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Natural disasters could cost an average US$278m a year for PICs

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Island Business: June 2013 Dionisia Tabureguci - Year after year, earthquakes and tropical cyclones have battered a number of small islands countries in the Pacific region, some to such a degree that thousands of lives are lost and millions of dollars in damages are incurred.

They have become regular visitors to the region, their tendency to disrupt national planning and put pressure on national budgets becoming as much a concern as their propensity to cut swathes through national population and bring untold trauma. Not surprisingly, scientific studies have categorised some of them as among the most vulnerable countries in the world when it comes to their exposure to natural hazards and indeed, while earthquakes and cyclones have been identified as the region’s two chief nemeses, the region is not spared from other forms like flooding, volcanic eruptions and tsunamis.

As momentum increases in the region to address their ravaging impacts, a new research is shedding new light on just how exposed Pacific Islands Countries (PICs) are to earthquakes and tropical cyclones, projecting an average annual bill of some US$278 million for 14 PICs from damages they will sustain from these two forms of natural disasters. Known as the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), the multi-donor-supported project is administered by the Secretariat of the Pacific Community (SPC) through its Applied Science and Technology Division (SOPAC).

It uses a combination of historical data and new mapping technology to give vulnerable islands nations in the region improved tools for planning and preparedness.

Pioneering project

“PCRAFI was started six years ago to assist Timor Leste and 14 PICs—Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Nauru, Niue, Palau, Papua New Guinea, Republic of Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu—with managing risks from natural disasters,” World Bank’s senior country officer for the Pacific Islands, Robert Jauncey, told ISLANDS BUSINESS. It is the bank’s pioneering initiative established for the Pacific in 2007. “It has been designed to provide countries with information and tools for risk assessment, disaster risk financing and most recently as of January this year, innovative disaster-related insurance solutions for five PICs.

“This support is especially important for the Pacific, one of the most disaster-prone regions in the world, where natural hazards cause millions of dollars of damage and threaten the lives of tens of thousands of people.

“Assessments conducted under the programme have found that the average annual cost from natural disasters is around 2% of Gross Domestic Product (GDP). National losses as a proportion of GDP are even higher for countries like Vanuatu and these costs take a major toll,” Jauncey said.

By making available crucial data for each country—such as its population, its inventory on nationwide infrastructure, crops and buildings, their estimated value, how each country is placed in a simulation of historical natural hazards data for the Pacific region and the possibility of tropical cyclones and earthquakes hitting them over the next 50 years and how many lives are likely to be lost—the PCRAFI project has been able to give each Pacific islands nation a better picture of its exposure than was perhaps ever available to it.

For instance, according to the individual country profiles, four PICs—PNG, Solomon Islands, Tonga and Vanuatu—are sitting on what’s known as the Pacific ‘Ring of Fire’, meaning they “geographically sit on the boundaries of tectonic plates, which are known to be very active seismic zones that can generate large earthquakes and sometimes major tsunamis that can travel great distances.”

Vulnerable PICs

While that increases their vulnerability as it puts them directly in a high-risk location, the rest of the PICs are equally vulnerable. Despite being in “quiet seismic areas”, they are surrounded by the Pacific ‘Ring of Fire’ and to varying degrees—interestingly with the exception of Nauru (see story on page 19)—each has had its fair share of tropical cyclones, earthquakes and tsunamis.

PNG, the biggest landmass in this group of PICs and with a population of over 7 million, has historically been at the brunt of its default geographical location, perhaps suffering the most out of all PICs.

“Many earthquakes caused deaths and destruction in Papua New Guinea in the last decades,” its PCRAFI country profile read.

“A recent and tragic example is the 1998 magnitude 7.0 earthquake which struck in the north coast region near Aitape, triggering a large undersea landslide that caused a devastating tsunami with almost 2,200 fatalities and US$50 million in economic losses.” PNG, it added, is located south of the equator at the northern extremity of an area known for the frequent occurrence of tropical cyclones with damaging winds, rain and storm surges between October and May.

“Positioned as such within an area that spans the equator to New Zealand in latitude and Indonesia to east Hawaii in longitude, PNG is located in an area that has seen “almost 1000 tropical cyclones in the last 60 years, with an average of about 16 tropical storms each year. “The northern part of the country is close to the equator where tropical storms are rarer.

The southern part, however, was affected by severe cyclones multiple times in the last few decades. For example, tropical cyclones Justin and Guba in 1997 and 2007 respectively, caused between 180 and 260 fatalities; brought torrential rain that produced widespread flooding and landslides; and damaged buildings, infrastructure and crops with about US$300 million to US$500 million in losses combined,” the PNG country profile further read.

PNG’s risk model under the PCRAFI project shows there is a 40 percent chance it will, over the next 50 years, experience at least one severe tropical cyclone which will be destructive enough to cause widespread damage and significant economic losses.

Costly exposure

But PNG’s predicament in terms of projected economic losses pales in comparison with the other three PICs that sit on the Pacific ‘Ring of Fire’ and few others surrounded by it.

The other three—Vanuatu, Solomon Islands and Tonga—and five others—Niue, Federated States of Micronesia(FSM), Fiji, Marshall Islands and Cook Islands are actually among the top 20 vulnerable countries in the world with the highest average annual losses from natural hazards as a proportion of GDP.

That ranking, ISLANDS BUSINESS was told, incorporated data from the PCRAFI modelling work and information from research conducted by the United Nations and World Bank for the production in 2010 of the publication Natural Hazards, UnNatural Disasters: The Economics of Effective Prevention.

Under PCRAFI’s risk modelling, projected annual cost of damages sustained (in US dollars) by the eight PICs are: Cook Islands—$5 million (2.04% of national GDP); Fiji—$79 million (2.62 % of GDP); FSM— $8 million (2.78% of GDP); Marshall Islands—$3 million (2% of GDP); Niue—$0.9 million (5.6% of GDP); Solomon Islands—$20.5 million (3% of GDP); Tonga—$15.5 million (4.3% of GDP); and Vanuatu—$48 million (6.5% of GDP). It’s equally costly for the others. Kiribati is projected to experience an annual economic loss of $0.3 million (0.19% of GDP); Nauru—less than $2,000 (0.05% of GDP), Palau—$2.7 million (1.59% of GDP); PNG—$85 million (0.89% of GDP); Samoa—$10 million (1.76% of GDP); and Tuvalu—$0.2 million (0.62% of GDP).

In total, that’s roughly US$278 million a year bill for damages expected from tropical cyclones and earthquakes alone in all the 14 PICs combined.
PCRAFI’s risk modelling is also able to project cost over the next 50 years and the number of lives lost (see Country Risk Profile box on page 20) from impacts of tropical cyclones and earthquakes.

To see that within the context of minimal, if not negative, annual economic growth in most countries in the Pacific, natural disasters do take their toll on the stressed government dollar already under pressure from inefficiency, corruption and wastage. Alongside natural hazards, these are common weaknesses in many Pacific economies.

Understandably, tackling projected associated costs and being able to better plan around natural disasters using the wider range of information now available under PCRAFI would go a long way in saving monetary resources and lives.

Financial solution

To that end, project PCRAFI has been further developed to give governments in the Pacific not just technical data but financial solutions as well. “The Pacific Risk Information System (PacRIS) is one part of the PCRAFI programme which includes a regional geospatial database and country-specific catastrophe risk models and maps,” Jauncey said. “This provides governments and those institutions responsible for managing disaster response with the tools and information they need to quickly assess damages following a disaster. For example, it has mapped an estimated 3.5 million buildings for vulnerability to natural hazards. “In addition, PacRIS is informing the Pacific Disaster Risk Financing and Insurance Programme (PDRFI). This insurance pilot scheme aims to help Pacific Islands nations—in its pilot stage, the Marshall Islands, Samoa, Solomon Islands, Tonga and Vanuatu—to deliver an immediate and effective response when a disaster strikes, by allowing them to access affordable earthquake and hurricane catastrophe coverage.

“It relies on state-of-the-art risk modelling techniques and is the first ever Pacific scheme to use parametric triggers, linking immediate post-disaster insurance payouts to specific hazard events,” Jauncey added.

“Through the scheme, the World Bank will act as an intermediary between the Pacific Islands nations and a group of insurance companies selected through a competitive bidding process—Sompo Japan Insurance, Mitsui Sumitomo Insurance, Tokio Marine & Nichido Fire Insurance and Swiss Re. “AIR Worldwide provides the underlying risk modelling for the transaction. The pilot is being supported by the World Bank, Secretariat of the Pacific Community and the Asian Development Bank with financial support from the Government of Japan, the Global Facility for Disaster Reduction and Recovery (GFDRR) and the European Union,” said Jauncey.

Out of the five PICs that have joined the pilot PDRFI insurance scheme, four are on the list of top 20 most vulnerable countries.

These five join as part of the Pacific Catastrophe Risk Insurance Pilot component of PDRFI. Said Paula Holland, Manager Natural Resource Economics and Governance at SPC: “The Pacific Catastrophe Risk Insurance Pilot is one part of the PDRFI programme and was launched in January 2013. It will run for two years to test the viability of market-based catastrophe risk insurance solutions in the Pacific.

“The objectives of this pilot are to: (i) test the credibility of the catastrophe risk models for market transactions; (ii) assess the risk appetite of international reinsurers for Pacific catastrophe risks; and (iii) test the viability of Pacific catastrophe risk insurance.” Holland oversees the resource economics programme at SOPAC.

Insurance plan for PICs

While the actual work on PCRAFI began in 2008, where in conjunction with AIR Worldwide, the World Bank developed country risk profiles for the Pacific as part of the heavily technical Phases One and Two, PDRFI is one of the activities under Phase Three of PCRAFI. Disaster Risk Financing Insurance is unlike conventional disaster insurance schemes because it is ‘parametric’, said Holland. “Conventional insurance requires an assessment of the costs an event causes before an insurance payout can be made. By comparison, parametric insurance is triggered by the occurrence of a specific event (eg: cyclone or earthquake). To determine whether a payment will be triggered under the DRFI, models of the scale of costs of events are used, not actual costs,” Holland added. In 2013, the aggregate insurance premium required by the five PICs amounts to around US$45 million and is being paid for by the Government of Japan.

“Given the innovative structure of the pilot and the current budget constraints faced by PICs, the Government of Japan has agreed to co-finance the catastrophe risk insurance premiums for the first two years of the pilot operations. After this point, alternative sources of funding for premiums will need to be sought,” said Oliver Mahul, programme coordinator at the World Bank. The scheme, he added, is available to other PICs during the second year of the pilot, but they will have to pay their own premium. They still qualify, however, to take advantage of the technical assistance activities offered as part of the project.

Natural disaster meets climate change

It can be seen that through PCRAFI, PICs now have a clear idea of the economic loss they are likely to suffer from earthquakes and tropical cyclones. While these two forms of nature’s wrath may be their chief nemeses, climate change is another natural phenomenon that has gradually surfaced to be a grave concern. The impacts are perceived to have far reaching permanence to them that PICs might be better off if they had to deal with natural hazards alone. But climate change is as real in the region as natural disasters in the way that most of these small islands countries are positioned to suffer issues like population displacement, rising water level and food security alarm as a result of climate change.

Because the line between climate change and natural hazards is blurring, there is a growing recognition in the region that they should be tackled together. In Phase 3 of PCRAFI, there are expectations that climate change will be added to the country risk profiles generated by AIR Worldwide and the World Bank, according to Holland. In July, in a first of its kind in the region and in the world, a conference in Fiji will merge two major regional conferences—one on climate change and the other on disaster risk management, narrowing the gap that exists between these two issues.

Stakeholders expected to attend include representatives of regional governments, civil society, private sector, regional and international donor organisations among others. But what’s perhaps crucial is that regional institutions that have climate change and disaster risk management (DRM) in their portfolios, such as the SPC and the Secretariat of the Pacific Regional Environment Programme (SPREP), will be talking together on a common platform, that of DRM and climate change combined. “Preparing for natural disasters makes imminent sense as a precautionary measure against climate change,” said SPREP Director General, David Sheppard. “Some natural disasters are expected to be exacerbated or made more intense by climate change.

As a result, SPREP and partners, particularly SPC, are working with PICs on linking work done on disasters as well as climate change. SPREP recognises the importance of integrating responses to climate change and disaster risk management at national and regional levels. A concrete response to this has been the development of Joint National Action Plans (JNAPs) in a number of PICs, which integrate these key areas and also involve close and effective cooperation between SPREP and other regional agencies particularly SPC. There is also a series of regional meetings in Nadi from 1 to 11 July which will culminate in a joint meeting of the Pacific Platform for Disaster Risk Management (PPDRM) and the Pacific Climate Change Roundtable (PCCR) from 8 to 11 July. SPREP, SPC, UNISDR and other relevant agencies are working closely on this major event, which represents a first for the region and a first for the world,” Sheppard added.

PICs may have at their disposable a very comprehensive technical financial solution package for natural hazards through project PCRAFI but being also on the line of fire from impacts of climate change, they have comparatively little to go on with. SPREP’s ambition to do something similar to PCRAFI in relation to climate change and the impact to PICs has been hampered by lack of resources while finances available to PICs through global climate change funds are difficult to access because of their stringent requirements. However, “there are numerous cost-benefit analyses that have been carried out by SPREP under the Pacific Adaptation to Climate Change Project that could contribute to this enhanced understanding of what climate change will mean for the region,” said Sheppard.

For now, the closest to an integrated effort there is in the Pacific is the JNAPs in some PICs. “These have implementation strategies attached that seek to tackle immediate vulnerabilities as a common sense measure, while also planning more long-term measures against greater damages from climate change,” Sheppard added. “SPREP’s work on climate change adaptation through the Pacific Adaptation to Climate Change project also seeks to integrate responses to climate change across sectors and across the areas of climate change adaptation and disaster risk reduction.”

WHAT’S PCRAFI?

PHASE I & 2

In 2008, the first country risk profiles were developed for eight PICs by Air Worldwide and the World Bank under Phase 1. These profiles were then improved and expanded to include additional data and country coverage under Phase 2. Several key outputs were developed in Phase 2 including:

• Regional historical hazard and loss database for major disasters which contain a historical earthquake catalogue covering approximately 115,000 events of magnitude 5 or greater that occurred in the region between 1768 and 2009, and a historical tropical cyclone catalogue includes 2,422 events from 1948 to 2008;

• The hazard models, which include earthquakes (both ground shaking and tsunamigenic) and tropical cyclones (wind, storm surge and excess rainfall), have been peer-reviewed by Geoscience Australia who described them as “high standard, thorough and representative of best practice.”

• The regional GIS exposure database contains components for buildings and infrastructure, agriculture, and population. For the building and infrastructure data set, more than 400,000 building footprints for structural classification were digitised from high-resolution satellite images;

• Country-specific catastrophe risk models have been developed for each country integrating data collected and produced through the risk modelling process and include maps showing the geographical distribution of hazards, assets at risk, and potential losses that can be used to prioritise disaster risk management interventions;

• Pacific Risk Information System includes the data and information captured in the database and makes them available in an on-line portal. It offers better risk information for smarter investments;

• At the request of PICs during the Pacific Seminar of the 2011 World Bank/IMF Meetings held in November 2011, the World Bank initiated Phase 3 of PCRAFI. The third phase of the PCRAFI aims to provide further technical assistance to the PICs for the refinement of the Pacific disaster risk assessment tools and embedding the application of these tools into planning and budgetary processes. PDRFI is one of the activities under Phase 3 of PCRAFI.

Source: Paula Holland, SOPAC


Nauru, safest place in the Pacific

If the ‘safest place’ in the Pacific may be measured by how vulnerable each country is to natural disasters, then Nauru would have to be on top of the list as the ‘safest’. Information from the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) database reveals Nauru as least exposed to natural disasters compared to 13 other Pacific Islands Countries (PICs) and the likelihood of it experiencing costly damage from earthquakes and tropical cyclones is almost zero. “Nauru is expected to incur, on average, less than US$2,000 a year in losses due to earthquakes and tropical cyclones,” PCRAFI says in its risk assessment profile for individual PICs. “In the next 50 years, Nauru has a 50 percent chance of experiencing no economic losses and no casualties, and a 10 percent chance of experiencing a loss exceeding US$0.2 million and no casualties.” PCRAFI, a multi donor-funded project implemented by the Secretariat of the Pacific Community (SPC) through its Applied Geoscience and Technology Division (SOPAC), is a result of seven years of multi-layered data collation for 14 PICs based on the history of natural disasters in the Pacific and the results have been used to draw up risk profiles for each country. A revelation emerging from this is that Nauru appears the least
exposed and has experienced no tropical cyclones nor earthquake or tsunami in the last 60 years, whereas others have had their share of these natural hazards, not one of them being spared.

“In the Pacific region from Taiwan to New Zealand in latitude and from Indonesia to east of Hawaii in longitude, almost 2,500 tropical cyclones with hurricane-force winds spawned in the last 60 years with an average of about 41 tropical storms per year. “However, in historical times, none of these cyclones affected Nauru,” PCRAFI’s country risk profile for Nauru said. It could well be the safest place in the region, sheltered as it is in a “very quiet seismic area” although, according to SOPAC Manager Natural Resources Paula Holland, a low level of risk does remain for Nauru. “There are no historical records of disasters caused by earthquakes or cyclones in Nauru,” Holland told ISLANDS BUSINESS. “While this does not mean that no risk exists, you can say that based on historical records, the country is very much less risky than others for these hazards,” Holland added. Nauru’s prime location on the equator is seen as its saving grace, as this means it is “outside the belt of frequent occurrence of tropical cyclones with damaging winds, rains and storm surge between the months of October and May,” according to its risk profile. While significant wind speeds from local storms are possible in Nauru, they are not expected be strong enough to wreak damage to crops, buildings and infrastructure.

The country is also spared from killer earthquakes and tsunamis, unlike the other 13 PICs and that again it owes to its location. “Nauru is situated in a very quiet seismic area but is surrounded by the Pacific ‘Ring of Fire” which aligns with the boundaries of the tectonic plates,” its country risk profile read. “These tectonic plate boundaries are extremely active seismic zones capable of generating large earthquakes and, in some cases, major tsunamis that can travel great distances. In historical times, no records of earthquake or tsunami damage in Nauru have been recorded.” In the next 50 years, the likelihood of Nauru experiencing at least one earthquake or tsunami is estimated under PCRAFI to be nil.

COUNTRY RISK PROFILES—Assessed 2010

COOK ISLANDS (population=19,800)

The Cook Islands are expected to incur, on average, about US$5 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, the Cook Islands have a 50% chance of experiencing a loss exceeding US$75 million and casualties larger than 130 people, and a 10% chance of experiencing a loss exceeding US$270 million and casualties larger than 200 people.

FIJI (population=847,000)

Fiji is expected to incur, on average, US$79 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Fiji has a 50% chance of experiencing a loss exceeding US$750 million and casualties larger than 1,200 people, and a 10% chance of experiencing a loss exceeding US$1.5 billion and casualties larger than 2,100 people.

FEDERATED STATES OF MICRONESIA (population=112,000)

The Federated States of Micronesia (FSM) is expected to incur, on average, US$8 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, FSM has a 50% chance of experiencing a loss exceeding US$105 million and casualties larger than 220 people, and a 10% chance of experiencing a loss exceeding US$470 million and casualties larger than 600 people.

KIRIBATI (population=101,400)

Kiribati is expected to incur, on average, about US$0.3 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Kiribati has a 50% chance of experiencing a loss exceeding US$1 million and casualties larger than 10 people, and a 10% chance of experiencing a loss exceeding US$40 million and casualties larger than 200 people.

MARSHALL ISLANDS (population=54,800)

The Republic of the Marshall Islands is expected to incur, on average, US$3 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, the Republic of the Marshall Islands has a 50% chance of experiencing a loss exceeding US$53 million and casualties larger than 50 people, and a 10% chance of experiencing a loss exceeding US$160 million and casualties larger than 150 people.

NAURU (population=10,800)

Nauru is expected to incur, on average, less than US$2,000 a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Nauru has a 50% chance of experiencing no economic losses and no casualties, and a 10% chance of experiencing a loss exceeding US$0.2 million and no casualties.

NIUE (population=1,480)

Niue is expected to incur, on average, US$0.9 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Niue has a 50% chance of experiencing a loss exceeding US$15 million and casualties larger than 20 people, and a 10% chance of experiencing a loss exceeding US$60 million and casualties larger than 25 people.

PALAU (population=20,500)

Palau is expected to incur, on average, US$2.7 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Palau has a 50% chance of experiencing a loss exceeding US$30 million and casualties larger than 45 people, and a 10% chance of experiencing a loss exceeding US$247 million and casualties larger than 175 people.

PAPUA NEW GUINEA (population=6,406,000)

Papua New Guinea is expected to incur, on average, US$85 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Papua New Guinea has a 50% chance of experiencing a loss exceeding US$700 million and casualties larger than 4,900 people, and a 10% chance of experiencing a loss exceeding US$1.4 billion and casualties larger than 11,500 people.

SAMOA (population=183,000)

Samoa is expected to incur, on average, US$10 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Samoa has a 50% chance of experiencing a loss exceeding US$130 million and casualties larger than 325 people, and a 10% chance of experiencing a loss exceeding US$350 million and casualties larger than 560 people.

SOLOMON ISLANDS (population=547,500)

The Solomon Islands are expected to incur, on average, US$20.5 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, the Solomon Islands have a 50% chance of experiencing a loss exceeding US$240 million and casualties larger than 1,650 people, and a 10% chance of experiencing a loss exceeding US$527 million and casualties larger than 4,600 people.

TONGA (population=103,000)

Tonga is expected to incur, on average, US$15.5 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Tonga has a 50% chance of experiencing a loss exceeding US$175 million and casualties larger than 440 people, and a 10% chance of experiencing a loss exceeding US$430 million and casualties larger than 1,700 people.

TUVALU (population=9,960)

Tuvalu is expected to incur, on average, US$0.2 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Tuvalu has a 50% chance of experiencing a loss exceeding US$4 million and casualties larger than 15 people, and a 10% chance of experiencing a loss exceeding US$9 million and casualties larger than 50 people.

VANUATU (population=246,000)

Vanuatu is expected to incur, on average, US$48 million a year in losses due to earthquakes and tropical cyclones. In the next 50 years, Vanuatu has a 50% chance of experiencing a loss exceeding US$330 million and casualties larger than 725 people, and a 10% chance of experiencing a loss exceeding US$540 million and casualties larger than 2,150 people.

Last Updated on Friday, 21 June 2013 14:01  

Newsflash

Exploring for deep sea minerals and possible exploitation in future presents an emerging new economic opportunity for Pacific Island countries. But this opportunity must be balanced against protection of the ocean environment and preservation of rare and fragile ecosystems and ocean habitats.

Dr Russell Howorth of the Secretariat of the Pacific Community (SPC) emphasised this point in his opening address at the Regional Training Workshop on Geological, Biological and Environmental Aspects of Deep Sea Minerals, saying that ‘the precautionary approach must prevail.’ Dr Howorth is Director of SPC’s Applied Geoscience and Technology (SOPAC) Division.

The workshop, held recently in Nadi, was organised by the EU-funded, SPC Deep Sea Minerals (DSM) Project and is part of the technical assistance provided to the 15 Pacific-ACP (African Caribbean and Pacific) states.

The 15 states are the Cook Islands, Federated States of Micronesia, Fiji, Kiribati, Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor Leste, Tonga, Tuvalu and Vanuatu.

He said that DSM Project team members have already completed 13 national stakeholder consultation workshops across the region, with plans to visit the remaining two countries, Papua New Guinea and Timor Leste, in September.