EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf

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Fiscal, regulatory and policy decisions are often not aligned, and are sometimes contradictory. For example, a corporatization strategy requires consistency between governance, tax treatment, accounting rules, corporate objectives and fiscal support for corporatized entities. Lack of coordination means that reforms intended to improve performance in the Pacific have often failed to achieve the desired results Although some Pacific countries develop infrastructure master plans, anecdotal evidence suggests implementation of infrastructure development, upgrades and maintenance often lack coordination between sectors. For example, it would make sense to try to coordinate maintenance or upgrades to water pipes and telecommunications lines, which are buried along the same stretches of road. Pacific countries have few institutional arrangements or governance processes in place which traditionally encourage accountability. There is very little competition for services, and few effective oversight mechanisms in place to ensure monopoly providers operate efficiently and price effectively. In fact, in many Pacific countries, infrastructure services are provided and sanctioned by the same entity, the government. This model has failed to provide incentives for good performance. 2.3 Is it Possible to overcome these Barriers Appropriate infrastructure development will only be achieved and sustained in the long term with institutional arrangements and governance structures that offer incentives for good performance and provide for coordination. In the figure below, we propose a framework for infrastructure reform which attempts to address barriers to coordination and accountability: 1) Benchmark performance to identify if reforms are necessary, and if so, what sector-specific challenges must be overcome. Where performance is acceptable, no reform is needed 2) Select the appropriate mix of reforms. These may include public sector reforms, introducing private sector involvement, introducing competition, or a mixture of these solutions 3) Regardless of the reform option selected, governments need to put in place sufficient oversight mechanisms to encourage good performance and discourage poor performance 4) The government needs to give infrastructure development appropriate priority in budget allocation, both to ensure an efficient mix of investment and maintenance, and to provide subsidies which achieve the “biggest bang for the buck” in terms of infrastructure outcomes Choose Reform Option Public Sector Reform Private Sector Involvement Competition Benchmark Performance Reform Required Yes Coordinate Balance Fiscal Priorities No Regulation Governance Community Leave ‘As Is’ Put Oversight Mechanisms in Place to Support Reform 6
5) All relevant policies, plans and implementation mechanisms must be fully coordinated to ensure results. Some of these reforms have been tried before in Pacific countries, with mixed success. Regional benchmarking has been initiated in the electricity and water sectors. These programs have faced some challenges. Many utilities lack the human resources capacity to undertake the required data gathering, and utilities do not adopt a common approach to measuring performance for each indicator, therefore comparisons are not always accurate. In addition, electricity benchmarking results are not made public. This has caused an added capacity burden for utilities, as consultants or donors must contact them directly for data each time a review is undertaken. Keeping the results confidential does not help to create the incentives for improved efficiency one could expect from such a program. Most Pacific governments have initiated public sector reforms to address poor infrastructure sector performance. Corporatization has been successfully implemented for Papua New Guinea’s Water Board, the Fiji Electricity Authority and the Samoa Ports Authority. However, it has been less successful in other cases. Many technical assistance programs have been implemented to strengthen public sector capacity to enable public sector reforms. These have also had mixed success. There are few examples of private sector participation in the Pacific but experience in comparator countries has shown it can help to improve performance. Fiji has had some success in outsourcing electricity generation, Vanuatu’s decision to engage a private operator to deliver water and electricity services under a concession contract has resulted in some of the most efficient services in the region. Ports in Samoa have benefited from adopting a ‘landlord’ model, in which port services are provided by private companies. However, poorly planned PSP arrangements have resulted in additional challenges for infrastructure performance in the Pacific and elsewhere. Competition is limited in the Pacific, but where it has been introduced, it has been effective in achieving performance improvements in certain sectors, despite small scale. 2.4 What’s the Size of the Challenge Improving access to and the quality of infrastructure in the Pacific will require considerable investment. We were unable to obtain comprehensive data with which to calculate investment needs for each infrastructure sector, in each Pacific country. However, Figure 2.2 provides a useful snapshot. It shows that if total investment levels were to be maintained at their current levels, a significant re-allocation of resources would be required. For example, Fiji, which has enjoyed relatively high levels of total investment due to its strong tourism and manufacturing sectors, would need to devote about 25 percent of those investments to the infrastructure sectors. At the other extreme, Solomon Islands would need to allocate almost their entire current investment spending to infrastructure. 7
Page 2 and 3: The Pacific Infrastructure Challeng
Page 4 and 5: Table of Contents 1 Acronyms and Ab
Page 6 and 7: Figure 8.4: Annual Per Capita Inves
Page 8 and 9: Box 7.9: ECTEL - Regulatory Coopera
Page 10 and 11: kWh MDG MIAA MIPA MNOC MOTCA MOU MP
Page 12 and 13: 2 Executive Summary This discussion
Page 16 and 17: Figure 2.2: Estimated Annual Invest
Page 18 and 19: 3 What’s the Purpose of the Discu
Page 20 and 21: Box 4.2: Improving Infrastructure f
Page 22 and 23: 5 How well are Pacific Countries Pe
Page 24 and 25: Figure 5.1: Access to Electricity 1
Page 26 and 27: Water tariffs are often too low In
Page 28 and 29: Table 6.1 shows that in addition to
Page 30 and 31: These characteristics mean that Pac
Page 32 and 33: 6.2 Challenges to Institutions and
Page 34 and 35: 6.2.2 Demographic Issues in the Reg
Page 36 and 37: These high rural populations mean t
Page 38 and 39: Figure 6.3: Comparison of Defining
Page 40 and 41: Lack of legal and regulatory suppor
Page 42 and 43: 7 Challenge: How do we Lift Perform
Page 44 and 45: 7.1.2 Poor Policy Design and Coordi
Page 46 and 47: different, some efficiency may be g
Page 48 and 49: Figure 7.1: Accountability in Infra
Page 50 and 51: Box 7.3: Expert Panels can Improve
Page 52 and 53: Some of these reforms have already
Page 54 and 55: 7.2.2 Choose an Appropriate Reform
Page 56 and 57: Box 7.5: Public Sector Reforms in t
Page 58 and 59: Pacific countries, management salar
Page 60 and 61: There are three classic types of pr
Page 62 and 63: While private sector involvement ma
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Air services would also benefit fro
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7.2.5 Regional Coordination One opt
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8 What’s the Size of the Challeng
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Figure 8.3: Annual Per Capita Inves
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Figure 8.5: Mainlines Trend 0.600 N
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Figure 8.8: Annual Per Capita Inves
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Figure 8.11: Total Annual Per Capit
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9 How do we meet the Challenge This
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Box 9.3: Can private sector involve
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Box 9.6: How can the public sector
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The proportion of mainline access a
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Box A.2: Introducing Telecommunicat
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Universal Access Universal access r
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good example of this. The Kiwi Shar
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Figure A.7: Reported Faults per 100
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Table A.1: Institutional Indicators
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and there have been calls to recons
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A.2 Electricity Sector Analysis A s
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Figure A.10: Average Electricity Ta
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Figure A.11: Economies of Scale in
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interest rate relief on a US$9m loa
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As Figure A.14 shows, Vanuatu perfo
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Table A.3: Industry Structure and G
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Regional Cooperation in Electricity
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A.3 Water and Sanitation Sector Ana
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Figure A.17: Availability of Water
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Figure A.20: Staff per 1000 Connect
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including full operating expenses a
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Corporatization is often employed t
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operating costs, collections levels
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Figure A.25: Road Network Density v
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Federated States of Micronesia at b
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In Samoa: Samoa’s Public Works De
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Many Pacific countries already outs
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4. Domestic and Pacific Island serv
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Figure A.31: TEU Throughput Levels
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system reduces cargo handling effic
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Economies of Scale Port operations
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The landlord model is the most comm
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Fiji 84 Ports The Maritime and Port
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Apia Port has become one of the bes
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Kiribati 90 Ports The Kiribati Port
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In Shipping: Services are considere
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Figure A.36: Total Passenger Throug
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Airline Services Figure A.38 illust
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establishment period. For the offic
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Vanuatu 101 Airports Vanuatu Limite
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Samoa 104 The Samoa Airport Authori
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Institutional Arrangements in Aviat
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Summary of Aviation Analysis The Pa
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Fiji Kiribati Marshall Islands Micr
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Barbados Dominica Grenada Jamaica M
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Samoa Solomon Islands Timor-Leste T
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Samoa Solomon Islands Timor-Leste T
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