To Reduce Impact of Natural Disasters, Vietnam Must Engage Small Businesses

April 18, 2012

By Nguyen Tri Thanh

In late March, Ho Chi Minh City’s residents braced for heavy windfall and flooding as tropical storm Pakhar – the first storm of the season – headed for the nation’s economic hub. Many residents were caught off guard, as experts declared the storm “abnormally early.” Although overall loss to lives and property were less than in past storms, experts are concerned by the changing patterns, warning that Vietnam is likely to be severely impacted by an increasing amount of weather extremes over the coming decades.

Floods and storms exact an enormous annual socio-economic toll on Vietnam. The United Nations Development Programme (UNDP) estimates that between 1990 and 2009, the country suffered annual economic losses equivalent to 1.3 percent of GDP, or $3.85 billion. Vietnam’s long coastline and densely populated low-lying deltas make it particularly at risk to flooding, and 70 percent of the population and the majority of Vietnam’s productive capacity are located in these areas that are directly vulnerable to water-related natural disasters. In 2011 alone, some 700,000 people were affected by flooding. To make matters worse, rapid growth and an expanding population are stretching natural resources and infrastructure to the breaking point.

Vietnam’s hundreds of thousands of small and medium sized enterprises (SMEs), which make up the backbone of the nation’s economy, will have to play a critical part in reducing the risk of natural disasters and climate change on their businesses and their communities.

Vietnam's small and medium businesses represent more than 90 percent of the country's businesses, employ almost 80 percent of the population, and produce over 40 percent of national GDP. Photo by Karl Grobl.

SMEs represent more than 90 percent of the country’s businesses, employ almost 80 percent of the population, and produce over 40 percent of national GDP. These locally rooted enterprises provide the jobs, income, and services important for the development of vibrant communities. Their ability to bounce back after a natural disaster, re-establish production and continue to provide employment to local workers and adapt to the long-term pressures of climate change is a critical determinant of both local community and the country’s overall resilience to climate change. However, most climate change projects continue to fail to engage small and medium enterprises.

This neglect of a vital sector is even more glaring in view of their lack of preparedness. A survey that The Asia Foundation conducted in 2011 showed that the majority of SMEs have little to no information about or plans for disaster preparedness, even though many of them have incurred heavy losses from floods and storms in recent years. Almost 85 percent of businesses reported that they have been frequently hit by seasonal storms, 45 percent by floods, and 12 percent by cyclones and high tide. The survey also showed that more than 60 percent of businesses had incurred losses caused by natural disasters in the last five years. Of those who suffered losses, 5 percent of the businesses experienced such significant damage that the business operations they had before the disaster were no longer viable and they were forced to start a new business. Thirty percent indicated heavy losses to their facilities and products damaged, leaving business operations and productivity affected for a significant period. A further 43 percent identified slight losses. Businesses were particularly concerned that their most important physical assets such as office buildings and factories, products, and equipment are left extremely vulnerable to future disasters.

Despite such crippling losses, plans to increase disaster risk preparedness among SMEs are still generally minimal, if they exist at all. Of the 117 businesses in the survey that had been hit by natural disasters in the last five years, 46 percent have not yet developed disaster preparedness and response plans, with 33 percent having a disaster preparedness plan but no capacity to implement the plan. So, even in areas that are prone to floods and storms, most of the businesses reported that they have not yet developed effective disaster preparedness and response plans. The increasing economic and social costs on account of losses caused by natural disasters clearly indicates the need for strengthened disaster risk reduction and management to minimize both human and economic losses.

Since early last year, we have been working in three vulnerable provinces: Da Nang, Khanh Hoa, and Nghe An to build more effective and sustainable disaster response programs.* We have conducted a training program focused on SMEs with over 180 local business people from more than 140 companies participating so far. We have also worked with local business associations to develop locally based corporate social responsibility initiatives that assist with community disaster preparedness, as well as publishing a handbook on CSR giving for businesses. We’ve also conducted a local media campaign to help spread the message.

By engaging Vietnam’s powerful small business community, we hope that we can help strengthen the future resilience of Vietnam to respond and adapt to the effects of climate change.

*This program is supported by the USAID Office for U.S. Foreign Disaster Assistance (OFDA).

Nguyen Tri Thanh is the Environment Program Officer in The Asia Foundation’s Office in Vietnam. He can be contacted on [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.

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