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

Lack of legal and regulatory support for alternative modes of service
provision. For example, in the Solomon Islands, telecommunications
services are provided under an exclusive license which does not
specifically set rural coverage targets (see Box 7.7). As a result,
telecommunications access is largely limited to the Honiara area.
6.4.1 Inefficient Infrastructure Service Provision
The naturally higher costs of providing infrastructure services in the Pacific also mean
it is particularly important to be as efficient as possible. However, many utilities and
other infrastructure service providers in the Pacific demonstrate significant levels of
inefficiency.
In the water and electricity sectors, Pacific countries have lower labor productivity
levels than most comparator countries. With the exception of Vanuatu, Palau and
Fiji, Pacific water utilities all have over 10 staff per 100 connections. By comparison,
many water companies around the world are able to operate effectively on less than
four staff per 100 connections. Pacific electricity utility labor productivity levels are
also poor when compared with comparator utilities of similar size and level of
performance.
Non-revenue water levels are high in Pacific countries. Many water utilities in
developing countries are able to achieve levels of between 20 – 30% non revenue
water. Of the Pacific countries, Vanuatu performs best with losses of less than 25%.
Samoa, Fiji, Solomon Islands and Kiribati perform worst with estimated losses of
between 40% and 55%. Pacific countries also have high distribution system losses,
with many countries’ losses at levels of 15% or more. FSM, Tonga and Samoa’s
losses are above 17.5%.
Inefficiency is a bottleneck in other infrastructure sectors as well. Pacific ports have
lower TEU throughputs per annum than comparators. Operational efficiency is
constrained by outdated design and equipment, and this inefficiency is compounded
by poor maintenance.
6.4.2 Inappropriate Infrastructure Pricing
Given high costs, high prices for infrastructure services may be appropriate in some
Pacific countries. Small scale and remoteness contribute to higher infrastructure
costs. These translate into higher prices for customers. However, higher
infrastructure costs (and therefore prices), can also be caused by inefficient
operations. Some infrastructure prices in some Pacific countries are higher than
could be expected, even given the challenge of small scale and remoteness.
Charges for mobile, internet services and international telephone calls are higher in
Pacific than in most comparator countries, including the Caribbean which faces
similar disadvantages of scale. Internationally, the trend in mobile and international
telecommunications has been for prices to fall significantly with the introduction of
competition. This has been the case in the Caribbean. Tonga experienced a similar
decrease in prices for mobile calls after introducing a competing operator. This could
be a result of inappropriate pricing prior to introducing competition. Alternatively
competition may have spurred the mobile companies to operate more efficiently,
reducing costs, and therefore pricing. This example suggests that competition could
put downward pressure on prices elsewhere in the Pacific too.
Average electricity tariffs are high in some Pacific countries such as Tonga, Kiribati
and Vanuatu. While fuel costs and small size account for a good part of these higher
costs, there appear to be other factors involved. For example, Tonga relies on the
same fuel as Vanuatu, has a similar system size and a more favorable topography, and
yet charges its customers considerably more.
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