DOCUMENTOF The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 32261-EAP INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized REGIONAL ENGAGEMENT FRAMEWORK FY2006-2009 FOR PACIFIC ISLANDS May 3,2005 Public Disclosure Authorized Papua New Guinea, Pacific Islands and Timor-Leste Country Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of Public Disclosure Authorized their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The date of the last Country Assistance Strategy was May 2000. ABBREVIATIONS AND ACRONYMS AusAID Australian Agency for International NAPA National Adaptation Program of Action Development EDF European Development Fund NZAID New Zealand International Aid and Development Agency ICT Information and communications NERRDP National Economic Reform technologies IDA International Development Association OED Operations Evaluation Department MDG Millennium Development Goal OIA Office of Insular Affairs CRJ? Comprehensive Reform Program PACER Pacific Agreement on Closer Economic Relations FTA Free trade agreement PEDF Pacific Enterprise Development Facility ADB Asian Development Bank PIC Pacific Island Country EU European Union PICTA Pacific Island Country Trade Agreement FA0 Food & Agriculture Organization PSD Private sector development FDI Foreign direct investment RAMS1 Regional Assistance Mission to the Solomon Islands FEMM Forum Economic Ministers Meeting RMI Republic of the Marshall Islands SEA Solomon Islands Energy Authority FSM Federated States of Micronesia SME Small- and medium-size enterprise FIAS Foreign Investment Advisory Service SOE State-owned enterprise IBRD International Bank for Reconstruction and SPREP South Pacific Regional Environment Development Program IAEA International Atomic Energy Agency STAl3EX Stable Exports Fund (EU compensatory finance scheme) GDP Gross Domestic Product SWAP Sector-wide approach GNI Gross national income UNCTAD United Nations Conference on Trade and Development IFC International Finance Corporation UNDP United Nations Development Programme GEF Global Environment Facility UNEP United Nations Environment Programme ICAD UN Interagency Coalition on AIDS UNESCO United Nations Educational, Scientific and Development and Cultural Organization ILO International Labor Organization UNFPA United Nations Population Fund ITU International Telecommunication Union UNICEF United Nations Children’s Fund IMO International Maritime Organization UNIDO United Nations Industrial Development Organization ITC International Trade Center UPU Universal Postal Union ICAO International Civil Aviation Organization WBI World Bank Institute JICA Japan International Cooperation Agency WHO World Health Organization JBIC Japan Bank for International Cooperation WIPO World Intellectual Poverty Organization KAP Kiribati Adaptation Project WMO World Meteorological Organization LICUS Low-Income Country Under Stress WTO World Trade Organization FOR OFFICIAL USE ONLY CONTENTS EXECUTIVESUMMARY ........................................................................................................... i ... CONTEXT AND ROADMAPFOR THE DOCUMENT................................................................ ill I. DEFININGFEATURES OF PACIFIC ISLAND COUNTRIES ............................................... 1 A . Exogenous Factors ................................................................................................... 1 B. Socio-Economic Manifestations .............................................................................. 4 I1. ROLEOF THE WORLD BANKIN THE PACIFIC............................................................ 11 A . Lessons from Experience ....................................................................................... 12 B . Feedback from Consultations ................................................................................. 13 I11. REGIONALFRAMEWORK ........................................................................................... 15 IV. BALANCING REGIONAL AND COUNTRY-LEVEL FOCUS ............................................. 21 A . Regional Focus ....................................................................................................... 21 B. Country-Level Focus ............................................................................................. 23 V . PARTNERSHIPS............................................................................................................ 27 A . Internal Coordination ............................................................................................. 27 B . External Partnerships.............................................................................................. 27 VI. RESULTS ..................................................................................................................... 31 VI1. RISKS .......................................................................................................................... 33 ... A . Country Chapter: Fiji ......................................................................................... 35 B . Country Chapter: Federated States of Micronesia ............................................. 41 C . Country Chapter: Kiribati .................................................................................. 45 D. Country Chapter: Marshall Islands .................................................................... 51 E. Country Chapter: Palau ...................................................................................... 55 F. Country Chapter: Samoa .................................................................................... 59 G. Country Chapter: Solomon Islands .................................................................... 65 H. Country Chapter: Tonga ..................................................................................... 75 I. Country... Chapter: Vanuatu .................................................................................. 83 Annex A . Fiji..................................................................................................................... 89 Annex B. Federated States of Micronesia...................................................................... 97 Annex C. Kiribati ........................................................................................................... 105 Annex D. Marshall Islands............................................................................................ 113 Annex E. Palau ............................................................................................................... 121 Annex F. Samoa ............................................................................................................. 129 Annex G. Solomon Islands ............................................................................................. 141 Annex H. Tonga .............................................................................................................. 151 Annex I. Vanuatu ........................................................................................................... 161 Annex J. Pacific Islands Summary of Nonlending Services....................................... 169 Map This document has a restricted distribution and may be used by recipients only in the performance of their official duties . Its contents may not be otherwise disclosed without World Bank authorization . ACKNOWLEDGMENTS The team greatly appreciates the collaboration and contributions of the Pacific Island governments in the preparation of this regional strategy. The consultations with representatives of business chambers, civil society, NGOs, and the private sector in the Pacific Island countries have also been very helpful in informing the strategy. The strategy has also benefited from a process of consultations with a broad group of development partners in the region over the entire course of its preparation. In particular, the team wishes to acknowledge the contributions of NZAID, AusAID, and the EU through continued informal dialogue as well as for providing detailed comments and suggestions. This interaction has enriched the document by enhancing the overall accuracy of the information presented, as well as contributed greatly toward building momentum into the donor coordination process in the region. The frequent and informative discussions with colleagues in the Sydney office were most valuable: notably Cyrus Talati, Thakoor Persaud, Ian Collingwood, Elisabeth Mealey, David Chandler, Ian Morris, and Damian Brindley contributed to the contents of this document. Additional support from Cynthia Abidin and Sheldon Lippman in Washington in consolidating the various parts of this document is gratefully acknowledged. Valuable advice was also received from Tevfik Yaprak and Sanjay Kathuria, as well as many others who sent written comments during internal reviews. The overall guidance of Homi Kharas and Sanjay Dhar is gratefully acknowledged. Vice President: Jemal-ud-din Kassum Country Director: Xian Zhu Task Team Leader: Manjula Luthria Task Team: Chris Bleakley, Esme Abedin, Piers Merrick, Evelyn Ng, and Susan Shen EXECUTIVE SUMMARY 1. The nine Pacific Island countries (PICs)’ covered in this regional strategy face similar development challenges today despite notable differences in history, culture, and endowments. The lack