Vanuatu Roads for Development Phase Two
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VANUATU ROADS FOR DEVELOPMENT PHASE TWO INVESTMENT DESIGN DOCUMENT 1 CONTENTS 1. EXECUTIVE SUMMARY 4 2. ANALYSIS AND STRATEGIC CONTEXT 9 3. INVESTMENT DESCRIPTION 16 4. IMPLEMENTATION ARRANGEMENTS 2525 Annex A Sector review 31 Annex B Social dimensions 56 Annex C Institutional review 68 Annex D Other supporting requirements – Not Used 88 Annex E Monitoring and evaluation 890 Annex F Risk matrix 108 2 Abbreviations ADB Asian Development Bank MWG Management Working Group AHC Australian High Commission, NC National contractor Vanuatu NMT Non-motorized travel APPR Aid Program Performance Report NSDP National Sustainable AQC Aid Quality Checks Development Plan AusAID Australian Agency for Internat- O&M Operations and maintenance ional Development (now DFAT) ODA Official Development Assistance CBC Community Based Contract PFM Public financial management CPO Community Partnership Officers PMO Prime Minister’s Office CSU Corporate Services Unit (in MIPU) PRIF Pacific Region Infrastructure CTB Central Tender Board Facility DAC Development Assistance PSC Public Service Commission/- Committee Program Steering Committee DFA Direct Funding Arrangement PVUDP Port Vila Urban Development DFT Department of Finance and Project Treasury (in MFEM) PWD Public Works Department (in DSPPAC Department of Strategic Policy MIPU) Planning and Aid Coordination R4D Roads for Development Program (in PMO) (Phase 1) EoPO End-of- Program Outcome R4D2 (Proposed) Roads for FA Force Account Development Program (Phase 2) GDP Gross Domestic Product RAMS Road Asset Management System GESI Gender equity and social RIMS Road Information Management inclusion System GfG Governance for Growth Program RMP Risk Management Plan GoA Government of Australia RRAP Rural Roads Access Policy GoV Government of Vanuatu SOR Statement of Requirements GST Goods and Services Tax TA Technical Assistance HIV/AIDS Human Immuno-Deficiency Virus TOR Terms of Reference /Acquired Immuno-Deficiency TVET Technical and Vocational Syndrome Education and Training IBC Island Based Contractor UNFCCC United Nations Framework IDA International Development Convention on Climate Change Association (part of the WBG) VAIP Vanuatu Aviation Investment IDD Investment Design Document Project IE Independent Evaluation (of the VAT Value Added Tax R4D program) VBC Vanuatu Based Contractor IMF International Monetary Fund VIRIP Vanuatu Infrastructure ISP Implementation Service Provider Reconstruction and Improvement JICA Japan International Cooperation Project Agency VISIP Vanuatu Infrastructure Strategic M&E Monitoring and evaluation Investment Plan MCC Millennium Challenge Corporation VNSO Vanuatu National Statistics Office MDB Multi-lateral development bank VPMU Vanuatu Project Management Unit MDG Millennium Development Goals VUV Vanuatu Vatu MFAT (New Zealand) Ministry of Foreign Affairs and Trade VTIP Vanuatu Transport Infrastructure Program MFEM Ministry of Finance and Economic Management VTSSP Vanuatu Transport Sector Support Program MIPU Ministry of Infrastructure and Public Utilities WBG World Bank Group MIS Management information system 3 1. EXECUTIVE SUMMARY Context Building resilient infrastructure and an environment for economic opportunity is one of the strategic objectives of the Government of Australia’s (GoA’s) Vanuatu aid program. Australia’s major infrastructure investment, the Roads for Development Program (R4D) and its predecessor, the Vanuatu Transport Sector Support Program (VTSSP) have supported improved economic growth and service delivery in rural areas through increased access to a better-maintained, affordable and integrated transport network. An independent evaluation in 2017 found that R4D had improved the capacity of the Government of Vanuatu’s (GoV’s) Public Works Department (PWD). Australia also co-funds the Port Vila Urban Development Project (PVUDP) with the Asian Development Bank (ADB). The Governance for Growth Program provides regulatory reform and policy support to GoV. Improving the national road network is a high priority for the GoV, with 2,100 km of national roads providing Vanuatu’s predominantly rural population access to schools, medical facilities, and commercial and transport hubs. The new Vanuatu National Sustainable Development Plan 2016-2030 (NSDP) articulates this priority under the economic pillar. Seventy-six per cent of ni-Vanuatu live in rural areas, villages and small towns. Their social and economic well-being – and their resilience to natural disasters and climate change – depend greatly on accessibility; which means the road network. Maintaining and rehabilitating Vanuatu’s rural arterial roads is a high-return investment opportunity for Australia. There is a clear rationale for Australia to continue supporting Vanuatu’s transport sector in light of its strategic value and effectiveness. Australia’s support is highly valued, highly visible and provides an opportunity to engage in strategic discussions. The changing geopolitical context and entry of a range of donors and multilateral development banks in the infrastructure space, however, provides an opportunity for Australia to recalibrate our support in line with the Foreign Policy White Paper (Commonwealth of Australia 2017). Australia’s ‘stepped up’ engagement in the Pacific aims to develop stronger partnerships for economic growth, stronger partnerships for security and stronger people-to-people links. In line with this, Australia will rebalance the emphasis on providing direct financial assistance for infrastructure works in the Pacific and provide more support to leverage increased financing from other sources, such as the multilateral banks. This will be complemented by more flexibility to invest in infrastructure projects of high strategic value to the Australian and Vanuatu Governments. This shift is opportune as WBG, ADB, New Zealand, Japan and China are investing in economic infrastructure in Vanuatu on an unprecedented scale. Around US$385 million of works are either ongoing or are committed for the next five years, with most in the transport sector. However, most of this will be capital investments in upgraded and renewed major assets. There is no programmed support for road maintenance. In its current fiscal state, the GoV is able to budget and spend approximately 25-30 per cent of what is required to maintain its road network in ‘good’ to ‘fair’ condition. Moreover, GoV invests only a small fraction of what is required to bring its roads up to a ‘maintainable’ condition. A funding gap will continue; however Australian support can help reduce it. Program Goal and Outcomes The Vanuatu and Australian Governments agree that Roads for Development Program Phase 2 (R4D2) should help Vanuatu achieve the following two NSDP goals: • A dynamic public sector with good governance principles and strong institutions delivering support and services to all citizens of Vanuatu. • Sustainable and well-maintained infrastructure and services for all, through inclusive and effective partnerships. The investment aims to achieve the following end-of-program (EOP) outcome: • Ministry of Infrastructure and Public Utilities (MIPU)-PWD positively influences road funding outcomes and uses enhanced institutional capacity to manage the road network of Vanuatu more effectively and efficiently. The EOP outcome addresses the road subsector’s three overriding development constraints: (i) inadequate finance; (ii) limited capacity of organisations; and (iii) restrictive rules and regulations (refer analysis of development problems and issues, pages 4-5). Supporting the roads subsector on these three fronts will contribute directly to the target NSDP goals. R4D2 will help PWD within MIPU influence both the supply and the demand for road subsector finance, and how efficiently the finance is used. The overall result will be a smaller funding gap. Alongside this, R4D2 will help MIPU-PWD complete the transition from a traditional public works department to a modern-style road network manager, delivering on network performance targets rather that delivering road works. Reformed rules and regulations will give PWD room to innovate. 4 Investment success A successful investment will see MIPU-PWD engaging with the Prime Minister’s Office (PMO) and the Ministry of Finance and Economic Management (MFEM), and with development partners to increase road funding and to maximise economic and social benefits from road expenditure. National road policy and strategies will be setting realistic expectations and guiding the allocation of resources. PWD will be structured and staffed as a modern- style road network manager. Supportive government rules and regulations will be helping MIPU-PWD institute budgeting, financial management, and procurement reforms. Its managers and staff will be meeting agreed performance standards. Australian aid will have supported infrastructure innovation, good practice, and high impact investments. Investment Description R4D2 will be delivered under three ‘streams’ of outputs and activities: Stream A: Road Network Operations Output A1: Increased and sustainable year-round rural access: Stream A support will be directed to PWD’s road operations in the field and to PWD’s divisional managers, staff, and contractors who deliver the operations. R4D2 will help PWD deliver GoV’s national rural road access targets as set in the Rural Roads Access Framework (RRAF –policy and strategy that R4D helped prepare). The targets are clear and definitive, articulated as time-bound ‘Rural Access Index’ percentages, for each Province