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

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Box 9.3: Can private sector involvement be encouraged Private sector involvement in infrastructure has helped to improve performance in many countries, but the rate of success is very sensitive to the policy environment private sector operators can work. The greater the uncertainty they face from opaque rules, from arbitrary or inconsistent regulatory frameworks where monopoly or dominant operator conditions exist, or from the lack of an independent, competent and timely Court system is available to resolve disputes, will simply discourage PSP. Inevitability the greater the scale of the problems PSPs face, the higher will be the risk premium for uncertainty. This is a real cost to consumers in the form of higher prices, or to taxpayers where subsidies are involved. On the other hand, awarding contracts for private sector service provision can help to overcome technical and management skills and capacity constraints. It can also provide much needed capital investment for countries which invariably face problems in attracting risk capital. In very small Pacific countries, or for extending infrastructure service to rural or remote areas of larger countries, it may not be possible to attract private providers without offering a subsidy. In these situations, governments could introduce competitive bidding to select operators willing to provide services for the lowest subsidy. If subsidies are required, they should be made explicit. The question is how far are governments prepared to go to expose the true cost of providing infrastructure for poverty reduction and allocating ongoing subsidies in the annual Budget Larger countries may be able to attract private investment for some services (e.g. airport terminal services, port services or electricity generation). In smaller countries, this may not be possible, as the small scale and geographical isolation would not attract interest in a world where there are greater opportunities for less risky investment elsewhere. These countries could try to contract all services to a single operator on a long term basis to improve efficiency. This may work in smaller ports or airports, or for road maintenance in small countries. Private sector contracts should be carefully designed to ensure they provide incentives for the operator to address the specific sector issues, and specifying appropriate monitoring mechanisms to ensure service prices and quality expectations are met. 72
Box 9.4: How extensive are the opportunities for competition in the Pacific region There appear to be opportunities for competition in mobile and international telephony and in internet service provision for example. Competition can help to lower costs and improve service in countries that are large enough to support two or more competing operators. Countries like Fiji, Samoa, Vanuatu, Solomon Islands, Tonga or Papua New Guinea can and do have competitive operators. However it has to be said that the rules for the players are sometimes skewed in favor of the incumbent – often government owned – operator. In the end, a PSP will not commit the investment in new services or maintain existing services of the playing field is not level. Competition in air services may help to encourage more choice and lower airfares, but the potential is sensitive to the environment within the country seeking the air services. For example, are landing fees and airport facilities adequate and fairly priced Where governments are concerned about continuity of service (particularly in smaller, more remote countries), competitively bid contracts under which airlines promise to service specified routes at specified frequencies in return for an agreed subsidy, may be more effective and efficient than financing a loss making national carrier. Competitive environments can be simulated in natural monopoly sectors, such as water and electricity distribution, by inviting private operators to bid for contracts to provide service for a fixed term. Box 9.5: How good are the oversight mechanisms in Pacific countries In essence, most countries in the region have a lot to do to install open, transparent and independent oversight mechanisms to ensure accountability. Sector reforms will help to achieve separation between the service provider and the governing authority, but this needs to be accompanied by open reporting to and oversight processes by independent regulatory bodies or to Parliament where the government is the service provider and implicit regulator. Independent Boards with the responsibility to report openly, can oversee management activities in public corporations or corporatized entities. Where the private sector faces competition and consumers of infrastructure services have real choice, it should not be necessary to have a specific sector regulator beyond an anti-competitive agency to monitor and prosecute predatory behavior. In small countries with human capacity and skills issues in being able to provide these overview functions, there is a strong case for establishing region wide overview capability. This is an issue which the Pacific Forum could explore in depth across the sensitive infrastructure sectors like water, electricity communications and international transport services. Publicized performance benchmarking will help to encourage some accountability, as will strong community involvement. Donors and multilateral lending agencies can also help to encourage increased accountability. 73
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The Pacific Infrastructure Challeng
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Table of Contents 1 Acronyms and Ab
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Figure 8.4: Annual Per Capita Inves
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Box 7.9: ECTEL - Regulatory Coopera
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kWh MDG MIAA MIPA MNOC MOTCA MOU MP
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2 Executive Summary This discussion
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Fiscal, regulatory and policy decis
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Figure 2.2: Estimated Annual Invest
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3 What’s the Purpose of the Discu
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Box 4.2: Improving Infrastructure f
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5 How well are Pacific Countries Pe
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Figure 5.1: Access to Electricity 1
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Water tariffs are often too low In
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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 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 70 and 71: Figure 8.3: Annual Per Capita Inves
Page 72 and 73: Figure 8.5: Mainlines Trend 0.600 N
Page 74 and 75: Figure 8.8: Annual Per Capita Inves
Page 76 and 77: Figure 8.11: Total Annual Per Capit
Page 78 and 79: 9 How do we meet the Challenge This
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
Page 104 and 105: interest rate relief on a US$9m loa
Page 106 and 107: As Figure A.14 shows, Vanuatu perfo
Page 108 and 109: Table A.3: Industry Structure and G
Page 110 and 111: Regional Cooperation in Electricity
Page 112 and 113: A.3 Water and Sanitation Sector Ana
Page 114 and 115: Figure A.17: Availability of Water
Page 116 and 117: Figure A.20: Staff per 1000 Connect
Page 118 and 119: including full operating expenses a
Page 120 and 121: Corporatization is often employed t
Page 122 and 123: operating costs, collections levels
Page 124 and 125: Figure A.25: Road Network Density v
Page 126 and 127: Federated States of Micronesia at b
Page 128 and 129: 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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