Kathmandu Nepal, By Göran Höglund (Kartläsarn), Flickr, CC 2.0 License.

The Economic Case for City Resilience

It can be helpful to evaulate ‘Why Urban Resilience? in hard, economic terms. This post by 100RC VP for Strategic Partnerships and Solutions Liz Yee, which originally appeard on the World Economic Forum blog Agende, makes the economic case for building resilient cities. 

How much can a country save by building resilience? At least an estimated $7.1 billion in the case of Nepal. The cost of the country’s ongoing recovery in the aftermath of the Gorkha earthquake represents nearly one-third of the Nepals’s annual GDP. This is a painful example, but Nepal is not alone in this journey. According to Swiss Re, acute events like the Gorkha earthquake have had significant economic impacts – causing approximately $100 billion of losses in 2014 alone.

Source: Swiss Re Financial Report 2014, Natural Catastrophes and Climate Change

Prior to the earthquake, Nepal was focused on transitioning from a “less developed country” to a “developed country” by 2022, which required it to sustain approximately 8.0% annual GDP growth. Since Gorkha, the Asian Development Bank (ADB) estimates that Nepal’s GDP growth has slowed from a peak of 8.6% down to 3.0% as of July 2015. Inflation is expected to reach 9.0% in 2016 as a result of the expected drop in agricultural output and other supply disruptions, which will have the greatest impact on Nepal’s most vulnerable populations. Absent a material improvement, severe declines in agricultural output and tourism, both of which represented sizable portions of Nepal’s GDP, has been and will continue to be economically devastating to the country.

The impact and severity of these disruptions continues to grow across the globe, primarily driven by three forces:

  • There are more frequent and intense natural disasters. According to the National Centers for Environmental Information, the number of natural disasters exceeding $1 billion in damage that occurred in the United States between 2008 and 2014 is comparable to the number of disasters that occurred over the 18 years from 1980-1998.
  • Increased urbanization leads to denser cities and heavier infrastructure use. Disasters and slow-burning stresses that impact cities affect a larger percentage of the global population – roughly 50% of the world’s population resides in cities today, up from 30% in 1950, and 70% are projected to live in cities by 2050 – putting a strain on already taxed city resources.
  • Globalization – our global interconnectedness – enhances every individual’s, city’s, and country’s exposure to the effects of disruptive events, regardless of geographic distance.

We also have a great deal of evidence about the economic benefits from building resilience, especially at the city level. A more resilient economy leads to higher productivity, lower losses, less friction, and ultimately a faster recovery following an event.

  • Since the 1950s, Singapore has had a history of flooding due to intense rainstorms and unfavorable tides, which resulted in a dramatic loss of lives and livelihoods. In 2008, the city constructed the Marina Barrage at cost of S$226 million (approximately $135 million in 2008 U.S. dollars). It is the first catchment basin in the heart of the city, and alleviates flooding in key areas of Singapore in three ways: by acting as a barrier against high tides and surges from the sea; by channeling and allowing excess storm water to flow out from the city more quickly; and by pumping stormwater out when high tides would retain it. In addition, the Barrage provides water storage and recreation space, and integrates 760,000 kWh of solar electricity to supplement daytime lighting of the gallery and offices in the Barrage. This intervention provides Singaporeans with healthier living and outdoor recreation space, and it enabled the further development of the Chinatown, Boat Quay, Jalan Besar and Geylang areas, consequently improving Singapore’s tax revenue. Equally important, the Barrage helps Singapore mitigate economic losses due to flooding and other water challenges.
  • In the 1990s, Medellin, Colombia was the “murder capital of the world” with roughly 380 homicides per 100,000 residents. In 2004, the city implemented a multi-modal programme to connect, revitalize, and increase public safety in the most estranged neighbourhoods, which were isolated up in the hills away from jobs, and which were important factors in the city’s crime and homicides. They installed gondolas, escalators, and stairways to reach these neighbourhoods, added more lighting, built community centres at natural hubs in these communication paths, and encouraged community-building activities.The now famous gondolas were a key component of the programme that reduced crime and traffic, improved access to jobs, and increase inter- and intra-community cohesion. From 2003-2008, Medellin saw an 84% reduction in the homicide rate. Gondolas reportedly save users up to 50,000 pesos ($26) per month in travel costs. This is approximately 8% of most informal workers’ annual incomes. The network of gondolas and escalators reduced travel time to reach downtown, decreasing it from a multiple-hour bus ride on winding roads to just 30 minutes.
  • In Africa and around the world, inadequate access to financial services has compounded the challenge of improving the lives of the most vulnerable populations. This lack of access stems from insufficient banking infrastructure, limited transportation alternatives and low literacy rates, among other factors. As a result, these vulnerable populations struggle to improve their livelihoods and are unable to easily purchase tools to enhance their productivity or to seek additional economic or employment opportunities. For many, this inadequate access has also led to criminal activity, driven by the simple fact that they are forced to carry too much cash, making them targets for crime. According to the National Institute Statistics of Rwanda, the number of Kigali households with at least one mobile phone increased from 33.2% in 2005-06 to 79.6% in 2010-11. In response, the City of Kigali has made significant strides by investing in mobile payment architecture to enable its citizens to pay for everything from construction permits to school fees, TV bills and electricity, and water from the comfort of their home. The transition to mobile payments has been beneficial for citizens and the city government alike. It has improved government revenues by bolstering the city’s collection rate, resulted in more timely payments from citizens, and reduced transaction costs and furthered efficiencies for both parties, ultimately enhancing governmental financial transparency.

Disasters have always been costly, on both a human and economic scale. The drama of disruptions, both the shocks and the stresses, has increased due to the three complimentary trends of climate change, urbanization, and globalization, and we have more information than ever before to understand these disruptions, both in terms of their magnitude and exacerbating factors. However, this also gives us the means to build resilience at the city and country level like never before, leveraging lessons from all over the globe to speed up the learning process and increase “the ability to resist, absorb, accommodate to, and recover from the effects of a hazard.” The cost of inaction, of failing to build resilience, is too high to ignore.

Learn more about resilience in Nepal after the Gorkha earthquake in “Building Resilience in Nepal Through Public-Private Partnerships” available from The World Economic Forum here.