On Feb 3, the Tokyo Disaster Risk Management (DRM) Hub moderated a session on Quality Infrastructure Investment for Disaster Resilience as part of the Second International Conference on Quality Infrastructure Investment (QII) organized by GSURR's Tokyo Development Learning Center (TDLC) and the Government of Japan. Approximately 80 participants from client countries, ministries, academia, and the private sector attended.
From concept to implementation: How to incorporate resilience into an infrastructure project cycle
During the session, Jolanta Kryspin-Watson, Lead DRM Specialist of the World Bank, showcased the Bank's initiatives in incorporating resilience across the infrastructure project cycle with exemplars from the East Asia and Pacific region. Cledan Mandri-Perott, Head of Infrastructure Finance and Public-Private-Partnerships (PPPs) from the Bank's PPP-CCSA, shared key challenges and opportunities for incorporating resilience into the policy and planning stage by utilizing the Infrastructure Prioritization Framework (IPF). Yumiko Noda, PwC’s Partner and Head of Infrastructure and PPP Practice, shared Japan's best practice and lessons learnt on the allocation of disaster risks between the public and private sector through appropriate contract definition of force majeure and risk transfer measures in infrastructure PPPs.
Resilient infrastructure investment at scale
The panelists discussed challenges and opportunities for scaling up resilient infrastructure investment from the perspectives of policy and planning, project implementation, and private sector. From a policy perspective, Cledan summarized three important factors that policy makers need to consider: (i) incorporating resilience at the forefront of an infrastructure project cycle (what I want); (ii) how resilient investment aligns with the policy direction (what I need); and (iii) the cost implications of incorporating resilience (what I can). He highlighted the importance of finding a right balance among the three factors as well as the need to take into account the network effects when planning and prioritizing infrastructure.
Jolanta Kryspin-Watson emphasized the importance of considering the impact of natural disasters and resilience investment on the welfare of the poor. For example, Typhoon Haiyan in 2013 posed a limited impact on the Philippines’ national target for economic growth while it left a devastating impact on poverty reduction where two million people in the affected areas fell under the poverty line. She also recommended a different approach to prioritization depending on sectors, natural hazards, and benefits for vulnerable people. For example, retrofitting 3% of most vulnerable schools in Metro Manila is estimated to reduce 18% of children’s disaster mortality. She also highlighted that the governments have been increasingly investing in risk reduction of recurrent natural disasters such as floods while the opportunities for reducing the risk of natural disasters with a longer return period such as earthquake often arise during a post-disaster period.
Yumiko Noda discussed that the private sector prefers the public sector to take as much risk as possible, but allocating some degrees of risk to the private sector in PPPs could bring an opportunity for the private sector to come up with solutions and innovation to address and manage the risk.
Risk transfer between the public and private sectors to protect the most vulnerable
During the Q & A session, one of the participants raised that it is often a challenge for the public sector without sufficient experience in PPPs to define an appropriate risk allocation mechanism. Yumiko recommended that continuous dialogues between the public and private sectors is key to identifying and defining the extent of risk allocation to the private sector. Cledan also added that a risk basket created as a result of such dialogues is what makes the infrastructure project bankable or non-bankable. He highlighted that Japan’s practice implies that the government would protect the private sector beyond a certain threshold while expecting the private sector to design and build the infrastructure well and to mobilize more effectively and quicker than the public sector in responding to a natural disaster within the threshold. Therefore, finding a right mechanism and defining a minimum threshold is a good contractual way in which a risk transfer can occur. Jolanta highlighted that a right balance of risk transfer is key to enabling the government to use limited public funds to support the vulnerable people who cannot afford insurance and other means for livelihood recovery in the aftermath of a disaster.