By Dr. Raymond Prasad – Economic Adviser, Pacific Islands Forum Secretariat
The Pacific Islands Forum Economic Ministers Meeting begins in Palau this week and is focused on strengthening Pacific ownership of its resilient development agenda by exploring Pacific led solutions.
Recent trans-boundary disasters such as the recent Tropical Cyclone Gita which affected more than a few Forum member countries, and the devastating earthquakes in Papua New Guinea, reinforce the pressing need to build resilience to climate change and natural hazard risks for Forum Island Countries (FICs).
These and other disasters have exposed affected countries and their communities to extreme economic, social and environmental impacts and hardship. These constantly place countries in disaster response, recovery and reconstruction mode, which compounds the ongoing challenges of macroeconomic stabilisation.
Such extreme disaster events also tend to disproportionately affect the poorer and more vulnerable parts of society, which in turn can exacerbate the income and wealth inequality within a country and across the region.
These shocks and stressors challenge the traditional thinking and approach for the sustainable economic development of Small Island Developing States (SIDS), including FICs, as the significant cumulative value of direct and indirect losses from these climate change and extreme disaster events tend to outstrip the expansion in both national and regional GDP.
Collective impacts of climate change (coupled with disasters) also tend to compound the economic fragility of SIDS through either temporary and/or permanent losses to the productive economic (and export) sectors, as well as to national public and private infrastructure and assets.
Such imputed costs cannot only be accommodated or cushioned by allocating national budget contingencies and shifting sovereign or non-sovereign risks to the market – that is through sovereign insurance. Therefore there is a need to have an array of instruments and options to finance and support recurrent recoveries.
Innovative action and mobilisation of international public and private finance would need to be mobilised for maximum impact and for “resilience dividends” to be felt.
Financing Resilience in the Region
Global research shows that for every $1 spent on building resilience to catastrophic events up to $7 is saved in disaster response and recovery. Similarly, the Global Resilience Partnership notes that $1 in every $3 spent on development assistance is wasted, due to the limited focus on investment for resilience. As a result, resilience dividends tend to be higher if investments are made upfront in preparedness and risk prevention.
In response to the combined challenges of climate change and disaster risk, Forum Leaders endorsed the Framework for Resilient Development in the Pacific in 2016. It is a world first in terms of coordinating efforts to build resilient communities and countries by ensuring that risk considerations are addressed in all development decisions now and in future.
At the 2017 Forum Economic Ministers Meeting (FEMM), Economic and Finance Ministers considered a policy paper on a Regional Financing Facility. While they commended the paper, they proposed that further work target developing financing products and options to address critical regional challenges for climate change adaptation and disaster risk management.
A Pacific Resilience Facility
A Technical Working Group (TWG) comprising the FEMM Troika (Cook Islands, Samoa and Palau), as well as Fiji and New Zealand, and supported by the Pacific Islands Forum Secretariat was set-up to develop the proposed Pacific Resilience Facility. In line with the agreed arrangements, the Forum Secretariat carried out extensive Member country consultations between January and March 2018 to seek further guidance and wider input.
The TWG provided valuable feedback and guidance in shaping and crystallising the issues to ensure the proposed Resilience Facility provides unique opportunities for Forum Island Countries to build their resilience, through upfront investment in preparedness to disaster risk and climate change adaptation. This is needed to minimise future loss of lives and displacement of people, and extensive economic losses.
In parallel, the Forum Secretariat, led by the Secretary General, Dame Meg Taylor, has sought further advice from a range of international experts, including Lord Nicholas Stern, known for his seminal 2006 Review on the Economics of Climate Change.
The Pacific Resilience Facility proposes to set up a regional fund to assist Forum Island Countries’ governments, private sector and communities to co-finance and leverage additional funding for resilience investment of new projects and the retro-fitting of existing infrastructure projects – to make them resilient to risks.
The strategic objectives of the proposed Pacific Resilience Facility are to strengthen collective, cost-efficient and contextualised financial resilience by building strategic and genuine partnerships with key development partners and building and developing capacity at national and regional levels.
It is important to note that the Pacific Resilience Facility addresses current gaps in development financing and complements existing initiatives in the region. Therefore, the key guiding principles of the Pacific Resilience Facility are to promote:
The detailed proposal on the Pacific Resilience Facility will be tabled this week at the 2018 FEMM in Koror, Palau for consideration by the Economic and Finance Ministers of the Pacific Islands Forum.