Page 1 PROGRAM INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB3727 Operation Name Turkey Catastrophe Deferred Draw Down Option Region EUROPE AND CENTRAL ASIA Sector Flood protection (25%);Central government administration (25%);Sub-national government administration (25%);Housing construction (25%) Project ID P110772 Borrower(s) REPUBLIC OF TURKEY Implementing Agency Date PID Prepared March 10, 2008 Estimated Date of Appraisal Authorization Estimated Date of Board Approval September 24, 2009 1. Key development issues and rationale for Bank involvement The Government’s 9 th Development Plan for 2007-13 sets out a vision of Turkey with stable growth, a more equitable income distribution, and increased global competitiveness, as the country transforms into an information society and completes EU harmonization. The development priorities embedded in the Plan are clustered around improved competitiveness and employment, equitable human and social development, and efficient provision of high-quality public services, with emphasis on the reduction of regional differences. The agenda for EU accession is a major cross-cutting theme. One of the key areas identified as a priority by the Government and by the recently approved Country Partnership Strategy (CPS) is Turkey’s vulnerability to natural disasters, especially earthquakes, floods and wildfires due to severe droughts. Natural disasters disproportionately affect the poor- those who live in slum and squatter settlements on steep hillsides, in poorly drained areas, or in low-lying coastal zones. From 1994 to 2003, deaths per reported disaster were on average seven times higher in countries of low development than in highly developed countries 1. Over 90 per cent of losses in human life from natural disasters around the world occurred in poor countries. Two stylized facts are noteworthy in this context: First , studies of the impact of natural disasters point to a discernible short-term macroeconomic impact. A common finding is an immediate contraction in output and a worsening of external and fiscal balances, and an increase in poverty. 2 Second , investment in hazard risk reduction and mitigation saves lives and money. Macro- level assessments also show a high benefit to cost ration for DRR measures. For example, the US Geological Survey and the World Bank estimated that an investment of $40 billion would have prevented losses of $280 billion in the 1990s 3 . These two facts point to the need for liquidity support to manage the immediate aftermath of a disaster while investing in and maintaining a robust hazard risk reduction framework. Turkey is one of the most vulnerable countries in the world to natural disasters due to its location within the active earthquake zones. It is estimated that 81 percent of the population of Turkey lives in 1 http://www.iucn.org/themes/disaster/ecosystems_livelihoods/index.htm 2 Macroeconomic Implications of Natural Disasters in the Caribbean, TOBIAS RASMUSSEN, International Monetary Fund (IMF) 3 http://www.dfid.gov.uk/pubs/files/disaster-risk-reduction-study.pdf Page 2 the areas at risk from at least two hazards, such as earthquakes, floods or landslides. These areas also generate an estimated 83 percent of the country’s GDP 4 . T he probability of economic losses exceeding $11.4 billion in one year is about 0.5 percent. This is about 6 percent of the country’s GDP. The probability of annual losses exceeding $3.5 billion is about 5 percent. Earthquakes have the largest impact on people’s lives and cause significant economic damage as the country lies on the 1,400- kilometer long Northern Anatolian fault, which slips at a rate of 24 millimeters per year. Between 1992 and 2004, Turkey experienced 130 earthquakes of 5.0 and above on the Richter scale. Over the last 50 years there have been 17 earthquakes with a magnitude greater than 6.8. In total these caused over 80,000 causalities and heavy damage to about 450,000 buildings. The most devastating recent earthquake was in 1999 in the Marmara region which killed about 17,000 people and made 200,000 people homeless. The State Department for Planning ( Devlet Planlama Teskilati , 1999)estimated direct economic losses of between US$9 billion and US$13 billion, (industrial facilities accounting for US$2 billion, buildings US$5 billion, and infrastructure US$1.4 billion) plus a similar figure for the costs of indirect losses generated through lost production during the many months required for factories and industrial facilities to return to their pre-disaster production levels 5 and resulted in the estimated fiscal cost of up to $2.2 billion. Floods are among most frequent natural disasters in Turkey with over 1,300 events reported in the period 1955-2002 6 causing about 1,240 deaths and serious damages to over 61,000 dwellings. The main purpose of this project would be to provide a source of immediate liquidity that could serve as a source of bridge financing while other sources (e.g. concessional funding, bilateral aid, or reconstruction loans) are being mobilized following a natural disaster. In parallel the Bank will work with the Government of Turkey through a number of ongoing and planned activities to develop and enhance the capacity of the Government of Turkey to manage natural hazard risk. The Bank has been a close partner with Turkey in the recovery from disasters and since 1999 in the hazard mitigation efforts. Between 1992 and the present the Bank responded to Government requests for assistance in the aftermath of six disaster emergencies – the Erzincan earthquake, flooding and mudslides in Senirkent and Sütçüler, flooding and landslides in the Western Black Sea Region, an earthquake in southern Adana, and finally, the devastating Marmara earthquake. Over the time, notably, since the Marmara earthquake, the support of the Bank has gradually moved from ex-post assistance to ex-ante mitigation, with a major part of the Marmara Earthquake Emergency Reconstruction (MEER) project dedicated to the preparedness and mitigation, and more recently, through ISMEP project targeting key public facilities and emergency response institutions in Istanbul. While Istanbul is, as should be, the current focus due to its vulnerability, economic, social and cultural importance, one must remember that 92% of the country’s territory, where 95% of population lives, is prone to earthquakes. Important cities such as Izmir and Adana, just to name two, also straddle the seismically active zone. 2. Proposed objective(s) The objective of the proposed Deferred Draw Down Option (DDO) is to make liquidity rapidly available to the Turkish authorities in the immediate aftermath of a catastrophic natural disaster to help mitigate the impact of the disaster on affected people. 3. Preliminary description 4 Natural Disaster Hotspots – A Global Risk Analysis; World Bank, Washington, D.C., 2005 5 Özerdem, A. and Barakat, S. 2000: After the Marmara earthquake: lessons for avoiding short cuts to disasters. Third World Quarterly 21(3), 425–39. 6 Country Strategy Paper for Natural Disasters in Turkey , JICA, Ankara, 2004 Page 3 The project proposes to set up a $500 million DDO as liquidity support for the Government of Turkey in the event of a natural disaster. The triggers for drawing funds will be a natural disaster in Turkey (to be defined during project preparation but should include earthquakes, floods, landslides and fires) and declaration of a national emergency by the Prime Minister’s Office. Throughout the drawdown period, the satisfactory implementation of the hazard risk management program would be monitored periodically. Unlike other operations processed under OP 8.60, the Cat DDO would only require the adequacy of the macroeconomic framework to be established at effectiveness and reconfirmed at renewal. 4. Environment Aspects Vulnerability to hazards is related to environmental and social themes. Land use patterns, human settlement developments and construction practices that are not sensitive to weather related hazards contribute significantly to unsafe conditions. Recurrent patterns include encroachments into flood plains and substandard construction on unstable slopes. Land use practices that do not respect natural resource protection, as well as environmental factors such as depletion of forests and mangroves, coastal erosion, siltation, and inadequate water and water-shed management, may further exacerbate the impacts of natural hazards. It is anticipated that changes in demography and climate, and the continuation of unsound environmental practices and development patterns may increase frequency and losses from small and medium size disasters. These will be considered during the assessment of the HRM framework 5. Tentative financing Source: ($m.) Borrower 0 International Bank for Reconstruction and Development 500 Total 500 6. Contact point Contact: Abhas Kumar Jha Title: Advisor to Executive Director Tel: (202) 458-1050 Fax: Email: ajha@worldbank.org