European Commissioner for International Cooperation, Humanitarian Aid and Crisis Response
Disaster Risk Reduction: Why More needs to be done and what the EU can contribute
Parliamentary hearing on DRR
15 June 2011, DEVE Parliamentary Committee
I would like to start by thanking the Committee for the opportunity to have this discussion today, and in particular to have it in the presence of Margareta Wahlström and Marcus Oxley.
Over the last months there has been a very strong push for bringing more attention to the topic of Disaster Risk Reduction (DRR) and for that we probably have to direct our gratitude to mother nature, because it has been a very difficult time across the world.
Last year, many (mostly developing) countries experienced disasters including the mega catastrophes in Haiti and Pakistan. This year is has been the fate of the developed world – starting with flood in Australia, then a massive earthquake in New Zealand. Then the triple disaster – earthquake, tsunami, nuclear meltdown - in Japan and most recently extreme weather in the United States. This is the clearest possible evidence that we should no more talk about DRR as a task for the future. It is something that is on the political agenda today, and actually to be more accurate we should probably say, as of yesterday.
Let me, Madame President, following your guidance, address three questions. I will start with the economics of DRR, because the hard facts of the economic reality should make us pause for thought and ask how come we are not doing much more in this area. Study after study after study demonstrates that investments in preparedness and prevention have the highest pay-off in comparison of other public sector and private sector investments. My former employer, the World Bank, has come up with an analysis that shows us that for every dollar - but that would be the same for every euro or any other currency of the EU - invested in DRR the returns are somewhere between 4 and 7 dollars. In other words, we have between a 400% to a 700% return on investment. And frankly I don't know many investments in which the return is so high.
And yet, if you look at what is happening in terms of how we go about investment in DRR, we are surprisingly not doing so well. Let me take the organisation I represent, the European Commission, where we have somewhere between 6 and 8 billion Euros, (it depends on how we apply methodology), in regional funds, that are available for investments in disaster preparedness and prevention. The magnitude of this funding is appropriate to the scale of the problems that we face in the EU – with the biggest chunk going in flood reduction and flood management. And yet the take up on this money is low. It is actually lower than the average absorption we see in regional funds overall. So far we have only used slightly over 20% of this money that is available to governments to protect their citizens from the dangers that come from disasters.
Similarly, and this is particularly relevant for this committee, when we talk about investments from development finance, we find that - again we can argue a little bit about the methodology - but only half a percentage of development funding goes to DRR today. When I was with Margareta in Geneva last month, and again in Oslo just last week, one of the main conclusions that was drawn is that we have to raise awareness among the development professionals on the importance of integrating DRR in the way they operate and the projects that they plan.
And this takes me to my second point, Madame President. What can we do to increase our investments in DRR? And allow me to share three observations.
First, clearly we have to better understand risks, and the ways to address them. In the European Commission we have taken two steps that will take us in this direction. We have invited Member States to scan the different risks that affect them, so by the end of next year we should have an overview of major risks that pose a threat to us in the EU. And of course this knowledge will provide the foundation for us to have a pragmatic strategy to address these risks. We are also strongly supporting risk scanning in developing countries' programmes. The Commission recently became a very major contributor to a programme run by the World Bank's special facility for disaster risk management. We are contributing 60 million Euros and we are already seeing how a collective action, that brings the UN, the international financial institutions, the Commission and some of our Member States together can actually lead to a much better understanding of the risks faced by developing countries. Risk profiles have been produced for 31 of the most disaster-prone developing countries and obviously this is a very important contribution for us to be able to direct development finance to DRR.
My own service – the Directorate for Humanitarian Assistance and Civil Protection - has also been running a small programme called DIPECHO. While the World Bank works mainly at the level of governments, what we do is at the level of pilot projects with local communities, so that we can build experience bottom-up. And again our targets are the most disaster prone countries.
The second point on how we can increase DRR investment relates to integrating these investments across the board in a way that we approach infrastructure, education and public health. In all of the areas there is a link to awareness and capacity to respond to disasters. We are now at the critical junction in the climate change debate. Finally, we saw in Mexico last year a recognition that the climate change debate is no longer just about mitigation. The train has left the station and we now need to also talk about living with a changing climate: in other words, adapting to a changing climate. Over 90% of disasters are related to extreme weather and what we need to do is to apply tools that are being developed to deal with vulnerability to climate change and see if we can use these tools to encourage investments in DRR.
I would also argue very strongly that we need to rethink our approach to conditionality when it comes to investments. Why should we be giving our tax payers' money to countries that have not taken steps to reduce their risk of disaster? Instead we should be asking them to take DRR into account if they want to have access to funds that cover compensation for disasters, such as the Solidarity Fund. There has been a long debate on conditionality saying "conditionality is not good, it should be country owned", and so forth. But when it comes down to the safety and security of the citizens, I think that conditionality has a role to play.
My third point is that we need to do more to make the full use of market signals and in particular insurance. There are countries that are going in the direction of relying more on insurance tools as a part of the disaster management toolkit. Using insurance can send a signal on whether or not you can build in a particular area and what you can build in this area. When the project is too risky then the insurance premium is too high and you don't build. By relying on market signals, especially on insurance, as a way to direct attention to better planning, we can reduce the cost of disasters to society. But this is still an under-utilised tool.
Madame President, let me now go to the final question that you put, how to raise public attention and generate public will. Here, in the Commission we are emphasising three types of actions. The first one is awareness building. This is one of the reasons I am here with you today, but I am also relentlessly raising these issues whenever I travel in particular with development planners and with the development community. We have to raise awareness of why DRR must become an integral part of our development planning. We have made it, as you know Madame President and members of this committee, a priority for our cooperation with Commissioner Piebalgs because we are on the receiving end of what happens if you don't invest in DRR. Awareness building has to become a real priority in order to get the understanding of risk – and the need to invest in risk prevention – across to all levels of society. To policy makers, but also to ordinary citizens, there needs to be a recognition that the world has changed and that in this new world - for our kids and for our own well being - we have to change our policies accordingly.
Second, we are also taking efforts to promote horizontal coordination in the Commission. If this is what we are preaching to developing countries we should certainly be doing it ourselves. We have identified that 26 Commissioners are, in one way on another, somehow involved with disaster preparedness, prevention and response. And what we are doing is looking to work with key colleagues to collectively develop our policies and promote DRR.
And third, I strongly believe that we owe it to our citizens to put forward policies that raise accountability. If politicians know the facts about the risk from disasters and don't take the necessary steps to reduce these risks they should be held accountable.
As you know we will soon be coming to the Parliament with our policy proposals for strengthening EU disaster response. But an equal priority is strengthening our policies on preparedness and prevention and my services are working to develop proposals in this area as well. What we want are policies that are not simply good intentions but ones that have real teeth.
I very much look forward to working with Parliament as we develop these policies.