Funding Disaster Relief in the Third World: A New Approach

The earthquake that hit Nepal a few days ago is but one in a long list of disasters that have hit relatively poor countries around the globe. In recent memory, there was the earthquake in Haiti in 2010 that left the country devastated and about 200,000 people dead. There was the Tsunami in Sumatra in 2004 that reportedly killed at least 200,000 people and an earthquake in Pakistan in 2005 killed 86,000 people. Grim as these statistics are, they are but a relatively small part of the overall disaster scenario that was visited upon these countries. The destruction of invaluable infrastructure, the spread of diseases such as Cholera, the disruption of educational services are but a few of the hardships that accompany most such situations.

Of course, these countries mentioned above are not the only countries that have seen disasters of horrendous magnitudes these past few years. Disasters are not confined only to poor Third World countries either. China has seen its share of killer quakes and even the mighty USA has still not wholly recovered from the consequences, social, political and economic of Hurricane Katrina. There is a difference, however, when a disaster hits a country like China or the US and when a similar fate befalls a country of smaller economic means such as Nepal or heaven forbid, Ghana.

When a disaster hits the United States, for example, it has the internal resources to meet the needs of the people in the affected regions, initial bureaucratic and political incompetence notwithstanding. A similar point can be made about China, Japan and the industrialized West in general. No such thing can be said of a country like Nepal which is having huge problems dealing with the consequences of its earthquake even as we speak.

For most countries in the lower rungs of the global economic order, the arrival of a disaster of major proportions brings out the proverbial tin cup. I recently listened to a BBC interview with the Nepalese Foreign Minister in which he bemoaned the paucity of the aid that was arriving from outside Nepal to help with disaster relief. In fairness to the Foreign Minister, his words could have been coming from some high Government official in Haiti, Pakistan, Malawi or Peru. The simple fact of the matter is that the if there is a folder in the government offices of most Third World countries labelled “What to do in Case of Disaster”, there is most likely just one sheet of paper in it with the one line in bold letters: “Call for Outside Help ASAP!”.

The question I wish to pose here, is “Why is this the case and why does it continue to be so in the 21st Century?” The most likely answer that one would surely get is that these are poor countries and only outside charitable help can alleviate the suffering of their citizens when disaster strikes. I wish to suggest that this very line of thinking is what has reinforced the “tin cup” mentality all these years.

Contrast this “there is nothing that can be done” attitude with the approach that the West take (and by West I mean the highly industrialized countries which would include China, Japan and South Korea) when they see a problem out there that impacts their interest, be it global trade, infectious diseases, international terrorism, exploitation of the resources of the sea etc., etc. What happens is that an international conference is called, most often under the auspices of the United Nations, solutions are brought forward and treaties are signed. There are violators of human rights out there and dictators you don’t like? Create the International Criminal Court. Thinking of exploiting the resources of the sea? Call the Law of the Sea conference and thrash out some rules. Want to shut down funding for terrorists who are making your life miserable? Create some type of global “money watch” and limit cash transactions around the globe. And when such initiatives are proposed usually by the West, Third World countries sign up in their numbers often willingly but sometimes under subtle diplomatic pressure.

Contrast this with the international response to disasters. There is, of course, the International Red Cross, but its capabilities are quite limited and it also simply brings out what might be best described as a fancier tin cup to collect donations in response to such crises. Each country is otherwise on its own which means that for rich Western countries, disasters are an internal and addressable matter, hence the lack of a Western-initiated global disaster response plan. They have no need for it. Also if you are “well-connected” Third World country and have a lot of well-wishers among people in the rich countries, you are likely to get a significant outpouring of help. If I recall correctly, there was a U.S warship stationed off the Philippines with helicopters on standby to ferry supplies to the remotest parts of the country as needed soon after the typhoon tore that country apart. The Philippines, of course, has a long historical relationship with the Unites States. In Nepal, the only helicopters on duty are the very few (six?) that the government could muster. So for most of the non-Western world, in case of disaster, you hope CNN captures enough images of the suffering of your people to open up some wallets in the West. Some disaster response plan, if you ask me!

So what can be done? One approach I’d like to suggest is that the Third World countries show some initiative on this matter and propose a global conference under the auspices of the United Nations to set in place a permanent, well-funded institution for disaster relief. And where would the funds come from to support such an institution other than from the coffers of the same aid donors in the West? Fair question. This is where I believe some creative thinking is called for, the type of creativity which the West uses to address its concerns, but which too often seems in very short supply in the Third World.

If my house burns down, I do not expect my neighbors to raise funds to help me re-build. That was the model when we lived in rural societies and cash, even more so, the concept of insurance was unheard of. This is the 21st Century and perhaps it is time to put in place 21st Century solutions to this very serious problem. Indeed, if calling on my neighbors for help was my disaster response plan, I would most likely be sleeping in a tent for a very long time, which analogically is what happened in Haiti and is likely to be the fate of most Nepalese victims of this earthquake. What I do to prepare for disaster is I buy insurance against my house burning down and I pay, in comparison to the value of my house, a pittance every month to an insurance company for that day when the fire comes. So why could there not be an equivalent International Disaster Insurance Corporation for international catastrophes?

I am no business major and will not attempt to create such an institution here, but the insurance concept might be based on monthly or yearly premiums determined by an assessment of risk among other factors. So if you are situated in a high probability earthquake zone, you pay a bit more in premiums. Other factors would be national income, population, the assessed value of critical national infrastructure and the anticipated living costs for a period of time of citizens in the affected areas etc. The incentive to join such an institution would be that, if you don’t and disaster strikes you will be on your own or wait for Bono or Live-Aid for assistance. Premiums for a country such as the US could be kept relatively low by allowing very high deductibles for those countries that are mostly able to take care of themselves. Countries could also decide for themselves the amount of insurance they want to buy and the level of deductibles although a minimum amount based on each country’s economic and infrastructural needs would be enforced to avoid deliberate under-insurance. After all, the idea is to make sure that in case of disaster, there would be sufficient resources available from the insurance pool to provide reasonable assistance to the affected zones.

My guess is that a country like the US, even though it is largely self-sufficient in terms of its internal disaster response capabilities might very well want to encourage the formation of such an entity and would most likely join it not only as a show of support, but also to lessen the burden on itself when disaster strikes in a poorer country. After all, if properly planned, the existence of such an international body would mean that there would be a significant pool of funds available for relief from the premium payments of all the countries around the globe thereby lessening the impact on itself. Its commitment to disaster relief would thus be limited to an agreed upon and pre-planned set of premium payments, as with all the other participants in the global insurance pool and as long as these are reasonable, the US, for example, may indeed find that it may end up spending less on disaster relief under this plan than under the current helter-skelter method where American taxpayers are by default the world’s disaster relief providers.

There may very well be much better approaches to solving the problem at hand than what I have proposed here, but it is also clear that the current one based on the generosity of donor countries is a failed model. We should not have to rely on a group of pop stars getting together to create a charity CD in order to relieve the suffering of our people. Such embarrassing episodes should be a thing of the past. So over to you, our business professors and Think Tanks. The West will not be the initiators of this institution since they can handle their disasters from internal resources. This is our chance to propose solutions on an international scale to our problems and try and get international buy-in. Who knows where the next disaster might strike? Last time I checked, Accra sits in an earthquake zone. The time to start planning and putting the proper disaster relief infrastructure in place is now before it is too late.