Download the file - United Nations Rule of Law

286Towards safer and more secure citiesCost-benefitanalysis offers amethodology to helpdetermine theoptimum allocationof resources toreduce disaster riskDisaster risk is …not included in themajority ofevaluations forurban planningdecisionsbeing. There is a wide variety of cost–benefit tools and theseare frequently applied in decision-making in urban infrastructuredevelopment. Most methodologies include athree-stage process. First, the costs and benefits of an investmentare identified. If a quantitative methodology is used, acommon metric and numerical value must be assigned toeach cost and benefit. Second, future costs and benefits arediscounted to allow for the comparison of future and currentvalues. Third, a decision criterion is applied to determinewhich is greater, the costs or benefits of a proposed investment.Recent efforts have applied the cost–benefit analysisapproach to measure the pros and cons of land-use decisionsand the relative merits of investing in hazard mitigation.Despite some growing evidence of the utility ofcost–benefit analysis as an aid to land-use decision-makingfor risk reduction, it is still not routinely used to determinethe comparative advantage of investing in disaster prevention,preparedness and mitigation infrastructureinvestments. Cost-benefit analysis offers a methodology tohelp determine the optimum allocation of resources toreduce disaster risk. Where cost–benefit analysis has beenundertaken, there is now a growing body of evidence toshow empirically the cost effectiveness of investing in riskreduction. For example, a comparison of different disasterprevention measures undertaken against floods and volcanichazard in the Philippines calculated benefits of between 3.5and 30 times the project costs. 22 The Philippines case isbased only on direct losses. Box 12.7 presents additionalmeasures of the benefit of proactive investment in riskreduction, which have been calculated using a range ofcost–benefit methodologies.Disaster risk is similarly not included in the majorityof evaluations for urban planning decisions. 23 This increasesthe chance of projects being damaged or destroyed bynatural and human-made hazards. Where investment fundshave to be borrowed internationally, this increases debtBox 12.7 Revealing the advantages of disaster risk reductionthrough cost–benefit analysisThe World Bank and US Geological Survey calculated that economic losses worldwide fromdisasters during the 1990s could have been reduced by US$20 billion if US$40 million had beeninvested in mitigation and preparedness.In China, investments of US$3.15 billion in flood control measures over 40 years arebelieved to have averted potential losses of US$12 billion.In Viet Nam, 12,000 hectares of mangroves planted by the Red Cross to protect 110kilometres of sea dikes costs US$1.1 million, but has reduced the costs of dike maintenance byUS$7.3 million per year, in addition to protecting 7750 families living behind the dikes.A study on Jamaica and Dominica calculated that the potential avoided losses comparedwith the costs of mitigation when building infrastructure, such as ports and schools, would havebeen between two and four times. For example, a year after constructing a deepwater port inDominica, Hurricane David, in 1979, necessitated reconstruction costs equivalent to 41 per centof the original investment; while building the port to a standard that could resist such a hurricanewould have increased basic costs by only about 12 per cent.In Darbhanga district in North Bihar (India), a cost–benefit analysis of disaster mitigationand preparedness interventions suggests that for every Indian rupee spent, 3.76 rupees ofbenefits were realized.Source: DFID, 2005while running the risk of losing the investment. The scale ofthis problem is seen in the increasing number of disasterreconstruction projects that international developmentbanks, and mainly the World Bank, have supported duringthe last two decades. It is hoped that increasing the awarenessof disaster risk through tools such as cost–benefitanalysis will prevent reconstruction investments from alsobecoming subject to disaster. The need to adapt to climatechange places additional pressure on the necessity ofintegrating disaster risk within development planningdecision-making.The variable frequency and severity of natural andtechnological hazard events and any associated humandisasters present a challenge to cost–benefit analysis,although a number of statistical methods can be employedto measure the uncertainty that this brings to calculations.24 Cost-benefit analysis is further constrained by theneed to reduce inputs to a common metric that usuallyrequires putting a monetary value on all costs and benefits,including human life and injuries. This is a challenge for anycomparative assessments between places with differentland uses – for example, in attempting to measure relativereturns from an investment that increases security in abusiness district or a low-income housing area. The formerland use will have far higher economic value; but the latterprovides life-support services, some of which (shelter andaccess to basic services) can be quantified in economicterms, as well as social and ecological services (a sense ofidentity and community) that cannot be easily represented.More generally, methods for deriving values for human life,and also for other intangibles such as environmental qualityor women’s empowerment, are hotly contested. Oneapproach is to ask people how much they are willing to payto protect a certain asset, or how much they would bewilling to receive in compensation if an asset was lost. Thelatter methodology routinely provides values an order ofmagnitude higher. This serves to indicate the vulnerabilityof cost–benefit analysis to manipulation or misinterpretation.Part of the solution to this is not to use cost–benefitanalysis as a stand-alone tool to determine decisions, butrather to provide supporting evidence for decision-makingalongside other non-economic inputs. 25Institutional reformAppropriate institutional arrangements define the relationships,responsibilities and power of stakeholders in disasterand its management. The movement from managing riskthrough emergency relief and response towards a moreproactive pre-disaster orientation requires institutionalchange. Development actors are better placed and havemore appropriate skills than emergency response experts inachieving disaster risk reduction. Humanitarian actors andthose involved in disaster reconstruction also need tointegrate development planning within their work. Thesetwo shifts require a change in the distribution of responsibilitiesfor risk management. This is likely to be accompaniedby adjustments in budgets and in policy. Institutionalarrangements can help in co-coordinating such changes