Pacific: Regional Operations Business Plan (2015-2017)

Regional Operations Business Plan

December 2014

Pacific 2015–2017

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

ABBREVIATIONS

ADB – Asian Development Bank DMC – developing member country ROBP – regional operations business plan TA – technical assistance TFP – Trade Finance Program

NOTE In this report, “$” refers to US dollars unless otherwise stated.

Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Team leader E. Veve, Director, Urban, Social Development and Public Management

Division, PARD Team members N. Carandang, Social Development Specialist, PARD C. Currie, Senior Country Economist, PARD M. Drilon, Senior Natural Resources Economist, PARD C. Edmonds, Senior Economist, PARD H. Everett, Senior Country Specialist, PARD P. Holden, Team Leader, Private Sector Development Initiative S. Khan, Senior Transport Specialist, PARD S. Lee, Principal Social Development Specialist (Gender and

Development), PARD A. Maxwell, Senior Energy Specialist, PARD M. Melei, Country Specialist, PARD A. Parker, Principal Social Sector Economist, PARD

X. Pu, Principal Investment Specialist, PSOD P. Safran, Principal Operations Coordination Specialist (Fragile

Situations), PARD N. Sapkota, Safeguards Specialist, PARD S. Spohn, Private Sector Development Specialist, PARD C. Thonden, Education Specialist, PARD M. Trainor, Energy Specialist, PARD H. Uusimaa, Climate Change Specialist, PARD J. Williams, Senior Environment Specialist, PARD J. Wolff, Economist (Public Finance), PARD

A. Woodruff, Urban Development Specialist, PARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

I. CONSISTENCY OF THE BUSINESS PLAN WITH THE PACFIC APPROACH 1

II. INDICATIVE RESOURCE PARAMETERS 2

III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2

APPENDIXES

1. Updated Regional Results Framework 3 2. List of Linked Documents 7 3. Indicative Assistance Pipeline 8 4. Assistance Program for Current Year 11

I. CONSISTENCY OF THE BUSINESS PLAN WITH THE PACIFIC APPROACH

1. For the Pacific regional assistance program of the Asian Development Bank (ADB), 2015 will be a transition year—with the development of the successor to the Pacific Approach, 2010–2014, to guide regional support in the Pacific.1 The implementation review of the Pacific Approach highlighted three key strategic directions for consideration as ADB updates its Pacific Approach: (i) reducing the high costs that hinder sustained growth in Pacific developing member countries (DMCs) through continued focus on expanding physical and nonphysical connectivity within and across Pacific DMCs; (ii) protecting development gains by increasing Pacific DMC resilience to economic shocks and natural disasters; and (iii) helping Pacific DMCs create value through niche, high-value, low-bulk products that can compete globally.2

2. ADB’s regional assistance continues to comprise a mix of pure regional assistance promoting regional cooperation and integration,3 as well as interventions that are common across countries and bundled for regional delivery for administrative simplicity. ADB’s Pacific program remains led by flagship regional technical assistance (TA)—the Private Sector Development Initiative, Pacific Economic Management, the Pacific Regional Infrastructure Facility, and the Pacific Business Investment Facility.4 These support the core of the Pacific’s development needs: an efficient public sector, a growing private sector, and infrastructure providing critical connectivity within and between Pacific DMCs and neighboring regions. This ensures the regional program reinforces and supports investments and assistance set out in the country operations business plans. An updated regional results framework is in Appendix 1.

3. Lending for regional projects has gathered pace since 2010. However, given the insular nature of Pacific geography, much of this remains within country pipelines. Submarine fiber optic cables are connecting Pacific countries with the rest of the world, and ADB has supported such projects in Tonga and Solomon Islands,5 with projects planned in the Cook Islands, Palau, and Samoa. Support for port development is another focus area improving connectivity. Pipeline projects are included for the Federated States of Micronesia, Nauru, Samoa, Timor-Leste, and Tuvalu.

4. Pacific leaders have recognized that while regional cooperation has made good progress, deeper forms of integration would help increase socioeconomic and development prospects, expand market opportunities, and improve service delivery. In 2014, Pacific leaders endorsed the Framework for Pacific Regionalism to allow for greater political guidance and a clear prioritization process for regional activities.6 The new framework is expected to enhance the current close

1 ADB. 2009. ADB’s Pacific Approach, 2010–2014. Manila (available from the list of linked documents in Appendix 2).

The successor document will be finalized in 2015. 2 ADB. 2014. Pacific Approach, 2010–2014, Implementation Review. (available from the list of linked documents in

Appendix 2) 3 ADB. 2014. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila

(available from the list of linked documents in Appendix 2) recognizes supporting regional cooperation and integration as a strength of ADB.

4 Private Sector Development Initiative (http://adb.org/projects/details?proj_id=46510-001&page=overview); Pacific Economic Management (http://adb.org/projects/details?proj_id=47342-001&page=overview); Pacific Regional Infrastructure Facility (http://adb.org/projects/details?page=overview&proj_id=46500-001); and Pacific Business Investment Facility (http://adb.org/projects/details?page=overview&proj_id=47373-001)

5 Complementary Private Sector Operations Department financing is being processed

6 Pacific Islands Forum Secretariat. 2014. The Framework for Pacific Regionalism. Koror, Palau (available from the list

of linked documents in Appendix 2) sets four strategic objectives for the region, which closely align with ADB’s strategic interests: (i) economic growth that is sustainable, inclusive, and pro-poor; (ii) sustainable development that combines economic, social, and cultural development in ways that improve livelihoods and well-being and conserve the environment; (iii) good governance for transparent, accountable, and equitable management of all resources; and (iv) security to ensure stable and safe human and political conditions for all.

http://www.adb.org/Documents/CPSs/PAC/2010-2014/RCS-PAC-2010-2014.pdf


http://www.forumsec.org.fj/resources/uploads/embeds/file/Framework%20for%20Pacific%20Regionalism.pdf


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coordination among development partners around sectors and themes.

II. INDICATIVE RESOURCE PARAMETERS

5. Lending program. The regional program is expected to average $10.5 million annually over 2015–2017 (Appendix 3, Table A3.1).7 Cofinancing and funding from other sources, including the ADF subregional pool, will be actively explored in consultation with the Governments. Steady progress in implementing the 2012 Higher Education in the Pacific Investment Program8 with the University of the South Pacific continues, which was supported with the ADF subregional resources. The subsequent tranches under the multitranche financing facility are programmed for 2015 and 2016. A project is in the pipeline, to follow the program, to expand access to regional campuses and improve the quality of remote-learning content, and will be supported with the ADF subregional resources as well.

6. Nonlending program. Regional TA is expected to average $4.9 million annually over 2015–2017, with at least 20% from cofinancing. The nonlending program emphasizes building linkages within and outside the region to facilitate heightened economic growth. It also focuses on the efficiency gains to be achieved through joint regional approaches to issues in key sectors such as energy, education, and water, as well as in core government services—audit, economic management, public finance, and statistics. Support will be continued through ongoing flagship TA (paragraph 2).

7. To minimize capacity demands on governments, ADB will seek to collaborate with other development partners in implementing the lending and nonlending pipeline, and will seek cofinancing to bring additional resources to the Pacific. ADB’s Private Sector Operations Department will play an important role in promoting public–private partnerships and the expansion of private investment in the Pacific. Contingent on the Trade Finance Program (TFP) being provided further resources, the TFP will expand into the Pacific in 2015–2017. ADB brings practical experience to its knowledge-driven development solutions in the Pacific. Ongoing research programs in private sector development and economic linkages will be expanded to include labor market issues. This will support partnerships critical to ADB’s Pacific operations.

III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS

8. The assistance pipeline for 2015–2017 is in Appendix 3 and the 2014 pipeline is in Appendix 4. The lending program has been adjusted to reflect additional financing for tranche 1 of the investment program for Higher Education in the Pacific, and delays in subsequent tranches to allow for additional preparatory work due to the new Solomon Islands campus location. Pacific Economic Management TA, Phase 2, planned for 2014, was advanced to 2013 approval. The 2014 Business Development Services TA was retitled the Pacific Business Investment Facility and will receive significant support through the Pacific Business Investment Trust Fund. Support to the Pacific Financial Technical Assistance Centre has been delayed to 2016. Further pipeline adjustments reflect (i) proposed TA for the Nationally Appropriate Mitigation Action Readiness Project being replaced by Strengthening Climate Resilience of Investments in the Pacific; (ii) Pacific Economic and Social Analysis scope combined into Sector and Thematic Analyses in Policy Development; (iii) Strengthening Country Financial, Procurement and Safeguard Systems being supported through ongoing TA; (iv) new TA support for cooperation among DMCs, fragile and conflict-affected situations, and urban issues, and (v) planned TA for public sector management has been dropped as cofinancing is unavailable.

7 The indicative allocation for the lending program for the Pacific DMCs amounts to $1,124.1 million, including $331.8

million from the Asian Development Fund. 8 http://www.adb.org/projects/documents/higher-education-pacific-investment-program-mff

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UPDATED REGIONAL RESULTS FRAMEWORK (Board endorsement of the Pacific Approach: 2009; ROBP December 2014)

Regional Development Goals Changes from Last ROBP

Sustainable development that combines economic, social, and cultural development in ways that improve livelihoods and well-being and use the environment sustainably;

Economic growth that is inclusive and equitable;

Strengthened governance, legal, financial, and administrative systems; and

Security that ensures stable and safe human, environmental, and political conditions for all.

Reference document is the new Framework for Pacific Regionalism, which replaces the Pacific Plan. Goals are unchanged.

Sectors Selected by ADB

Government Sector Objectives

Sector Outcomes that ADB Contributes to and

Indicators ADB Areas of Intervention

ADB Indicative Resource Allocation in the Next Pipeline and Strategic

Priorities

1. Transport (Core Area: Infrastructure)

Improved efficiency and effectiveness of infrastructure development and associated service delivery

Investment and knowledge support for better transport development and service delivery made widely available to Pacific DMC stakeholders (indicator: country uptake of PASO and PRIF’s high-quality technical and policy advice)

Improved international access for rural commodities (indicator: additional transport connections in the Pacific, as measured by wharves built or upgraded, and beneficiaries from projects)

Continued economic growth in the face of global climate change and natural disasters

Trade and transport facilitation

Maritime infrastructure and services

Climate proofing of infrastructure

Sector and/or thematic assessments and knowledge products

$1.0 million, 3% of total ROBP projected financing, of which ESG: 20% GEM: 20% PSD: 20% RCI: 50% $2.3 million approved by end of 2014, of which ESG: 0% GEM: 0% PSD: 50% RCI: 100%

Themes previously represented as sectors (Gender Equity and Environmental Sustainability) now reflected in appropriate sectors

Revised sector name based on the 2014 sector classification

Text now reflects only transport sector assistance in line with 2014 sector classification

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Priorities

2. Information and Communication Technology (Core Area: Infrastructure)


Investment and knowledge support for better ICT development and service delivery made widely available to Pacific DMC stakeholders (indicator: country uptake of PRIF’s high-quality technical and policy advice)

Low-cost reliable communications (indicator: decrease in communication service cost, and increase in communications service quality)

Submarine fiber optic cables ICT applications to support social services ICT investment planning and capacity development Sector and/or thematic assessments and knowledge products

$1.0 million, 3% of total ROBP projected financing, of which ESG: 0% GEM: 0% PSD: 50% RCI: 100% $0.0 million approved by end of 2014

Revised sector name based on the 2014 sector classification

Text now reflects only ICT sector assistance in line with 2014 sector classification

3. Public Sector Management (Core Area 3: Regional Integration )

Improved transparency and accountability in managing and using public resources Strengthened capacity to manage for inclusive economic growth, improve public sector economic and fiscal management and regulation, and formulate and analyze policy Increased private sector participation in, and contribution to,

Public accounts of participating countries audited in a timely manner to maintain uniformly high standards, with enhanced audit impact and improved audit capability Improved economic policies adopted as recorded in annual CPA ratings Increased incidence of public–private partnerships in delivery of public services Measurable improvement in the business environment as demonstrated by

Economic management Public financial management Audit Statistics Development partner coordination Developing country cooperation Sector and/or thematic assessments and knowledge products

$8.8 million, 28% of total ROBP projected financing, of which ESG: 0% GEM: 20% PSD: 50% RCI: 50% $1.9 million approved by end of 2014, of which ESG: 0% GEM: 0% PSD: 50% RCI: 50%

Now includes driver of change: private sector development Planned Public Sector Management TA dropped

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Priorities

development

selected indicators corresponding to PSDI activities in Pacific DMCs


Improved enabling environment for gender mainstreaming as recorded in annual CPA

4. Energy (Core Area:1: Infrastructure and 2: Environment)

Increased efficiency of energy use, increased access to renewable energy, and improvements in demand-side energy management practices

Improved energy security (proportion of energy imported), increased deployment of renewable energy, greater affordability of energy services (power tariffs, $/kWh), and reduced greenhouse gas emissions from the power sector (tCO2/MWh)



Access to renewable energy Climate proofing of infrastructure Sector and/or thematic assessments and knowledge products

$2.0 million, 6% of total ROBP projected financing, of which ESG: 100% GEM: 50% PSD: 50% RCI: 0% $0.3 million approved by end of 2014 ESG: 100% GEM: 50% PSD: 50% RCI: 0%

5. Education (Core Area 5: Education and Core Area 3: Regional integration)

Improved access to, and quality of, education

Improved education, infrastructure, learning materials, and school management

Higher education Skills strategy Labor market analysis

$16.3 million, 54% of total ROBP projected financing, of which ESG: 0% GEM: 100%

Higher education MFF with the University of the South Pacific second and third tranches delayed until 2015 and 2016

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Priorities



PSD: 10% RCI: 100%

$2.0 million approved by end of 2014, of which ESG: 0% GEM: 100% PSD: 50% RCI: 100%

6. Finance (Core Area 4: Finance)

Increased private sector participation in, and contribution to, development

Private sector has greater access to finance (amount of commercial financing accessed by users of Pacific Business Investment Facility services)

Business skills strengthening Access to finance

$0.0 million, 0% of total ROBP projected financing


New sector for regional level involvement

7. Water and Other Urban Infrastructure Services (Core Area 1: Infrastructure)


Improved access to potable water



Climate proofing of infrastructure


$1.5 million, 5% of total ROBP projected financing, of which ESG: 100% GEM: 100% PSD: 50% RCI: 0%


New sector for regional level involvement

ADB = Asian Development Bank, CPA = country performance assessment, DMC = developing member country, ESG = environmentally sustainable growth, GEM = gender equity and mainstreaming, ICT = information and communication technology, kWh = kilowatt-hour, MFF = multitranche financing facility, MWh = megawatt-hour, PASO = Pacific Aviation Safety Office, PRIF = Pacific Region Infrastructure Facility, PSD = private sector development, PSDI = Private Sector Development Initiative, RCI = regional integration, ROBP = regional operations business plan, tCO2 = total carbon dioxide. Source: Asian Development Bank.

Appendix 2 7

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/ROBP/?id=Pacific-2015

1. ADB’s Pacific Approach, 2010–2014 2. Pacific Approach, 2010–2014, Implementation Review 3. Midterm Review of Strategy 2020 4. Framework for Pacific Regionalism, Pacific Islands Forum Secretariat

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INDICATIVE ASSISTANCE PIPELINE

Table A3.1: Lending Products, 2015–2017a

Project/Program Name Sector Poverty

Targeting

Strategic Agendas

and Drivers of Change Division

Year of

PPTA/ PDA

Cost ($ million)

Total

ADB

Gov’t Co-

finance OCR

ADF

Total Loans Grants

2015 Firm

Higher Education in the Pacific Investment Program (tranche 2)

EDU GI RCI, GCD PAUS 13.55 0.00 13.55 0.00 13.55 0.00 0.00

Total 13.55 0.00 13.55 0.00 13.55 0.00 0.00

2016 Firm Higher Education in the

Pacific Investment Program (tranche 3)


Total 1.85 0.00 1.85 0.00 1.85 0.00 0.00

2017 Firm Higher Education in the

Pacific Investment Project

EDU GI RCI, GCD PAUS 2016 15.00 0.00 15.00 0.00 15.00 0.00 0.00

Total 15.00 0.00 15.00 0.00 15.00 0.00 0.00

ADB = Asian Development Bank; ADF = Asian Development Fund; EDU = education; GCD = governance and capacity development; GI = general intervention; Gov’t = government; OCR = ordinary capital resources; PAUS = Urban, Social Development and Public Management Division; PDA = project design advance; PPTA = project preparatory technical assistance; RCI = regional integration. a The following projects included in country operations business plan pipelines have regional benefits, above the benefits to the country of their location:

information and communication technology ICT Submarine Cable Project (Cook Islands, 2017); Pohnpei Port Development Project (Federated States of Micronesia, 2015); Submarine Cable Project (Samoa, 2015); Connectivity for Integrated Growth (Timor-Leste, 2016); and Dili International Port (Timor-Leste, 2015). The Federated States of Micronesia port project and Samoa cable project are partially supported by the ADF subregional resources.

Source: Asian Development Bank.

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Table A3.2: Nonlending Products and Services, 2015–2017

Assistance Name Sector Division Assistance

Type

Sources of Funding

ADB Others

Total

($'000) Source Amount


($'000)

2015 Firm

Enhancing Engagement in the Pacific DMCs, Phase 3

PSM PAOD CDTA TASF V 500 TBD 2,000 2,500

Strengthening Climate Resilience of Investments in the Pacific

ENE, TRA, WUS

PATE CDTA TASF V 1,500 1,500

Building Capacity for Statistics in the Pacific, Phase 2

PSM PAUS CDTA Trust Fund 1,000 1,000

Standby

South–South Cooperation PSM

SPSO

CDTA

TASF V

200

200

Pacific Economic Management, Phase 2 (additional financing)

PSM PAOD CDTA TASF V 725 725

Pacific Information and Communication Technology Investment Planning and Capacity Development Facility (additional financing)

ICT PAUS CDTA TASF V 500 500

Total 4,425 2,000 6,425

2016

Preparing the Higher Education in the Pacific Investment Program, Phase 2

EDU PAUS PPTA TASF V 800 800

Increasing Access to Renewable Energy ENE PATE CDTA TASF V 1,000 1,000 Pacific Financial Technical Assistance Center

2017–2021 PSM PAUS PATA TASF V 1,670 1,670

Evolving Linkages of the Pacific Economies, Phase 2

PSM PAUS RDTA TASF V 500 TBD 1,000 1,500

Enhancing ADB’s Engagement in Fragile and Conflict Affected Situations

a

PSM, TRA, ENE, WUS, EDU, ICT

PAUS CDTA TASF V 800 800

Promoting Evidence Based Policy Making for Gender Equity in the Pacific, Phase 2

PSM PAUS CDTA TASF V 800 800

Improving Urban Services Regulation and Governance in the Pacific

WUS PAUS PATA TASF V 500 500

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Type

Sources of Funding

ADB Others

Total



($'000)

Total

6,070

1,000

7,070

2017 Sector and Thematic Analyses in Policy

Development, Phase 2 PSM, TRA, ENE, WUS, EDU, ICT

PAUS PATA TASF V 500 500

Pacific Economic Management, Phase 3 PSM PAUS CDTA TASF V 725 725 Total 1,225 1,225

ADB = Asian Development Bank; CDTA = capacity development technical assistance; DMC = developing member country; EDU = education; ENE = energy; ICT = information and communication technology; PAOD = Office of the Director General; PATA = policy and advisory technical assistance; PATE = Transport, Energy, and Natural Resources Division; PAUS = Urban, Social Development and Public Management Division; PPTA = project preparatory technical assistance; PSM = public sector management; RDTA = research and development technical assistance; SPSO = Pacific Subregional Office; TASF = Technical Assistance Special Fund; TBD = to be determined; TRA = transport; WUS = water and other urban infrastructure and services . a ADB corporate TA.

Source: Asian Development Bank.

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ASSISTANCE PROGRAM FOR CURRENT YEAR

Table A4.1: Lending Products, 2014a

Project/Program Name Sector Poverty

Targeting

Strategic Agendas

and Drivers of Change Division

Year of

PPTA/ PDA

Cost ($ million)

Total

ADB

Gov’t Co-

finance OCR

ADF

Total Loans Grants

Firm Higher Education in the

Pacific Investment Program, Tranche 1 (additional financing)


Total 1.0 0.0 1.0 0.0 1.0 0.0 0.0

ADB = Asian Development Bank; ADF = Asian Development Fund; EDU = education; GCD = governance and capacity development; GI = general intervention; Gov’t = government; OCR = ordinary capital resources; PAUS = Urban, Social Development and Public Management Division; PDA = project design advance; PPTA = project preparatory technical assistance; RCI = regional integration. a The North Pacific Regional Connectivity Project (Palau) and Solomon Islands’ Broadband for Development Project (additional financing) are included in country

operations business plan pipelines but have regional benefits and both projects are partially supported by the ADF subregional resources. Source: Asian Development Bank.

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Table A4.2: Nonlending Products and Services, 2014


Type

Sources of Funding

ADB Others

Total



($'000)

Trade and Transport Facilitation in the Pacific TRA PATE CDTA JFPR 2,000 2,000

Pacific Business Investment Facility FIN PLCO CDTA TASF-Others

1,500 PBIF 11,000 12,500

Strengthening Public Sector Management in the North Pacific (additional financing)

PSM PAUS CDTA 0 AUS 562 562

Results Based Strategy and Sector Planning in the Pacific (additional financing)

PSM PAUS PATA TASF V 500 WFPF 500 1,000

Improving the Performance of Labor Markets in the Pacific

EDU PAUS PATA TASF V 750 750

Mapping Resilience to Fragility and Conflict in Asia and the Pacific


PAUS CDTA TASF V 900 900

Sector and Thematic Analyses in Policy Development


PAUS PATA TASF V 800 800

Total 6,450 12,062 18,512

ADB = Asian Development Bank; AUS = Australia; CDTA = capacity development technical assistance; EDU = education; ENE = energy; FIN = finance; ICT = information and communication technology; JFPR = Japan Fund for Poverty Reduction; PATA = policy and advisory technical assistance; PATE = Transport, Energy, and Natural Resources Division; PAUS = Urban, Social Development and Public Management Division; PBIF = Pacific Business Investment Fund; PLCO = Pacific Liaison and Coordination Office; PSM = public sector management; TASF = Technical Assistance Special Fund; TRA = transport; WFPF = Water Financing Partnership Facility; WUS = water and other urban infrastructure and services. a This technical assistance is financed through a special allocation from Strategy and Policy Department (SPD) and reflects support to all of ADB’s countries in

fragile and conflict-affected situations, not just those in the Pacific. Source: Asian Development Bank.