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

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Table 6.1 shows that in addition to low levels, the rates of income growth have also been low. While most Pacific countries enjoy relative macroeconomic stability, their fiscal situation tends to be weak. This reflects these countries’ reliance on foreign aid. Table 6.1: Summary of Selected Macro-Economic Indicators Country GDP per capita growth (annual %) Inflation (% annual change in CPI) Cash surplus/ deficit (% of GDP) Fiji 3.3 2.4 -9.5 Fed States of Micronesia 0.6 1.0 -6.7 Kiribati 0.7 2.3 -30.2 Marshall Islands 2.0 2.0 -3.1 Palau 3.4 -12.4 Papua New Guinea 0.4 7.4 -2.0 Samoa 2.5 2.4 -0.9 Solomon Islands 2.0 6.8 4.0 Timor Leste -7.0 4.1 Tonga 2.1 11.0 -0.6 Vanuatu -0.2 2.8 0.9 Source: World Development Indicators 2003 Clearly, poor economic performance makes it harder to achieve good infrastructure outcomes. However, the macroeconomic picture does not explain the Pacific infrastructure challenge. The real challenge is that Pacific countries demonstrate worse infrastructure performance than could be expected for their level of GDP. This paper does not focus on why Pacific countries are poor. Rather, it examines why Pacific countries appear to under-perform in infrastructure service provision even for their relatively low level of income. An obvious possible explanation is that the costs of providing infrastructure services are naturally high in the Pacific. This is due to a set of inherent characteristics shared by all Pacific countries: Population size and density. Very small populations constrain development. So do very dispersed populations. They make it difficult to achieve economies of scale in infrastructure service provision. For example, it costs about the same amount to install an electricity generator for a town with a population of 5,000 as in one with a population of 20,000. The difference is that the unit cost of service provision is higher in the smaller center. Providing a densely populated community with telecommunications or water costs less per person than extending these services out to remote dispersed communities. Pacific countries share these challenges to varying degrees. Timor-Leste, Fiji and Papua New Guinea have relatively large populations, but they are very dispersed. Kiribati, Tonga and FSM have small, but relatively dense populations. Marshall Islands, although small, has the highest population density Remoteness. Most Pacific countries are a long way from major trading centers. Transporting fuel, building materials, machinery or parts is more costly for Pacific countries, raising the cost of service provision. Kiribati, Marshall Islands, FSM, Samoa and Tonga are all over 3,500 km from the nearest major port. 20
Vanuatu, Solomon Islands and Papua New Guinea are less remote, at distances comparable to some Caribbean countries’ proximity to the US market. Palau is the least remote of the Pacific countries Topography. Topography also raises the cost of infrastructure service provision. Very high mountainous terrain makes it difficult and more costly to link infrastructure networks with hinterland communities. The Melanesian countries of Papua New Guinea, Solomon Islands, Vanuatu and Timor-Leste are all relatively mountainous. No land elevation can be equally disadvantageous. Small low lying atolls have little topsoil, little groundwater and are vulnerable to rising sea levels, high tides and drought. Kiribati has a small freshwater lens which often is under threat in times of drought. Alternative water sources, such as desalination plants are expensive to install and maintain. Countries comprised of numerous small, dispersed islands or atolls face the additional cost of linking services between islands. It is easier, and less costly to extend a telecommunications network to all communities on a single, flat landmass like Barbados, than it is to link the many islands of the Federated States of Micronesia, spread over a large Exclusive Economic Zone (EEZ). Table 6.2 shows that most Pacific countries share this disadvantage. They tend to be chains or archipelagos of more than 20 islands, while most comparator countries are less dispersed Susceptibility to natural disaster. Natural disasters such as cyclones, earthquakes or drought significantly increase the cost of infrastructure service provision. Damage from such events results in considerable loss of physical assets and in enormous economic costs. Samoa’s average losses during disaster years amounted to almost half of their GDP for those years. In Vanuatu, it amounted to a third 8 . Hazard management procedures and equipment are a further expense, although they help to reduce the damage (and therefore the costs) from disasters. In the Pacific, Papua New Guinea, Fiji and Tonga have experienced natural disasters most frequently – over 30 disasters in the past 55 years. Table 6.2 provides an overview of the potential for natural disaster in Pacific and comparator countries. 8 Regional Engagement Framework FY2006-2009 for Pacific Islands, May 3, 2005 21
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 14 and 15: Fiscal, regulatory and policy decis
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 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
Page 64 and 65: Air services would also benefit fro
Page 66 and 67: 7.2.5 Regional Coordination One opt
Page 68 and 69: 8 What’s the Size of the Challeng
Page 72 and 73: Figure 8.5: Mainlines Trend 0.600 N
Page 76 and 77: 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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