Recent weeks have witnessed several disasters in many parts of the world. There has been severe flooding resulting in loss of life and property in places as far apart as Japan, India and Europe.
There have been unprecedented wildfires in California, a deadly drought in Australia and a catastrophic bridge collapse in Italy. While closer to home we have seen heavy loss of life and economic losses in Lombok due to a series of earhquakes, some of which also impacted Bali. Mount Agung still poses an unknown threat.
The causes are many, ranging from the inevitable and unstoppable forces of nature such as earthquakes and volcanoes to forces where humans have probably tipped the balance through ignorance, mismanagement and greed by causing natural cycles of rain, wind, and temperatures to become extreme. Does anyone, apart from one notorious suspect, still believe climate change is a hoax? Then we have the disasters that are more clearly man-made such as the Italian bridge disaster, the actual causes of which will only be known after extensive investigations.
What has this got to do with ‘Money Matters’?
The connection is that there is one common factor that runs through all these disasters, namely money. You cannot prevent earthquakes, but by spending money you can drastically reduce the loss of life and number of injuries. Japan for example, has strict building codes and practices that ensure structures are earthquake-proofed or at least cause less loss of life when they occur. I understand that many deaths and injuries were caused in the recent earthquakes and indeed by earthquakes in many parts of the world by collapsing roofs.
Is it really that difficult to construct buildings using lightweight materials that will not cause serious injury when they fall on people? Are there not ways to strengthen foundations and walls to offer better resistance to nature’s forces? Of course there are. But they all require money. Either from the government or from those who wish to pay more for safety down to the villagers with very limited resources who don’t have the luxury of money to spend on protection which they hope will never be needed.
Poverty alleviation is one way that will help put money into people’s pockets that will enable them to make better choices. Indonesia is making progress in this direction but more needs to be done. Money comes from having jobs; the creation of jobs requires investment. Investors, particularly foreign ones, demand a level playing field, legal certainty, lack of corruption, efficient administrative processes and freedom to move their profits wherever they wish. Without which they will have no difficulty in finding welcome arms elesewhere.
In the case of man-made disasters it all comes down to money again. Infrastructure is critical for the development of a country. We have seen unprecented advances in Indonesia under the presidency of Jokowi. But the money has to be well-spent to ensure high standards of quality and safety. Short cuts due to insufficient funds or corruption can easily lead to disasters. Similarly, failure to maintain structures on an ongoing basis to the same standards can lead to problems later on. You can save money by not servicing your car but sooner or later the cost of an accident or major repair will far exceed the money you saved.
How can an expat mitigate the impact of disasters?
There are the obvious precautions that should be an automatic part of everyone’s financial planning, namely medical insurance, life and critical illness insurance together with general insurance to cover property, cars etc. Yes, they all cost money and you may argue you might get nothing in return. But the unseen benefit is peace of mind, a positive psychological factor that can give you more confidence in everyday life and remove an underlying anxiety that can adversely affect your performance. If you never have to make a claim that is an added bonus.
There are other things you can do. By building up your financial investments and pension schemes in safe offshore jurisdictions you have a buffer against the impact of disasters, loss of your home or job or even the collapse of a currency. When any currency falls heavily in value, paper money will lose its purchasing power but investments in property or stocks, albeit with their own risks, represent solid assests which will retain some if not all of their value.
The ‘don’t keep all your eggs in one basket’ advice applies universally. If you are running a business make sure you have other investments that are completely unrelated and if necessary ring-fenced from creditors in the case of a failed business. A Trust may be able to provide such protection, providing your business isn’t already on the verge of collapse! If you are selling products internationally don’t just focus on one customer or one market. The US threatened trade tarrifs are an example of the potential dangers.
At the end of the day, we know there will be more disasters. Natural ones cannot be prevented; man-made ones can but due to political and financial decisions they too are likely to keep occurring. But we do have control over how we can mitigate the risks and the impact of disasters. It all comes down to choice as to where we decide to allocate our resources. But for now our thoughts go out to all those who have suffered in recent disasters.
Colin Bloodworth, Chartered Member of the Chartered Institute for Securities and Investment (UK), has spent over 20 years in Indonesia. He is based in Jakarta but visits Bali regularly. If you have any questions on this article or related topics you can contact him at firstname.lastname@example.org or +62 21 2598 5087.
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Copyright © 2018 Colin Bloodworth