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

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7.2.2 Choose an Appropriate Reform Option The organizational structure through which infrastructure services are provided can have a critical effect on the efficiency of provision. Table 7.1 highlights the key features of the entities responsible for providing infrastructure services. They are presented in order of government involvement, ranging from complete government control and involvement on the far left, to private control and ownership, in the far right column. Table 7.1: Distinguishing Between Infrastructure Providers Feature Government Department Public Corporation Corporatized Company Private Sector Participation Private Company Legal Basis Public finance and/or state sector legislation Special Statute Incorporated under company law PSP Contract Incorporated under company law Entity Ownership Government Government Government Government Private Assets & Operations Ownership Government Corporation Corporation Government or Private Private Governance Government Ministry Government appointed Board with objectives defined by Statute Government appointed Board with profit making objectives Board Privately appointed Board Senior Mgt Appointments Government Ministry Board Ministry may be involved Board Ministry may not be involved Board Board Revenue Source Government Budget allocation or user charges Charge customers for service Charge customers for service Charge customers for service Charge customers for service Source of Finance Budget Borrow from financial sector Borrow from financial sector Equity and debt Equity and debt Budget Management Manage budget allocation Responsible for managing own budget Responsible for managing own budget Responsible for managing own budget Responsible for managing own budget Financial Targets Source: Castalia None Cover costs Cover costs & make a return comparable to private businesses in the same sector Cover costs & make a return comparable to private businesses in the same sector Cover costs & make a return Each entity provides different incentives for performance. Infrastructure services in the Pacific have traditionally been provided by government departments. This has not always resulted in good performance. Many governments have already recognized this problem, and have embarked on sector reforms. Public corporations and corporatization are both examples of public sector reform. They are discussed together under the heading ‘Public Sector Reform’ below. Private sector involvement lies between public sector reform and full privatization, and is discussed in a separate section. Competition is also discussed separately. While it is a 46
eform option, we do not discuss privatization in detail, although we touch on private sector service provision under the heading of competition. The institutional challenges differ along the continuum of organizational options. For example, smaller countries with strong informal tribal governance arrangements may find it more difficult to implement high quality corporatization and State Owned Enterprise models, since this requires clear separation of roles of government appointed Boards (which should pursue commercial objectives), and the government itself, pursuing a wide range of policy targets. Privatization and PSP contracts are better able to achieve the required arms-length separation in these settings. On the other hand, arrangements involving the private sector require high levels of skill for effective regulation. When selecting a reform option, governments will need to think carefully about the whether the chosen approach is applicable to improving service to rural and remote areas as well as urban areas. In assessing reform options for rural areas, governments will need to analyze affordability and willingness to pay for services. It is likely that a different approach or even a different mix of services from those offered in urban centers may be more appropriate. Public Sector Reform Most Pacific governments have initiated public sector reforms to address poor infrastructure sector performance. This has delivered mixed results. Corporatization has been implemented in some Pacific countries and, where effectively implemented, has increased efficiency and revenue for operations and maintenance in various sectors. Corporatization has worked well with the PNG Water Board, in electricity supply in Fiji (see Box 7.5) and in the Samoa Ports Authority. However, in the water sector in Fiji, failure to achieve true separation from government by appointing a strong independent Board and management team, contributed to failed reforms. 47
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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 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 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
Page 78 and 79: 9 How do we meet the Challenge This
Page 80 and 81: Box 9.3: Can private sector involve
Page 82 and 83: Box 9.6: How can the public sector
Page 84 and 85: The proportion of mainline access a
Page 86 and 87: Box A.2: Introducing Telecommunicat
Page 88 and 89: Universal Access Universal access r
Page 90 and 91: good example of this. The Kiwi Shar
Page 92 and 93: Figure A.7: Reported Faults per 100
Page 94 and 95: Table A.1: Institutional Indicators
Page 96 and 97: and there have been calls to recons
Page 98 and 99: A.2 Electricity Sector Analysis A s
Page 100 and 101: Figure A.10: Average Electricity Ta
Page 102 and 103: 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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“A-Z World Airports Online” www
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