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 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.Research background 1.2 Problem statement 1.3 Purpose of the study 1.4 Objective of study 1.5 Research questions 1.6 Research method 1.7 Significance of the study 1.8 Limitation of the study 1.9 Structure and overview of the thesis 1.10 Summary CHAPTER 2: LITERATURE REVIEW 2.1 Contextual Review: Natural disasters impacts in Vietnam 2.1.1 Current status of natural disasters in Vietnam 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 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 i 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 ii LIST OF ABBREVIATION Order Abbreviations Full word CRED EM-DAT FDI GDP GFDRR GMM GSO HQ IFRC 10 11 12 13 14 IPCC IT JICA MARD MET 15 MLIT 16 17 MPP NGO 18 OECD 19 20 21 PCI R&D UN 22 UNSIRD 23 24 25 26 UT VCCI VJU WHO Centre for Research on the Epidemiology of Disasters Emergency Events Database Foreign Direct Investment Gross domestic product Global Facility for Disasters Reduction and Recovery Grants Management Modernization General Statistics Office Headquarter International Federation of Red Cross and Red Crescent Societies Intergovernmental Panel on Climate Change Information technology Japan International Cooperation Agency Ministry of Agriculture and Rural Development Ministry of Education and Training Ministry of Land, Infrastructure, Transport and Tourism Master of Public Policy Non-governmental organization Organization for Economic Co-operation and Development Provincial Competitiveness Index Research and Development United Nations United Nations Research Institute For Social Development University of Tsukuba Vietnam Chamber of Commerce and Industry Vietnam Japan University World Health Organization iii 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 2013) and by conventional urban development planning and urban governance and to support organizations that normally respond to disasters to expand their role in disasters risk management (Diagne, 2007) After all, the cooperation between governments and government in before, during and after the natural disasters is the biggest support when a big disasters occurs (Fidler, 2005) However, other instrument variable did not show any significance in the relation with the economic outcome, and in the model applied for the service sector, there is no instrument variable showing the significant relationship with the outcome of this sector 5.3.Conclusion The aim of this chapter is to describe the result of regression and reject the creative destruction hypothesis The table 5.2 has shown the different sign between the expected or hypothesis sign and the actual sign It does not mean that the result from previous research is not appropriate but it could come from main different reasons The first one is because of the increasing natural disasters magnitude leading to the severe impact on the economy And the second reason is that of the differences in both time scope and database The result also shows that the governance and the industry – economic openness status of a province has a positive impact on the economic growth in the model, while another factor has not shown a significant effect In the next chapter, the policy implications are drawn according to the result of estimation and Vietnamese policy context in the literature review 53 CHAPTER 6: POLICY IMPLICATIONS In Vietnam, there are many problems in the natural disasters risk management sector Because of the historical mindset, the government did not pay attention to another kind of natural disasters except water-related disaster, later, they prefer the term "Natural disasters prevention and control‖ (which is impossible) rather than ―natural disasters response and mitigation‖ The establishment of the law on natural disasters prevention and control and the Directorate of Natural Disasters Prevention and Control in Ministry of Agriculture and Rural Development has shown a movement of the government to cope with the climate change situation However, since those government agencies and law is so new, the documentation is supporting their activities is inadequate There are many smaller projects and implemented without an efficient collaboration method or linkage At the moment, the Red Cross Society and the Directorate of Natural Disasters Prevention and Control have together established a communal disasters response team and training them to work together It is a good sign and should be better if other actors could join and all the resources could be mobilized efficiently Later, in Vietnam, the database is unavailable and hard to assess At the moment, only the Directorate of Natural Disasters Prevention and Control provide reports in this field frequently and collect all the related documents Furthermore, the efficiency and sustainability are still questionable It is difficult to conclude that those activities are efficient and sustainable or not since there is not a generally appreciated plan However, the existence of the Natural disasters prevention and control policy is still essential In terms of feedback, the feedback is collected passively depending on the requirement of the projects 6.1.Implications for Governance In terms of the overlapping situation between governmental offices and nongovernmental organization, the center steering committee of natural disasters 54 prevention and control should be the key authority to manage other actors In 2018, the chairman of the center steering committee is the minister of MARD It is a limitation on managing, mobilizing both human resource and financial resource Firstly, the minister of MARD could only manage the officials in MARD but other ministries Moreover, the vice president and other members in center steering committee is the MARD officials, hence, their voice is not loud enough to influent other ministries, or arrange mission for other ministry officials The suggestion is that there should be a rearrangement in organization in the center steering committee on natural disasters prevention and control: The chairman should be one of the top positioned officials such as the prime minister or the vice minister of Vietnam For example, in the Central Steering Committee on anti-corruption, the General Secretary of Vietnam Communist Party Because in his position, he has the power to connect and lead other ministries and organizations to cooperate and concentrate on a same mission The previous document especially legal document and national program should be reviewed In all paper related to natural disasters response and control including preparedness, relief and recovery activities, should mention the role of the center steering committee on natural disasters prevention and control as the key members or event is the leading organization among other actors Hence both in the decision making and managing could reach a consistency In terms of natural disasters prevention and control fund, there are three main problems: -Firstly, 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 collecting process could not be carried out -Secondly, even though the fund was raised in some provinces, the local could not use the fund The reason is that in in the Decree No 94/2014 / ND-CP, the disbursement plan has to be submitted to the Provincial People's Council before 55 implementing The Provincial People's Council has disapproved the plan from the provincial department of agricultural and rural development because there are difficulties in property value assessment and responsibility clarification -Thirdly, the purpose of using fund is still not practical The Disbursement plan of Fund Management Board should be revised and there should be a change in the Decree No 94/2014 / ND-CP Hence, there are four main recommendations for the policy as below: -Firstly, the feedback from the fund payers and fund collectors should be gathered to understand deeper the problem of fund collection process -Secondly, checking other similar but successful fund management documents Hence, Decree No 94/2014 / ND-CP could be adjusted to be more practical -Thirdly, checking again the role of all stakeholders in the Budgeting and Disbursement process map Since the direction of money and administrative flows will be changed after fixing the role of each stakeholder, the map needs to be redrawn -Lastly, examine the Decree No 94/2014 / ND-CP, and create a mechanism for a more proactive fund management Instead of the president of the provincial people committee, the director of the fund management board should have the authority and right to use the fund and the purpose of the fund should not concentrate on infrastructure construction work, which needs a huge investment from the budget So, the main activities should be preparedness and relief activities for local people 6.2.Implications for Education and Health In terms of Education: in Vietnam, the education on natural disasters response is limited especially at school At the moment there are two big projects in education: - The Program 1002 on raising awareness of community on community-based disasters risk management The aim of this project is to build the capacity for local government officials at all levels of management and implementation of community-based disasters management Although the evaluation for this project is 56 not published, it is a good chance if this project could reach its purpose, and the community-based disasters management skill will be applied even when the project finishes - Decision No 329 / QD-BGDDT dated 2014 approving the project "Information and communication on climate change response and disasters prevention in schools for the period 2013-2020" by the Minister of Education and Training However, except program 1002, the second project process is not published Actually, there is no other legal document and practical document (eg textbooks) showing that the official education at school paying attention to the natural disasters risk management Since the education is one of the most important tools using to raise awareness, equip living and responding skill, education should be paid more attention There should be a mutual project between the MARD and Ministry of Education and Training on integrating the natural disasters on the textbook of students In term of Healthcare: in the emergency response team at commune level, there is a combination of defense force – or army, healthcare staffs, red cross society and local officials However, the healthcare staffs could not show their highest support since the equipment for the health sector is poor at commune level, and the quality of health staffs is also limited In order to enhance the skills for staffs, some projects were carried out, but after disbursement, many projects have stopped instead of spreading the skill vie training courses or doing conferences, because of lacking financial resource At the same time, in other areas, there is no such kind of activities Hence, local government should allocate budget for training activities, especially from the natural disasters prevention and control fund 6.3.Implications for Infrastructure Besides the building code for construction, there is a national program considering natural disasters risk management as a key criterion, which is in the 57 process This program is called new rural development program If a commune is called new rural commune, it has to satisfy a group of criteria, in which, the Safe commune criteria for natural disasters prevention and control is mentioned However, in the urban area, no program which is the same is implemented Hence, there are recommendations as below: - Enforce the building code, not in the urban area but in rural and remote areas, since many people in the non-urban area, not aware of the safe criteria for there house - In 2018, the project on building a new rural commune which satisfies the Safe commune criteria for natural disasters prevention and control is carried out However, these criteria are applied only in pilot areas Hence, implementing the Safe commune criteria for natural disasters prevention and control in all rural area as soon as possible is needed - Prepare a similar program for the urban area, focusing on urban resilient especially on infrastructure such as building, sewage system 6.4.Implications for other aspects - For economy, strengthening the economy also is important By attracting more FDI, the GDP and manufacturing sector will be improved - The insurance for natural disasters risk management is also important in preparedness activities for both household and organization However, there is no separated disasters risk insurance products on the Vietnamese insurance market Disasters risk is commonly deployed by insurance companies as a risky extension in property insurance or personal insurance or agricultural insurance 6.5.Limitations and Implications for future research There ate main limitations of the study which could be improved in the future research: 58 - Firstly, the panel data is from 2012-2016 is focus only on the recent situation If the data from EM-DAT could be collected, the longer time period data should be tested with the same model - Secondly, there are noise factors which could not put in the model such as the unavailability of related instrument variables or an index to summarize the magnitude of the natural disasters There are some indexes which should be considered in the model, including the governmental spending on natural disasters, the disbursement rate of natural disasters prevention and control fund, the level of infrastructures, awareness of local people on natural disasters prevention and control or the index of vulnerability Moreover, the damage caused by the natural disasters is just a representative of the impact of natural disasters There could be a research focus on normalizing the magnitude of a natural disaster, then convert all economic damage and human loss into one index - Lastly, this study can only give an overview of relation natural disasters and economic development, as well as an overview of the policy on natural disasters prevention and control Hence, in next research, a smaller topic focusing on a certain policy could be picked up for a further discussion 6.6.Conclusion This chapter does not aim to support the economic growth but giving the recommendations on reducing the negative impact of natural disasters on the economy By enhancing other sector represented by the instrument variables, the damaged caused by natural disasters could reduce The capacity of provinces to confront natural disasters would increase while the vulnerability would decrease Moreover, with the improvement of governance, a more comprehensive and consistent strategy and vision for natural disasters prevention and control could be carried out Lastly, based on the limitations on database and unavailable index, as well as to tackle smaller problems in the policy, various topic for further research could be considered 59 CHAPTER 7: CONCLUSION The thesis aims to answer the question that in what way the economy growth is impacted by the natural disasters in the case of Vietnam and in the provincial scale This thesis using the GMM method and database collected from the MARD and GSO to test the creative destruction hypothesis The result is that, in the time period from 2012 to 2016, the hypothesis is rejected, that the natural disasters was not an encouragement of economic growth in GDP, agricultural, manufactural and service sectors Additionally, not only the model of impact, research papers are reviewed in this thesis, but the policy context in Vietnam is also summarized This also is the limitation of previous research papers Hence, an overview of Vietnamese natural disasters situation and policy has been reviewed in order to give some policy implications in chapter Among instrumental factors, the role of governance is really important, in all activities from preparedness, response, relief, and recovery However, in Vietnam, the decision making process and responsibility of related ministries are not consistent and overlapped Hence, a change from the organization inside and inter-government could be a help to solve this problem Moreover, the financial source and budget al.location also need to be clarified, especially the role of natural disasters prevention and control fund Lastly, implications for education, healthcare, infrastructure are shown Although, the study attempts to prove the negative impact of natural disasters on economic growth, the time scope is still limited and contain many noise factors such as lack of necessary variables For further study, a more particular topic could be considered and a survey should be carried out 60 REFERECES Adger, Niel (1999) ―Social Vulnerability to Climate Change and Extremes in Coastal Vietnam.‖ World Development 27 (2): 249–69 doi:10.1016/S0305–750X(98)00136–3 Adger, W N (2006) Vulnerability Global environmental change, 16(3), 268-281 Almon, S (1965) The distributed lag between capital appropriations and expenditures 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There are 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. .. the deaths caused by the natural disaster 30 The data of damage caused by the natural disasters is taken from OFDA/CRED And the hypothesis is when the income of local people increases, the rate