Regional : Enabling Climate Change Responses in Asia and the Pacific - Disaster Risk Financing for Total Climate Risk (Subproject 6)

Finance / Finance sector development

Traditionally, developing countries have relied heavily on ex post government budget allocations, public borrowing and international assistance to finance their disaster relief, early recovery and reconstruction efforts. This practice has resulted in delays in reconstruction, exacerbating the indirect impacts of disasters. The additional post-disaster pressure on public resources has also had adverse implications for the achievement of long-term social and economic development goals.

Over the past decade, there has been increasing interest in proactive, ex ante financing mechanisms via public-private partnerships (PPP) to help address these issues. These mechanisms allow the participating country to transfer and manage disaster risk via private sector finance and insurance mechanisms before a disaster occurs. The mechanisms are typically developed with the support of private sector reinsurance and risk modeling companies, which quantify and estimate disaster risk. Ex ante DRF mechanisms complement ex post arrangements, creating a long-term solution for sustainable and timely DRF.

Viet Nam is highly exposed to natural hazards, in particular hydrometeorological hazards, and its susceptibility to the effects of climate change will raise its level of disaster risk. The subproject will assist two cities in the country to develop ex ante DRF mechanisms. The subproject''s urban focus reflects the fact that urban areas face unique and rising disaster risk and climate change challenges and account for an increasing share of Viet Nam''s total population and economic productivity, yet have received relatively little attention to date in the development of DRF solutions. The Government of Viet Nam has set a 50% urbanization goal by 2025; and urban areas already accounted for 70% of GDP by 2010.

The subproject will be complemented by additional activities under RETA 7812, a separate JFPR-funded DRF TA, which will focus on the development of DRF options in two cities in Indonesia and two cities in the Philippines that face both geophysical and hydrometeorological risks.

(i) Risk profiles and risk models completed and available to Viet Nam that highlight the disaster-related consequences of climate change.

(ii) Consensus reached on an appropriate DRF mechanism for each city.

(iii) Consultation, training, and dissemination activities completed to increase awareness within Viet Nam regarding IDRM

(iv) Project management units (PMU) established

The project is being implemented in three phases: Phase 1: development of disaster risk profiles for selected medium-sized urban areas in Viet Nam, culminating in the selection of two project cities; Phase 2: development of in-depth hazard and loss models for each of these two cities, leading to the identification and development of DRF options tailored to the disaster risk circumstance, capabilities and interests of each one; Phase 3: selection of one DRF mechanism, following an independent review of all Phase 2 options.

Consultative Groups

A Project Working Group was formed in 2013 comprised of the Ministry of Construction, Ministry of Finance (MoF), Ministry of Agriculture and Rural Development (MARD), Ministry of Natural Resources and Environment (MONRE) and the Ministry of Planning and Investment (MPI). The working group convened in March 2013 and June 2013 to consider city selection criteria and to evaluate recommendations made by the project consultants on final pilot city selections.