Mekong River Commission

The major challenge to any systematic review of the financial costs of flood damage in the Mekong region is that national guidelines and methodologies vary, such that building up a consistent regional database is difficult. The accuracy of the estimates is effectively unknown since they depend upon the valuation of private property, public infrastructure, crops and livestock which can vary in line with the economic climate prevailing at the time, though in general the total value at risk increases from year to year as repair and replacement costs rise. In addition the property and inventory exposed to flood inundation is growing year on year as areas at risk are developed.

Primary flood damage arising from the fact of inundation is probably easier to assess. Less straightforward to evaluate are secondary losses, principally those that accumulate during the time that normal economic activity is suspended and production and services are suspended. These secondary losses can accumulate over a very long period after the flood has receded, usually months and sometimes a year or more depending on the time it takes to fully repair the damage and for normal services to be resumed.

Issues of scale dictate that in the Lower Mekong Basin flood damage and the associated financial costs are best considered at the macro level since extreme flooding tends to be regional in extent. So much so that the impact of the losses can often be measured in terms of reduced GDP. The major component of total economic damage varies. In rural Lao PDR, for example the agricultural sector usually suffers the major losses, though the consequences for structural economic assets such as houses, schools, roads and bridges can also be significant. In the more densely populated and urbanised delta damage to infrastructure typically exceeds that to crops.

Figure 3.1: Flooded rice fields near Pakse, September 2008.

The economics of flood damage are complex since there are a number of damage categories that have to be valued differently:

• Residential - includes physical damage to the structure, clean-up, and damage to the contents of the house.
• Commercial - includes structural damage to shops and industrial premises and the losses in terms of stock and equipment.
• Commercial - includes structural damage to shops and industrial premises and the losses in terms of stock and equipment.
• Agricultural - refers not only to crop damage and losses but also to livestock losses and damage to irrigation infrastructure and on farm property. Also included is the fish farming sector which in parts of the Mekong region is extensive and a key local economic activity.
• Communications and transport – covers structural damage to roads, railways and bridges.
• Service facilities – encompasses damage to power supply and telecommunications, for example

To these potential sectoral costs and losses must be added the additional costs incurred during flood emergencies for evacuation, temporary housing, medical supplies, food and clothing, A significant diversion of resources from other activities during the emergency response also carries a cost with it. Finally, the secondary losses in terms of ongoing post flood disruptions to economic activity and reduced agricultural, commercial and industrial production can in the case of extreme regional events accumulate over time to become a significant proportion of total damage (Anderson et al., 1993).