A Quantitative Analysis of Disaster Risk Reduction Investment Effects for Sustainable Development: Indonesia Case Study

29 June 2020
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This paper analyses the long-term impacts of large-scale disasters on the economic growth of developing countries in the Association of Southeast Asian Nations (ASEAN) Community, by the scale of disaster risk reduction (DRR) investments. As a means of quantitatively analysing the optimal level and economic efficiency of DRR investments, a case study was conducted on Indonesia by using a dynamic stochastic macroeconomic model. The results showed that in Indonesia, although greater economic growth is expected when additional DRR investments are made, an excessive DRR investment may contrarily lead to a slowdown in economic growth: an optimal level of DRR investment exists and maintaining its level is essential for sustainable economic growth. Furthermore, it was confirmed that there is a break-even point when the amount of accumulated disaster damage mitigation benefits exceeds the amount of accumulated DRR investment. This demonstrated that the funds invested in DRR could be recovered. Additionally, the results also showed that even if no disaster damage is caused over a long period of time, DRR investments are by no means redundant as the ‘ex-ante risk reduction effect’ will be generated when the optimal level of DRR investment is made. Lastly, it was determined that providing a continuous DRR investment is important in achieving the global target set forth in the Sendai Framework for Disaster Risk Reduction. In addition, it is considered desirable to maintain a higher level of DRR investment than that which is currently being implemented.

A Quantitative Analysis of Disaster Risk Reduction Investment Effects for Sustainable Development: Indonesia Case Study

AustraliaAustralian National University (ANU)>>
Brunei DarussalamBrunei Darussalam Institute of Policy and Strategic Studies (BDIPSS), Ministry of Foreign>>
CambodiaCambodian Institute for Cooperation and Peace (CICP)>>
ChinaNational Institute of International Strategy, Chinese Academy of Social Sciences (CASS)>>
IndiaResearch and Information System for Developing Countries (RIS)>>
IndonesiaCentre for Strategic and International>>
JapanInstitute of Developing Economies (IDE-JETRO)>>
KoreaKorea Institute for International Economic Policy (KIEP)>>
Lao PDRNational Institute of Economic Research (NIER)>>
MalaysiaInstitute Strategic International Studies (ISIS)>>
MyanmarYangon University of Economics (YUE)>>
New ZealandNew Zealand Institute of Economic Research (NZIER)>>
PhilippinesPhilippine Institute for Development Studies (PIDS)>>
SingaporeSingapore Institute of International Affairs (SIIA)>>
ThailandThailand Development Research Institute (TDRI)>>
Viet NamCentral Institute for Economic Management (CIEM)>>

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