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The floods that hit several areas in Indonesia, especially
Jakarta, have been a warning to some provinces and districts of the need to
provide disaster mitigation spending in local budgets.
Natural
disasters do not just include flooding, but other catastrophes such as the
tsunami that hit Aceh in late-2004 and the fatal earthquakes including the
Yogyakarta earthquake in May 2006 and the Padang earthquake in September
2009.
While the
central government is continuously developing disaster risk management and
its financing, local government responses to financially mitigate natural
disasters are arguably far from adequate. The government of Jakarta under
Governor Jokowi, for example, does not allocate special funds to anticipate
major flooding, despite the city’s vulnerability to the disaster.
Until today,
West Java and East Java are the only provinces that have set aside special
budgets for disaster management. Respectively, they allocate Rp 100 billion
(US$10.41 million) for disaster mitigation. Other provincial and regional
governments insist they have allotted disaster management budgets under
unpredicted expenditures spread across government agencies.
Reflecting on
this, now is the time for any disaster-prone province or regency to
consider a budget for disaster mitigation. In general, it should be well
understood that it is impossible for any region to rely on the central
government’s assistance when it comes to natural disasters.
In terms of
public management, this issue is stipulated in Law No. 24/2007 on disaster
management and Government Regulation No. 22/2008 on the funding and
management of disaster assistance, which clearly divide the powers and
responsibilities of the central and local governments. The central
government has outlined the scale of the disasters it will handle in
proportion, while a local government’s primary responsibility is to
allocate adequate policy so as to not rely solely on the actions and
funding from the central government. Furthermore, financial management is
needed to anticipate these problems within an integrated policy framework.
For that, from
the point of view of public management, each local government, both
provincial and regional, should anticipate five important aspects, namely
risk assessment, institutional capacity building, investment in risk
reduction, emergency preparation and the allocation of funding following a
disaster. This approach is integral, and not only deals with the event of
any disaster but also the related aspects.
Therefore, a
budget has to be a regional financial allocation that integrates a
pro-green development policy to the regional development program. Once a
relevant policy has been prepared, the local government can think about
crucial aspects in the aftermath of disasters, such as emergency response,
recovery and reconstruction.
In particular,
more attention needs to be given to the financial aspects of the local
governments in the allocation of mitigation expenditure as well as its
financing. In fact, some local governments traditionally allocate
expenditure in the form of disaster insurance.
One example is
the West Sumatra provincial government, which has insured regional assets
from possible earthquakes since 2008. With the “Insurance Expenditure on
Government Assets” budget amounting to Rp 200 million, they claimed
insurance funds of Rp 20 billion in May 2010, just seven months after the
earthquake. Likewise Yogyakarta, which has insured public assets since
2003, received a payment of Rp 3.4 billion after the major earthquake in
2006, a sum that was 14 times the annual premium paid. This amount was
obviously insufficient compared to the sultanate city’s losses, which
exceeded Rp 29 trillion.
Initiatives
like insurance spending in anticipation of fiscal risk in disaster-prone
areas may set a good example for other regions. However, there are pros and
cons in finance. In the State Finance and Budget Law, there is no
regulation which explicitly disallows insurance.
In practice,
there are also several insurance programs financed by the state budget.
However, the budget allocation is limited to insurance of public assets
only. When expanded to other beneficiaries, its legal basis is weak as the
insurance mechanism provides no measurable clarity on budget performance
(output/outcome). Dues premiums will run out, with no real output.
Therefore, the
government should deliberately consider ex-ante schemes for their
mitigation funding. These schemes are anticipated at an early stage to
think of natural disasters and prepare every relevant precaution measure
needed. This scheme is also the format that best fits the pattern adopted
for disaster mitigation management policies as described earlier, which is
to reduce fiscal risk areas that may arise due to a disaster.
Policymakers in
each region need to prepare the legal infrastructure so that the aspect of
funding can be dealt with in accordance with state financing. Insurance is
crucial, and any local government can choose one or more types of
insurance, but spending on those insurance policies should cover public
interests in general.
Indeed, fiscal
mitigation will remain lower than the losses incurred. But, we have seen
the tremendous losses resulting from inadequate disaster mitigation because
it is not backed by financing schemes. So, why are we not getting in there
early? ●
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