TAIWAN REMAINS VULNERABLE TO ECONOMIC IMPACT OF

UNCLAS SECTION 01 OF 03 TAIPEI 000236 SIPDIS SENSITIVE SIPDIS INTERIOR FOR USGS; DEPT. FOR USAID/OFDA; DHS FOR FEMA E.O. 12958: N/A TAGS: AEMR ECON ETRD SENV TSPL TPHY TW SUBJECT: TAIWAN REMAINS VULNERABLE TO ECONOMIC IMPACT OF NATURAL DISASTERS REF: A. 07 TAIPEI 2302 ¶B. 07 TAIPEI 21 ¶1. (SBU) This is an action request for USAID/OFDA. Please see para. 11. ¶2. (SBU) SUMMARY. Taiwan is very vulnerable to natural disasters since it lies in the path of typhoons in the Summer and Fall and is also part of the Pacific Rim's earthquake-prone Arc of Fire. Natural disasters such as typhoons and earthquakes can cause much economic loss, as shown by the major quake of September 21, 1999 and its economic impact on the IT sector. According to data from the Directorate General of Budget Accounting and Statistics (DGBAS) and disaster relief offices, the 9-21 earthquake resulted in 2,494 deaths and financial losses of US $11.5 billion, amounting to 3.5 percent of Taiwan's GDP in 1999. Taiwan's semiconductor industry was particularly hurt as power outages caused a fall in production of integrated circuits (IC) and affected the world supply, doubling prices in certain memory chips. Taiwan's Dec 26, 2006 quakes also shutdown internet and telecom services from Taiwan to the rest of the world. Aside from earthquakes, the island is very prone to typhoon damage, as its mountainous terrain is subject to landslides, but losses have been confined to the agriculture sector. Although in the past emphasis was placed on technological solutions to natural disasters such as emplacing seismic sensors nationwide, recent efforts have focused more on preventive measures such as encouraging people to purchase insurance for such eventualities. Relief agencies wish to exchange experiences with their U.S. counterparts such as FEMA on command and control issues. END SUMMARY. MOUNTAINOUS ISLAND WITH UNSTABLE SUBSTRATE -------------- ¶3. (SBU) Taiwan is two-thirds mountainous, with a geologically young substrate dating from the Cenozoic period (65 million years ago to present). Taiwan's geographic position in East Asia makes it susceptible to both seasonal typhoons and earthquakes. According to seismic experts, the young substrate is prone to collapse during earthquakes and typhoons and is the cause of numerous roads being closed due to landslides and rockfalls. Development pressures have also destabilized the hillsides, as fruit farms and tea plantations on mountain slopes become highly susceptible to landslides during typhoons and earthquakes. Much needed reforestation has not been able to keep pace and poorly enforced zoning practices contribute to the agricultural losses during typhoons and earthquakes. TYPHOONS--LOW CASUALTIES, HIGH ECONOMIC LOSS -------------- ¶4. (SBU) Taiwan lies in the path of yearly typhoons which begin to form in the summer months of June-July and continue to affect the island into November. While life-threatening, typhoons primarily affect economic output in the agricultural sector. Starting from the 1959 Typhoon Ellen, which resulted in extensive flooding and 667 deaths and economic losses of NTD37 billion ($1.1 billion),to the latest typhoon Krosa (reftel A) which killed 9 persons but caused economic losses of NTD100 billion ($3.1 billion),the trend has been diminishing casualties but growing economic loss. Other than damage to infrastructure, flooding and landslides often occur during typhoons. According to the National Center for Disaster Reduction (NCDR) experts, flooding results when streams cannot accommodate excess runoff during typhoons. Command and control during these episodes becomes problematic because multiple agencies exercise control over issues related to flooding and water resources. Studies by the Water Resources Bureau of the Ministry of Economic Affairs (MOEA) indicate that on average, typhoon-related damage to agriculture account for 60 percent of the economic losses followed by fisheries (12 percent),irrigation (13 percent), transportation (9 percent) and communications (6 percent). EARTHQUAKES: WORLD CHIP MARKET AFFECTED -------------- TAIPEI 00000236 002 OF 003 ¶5. (SBU) The September 21, 1999 "Chi-Chi" earthquake was the strongest in recent memory, registering 7.3 on the Richter scale. It resulted in the deaths of 2,494 people, and 11,305 injured. Material losses amounted to NTD134 billion ($4.13 billion). The Chi-Chi quake resulted in the collapse of 173 buildings and houses, and serious damage to 51,392 houses. Aside from buildings collapsing, roads were shut by rockfalls and power outages to the Hsinchu Science Park resulted in cumulative losses to the IT sector of US$700 million. A two-week black-out in Hsinchu, center of Taiwan's semiconductor industry, caused a significant drop in IC production from Taiwan, resulting in average price increases of 25 percent worldwide for IC chips, with prices for certain types of memory chips increasing by 100 percent. In addition, share prices of U.S.-owned Dell computers dropped by 7 percent on the NY Stock Exchange, according to industry analysts. In real economic terms, total losses amounted to 3.5 percent of Taiwan's GDP in 1999, compared with 2 percent for Japan's Kobe earthquake in 1995. The estimated loss of revenue from the quake was about NTD 36.8 billion ($1.15 billion),including tax revenue loss of NTD 24.9 billion ($0.7 billion). ¶6. (SBU) Other quakes which caused a major shutdown of telecom services in the area happened on December 26, 2006 (reftel B). The quakes, measuring 7.1 and 6.9 on the Richter scale, damaged four major submarine cables which connected North America, Southeast Asia and Europe. Local Chunghwa telecom claimed a revenue drop of NTD100 million ($ 3.06 million) due to the disruption in services. Cable repairs were estimated to cost about NTD50 million ($1.5 million) and take two weeks to restore. Although loss of life was minor, with two deaths reported, the effect on the financial and telecommunications sector served as a warning of what could happen after an even stronger shock. DISASTER RESPONSE: TECHNOLOGY AND SOCIAL REMEDIES -------------- --- ¶7. (SBU) National Center for Research on Earthquake Engineering (NCREE),Director Tsai Ke-chyuan told AIT ESTH officer that earthquake strategy in the past focused on technical solutions to problems, i.e. rebuilding homes, roads and infrastructure, and restoring water and electricity. Taiwan's Central Weather Bureau has built a network of 1,000 monitoring stations island-wide that will provide real-time indications of an earthquake's strength and potential damage. The NCREE is also building the Taiwan Earthquake Loss Estimation System (TELES),a databank on previous earthquakes as well as information on roads, bridges, energy and water supply facilities which can provide quick data on the areas most in need of assistance if a major disaster strikes. Once this network is set up it will provide quick information to emergency relief teams to tackle the most urgent needs. TELES can also be used to build earthquake scenarios and develop risk management tools such as estimating earthquake insurance. On the power supply side, Yu Shang-Hsiung, Director of Power Development at state-owned utility Taipower Company, said his company has implemented a dual power grid system instead of a centralized single grid system for the sensitive science parks so that damage can be limited to one grid rather than cutting the power to the entire area. ¶8. (SBU) Typhoon remedies have largely been reactive, focusing on emergency response, rather than proactive like better land-use management. Reforestation has been one area which the authorities have made progress. According to Council on Agriculture (COA) data, from 2001 to 2006, 24,235 hectares have been reforested. Beginning in 2008, the Executive Yuan has also allocated NTD 7.18 billion ($222,29 million) for five years, including subsidies to farmers to turn fallow land back into forested land. Disaster relief agencies have focused on social approaches to disaster prevention by encouraging people to take earthquake insurance, educating people of earthquake risks and advising them to stockpile emergency supplies. Although the earthquake helped contribute to tougher building codes and helped identify poorly-built structures around the island, Tsai of NCREE emphasized that the concentration of people and SIPDIS TAIPEI 00000236 003 OF 003 high-rises in major cities like Taipei could still result in higher casualties in the event of a major quake. RECONSTRUCTION THROUGH THE PRIVATE RELIEF FUND -------------- - ¶9. (SBU) To better understand reconstruction efforts by the authorities, ESTH officer met with the Shieh Jyh-cherng,Director of the Earthquake Relief Foundation (ERF). The foundation was formed in 1999 as a state agency to manage relief donations. Since the public did not trust the bureaucracy to manage such a large sum of money, the ERF became a quasi-independent body whose assets have grown substantially to NTD14 billion ($437 million). ERF is run by a staff of 10 and has an operating budget of NTD 1.2 million ($38,000) a month. No-interest loans were advanced to those who lost their homes due to the 9-21 earthquake. Once they rebuild their homes, the beneficiaries are required to obtain their own loans from banks to pay the ERF back, ensuring the ERF fund remains viable for use at the next emergency. Shieh said that 68 percent of the fund was earmarked for housing reconstruction, 15.8 percent for financial assistance to earthquake casualties. However, Shieh is concerned for the funds' future unless the ERF is made into an official agency, subject to oversight. (Note: The ERF is a typical solution borne out of distrust of bureaucracy--its Achilles Heel being its reliance on a strong personality, Shieh, rather than institutional mechanisms.) When the ERF is disbanded later this year, all leftover monies will be turned over to the authorities for future relief use. DESIRE FOR LIAISON WITH FEMA -------------- ¶10. (SBU) Our visits with the National Center for Disaster Reduction (NCDR) showed that Taiwan is technically well-prepared for any disaster related emergencies, from earthquakes to typhoons. Because of better engineering practices, quick response, and forecasts and information flow, the casualty rate from typhoons has dropped considerably since the 1970s. However, major earthquakes are a different matter, and tougher building codes are no guarantee of low casualties. On the economic side, losses resulting from natural disasters will likely continue to grow, especially in agriculture, due to poor land-use practices. The potential for a major disruption to key economic sectors such as the IT sector, which could have important repercussions to the world supply of semiconductor chips, remains a concern following the major quake of 1999. As such, the authorities have strengthened power supply and communications systems to avoid the power outages which hurt the IT sector so seriously then. The wealth of accumulated knowledge from that quake is being used to plan major quake scenarios using computer modeling. The bigger challenge is how to institutionalize a credible disaster relief fund as part of the authorities' overall disaster relief strategy and impart to the public lessons learned and the need for proper land use and preventive measures. ¶11. (SBU) Action request: NCDR has expressed a wish to meet with their counterparts at the Federal Emergency Management Agency (FEMA) to share experiences in disaster management, particularly command and control systems. AIT would appreciate if USAID/OFDA can help identify contacts at FEMA for such an exchange. YOUNG