As Brian Caplen continues his travels around the Pacific Island countries, he looks at how these places can protect themselves – both physically and economically – against the frequent natural disasters they contend with.

Some development challenges are easier to fix than others. Investing in education, health and infrastructure are all relatively straight forward, as is freeing up the private sector from government interference. 

But the Pacific Island countries (PIC) have a different kind of challenge – that of frequent and devastating natural disasters, mostly in the form of cyclones. Of course the PICs are not the only countries to suffer in this way but research shows that the economic impact here is worse than almost anywhere else. This is due to their small size and fiscal weakness. It means that average economic growth rates in the Pacific are generally lower than those of the Caribbean and much lower than in Asia. 

Small wonder, then, that PIC governments together with multilateral agencies are focused on building resilience in terms of the strongest possible infrastructure and fiscal buffers. Taking out insurance against natural disaster is also a possibility but given the high rate of occurrence premiums are high.

According to an IMF report, the probability of a natural disaster averages 20% a year across the PICs and Papua New Guinea. This means that one will occur every five years on average, but the rate is higher in some countries such as Papua New Guinea, Fiji, Vanuatu and the Solomon Islands. Vanuatu has the highest natural disaster risk in the world in the World Risk Index, with Tonga third and the Solomon Islands sixth. 

How much worse this has become due to climate change is a matter of debate, but the frequency of cyclones is certainly increasing and the sea level is rising – between 1 metre and 1.7 metres in some instances – threatening the very survival of low-lying countries such as Kiribati, the Marshall Islands and Tuvalu. 

Since the PICs have limited power in persuading developed countries such as the US and China to curb carbon dioxide emissions, their strongest policy arm is to concentrate on making their infrastructure and balance sheets resilient and their people well prepared. 

Fiji appears to be having some success at this. Despite being hit by Cyclone Winston in February, which killed 44 people and caused extensive damage, the country's economy is still on a positive growth course for 2016. But Fiji is a middle-income country with a more diversified economy than most other PICs. For the rest  of the region building resilience is very much a work in progress.

A full report on both the challenges and investment opportunities in the Pacific will appear in the January issues of both The Banker and fDi Magazine.  

Brian Caplen is the editor of The Banker.

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