How climate change affects the global economy

Doris Magsaysay-Ho1First of two parts

AS supply chains become more globalized, the vulnerability of businesses to calamities increases. Local disasters have impacts that ripple through the entire regional and global supply chain, causing indirect losses to businesses all over the globe with massive adverse macroeconomic effects.

Direct losses from disasters include complete and partial destruction of a business’ stocks and assets, such as damage to their production facilities, work spaces and product. There can also be indirect losses, as a consequence of disruption in the supply chain, potentially impacting other clients, partners and suppliers throughout the globe and ultimately undermining long-term competitiveness and sustainability.

The issue is particularly urgent in the Asia-Pacific region, the world’s most disaster-prone region, accounting for almost 70 percent of the world’s disasters. The Philippines alone, located in the Pacific Ocean and directly within the Ring of Fire, constantly faces the risk of typhoons—averaging about 20 a year—earthquakes and volcanic eruptions. As an archipelago, 70 percent of our cities and municipalities are in coastal areas, leaving communities who remain unprepared even more at risk. Supertyphoon Yolanda (international code name Haiyan), which hit the Philippines in November 2013, left 4.1 million people displaced and over 6,300 dead in its wake.

As representatives of the business sector, Apec Business Advisory Council (Abac) believes that it is vital—now more than ever—that we mount a focused, cooperative effort to address the economic threats posed by the new normal and move forward with concrete actions to build communities that are resilient in the face of disaster. This includes efforts to ensure that the region is equipped with the necessary instruments, tools and infrastructure to mitigate the impact of disaster.

Abac sees that efforts in building disaster resiliency should work toward strengthening micro, small and medium enterprises (MSMEs) resilience, building and strengthening global value chains, building resilient infrastructure, building sustainable, resilient communities, developing disaster-risk financing, and developing information and communications technology infrastructure resilience against natural disaster

MSMEs are among those that are most vulnerable to the impact of disasters. As such, it is important to capacitate MSMEs toward building business resiliency in their operations.  To do this, we need to develop best practices for strengthening MSME resilience, which will cover measures to mitigate the impact of natural disasters, financial crises and other unexpected events.  There is a lot to be drawn from lessons from responses to past crises and successful experiences in the use of micro-insurance and disaster-risk finance.

Production operations no longer operate in isolation. Today, trade and investments are increasingly organized within so-called global value chains (GVCs), with the different stages of the production process situated across different economies.  A striking fact is that one disaster not only impacts the economies of those directly affected, but it also disrupts the region’s entire value chain and the global supply chain, as well.

Abac urges Apec to examine mechanisms, such as global data standards, to strengthen the resiliency of GVCs in order to enable them to navigate the challenges brought about by natural disasters. We need to give serious thought and attention to building data standards, sharing and accessibility. Today’s supply chain means integrating traditional and nontraditional types of information.

The new normal has made the occurrence of high-impact disasters increasingly frequent throughout the region. The resulting damages to the world’s built infrastructure is very alarming; thus it is important for both the private and public sectors to look for solutions to bolster the strength and build resiliency of infrastructure in order to mitigate the impact of natural disasters.

Next week: Abac initiatives to address the vulnerability of MSMEs to calamities


The Abac provides advice on specific business sector priorities, responds when the various Apec fora request information about business-related issues, and provides the business perspective on specific areas of cooperation. Abac comprises of up to three members of the private sector from each economy.

Abac members are appointed by their respective leaders, and represent a range of business sectors, including small and medium enterprises. This private sector body presents recommendations to Apec Leaders in an annual dialogue and advises Apec officials on business sector priorities and concerns. Abac meets four times per year, and Abac representatives also attend Senior Officials’ Meetings, the Annual Ministerial Meeting and the sectoral Ministerial Meetings.







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