ASIAN DEVELOPMENT BANK TAR:FIJ 35493
TECHNICAL ASSISTANCE (Financed by the Japan Special Fund)
TO THE
REPUBLIC OF THE FIJI ISLANDS
FOR PREPARING THE
CIVIL AVIATION AND AIRPORTS IMPROVEMENT PROJECT
April 2003
CURRENCY EQUIVALENTS (as of 14 March 2003)
Currency Unit – Fiji Dollar (F$) F$1.00 = US$0.50 US$1.00 = F$2.00
ABBREVIATIONS
AFL – Airports Fiji, Limited CAAFI – Civil Aviation Authority of Fiji Islands GCC – Government Commercial Company GDP – gross domestic product MOFPT – Ministry of Finance, Planning, and Telecommunications MOTCA – Ministry of Transport and Civil Aviation MPAF – Maritime and Port Authority of Fiji MPE – Ministry of Public Enterprises
NOTE
The Fiji dollar is linked to a weighted basket of currencies of the country’s major trading partners.
This report was prepared by S. Jarvenpaa, Pacific Operations Division.
I. INTRODUCTION
1. The Government of the Fiji Islands (the Government) has requested support from the Asian Development Bank (ADB) for a technical assistance (TA) to prepare a civil aviation and airports improvement project.
2. Fact-finding for the TA was conducted in December 2002. The Fact-Finding Mission reached understandings with the Government and its agencies; Civil Aviation Authority of Fiji Islands (CAAFI); and Airports Fiji, Limited (AFL) on the TA objectives, scope, cost estimates, financing plan, implementation arrangements, and terms of reference for the consultant services. These are recorded in a memorandum of understanding. The TA is included in ADB’s 2003 country strategy and program update for the Fiji Islands.1 This TA report was prepared based on the Mission's observations in the field and discussions with the Government and its agencies.
II. ISSUES
3. Transport in the Fiji Islands is well developed and consists of road, maritime, rail, and air modes of transport. The gateway international airport is at Nadi, with regional air traffic handled by the Nausori airport near Suva. Domestic aviation infrastructure includes 18 airports.
4. The Fiji Islands’ economy relies primarily on tourism, agriculture, and manufacturing. Tourism is the primary source of growth and export income earnings. About 496,000 people visited the Fiji Islands in 2001, with 85% of these tourists, 5% business visitors, and the rest related to education and family visits. Visits to the Fiji Islands have grown by an annual average of 9% since 1961, and 5% since 1990. While the visits declined considerably in consequence of the two coups d’etat, in 1987 and 2000, the long-term annual visitor growth has remained at 5% for the past decade. Tourism also contributes about 20% to employment (or about 40,000 jobs) and 17% of gross domestic product (GDP), more than any other single industry. Over the years, the receipts from tourism have helped to reduce the impact of the trade deficits, contributing thus to the positive current account positions and stability of the local currency.
5. In its Strategic Development Plan (2003–2005) and 20–year Development Plan (2001– 2020), the Government consistently emphasizes its proactive approach to increasing tourism income through programs that support tourism development, including (i) implementing the current Tourism Development Plan 1998–2005; (ii) establishing new training facilities for tourism services; (iii) supporting private investments in the sector; and (iv) most importantly, attracting additional flights to new and existing markets. These documents emphasize the impact of tourism on poverty reduction through micro-business and employment.
6. The transport infrastructure and management, particularly the aviation facilities, are crucial for the Fiji Islands’ competitiveness as a tourist destination. Tourism is forecast to drive GDP growth under the Government’s medium-term development scenario, with tourist arrivals expected to exceed 500,000 in 2003 and double by the end of the decade. Through the secondary tourism activities, the Government has concluded that improvement in tourism catalyzes far-reaching positive impacts that are crucial for poverty reduction and improvement of welfare in the Fiji Islands.
7. The Government, however, has recognized that aviation facilities, particularly the airport infrastructure, constrains the development of tourism. Nadi International Airport, capable of
1 The TA first appeared in Asian Development Bank Business Opportunities (Internet version) on 17 December 2002. 2 handling 747s, is an international gateway to the Fiji Islands. Nausori airport—a second international entry point and critical for domestic and regional traffic—is capable of handling 737s. The national carrier, Air Pacific, Qantas, Air New Zealand, and Korean Airlines land at Nadi airport, with domestic air services provided by Air Fiji and Sunflower Airlines. These airlines are planning aircraft upgrades in response to their business growth. Aircraft movements in Nadi numbered 42,282 in 1999, with 54% domestic; 19% international; and 27% private, military, freight, and training flights. The cargo traffic amounted to 20,000 tons in 2000. In 2002, 1.2 million passengers transited through the Nadi airport; 85% of them were international passengers. While the passenger traffic and cargo handled at Nadi airport declined as a result of the political events of May 2000, passenger arrivals bounced back in 2001 and 2002. The Strategic Development Plan provides a policy framework for upgrading the aviation and airport sector infrastructure and management to meet international standards and practices.
8. The 2002 masterplan for Nadi airport forecast the long-term (20 year) increase of the international and domestic passenger at 5% and 3% per annum, respectively. The forecast correlates growth in air cargoes with the national GDP, and these are projected to grow by 3.5% per annum. The international aircraft movements are forecast to grow by 7% per annum. Australia, New Zealand, and United States continue to be the main origins of passenger traffic to the Fiji Islands, and the demand for airport services relies on developments in these economies. The Nausori airport handled 190,000 domestic passengers in 2002, and this is forecast to grow by 4% per annum. Nausori airport also serviced a small number (24,000) of international passengers.
9. The airport terminals at Nadi and Nausori were built in the 1960s and are having difficulties handling the current aircraft traffic. The facilities do not provide services at international standards. Space required for airport operations at Nadi and Nausori airports exceeds that available; by 2009, 53% more space will be required at Nadi and 131% at Nausori airports. In addition to the forecast air traffic growth, both airports could increase their income from retail businesses, which would increase employment and contribute to poverty reduction. The Fiji Islands National Transport Plan and its 2001 review and policy update detail the need to examine the condition of the current airport facilities including the adequacy of the international and domestic runways, ground handling facilities, air terminals, and sector organization. The aviation industry has expressed the need to assess the runway conditions.
10. The Fiji Islands has 16 domestic public and 2 privately owned airports. The public airports have been maintained only on an ad hoc basis. The facilities cannot serve high-end or high volume traffic. Funding for maintenance is insufficient and has not been disbursed in full. Increased user charges and community engagement in the maintenance could help improve the maintenance conditions. As a part of the TA, the Government will assess (i) domestic airport conditions; (ii) traffic and demand forecasts; (iii) contracting arrangements for air services and for infrastructure maintenance; (iv) the regulatory framework for the domestic aviation, cost recovery, and landing charges; and (v) effective strategies for providing remote air transport.
11. In April 1999, self-funding airport operations of the Government’s statutory authority, the Civil Aviation Authority of Fiji, were reorganized into operational functions of Airports Fiji, Limited (AFL).2 AFL was established as a state-owned commercial entity with merit- and market-based personnel policies and powers to propose, set, and collect fees. AFL reports on the achievement of its performance indicators to the Ministry of Finance and Planning and the Ministry of Public Enterprises (MPE), representing the government shareholding. The civil
2 Reorganization Charter approved in February 1998 under Public Enterprise Act 1995. 3 authority’s regulatory functions were allocated to the new Civil Aviation Authority of Fiji Islands (CAAFI). The Government’s obligations under international aviation conventions remained a responsibility of the Ministry of Transport and Civil Aviation (MOTCA). Additionally, the Airport Terminal Services, 51% owned by CAAFI and 49% by the employers, provides ground handling services at the Nadi airport.
12. MOTCA is responsible for the legal framework of the sector, traffic rights, conventions, and treaties including relations with international agencies. CAAFI became responsible for personnel, operator certification and licensing, aircraft airworthiness certification, and meeting the Fiji Islands’ obligations under international aviation conventions. AFL is licensed by the Government3 to (i) manage air traffic services in the Fiji Islands’ flight information region; (ii) operate, maintain, and manage the 16 public airports, including the 2 international airports; and (iii) control the other revenue-generating activities associated with the airports. AFL represents the Government’s ownership of the public airport assets, and is a fully state-owned entity. AFL operates Nadi and Nausori airports on a commercial basis, with a cross-subsidy from Nadi to Nausori operations. AFL receives a grant of F$0.48 million (US$0.24 million) from the fiscal budget for the management of other domestic airports to supplement the domestic cost recovery revenues. These funds are, however, insufficient for adequate maintenance and management of these airfields and terminals. As a result, domestic airport operations do not receive inadequate attention. Significant improvement in the management of the sector requires completion of the reforms, including improvement of financial management of domestic aviation and the related subsidies, maximization of benefits from potential outsourcing and privatization, and reallocation of responsibilities among the sector agencies.
13. In light of the tourism and civil aviation forecasts, a long-term development plan is required to support the planned investments. The plan is to (i) validate demand forecasts and prioritize the proposed investments; (ii) determine tariffs; (iii) establish institutional and human resources; (iv) outline a regulatory framework and industry conditions; (v) prepare least-cost financing packages for the investments; and (vi) determine policies for privatizing the national airline (Air Pacific), maximizing air services, and improving air safety.
14. The ensuing Project is envisaged to (i) increase capacity of the airports enabling landing of B747-400s in Nadi and 737-800s in Nausori, (ii) upgrade air terminals, (iii) upgrade aircraft service facilities and navigation aids, (iv) upgrade space for airport businesses, (v) improve domestic airports, and (v) implement reforms. The improvements in airport facilities, including runways, terminal buildings, and navigation aids, will enhance access of international travelers to the Fiji Islands and its domestic destinations, and thus generate income for the rural poor. Improvements for airport businesses will generate employment and contribute to poverty reduction. Improving the efficiency of airport services through reforms will reduce the cost of travel, enable the rural population to have access to the mainstream markets, and reduce urbanization.
III. THE TECHNICAL ASSISTANCE
A. Purpose and Output
15. The TA will prepare a feasibility study for upgrading the airports and civil aviation in the Fiji Islands. The TA will (i) assess the demand for air transport; (ii) prepare a program for investments; (iii) identify a policy framework to improve the effectiveness of aviation operations;
3 Companies Act 1983. 4
(iv) identify least cost technical solutions for the proposed investments and financing, including an assessment of the use of ADB’s credit enhancement schemes; and (v) for the management of the domestic airports, identify solutions that target reducing poverty and increasing private sector involvement. A framework for the TA is provided in Appendix 1.
B. Methodology and Key Activities
16. The TA methodology will employ inclusive and consensus-building methods through workshops, stakeholder consultations, and public presentations. Key activities of the TA are (i) evaluating demand for, and benefits and beneficiaries of, improved airport and civil aviation infrastructure, facilities, and management; (ii) preparing a long-term development program that prioritizes investment; (iii) identifying domestic and external financing possibilities; (iv) preparing project implementation arrangements; (v) recommending competitive tariffs and regulations, including a competitive regime of air services agreements, (vi) establishing a pragmatic program for implementing institutional and policy reforms; (vii) evaluating the financial and economic viability of the proposed investments in accordance with ADB’s Guidelines on Economic Analysis of Projects; and (viii) assessing the social and environmental impacts of the proposed investments as required for category A projects under ADB’s Environment Policy, Guidelines for Incorporation of Social Dimensions in Bank Operations and Environmental Guidelines for Selected Infrastructure Projects, and in accordance with regulations of the Government.
C. Cost and Financing
17. The total cost of the TA is estimated at $1,009,000 equivalent, of which the foreign exchange component is $666,600 and the local currency component is $342,400 equivalent. The Government has requested ADB to finance $710,000 equivalent, covering the entire foreign exchange cost and $43,400 equivalent of the local currency costs. The TA will be financed by the ADB on a grant basis from the Japan Special Fund, funded by the Government of Japan. The Government will finance the balance of the local currency cost. The Government has been advised that approval of this TA does not commit ADB to finance any ensuing project. Detailed cost estimates are provided in Appendix 2.
D. Implementation Arrangements
18. A total of 25 person-months of international consultant services are required from an international firm in the fields of airport economics; aviation engineering; corporate and project finance; institutional development and the International Civil Aviation Organization guidelines; and financial, economic, social, poverty, and environmental analysis. The consulting services will be engaged in accordance with ADB's Guidelines on the Use of Consultants using the quality- plus cost-based selection. The outline terms of reference for the consultant services are in Appendix 3.
19. Executing Agency. AFL will be the Executing Agency for the TA with MOTCA. The Ministry of Finance, Planning, and Telecommunications (MOFPT) and CAAFI will closely oversee the TA. AFL will coordinate the TA activities with all stakeholders, including MPE, the aviation industry, and the communities, and will ensure that the consultations with these stakeholder groups are inclusive and substantive. AFL will assist with data gathering during TA implementation, and will be responsible for attaining the necessary government approvals. A steering committee comprising the heads of MOTCA, MOFPT, CAAFI, MPE, and representatives of air transport provides and users will be established to guide the TA.
5
20. Deliverables. The TA will be implemented during 6 months commencing in June 2003 and ending in January 2004. The consultants will submit inception, monthly progress, draft final, and final reports. The consultants will organize a minimum of three meetings between Government, the consultants, and ADB. The meetings will review the consultants’ reports and proposals. The consultants will also convene coordination meetings with funding agencies in connection with the three scheduled meetings. The consultant will organize stakeholder workshops to develop consensus on the proposed investments and reform programs.
IV. THE PRESIDENT'S DECISION
21. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of US$710,000 on a grant basis to the Government of the Fiji Islands for preparing the Civil Aviation and Airports Im provement Project, and hereby reports this action to the Board. 6 Appendix 1
TECHNICAL ASSISTANCE FRAMEWORK
Performance Monitoring Assumptions Design Summary Indicators/Targets Mechanisms and Risks
Goal
The ensuing project will A feasibility study by · Financial statements Risks: enable the Fiji Islands’ January 2004 prepared of Airports Fiji, Ltd. · Volatile global economic aviation sector to under this technical · Reports of Association trends in main tourism facilitate additional assistance (TA). An of South Pacific markets flights from new and ensuing loan to be Airlines · Geopolitical conditions existing markets to Fiji submitted for approval · Government statistics affecting global travel Islands, and thus in the 3rd quarter of · Political stability in the Fiji increase the aviation 2004. Islands sector’s contribution to economic growth and Investment project poverty reduction benefits that will accrue through increased after commissioning of employment new facilities, which opportunities in the entails a 5-year tourism sector. implementation period, will include increased
a. air traffic, b. international and domestic passenger and cargo, c. international and domestic investment in tourism, d. employment in tourism, and e. enhanced private sector participation in sector operations.
Purpose
Preparation of an By October 2004, i.e. · TA review missions. Government approval of a aviation and airport 14 months after the · Policy dialogue with comprehensive aviation and improvement commencement of the the executing agency airport sector investment investment project that TA and 9 months from (EA) and the and reform program. supports air transport the delivery of its final government. growth and enables the output: · Tripartite meetings. Fiji Islands to harness · TA reports. promising tourism a. A report and incomes. recommendation of the President (RRP) for an aviation sector infrastructure improvement project; Appendix 1 7
Performance Monitoring Assumptions Design Summary Indicators/Targets Mechanisms and Risks
b. A proposal for a sector reform program, and efficiency and cost recovery improvements, including a pragmatic schedule of policy reforms;
c. A full environmental, social, and poverty assessment of the proposed civil works and reform program;
d. A full assessment of cofinancing possibilities for the ensuing project, including potential private sector participation; and
e. Enhanced regulatory environment and opportunities for private sector involvement.
Outputs
Feasibility study for an By January 2004, i.e., · Consultant’s inception, · TA implementation in ensuing investment 6 months after the progress, midterm, accordance with project with viable commencement of the draft final, and final schedule. sector improvement TA, the following will be reports. · Quality of consultant’s investment project and accomplished: · ADB review missions. reports. reform action plan. · Tripartite meetings. a. The inception report will be approved by the EA and the Asian Development Bank (ADB) in July 2003; b. five monthly progress reports; c. a midterm report will be approved by the EA and ADB in
8 Appendix 1
Performance Monitoring Assumptions Design Summary Indicators/Targets Mechanisms and Risks
November 2003; d. a draft final report will be approved by the EA and ADB in December 2003; and e. a final report will be made upon submission of comments from the EA and ADB, and approved by EA and ADB in January 2004.
Activities
1. Mobilization of Start: 15 June 2003 Consultants reports · Consultant’s inputs in consultants End: 30 Jan 2004 accordance with the implementation plan. 2. Feasibility study for Responsibility of TA · Quality of consultant’s an investment project consultants. consultations with stakeholders. a. Conduct of technical · Delay in convening survey and tripartite meetings and assessment of least- government approvals. cost technical solutions. b. Identification of demand for the proposed investment components. c. Prioritization of investment proposals. d. Preparation of cost estimates and identification of sources of funding. e. Preparation of specifications and terms of reference. f. Preparation of social and environmental Appendix 1 9
Performance Monitoring Assumptions Design Summary Indicators/Targets Mechanisms and Risks
assessments. g. Preparation of poverty analysis. h. Preparation of resettlement analysis and land- acquisition plans. i. Preparation of project implementation arrangements.
j. Preparation of
project financing
arrangements.
k. Preparation of
project performance
indicators, project
framework, and
project
documentation.
3. Feasibility study for reform action plan Start: 15 June 2003 Consultants reports. End: 30 Jan 2004 TA review missions. a. Institutional review Tripartite meetings. and international Responsibility: Policy dialogue. comparison. TA consultants b. Review and recommendations for cost recovery improvement. c. Review and recommendation for financial management improvement. d. Preparation of a pragmatic, time- bound, and agreed schedule of reforms.
10 Appendix 1
Performance Monitoring Assumptions Design Summary Indicators/Targets Mechanisms and Risks
Inputs · ADB disbursement Timely consultant selection. ADB Contribution: Resources: documents. 25 person-months of · Consulting services international consulting · Consultant’s progress reports. · Workshops services · Report preparation, US$610,000 · Consultant’s contract local transport, US$10,000 claims. supplies US$20,000 · Government US$6,000 participation in US$64,000 negotiations · Contingencies
Executing Agency Contribution: US$164,000 US$135,000 · Office facilities · Strategic domestic air services study
Appendix 2 11
COST ESTIMATES AN D FINANCING PLAN ($)
Foreign Local Total Item Exchange Currency Cost A. Asian Development Bank Financinga 1. International Consultants 600,000 10,000 610,000 a. Remuneration 475,000 0 475,000 b. Per Diem 90,000 0 90,000 c. International Travel 35,000 0 35,000 d. Local Air Travel 0 10,000 10,000
2. Miscellaneous 0 30,000 30,000 a. Communications 0 3,000 3,000 b. Report Preparation 0 5,000 5,000 c. Office Suppliesb 0 2,000 2,000 d. Local Vehicle Transport 0 10,000 10,000 e . Workshops b 0 10,000 10,000
3. Government Participant in Contract 6,000 0 6,000 Negotiations 4. Contingencies 60,600 3,400 64,000 Subtotal (A) 666,600 43,400 710,000
B. Government Financing 1. Office Space and Logistical Support 0 75,000 75,000 2. Office Support 0 50,000 50,000 3. Strategic Domestic Airservices Study 0 135,000 135,000 4. Contingencies 0 39,000 39,000 Subtotal (B) 0 299,000 299,000 Total 666,600 342,400 1,009,000 a Financed by the Japan Special Fund. b Provisional sums Source: Asian Development Bank estimates.
12 Appendix 3
TERMS OF REFERENCE FOR CONSULTANTS
A. Preparation of Investment Project
1. The consultants' assignment includes, but is not limited to, the following tasks.
(i) Review. Review the documentation on international and domestic civil aviation, including masterplans, the government’s domestic aviation assessment, investments proposals, policies (including those on cost recovery and financial management), sector organization (covering roles and mandates of all sector agencies), and the regulatory framework in light of obligations under international conventions.
(ii) Demand Analysis. Evaluate demand for air transport infrastructure and services, and prepare a detailed, 20 year forecast for international and domestic air transport providing data on traffic trends and peaking patterns, recognizing the emerging opportunities, and examining demand for all proposed investments including (a) airport infrastructure, (b) navigation and safety, (c) terminals and facilities, (d) airport security, (e) nonaeronatical businesses, and (f) facilities required under the international obligations. The review will include an assessment of data from the air transport operators, industries requiring air transport, government and its agencies, and the relevant regional and international organizations.
(iii) Investment Project. Prepare a detailed investment project giving objectives for the program and the investment components. Develop options for improving the current conditions in response to demand forecast validating, updating, and detailing the existing proposals and assessing their viability. Update any existing technical solutions and specifications. Recommend short-, medium-, and long- term objectives, scope of the proposed investment project, and a time-bound phased implementation plan for financing and implementing the program. The program will cover all areas of aviation operations in the Fiji Islands, including international airport operations, administration and finance, air traffic management, infrastructure engineering and construction requirements, marketing and capturing of new opportunities, ground handling, security and customs, and sector reforms to support long-term sector objectives.
(iv) Institutional Review. Review the sector organization; institutions; contractual arrangements; legal framework, and the related productivity, effectiveness, and efficiency. Identify issues concerning (a) administration and finance; (b) operation of sector facilities; (c) engineering, infrastructure, and maintenance; (d) ground handling; (e) air traffic operations; (f) security, immigration, and customs; and (g) marketing and public relations. Recommend action plans for improving these areas, including for a tariff policy; regulatory framework; management and operations; asset ownership; organizational, technical, financial, and human resources; and coordination. In particular, the action plans should address redundancies, effective decision-making, and cost-efficient and sustainable aviation operations. Recommend a clear sector reform program as required to establish effective and efficient management and operations.
Appendix 3 13
(v) Sector Liberalization. Review and recommend a reform program for applying good practices and generating cost-effective solutions for liberalizing the aviation sector from excessive and costly protection of the domestic carriers. Review, prepare, and develop consensus on a reform program evaluating options for privatizing the national airline (Air Pacific), maximizing private sector participation in the operations of the Airports Fiji, Limited and the Civil Aviation Authority of Fiji Islands considering outsourcing of all commercial operations, including operations and maintenance, airport concessions, and privatization of the Airport Terminal, Limited. Recommend a strategy for ensuring that efficient operational structures are in place enabling increase in flights to the Fiji Islands through adopting open skies policy, appropriate initiatives for private involvement, concessions, tax breaks, freedom rights, minimization or elimination of domestic carrier protection, and maximization of benefits from regional cooperation.
(vi) Project Financing. Determine optimal financing conditions for the proposed investment project assessing availability of grant sources, concessional financing from the Asian Development Bank (ADB), and commercial financing using ADB’s credit enhancement schemes. Review and identify in detail cofinancing arrangements for the program determining opportunities for reducing the total cost of the investment and the cost of financing. Identify benefits of accessing ADB’s private sector products, including the political risk guarantee and the partial risk cover scheme, and financing arrangements including contractor participation through build-own-transfer arrangements. Ensure comprehensive and detailed understanding of these options by the Government and its agencies.
B. Feasibility Study
2. For the feasibility study, the consultants will do the following:
(i) Feasibility Study. Prepare a detailed feasibility study covering the recommended short-, medium-, and long-term investment proposals in accordance with ADB’s guidelines and international standards. The study will incorporate least-cost engineering solutions. Prepare feasibility studies for all the proposed investments components. The feasibility documentation will include a financial and an economic evaluation, in accordance with ADB's Guidelines for Economic Analysis of Projects, determining (a) the financial and economic net present values of the proposals and other feasibility indicators, sensitivity tests, and switching values for major parameters such as costs, demand, benefits, and financial and economic values for all parameters; (b) a quantitative risk assessment, particularly in light of the volatile nature of the tourism and political stability of the Fiji Islands; and (c) an evaluation of environmental and social costs and benefits for each project component, including the impact on employment, economic growth and development, and poverty, over the intended life of the investment.
(ii) Technical Specifications. Prepare technical specifications including terms of reference (TOR) of the proposed prioritized program and its components, including specifications for the civil works, equipment, and consulting services. Prepare the contract packages for the civil works, equipment, and consulting services, in accordance with ADB's Guidelines for Procurement.
14 Appendix 3
(iii) Cost Estimation. Investigate costs and cost components of locally available and imported materials for construction purposes; estimate construction, installation, and maintenance costs of the proposed investments; and disaggregate cost estimates into foreign and local components, taxes and customs duties, equipment depreciation, spare parts, materials, labor, and overhead, etc. as well as by general items, civil works, electric works, installation, and equipment.
(iv) Cost Recovery. Review the current tariff policies including aeronautical, nonaeronatical charges,1 validating the policy objectives and transparency against internationally acceptable standards. Establish and examine comparator data for the current and proposed pricing and tariff policies, and recommend, if required, alternative policy objectives to ensure efficient use of the facilities and attainment of cost recovery principles. Identify tariffs and scales of charges that cover the proposed investments including depreciation and interest, recurrent costs, and the sectors obligations to the government, as appropriate. Identify implications of the recommended investment project and the pricing policy on the suppliers and users of air transport ensuring application of best practices and commercial principles, break-even objectives, and transparency of the financing and potential subsidies. Recommend cost recovery policies that ensure sector viability and sustainable financial conditions. Assess the capability and willingness of the Government to subsidize nonviable services, particularly of domestic aviation, in line with ADB’s criteria on subsidies.
(v) Financial Management. Review sector information management systems and controls, particularly the financial management systems and arrangements, including the quality and integrity of data, and capabilities of the system and staff. Recommend improvements, where needed, and detail these under the feasibility study. Determine financial conditions of the sector agencies checking their financial statements and preparing financial statements, as required, in accordance with ADB’s relevant guidelines and international standards. Assess financial performance indicators, sector budgets, and availability of counterpart funding for the purposes of the proposed investment project.
(vi) Initial Social Assessment. Conduct an initial social assessment for the feasibility study in accordance with ADB's relevant guidelines (a) identifying the direct and indirect users and project beneficiaries, and the beneficiaries’ socioeconomic profiles, needs, and demands, livelihood, income, use of air transport, and expenses incurred; (b) identifying alternative transportation; (c) assessing the needs of the client groups for air transport facilities in relation to their other needs (e.g., maritime transport, etc.); (d) assessing the activities of the client groups that complement the project proposal (e.g., access issues) and problems with the current air transportation conditions; (e) determining the preferred improvements, and the willingness of the user subgroups to pay the relevant fees as suggested under the cost recovery proposal; and (f) preparing a detailed social analysis in accordance with ADB's Guidelines for Incorporation of Social Dimensions in Bank Operations, in full consultation with the relevant agencies, industry and nongovernment agencies, and individuals, and incorporating their views in the feasibility study; and (g) preparing an assessment
1 Aircraft landing, parking, passenger service, and other charges levied on traffic operations and rentals, concession fees, and other non-aeronatical revenue sources. Appendix 3 15
of impact on indigenous peoples as required by ADB’s Policy on Indigenous Peoples. Determine a program of user, landowner, beneficiary, and affected community consultations; develop a consultation mechanism; and assist the Government and its agencies with an effective beneficiary consultation and public awareness program.
(vii) Poverty Analysis. Prepare a specific project-related poverty analysis in accordance with ADB’s Policy on Poverty Reduction and related guidelines, identifying all spin-off and indirect impacts of improvements in aviation conditions, prioritizing and quantifying poverty-reducing project benefits, recommending management structures to target poverty reduction, and identifying associated programs for poverty reduction. This analysis will determine benefits accruing to the poor and (a) identify project beneficiaries by location and income group, (b) identify institutional mechanisms to target particularly the poor beneficiaries, and (c) incorporate specific features or measures to maximize poverty reduction under the project. Prepare a distribution analysis that identifies the expected distribution of project effects among the stakeholders, particularly the poor. Implement consultative and participatory approaches to ensure the participation of the poor in project design.
(viii) Environmental Assessment. In accordance with the requirements of a category A environmental classification, prepare a full environmental impact assessment in accordance with ADB’s Environment Policy, Environmental Guidelines for Selected Infrastructure Projects , and ADB’s Environmental Assessment Guidelines for category A projects, as well as regulations of the Government. Emphasize sensitive areas, particularly mangroves, coral reefs, and the estuary ecosystem; provide mitigation measures including their costs. Based on the assessment, to prepare a summary following ADB’s format for Board circulation 120 days prior to the possible Board consideration.
(ix) Land Acquisition. Assist the government and its agencies in preparing a land acquisition program, as required, in consultation with the Ministry of Lands and the land owners. Prepare a specific land acquisition action plan for the proposed investment project in accordance with the policies and guidelines of the government and ADB on resettlement.
(x) Project Administration. Prepare project management, administration, and implementation arrangements for effective project implementation including a project management unit and steering committee. Determine financial management of the project. Determine coordination among sector agencies and stakeholders and assign roles and tasks for agencies and persons involved. Prepare implementation schedules and action programs for establishing project implementation resources, including counterpart resources. Assess the capacity of Airports Fiji, Limited and the other sector agencies in light of the project management and contract administration responsibilities under the proposed implementation arrangements.
(xi) Project and Sector Performance Indicators. Prepare performance indicators for the project and the aviation sector reflecting the international standards and expectations of the industry, and assign benchmark indicators and target values to be achieved under the proposed investment projects.
16 Appendix 3
B. Reports
3. The consultants will submit the following reports in English to the Government through the Ministry of Finance, Planning, and Telecommunications, and its sector agencies, the Minister of Transport and Civil Aviation, the Civil Aviation Authority of Fiji Islands, and the Airports Fiji, Limited (two copies each) and ADB (three copies). The consultants will organize three tripartite meetings for considering the inception, midterm, progress, and draft final reports, and TA progress and status, and in connection with these, will arrange meetings with other aid agencies, potential cofinanciers, and commercial financiers. The consultants will prepare and circulate minutes of these meetings, and incorporate comments in the TA reports and activities, as appropriate.
4. Inception Report. This brief report will be submitted within 4 weeks of the consultants’ commencing work. The report will outline the consultants’ approach, methodology, work plan, and cost implications for consulting services; provide a bar chart of all activities; and recommend changes to the implementation arrangements.
5. Monthly Progress Reports. These brief reports will inform the Executing Agency (EA) and ADB of achievements under each item of the TOR, identify any emerging difficulties in implementation, and outline proposed solutions. The reports will provide, in clear presentations, the implementation status, accomplishments under each TOR, plans for the next month’s work, and the personnel schedule. The reports will adopt a uniform format facilitating monitoring and will update the bar chart on all activities under the TA.
6. Midterm Report. This report will be submitted at the midpoint in TA implementation. It will summarize all recommendations developed under the TOR, provide a detailed background to the sector, and identify issues and decision-making requirements, to facilitate progress under the TA. The format of the report will correspond with ADB’s requirements for the report and recommendation of the President, with particular attention paid to the policies on procurement, economic guidelines, private sector development, resettlement, poverty assessment, environmental and social assessments, and the indigenous peoples. The model used for the economic and financial analysis and cost estimation will also conform with the requirements of ADB.
7. Draft Final Report. This report will (a) be submitted on completion of the TA; (b) summarize the TA activities and recommendations in accordance with the requirements for the midterm report; and (c) provide recommendations on each item under the TORs, in detail with action plans.
8. Final Report. This report will be submitted 1 month after receipt of the comments on the draft final report from the EA and ADB.