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A Brief Review of Escalating Number of Disasters in Nepal

Nepal-Earthquake(Photo Source: Google)

Mid April 2014, a deadly avalanche on Mt. Everest killed over a dozen Sherpa guides. After a long dispute between the Nepalese government and the Sherpas, few of the insurance, compensation and safety related demands were met by the government. Foresight of the government and the relevant agencies would have made the aftermath a lot smoother as far as adequate insurance compensations for the deceased trekkers’ families were concerned.

Around the same time, late April 2014, A landslide hit the tunnel of Upper Madi Hydropower Project (25 MW) in Sildjure VDC, Kaski district of Nepal.  Over a dozen workers including a Chinese national were trapped in the under-construction tunnel. Three workers were found dead while rest were saved after a long and treacherous rescue efforts.

A massive landslide in Sindhupalchowk district of Nepal took hundreds of lives in early August, 2014. The Sunkoshi River and the roads were blocked in the region for weeks. Thousands of people in the region were affected and struggled for livelihood. The Sunkoshi Small Hydro-power Plant (2.5MW) remained submerged underwater for weeks when the river rose up to 30 meters in height forming a pool of water following the landslide and river-blockage.

In the following days, the landslide triggered chain of events including loss of lives, properties, infrastructures, supply-chain and businesses in many sectors. Ministry of Home Affairs (MoHA) estimates that, between June and September, 2014, there were 265 dead, 256 missing and 157 injured due to floods and landslides alone.

Around mid-October 2014, cyclone Hudhud, hovering in Nepalese sky, claimed dozens of lives and left unforgettable scars in the domestic tourism circuit. Although storms and heavy rain caused by Hudhud was devastating in the Indian states of Orissa and Adhra Pradesh, the scale of damages predicted for Nepal was rather moderate at the time. On the contrary, by the time the cyclone reached the heights of Nepalese mountains, it triggered deadly snow blizzards and avalanches in the Himalayas. There were hundreds of trekkers (national and foreign) on the mountains while means of communication were mostly disrupted when the storm hit the region.

It is apparent that the weather related information were not spread out in accurate and timely manner to the end users. The hydrological system in South Asia is strongly controlled by the Himalayas, which act as barriers for monsoon rains. The Hudhud’s effects could have been expected or minimized (if not predicted or prevented) by the Goernment and preparedness/response procedure (if it already had one in place) could have been followed to mitigate the loss.

Nearly 82 years after the mega earthquake of BS 1990, Nepalese were heavily shaken by the recent M 7.6 earthquake on Saturday, 25th April, 2015 and a major aftershock of M 6.8 on Tuesday, 12th May, 2015. Although the earthquake-epicenters were located in Gorkha and Dolakha districts respectively, the devastations left around 9,000 dead, 23,000 injured and thousands homeless all over the country. As per the Post Disaster Needs Assessment (PDNA), the private sectors have sustained over three times in damages and losses i.e. NPR 540 billion compared to the damages and losses of NPR 166 billion incurred by the public sectors.

More recently, the economic blockade imposed by India is no less than a man-made disaster for the Nepalese people and businesses facing dire need of petroleum products and other emergency supplies. Besides day to day inconveniences faced by the people, thousands of private sector industries and businesses were shut down within a week due to inadequate supply of fuel and raw materials from India. The blockade has interfered with every possible socio-economic dynamics of the country including, transportation, schools, hospitals, offices, business, services, households, festivals, entertainment, etc….

(NOTE: Please click the link below to read the entire article “Series of Disasters in Nepal: An Urgent Call for Preparedness”)

Series of disasters in Nepal: An urgent call

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(Part 2 of 3) Impact on construction sector businesses in Nepal due to the Gorkha Earthquake 2015 and its potential implications on reconstruction

Nepal-Earthquake(Photo Source: Google)

(Project Submission Date: 15th December, 2015)

CHAPTER III: RESULTS (Contd.)

Brick Industries

  • After the Gorkha Earthquake, there were 2 recorded fatalities and 6 injuries in brick factories all over the nation. Extensive major and minor damages to chimneys, kilns and green bricks were recorded in factories throughout the nation. The total damage loss was estimated to be NPR 1,126,111,700. Please refer the Table 3 below for a detailed earthquake damage loss estimation of brick industries in Nepal.

Table 3. Earthquake damage loss estimation of brick industries in Nepal (Source: FNBI)Table 3

  • At least 75% monthly loss of revenue was estimated for individual brick factories due to reduced demand, production and sales. There are around 300,000 workers are employed in brick factories throughout the country. Although workers have started returning to factories, approximately 95% job loss was estimated in the following 6 months after the earthquake. Please see Table 4.

Table 4. Information related to employee casualty, damage loss, revenue loss and employment lossTable 4

  • Most of the brick factories are unable to recover even after 6 months. Over 95% of the factories are not in full operation due to the earthquake damages incurred as well as lack of workers and fuel after the economic blockade. Before the earthquake an average 4 million bricks were produced annually by individual brick factories in Nepal. Around 850 brick factories all over the country produced about 3.4 billion bricks every year.
  • It is estimated that the national annual demand for bricks all over the country was around 3.57 billion before the earthquake. It is also predicted that in coming days the annual demand would increase by at least 30% after the earthquake. Depending on varying quality of bricks, the current brick price fluctuates between NPR 8 to NPR 12 per piece (excluding VAT and transportation). Brick prices are claimed to be stable before and after the earthquake. Please see Table 5.

Table 5. Information related to business recovery, production capacity, demand and market pricesTable 5

Cement Industries

  • Except for some minor injuries to employees and their families, there were no significant casualty in cement industries. Only minor damages were recorded in some factories ranging from NPR 50,000 to NPR 15 million in loss. The damages were mostly to the sheds and boundary walls. Overall the total damage loss is estimated to be over NPR 100 million.
  • Following the Gorkha Earthquake, individual factories incurred 25% to 95% loss of revenue due to reduced demand, production and sales. It is estimated that the industry experienced a total revenue loss of NPR 3 billion in the first 3 months alone. Over 10,000 workers are employed in cement industry all over the country. Around 25% workers are believed to have lost their job after the earthquake. Most of them are daily wage workers. Please see Table 6.

Table 6. Information related to employee casualty, damage loss, revenue loss and employment lossTable 6

  • Since the damages were not significant, most of the factories were able to recover their production within a couple of weeks. The estimated production downtime due to the earthquake ranged from 2 days to 2 weeks for different factories, majorly due to the employees’ fear of future shakings. Presently there are 46 cement factories all over the country. Before the earthquake, the total annual production capacity of the entire industry was around 4 million MT. Initially, because of the earthquake, production capacity of individual factories has come down by only 30% to 35%. Later, due to government restrictions on construction and reduced demand the production has significantly dropped by 75%.
  • Before the earthquake the country had an estimated demand of around 5 million MT cement annually. In the coming days the demand is expected to shoot up by around 25% due to reconstruction activities. The market price of OPC Cement ranged from NPR 650 to NPR 750 per bag before the earthquake. Due to the hike in transportation cost and fuel crisis the current cement price is around NPR 800 per bag. Please see Table 7.

Table 7. Information related to business recovery, production capacity, demand and market pricesTable 7

Reinforcement Steel Bar Industries

  • There was no earthquake casualty reported by the factories surveyed for this paper. Only minor damages were recorded in iron & steel factories all over the country. The damages were mostly done to the sheds and boundary walls of the plants. Following the earthquake, individual factories incurred a drastic 80% to 90% loss of revenue due to reduced demand, production or sales.
  • It is estimated that the rolling mill industry as a whole experienced a total revenue loss of over NPR 10 billion in the first 3 months after the earthquake. There are 16 reinforcement steel bar industries in the country. Depending on the size of the organization, the number of workers employed in them varied from 200 to 3000. Except for few exceptions where employees left the job out of earthquake fear, the crisis did not cause any major layoff in the industry. Please see Table 8.

Table 8. Information related to employee casualty, damage loss, revenue loss and employment lossTable 8

  • After the earthquake the production was interrupted for at least 1 month or as long as 6 months in major iron & steel industries. The cause of interruption was mostly absent employees, reduced demand and government imposed restriction on new constructions. The individual factories around the country experienced an estimated 33% reduction in their production capacity. The reduced production capacity was mainly caused by the lack of raw materials, fuels, employees as well as reduced demand for the reinforcement steel bars.
  • Before the earthquake the country had an estimated demand of around 875,000 MT every year.  In the following months after the earthquake the demand has gone down as low as 50% of the total annual demand of the country. The unit market price has decreased by approximately 10% in the aftermath of the earthquake. The average market price of reinforcement of steel bar was NPR 70 per kg before the earthquake. The current market price is around NPR 65 per kg excluding VAT. Please see Table 9.

Table 9. Information related to business recovery, production capacity, demand and market pricesTable 9

CGI Sheet Industries

  • During the survey, there was no earthquake casualty reported by the CGI Sheet factories. Besides minor damages to the sheds and boundary walls of the factories, there were also some serious damages reported such as spill of molten zinc and severe damage to the coal gasification plant. The estimated total loss is over NPR 100 million.
  • There was no evident revenue loss since the need for CGI Sheets increased due to skyrocketing demand of temporary shelters right after the Gorkha Earthquake. There are 4 major CGI Sheet industries in the country and no loss of employment recorded due to the earthquake. Please see Table 10.

Table 10. Information related to employee casualty, damage loss, revenue loss and employment lossTable 10

  • Besides first couple of weeks of production interruption due to minor facility damages and fear among the employees, businesses did not face major hardship to recover from the earthquake crisis. Due to increased demand, CGI Sheet industries had to increase their production by nearly 80% in the first few months following the earthquake.
  • Before the earthquake the country had an estimated demand of around 150,000 MT CGI Sheets every year. Because of the steep rise in demand, the unit price of the CGI Sheets increased slightly by around 2% to 3% immediately after the earthquake. Later the market prices were dictated by the varying transportation cost in different districts. Please see Table 11.

Table 11. Information related to business recovery, production capacity, demand and market pricesTable 11

GI Wire Industries

  • There was no major or minor casualty reported by the factories surveyed for this study. After the earthquake, there was only minor or no damage incurred by the GI Wire industries in Nepal. Few minor incidents of boundary wall collapses were reported.
  • Around 50% to 70% loss of revenue every month was reported due to reduced sales in the months following the earthquake. Altogether there are 5 major GI Wire industries throughout the country. An estimated 2,500 employees are working in them. No job loss was reported by the factories due to the earthquake. Please see Table 12.

Table 12. Information related to employee casualty, damage loss, revenue loss and employment lossTable 12

  • GI Wire businesses did not face major hardship to recover from the earthquake crisis. Due to minor facility damages and fear among the employees, there was production interruption for the first couple of weeks after the earthquake. The estimated annual capacity of all the CGI industries in Nepal is 78,300 MT. Due to reduced demand and insufficient power supply, the production dropped around 9% after the earthquake.
  • Before the earthquake the country had an estimated demand of around 25,000 MT of GI Wires every year. In the months and years following the earthquake the demand is expected to rise by around 50%. There are 3 major grades of GI Wires available in the market namely, heavy-Zinc, medium-Zinc & commercial grade. The average market price of the popular heavy-Zinc grade before the earthquake was NPR 86.5 per kg while after the earthquake it is around NPR 77 per kg. Please see Table 13.

Table 13. Information related to business recovery, production capacity, demand and market pricesTable 13

A comparison of nationwide projected production and demand

A comparison of nationwide production and demand projection for construction materials after the earthquake was performed. The Projected Annual Production was calculated by looking at the production trend of first 3 months after the earthquake. Post Disaster Need Assessment (PDNA), Government of Nepal has estimated the Projected Demand for the Earthquake Reconstruction which was further taken into account while calculating the Total Annual Projected Demand after the Earthquake. Please see Table 14 below.      

Table 14. A comparison of nationwide production and demand projection for construction materialsTable 14

Supply and demand of construction materials

In coming days, there will be massive rise in building construction activities for several years as over 600,000 houses will be constructed and nearly 250,000 buildings will be either repaired or retrofitted. The two critical factors to be considered are the availability of construction materials and construction labors in the country.

  • Looking at the trend of first 3 months after the earthquake, the brick factories seem to be in miserable condition with only 170 million projected annual production nationwide. The national annual demand for bricks before the earthquake was 3.57 billion while the estimated annual production capacity was 3.4 billion. It will be hard to meet the annual projected demand of 4.77 billion bricks. PDNA estimates that around 25% of this demand can be compensated by the recycling of the salvage. On the other hand Federation of Nepal Brick Industries (FNBI) claims that with an expected 25% increase in existing total capacity, around 5 billion bricks could be produced within next year if economic and climate conditions are favorable.
  • In the months following the earthquake, due to the government regulations on construction bar, the demand for cement drastically came down to negligible numbers, although total annual projected demand is around 7 million MT. Based on the trend of first 3 months after the earthquake the projected annual production is mere 1 million MT. The nationwide annual demand before the earthquake was around 5 million MT and Cement Manufacturers’ Association of Nepal (CMAN) estimates that due to reconstruction activities there will be only 25% hike in total demand. As per CMAN this demand can be sustained by Nepalese cement factories as most of them were operating almost 50% below their installed capacity even before the earthquake.
  • The total annual projected demand for reinforcement steel bar is over 1 million MT which comprises the annual demand of 875,000 MT and reconstruction demand of around 140,000 MT. Looking at the first 3 months’ production trend after the earthquake, only 757,770 MT of reinforcement steel bar production is expected next year. Since the current reduced production is mainly due to fuel crisis, power shortage and supply-chain disruption, the future reconstruction demand can be met successfully if the situations are favorable.
  • The total annual projected demand for CGI Sheets is around 240,000 MT which comprises the annual demand of 150,000 MT and reconstruction demand of around 90,000 MT. In coming months, the demand is expected to stay more or less the same as new constructions have come to a halt while the demand for new shelters has gone up. CGI Sheet industries had to increase their production by nearly 80% in the first few months after the earthquake. Following the trend, the projected annual production after the earthquake is estimated to be 421,200 MT which can sufficiently meet the reconstruction demand of the country.
  • The total annual projected demand for GI Wire is 35,000 MT which comprises the national annual demand of 25,000 MT and reconstruction demand of around 10,000 MT. From the first 3 months’ production trend after the earthquake, 71,253 MT of GI Wire will be produced next year. Even with the current reduced production capacity, Nepal can sufficiently meet the reconstruction demand for GI Wires.

Demand for construction workers

The reconstruction phase can also be seen as an opportunity for job creation. International Labor Organization (ILO) estimates that there are one million workers already involved in the housing sector. PDNA estimates that housing reconstruction may generate up to 352 million workdays over the next five years. Since the major reconstruction will occur in first 3 years, it is estimated that 700,000 construction workers will be required for reconstruction alone.  

(To Be Contd. ….)

(Part 1 of 3) Impact on construction sector businesses in Nepal due to the Gorkha Earthquake 2015 and its potential implications on reconstruction

(Part 3 of 3) Impact on construction sector businesses in Nepal due to the Gorkha Earthquake 2015 and its potential implications on reconstruction

 

 

Series of disasters in Nepal….

Published in Magazine Issue: Vol:09,No 13 January 22, 2016 (Magh 8,2072)

A hazard has numerous risks attached to it and can present itself in many forms such as natural calamity, technological crisis or man-made tragedy. Businesses could face technological disasters such as supply-chain interruption, building collapse, information technology failure, power disruptions etc. Likewise, massive earthquake, flood, landslide etc. could strike us in the form of natural disaster. Sometimes hazards could be accidental or human-induced such as fire, chemical spill, strike, blockade, riot, and as extreme as terrorism.

Nowadays, increasing number of disaster is rapidly becoming a global phenomenon. We do not need to look elsewhere as we revisit a series of recent disasters that took place in our own backyard. 

Escalating number of disasters

Mid April 2014, a deadly avalanche on Mt. Everest killed over a dozen Sherpa guides. After a long dispute between the Nepalese government and the Sherpas, few of the insurance, compensation and safety related demands were met by the government. Foresight of the government and the relevant agencies would have made the aftermath a lot smoother as far as adequate insurance compensations for the deceased trekkers’ families were concerned.

Around the same time, late April 2014, A landslide hit the tunnel of Upper Madi Hydropower Project (25 MW) in Sildjure VDC, Kaski district of Nepal.  Over a dozen workers including a Chinese national were trapped in the under-construction tunnel. Three workers were found dead while rest were saved after a long and treacherous rescue efforts.

A massive landslide in Sindhupalchowk district of Nepal took hundreds of lives in early August, 2014. The Sunkoshi River and the roads were blocked in the region for weeks. Thousands of people in the region were affected and struggled for livelihood. The Sunkoshi Small Hydropower Plant (2.5MW) remained submerged underwater for weeks when the river rose up to 30 meters in height forming a pool of water following the landslide and river-blockage. The landslide triggered chain of events including loss of lives, properties, infrastructures, supply-chain and businesses in many sectors. Ministry of Home Affairs (MoHA) estimates that, between June and September, 2014, there were 265 dead, 256 missing and 157 injured due to floods and landslides alone.  

Around mid-October 2014, cyclone Hudhud, hovering in Nepalese sky, claimed dozens of lives and left unforgettable scars in the domestic tourism circuit. Although storms and heavy rain caused by Hudhud was devastating in the Indian states of Orissa and Adhra Pradesh, the scale of damages predicted for Nepal was rather moderate at the time. On the contrary, by the time the cyclone reached the heights of Nepalese mountains, it triggered deadly snow blizzards and avalanches in the Himalayas.

There were hundreds of trekkers (national and foreign) on the mountains while means of communication were mostly disrupted when the storm hit the region. It is apparent that the weather related information were not spread out in accurate and timely manner to the end users.

The hydrological system in South Asia is strongly controlled by the Himalayas, which act as barriers for monsoon rains. The Hudhud’s effects could have been expected (if not predicted) by the State and preparedness/response procedure (if it already had one in place) could have been followed to mitigate the loss.

Nearly 82 years after the mega earthquake of BS 1990, Nepalese were heavily shaken by the recent M 7.6 earthquake on Saturday, 25th April, 2015 at 11:56 NST and a major aftershock of M 6.8 on Tuesday, 12th May, 2015 at 12:50 NST. Although the earthquake-epicenters were located in Gorkha and Dolakha districts respectively, the devastations left around 9,000 dead, 23,000 injured and thousands homeless all over the country.

As per the Post Disaster Needs Assessment (PDNA), the private sectors have sustained over three times in damages and losses i.e. NPR 540 billion compared to the damages and losses of NPR 166 billion incurred by the public sectors.

More recently, the economic blockade imposed by India is no less than a man-made disaster for the Nepalese people and businesses facing dire need of petroleum products and other emergency supplies. Besides day to day inconveniences faced by the people, thousands of private sector industries and businesses were shut down within a week due to inadequate supply of fuel and raw materials from India. 

The blockade has interfered with every possible socio-economic dynamics of the country including, transportations, schools, hospitals, offices, business, services, households, festivals, entertainment, etc. 

Business threats

The aforementioned events were devastating in many ways compelling us to ask important questions such as, “Are our politicians liable?”, “Did the government envision such dreadful consequences?”, “Were the businesses prepared?”, “What is their response or plan ‘B’?”

Although, under normal circumstances, the probability of similar cataclysmic events repeating in the near future could be predicted relatively low but as we see, the consequences are certainly going to be catastrophic for people, businesses, communities and the country as a whole.

Flood, landslide and earthquake are some of the high risk natural hazards the nation is facing for a long time. Moreover, the businesses today cannot disregard other potential threats posed by fire, explosion, utility failure, communication breakdown, computer crash, equipment malfunction, operator error, terrorism, criminal activities or a blockade. Are our private businesses ready to face such painful surprises? How prepared are we to sustain and recover our businesses out of these catastrophes?

Disasters might occur locally but their effects can be sensed throughout the country if not globally.

In March, 2011, after the Tohuku-Tsunami in northeastern Japan, 656 Small and Mid-sized Enterprises (SMEs) went bankrupt within a year. Surprisingly, only 12% of the businesses were located in the vicinity where the disaster actually took place. Rest of the businesses were scattered throughout the country and were bankrupted by indirect loss of supply-chain disruption caused by the tsunami.

We need not look further as these scenarios are largely shaping in front of us and as a matter of fact, quite frequently these past couple of years. An avalanche occurs in the remote slopes of Himalayas and we see thinning crowd of domestic and international tourists in our airports for months.

A landslide occurs in Sindhupalchok district while people and businesses in the capital go panic due to elevated hours of load shedding and reduced supplies. Likewise, onset of political strikes in the southern belt can close down thousands of business all over the country within a week.

The rising frequency, ferocity and the extent of damages caused by natural disasters are not only threatening the growth of businesses but also questioning the sustainability of the entire country’s economy as the disaster loss of the nation takes away a big chunk of GDP every year.

When businesses are disrupted, it costs money. Lost revenues plus extra expenses means reduced profits. Insurance does not cover all the losses and cannot get back valued customers.

Role of private sector

It is a prevalent norm around the globe that less probable threats such as natural & technological disasters or the issues pertaining to emergency preparedness for that matter get lower priority than most of other functionalities within a business organization. In a country like Nepal this seems even more evident due to the lack of adequate government policies, visionary business model and culture of disaster preparedness.

As an engine for economic growth, private sector provides employment, standard of living as well as socio-economic growth of a country. Private sector businesses should not ignore the fact that their productivity and services are closely correlated with the safety and well-being of employees, community and the country as a whole. On the contrary, more often than not private sectors long for profit at the cost of disaster preparedness, environmental impact, business resilience and safety of people.

Many times, we have experienced in the past that the Government of Nepal as well as private sectors are awake for a few months during the flooding season. Authorities, communities, business houses and others come forward with titbits which are labeled ’emergency response’ and ‘disaster relief’ efforts in bits and pieces. After another few months the issues settle in oblivion as no sustainable effort is made for the recovery of people, community and businesses in the region.

Although the efforts and contributions are highly commendable and encouraging, the targeted CSR (Corporate Social Responsibility) value seems to get diluted and become unsustainable over time from a comprehensive Disaster Risk Management (DRM) perspective.

Anticipating, mitigating and managing disaster risks should be a collective effort because when disasters strike, “Business as usual” is disrupted for all. Avoiding supply-chain disruptions and maintaining smooth operations are in private sectors’ interest while at the same time this could be motivated by the CSR principle of the company, eventually adding value to the business by creating loyal customers.

Private companies could engage with their local or national communities, and undertake a systematic policy of ‘Giving Back’ to customers through DRM programs which would create a feedback loop resulting in long term customer loyalty, improved brand image as well as employee satisfaction. 

Way forward 

In Nepalese context, policies look good on paper but commendable action is nowhere near to be seen. A consolidating national authority (such as National Disaster Management Authority; NDMA)  and coordinated policies and efforts (comprising communities, private sectors, NGOs etc.) are still missing to prevent and mitigate the potential of loss due to natural, technological or human induced disasters.

Current Government policies are largely focused on reactive approach mostly responding to disasters rather than proactive measures such as prevention and risk mitigation initiatives. Thus, systematically embedding and infusing DRM strategy into the national infrastructure development projects is critical if the country honestly envisions proactive as well as sustainable DRM in the country.

Witnessing series of disasters throughout the country, it is proven that economic and the humanitarian catastrophes are imminent following a disaster such as a massive earthquake, extended flooding, landslide or a blockade.

Over the years, many independent humanitarian and development organizations have been propagating their DRR (Disaster Risk Reduction) efforts through public-private partnerships, awareness presentations, preparedness seminars, emergency response training and capability building workshops with a mission to achieve more resilient communities and safer societies around the country.

In today’s world of supply-chain network, business sectors and livelihoods of people are intertwined so intricately that they have to support each other to survive and sustain. The government and the private sectors must work together to make the businesses & communities more resilient to future disasters. Hence the pressing need of public-private partnership for the risk prevention, emergency preparedness, and business continuity planning in the event of recurring disasters, natural or otherwise.

At this juncture, it is high time now that the private businesses of Nepal should rightfully intervene for their own good and come together to join hands with the government as well as non-government agencies to increase their own disaster resilience and business continuity.   

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Published in Magazine Issue: Vol:09,No 13 January 22, 2016 (Magh 8,2072)

Risk Control and Safety Management, NEPAL