EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
EAP - The Pacific Infrastructure Challenge - World Bank (2006).pdf
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In other infrastructure sectors, prices are too low, and don’t cover the cost of<br />
providing service. For example, water tariffs are held below cost in many <strong>Pacific</strong><br />
countries, and have remained unchanged for many years. Fiji, the Solomon Islands<br />
and Kiribati have relatively low cost recovery ratios when compared with UNELCO,<br />
the water service provided in Vanuatu, which is allowed to recover the full cost of its<br />
operations, or the Papua New Guinea Water Board which managed to achieve a total<br />
cost recovery ratio of over 100%, including full operating expenses and depreciation.<br />
When tariffs are held below cost, operational efficiency and maintenance often<br />
suffer. It is perhaps not surprising that Vanuatu and PNG’s water utilities also have<br />
the lowest levels of NRW.<br />
Pricing too high impedes development by making it more costly to live in and do<br />
business in <strong>Pacific</strong> countries. Pricing too low is also obstructive. This simply masks<br />
the actual costs of service provision, and creates a disincentive for good planning,<br />
investment and maintenance. <strong>Pacific</strong> countries demonstrate both of these problems<br />
in infrastructure.<br />
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