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

Table 6.3: Aid Flows to the Pacific and Other Regions
Total Aid Flows
1970 – 1999
(1998 US$ m)
Average Annual Aid Flows
per Capita 1995 - 1999
(1998 US$ m)
Pacific 49,300 220
Caribbean 45,100 34
Sub Saharan Africa 416,600 22
Middle East and North Africa 282,600 15
Latin America 111,700 10
Other South Asia 137,800 9
Other East Asia 152,600 8
India 85,000 2
China 41,200 2
Total $1,321,900
Source: Helen Hughes “Aid has Failed the Pacific” ACIS Study 2003
Most of the aid to the Pacific is provided by bilateral donors. Each donor attaches
specific conditions to the aid, which must then be worked into each country’s overall
infrastructure strategy. The conditions are often contradictory and influence
development priorities. This weakens governments’ ability to plan and prioritize for
the ‘big picture’.
For example, in some sectors (e.g. roads), different donors set up, fund, and build
parts of the same infrastructure system and leave it to the government to try and
coordinate the different donor activities. This does not always work very well, and
often produces poor quality infrastructure investment.
In recent years, donors have focused on supporting the social infrastructure and
services, rather than on economic or infrastructure enhancement. Little or no
provision has been made for capital replacement, and consequently much of the
infrastructure in Pacific countries is in a poor state of repair and is aging rapidly.
Many assets can only be replaced or upgraded with new capital injections often
through donor provision. In part this is because governments are not making
adequate provision for full cost recovery through tariffs for infrastructure services, or
insufficient subsidies are being allocated in annual government budgets because of
insufficient fiscal provision and/or inadequate knowledge about the true long term
sustainable cost of providing infrastructure services.
Aid dependence also weakens accountability and risk management. When an
infrastructure asset is created with aid money, the normal disciplines of valuing the
asset and providing for its replacement in the future can be avoided, unless there is a
clear government policy framework to adopt the appropriate fiscal disciplines and
regulatory policy frameworks required to achieve good outcomes. In the longer term,
this is an unsustainable approach to infrastructure investment. Making capital free
may have contributed to poor governance and poor management over time by
removing the pressure to have to pay for valuable assets or provide for their eventual
replacement in the absence of donor aid.
The question is whether donor provision of capital through aid is adequately
coordinated between donors, and whether the policy framework for providing
infrastructure capital to Pacific governments is – unintentionally – hindering good
infrastructure outcomes for consumers and for development policies.
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