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Ground Zero for Commerce Exposure to Climate Change

October 10, 2019

The author has experienced flooding in Southeast Asia for much of his life which was always taken in stride by everyone. Houses on the rivers were built on stilts and everyone was quite sanguine wading through flooded streets while plenty of small personal boats were at the ever ready. Canals gave way to highways and concrete which exacerbated annual rainy season flood conditions. Moreover, industrialization changed the nature of the inhabitants from rice farmers to a population profile based upon modern economic communities. However, climate change is kicking in to have a major impact on commerce and, more importantly, the populations to a dangerous level. Ground Zero in the world's most vulnerable region is Southeast Asia.

Recently, the Nikkei Asian Review published an article entitled Storm Clouds Loom for Companies Unready for Climate Change. As most governments in today's world are managed by hopeless, unscrupulous and confused politicians, perhaps more efficient corporate entities should take the lead to save their own enterprises and do something to save the world as we know it. There you have it-the corporate suits should get their heads out of the sand and step up. 

Fundamentally, corporations in the Ground Zero of Southeast Asia must develop their own solutions in order to survive. Perhaps the most startling example was the 2011 floods in Thailand which were the worst there in five decades impacting global food supplies and shutting down manufacturing concerns from car components to semiconductors. The World Bank estimated that losses of some $46 billion occurred which ranked among the top ten of all insurance payouts.

Do you think the British insured the cost of Brexit before a slim majority of the voting population chose to bail from the EU? Lloyds of London would be upside down had they insured that looming event. Moreover, had a poll been taken of most major UK corporations, the clear answer would have been to "Remain." That result may have spoken to the sanity of cold-hearted corporate behavior and stewardship to their shareholders.

On the other hand, historic flooding in Ayutthaya, Thailand was the traditional effect of monsoon rains causing rivers to overflow their natural banks. The effect of stronger and more erratic seasonal rains was exacerbated by the impact of Japanese corporate activity to artificially create landfill sites in order to transfer automotive manufacturing from Japan to Thailand to take advantage of lower cost Thai labor.

Toyota Motors has over 8% of its global production in Thailand and it lost production in three of its plants during the 2011 flood in Thailand. Honda Motor had to suspend its Thai operations for months following the loss of over 1,000 vehicles flooding which resulted in a sea of floating cars as they were not able to be moved in time. The economic factors which favored the historical choice of these manufacturing locations have faded in significance. 

Nowhere in the world is thought to be more vulnerable than Asia from the threat of climate change. South Asia and Southeast Asia are thought to be the most impacted by global sea level rise. Industry there contributes to the problem through air emissions or extraction of groundwater to cause subsidence.

The Asian Development Bank has reported that six of the world's ten countries facing future extreme weather are close to its home: Bangladesh, Myanmar, Pakistan, the Philippines, Thailand and Vietnam. Their estimate was nearly 49% of Bangladesh's population and 55% of Vietnam's population, representing a total of 135 million people, are vulnerable to rising sea levels. The author is frequently in Vietnam and few industries there have climate change at the top of their agenda.

Moreover, a study by the Stanford School of Earth Sciences reported in the journal, Nature Climate Change, confirmed observations by Indian farmers that the monsoon season has changed in character. There are heavier downpours earlier in the year followed by longer dry spells. Sadly, there is no end in sight as predictions reflect heavier downpours and more frequent dry spells with further extremes on the horizon.

The Asian Development Bank published a comparison of forecast average temperature increase following an active management of climate change relative to a "do nothing case." It is clearly presented below indicating a "business as usual" course will lead to a dark future for Asia.

Clearly, the corporate world must take independent action to solve the problems that their respective governments are unable to address. The threatened Vietnam Delta faces massive future flooding that the government has ignored. However, the Vietnam Chamber of Commerce and Industry has reported, despite the increasing losses arising from changing weather patterns, the companies expect the government to take the lead. Therefore, it is becoming increasingly clear that if the corporations want to keep their rice bowls intact, they must be the ones to take the initiative to maintain their own futures. In the final analysis, it is always the most efficient path rather than relying on governmental bureaucrats whether it is Vietnam or the most developed countries on this planet.

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