conclusion 43

CHAPTER 4 DATA 44

4.1 Data collection 44

4.2 Data Descriptive 45

4.3 Conclusion 46

CHAPTER 5: ESTIMATION RESULT 48

5.1 Impact of damage caused by natural disasters on economic outcomes 48

5.2 Impact of Instrument variables on Economic outcome 52

5.3 Conclusion 53

CHAPTER 6: POLICY IMPLICATIONS 54

6.1 Implications for Governance 54

6.2 Implications for Education and Health 56

6.3 Implications for Infrastructure 57

6.4 Implications for other aspects 58

6.5 Limitations and Implications for future research 58

6.6 Conclusion 59

CHAPTER 7: CONCLUSION 60

REFERECES 61

APPENDIX 67

LIST OF FIGURE

Page

Figure 2.1 Number of killed people, injured people and destroyed houses caused

by the natural disasters in Vietnam from 2011-2017 10

Figure 2.2 The annual economic growth rate and economic losses caused by the natural disaster 12

Figure 2.3 Number of people killed by the natural disasters at regional scale 13

Figure 2.4 Damage caused by the natural disasters at regional scale 13

Figure 2.5 Regional GDP of Vietnam from 2012-2016 14

Figure 2.6 The fund collection and disbursement process .20

Figure 3.1 relation between variables 38

LIST OF TABLE

Page

Table 2.1 The main document on natural disasters prevention and control that

Vietnamese government has released 15

Table 2.2 The possible mutual activities of Vietnam Red Cross Society and the Central Steering Committee for Natural disasters prevention and control 16

Table 2.3 The assigned role and responsibility in Natural Disasters Response and Control according to Decree of 44/2014 ND - CP 18

Table 2.4 The effectiveness and impact of the Natural Disasters prevention and control fund 23

Table 2.5 Variable in the model of Hideki Toya and Mark Skidmore (2007) 30

Table 2.6 Variable in the model of I.Noy (2007) 32

Table 2.7 Variable in the model of Tam Vu (2010) 34

Table 3.1 Compare and contrast to previous research papers 39

Table 4.1 The data collection and the source 44

Table 4.2 Descriptive statistics for disasters variables 45

Table 5.1 Effect of natural disasters on economic outcome 48

Table 5.2 Expected and Actual signs of variable 51

LIST OF ABBREVIATION

Order Abbreviations Full word

1 CRED Centre for Research on the Epidemiology of Disasters

2 EM-DAT Emergency Events Database

3 FDI Foreign Direct Investment

4 GDP Gross domestic product

5 GFDRR Global Facility for Disasters Reduction and Recovery

6 GMM Grants Management Modernization

7 GSO General Statistics Office

12 JICA Japan International Cooperation Agency

13 MARD Ministry of Agriculture and Rural Development

14 MET Ministry of Education and Training

15 MLIT Ministry of Land, Infrastructure, Transport and

Tourism

16 MPP Master of Public Policy

17 NGO Non-governmental organization

18 OECD Organization for Economic Co-operation and

Development

19 PCI Provincial Competitiveness Index

20 R&D Research and Development

21 UN United Nations

22 UNSIRD United Nations Research Institute For Social

Development

23 UT University of Tsukuba

24 VCCI Vietnam Chamber of Commerce and Industry

25 VJU Vietnam Japan University

26 WHO World Health Organization

CHAPTER 1: INTRODUCTION

1.1 Research background

The relation between natural disasters and economic development has been discussed in many papers and international conferences Many papers mentioned this relation in the cross country scale, some just focus on the sole country However, the results all show that natural disasters lead to economic loss (Wilhite, 2000; Neumayer et al., 2014; Schipper et al., 2006) From case to case, in the flooding of Hat Yai (Assanangkornchai et al., 2004) in Kelantan of Malaysia (Jega

et al., 2018); hurricane in USA (Davidson et al., 2001) especially the Hurricane Katrina (Burby, 2006) and earthquake in Kobe (Horwich, 2000) in Wenchuan (Wu

et al., 2012), natural disasters have become a threat to global population and economy by inducing millions of deaths and enormous economic damage (Xia 2017) Besides, international as well as the national conferences on natural disasters risk management or disasters relief are held annually These are valuable opportunities for researchers, governmental officials or even the NGOs discuss and find a solution to reduce the risk of disasters, such as UN World Conference on Disasters Risk Reduction hold by the UNSIRD or International Conference on Natural Disasters, Assessing Hazards and Risk by Excellence in Research and Innovation for Humanity Among them, the Hyogo Framework 2005-2015, Sendai framework 2015-2030 conferences are the milestone of disasters risk management progress In those conferences, numerous researchers and officials from various countries have discussed and agreed that an effective disasters risk management contributes to sustainable development

Moreover, natural disasters prevention and controls is considered as one of the primary policy of a country Even though natural hazards cannot be prevented, their human impacts can be greatly reduced through preparedness activities and enhance community awareness (Godschalk et al., 1998) The policy which includes many

aspects, the education on natural disasters response (Smawfield, 2012), the building code (May et al., 1994; May et al., 2000), preparedness activities (Mathbor, 2007; Lin Moe et al., 2006), or raising an emergency fund (Bennett et al., 2000) could assist people to mitigate to the natural disasters

In Vietnam, in 2017, the number of storms in Vietnam reached the largest number ever in 5 years There were 16 hurricanes and 4 low-pressure activities in the South China Sea, the highest number in terms of the number of storms In addition, the typhoon had a direct impacted on Vietnam by the typhoon No 10 Doksuri landing Ha Tinh - Quang Binh had the wind level 11-12, even level 14-15, which after 6 hours of occurring, killed 8 people, made nearly 200,000 roof houses

be damaged and collapsed; 1.3 million households lost power Physical damage reached over 11,000 billion, had been recorded by calculation of MARD Even after the theoretical storm season had finished, at the end of December, the people of the South region tensed to deal with Typhoon Tembin - the storm had a similar path and intensity to Linda - a disasters caused nearly 3,000 deaths in Southern Vietnam

in 20 years ago Fortunately, in the early of the 26th, December, the storm has weakened before landing According to the Central Steering Committee on Natural disasters prevention and control, in 2017, 325 people have died, 61 missing and more than 600 injured Over 8,000 homes were collapsed and more than 350,000 houses were damaged The system of transportation, irrigation, telecommunications, electricity in impacted areas were seriously damaged

1.2 Problem statement

Although natural disasters got negative impact on the economy in Vietnam via media, none specific quantitative research was shown at a recent time to prove the statement Which means that politicians or government officials only use the secondary statistic data, which only showed the damage or magnitude of the disasters instead of a correlation between natural disasters with the economy, to explain for the severe impact of natural disasters At the same time, even though the natural disasters lead to huge damage, the GDP growth rate still shows the positive

number Because those are many factors contributing to the development of the economy Hence, natural disasters damage is just one of the endogenous factors limiting the economic growth

Previous research has shown a negative impact of natural disasters on economic growth at the global scale and regional scale The number of researches on Vietnam case study is limited while the abnormal situation of disasters in recent years has led

to the worse economic loss in the 21st century, other previous research papers on the economics of natural disasters are highly appreciated but not up-to-date

In this thesis, instead of providing the data, the correlation between disasters and economy is going to be checked with the more updated panel data

1.3 Purpose of the study

The purpose is calculating the impact of natural disasters on the economy at provincial scale, with the same model of the previous search but, adjust with a new variable and check with the more detailed outputs of the agriculture, manufacture and service sector From the result of estimation, and the policy base of Vietnam, some brief policy implications is carried out

1.4 Objective of study

The objective of this research is showing an impact of natural disasters on the provincial economy in Vietnam The model is built and data is collected to test the hypothesis of creative destruction effect

1.5 Research questions

This master thesis aims to answer the question that:

How the natural disasters impacts the economic growth in the provincial scale in Vietnam?

1.6 Research method

The time scope is from 2012 to 2016 The special scope is 63 provinces in Vietnam The database was available from the Vietnam General Statistic Office as well as the MARD of Vietnam

Using the secondary data provided by the GSO and MARD and applying GMM model in Stata software, the relation between GDP including agriculture, manufacture and service sector and the damage of natural disasters will be checked Inside the model, the damage of natural disasters was considered as the endogenous variable, while other factors as education, health care, infrastructure, governance and openness for business are considered as the instrument or exogenous variables After testing with Creative Destruction hypothesis, based on the significant variables, the proper implications will be shown

1.7 Significance of the study

There are 3 contributions of the thesis:

Firstly, the paper updates the time period to the latest database which is available

at the moment for the case of Vietnam It means that the result of the model shows the most recent situation of the economics of natural disasters

Secondly, although the basic model is reserved, the instrument variable was adjusted with the new database The governance efficiency which is represented by the PCI – the provincial competitive index is added to check whether the governance of provincial government involves in reducing the damage of natural disasters or not

Thirdly, the research has rejected the creative destruction hypothesis of previous research which showed that in 2 recent years (last year and current years) the natural disasters as an endogenous factor has created a negative impact on the GDP Furthermore, for each sector of the economy, natural disasters show different effects However, the governance factor has shown its vital role in the model while other factors could not show any significant results Although the model could not

explain in which way, governance can reduce the impact of natural disaster, or why other factors could not involve in this process, based on the review on Vietnamese policy system for the natural disaster, the brief recommendations would be proposed at the end of the thesis

1.8 Limitation of the study

Since this thesis focuses on the quantitative methodology only, hence, it could not explain in detail the mechanism of how natural disasters or instrument variables such as governance, healthcare sector, education, investment participating in the economic growth Additionally, the time period is short which is only 5 years from

2012 to 2016, the long-term outcome of policy could not be shown in the model It means that if the year of a lag variable was changed into 2 years lag or more, it should show a different testing result

Next, due to lack of the database, some important factors are unable to be checked For example, the government expenditure for natural disasters prevention and control activities is an important variable for governmental investment or expenditure on natural disasters relief or mitigation, but this data is impossible to be collected And there are more factors could be a list in the instrument variables but they could not calculate in the model

Lastly, none specific recommendation for a certain policy will be given in the conclusion of the thesis, since no specific policy is mentioned and examined in the thesis All of the mentioned limitations caused by noise factors, which are unable to mention in the model, as well as data unavailability, are explained in detail in the last chapter of the thesis

1.9 Structure and overview of the thesis

The thesis contains 6 main parts including introduction, literature review, methodology, findings and discussions and summary, conclusion, and policy implication

Chapter 01: Introduction – presents the overview of the research containing basic and key ideas of the thesis such as rationale of the research, problem statement, purpose of the study, research questions, research method, significance

of the study, limitation of study and structure and overview of the thesis

Chapter 02: Literature review concentrate on briefly showing the study-related academic works in the past At first, the chapter explains the definition which was used, then the impact of natural disasters according to previous research, a relevant model with this topic and finally the research gap Then, the contextual review on Vietnamese current disasters situation and policy will be described

Chapter 03: Research Methodology – is a chapter in which, the methodology of the study and model adjusting is expected to be discussed Moreover, the rationale for choosing the model and database will be explained along with how each indicator or factor has been calculated This chapter also shows the limitation of the research process or the points that are unable to be mentioned in the thesis

Chapter 04: Data – focusing on the data collection, description, and calculation Chapter 05: Estimation result - include 2 main parts, the GMM results, and the hypothesis discussion In the first part, the model is run to find the correlation between economic outcome and the damage caused by natural disasters In the second part, the hypothesis is tested and discussed why the result is different to previous research

Chapter 06: Policy Implications –some policy implications will be given at the provincial scale for the local government, especially among the preparedness of the province for natural disasters relief

Chapter 07: Conclusion – is the final chapter of the thesis concludes the main findings, limitation of the study as well as giving the recommendation for future research

CHAPTER 2: LITERATURE REVIEW

At the first chapter, the related definition and also previous paper related to a topic of the thesis will be reviewed and analyzed Hence, it is divided into two main parts including academic review and context review In the academic review, the definition, model, and impact of natural disasters on the economy as well as other social aspects are the main topic And in the context review, the impact of natural disasters in Vietnam at the national level and some smaller typical events will be shown

2.1.Contextual Review: Natural disasters impacts in Vietnam

2.1.1.Current status of natural disasters in Vietnam

Vietnam as one of the five countries most severely suffered by natural disasters and global climate change (Vien, 2011; Portal, 2015): a 1-meter rise in sea level would partially inundate 11 percent of the population and 7 percent of agricultural land (World Bank & GFDRR, 2011; GFDRR, 2015) According to the Law No 33/2013/QH13 on Natural Disasters Prevention and Control (2013); there are 21 types of natural disasters occurring in Vietnam A report of The Central Steering Committee for Natural Disasters Prevention and Control, the Directorate of Natural Disasters Prevention and Control, Ministry of It was estimated that Viet Nam is hit

by from 10 to 15 hurricanes, floods, landslides, which seriously affecting up to 50%

of land area and 70% of the Vietnamese population in most prone hazard areas In

2013 alone, there were 14 storms and floods that occurred in Viet Nam, the total number of people affected reached 4.13 million, the highest in the past 10 years Last year (2017), the total damage caused by the Natural disasters are approximately 60,000 billion Vietnam dong or 2.65 billion USD By 2017, the disasters have left 386 dead and missing, 654 injured; more than 8,126 houses collapsed, washed away, more than 561,696 houses flooded, damaged, roof speed; 352,943 ha of damaged rice and crops; over 2.65 million birds, livestock died, many dyke sites have to handle emergency, many km of canals and roads were slipping

From 1999, it was concluded that in Vietnam, climate change impacts were expected to primarily occur in the future, however, flooding had already caused serious problems, with some segments of the population who would be more vulnerable than others (Adger, 1999; World Bank, 2010; World Bank & Australian AID 2014) According to Hallegatte et al (2016), evidence suggests that people living in poverty, are more vulnerable than the rest of the population to natural disasters Furthermore, the capacity to cope with and adapt to shocks due to lower access to savings, borrowing, or social protection; and climate change of the poor, is likely to be worse

Climate change impacts can make frequent events as important as rare ones in terms of exposure: for instance, a 25-year flood under future conditions of high sea level rise exposes 15 more people than a 200-year flood under current conditions (Bangalore et al., 2016) Moreover, the level of poverty impacts to the capacity to adapt to the climate change and natural disasters That is why, research about the historical returning possibility of the Natural disasters which is not available because of inadequate disasters records, is really important In Vietnam, flood and storm are common For example, there were some historical events in Vietnam such

as in Yen Bai 2017; Quang Ninh 2015; Ha Tinh 2010; Hanoi 2008; Hue 1999

Figure 2.1 Number of killed people, injured people and destroyed houses caused

by the natural disasters in Vietnam from 2011-2017 Figure 01 shows that, although the number of the death toll, injured people, and damaged houses depends on the magnitude of natural disasters and resilience capacity, the trend of the negative impact of natural disasters in Vietnam is generally increasing After the huge damage in 2013, by issuing the natural disasters prevention and control law, 2 years later, the damage is lower than the previous time However, in 2016 and 2017, there was a rise in damage due to abnormal disasters especially the unexpected storm season with abnormal characteristics The abnormal characteristics include natural disasters occurring in unexpected season For example, the snow and coldness suddenly attacked Vietnam from North to the North Center region of Vietnam in 2016, or the storms in 2017 continuingly happened till the end of the year and even in early 2018 In the Highland Center, the heavy rains which do not follow the rainy season, lead to damage in crop and agricultural product

The statistical data of damage caused by natural disasters and GDP growth rate

in figure 2 also shows a relation between natural disasters and economy From 2011

to 2017, when the loss caused by natural disasters increase, the economic growth rate also presents the decreasing trend For instance, from 2011 to 2013, since the amount of economic loss raised from 12 trillion Vietnam Dong to 27 trillion Vietnam dong, simultaneously, the GDP growth rate of 2012, 2013 decrease from 6.24% to 5.25% and 5.42% respectively In 2014 and 2015, the damage caused by the natural disasters is at the lowest level, there is an increasing trend of GDP The GDP growth rate continuingly passed appropriately 6% in 2014 and reach 6.68% in

2015 However, the rate of natural disasters loss suddenly occupied more than 1%

in 2016 and nearly 2% in 2017 has contributed to slow down the economic growth rate In 2017, Vietnam has been attacked by a more severe storm season which led

to the highest loss ever in 10 years recently The falling growth rate could have partly resulted from this event

At the regional scale, in Vietnam is divided into six administrative regions including the Red River delta, the Northern Midlands and mountain areas, the North Central and Central coastal areas, the Central Highlands, the South East areas and the Mekong River Delta As figure 3, figure 4 and figure 5 show, the North Central and Central coastal areas have been most suffered by the natural disasters in both numbers of killed people and economic loss In 2013 and 2016, the total number of killed reached approximately 140 people and the total damage also peaked around 23.5 trillion Vietnam Dong and 14 trillion Vietnam Dong respectively This part of Vietnam also is the area which is most frequently attacked by the severe storms Although the economic loss in Northern Midlands and mountainous areas is not as high as the center area, the number of killed people is the second highest in Vietnam In contrast, the South East provinces such as Hochiminh city, from 2012

to 2016 did not have to face big disasters The GDP of this area always is top 1 of Vietnam and did not be negatively impacted by natural disasters Recently, there is

no big storm of serious disasters happened in this area

Figure 2.2 The annual economic growth rate and economic losses caused by the

natural disaster

Figure 2.3 Number of people killed by the natural disasters at regional scale

Figure 2.4 Damage caused by the natural disasters at regional scale

North Central and Central coastal areas Central Highlands

North Central and Central coastal areas Central Highlands

Figure 2.5 Regional GDP of Vietnam from 2012-2016

2.1.2.Current status of the natural disasters prevention and control policy

2.1.2.1.Overview of policy system for the natural disasters prevention and control

As mentioned in the definition part of chapter 2, the new law on Natural disasters prevention and control is the main legal document for this field However, this law is really new In the past, people believe that they could predict and prevent the natural disasters (building the dyke to avoid the flood) Now, the government has considered Natural disasters prevention and control as an important target for the sustainable development goal Instead of only focusing on the water resources and flood – storm prevention, Vietnam government has shown a longer and wider purpose: natural disasters prevention and control This table below indicates the change of Vietnamese government‘s vision Based on the traditional irritation activities of more than 2000 years ago, previous dynasties and current government tend to pay attention to the water resources control as well as floods and storms prevention For example, dyke systems have been built and improved in the Red River delta The strong focus on only water-related and traditional approach (on dykes and storms) is a limitation on climate change adaptation and mitigation Along with the impacts of climate change, the Vietnamese government has

200.000

North Central and Central coastal areas Central Highlands

recognized, with the assistance of international and regional organizations, the aim

is changed to disasters risk management which also plays a vital role in sustainable development

Table 2.1 The main document on natural disasters prevention and control that

Vietnamese government has released

Years Main movement

Before

2006 Ordinance on Flood and Storm Prevention and Control (PL

No 27/2000 / PL-UBTVQH10); Law on Dykes (No 79/2006 / QH11 on 29/11/2006)

2007 National Strategy on Natural disasters prevention and control

(Decision No 172/2007 / QD-TTG on 16/11/2007 by the Prime Minister)

2009 Project "Enhancing Community Awareness and

Community-Based natural disasters risk management" (Decision No 1002 / QD-TTG of the Prime Minister)

2013 The law on natural disasters prevention and control (No

17/02/2017

Decree No.15 / ND-CP: Rearrangement and establishment of Directorate of Natural Disasters Prevention and Control in Ministry of Agriculture and Rural Development

2.1.2.2.The implementation and monitoring: the overlapping situation and lack of collaboration

One of the biggest problems of implementation and monitoring part is the overlapping situation and the vague role of many implementers In the activity named natural disasters prevention and control, there are five main actors including the Red Cross Society, Central Steering Committee for Natural disasters prevention and control (or the Directorate), the National Committee for Search and Rescue and the National Front In the Master Plan, only the National Committee for Search and Rescue and the National Front were mentioned while two others are not considered

as the main human resource for natural disasters response

Furthermore, missions between those implementers have many similar points as the table:

Table 2.2: The possible mutual activities of Vietnam Red Cross Society and the

Central Steering Committee for Natural disasters prevention and control (or the directorate)

Vietnam Red Cross

Society

Mutual activities Central Steering

Committee for Natural disasters prevention and control

Implementing the Law

on natural disasters prevention and control

To prevent, response and overcome the consequence of the natural disasters

in case of natural calamities;

 Strengthening international cooperation in disasters prevention and control

- There are 5 levels for each natural disasters

Last but not least, there is lack of a mutual plan and an efficient collaboration strategy As a result, those implementers are only connected to a certain project or program and there is not a mutual or team working training between them

Table 2.3: The assigned role and responsibility in Natural Disasters Response

and Control according to Decree of 44/2014 ND - CP

Communal District Provincial

Communal District Provincial

The Prime Minister

command the President

promulgate the natural disasters emerge

Centra

l level

no clear statement on how to efficiently

collaborate

Central steering committee

Central steering committee

Red

Cross

Society

Independently reaction, no clear responsibility or mutual plan

2.1.2.3.The Financial problem with Natural disasters prevention and control fund

In the Workshop on disasters risk finance in Vietnam, according to World Bank estimates, over the next 50 years, Vietnam could suffer losses of more than 141,200 billion dong ($ 6.7 billion) due to floods, storms or earthquakes In this case, the state budget will face many difficulties in supporting and overcoming the consequences of natural disasters Therefore, development of new financial solution systems for and disasters risk management is essential, where an insurance solution

is an effective tool However, the budget now covers only emergency relief and disasters recovery policies, and the budget for post-disasters development investment remains very limited Therefore, among the mitigation measures, natural disasters insurance is considered an effective tool for risk transfer and contributes to reducing the burden on the state budget

According to the ―Outline introducing the Law on Natural Disasters Prevention and Control‖, financial resources for natural disasters prevention and control include: state budget; Funds for natural disasters prevention and control and voluntary contributions from organizations and individuals are provided for as follows:

+ The state budget for natural disasters prevention and control covers the state budget according to the annual expenditure estimates and state budget reserves The Law also specifies expenditure contents, the estimation, allocation, management and use of the state budget according to the annual expenditure estimates and the use of the State budget reserve for natural disasters prevention and combat

+ The Natural Disasters Prevention and Control Fund is a fund established at the provincial level managed by the provincial people's committee The Natural Disasters Prevention and Control Fund does not include state budget and is not sourced from the state budget Financial sources of the Natural Disasters Prevention and Control Fund include compulsory contributions of domestic and foreign economic organizations in localities, Vietnamese citizens aged between full 18 and working-age under the provisions of law And other legal sources The Law also provides for a number of principles for the management and use of the Fund and for the Government to specify the establishment, level of contribution, subjects eligible for the exemption, reduction, and suspension of contribution, management, use, and enforcement Math Funds for natural disasters prevention and control

+ Voluntary contributions to natural disasters prevention and combat in the form of contributions to social funds, charity funds; to participate in donations in accordance with the law and directly support organizations, households, and individuals suffering from natural disasters The Law also stipulates the distribution and use of voluntary contributions in accordance with the law on social funds, charity funds and the agreement of the local authorities where the beneficiaries are supported

- Regarding materials, means, equipment, information systems and necessities for natural disasters prevention and control activities: The Law defines the responsibilities of state agencies, organizations, individuals and households Must be prepared to respond to natural disasters, especially the "4 on-spot" local and community reserves

Hence, the establishment of Natural Disasters Prevention and Control Fund will contribute to reducing the burden on the state budget and encourage private sectors

to share the responsibility in this field

Since in some provinces, the private companies refuse to pay money into the fund; and there is no money for the operation of the fund management board The operating cost of fund collection should be considered as an item in the disbursement plan In addition, the local government or the fund management unit should organize annual natural disasters risk management conference in order to clarify and explain the role and importance of the fund toward private sectors and other stakeholders in each province

According to statistics of the Vietnam Chamber of Commerce and Industry (VCCI) in Da Nang, 81% of businesses surveyed are not active in preventing disasters risks It also looks forward to much support from the state, especially financial support

Based on the Decree No 94/2014 / ND-CP, the budgeting and disbursement process of the Natural Disasters prevention and control fund was simplified as the figure below:

Figure 2.6: The fund collection and disbursement process

As the figure 2 shows, there are 6 main links, the red directions represent the money flow and the blue directions represent the administrative flow

(1) Two different agencies are required to submit two plans In the Fund management board, they based on the last year spending and other Natural disaster-related projects to estimate the total amount of money By asking other on-going project implementers and annual spending in local areas, they finish a proposal then report last year spending and this year plan to Provincial People Committee Besides, the Department of Agricultural and Rural development (specifically the provincial Steering Committee of Natural Disasters Prevention and Control) has to submit a proposal of fund collecting process including how to collect fund, how many can be collected, then submit to the Provincial People Committee

(2) If the plan of DARD was accepted, the Provincial People Committee will send a Decision to Communal level to collect the money

(3) After collecting all the money, the communal People Committee send a report to the Provincial People Committee

(4) At the same time, all of the money will be sent to the Provincial Tax Department The contribution of enterprises accounted for a large proportion Provincial Taxation Department is the most informed of enterprise information through annual tax returns Because the enterprises prefer to send the money directly to the bank account of the Tax Department However, Decree 94 does not address the sector's responsibilities for planning and organizing revenues Then, the report from the Provincial People Committee is inadequate and improper

(5) If the plan of Fund Management Board was accepted, the Provincial People Committee will send a Decision to Provincial Tax Department

(6) Then, the Tax Department will send the money to the Fund Management Board (7) After that, other implementers will receive the money as their requirement

At the moment, in the Decree No 94/2014 / ND-CP, the disbursement plan has

to be submitted to the Provincial People Committee before implementing The Provincial People Committee has disapproved the plan from the provincial department of agricultural and rural development because there are difficulties in property value assessment and responsibility clarification The biggest problem of implementation and monitoring part is the overlapping situation and the vague role

of many implementers In one activity named natural disasters prevention and control, there are five main actors including the Red Cross Society, Steering Committee for Natural Disasters prevention and control (or the Directorate), the National Committee for Search and Rescue, the National Front and other Project-related stakeholders Then, it is impossible for the many Provincial People Committee to check and make the decision on how to spend the fund properly while there are numerous problems which are needed to be tackled

Moreover, In the fund Decree No 94/2014 / ND-CP, the fund was (only) used in the communal level projects, so at the district level and provincial level, there is no budget for any related activities such as training skills, enhancing awareness or building the natural disasters response plan In addition, the budgeting process is not the activities-based one, and there is a lack of a mutual plan and an effective collaboration strategy As a result, those implementers are only connected to a certain project or program and there is not a mutual or team working training between them Thus, the department of agricultural and rural development in provincial level should build its own plan including prioritized projects, based on the demand of the communes and the expectation and decision of the Central Steering Committee for Natural Disasters prevention and control

Table 2.4 The effectiveness and impact of the Natural Disasters prevention and

control fund

Output Outcome Impact

Theoretically - An extra

financial support

- Reducing the burden

on the state budget

- Strengthen infrastructure

- Training activities

- Providing necessary equipment and facility

- Save people life

- Support after natural disaster

- Support for agricultural and rural development (higher

productivities)

Practical

result

- Could not collect enough money

- Could not send the money

- The planned activities are not carried out because of the administrative problems

- The negative feedback from local

implementers as well as authorities

- No clear impact in general, just some positive reflections

in some certain provinces (16)

- Since there is no new contribution and disbursement, there is no support

2.1.2.4.Other problems of natural disasters prevention and control policy system 1- Limited Database: There is natural disasters damage report portal on the internet, provided on the website of Central Steering Committee for Natural disasters prevention and control That information includes the annual report, natural disasters news and so on On the other hand, only the Central Steering Committee for Natural disasters prevention and control provides this information frequently but other agencies the papers, document and updated information are not available

education: Since the law on natural disasters prevention and control is new, the integration climate change into education is limited The point 21 and 23 of the laws mention that: The Ministry of Education and Training directs and guides the integration of disasters prevention knowledge into the curriculum at all levels‖ However, at the moment, there are some training material named ―Natural Disasters risk reduction handbook for teachers‖ of MARD, which is not written or edited by MET and one called ―teach and learn about disasters risk reduction‖ published by MET but had not used widely and applied in the official teaching program at school Although the Collaboration Program No 3485 dated 08/5/2018" on natural disasters prevention and mitigation in the education and training sector in the period 2018-2023‖ was signed by MET and MARD, at the moment (05/2018) there is no practical activities at national scale on education on natural disasters prevention and control for students at all levels

3- Infrastructure improvement: At present, in Vietnam, there is no standard policy system on infrastructure for natural disasters prevention at the national level Although there are building codes, and building models are resistant to typhoons, the management of construction is still very difficult The Ministry of Agriculture and Rural Development is implementing a new rural development program This is the first and only nationwide program to have criteria for construction and planning In particular, Article 3.2 specifies the criteria of the safe commune in natural disasters prevention Therefore, for each village in the rural area, try to ensure self-sufficiency

in coping with natural disasters However, there is no national level project with the urban area, or linkage between urban, rural and interregional areas Dam - infrastructure repair projects are still independent of each other

2.2.Academic review: the impact of natural disasters

2.2.1.Natural disasters and related concepts

Natural disaster, vulnerability, hazard

The very first question is that what is the natural disaster?

According to the International Red Cross and Red Crescent Society, a disasters was defined as a sudden, calamitous event caused by nature which seriously disrupts the functioning of a community or society and causes human, material, and economic or environmental losses that exceed the community‘s or society‘s ability

to cope using its own resources To be more specific, disasters was shown in the equation below:

(VULNERABILITY+ HAZARD) / CAPACITY = DISASTERS

In which, the hazard means a threatening event or probability of occurrence of a potentially damaging phenomenon within a given time period and area Disasters occurs when a hazard impacts on vulnerable people

The vulnerability is often described in the negative term The central idea of the definition is often cited according to IPCC (McCarthy et al., 2001) as the degree to which a system is susceptible and cannot cope with the adverse effects (Adger, 2006) Hence, the disasters is not only an event but is combined with various aspects including the capacity of that region In other words, an event is only the disasters when it is strong enough to create damage in a region which cannot confront the attack

According to WHO (1971) on the book called Guide to sanitation in natural disasters WHO; a natural disasters was mentioned as an act of nature of such magnitude as to create a catastrophic situation in which the daily life is suddenly disrupted and people are plunged into helplessness and suffering, and, as a result, need both physical, mental support such as food, clothing, shelter, medical and nursing care and other necessities of life, to overcome or be prepared for unfavorable environmental factors and conditions

Similar to the two mentioned definitions, in this paper, since the data was collected from the Vietnamese government source, the definition is taken from the Natural Disasters Prevention and Control Law (2013) According to the law,

human life, property, the environment, living conditions and socio-economic activities‖ It means that a natural phenomenon is only called natural disasters since

it has already negatively damaged people's life, or the level of this natural phenomena has already affected people in the past Although the definition does not mention the factors involving inside as the IFRC, the definition agrees with the statement that, if the natural disasters is small and the ability to cope with natural disasters is high, the damage would be limited At that case, the event is only the natural phenomena but the disasters

Resilience, Mitigation, Adaptation

Three concepts resilience, mitigation, and adaptation is used as the main countermeasure for natural disasters and climate change field Although mitigation

of and adaptation was said to have the similar purpose: reducing its undesirable consequences caused by climate change, mitigation purpose is to reduce the climate change effect while adaptation mission is to reducing vulnerability to these effects (Swart et al., 2007) Generally, the definition was taken from the UNISDR Although those terminologies are defined in the law on natural disasters prevention and control of Vietnam, the meaning and explanation of each word are not different Many other papers talked about the definition and model of resilience with different viewpoints such as adaptive capacities (Norris et al., 2008) or engineering sciences – infrastructures (Bruneau et al., 2003, Kahan et al., (2009) However, the most common understanding of this term could be taken from UNISDR that resilience is the ability of a system, community or society It is exposed to hazards

in order to resist, absorb, accommodate, adapt to, transform and recover from the effects of a hazard in a timely and efficient manner, including through the preservation and restoration of its essential basic structures and functions through risk management Similarity, according to UNISDR, mitigation is an action aiming

to lessen or minimize the negative impacts of a hazardous event And, adaptation usually refers to a process, action or outcome in a system (household, community,

group, sector, region, country) in order for the system to better cope with, manage

or adjust to some changing condition, stress, hazard, risk or opportunity

Prevention, Preparedness, Response,

It is impossible to prevent a natural disasters or any kind of natural event However, disasters risks could be prevented Hence, the damage caused by a natural disasters would reduce Disasters prevention is defined as a group of activities and measures, which is applied to avoid the existing and new disasters risks

The preparedness is a state when not only the government but organizations, communities, and individuals have developed and equipped necessary knowledge and capacities to an effective response to and recover from the impacts of disasters The response is a group of action to rescue people, save lives, reduce health impacts, ensure public safety and meet the basic subsistence needs of the people affected This group of action was taken in 3 periods of disasters including before, during and after a disasters

2.2.2 The Macro-economic impact of natural disasters

As being said by Hewitt (2014) that disasters could ruin various types of functions as well as institutions at once, it also could bring a society-wide and systemic crisis With the increasing trend of damage caused (IPCC, 2001) and the number of people affected (Rasmussen, 2004) natural disaster, Bouwer (2010) and Schmidt et al (2009) pointed out that it could be a driving force impacting the economic development

It is undeniable that the number of losses including infrastructure, human, and property by the natural disasters will affect not only the manufacturing and producing (Rose & Liao, 2005) but also the development policy of this region (Romulo Caballeros, 1995; Skoufias, 2003) Rasmussen (2004) wrote that natural disasters were found to have had a discernible macroeconomic impact, including large effects on fiscal and external balances, pointing to an important role for

precautionary measures Moreover, developing countries and the small island of developing state (Briguglio, 1995) tend to suffer most from natural disasters, especially in terms of the number of persons affected and the value of the damage Additionally, vulnerability to natural disasters could be considered as important policy implications

Toya and Skidmore (2007) discuss that natural disasters has an impact on Economic development By running a regression model with the number of death people and damage of natural disasters and other factors could reducing the level of damages such

as the engagement of the economic openness, private sectors, governmental and governmental organizations Besides, gender also contributes to the differences in the impact of natural disasters (Murillo et al., 2017)

non-Natural disasters have a statically observable advert impact on the Economy in the short-run and the Developing countries face much larger output decline (Noy, 2009) Based on this research, later on, many Economic impacts of Natural disasters with the model developed from Noy (2009) was written In which, the internal capacity to confront the natural disasters of a nation, as well as the level

Macro-of the natural disasters occurring, will determine the level Macro-of economic growth

In 2016, with the involvement of Prof Tam Vu, other specific research about Vietnam was conducted In which, the natural disasters has created adverse effects

on retail sales In a big city, the support from the government toward firms has avoided the long-term adverse effects (Vu & Noy 2016) Before that thesis, Noy, I.,

& Vu, T B (2010) can test only on the Sub-regional scale because of the lack of Data In this paper, the provincial scale will be considered Which is smaller that sub-regional scale In Vietnam, there are 3 main regions are the North, South and Middle part In the smaller scale, there are 8 sub-regions based on the types of natural disasters as well as geographic aspects As the discussion with Prof Tam

Vu, it was explained that the limitation was finding the data for natural disasters impact of each province Later on, working for the Directorate of Natural Disasters

Prevention and Control has provided an opportunity to collect the needed database for economic damage This thesis is expected to check the economic impact at the smaller scale

2.2.3 Other impact of disaster: Creation Destruction

Using the normalizing economic loss, Eric Meumayer et al (2011) claimed that although there is no evidence for an increasing trend of economic loss caused by climate change, it can be seen that there is the sign of natural disasters

Many papers have talked about the case of Japan Even though natural disasters occur frequently, and bring huge destruction, the economy of Japan still growth The same situation happened in other countries such as Indonesia and Vietnam Yamamura (2010) used regression analysis to prove that in the case of Japan, the natural disasters is a push factor to encourage an individual to cooperate and enhance the effectiveness of social capital At the same time, after the event, the budget for reconstruction and relief will quickly push the economic growth This type of action is called ―Creative Destruction‖ or ―investment-producing Destruction‖ It means that along with the destruction, the investment and producing will be promoted until the affected area recovers and event develop further Many articles have talked and test about this hypothesis such as Ramirez et

al (2011) with the case of the earthquake in Japan, Jha (2018) and a case study of the Philippines, and another case of Vietnam of Tam Vu et al (2010, 2014, 2017).This Creation destruction also is the hypothesis of this thesis

2.2.4 Model on Evaluation the economic impacts of natural disasters

Many models were applied At first, many researchers used the statistic method

to identify the impact of natural disasters on economic growth There research or report only can concentrate on data describe Some others used the case study of the specific natural disasters event to analyze In this part, 3 model will be reviewed, one is the linear regression model and one is the GMM – generalized moment