World Bank, the (WB)
By Sam Fargher and Stephane Hallegatte
Like every other country, the Republic of Fiji faces the unprecedented challenge of managing the consequences of the COVID-19 pandemic. While the number of cases remains low, in a country where international tourism is a cornerstone of the economy, the implications of the crisis are massive. GDP is expected to contract by more than 20 percent in 2020, with a 75 percent drop in international tourist arrivals and 40,000 tourism jobs already lost. In response, the government is planning a 3.7-billion-Fijian-dollar stimulus package to protect the population and support economic activity.
So how should Fiji allocate these resources? Can it do so in a way that delivers short-term benefits, protecting the population against the current crisis, and achieves longer-term objectives, building a more inclusive, prosperous, and sustainable economy? How can it assess interventions that do both? And are there lessons for other countries grappling with the same challenge? While the current package announced by the government is focused on reducing taxes and tariffs, stimulus packages usually include investments and create jobs, and there is no reason why these investments and jobs could not contribute to long-term sustainable growth.
However, not every stimulus spending has long-term benefits – British economist John Maynard Keynes even famously proposed to fill bottles with old bank notes and bury them, so that people would be employed to dig them up, which may deliver jobs and income over the short-term but is an obvious waste of resources. Reciprocally, not all long-term investments will be able to deliver a short-term stimulus – for instance, infrastructure projects often take years to be designed and approved, so they cannot create many jobs quickly, unless they are already ready to go. How can countries help identify a sweet spot between these two objectives, with a set of interventions that deliver both short- and long-term gains and create synergies between multiple policy objectives?
To guide countries to answer these questions, the World Bank has proposed to start from existing long-term plans – including national development plans – and developed a proposed sustainability checklist. The checklist is designed to help policymakers identify in those plans the potential projects, policies, and measures that are best suited for inclusion in a stimulus package, with the key objective to deliver both short- and long-term gains. In this article, we apply this checklist to Fiji and look to illustrate the design of a stimulus package that would not only mitigate the short-term consequences of the COVID-19 pandemic, but also make Fiji more resilient to future natural hazards, climate change, and other external shocks.
It’s important to note that the application is for demonstration purposes with the goal of showing how short- and long-term considerations can be combined in a single approach, and how existing plans can serve as the basis to identify promising interventions during a recovery period. While traditional planning approaches focus on the long-term, here we add due consideration of the specific needs of this unprecedented period. However, the actual selection of projects would require further work and integration into the country’s own procedures.
For Fiji, a vital long-term objective is to build resilience to natural shocks. The country is no stranger to natural disasters. In early 2016, Tropical Cyclone (TC) Winston - the strongest and most devastating tropical cyclone to ever make landfall in the southern hemisphere – tore through the islands. Over 40 people were killed, more than 60% of the population was affected, with around 131,000 people left homeless, and over a third of Fiji’s GDP wiped out in 36 hours.
"We lost everything. The next morning, the sun was shining as if nothing happened. It was as if a bomb was dropped in the village because there was nothing left, not even clothes were spared."
– Riavolita ‘Rai’ Tabusoro, Former village headman of Nabukadra
As its massive rebuilding and recovery effort got underway after TC Winston, Fiji recognized that it would achieve resilience through stronger, faster and more inclusive post-disaster reconstruction - launching a “Build Back Better” program.
"Tragedy has taught us that economic development and climate resilience must be one and the same. The investments we make in adaptation save lives and save us the costs of continuous rebuilds many times over – granting our economies the resilience to bounce back after climatic events without restarting and recharting our progress."
– Honorable Aiyaz Sayed-Khaiyum, Oct 2019, Attorney-General and Minister for the Economy, Civil Service, and Communications
To inform investment decisions for the future, the Fiji Government worked with the World Bank to develop the country’s first ever Climate Vulnerability Assessment (CVA). Underpinned by the lived climate experience of the Fijian people, the CVA sought to quantify and better understand the threat posed by natural hazards and climate change to Fiji in order to help design climate adaptation and risk management plans.
The CVA identified five main areas that could significantly reduce the country’s vulnerability, including inclusive and resilient urban development, enhanced and resilient infrastructure services, sustainable agriculture and fisheries, conserving ecosystems and building socioeconomic resilience through actions on early warning and preparedness, social protection, and health care. The outcome of the CVA was a proposed list of 125 interventions across 10 sectors: housing and land use, hazard management, transport, water, energy, health/education, environment, agriculture, fisheries, and social protection. The total estimated cost to do all the interventions was F$9.3 billion (almost 100% of GDP) over 10 years, plus additional maintenance and operational costs, and social expenditures.
COVID-19 is one more test for the resilience of the country. Fiji has been relatively successful in containing the disease, with only 32 cases and 2 deaths as of September 10. While strictly enforced border closures since March 25 contained cases, this has come at a steep economic cost. At least 150,000 Fijians, almost half the labor force, face either reduced incomes or job losses and most activity in the tourism sector, which accounts for almost 40% of the country’s GDP, has ground to a halt.
And Nature does not pause during pandemics. In April 2020, Fiji was met with a secondary shock: Tropical Cyclone (TC) Harold, a category 4 storm, hit the country, and resulted in F$44 million in damages with at least 635 houses destroyed and 2,100 homes damaged.
TC Harold was the first significant storm to test the more resilient standards used in the reconstruction after 2016’s Tropical Cyclone Winston. Of the 181 schools and 25 public buildings that had been completed to date under the “Build Back Better” program, none were damaged. This delivered a twofold gain for Fiji – protecting the Fijian people during a crisis and the government’s budget from the catastrophic costs of rebuilding.
The experience from previous disasters in Fiji highlights the benefits from investing in resilience. And with increasing risks driven by socioeconomic development and urbanization, the need to do more for resilience remains. In this context, it is clear that an economic stimulus would be most beneficial for individuals, communities, and the country if it responds to short-term needs while boosting long-term sustainability and resilience. This lesson applies directly to the COVID-19 crisis: the stimulus measures that will be drawn up to kickstart countries’ economic recovery from the pandemic are a once-in-a-generation investment that can help them also withstand future risks and shocks. And Fiji’s “build back better” mindset offers an exceptional entry point to consider how the country’s response to the current crisis can be strengthened.
"[We teach the students] about pollution and how landslides are happening from the clearing of forests or using excessive chemicals or setting fire,” she explains. “It’s about exploring the contributing factors of climate change... changing weather patterns and how human beings are contributing to it and how we can stop it."
– Asmita Ashwin Kamal, Nov 2017, Teacher at Bayly Memorial School
So what will it take to apply this underlying principle of a sustainable recovery to the current context? Fortunately, the government of Fiji does not need to start from scratch and can build on existing analyses, in this case, the 125 interventions identified in the CVA against which we applied our sustainability checklist to provide a first screening.
A simple classification was used to categorize performance against the checklist’s 35 dimensions with ‘1’ signifying ‘good’ (for example, this measure generates short-term jobs), ‘0’ signifying ‘not relevant’ or ‘requires more information’, and ‘-1’ signifying ‘bad’ (for example, this measure does not generate short-term jobs). We did not aim at quantifying the number of jobs or the economic multipliers in various sectors. Instead, we used the large existing literature on this topic to identify, qualitatively, the dimensions in which each intervention can be expected to perform well or poorly.
Additionally, if an intervention performed poorly along one dimension deemed as crucial to the “build back better” design of the stimulus then that intervention would be automatically disqualified ( in-depth methodology and results are described in our technical note). The assessment was quick and simple, in the spirit of a checklist aiming at identifying promising candidate interventions that would go through further analysis and more evidence collected before implementation.
As a result of this initial screening, the 125 interventions were reduced to 63 core interventions. As shown in the figure below, the results of the screening suggest that they all score strongly on resilience: no surprise as the CVA is effectively a resilience plan. But they also perform well on long-term growth. Again, some of this can be expected since the CVA was developed to support long-term sustainable growth. But here’s some additional good news: these 63 interventions also provide some short-term benefits during a recession. That means each of these investments could deliver much-needed employment to Fiji’s working population, and a boost to spending that would unlock local economic activity.
On March 26, 2020, as part of its response to the pandemic, the Government of Fiji announced an initial stimulus, including supplemental expenditures on public health, lump sum payments through the Fiji National Provident Fund (FNPF), tax and tariff reductions. The stimulus also included loan repayment holidays (up to F$400 million of the total envelope) aimed at protecting public health, supporting the economy and ensuring food security. Furthermore, on July 17, as part of its 2020 National Budget, the government announced an additional F$2 billion direct government stimulus package to fund a comeback from COVID-19’s economic impact.
Could additional stimulus be generated from investment in resilience-building interventions? To illustrate the potential of our approach, we assumed a budget of 3% of the country’s GDP and identified how best to use the CVA to allocate this amount. With this budget cut-off applied, the 63 pre-screened interventions came down to 10 (see Figure 2). Again, as expected for measures extracted from a resilience plan, the top 10 all perform well in how they will enable communities to build resilience for future shocks and crises. All of them also boost long-term productivity and growth, either by improving agricultural productivity, the reliability of infrastructure, or by reducing energy or untreated wastewater. And some, but not all, also contribute to decarbonization.
These 10 interventions are ranked based on an overall score representing all four categories, placing emphasis on both the short-term and long-term. How would our Top-10 differ if only the immediate short-term needs of communities affected by the pandemic and the economic lockdown were prioritized? Selecting interventions out of the CVA would ensure that these measures would still contribute to resilience and long-term growth. To show the difference, we undertook a similar analysis which applied an alternative approach to the selection of stimulus interventions, screening only for the short-term stimulus potential. Even in this scenario, interventions in housing, environment, and social protection shine: delivering jobs and a boost to GDP quickly.
The best part though, is that, even when screened solely for short-term goals, these interventions will still contribute to long-term growth, resilience, and often the decarbonization objectives of the country (see Figure. 3). This suggests that it may be enough to start from existing long-term plans – such as national development plans, infrastructure masterplans, or climate-change-related plans – and to screen the measures they contain for their stimulus potential. But, of course, one needs to keep in mind that the quality of the outcome remains dependent on the quality of the plan one starts from.
Investing in these kinds of interventions not only helps communities and economies respond to the impacts of the current crisis – but it can also lay critical foundations for helping deal with future ones.
This exercise does not pretend to identify the best stimulus package for Fiji or for other countries, but to illustrate an approach to designing short-term stimulus packages that can contribute to long-term sustainable growth. Ultimately, the design of a stimulus package would require further exploration of options and interventions in line with each country’s fiscal capacity. But some clear guiding principles emerged from this analysis:
As countries begin to look at their own longer-term economic recovery, they should look at the “build back better” successes that have already been implemented, Fiji’s prime among them. Many of the solutions that are needed are already within the reach of governments – particularly in their NDCs and existing climate policies. Embracing a smarter approach to screening, learning from the past – not reinventing the wheel – and being prepared to work outside sectoral boundaries will all be key to successfully balancing the jobs and growth we need today with the climate resilience and decarbonization we can’t afford to delay to the future.
When asked if she thought she would see a storm like TC Winston again in her lifetime, 24-year old Asmita hesitated in answering. Her response holds just as true for a world living with a pandemic as it does for one dealing with the impacts of a changing climate.
“I just pray to God that nothing like this happens again, [but] if it does happen in the future people will be strong and they will work hand in hand.”
–Asmita Ashwin Kamal, Teacher at Bayly Memorial School
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