Floods have been accounted for 85 percent of all natural disasters since 2000 in Malaysia. These recent instances really alerted the general public:

• In December 2021, Malaysia experienced some of the worst floods in decades. Torrential rain over three days caused severe flooding in eight states, partially submerging towns and villages. More than 70 people died, and the total of displaced victims reached 67,500.
• In March 2023, the southern state of Johor was the worst-hit among six Malaysian states affected by flooding. Nearly 40,000 people left their homes seeking refuge from rising waters, and over 1,000 were evacuated in other states.

Malaysia is being battered by increasingly frequent and heavy downpours. Unless addressed, these trends, coupled with projections of even higher precipitation, could significantly worsen flood risks.

The World Bank Report

Building resilience to floods is imperative for sustainable private sector development and growth in Malaysia. However, empirical evidence on the vulnerability of businesses to flood risks has been scarce. A novel business-level survey conducted on 1,500 Malaysian businesses reveals that small and medium enterprises (SMEs) are particularly vulnerable to floods, both directly and indirectly.

Key findings include:

• SMEs were 50 percent more likely to report financial damages due to floods than large businesses.
• Limited access to finance for adaptation and resilience is a significant barrier for Malaysian businesses, especially SMEs.
• Insurance payouts represent an important source of funding for recovery efforts.

The study estimates that a hypothetical 1-in-20-year flood could cost Malaysia up to 4.1 percent of GDP in 2030 and lead to a 2.2 percentage point increase in Malaysia’s unemployment rate. An integrated approach involving the public sector, financial institutions, and the private sector is crucial for building a flood-resilient economy.

This report was prepared through a joint collaboration between the World Bank and Bank Negara Malaysia. This report outlines a range of complementary policy actions in six key areas, focusing on how policy makers in Malaysia can support and foster private sector resilience to floods:

• Enhancing data availability, accessibility, and affordability 
• Developing a long-term flood risk adaptation strategy 
• Strengthening the enabling environment for the financial sector 
• Supporting access to finance for adaptation and recovery 
• Deepening the insurance market 
• Enhancing flood risk awareness and building capabilities
  

Click here to read more about the report.