Policy Research Institute - PRI Bangladesh

The Policy Research Institute of Bangladesh (PRI) is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of the Bangladesh economy, its key policy challenges, domestically, and in a rapidly integrating global marketplace.

Climate change: Time to take positive measures

Published: Wednesday, Aug 08, 2012

Climate change: Time to take positive measures

Mehrin Karim concluding her two-part article on 'Climate change and its impact on economic development of Bangladesh'

The fate of many developing countries, including Bangladesh, largely depends on how they combat the situation arising out of climate change. The problem, if not properly taken care of, will affect all economic sectors - agriculture, fisheries, industries, navigation, health etc. The poor in Bangladesh are heavily dependent on fisheries and agriculture for their livelihood. Fisheries provide 65 per cent of the country's consumption of animal protein. It is an important earner of foreign exchange and provides employment to 9.0 per cent of the country's total labour force. Food security is also another important tool for self-sustenance of Bangladesh. In the coming half century, grain production will need to be increased by about 20 million tonnes, thus causing a raise in the area of irrigated crops. However, intensive production will also degrade freshwater resources. 

The World Bank conjectures that the population of Bangladesh is likely to rise to 220 million in the next fifty years. Population growth, combined with economic growth, will strain water resources and is expected to be the foremost environment and development problem for Bangladesh. This problem, if allowed to aggravate through lack of initiatives, will directly and indirectly affect the ability of the country to eradicate poverty, attain self-sustenance and conserve environment.

Developed countries are far better equipped to face the challenges of climate change. They have the technical know-how to understand climate, resources to devote to research on climate and its related risks. They share risks through both government disaster-assistance programmes and the insurance market. Developed countries invest resources in emergency responses at all levels of government. All of these are weak in a developing country like Bangladesh. Development is generally linked to a better financial system, which allows a wider diffusion of the impact of a disaster. 

Undoubtedly, vulnerability is one of the numerous factors that can explain the stagnation of a developing country. The role of vulnerability should be addressed, including its indirect effects, such as discouraging private investments or increasing the risk of political instability. Following are some recommendations that can be adopted by Bangladesh to slow down the adverse impact of climate change. 

Micro-credit institutions: Micro-credit institutions can help cushion the impact of the disaster for a part of the population that is highly vulnerable and not often reached by other institutions.

Natural disasters have a profound impact on households, including human losses, but also loss of housing, livestock, food stores, and productive assets such as agricultural implements. The disaster-affected population has to replace homes and assets and meet basic needs. In the absence of micro-credit institutions, poor households are forced to rely on moneylenders, who charge higher rates of interest.

In Bangladesh, after the 1998 floods, considerable refinancing from the Bangladesh Bank prevented many micro-credit institutions from falling into bankruptcy. The government backstop is essential because, once again, the high covariance risk would result in the micro-credit agencies facing problems during a disaster. To avoid repercussions for the users of micro-credit, a constant contingent liability from the governments or donors will be required. A risk-pooling arrangement with microcredit institutions from different parts of the world could be another prospect of diversifying risks.

Increasing the flexibility of aid disbursements: The term "moral hazard" has often been used for accusing the governments of the poor countries for not doing enough for disaster mitigation as part of their development strategy because they expect to be able to count on external assistance for post disaster recovery.

However, the cost of insurance can be so high that it could have long-term economic effects by diverting capital from investment or any others pending with a high opportunity cost. In this case it is rational to rely on international aid, not only at a national level, but also at a collective level, because international assistance would be the solution that minimises the long-term negative economic impact of natural disasters. It is likely that a country's capacity to handle the risks linked to natural hazard without international assistance will depend heavily on its stage of development. For this reason, insurance and instruments for spreading risk that are linked directly to the capital market-such as catastrophe bonds-might be accessible mainly to middle-income countries. 

Public awareness: Only a population informed of the risks related to natural hazards and concerned about them can create the appropriate incentives for the government to make sufficient investments in preparedness and mitigation. In Bangladesh, public awareness was not up to the mark despite frequent events. The flood in 1999 created a new level of public awareness, not only because of the unprecedented scale of the disaster, but also because it was mainly urban, making it difficult for the politicians, local municipalities, building contractors, and civil engineers to ignore their responsibility. One of the best ways to adapt to climate change is to involve people at the grass-roots level. Cropping practices may also be changed in the coastal area. New paddy varieties may be developed to withstand higher salinity and higher temperatures and be grown and harvested The people of Bangladesh are very enterprising and innovative. The people of Bangladesh have been living with disasters for a long, long time. Adapting to changing situations is a familiar traditional practice in Bangladesh. What is important is to carry out detailed scientific studies, to make the people aware of the impending dangers, and to develop, along with them, methods of adaptation.

Institutions: One of the most important factors in determining the resilience of a country is the willingness of the government to consider preparedness for natural hazards a priority. This includes a long-term commitment to mitigation and preparedness, even when no disaster has occurred during the preceding years. In addition, transparency, better reporting of relevant expenditures, and post-disaster reallocations are essential, as well as the enforcement of appropriate land-use and building codes. At the same time, the coincidence of a natural disaster and political instability can have dramatic consequences.

Reallocation of expenditures: One of the most common ways to cope with the urgent needs of a post-disaster situation is to reallocate budgetary resources. This solution provides a rapid source of funding while keeping domestic credit and money supply under control. However, it still diverts funds from planned investments, and thus hampers development. A main concern is that reallocation of funds after a disaster should follow a normal process rather than proceeding based on emergency decisions, so that funds would not be diverted from projects essential to the long-term development of the country. This is often not the case, and vital long-term development is affected.

Role of agriculture: Agriculture is another sector that can be severely impacted from climate change. Soils are complex systems with rich biodiversity, organic matter, water flows, complex layers and aggregates. Degradation comes fast, while the building of soils, particularly the organic matter content, takes decades or centuries. Restoration of degraded soils invariably requires increasing soil organic matter. A way to fight climate change is to extensive forest management and promoting plantation of trees to reduce soil erosion. 

Already cutting edge development on flood resistant rice that can breathe under water for two weeks is on its way to be marketed and Bangladesh can use this technology to assist the farmers cope with the climate change.

It is clear that climate change can bring bad news for Bangladesh in the long term if not addressed adequately in time. While the concerns generated from climate change are important now, their implications are even greater for future generations who will bear the consequences of current actions or inaction. 

The writer is Senior Research Associate, Policy Research Institute of Bangladesh.