Development Effectiveness Brief Pacific Subregion  pacific subregion SUBREGIONAL DEVELOPMENT SETTING

1. The Pacific subregion considered in this 3. Economic Growth. Gross domestic development effectiveness brief comprises product (GDP) growth in the Pacific 12 developing member countries averaged only 1.5% annually over the (DMCs)—Cook Islands, Fiji Islands, last decade, causing the subregion to fall Kiribati, Federated States of Micronesia further behind other developing regions (FSM), Marshall Islands, Nauru, Palau, of the world. This low level of economic Samoa, Solomon Islands, Tonga, Tuvalu, growth means that the subregion is and Vanuatu. Papua New Guinea and unable to provide the financial resources Timor-Leste are the subject of separate necessary to keep pace with the briefs. The Asian Development Bank aspirations of its growing population. (ADB) has provided both country level While external factors played a role in and regional level assistance in support of this, internal constraints also hampered development in the Pacific subregion. the generation and management of economic growth. In particular, key 2. Poverty and Human Development. Rapid areas of macroeconomic and financial population growth, limited new formal management need to be strengthened sector employment opportunities, urban across the subregion. drift, and changes in traditional support mechanisms have led to a growing 4. Challenges and Constraints. The very proportion of people in the Pacific nature of the small island states in recognized to be living in poverty. These the Pacific—isolated, with limited people lack access to social services, face resources, reduced land area, and small unemployment, and struggle for housing populations—is already a significant and other basic needs. Per capita gross development constraint. In addition, national product (GNP) figures vary political instability, civil unrest, weak significantly across the Pacific; available governance, and corruption also 2006 data indicate a range from $680 contribute to poverty and low rates in Solomon Islands to $7,990 in Palau. of economic growth. The inefficient However, these figures do not reflect delivery of services and the absence of a actual consumption and welfare levels as competitive private sector further add to they do not account for the high cost of the high cost of living and limit economic living in small island states and the extent diversification. Small islands also remain of subsistence lifestyles. particularly vulnerable to natural disasters and the effects of climate change. It is therefore not surprising that many of the weakly performing countries among ADB’s DMCs are in the Pacific. Indeed, all Pacific DMCs exhibit characteristics of fragile, vulnerable economies.

pacific subregion  ADB’S CONTRIBUTIONS TO DEVELOPMENT RESULTS

Volume and Performance 7. Promote a Conducive Environment for the of ADB Operations Private Sector. Creating an environment in which micro, small, and medium- sized enterprises—formal and informal, 5. Between 1995 and 2006, 39 Asian domestic and foreign—can develop is Development Fund (ADF) loans and critical for the economic and social well grants were approved and $242.8 million being of the Pacific subregion. To ensure was disbursed in the Pacific subregion, a sound basis for ADB interventions, covering all sectors of ADB assistance in-depth private sector assessments (figures 1 and 2). Over this same period, were conducted for five countries, as countries in the subregion also benefited well as for the subregion as a whole. from $60.4 million in technical assistance These assessments commonly identified (TA), aside from assistance at the regional difficulties faced by small businesses in level. Project completion reports were accessing finance. prepared for 35 projects in nine countries. Of these, 1 was rated highly successful, 8. Technical assistance to Solomon Islands 16 were rated satisfactory, 15 were rated and a loan to FSM have supported the generally or partially satisfactory, and 3 implementation of legal, regulatory, and were rated unsuccessful (figure 3). technical secured transactions frameworks that allow for the effective pledging of movable assets and recovery in the event Highlights of ADB Results of loan default. The result has been an increased number of secured loans (in 6. Overall Impact of ADB Assistance to the the first 3 months of operation in FSM, Pacific Subregion. ADB’s traditional role 770 secured loans were filed with the in the Pacific as a project bank in key online registry) and a broader range sectors such as infrastructure is effectively of borrowers. This approach is being complemented by its activities as a replicated in the Marshall Islands and knowledge bank. Through its TA projects, Vanuatu. ADB supports extensive economic, sector, and thematic work, including 9. In Samoa, the Small Business the widely read Pacific Studies Series. Development Project, as of December ADB also plays an important role as a 2006, has supported a total of 546 loans partner in supporting key reform efforts under its small business loans guarantee (e.g. private sector development) and in scheme, and a further 53 loans under policy dialogue and donor harmonization its microfinance facilities. In addition, efforts. ADB’s activities in the Pacific, business training is being provided both at the national and regional levels through its small business enterprise are guided by the Pacific Strategy 2005– center. 2009: Responding to the Priorities of the Poor. Key benefits arising from completed and ongoing ADB assistance towards the three objectives of the strategy are illustrated below.

 pacific subregion Figure 1 Figure 2 Asian Development Fund Disbursements Asian Development Fund Loans and Grants 1995–2006 ($ million) Approved, 1995–2006 (number of projects) 5 24 Water Education 4 54 21 6 Finance Multisector Water Education 1 Agriculture 12 2 Finance Industry and Trade 3 5 Finance Health 11 1 Transport 9 Health Law 2 100 10 Energy Law Agriculture 10 Multisector 1 4 Industry and Energy Trade

Figure 3 Project Completion Report Ratings, 1995–2006

Mu Multisector HS He Ag Agriculture He Health Ed Education S Mu Ag He Ed Tr Fi La Wa En Tr Transport Fi Finance PS Mu Ag Ed Fi La Wa La Law/economics Wa Water En Energy U Ag La In In Industry

0 5 10 15 0 HS = high successful, S = successful, Number of loans PS = partly successful, U = unsuccessful.

pacific subregion  natural disaster. The Post-Conflict Aviation Safety and Security Emergency Rehabilitation Project (PCERP), Road Improvement Project, and Emergency Assistance Project all The Pacific DMCs consist of thousands of islands focus on improving the capacity of the spread across 30 million square kilometers transport network to support rural of ocean. Modern air transport is essential for tourism and trade, which enable economic development, spur economic growth, growth and reduce poverty. The establishment and reduce poverty. More reliable of the Pacific Aviation Safety Office (PASO) by transport services will increase the 10 countries makes it possible to provide the ability of rural people—who make necessary regulation and oversight to ensure that up nearly 80% of the population—to regional aviation operations meet international market their produce, derive additional standards through harmonization of regulations, income from natural resources, and training, and inspections. access health and educational services. Already, the PCERP has provided 95 The direct beneficiaries of PASO include the kilometers (km) of sealed roads and governments of member countries that will be able 50 km of unsealed roads, and has to rationalize their civil aviation administrations and rehabilitated and repaired 50 bridges. lower public sector costs, 43 air transport operators These facilities have provided reliable with a total of 266 aircraft employing nearly 4,000 licensed personnel who will experience lower and safe access to about 300,000 regulatory compliance costs and more responsive Solomon Islanders. The other two services, and all users of air transport who will projects have a similar scale of civil benefit from higher safety and security standards. works for roads and bridges.

PASO’s mechanism of intergovernmental finance, 12. Enhance the Supply and Demand for its establishment through a treaty, and its Quality Basic Social Services. Access governance by a council of directors, form a to clean water, energy, transport model which could overcome political hurdles services, health services, and education and make other regional projects feasible in the are vital to development and poverty future. PASO also presents a new mechanism for alleviation. ADB’s assistance to ADB support to regional cooperative solutions facilitate the provision of such services that address the well-known problems of scale and in the Pacific subregion—including, capacity in the Pacific region. for example, for HIV/AIDS prevention (see box on next page)—has been changing people’s lives.

10. In such a geographically spread area, 13. In Kiribati, the Sanitation, transport is crucial to development, Public Health, and Environment particularly in allowing the growth of Improvement Project is contributing trade in goods and services. ADB has to improvements in the well-being played a key role in financing essential of people through, among other transport infrastructure, enhancing activities, supporting the efficient capacities to manage transport facilities, management and use of scarce water and creating a policy environment resources. The project has resulted conducive to transport development in the in the implementation of a new flat subregion (see box). rate water tariff, testing of constant flow devices in over 300 households, 11. In the Solomon Islands, three transport and a leak detection program. It infrastructure projects are helping restore also initiated the development of social and economic activities following new water resources in Abatoa and a period of civil conflict and a recent Tabiteuea.

 pacific subregion 14. The ADB-supported Samoa SchoolNet and Community Access Pilot Project HIV/AIDS Prevention and Capacity is piloting the use of information Development in the Pacific and communications technology (ICT) in education by adopting e- This ADF grant-funded project aims to improve the learning materials and providing e- management and delivery of HIV/AIDS prevention training, ICT equipment, and Internet services in 10 countries by (i) strengthening connections to five local schools and surveillance, (ii) supporting prevention activities at two community access facilities. This the community level, and (iii) targeting vulnerable approach has generated enthusiasm groups. The project forms a core part of ADB’s among teachers, students, and regional strategy on HIV/AIDS prevention. communities. A comprehensive Samoa education web portal provides access The Pacific subregion is home to an estimated to electronic educational materials, 4,000 seafarers and over 40,000 fishermen and teachers have been trained in the serving on various types of ships and fishing use of this system. Building on the vessels. Seafarers, their families, fishermen, and success of and lessons learned from those associated with these industries are among the pilot, Samoa has requested ADB to the most vulnerable groups to HIV infection. In addition, seafaring and fishing ports have been provide a grant to expand SchoolNet clearly identified as risk areas in many countries to all 42 government and missionary within the region. schools and their respective communities. This will provide about The grant has supported the establishment of 15,000 secondary students access to seafarer drop-in centers in Tuvalu (Funafuti), e-learning, and train 800 teachers. It Kiribati (Betio), Marshall Islands (Majuro), Solomon will be an integral and key element of Islands (Noro), and Vanuatu (Santo). These drop- the ongoing broader Education Sector in centers provide a supportive environment Project II supported by ADB, the where seafarers and their families can receive Australian Agency for International assistance, guidance, and information on HIV and Development (AusAID), and the New other sexually transmitted infections. The centers Zealand Agency for International also provide a place for national and international Development using a sector-wide seafarers to relax when their ships are in port, and are particularly appreciated as a diversion from approach. high risk activities. 15. Promote Effective Development Processes. Effective development processes are inclusive, participatory (involving the public and private Sustainable Development Strategy 2005– sector and civil society), transparent, 2025, which emphasized stakeholder and accountable. They are supported engagement in planning as well as the by the availability and dissemination development of capacity for participation, of quality data and information. is considered to have been a contributor to the decision by the Constitutional 16. ADB is assisting the Pacific DMCs Review Committee to utilize an open in the development of their national and inclusive review process. ADB also level plans and strategies, which will provided assistance in the development of help improve their ability to manage Tonga’s Strategic Development Plan 8 and for development results. These Tuvalu’s Te Kakeega II, which included a activities have also strongly focused range of public meetings and forums to on ensuring community participation discuss national development priorities. in the development process. A TA designed to support Nauru’s National

pacific subregion  17. Importantly, ADB is facilitating 18. In the Marshall Islands, an ADB TA improvements in the availability and supported the establishment of a Public dissemination of quality data and Policy Institute at the College of the information on development issues in the Marshall Islands in 2007. It aims to build subregion. Regional TA is being provided country capacity to generate statistics and to support demographic and health formulate policy and, at the same time, to survey work in the Marshall Islands, continue to strengthen country demand Nauru, Solomon Islands, and Tuvalu. The for an independent monitoring of, and information, once released, will provide management for, development results. interested stakeholders with up-to-date The TA is also supporting a series of health and demographic measures, which public policy presentations to Parliament, form an important input into sound Cabinet, and the public. decision making. The TA will also develop regional and country specific manuals, and train staff to carry out future surveys.

ADB’S AGENDA FOR ENHANCING PARTNERSHIPS AND AID EFFECTIVENESS

Current ADB Portfolio and Assistance Pipeline

19. Consistent with the priorities outlined improving legal and regulatory business in the Pacific Strategy 2005–2009, environments. Specifically, the TA will ADF assistance for 2005–2008 will be conduct diagnostic studies; provide focused on five sectors (figures 4 and technical expertise on priority reform 5). At the end of 2006, 19 loans and 69 areas; strengthen capacities in relevant TAs were active in the Pacific subregion. government agencies and organizations; Total contracts awarded amounted to support regional initiatives; and $18.45 million and disbursements were communicate good practices, reform $19.76 million. All, except for one, opportunities, and results. active projects are rated satisfactory or partly satisfactory (figure 6). A 20. Pipeline activities for 2007 and 2008 highlight of 2006 was the approval of include the Samoa Power Sector the Private Sector Development Initiative, Expansion Project ($26.6 million) and the supported by a US$8.7 million TA grant Outer Islands Growth Center—Kiritimati cofinanced by ADB and the Government Island ($10.0 million). The forward of Australia. The project is focusing pipeline contemplates ADF lending of on reforming state-owned enterprises, $26.6 million for 2007 and $75.6 million promoting public–private partnerships, for 2008–2010. strengthening the financial sector, and

 pacific subregion Figure 4 Figure 4 Asian Development Fund Projected Assistance Asian Development Fund Projected Assistance 2005–2008 ($ million) 2005–2008 (number of projects)

1 2 2 Education Transport Transport 23 Multisector

9 1 Education Health

1 8 4 Energy 27 Health Multisector Energy

Figure 6 Projects Performance Report Ratings (current)

Mu Multisector U Tr Wa Water Tr Transport He Health PS Mu In Industry and Trade Ed Education

S Mu Wa Tr He In Ed

0 5 10 15 U = unsatisfactory, PS = partially Number of loans satisfactory, S = satisfactory.

pacific subregion  Ownership, Alignment, and Managing for Results in ADB Operations

21. The ongoing midterm review of ADB’s 23. ADB emphasizes the alignment of its Pacific Strategy will help to further country partnership strategies (CPS) with articulate ADB’s role in the Pacific. national development strategies, including ADB envisages a stronger focus on the use of partner government measures infrastructure, private sector development and performance indicators to assess and governance, together with an emphasis progress. A CPS for Tonga is scheduled on managing for development results, in for approval in 2007, CPSs for a further relation to key result areas of the strategy. eight countries are programmed for 2008, Improved selectivity in country strategies and two more will be completed in 2009. and projects, based on ADB’s comparative These will provide an in-depth analysis advantages and the strengths and activities of binding constraints to development of other donors, is part of ADB’s new in Pacific DMCs, which will enable the results-based approach in the subregion. effective focusing of ADB assistance towards issues of weak performance, 22. The Pacific subregion has received high and a more rigorous monitoring of the per capita levels of aid over many decades. outcomes of ADB assistance through However, this has not always translated into results-based frameworks. significant improvements in development indicators. Key to achieving development 24. Continued changes in aid management results in the Pacific subregion is the use of processes at the national level are needed approaches suitable to weakly performing to promote ownership and alignment of countries. ADB is providing increased access development partners’ commitments with to grant financing, which is important for national priorities. Further effort is needed many Pacific DMCs who are debt distressed, to strengthen country systems in order yet are in need of major investments in to allow eventual development partner essential physical and social infrastructure harmonization with, and use of, country and to improve governance systems. ADB systems. ADB will continue to support such is making greater use of longer term TAs national efforts across the subregion. with a focus on capacity development and support for government-led reform efforts. Improved political economy analysis and increased focus on participation, including engaging with civil society in planning and implementation, are also beneficial to successful outcomes. The streamlining of existing systems and processes and the introduction of new funding modalities and approaches, such as program approaches and cluster TAs, are also expected to benefit weakly performing countries.

10 pacific subregion ADB’s Role in Donor Coordination and Harmonization Efforts

25. ADB prioritizes collaboration with other further coordination and harmonization development partners through joint efforts to avoid duplication and to not analytical work, joint strategy formulation overstretch country capacities. The Tonga (e.g. in Tuvalu), joint programming Joint Declaration with Development missions, or cofinancing of activities. At the Partners is one example of a commitment institutional level, ADB, AusAID, and the to improved donor coordination in World Bank have developed a cooperation partnership with the government. The agenda for Papua New Guinea and the use of partner government systems and Pacific to advance donor harmonization processes, and effective capacity building to and alignment. This allows partners to allow a transition into government systems, monitor progress against action items and needs to be further explored in partnership report on these annually. with other development partners. ADB is particularly looking at ways to improve 26. With new donors emerging in the Pacific partnerships with emerging donors in the and traditional donors such as Australia Pacific, such as the People’s Republic of scaling up assistance, there is a need for China and India.

pacific subregion 11 CONTACT

Sirpa Jarvenpaa Level 5 Ra Marama Building Regional Director 91 Gordon Street, Suva, Fiji Pacific Subregional Office Tel +679 331 8101 Asian Development Bank Fax +679 331 8074 (Cook Islands, Fiji Islands, Kiribati, Samoa, Tonga, [email protected] and Tuvalu)

Naomi Chakwin 1 Margaret St, Suite 1802 Level 18 Regional Director Sydney, Australia Pacific Liaison and Coordination Office Tel +61 2 8270 9444 Asian Development Bank Fax +61 2 8270 9445 (Nauru, Solomon Islands, and Vanuatu)

Eugenue Zhukov 6 ADB Avenue, Mandaluyong City Director, Area A 1550 Metro Manila, Philippines Pacific Department Tel +63 2 632 4444 Asian Development Bank Fax +63 2 636 2444 (Federated States of Micronesia, Palau, [email protected] and Marshall Islands) www.adb.org/pacific

October 2007

12 pacific subregion