Small Businesses Drive Vietnam’s Economy, but Remain at Risk to Disasters

October 24, 2012

By Anna Bantug-Herrera, William Taylor

In the just-released 2012 World Risk Index, which ranks countries based on their level of vulnerability to natural disasters, 12 of the top 20 at-risk countries are in the Asia-Pacific. Vietnam, which every year endures an average of eight to 10 extreme weather events and natural disasters, rose from 34th (out of 173 total countries) in 2011 to 18th this year. In addition to the loss of lives that natural disasters cause, the economic costs to these countries – nearly all of which are developing – is startling.

Vietnam endures 8-10 extreme weather events and natural disasters a year. Meanwhile, the nation’s small businesses remain unprepared for future disasters. Photo/Evangelos Petratos EU/ECHO

The UN Office for Coordination of Humanitarian Affairs (OCHA) estimates that over the last 30 years, natural disasters have caused Vietnam to lose an average of $257 million per year. This underscores just how critical addressing disaster risk reduction and management will be going forward for Vietnam’s continued economic prosperity.

In Vietnam, small and medium-sized enterprises (SMEs) employ 77 percent of the workforce and produce over 40 percent of the nation’s GDP. Their ability to recover after a disaster is essential to revitalizing communities and livelihoods. Natural disasters and climate change greatly impact SMEs, but many remain ill-prepared: 50 percent of companies that The Asia Foundation surveyed in the Central Vietnam region in 2011 lacked emergency response or disaster management plans. This illustrates how little domestic private sector involvement in disaster preparedness and mitigation efforts there are in Vietnam.

To address this, The Asia Foundation, with support from USAID’s Office of Foreign Disaster Assistance (OFDA), developed the first-ever program in Vietnam that links SMEs with government and community groups to help small businesses prepare for future floods and storms – a common occurrence in Vietnam. In recognition of the success of this project’s approach, last week, OFDA presented The Asia Foundation with an award for “Excellence for Innovation and Learning in Disaster Risk Reduction,” at its annual conference in Washington, D.C. The conference was attended by more than 120 participants working on emergency response, humanitarian assistance, and building resilience to natural disasters.

The Foundation has been working closely with the Vietnam Chamber of Commerce and Industry (VCCI), other business associations, as well as government and local NGOs including the Centre for Education and Development (CED) to develop the program. Since April 2011, we have developed a disaster risk management (DRM) training curriculum for SMEs that covers such topics as methodology for assessing risk and potential losses, disaster-proofing facilities, and building staff preparedness. We’ve also formed a group of 20 master trainers, and trained more than 500 individuals, including staff from over 300 SMEs in five coastal provinces prone to natural disasters. We are now working with VCCI to provide technical assistance to selected businesses for completing and testing their DRM plans and establishing networks of support.

We also support innovative public-private partnership models and corporate social initiatives on disaster management and risk reduction, such as the Da Nang Young Entrepreneurs Association’s (YEA) “The Storm Won’t Reach Da Nang” initiative. Da Nang YEA organizes engineers from the staff of its member businesses to assist poor and vulnerable households prepare their homes for disaster. So far, Da Nang YEA has engaged over 50 businesses and mobilized an additional 400 million VND ($20,000) to support local low-income households.

Understanding and coordinating individual and institutional incentives to implement disaster risk reduction plans has probably been the most critical factor for the project’s success. The program was built on detailed preparation and research, including a survey of nearly 200 businesses. The survey found that 85 percent of SMEs were regularly affected by seasonal storms, but none of the respondents claimed that they had comprehensive and fully operational preparedness plans, identifying a critical need for support in this area. Engaging businesses on the basis of their potential cost savings was essential, and has over time enabled us to engage on wider issues where individual benefits are not quite so clearly or immediately connected to cost savings.

While this project is off to a great start, challenges remain, including expanding to reach a greater number of Vietnam’s estimated 400,000 SMEs, and ensuring disaster preparedness principles are fully integrated into Vietnamese businesses, business associations, training centers, and NGOs to continue to reduce vulnerability over the long-term. Vietnam’s SMEs are key drivers of the nation’s economy and if Vietnam is to maintain its stunning growth record it cannot afford to have its most dynamic sector remain unprepared for more frequent and intense natural disasters.

Anna Bantug-Herrera is The Asia Foundation’s assistant director in the Washington, D.C., office and William Taylor is the Foundation’s deputy country representative in Vietnam. They can be reached at [email protected] and [email protected], respectively. The views and opinions expressed here are those of the individual authors and not those of The Asia Foundation.

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