GAR 2013 Main Report

Introduction: Risky Business

Disasters can seriously undermine business competitiveness and longer-term economic sustainability. In the last two years, many businesses experienced direct losses or impacts in the supply chain affecting their profitability. If critical infrastructure such as transport networks and power sup-ply are affected, businesses suffer. But business is affected not only as a consequence of direct and indirect losses but also owing to wider impacts and macroeconomic effects.

Market share may be lost as clients transfer their business to competitors; skilled workers may move or find other jobs; and relationships with suppliers and retailers can be severed. Consequently, business image and reputation may be permanently damaged, affecting longer-term sustainability.

Critically, global trade, financial markets and supply chains have become increasingly interconnected. When local disasters occur in globally integrated economies, the impacts ripple through regional and global supply chains causing indirect losses to businesses on the other side of the globe.

1.1

Like pouring water into a

bamboo basket

The 1990s were what they call a “lost decade” for the Japanese economy as a whole, and the Port of Kobe was already losing its comparative advantage. However, it was the 1995 Great Hanshin-Awaji Earthquake that drastically accelerated its decline.

During the 1960s and 1970s, the Port of Kobe, Japan, was the principal transport hub between Asian manufacturers and markets in North America. In the 1980s, however, its market share began

to fall owing to high costs, inflexible operations and powerful labour unions (Containerisation International, 1998

Containerisation International. 1998.,Japanese port study initiated., Containerisation International, 1 August 1998.. .

a).

Prior to the 1995 earthquake, Kobe was the world’s sixth-busiest port. After the quake, it failed to recover that prominence (see Box 1.1 below). Following two years of rebuilding, in March 1997, Kobe had fallen to 17th place worldwide (Chang, 2000b

Chang, S.E. 2000b.,Transportation Performance, Disaster Vulnerability and Long-term effets of Earthquakes., Second EuroConference on Global Change and Catastrophe Risk Management, 6-9 July 2000., Laxenburg,Austria.. .

); by 2000, it fell further to 23rd place; and by end-2010, it ranked 47th (Nagamatsu, 2007

Nagamatsu, S. 2007.,Economic Problems During Recovery from the 1995 Great Hanshin-Awaji Earthquake., Journal of Disaster Research Vol.2, N°5, 372-380.. .

). During the port’s reconstruction period, a big boost in trans-shipping business was given to other Asian ports, which provided lower costs, a large productive

Chapter 1

(Source: UNISDR) Box 1.1 The Great Hanshin-Awaji Earthquake

At 5:46 am on 17 January 1995, a 7.3 Mw earthquake in the southern part of Japan’s Hyogo Prefecture killed 6,437 people (Government of Japan, 2011

Government of Japan. 2011.,Disaster Management in Japan., February 2011., Tokyo,Japan.. .

). Direct damage was estimated at US$100 billion (Chang, 2000a

Chang, S.E. 2000a.,Disasters and transport systems: loss, recovery and competition at the Port of Kobe after the 1995 earthquake., Journal of Transport Geography 8 (2000) 53-65.. .

; Nagamatsu, 2007

Nagamatsu, S. 2007.,Economic Problems During Recovery from the 1995 Great Hanshin-Awaji Earthquake., Journal of Disaster Research Vol.2, N°5, 372-380.. .

) and damage to Kobe’s port accounted for 10 percent of that total, affecting all 35 container shipping berths; 177 out of 186 non-container shipping berths; and all gantry cranes, warehouses, bridges and utility lines (Chang, 2000a

Chang, S.E. 2000a.,Disasters and transport systems: loss, recovery and competition at the Port of Kobe after the 1995 earthquake., Journal of Transport Geography 8 (2000) 53-65.. .

). When the port shut down, devastating impacts rippled outward—the port had provided 39 percent of Kobe’s income and employed 17 percent of its population (City Government of Kobe, 2010

City Government of Kobe. 2010.,Comprehensive Strategy for Recovery from the Great Hanshin-Awaji Earthquake., March 2010., Kobe,Japan.. .

). Disruption of port services cost US$300 million per month—the equivalent of income loss for 40,000 employees in port-related businesses, manufacturing, wholesale and retail trade (Chang, 2000a

Chang, S.E. 2000a.,Disasters and transport systems: loss, recovery and competition at the Port of Kobe after the 1995 earthquake., Journal of Transport Geography 8 (2000) 53-65.. .

). Businesses absorbed higher transportation costs, and only from March to December 1995, these secondary costs amounted to approximately US$4 billion.