Bangladesh, the Philippines, Myanmar, India and Vietnam are among 10 countries where supply chains are at greatest risk from natural hazards such as flooding, earthquakes and tropical cyclones, according to risk analysis company Maplecroft.
The Dominican Republic, Honduras, Laos and Haiti round out the list of countries with the greatest proportion of their economic output at risk from natural disasters, Maplecroft said.
The Natural Hazards Risk Atlas shows that some of Asia’s most important growth economies have the highest financial risk from the threat of natural hazards, largely due to the high exposure of their cities and trading hubs to events like flooding. Many of these same high-risk countries also demonstrate poor capability to recover from a significant event, further exposing investments to risk of supply chain and market disruptions, Maplecroft said.
The impact of a natural disaster in the Asian growth economies of Bangladesh, the Philippines, Myanmar, India and Vietnam would not only disrupt their domestic economy, but also the operations and supply chains of many of the world’s largest corporation who invest in these locations.
For example, the worst flooding in Thailand in almost seven decades hit at least five major industrial parks last year, forcing Toshiba, Honda Motor Co., Toyota and other companies to shut down hundreds of factories, which also affected companies operating in other countries due to a shortage of key components made in Thai factories. The automotive industry and ICT sectors were the hardest hit and manufacturers of hard drives were only able to meet two-thirds of demand in the final quarter of 2011, pushing prices up by as much as 55 percent, Maplecroft said.
The 2011 floods in Thailand, which is ranked 32nd on Maplecroft’s Natural Hazards Relative Economic Exposure Index, wiped nine percent off the country’s GDP and damaged infrastructure, Maplecroft said.
Japan, China, Taiwan and Mexico have the highest economic exposure to natural hazards in absolute terms. Last year was one of the most expensive yet for insurers, and Munich Re estimates that the March 2011 earthquake and tsunami in Japan accounted for about 55 percent of the year’s $380 billion in economic losses.
However, huge economies such as Japan, that have strong governance, established infrastructure disaster preparedness and tight building regulations, have the capacity to recover relatively quickly.
In May, Maplecroft released its Water Stress Index, showing that unsustainable water use is threatening agriculture, other business and populations in China, India and the US.