Indonesia Seeks Global Assistance as Natural Disasters Cost It $1.5b Annually

A man searches for his family's belongings in the remains of their home in Petobo, Central Sulawesi, following last month's devastating earthquake and tsunami. (Reuters Photo/Darren Whiteside)

By : Sarah Yuniarni | on 3:02 PM October 11, 2018
Category : Business, Economy, Featured, Disasters

Nusa Dua. Indonesia has suffered average annual losses of Rp 22.85 trillion ($1.5 billion) from natural disasters over the past three years, far exceeding the government's ability to mitigate such risks, prompting it to request the international community to help it come up with a disaster financing and insurance solution.

The country is currently dealing with two natural disasters in two provinces – a powerful earthquake and tsunami in Central Sulawesi last month, and a series of devastating earthquakes on Lombok Island in West Nusa Tenggara in July and August – which killed thousands of people and caused widespread destruction of homes and crucial infrastructure. These two disasters alone are estimated to have cost the country more than Rp 20 trillion.

"We have just held discussions [with the World Bank] on how to mitigate the disaster, fiscal risks, and what solution we can find to this," Vice President Jusuf Kalla told reporters on the sidelines of the 2018 Annual Meetings of the International Monetary Fund and World Bank Group in Nusa Dua, Bali, on Wednesday.

He said Indonesia has institutions such as the National Disaster Mitigation Agency (BNPB) to deal with disaster management, but "when we need to rebuild and recover such areas, we are facing a problem, because it is always funded from the state budget, [which is limited]."

The government has over the past three years only been able to set aside Rp 4 trillion in the annual state budget to deal with disasters. This lack of funds "could hamper the redevelopment of such areas," Kalla said.

 

Also, public buildings and infrastructure are not insured against such risks. When the infrastructure is damaged or destroyed, it adds an additional burden on the state budget.

"We don't want to burden the state budget, or depend on international aid; that is why we want our public and national assets covered by insurance," Kalla said.

Immediate Action

In the meantime, Kalla said Indonesia would seek grants or a loan with a 35-year maturity from the World Bank to rebuild thousands of buildings, bridges, houses, schools and public assets in Palu and Donggala in Central Sulawesi.

World Bank chief executive Kristalina Georgieva said the global financial institution is ready to provide substantial financing and support for the reconstruction efforts in Central Sulawesi and Lombok.

"So what we will do in Indonesia, is to make sure that the country [which is located] on the Ring of Fire, can withstand disasters and protect its people and protect its economy," Georgieva told reporters.

She said Indonesia should invest more in disaster prevention and rebuild better after natural disasters.

"We are ready to support the rebuilding of schools, hospitals, housing in such a way that when [natural disaster] strikes [again], they can withstand it. Prevention is better than the cure. Every dollar invested in prevention could save $4 to $7 in damage later on," Georgieva said.

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