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Cablegate: Taiwan Remains Vulnerable to Economic Impact Of

VZCZCXRO2316
RR RUEHCN RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHVC
DE RUEHIN #0236/01 0511008
ZNR UUUUU ZZH
R 201008Z FEB 08
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 8161
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 4073
RUEHBJ/AMEMBASSY BEIJING 7846
RUEHUL/AMEMBASSY SEOUL 9335
RUEHKO/AMEMBASSY TOKYO 9591
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC

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

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