bet N. 1U434AP Pacific Islands Transport Sector Study (In Seven Volumes) Volume Il: Vanuatu - Transport Sector Survey March 1993 Infrastructure Operations Division Country Department III East Asia and Pacific Region FOR OFFICIAL USE ONLY J 4 Z 4-7 ;.T, ) ~~1. . '.. w- --:''Ls--'' =_ > ~- - '~ - ;,_,- ''f' 0. S'_ _ ..!. --".Z w~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -~~ ,A~~~ 4 ACRONYMS AND ABBREVIATIONS ADB - Asian Development Bank AIDAB - Australian International Development Assistance Bureau IMF - International Monetary Fund NPSO - National Planning and Statistics Office PMCs - Pacific Island member countries PITSS - Pacific Islands Transport Sectr Study FOR OMCIAL USE ONLY PREFACE The Pacific Islands Transport Sector Study (PITSS) reviews the status of the transport sectors in the six Pacific Island member countries (PMCs) of the World Bank. The PITSS is reported ir two volumes: Volume One - A Regional Perspective on Transport Issues - presents an analysis of transport issues across the region. Volume Two - Country Surveys - provides a detailed examination of the transport sector in each PMC. This survey of the transport sector in Vanuatu, is one in the series for the PMCs which, as a whole, represent Volume Two. Each sector survey presents an overview of transport, identifies areas of concern and suggests priorities for consideration by Government. Maintenance of transport infrastructure is identified as a common major problem area. Therefore, for this particular area, a separate Maintenance Annex is attached to the country sector survey. The PMCs share several areas of com-non concern with their transport sectors, including strategic planning, project evaluation, regulation, modal coordination, pricing and cost-recovery, commercialization, private sector participation, as well as the management of infrastructure and its maintenance. These areas are reviewed briefly in this survey and, on the basis of the surveys for all PMCs, subjected to comparative analysis in Volume One of this study. PITSS was undertaken by the World Bank with financial support for consultants from the Australian International Development Assistance Bureau (AIDAB) South Pacific Facility. The study was structured and managed by Colin Gannon (Senior Economist). Major contributions to the sector surveys were made by David Bray and Ian Gordon (consultants). The kind cooperation of the many government officials and industry representatives who assisted the mission is gratefully acknowledged. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CONTENTS 1. INTRODUCTION 1...................................... A. Review Context ..................................... 1 B. G.grsphy . 1 C. Demography andYSocial Structure. 2 D. Economy ............................ 2 2. INSTITUTIONAL STRUCrURE .......................I .... 4 A. Governm nt Structure ................................. 4 B. Agency Respon ibilities ................................ 4 C. Privat Sctor Participation .............................. 7 D. PublicFinance ...................................... 7 E. Aid Environment .................................... 7 F. Human Resources .................................... 7 3. ECONOMIC CONTEXT .................... 8 A. Demand for TransportServices ........................... 8 B. Country Development Strategy ....................... . 9 4. TRANSPORT SUBSECTORS ............. .. ............... 12 A. Land Transport ..................................... 12 B. Port and Marine Facilities .............................. 15 C. International and Domestic Shipping ............. ........... 18 D. Aviation ......................................... 19 5. TRANSPORT SECTOR DEVELOPMENT NEEDS ....... .. ........ 21 A. Introduction ....................................... 21 B. Institutional ....................................... 21 C. General Transport Sector Issues ........................... 22 D. Land Transport Sector ................................. 23 E. Maritime Subsector ................................... 23 F. Aviation Subsector ................................... 24 BIBLIOGRAPHY ............................................ 27 CHART: International Air Services MAPS IBRD Nos. 24570 and 24571 LIST OF TABLES TABLE 2.1 Agency Responsibilities .............................. 5 TABLE 3.1 Exports by Major Commodi.ies, 1982-88 ................... 9 TABLE 3.2 Merchandise Imports (million Vatu) ...................... 10 TABLE 3.3 Overseas Trade Imports and Exports 1989 (million Vatu) ......... 10 TABLE 3.4 Visitor Arrivals by Country of Residence ................... 11 TABLE 3.5 Projections of GDP Growth 1990-1999 ......... ........... 11 TABLE 4.1 Road Length by Districts Vanuatu ........................ 12 TABLE 4.2 Distribution of Vehiclcs - 1988 .......................... 15 TABLE 4.3 International Cargo Movement and Ship Visits 1985-1987 ... ...... 17 TABLE 4.4 Domestic Aviation Activity ............................ 20 SELECT DATA Vanuatu Geogranhy Land Area 12,000 sq km Sea Area 680,000 sq km Popuation Population (1987)/(1991) est. 145,000/151,000 Population Growth (1980-87) 3.0% per annum Population Density (1987) 12 persons per sq km Population of Capital, Port Vila (1991) est. 20,000 Economic GDP/Capita (1988)/(1991), est. US$820/US$1,120 Exchange Rates: 1980 Vatu 68.29 = US$1.00 1985 Vatu 106.03 = US$1.00 1989 (September) Vatu 122.14 = US$1.00 1991 (March) Vatu 109.72 = US$1.00 Transp2rt Registered Vehic:es (1938) 4,624 Vehicles/'000 Population (1987) 35 Length of Road (1989) 1,690 km % Road Sealed (1989) 6.5 CHAPTER 1 INTRODUCTION A. RziVzw CONIT and 171 deres east. It has a land area of 12,000 m2 and a *a ar of about 680,000 1.1 This country survey presents an overview km2. The largest island is Espiritu Santo, which of the transport sector in Vanuatu identifies together with off-shore islands, is 4,248 km2. areas of current md emerging concern, indicates The capital, Port Vila, is on Efate island which priorities and sugests future strategies for the is 915 km2. Only 14 of the islands have land sector.1 area in excess of 100 km2. It is some 859 kmn from the Torre Islands at the northwest of the 1.2 To facilitate the present study, a desk country to Anatom in the southeast. The highest review2 of the transport sector was previously mountain in Vanuatu is Mt. Tabwemasana undertaken for each of the Pacific Member (1,877 m) on Santo. While half of the islands Countries (PMCs) of the Bank.3 That review are islets and volcanic outcrops, the other half provided preliminary information on each are larger and generally have a terrain with country, including Vanuatu, and working mountains, plateaus and limited coastal plains. hypotheses on development needs in the There are a number of active volcanos. transport sector. The present survey builds on this work tc develop a current sector overview 1.5 Vanuatu has a typical South Pacific island so as 'to establish first, directions for the climate with south-east trade winds in the whiter formulation of strategies and priorities for each season. Annual rainfall in Vila is 2,300 mm. country, and second, the basis for selection of Cyclones occur (normally in the period January the specific issues addressed in Volume One of to April) and can cause substantial damage to this Report. crops and dwellings. Vanuatu is also subject to earthquakes. The major perennial cash crops are 1.3 The present survey is complemented with coconuts, coffee and cocoa; some specialty crops similar surveys for the other PMCs. A regional (for example, vanilla) are developing. Cattle are overview which compares and contrasts transport increasing in importance and fresh beef is sector issues across all six PMCs, and indicates exported to the Solomon Islands and Now priorities for improvements in sector efficiency, Caledonia. The principal natural resource of is presented as Part I in Volume One of this Vanuatu is its land. It is estimated that about 45 study. percent of the land area is potentially arable; about 15 percent of the total land area is currently being utilized. B. GEOGRAPEY 1.4 Vanuatu is an archipelago of approximately 80 islands located between 12 degrees and 21 degrees south and 166 degrees -2- C. D*MOGRIY AND development of agricultural pursuits outside clan SOCWSTRUCUaE areas is not easy. Insofar as internal migration occurs, it is to the two major towns, Santo and 1.6 Preliminary results from the 1989 Census Port Vila. indicate a population of 142,630 (including an estimated 4,000 expatriates). This implies an average annual growth rate of about 2.9 percent D. 9CONOMY4 among ni-Vanuatu sirce the previous Census in 1979 (and almost a four-fold increase since the 1.8 The Republic of Vanuatu has an 1930s). The death rate of 12 per thousand may estimated GDP per capita of US$820 (1988) decline further so that if the crude birth rate of which is slightly above the average for the 45 per thousand remains stable the population region. Given the abundance of land and the could exceed 200,000 by the turn of the century. traditional social sysm, the incidence of However, the more recent reported birth rate of poverty is regarded as relatively low, although 38 per thousand (IMF, 1989) suggests a slower available social indications suggest that the rate of population growth. About 93 percent of quality of life in many rural areas is quite poor. the population are Melanesian. The two Surveys indicate that about 47 percent of the principal islands are Efate, which contains the population suffer from malaria and that there are capital, Port Vila. and Espiritu Santo. A little dietary deficiencies which particularly affect the less than 37 percent of the country's population infant age group. live on these islands, with a further 43 percent living on other islands in the central part of the 1.9 External Aid is a dominant feature of the country. The remaining 20 percent of the balance of payments and the economy. During population live on the islands at the northwest the period 1984-1987 Vanuatu received an and southeast of the archipelago. The annual average of some US$178 per capita in populatior, is mostly rural and most people live grants and concessional loans. This doubled near the coast. Port Vila had a population of during 1987 as a result of the devastation of only 14,200 in 1986. Assembled literature Cyclone Uma, but has now decreased to more indicates the 1986 census defined Port Vila in a normal levels. different manner to that previously used. An exodus of expatriates from Port Vila following 1.10 The structure of Economy is highly independence is likely to have been offset by in- dualistic. The traditional sector encompasses migration of ni-Vanuatu seeking employment about 80 percent of the population, but there is opportunities. Santo, the next largest town a small but growing number of traditional which is located on Espiritu Santo, had a smallholders producing copra or vegetables on a population of 5,600 in 1986. commercial basis. The modem sector is highly diversified for a Pacific Island nation. Services 1.7 Consistent with these demographic account for about 70 percent of GDP, of which patterns, key domestic concerns of Government wholesale and retail trade, including tourism, is relate to inter-island shipping and rural the most important subsector and accounts for transport. Rapid population growth will add to about one-third of GDP. The public sector demand for these services. It is possible that a accounts for one-third of modern sector trend to urbanization could impose considerable employment. pressure on transport in the principal centers which are currently little more than modest-sized 1.11 Economic growth averaged 6.8 percent towns. The population exhibits the usual strong per annum for 1983 and 1984 but sub3equently Melanesian characteristic of great affiliation with stagnated until 1989; in this year an estimated the land. Accordingly, access to land for growth rate of 2.5 percent was achieved. . 3 - However, prospects for economic growth are 1.12 There is a nced for signifcantly higher good, though dependent upon appropriate levels of recurrent flnancing for operations and macro-economic policies. Vanuatu has the maintenance, particularly in the transport, health potential to grow by 4-5 percent per annum and education sectors. Official assistance, which during the 1990s. The services sector, is largely restricted to investment projects, is particularly tourism and financial services, are undercommitted due to the lack of economically expected to provide the primary impetus for viable projects and scarce local skilled growth. Industry is expected to develop rapidly, manpower. It would be desirable for the donor albeit from a low base, and both tht beef community to consider provision of recurrent industry and cocoa production are expected to cost financing and more technical assistance grow significantly in the next decade. within the framework of sectoral expenditure strategies. -4- CHAPTER 2 INSTITUTIONAL STRUCTURE A. Gov NweXr STRuCnT Communications, Civil Aviaton and Tourism. Mem Tranport and Civil Avistion portflios are 2.1 Vanuatu (formerly the New Hebrides) now the responsibility of the Prime Minister and was governed by an Anglo-French condominium the previous Ministry is now the Ministry of administration from 1914 until independence in Public Works, Ports and Marine, Postal Services 1980. At independence the country inherited a and Meteorology. lho Lad Transport Board, complex system of Government which involved which reguates public trport reports to the three sets of administrative units: English, Minister of Home Affairs, as does the Director French and common services represented by the of Local Government. Agency responsibilities condominium. Three official languages were are set out in Table 2.1. recognized: English, French and Bislama -a local version of pidgin English. 2.5 The functions of local Government councils (excluding the two municipal councils) 2.2 The Constitution of the Republic of are set out in the Decentralization Act of 1980 Vanuatu provides for a single-chamber 46 seat and include the preparation and implementation Parliament elected by universal franchise. of regional development plans, control of Executive power is vested in a Prime Minister vehicular traffic, location and maintenance of elected by Parliament, supported by a Council of secondary airfields and the levying and Ministers appointed by the Prime Minister from collection of specified taxes. Most of the the members of Parliament. nominated functions have not been devolved although discussions on the transfer of 2.3 A National Council of Chiefs, the ownership and maintenance responsibilities for pinnacle of a structure that involves chiefs at the transport infrastructure (roads, wharves, village, island and district level is primarily airfields) within local Government areas are concerned with matters of ni-Vanuatu language underw/ay. Such transfer of responsibilities and culture. Separately, 11 island Government wo& d require strengthening of the institutional, councils have been established to permit technical and personnel resources of councils deeentralization and local involvement in and provision of greater financial resources, regional affairs. Municipal Councils, headed by either by extended local revenue raising capacity a mayor, were established for the two major or by transfer from the Central Government. urban areas of Port Vila and Luganville in 1975 and continue to be responsible for urban administration. B. AGENCY RESPONSITMS 2.4 Prior to November, 1990, transport 2.6 Roads. The planning, construction and policy and operations were concentrated in one maintenance of roads is the general Ministry: the Ministry of Transport, responsibility of the Department of Public - 5- Table 2.1: VANUATU-AGENCY REspoNsIDILITiEs, 1991 Land Maritime Aviation Inter-Modal Policy MOT MPW DPPM NPSO Planning MPW MPW, DPM CAD NPSO Construction and Maintenance PWD PWD, DPM CAD NA Operations: Infrastructure NA DPM CAD NA Services Private Private Quasi-Private Regulation Police, LTB DPM CAD NA MOT Ministry of Transport MPW Ministry of Public Works, Ports and Marine, Postal Services and Meteorology PWD Public Works Department (in MPW) LTB Land Transport Board (in Ministry of Home Affairs) DPM Department Ports and Marine (in MPW) CAD Civil Aviation Department (responsible to the Prime Minister) NPSO National Planning and Statistics Office NA Not Applicable. Source: Mission consultations. Works, within the Ministry of Public Works, 2.7 Land Transport Operations. The road Ports and Marine, Postal Services and transport industry is a private sector activity. Meteorology. However, there is not a clear Buses and taxis are privately owned and definition of the Department's responsibilities individual ownership is common. Public for road3 of various classifications. Village transport services in the urban municipalities are access roads are not seen by the Department to regulated by the Transport Control Board. be their responsibility, but maiatenance work is Regulation includes fare setting and vehicle undertaken at Government direction. The safety standards but no market entry restrictions responsibility for roads in urban areas has been are applied There is no route control (route clarified and roads classified of national licensing, vr buses but the Board has indicated importance were transferred to the Department an intention to move to route licensing. A in 1990. The municipal councils retain Public Service Vehicle License (annual fee in responsibility for the remainder of the roads in 1991 - 30,000 Vatu) is required to operate a bus urban areas. and a Business License is a standard requirement for both bus and taxi operators. Commercial freight services are limited and are provided by -6- privately owned trucks or trucks belonging to locations throughout Vanuatu (Wilbur Smith, villages or cooperatives. Operato.s of these 1989), including eight which have been services must also hold a Business License. constructed recently with Japanese or ADB Multiproject Loan funding, These are not a 2.8 Vehicle standards (axle loading and Departmental responsibility, nor apparently the vehicle dimensions) have been set by regulation responsibility of any Government authority or but are not used as a control (or permit) on agency. vehicle import or registration. No on-road weigbing devices are in use and there is no real 2.12 Maritime Training. A Marine Training control, therefore, on overweight or over- School is run by the Department and provides dimension vehicles. Overloading of vehicles is elementary training in engine room and deck reported to be clearly evident (for example, skills. Teaching is constrained by operational some vehicles carrying containers or forest requirements and staff available within the products) but the extent of damage to the road Department. system cannot be quantified at present. Registration fees for heavy vehicles do not 2.13 Civil Aviation. The Cvil AWation reflect the attributable costs of road maintenance Deparvawnt is responsible for the operation, at legal loading. management and maintenance of airports, the provision of air traffic services and air safety 2.9 Shipping. The Depanmneat of Ports ane regulation throughout Vanuatu. The Department Marine is responsible for shipping legislation, operates Bauerfield Airport at Port Vila (the administration and control. The marine international airport), a primary regional airport functions include the survey of vessels on the (Pekoa) at f uganville on Santo (which can be Vanuatu Shipping Register, the issue of marine used by internatio;al aircraft) and 27 regional safety certificates and coastal trading licenses for domestic airports on outlying islands. An inter-island vessels. The Department also airfield is under construction at Paama (which is providas and mair.iaim marine navigation aids expected to be completed in 1993). Two within Vanuatu. The provision of safety additional airfields have been proposed-one on certificatec for inter-island vessels, which are Tanna and ene on Ambrym. The Department mostly old and under-maintained, is determined reviews requests for variations to domestic air by compliance with basic safety standards. As fares, and makes recommendations to Cabinet. there is no Marir.e Engineer on staff no authorization can be given of the structural 2.14 Policy and Planning. The National adequacy of vessels surveyed. Evidence from Planning and Statistics Office (NPSO) in tne the Department suggests this general area of ship Office of the Prime Minister is responsible for survey is a major concern. the preparation of the Five Year National Development Plan. Sector Officers within the 2.i0 Ports. The Department of Ports and Planning Office work with relevant Departments Marine is responsible for the provision and in developing and reviewing projects and maintenance of public wharf facilities at the two preparing submissions for Cabinet consideration. international ports; Port Vila and the Port of Resource constraints in the NPSO have meant Santo. Port operational iresponsibilities, other that much of the project initiation has been left than wharf maintenance, are confined to to the 'line' Departments and that strategic provision of linesmen, the supply of shoreside planning considerations have been subordinated services, and the operation of tug services. to a project-by-project approach. 2.11 There are an estimated twenty nine further public wharves and jetties at island -7- C. PRIVATE SErOR PARTICPAnON doubled in 1987 to some 40 percent of GDP and was planned to remain at that level for the 2.15 In addition to the involvement in land period to the end of 1991 to meet developmental transport services referred to in ..7, the private requirements. Over the last five years, sector is responsible for the provision and approximately cne-half of all donor assistance operation of inter-island shipping services has been invested in the transport sector. throughout Vanuatu. The extent of these services is described in Chapter 4 below. F. HUMAN RESOURCES D. PUBIC FINANCE 2.19 Vanuatu has a shortage of ni-Vanuatu with technical and managerial training and 2.16 Domestic revenue for the National experience. Within the transport sector, senior Govemnment of Vanuatu is drawn from a very execut;ve, specialist and professional staff are narrow tax base as Vanuatu does not impose predominantly expatriate, supplied usually under corporate or income taxes For the period 1985- U.K. or Australian technical assistance 1989 taxes on international trade and programs. Unlike Tonga and Western Samoa, transactions accounted for 78 percent of Vanuatu has rot experienced an emigration of Government revenue, whilst taxes on goods and professional indigenous staff to other countries. services accounted for the remaining share of tax Because of salary freezes in the public sector revenue. imposed because of Government budgetary problems, there has been a movement of skilled 2.17 Deficits on the recurrent budget have and experienced people to the private sector. A occurred for much of the 1980s, but a series of major deficiency, however, has been the small austerity measures, introduced initia;y in 1985 out-turn of professionally and technically trained and extended in 1989, have been successful in ni-Vanuatu to meet public and private sector reducing the fiscal deficit and producing a needs. The training, development and balanced recurrent budget. Capital outlays have advancement of ni-Vanuatu staff was noted as a been constrained during the 1980s, being limited major need in a recent management review study by donor assistance and Government borrowing. (AIDAB, 1988). Vanuatu has been able to attract substantial grant aid. E. Am ENVRONmENT 2.18 Aid has been the source of most developmental expenditure since independence. Vanuatu currentiy receives about US$35 million in aid each year (1985-88 average and including substantial STABEX funding in 1987), principally in grant form. Major donors have been France, the United Kingdom, Australia and the European Community. The reconstruction program following Cyclone Uma dominated the short term requirements. Aid more than -8- CHAPTER 3 ECONOMIC CONTEXT A. DEMND FOR TRANORT SERviCES 1991. A combination of events led to this situation. Ihe effects of several severe 3.1 Demand for transport services in Vanuatu cyclones, declining economic conditions in is derived primarily from activities in the tourist originating countries (in particular, agricultural and services sectors. Despite an Australia and New Zealand), problems with evident potential and some growth in the early international aircraft connections, and civil and period of the 1980s, agricultural production and political difficulties in the region contributed to exports have been impaired by cyclones and the decline over the 1985-1987 period (Table declining international commodity prices, 3.4). especially for copra. As shown in Table 3.1, there has been no sustained growth in any major 3.4 No formal data base exists to scale export commodity in the period 1982-1989. demand for marine and land transport activity in Imports increased over the period 1985-1989 Vanuatu. Some sampling of inter-island with machinery and transport equipment, and shipping cargo manifests and passenger carriage miscellaneous manufactured goods showing the was undertaken as part of the National Transport greatest increases (Table 3.2). The figures for Development Plan but the results may be 1989 (Table 3.3) reveal that the value of imports distorted (para. 4.20 below). exceeded exports by almost five times. 3.5 Demand for land transport is moderate in 3.2 The imbalance between imports and and near the urban areas of Port Vila and exports affects the efficiency of port operations, Luganville and minimal elsewhere. However, particularly as Vila is the main port for dry the inability of Government to finance the cargo and liquid fuel imports, whilst Santo recurrent cost of maintenance for roads, wharves dominates in the movement of export and jetties is seen as a major constraint to commodities (Table 4.2). Some 75 percent of medium-term development of the agricultural all copra exports are shipped through Santo. sector. The imbalance in shipping requirements is further reflected in Table 3.3, which shows the 3.6 Because of the archipelagic nature of the Asia/Pacific region (New Zealand and Australia country, an efficient, low cost, and effective in particular) is the main source of imports, and inter-island shipping service is vital to European countries the main receivers of widespread economic development and social exports. integration. Available evidence indicates that inter-island transport costs are high, adding 3.3 International visitor arrivals fell in the considerably to the cost of consolidation of period 1985-1987 after showing sustained exports and distribution of imports, and that growth in the early 1980s, but a reversal to a service levels outside the central regions of growth situation is evident for the period 1988- Vanuatu are poor. The inter-island fleet is old -9 - Table 3.1: VANUATU-EXPORTS BY MAJOR COMMODITIES, La 198248 1982 1983 1984 1985 1986 1987 1988 1989 Lb Copra Volume 34,798 38,538 46,682 34,930 40,612 31,846 31,704 23,620 Value 7.4 13.2 27.6 13.1 4.2 6.5 9.1 750 Cocoa Volume 548 1,232 791 814 1,197 1,243 813 1,573 Value 0.6 1.8 1.4 1.3 1.8 1.9 1.1 174 Beef Volume 776 1,054 681 1,134 502 1,044 964 997 Value 1.9 1.9 1.5 1.9 1.2 2.3 2.3 262 Timber Volume 652 3,900 19,161 17,423 7,839 19,283 7,001 12,626 Value 0.2 0.3 1.5 1.3 0.6 1.9 1.0 204 Coffee Volume - - - 84 22 44 19 - Value - - - 0.2 0.1 0.1 0.0 La Value is nominal, in millions of US dollars, and volume in metric tons unless otherwise indicated. /b Value in million vatu FOB. Source: World Bank (1991a) and Office of Statistics. and reported to be ill-suited to the task, but Increased economic growth in all sectors of the commercial returns are insufficient to support Vanuatu economy is forecast, with a projected upgrading of the fleet. Given present demand overall rate of growth of 4 percent per annum and price levels, more reliable, and possibly (Table 3.5). higher cost, service may not be economic for these thin markets. 3.8 Growth in the service sector, particularly in tourism and the Finance Center is expected to provide the primary impetus. Copra output is B. COUNrRY DEVELOPMEN STRATEGY expected to grow only at the rate of population growth, but the beef industry and cocoa 3.7 A recent examination of economic growth production are expec.ted to grow significantly. opportunities has concluded that Vanuatu has a Tourism growth can be expected to have most brighter outlook entering the 1990s than at any impact in the Port Vila area and around the time since Independence (World Bank, 1991). island of Efate generally. Indications are that - 10 - Table 3.2: VANUATU-MERCHANDISE IMPORTS, 1985 - 1989 (million Vatu) Item 1985 1986 1987 1988 1989 Food and Live Animals 1,210 1,089 1,022 1,263 1,213 Beverage and Tobacco 295 252 204 368 331 Crude Mate.rials (exclude fuels) 68 67 226 88 65 Mineral Fuels 651 573 634 584 640 Oil and Fats 38 37 25 31 33 Chemicals 395 364 450 421 540 Basic Manufacture 1,083 1,062 1,624 1,430 1,437 Machines, Transport Equipment 1,387 1,503 1,918 1,797 2,452 Misc. Manufactured Goods 972 820 983 851 934 Goods not specified 286 138 364 233 237 Total 6,385 5,905 7,450 7,066 7,882 Source: Vanuatu Statistical Bulletin. Table 3.3: VANUATU-IMPORTS AND EXPORTS, 1989 (million Vatu) Country Imports Exports Re-exports La Australia 3,803 163 Japan 917 298 New Zealand 1,025 Fiji 733 France 427 155 New Caledonia 233 124 Singapore 257 3 Hong Kong 295 Belgium 3270 Holland - 138 Other 912 138 Total 7,882 1,612 951 La Re-exports are not defined by country. Source: Vanuatu Statistical Bulletin. - 11- Table 3.4: VANuATU-VISrrOR ARRIVAUS BY COUNTRY OF RESIDENCE, 1984 - 1991 1984 1985 1986 1987 1988 1989 1990 1991 A. Total by Air 31,615 24,521 17,515 14,642 17,544 23,84 35,042 39,784 Nationality (%) Austndia 67.1 60.9 53.2 45.2 54.8 58.3 50.4 53.8 Now Caledonia 9.1 13.6 15.4 14.5 10.3 11.6 10.6 8.9 New Zealand 6.7 4.9 8.1 10.1 8.3 8.0 17.9 18.3 Japan 2.6 2.3 3.4 3.0 2.9 2.5 2.1 1.8 USA 1.9 2.3 3.4 5.0 3.6 2.9 2.6 2.8 UK and France 3.0 3.9 4.2 4.5 4.0 3.0 3.5 3.1 Pacific 4.8 5.7 6.1 9.0 9.6 6.3 5.4 5.2 Others/not known 4.7 6.4 6.2 8.7 6.5 6.S 7.2 6.0 B. Anivals by Cruise Ship L& No. of Ships 58 64 57 62 48 na. n.a. n.a. No. Visitors n.a. 75,742 56,090 49,381 SO,932 /a Includes double counting where ships visited both Vila and Santo. Source: National Transport Development Plan 1988, Statistical Indicators Vanuatu, and Departmnt of Ports and Marine. cocoa production will develop on the eastern shipping capacity for livestock or refrigerated side of Malekula and possibly in the Santo/Malo capacity if abattoir facilities are decentralized. region. Realization of the potential for beef The greatest potential generators of beef production will depend on increased inter-island production are Espiritu Santo and Malekula. Table 3.5: VANUATU-PROJEFIONS OF GDP GROWTH 1990-1999 1985-1989 1990-1994 1994-1999 Agriculture -1.3 3.0 3.5 Industry 8.1 4.1 4.5 Services 0.1 4.6 5.0 Total 0.6 4.2 4.6 Source: World Bank, (1991a). - 12 - CHAPTER 4 TRANSPORT SUBSECTORS A. LAND IRANSPORT being within or bordering the urban areas of Luganvfle (Santo Island) and Port Vila (Efate 4.1 Road Intructure. A road inventory Island). prepared in 1989 as part of the National Transport Development Plan lists 1,690 km of 4.2 Road Investment. The reported total roads in Vanuatu, of which 63 km were sealed, road length increased from 1,062 km in 1981 to 910 km were graveled, 360 km were 1,760 km in 1991 representing an increase of eathformed and 357 km were walking or 66 percent (see Table 4.1). In the same period seasonal vehicle tracks. The islands of Santo, the sealed length is estimated to have increased Malekula and Efate each have 200-250 km of from 35 km to 115 km. During the 1980s surfaced road (some 72 percent of the total of Government emphasis for capital funding for sealed or graveled road), with the sealed road transport has shifted from land transport to Table 4.1: VANuATu-RoAD LENGTH BY DISrRICrs, 1981 - 1989 Road Length (Iam) District 1981 1986 1989 Banks & Torres 30 35 44 Ambae/Maewo 95 107 161 Santo/Malo 250 255 361 Pentecost 112 130 118 Ambrym 50 55 107 Paama 5 5 5 Epi 55 63 76 Shepherds 20 59 52 Malekula 100 190 244 Efate 150 216 281 Tafea 195 203 241 1,062 1,318 1,690 Source: Government of Vanuatu and National Transport Development Plan, 1989. - 13 - marine infrastructure. External funding provide a basis for extension of contract assistance for road capital investment has maintenamne. The major constraint is the level amounted to US$2.5 million in the period 1981- of funding made available for road maintenance, 1988, of which some US$1.0 million was which does not meet minimum requirements and provided in the period 1987-1988 for precludes the extension to full contract reconstruction works following Cyclone Uma. maintenance. Present road maintenance costs by In excess of US$1.3 million of further funding Public Works Department appear lower because has been used for provision of heavy of the artificially low plant hire rates applied to construction plant and maintenance equipment the costing of Goverrnment maintenance works. for the Public Works Department. The New construction work is carried out by the improvement of 62 km of rural roads leading to Department as contractors will not bid for work outer island wharves and landings has been on remote islands and because of alleged funded in the 1989-90 period as part of a problems with the capacity and quality of work multiproject package cofinanced by ADB and undertaken. IDA. 4.6 Road Planning. An ADB-funded 4.3 The emphasis on road maintenance in the National Transport Development Plan was National Transport Development Plan reflects prepared in 1989 to provide an integrated multi- the concern that the maintainment of most modal approach to transport planning in infrastructure facilities in Vanuatu is inadequate Vanuatu. The plan proposes a series of priority and that road maintenance, in particular, has transport projects in three periods of five years been badly neglected. The plan estimates that each, covering the years 1989-2004. The choice regular maintenance of the existing road assets of projects within each mode involved the would require in the order of 850 million Vt per identification of 253 potential projects and the annum, or about nine times the amount budgeted preparation of an economic evaluation for each. for road maintenance in 1989. Project priorities within each mode were determined by internal rate of return and these 4.4 A similar concern is expressed in other priorities were taken into account in preparing reports. The Vanuatu Development Survey the five year programs. The plan identifies 20 (World Bank, 1991a) refers to the major land transport projects for the period 1989-1994 problem of maintaining rural roads because of of which 10 cover road maintenance, the inability of the Government to finance the reconstruction and new construction at an recurrent costs and the concern that 15-20 estimated cost of 390 million VT. A further 78 percent of these roads will become unusable if million Vt is recommended for improvements to there is no increase in the level of maintenance Public Works Department maintenance funding over the next several years. management capability and 30 million VT to provide basic maintenance equipment to local 4.5 Existing Government policy is to put all Government councils. road maintenance on Efate and Santo to contract and to reserve Public Works Department staff 4.7 Delivery of Road Construction and and equipment for maintenance work on remote Maintenance. The Public Works Department islands to which contractors are reportedly not undertakes all road construction and the majority attracted. Presently about 50 percent of road of road maintenance in Vanuatu. Substantial maintenance work on Efate is contracted out and funding has been provided by aid donors for is regarded as cost effective after initial attempts heavy construction and maintenance equipment at overpricing by contractors. Present contractor used by the Department. The equipment is rates are judged to be satisfactory and the view under-utilized and in poor condition. is that the skill levels in the private sector -14 - 4.8 A major review of the Department was excess of 400 vpd. Pavement sealing is undertaken in 1988 through AIDAB to examine recommended for the higher volume levels, the efficiency and effectiveness of the which would apply to urban and near urban organization. The review confirmed the roads in Port Vila and Luganville. perception that the service provided by the Department was neither efficient or effective. A 4.12 Appropriate road cross section and major overhaul has commenced in accordance geometric design standards have also been with the study recommendations, involving established and are being used for new restructuring of the organization, increased level construction or reconstruction. Greater attention of staffing, a major overhaul of the costing and is being given to drainage and road profile financial control systems (including full costing during both construction and maintenance. The of plant and vehicle hire rates) and upgrading of availability of suitable road construction depots and workshops. materials varies from island to island. Efate, for example has adequate supplies of coral which 4.9 Ongoing problems exist with the repair makes a good road base and is an excellent and maintenance of plant. The Department has surface for unsealed roads. Other islands (e.g. a large inventory of plant but its serviceability is Tanna, Ambae and Ambrym) have little coral very low. The acquisition and inventory control and local materials generally are plastic clays. of spare parts have been major deficiencies and there has been little commitment to maintenance. 4.13 Vehicle Registration. Road vehicles are Since 1990 plant hire rates have been revised to required to be registered and licensed annually. meet all operational costs and to provide for As at 1988 there are 4,624 registered vehicles in replacement. This rate is now applied to capital Vanuatu of which 434 are Government owned. works projects but a lower rate is used for Cars account for 47 percent and pick-ups for 38 maintenance, resulting in potential cross-subsidy percent of the total registration. Cars dominate from capital to recurrent works. At present, the the vehicle composition on Efate but, with the Department has no maintenance management exception of Santo (Luganville, in particular), system and it is not possible to establish past are not used elsewhere. Pick-ups are the maintenance costs by road link or to prioritize dominant vehicle type on the outer islands. The systematically a future maintenance program. distribution of vehicles by region is shown in The National Transport Development Study Table 4.2. Efate and Santo account for strongly recommends that a road maintenance 80 percent of registered vehicles (and 37 percent management system be established and operated. of total population). The major operators of vehicle trucking fleets are located in the urban 4.10 The Development Study also recommends centers of Port Vila and Luganville, and that Local Government Councils should take up generally own, at most, a few vehicles. responsibilities for roads within their areas, as Construction companies and logging enterprises provided by the Decentralization Act 1980. The operate their own vehicles as do commercial National Government would need to provide enterprises such as Burns Philp. Transport technical and financial support if decentralization services in the rural areas are provided by of responsibility for roads assets was adopted. individual owner operators or by 4WD vehicles owned by community groups. Vehicles involved 4.11 Road design standards based on traffic in commercial operations are required to have a volume and terrain category have been adopted Business License, however the informal nature recently although, the economic justification of of many of the operations in the rural areas these is not clear. Formation widths of 4.0 m often results in operation without a license. are provided where traffic volumes are less than 30 vpd, and range up to 7.5 m for volumes in -15 - Table 412: VANUATU-DISTRIBUTION OF VEHICLES, 1988 Vehicle Types Regions Vanuatu B/T S/M A/M Pe A Pa Ep M S Ef T Total Cars 446 4 0 0 0 0 5 0 1,717 2 2,186 Pick-ups 2 483 145 31 32 0 22 208 25 7 89 1,733 Trucks 54 0 0 0 0 0 9 0 670 14 184 Buses 23 2 0 0 0 0 12 0 100 24 210 Motor cycles 86 6 1 1 0 2 27 2 144 10 287 Special duty 142 6 Total 2 1,110 157 32 33 0 24 261 27 2,773 139 4,624 B/T Banks/Torres A Ambrym S Shepherds S/M Santo/Malo Pa Paama Ef Efate A/M Ambae/Maewo Ep Epi T Tafea Pe Pentecost M Malekula Source: National Transport Development Plan. 4.14 Road Safety. Road safety matters in shipping: Port Vila on Efate and the Port of Vanuatu are the responsibility of the Police. Santo on Espiritu Santo. Of the two, Port Vila There is no collation or analysis of traffic is the main port of the Republic. In addition to accident records. Accidents in the Port Vila the public facilities at Port Vila (the International area are causing concern because of the heavy Wharf and the petroleum anchorage), there are concentration of vehicle ownership. Learner two privately owned wharves, the Star Wharf drivers need to be 18 years of age and are and the Burns Philp Wharf. Inter-island required to display L plates and be accompanied shipping uses the private wharf facilities. The by a qualified driver until they pass a driving four wharves in Port Vila are at widely test. A Vehicle Inspection Scheme is operated separated haoor locations. by PWD and applies to public service vehicles - taxis and buses. There is no obvious formal 4.16 Port facilities at the Port of Santo process to ensure vehicles are presented for comprise an ocean wharf, which is being rebuilt inspection or that vehicles which fail the with ADB funding as a result of structural inspection are either repaired or taken off the deterioration of the original wharf, and a public road. inter-island wharf (Simonsen's Wharf). A private wharf to the west of the town (Melcofee Wharf) is also used by inter-island shipping. B. PORT AND MARNE FACUTIES 4.17 Vila is the major port for imported cargo 4.15 Vanuatu has two ports which and fuel, whilst Santo generates higher export accommodate international as well as inter-island levels, principally copra. For the period shown, - 16 international cargo handled through both ports for and full records of asses are not maintained. has fluctuated between 110,000 and 137,000 There are no figures available, therefore, to tonnes (excluding fuel), the main variations determine the extent to which revenues meet all occurring in movements through Vila. In 1986 operating and depreciation costs. However, it is export cargo through Vila dropped appreciably the Department's view that full cost recovery is whilst in 1987 imports rose substantially, in part unlikely. the result of rehabilitation requirements following Cyclone Uma in February 1987. 4.21 The level of cost recovery is further Total export figures for 1985-1989, show a confused by the payment to Government of a decline over the period (55,000 tonnes to 40,000 revenue-related annual fee by the single tonnes) due principally to the reduction in copra stevedore company operating ur.der contract at exports. International cargo movement and ship both ports. Stevedoring contracts were awarded visits are shown in Table 4.3. through a tender process in 1986 for a five year period, and, as of 1992, were extended under an 4.18 Visits by cruise ships are an important interim arrangement). The terms of the component of the developing tourist industry in contracts and the results are under review (with Vanuatu. Approximately 60,000 passengers a finance through the Commonwealth Secretariat). year were handled through Port Vila for the In essence, the stevedore at eacha port is required period shown although there have been a decline to pay to the Government a minimum annual in ship visits, total passenger numbers, and concession fee plus a percentage of gross passenger visit days in recont years. receipts over a base revenue level. Cargo handling performance requirements are stipulated 4.19 There is little information on domestic together with tariffs to be applied to various shipping movements and freight and passengers classifications of export and import cargo. carried. A sample survey using data from 12 Performance requirements are modest and any domestic ships in 1987 indicated general cargo improvement in performance would accrue in (38 percent), building materials (29 percent) and increased profitability to the stevedore. There is copra (19 percent) to be the principal categories no incentive or requirement to reduce tariffs to of cargo carried. The survey resu,; may have users. It appears that the present contractual been affected by the refusal of some perators to arrangement results in neither minimization of carry copra (because of inadequate tariffs - see stevedoring costs nor throughput efficiency, and para. 4.25 below) and the substantial rebuilding does not foster any share of cost savings to the works in 1987 following Cyclone Uma. (An user of the service. An action plan developed as inter-island shipping study, financed by ADB, part of the Santo Port Project Agreement sets was being completed in 1992.) out the steps to be taken to develop a commercially based accounting system and tariff 4.20 The Department of Ports and Marine review procedure to meet agreed financial levies charges for berthage, wharfage, storage, targets. A similar requirement for operations at pilotage and use of tugs. Charges for these Port Vila would be appropriate. services were last reviewed in June 1990. Total revenue from these charges amounted to 121.5 4.22 Port development needs for Port Vila million Vt in 1990, with a further 8.4 million Vt have been identified in the National Transport in marine fees and vessel charter fees. The Development Plan. The proposals result from Department operates on standard Government the need to accommodate cruise ships while not budget appropriation and retains no revenues. impeding the working of international cargo Its accounting policies and practices reflect the vessels, the requirement to upgrade the Star Government's cash-based accounting system in Wharf facilities to serve both domestic and which economic depreciation is not accounted overseas shipping, and the need to improve the -17 - Table 43: VANUATU-INTNATIONAL CAJGO MOVEME AND SHlr VSIm (1985-1987) Port Vila 1985 1986 1987 Dry Cargo - Imports (tonnes) 43,988 42,709 58,374 Dry Cargo - Exports (tonnes) 22,556 12,403 22,697 Total (tonnes) 66,544 55,138 81,070 Fuel Import (tonnes) 10,312 10,709 10,689 Shipping Calls: Dry Cargo 108 124 122 Tanker 24 23 22 Passenger 57 52 53 Santo 1985 1986 1987 Dry Cargo - .mports (tonnes) 2',012 18,809 17,837 Dry Cargo - Exports (tonnes) 32,676 35,713 37,783 Total (tonnes) 55,688 54,522 55,620 Fuel Import (tonnes) 7,723 5,441 4,133 Shipping Calls: Dry Cargo 69 65 58 Tanker 11 13 7 Passenger 7 5 9 Source: Ports and Marine Department. discharge of liquefied petroleum products, which 190 million Vt is identified in the 1989-'994 is presently both hazardous and slow. The plan plan period for 16 marine infrastructure projects proposes an investment of 510.5 million Vt on outer islands, involving channel construction, (inclusive of a new tug) in the 1989-94 period the construction of new wharf facilities and towards meeting these requirements. A further repairs to some existing wharves. - 18 - C. INTERNATONAL AND ships because of the small volumes of cargo on DOMESIC SHPNG offer. Stocks of imported goods can run out, and export commodities (e.g. copra) spoil if not 4.23 There has been a reduction in the number prepared and stored correcdy. Apart from the of companies providing scheduled international carriage of copra for which freight rates are set freight services to Vanuatu, though the number by the Vanuatu Commodities Marketing Board of ship calls has remained relatively constant. (on a zonai basis), freight and passenger rates The Pacific Forum Line service no longer appear to be determined by the individual operates and both CGM and Bank/Columbus operators. Line call only by inducement if sufficient quantities of copra are available. Bali Hai, 4.26 The kvel of profltability of inter-island Sofrana, Joint Service Line, and Kyowa Line shipping is unclear. The industry claims that provide general cargo services on a scheduled copra freight rates and other rates which can be basis. Over 40 percent of imports (by value) are charged for freight ad pasepgrs ae sourced from Australia, with Japan and New insufficient to meet costs. The age and Zealand being other significant import sources. condition of vessels used in the inter-island trade Europe is the dominant export destination would appear to support this contention. Vessels (copra) followed by Japan which imports beef are claimed to be purchased from the 'scrap' end from Vanuatu. of the overseas market and run past the end of their effective working life with minimal 4.24 Inter-island services are provided by maintenance. vessels typically of around 30 meters with a cargo capacity of some 100 cu.meters. There 4.27 Estimated costs of the operation of a are 36 ships licensed to operate and, with the 'typical' medium sized copra trading vessel exception of 5 vessels under one ownership, are developed in the National Transport owned individually. The operation of an inter- Development Plan indicate a potential profit island trading vessel requires a Marine Safety margin of 10 percent on costs, in a perfect Certificate, a Coastal Trading License and a operating situation. In practice a slightly better Business License. The Coastal Trading License than break even situation might result. Other states the route to be operated, but there appears estimates indicate that secondhand vessels of a to be no surveillance or enforcement of 'representative' type trading over a compliance. Choice of route, therefore, is 'representative' route and having a working life determined by the availability of cargo, with the of 10 years might just cover full operating costs major copra producing areas receiving the most (including capital) with a modest 2-3 percent intensive shipping services. margin but with full loadings of passengers and freight. 4.25 Port Vila and the Port of Santo act as the focii for the consolidation and distribution of 4.28 Existing efficiency of the interisland cargo for the southern and northern regions of shipping subsector is difficult to gauge. the country. There is substantial movement of However, cxisting barriers to entry and potential imported commodities from Port Vila to the Port cartel operations indicate shortcomings. A of Santo, but exports occur from both ports. number of alternative operating policies have The services from the regional centers to outer been canvassed (ADB, 1989), ranging from a islands are direct, rather than using subcenters as full deregulation (free entry, exit and pricing) to collection/distribution points. The remoter nationalization of shipping services. Also islands - Torres and Banks to the north, and the various forms of subsidy or bidding schemes for TAFEA region to the south - suffer service defined services have been suggested. One such problems; up to three months between visits by scheme is to foster the use of smalier vessels -19- trading on an exclusive route basis from regional manaement asistance arrangements were under subconters to remote islands with larger vessels negotiation as of 1992.) Luganville Airport confined to main feeder routes. However, the which sorves as the northern domestic hub has a case for regulated segmentation of routes has not sealed runway 2,600 by 30 meters and could been evaluated). A detailed design has been handle aircraft to B737 standard if the surface commissioned for a sail powered cargo vessel was rehabilitated to eliminate the risk of debris with auxiliary motor capable of being built in ingestion. Vanuatu for an estimated cost (1990) of US$270,000 (30 million Vt). The vessel would 4.31 Tbe 26 other domestic airstrips generally be capable of being beached to work cargo and have grassed runways varying in leng from able to carry 130 cu.meters of cargo (up to 50 475 m to 1,020 m, but typically around 900 m. tonnes). A proposal to construct this ship as a Most are equipped with a basic teminal pilot project to serve remote reas has been put building. MTe existing airstrips provid, a forward by the Department of Local reasonable coverage of the regions within Government. The resolution of the nost Vanuatu, although not every island has an appropriate policies to be applied to inter-islaud airfield. The National Transport Development shipping which would result in adequate services Study proposed only two additional airstrips, one at competitive rates remains a central transport at Gaua (Banks region) and one on the north issue. coast of Ambrym, during the period 1989-1994. Emphasis is given to improving air navigational 4.29 An advisory technical assistance inter- aids, the maintenance of airfields, provision of island shipping study, financed by ADB, is security fencing at existing airfields, and some scheduled to completed in 1992. This study is upgrading of runways and approach areas at directed to "formulation of suitable policy and selected airfields. The total cost of all air regulatory measures for domestic shipping (in transport proposals in the 1989-1994 period is particular to ensure services to outer islands), to estimated at 256.8 million Vt. Domestic assist private sector shipping to become aviation activity is shown in Table 4.4. financially, economically and technically sustainable, and to investigate opportunities to 4.32 Air transport is important in linking the develop ship repair and construction facilities". islands and regions of Vanuatu for commercial, Seminars are also planned to explore means to social and political reasons. Until 1989 domestic strengthen the management of privately owned air services were provided by Air Melanesia, a shipping services. foreign-owned airline, and by Dovair, an airline with both ni-Vanuatu and foreign shareholders. Government action in 1989 resulted in the D. AVATION formation of Vanair, a limited company, fully owned by the Government, which has a 4.30 Bauerfield Airport at Port Vila is the domestic monopoly over both route services and international airport for Vanuatu. Extensive charter operations. Vanair operates three Twin construction works were completed in 199:, Otter and four Britton-Norman Islander Aircraft, including a new international terminal, runway a substantial reduction from the combined extension, new apron, air navigation facilities aircraft register of the two previous companies. and security fencing. A new traffic control (Indicators of efficiency of domestic air services tower is to be completed and the old terminal are not readily available.) upgraded for domestic use. The works have been funded through Japanese and Australian 4.33 Services are provided to all airfields on bilateral grant aid and the airport can now both a scheduled and on-demand basis. The handle aircraft to B767 standard. (New airport summary figures for 1989 and the first nine 20 - Table 4.4: VANuATu-DoMEsrc AVIATiON AcmTY, 1986 - 1990 Aircraft Movements /a Emplanements Intern*ational Domestic International Domestic 1986 * 13,055 - 87,799 1987 1,236 16,187 37,557 92,182 1988 774 20,264 50,053 n.a. 1989 1,336 36,123 64,863 103,444 1990 1,598 13,195 83,946 193,216 1991 1,809 n.a. 159,498 208,963 La Commercial traffic only. Source: Civil Aviation Department. months of 1990 indicate a comparative reduction its own purposes on three days of each week and in aircraft movements and in emplanements. leases it to Australian Airlines on the other four However, the number of departures appears days; this achieves a high level of aircraft considerably in excess of the service levels utilization. The air services provided are provided by Air Melanesia and Dovair combined directed to the Australian and New Zealand prior to 1989. Changes to domestic airfares, tourist markets. In addition, Air Vanuatu block which include a domestic departure tax (200 Vt purchases seats on Solomon Airlines services in 1991) are approved by Government after between Vila and Nadi and has proposed proposals have been reviewed by the Civil additional sharing arrangements with other Aviation Departnent. regional airlines. Aircraft servicing is provided by Australian Airlines, though there is concern 4.34 International air services to Vanuatu are that the phasing out of B727 aircraft by provided by Air Vanuatu, Air Caledonie, Air Australian Airlines may jeopardize this Pacific and Solomon Island Airlines. Services arrangement. Flight crews are expatriates, but are provided to Honiara, Noumea, Nadi, cabin, office and ground staff are predominantly Auckland, Brisbane, Sydney and Melbourne. ni-Vanuatu. Air Vanuatu, the national airline, is operated under a management agreement with Australian Airlines. The contract, which commenced in 1987, is for five years. Air Vanuatu operates a B727 aircraft which was purchased with financial assistance from the Australian Government. Air Vanuatu uses the aircraft for -21 - CHAPTER 5 TRANSPORT SECTOR DEVELOPMENT NEEDS A. INMODUCTION resources have also contributed to a low level of investment in new infrastructure. 5.1 Vanuatu is the most recent Pacific Member Country of the Bank to gain independence (1980). As a result of an inherited B. INSMIJUlONAL public sector situation and economic problems following independence, the Government has 5.4 Inves!ment Justification. The had to adopt an austere fiscal policy stance. identification of projects in the National Transport Development Plan is the result of 5.2 One effect has been to minimize funding consideration of a series of projects which have of recurrent maintenance requirements, a been identified previously in National situation which has adversely affected the Development Plans or by various Government serviceability of transport infrastructure in the Departments and by local communities. country. The maintenance of rural roads and of Essentially they comprise a list of projects which wharves and jetties has been noted as a have previously been assessed only on the basis particular problem (World Bank, 1991) which, of broad socio-economic criteria. The if not addressed, will affect national output and justificati^!, of their inclusion in the constrain growth in the agricultural sector in the recommended development plan arises from 1990s. various perceived benefits - of which increases in the quantity and/or quality of output in the 5.3 Given the problems of accessibility and agricultural sector are significant components. remoteness arising from the archipelagic nature The effectiveness of this role of transport has yet of the country and the geography and geology of to be adequately established. It is an open many of the islands, the cost of improvements to question whether transport does provide the the transport infrastructure will be high, degree of stimulus presumed, given the social however, the demand is likely to be substantial. and cultural enviromment of Vanuatu (and other Over the period since 1980 investment in new similar countries in the Pacific region) and the infrastructure has been modest. Apart from two current prospects, especially for agricultural major projects (namely the construction of new exports. facilities at the Port of Santo and a new international terminal and associated air side 5.5 Government Accountability. As of facilities at Bauerfield) the greater part of 1991, departments and organizations of transport investment has been in the Government in Vanuatu are not required to reconstruction of facilities following Cyclone prepare annual reports, which cover the Uma. The lack of identification of economically performance of their functions and viable projects and the scarcity of local skilled responsibilities. Thus, there is no formal accountability to Government and the public and - 22 - no publicity and exposure of the effectiveness element in the future development of Vanuatu. and efficiency of policies and operations.' Because of austerity requirements, since 1985 the Government has pursued a policy of a freeze 5.6 Transport Responsibilities. The role of on civil service salaries and constraints on Provincial Government vis-a-vis National staffing. The result has been a loss of trained Government in the planning and operation of middle level staff to private enterprise. In transport infrastructure and services, and the addition, technical departments, such as those effect on the functions and objectives of with transport responsibilities, remain dependent Government departments and authorities with upon expatriates to fill senior executive, responsibility for transport matters, are not professional and specialist technical positions. clearly established. The Decentralization Act The training, development and retention of No. 11 of 1980 sets out the responsibilities of competent local officers at executive, Local Government, which include ownership and professiotial and managerial levels remains a maienanc, of transport facilities within their major problem which is not being overcome area. These have not been taken up and would through present Staffing Assistance require considerable strengthening of the arrangements. Use of "%winning' arrangements financial and technical resources of local with similar overseas organizations warrants Councils if transfer was formalized. The present exploration. situation adversely affects the maintenance of roads, wharves, jetties and airfields in Local 5.9 Policy and Practices. No policies have Government area, as Departments are loathe to been enunciated on user charges or cost accept responsibility, and are unlikely to receive recovery. With the exception of the commensurate budget appropriations. requirements set as part of the port development at Santo, there appear to be no explicit 5.7 Transport Strategy. The need for an objectives or requirements of a commercial integrated multi-modal approach to transport nature which Government organizations or planning had been identified at the enterprises need to achieve. Given the commencement of the Second Five Year importance of economic efficiency and the Development Plan (1987-1991) which has been necessity to generate funds for operations and completed recently. The National Transport mainenance, the development of such policies Development Plan identifies a number of policy should be given high priority. The feasibility of matters which will need to be addressed, and establishing user charges will increase as the tax constraints which will need to be reduced, if the base is widened. effectiveness of the transport system is to be improved. The manner in which the 5.10 Maintenance has been identified as a recommendations are dealt with will be an problem of major proportions and should be important issue. Some fragmentation of given urgent attention in setting budget transport responsibilities has occurred since priorities. The National Transport Development November 1990, and the role of the NPSO has Plan concluded that the needs of safety and been seen as reactive rather than pro-active in maintenance in the transport system ranks higher the development and implementation of policy in importance than improvement works and new and project initiatives. construction. The need for significantly higher levels of financing for maintenance has been supported in various studies. Provision of C. GENERAL TRANORT SECTOR IUES recurrent cost financing and technical assistance within an agreed framework of sectoral 5.8 Human Resource Development. The expenditure strategies warrants high priority development of human resources is seen as a key consideration by donors. The first step to -23-. address this matter is a review of all S. 13 Human Resource Developnent. Since infrastructure to establish the most valuable independence, there are very few ni-Vanuatu in assets which warrant maintenance. This would senior, professional and technical positions. allow the development of maintenance priorities Whilst technical assi.tance programs relieve the and financing requirements. situation, the solution is temporary. Lack of counterpart staff, high turnover and relatively 5.11 Private Sector Participation. The short term appointments of expatriate staff in private sector is fully involved in the provision key positions, changes in leadership and of land transport, marine services and domestic variability in the number and quality of shipping services. There are few substantial personnel supplied under technical assistance entry controls (subject to ownership by a ni- reduces prevailing effectiveness and makes the Vanuatu), nor route restrictions in either development of a cohesive and motivated transport mode. Price regulation applies in the organization very difficult. land public transport area but not elsewhere except tariffs for inter-island movement of 5.14 Private Sector Involvement. Existing copra. There are currently two areas of Government policy is to put all maintenance concern, the efficiency and effectiveness of the work on Efate and Santo to private contract, inter-island shipping services and of the leaving the remaining maintenance and stevedoring services at the Ports of Vila and construction works to the PWD. Implementation Santo. Examination of both areas is has so far extended to three-quarters of the roads recommended under the National Transport on Efate (undertaken by four contractors). The Development Plan. use of maintenance contracts to develop a private sector construction capability is highly desirable and should assist in providing a service capacity D. LAND TRANsPoRT SECroR to local Councils, when maintenance responsibilities are assumed under the 5.12 Management Systems. The need to decentralization policy. At the same time it is establish a road maintenance management system important for private contractors to secure sound is identified as a priority requirement in the technical skills and adequate plant. National Transport Development Plan. The lack of such a system does not allow establishment of 5.15 Road Safety and Traffic Operations. maintenance priorities and inhibits attraction of Road safety and traffic operations are emerging the funding levels necessary for effective road issues in the main urban centers of Luganville maintenance. In this same vein, consideration and Port Vila. The continued development of also needs to be given to the life cycle costs in the tourist industry will require a better level of relation to road standards, and the potential to signing and traffic management, particularly if modify standards to reduce ongoing maintenance most tourists continue to be drawn from needs. In addition, the management of plant and countries which use right-hand drive vehicles. equipment should be reviewed. Increased plant The location of the Port at Vila, which is serviceability and utilization would allow lower accessed by road through the town center, is holdings of plant and reduced plant hire rates. giving rise to the need for improved traffic Consideration should be given to the use of full management. cost recovery plant hire rates for maintenance works to avoid cross-subsidization from E. MARitIMn SUSECTOR construction projects and to better provide for future funding of plant replacement items.' 5.16 Strategy and Poliies. Effective maritime strategies and policies are crucial to the development of the Vanuatu economy. Four - 24 - areas of principal concern have been identified of Vila and are directed to improving berth in the National Transport Development Plan - availability for international cargo vessels and rehabilitation and provision of wharves and improving the safety and efficiency of unloading jetties, policies relating to inter-island shipping, petroleum products. Total cargo throughput has provision of ship repair facilities and provision been generally static during the 1980s but is of stevedoring services at the international ports. expected to increase in line with growth in the economy. 5.17 Wharves and Jetties. There is no authority responsible for the provision, 5.21 Port Operations. There is a need to maintenance and cost recovery of public wharves better maintain existing infrastructure in the and jetties outside of the main ports. The main ports, in addition to the outer island jetties National Transport Development Plan proposes and wharves. Improvements to the accounting the allocation of this responsibility to local system and a more conmnercial approach to the communities, with financial support from the fixing of charges is required as part of the Port National Government. This proposal is of Santo improvement. The adoption of consistent with the decentralization policies commercial accounting procedures and adopted by Government. specifying performance objectives to be met in both ports should be considered. Following the 5.18 Inter-Island Shipping. The efficiency recent review of the stevedoring contract and effectiveness of inter-island shipping is a arrangements, a future system should ensure that crucial element in the transport sector. Present there are strong incentives to improve the services appear deficient, with high prices; the efficiency of operations and to ensure that port fleet is old and in poor repair. The National users share in productivity increases through Transport Development Plan canvasses a number price reductions. of regulatory and operational policy options and recommended that a contract route licensing system should be introduced. Further evaluation F. AVIAnON SUBSECrOR of this option would be highly desirable. (An ADB study of inter-island shipping, scheduled 5.22 Strategy of Policies. Air transport is for completion in 1992, is addressing many of regarded as crucial to fostering growth in these policy, institutional and technical matters, tourism development. Vanuatu has secured as well as port costs.) substantial donor assistance for the development of the Bauerfield International Airport near Port 5.19 Regulation. The present system of Vila and this project is nearly complete. licensing which requires a Marine Safety Resurfacing of Pekoa airport (Santo) warrants Certificate, a Coastal Trading License and a attention. Upgrading and expansion of airstrips Business License does not appear restrictive in requires careful assessment of the net benefits. practice. A Marine Safety Certificate is a The National Transport Development Plan normal requirement in most countries and a proposes that priority should be given to the Business License applies to all business improvement in air navigation aids during the enterprises in Vanuatu. The Coastal Trading 1989-1994 period. License, which sets out the routes to be serviced (for which fees were increased by 50 perceiit in 5.23 Airport Maintenance. As in other 1990), in practice is not enforced-desirably it transport sectors, appropriate maintenance of should be revoked. existing infrastructure assets is a problem of major proportions. The National Transport 5.20 Port Investments. The investment needs Development Plan recommends the development in the ports area are confined mainly to the Port of specific programs for airport maintenance and - 25 - the consideration of devolution of responsibilities 5.25 Regulatdon. Entry is closed for potential and maintenance contracts for airstrips to local operators to the domestic aviation market; communities. Consideration needs to be given Vanair has a monopoly on the provision of all to the means of funding the increased recurrent services within the country. The consequences expenditure which will be required to maintain of this policy for users and the country as a recent and proposed developments in this whole are not clear; nor is the full justification subsector and in placing the operation of airports of the policy. The relative cost-effectiveness of on a more commercial basis. alternatives for the selection and provision of service on routes that are commercially not 5.24 Airflne Operations. The provision of viable, but deemed politically necessary, international air services to Vanuatu appears to warrants examination. have been developed satisfactorily and Air Vanuatu is developing toward a commercial base. The results of the recent Government decision to nationalize air services by forming Vanair, a totally Government owned airline, are not clear. From statistics available, service levels have increased, but no returns are available on financial performance. ke -26 - Endnotes 1. This transport sector survey is based on a mission to Vanuatu during March 19-22, 1991. The mission members were Colin Gannon (Senior Economist and mission leader), and Ian Gordon (consultant). A draft of this report was discussed with the Government of Vanuatu June 30 - July 3, 1992. 2. See World Bank (1989). 3. The five other South Pacific island countries which were members of the World Bank at the time of this study were Kiribati, Fiji, Tonga, Solomon Islands and Western Samoa. 4. The World Bank country study of the Pacific Island economies (World Bank, 1991a) presents a more detailed review of the Vanuatu economy and its development prospects. 5. Elections held in November 1991 resulted in a change in Govermnent, thus new policies are likely to emerge. 6. Fully-funded internal plan hire rat are scheduled to be introduced in January 1993. - 27 - BIBLIOGRAPHY Asian Development Bank (1989), National Transport Development Plan, prepared for the Republic of Vanuatu by Wilbur Smith and Associates. Australian International Development Assistance Bureau (1988), Review of Public Works Department, Vanuatu, prepared for the Department of Public Works by Cameron McNamara Pty. ltd. Australian International Development Assistance Bureau k.988), Outer Islands Alrfields, Project Identiflcation, Vanuatu, prepared by McIntyre & Associates. South Pacific Bureau for Economic Cooperation (1990), Review of Non-Directional Beacon Requirements, Vawuat, prepared by the Civil Aviation Authority of Australia. Transport and Road Research Laboratory (1982), The TRRL Road Investment Model for Devloping Countries (R27M2), TRRL Laboratory Report 1057. World Bank (1988), Road Deterioration in Developing Countries-Causes and Remedies, a World Bank Policy Study, Washington, June. World Bank (1989), South Paciflc Islands Transport Sector Review. World Bank (1990), 'Vanuatu Development Survey", Prepared for the Pacific Islands regional country study. World Bank (1991 a), Towards Higher Growh in Pacific Island Economies; Lessons from the 1980s, Report No. 9059-ASIA, January 18. - 28 - Vanuatu \Pt_ Vk RI AS'" AaiIc IE Solomon luluid Airwaysv mbum/ a. /. a -P AW [j wArm*s/ INTION4L AR SEMIC IE Somo WNW"ld nam o o - 29 - VANUATU TRANSPORT SECTOR SURVEY ANNEX 1 -30- ANNEX 1 CONTENTS 1. INTRODUCTION .... 32 A. Phase I Context of the Transport Sector Study - Vanua.. ..............2 B. Maintenance Management Framework ........................ 32 2. NATURE OF THE MAINTENANCE ISSUE .......... .. ......... 35 A. Transport Infrastructure Inventory - Vanuatu .................... 35 B. Assessed Maintenance .................................. 39 C. Maintenance Practices . . 42 D. Implications of Inadequate Maintenance ............................... 47 E. Maintenance Funding .................................. 48 F. Situation Summary .................................... 54 3. EQUIVALENT ANNUAL VALUE FOR TRANSPORT INFRASTRUCTURE 57 4. ROAD VEHICLE OPERATING COSTS .59 -31- ANNEXI LIST OF TABLES Table No. 1 Vanuatu-Management Information Inventory Roads .33 2 Vanuatu-Management Information Inventory Ports .34 3 Vanuatu-Management Information Inventory Airports .34 Vanuatu-Estimated Road Length in 1991 .36 5 Vanuatu-New Road Construction 1989-1991 .36 6 Vanuatu-Road Construction Costs .37 7 Vanuatu-Estimated Replacement Cost Government Marine Facilities .38 8 Vanuau-Estimated Replacement Cost Government Aviation Facilities .39 9 Vanuatu-Annual Average Maintenance Cost as a Percentage of Replacement Va'"ae for Marine Facilities .40 10 Vanuatu-Estdmated Average Annual Maintenance Cost Government Marine Facilities .41 1 1 Vanuatu-Annual Average Maintenance Cost Government Aviation Facilities .42 12 Vanuatu-Recurrent Income and Expenditure for Public Works Department .43 13 Vanuatu-Recurrent Income and Expenditure for Department of Ports and Marine .45 14 Vanuatu-Recurrent Income and Expenditure for Civil Aviation Departnent .46 15 Vanuatu-Summary of Infrastructure and Maintenance Costs .48 16 Vanuatu-Income from Import Duty and Service Tax, 1990 .51 17 Vanuatu-Summary of Cost Recovery .56 18 Vanuatu-Summary of Infrastructure Value and Maintenance Costs, 1991 .58 19 Vanuatu-Road Roughness and Condition .59 20 Vanuatu-Vehicle Operating Parameters .61 21 Vanuatu-Vehicle Operating Costs, 1991 .62 LisT OF BOXES Box No. 2.1 Vehicle Operating Costs ................................... 49 2.2 Economic Justification of Rural Roads .......................... 55 4.1 Traffic Volumes .60 -32 - ANNEX 1 CHAPTER 1 INTRODUCTION A. CONoEXr 1.4 Evidence of inadequate maintenance of transport Infrastructure as a major issue, is 1.1 This annex provides documentation of a generally circumstantial. The present, survey of the maintenance situation in Vanuatu.' rudimentary asset inventories held by the This survey, along with similar surveys for other responsible Departments contains no information PMCs, represents the background for the on asset conditions, nor historical data (othe: regional analysis of transport infrastructure than an estimate of the total length of road in the maintenance presented in Volume One (Part IT) country). Evidence of insufficient maintenance of this report. generally consists of descriptive observations of the present poor condition of infrastructure. 1.2 The Nationsl Transport Development Little analysis has been undertaken of the need Plan (ADB, 1989) and the Vanuatu Development for cost effective maintenance. The National Survey (World Bank, 1990) identify the Transport Development Plan (ADB 1989) inadequacy of maintenance of transport estimated that outlays nine times budgeted infrastructure in Vanuatu, and maintenance of maintenance expenditure in 1989 were required roads in particular as noted in the Country to adequately maintain existing road assets. Survey. Maintenance of existing assets in these reports is considered to rank higher in importance than improvement works or new B. MANENANCE MANAGEMENT construction. At present, government policy FRAMWORK does not appear to reflect these concerns for a systematic approach to the assessment of 1.5 Tables 1 to 3 indicate the extent of maintenance needs and priorities to assist management information available for each recurrent budget planning and for the provision transport subsector.2 of adequate funds. 1.6 The tables illustrate the almost complete 1.3 At present, the Government is giving lack of information available which would assist emphasis to decentralization of responsibility for in the development, operation and maintenance maintenance of regional transport infrastructure of the road system. The best information to local government Oocal roads, airfields, available at the sectoral level is that prepared for jetties). The Government is also considering the the National Transport Development Plan, which establishment of Government Authorities (Ports, reflects the situation in 1988. Some further Aviation), as means of developing a information is available in the aviation subsector, commercially oriented management approach directed mainly to meeting international and extending financial capacity. These operational and air safety requirements. The initiatives are important but are not directed to major deficiencies relate to information useful to the establishment of ovSrall maintenance policy. - 33- ANNEX 1 the development of adequate maintenance management strategies and systems. Table 1: VANUATU-MANAGEMENT INFORMATION INVENTORY ROADS Techaical Groupig L_i Fdod Pwpo- Lvel Road Pavament Sructur Traffic Rhwce Activity Resource I _________ _ _ _ ve ntory __________ _______a___ I Sectorul Overall budgetary P U U P p p P nd satitial infomation Network Tnffie demend P U U P U U P and physical ebaracteristies by _ _ _ _ _ ~~link_ _ _ _ _ _ _ __ _ Project Specific information related Not Applicable- to conaeuution, betterment and maintenence Operations Maintenance of the u U U U U U U sysu m to provide effective service Reearch and Used for specific U U U U U U U Development investigations of development of the sysem or it operational efficiency /a See pars .1.7. A - acceptable basic information available P - partial basic information available U - information unavailable. Sol'rce: Mission review. - 34- ANNEX 1 Table 2: VANUATU-MANAGEMENT INFORMATION INVENTORY PORTS Functronas uTechnical Groupng La Level Stnacturu Civil Buidiags Plant & Traffic Finace Resources Workh Equipmeat _ Sectoral Overall budgetary U U U U P p p and sutistical information Network Traffic dermnd and U U U U P U U physical characteriatics by location _ Project Specific data _ Not Assesed- Operations Maintenance of the U u U U U U U system to provide effective service Resarch and Used fo pecific U U U U U U Development investigations I& Seepaml. 1.7. A - acceptable basic information available P - partial basic infornation available U - information unavailable. Source: Mission review. Table 3: VANUATU-MANAGEMENT INFORMATION INVENTORY AIRPORTS Technial Grouping /a Functional Purpose Levl Civil Buidings Plant & Co uuni- Traffic Finance Resoures Works Equipment cation. Sectoral Overall budgetary p p P A A p P and staistical information I I I Network Trffic demand and P U P A A U U physical characte- ristics by location _ Project Specific data Not Assessed Operations Maintenance of the U U U A A U U system to provide effective service Research and Used for ecific U u u u A U U Development investgations /a Seepan 1r1.7. A - acceptable basic information available P - partial basic information available U - information unavailable. Source: Mission review. - 35 - ANNEX 1 CHAPTER 2 NATURE OF THE MAETENANCE ISSUE A. TRANSPORT INFRASUCTURE conditions or load capacity. This inventory is INVERRY broadly consistent with the requirements at the sectoral level but provides no information 2.1 There are limited data available on beyond this. Moreovar, the information is now transport infrastructure in Vanuatu. Such (December 1991) some 3 years old and has not information which does exist is presented been updated by the Department. The inventory below.3 includes 17 km of urban sealed roads in Port Vila and 15 km of urban sealed roads in 2.2 The value of major transport assets in Luganville. Responsibility for some 28 Vanuatu has been established using estimates of kilometers of sealed road in Port Vila and 18 the replacement cost of identified assets. Where kilometers of sealed road in Luganville was projects have been completed recently, the transferred from the Municipal Councils to the replacement cost is assumed equal to the Public Works Department in 1990. These roads construction cost, adjusted to present prices. appear to comprise approximately half the urban For older assets the replacement costs have been road system in Port Vila and all roads in calculated by comparison with the recorded Luganville. The road lenjths in the inventory value of similar recent assets.' for Efate and Santo, therefore, have been increased by 39 kilometers and 3 kilometers Road InvLntory respectively. 2.3 The Public Works Department does no; 2.4 Construction of some new roads has maintain a comprehensive formal road taken place since 1988, as listed below, and inventory. As set out in Table 4, there are only these have been added to the inventory which is limited data which would assist with the strategic shown in Table 5. There are no reports of roads planning, work programming, projeLt being eliminated since 1988. development or operational control of the road system.5 The best information available is that 2.5 The repiacement cost of the road assets is prepared for the National Transport estimated on the basis of road construction costs Development Plan, which reflects the extent and prepared for the National Transport general condition of the road network in 1988. Development Plan adjusted to 19?1 values (an Road links are listed by location and classified average inflation rate of 8 percent is used), and by construction class and pavement width. The recent costs for two roads constructed in the length of each link is given and a general northern region. The unit rates derived in the comment is made on the condition of the National Transport Plan used plant hire rates running surface. A separate register is provided which reflected commercial costs, rather than for bridges and culverts but without comment on Public Works Department rates which were significantly lower than full costs in 1988. -36 - ANNEX 1 Table 4: VANUATU-EsMATED ROAD LENGF, 1991 (km) _a Seasonal Earth Surfaced Sealed Total District Vehicle Formed Road Road Track Road Torres/Banks 24 14 13 . 51 Santo/Malo 16 47 287 27Lk 377 Ambai/Maewo 60 40 61 - 161 Pentecost 25 53 48 . 126 Ambryn 49 37 21 107 Paama 5 - - 5 Efi 35 21 20 76 Shepherds - 36 16 52 Malekula - 13 231 244 Efate 48 8 176 88/b 320 Tafea 95 93 53 - 241 TOt 357 362 926 115 1,760 Source: Vanuatu National Transport Development Plan (1989). la Excludes walking tracks. /b Revised figures prepared by Mission. (These costs appear lower than those estimated total, therefore, the replacement cost of all assets for other countries, but it is not possible to is likely to exceed 9 billion Vatu (1991 prices). distinguish the reasons for the differences.) Marine Infrastructure Inventory 2.6 Based on these estimated construction costs (see Table 6), the calculated replacement 2.7 The Ports and Marine Department does cost of road assets is 8,206 million Vatu (1991 not maintain an inventory of assets, use an asset prices). This estimate does not include bridge depreciation system, or prepare cxmmercially and major drainLge structures, for which no oriented financial accounts. inventory or estimated value is available. In Table 5: VANUATU NEW ROAD CONmUCrION, 1989-1991 Road Length/Width Type Malo 13 km 5 m Coral surface Vanua Lava 5 km 6 m Coral surface Gaua 2 km 3 m Earth with drainige structures Pentecost 8 km 6 m Coral surface Source: Public Works Department. -37 - ANNEX 1 Table 6: VANUATU-ROAD CONSrRUcrlON COsSr, 1991 (million Vatu, 1991 prices) Average Construction Costs/km Road Road Type Length Cost 3-5 m 5-7 m Weighted (km) width width Average Main urban roads LA n.a. 22.0 22.0 50 1,100 Sealed rural roads n.a. 8.5 8.5 65 552 Surfaced roads 3.9 5.9 5.6/b 926 5,183 Earth formed roads 2.3 3.4 2.8l/ 362 1,114 Seasonal track 1.0 n.a. 1.0 357 357 Total Road Replacement Cost 8,206 Source: Mission estimates. La Includes drainage, footpaths, curbing, junctions, signing. A total of 50 km is included in this category. L Assumes 70 percent of length is 5-7 meters in width. L, Assumes equal lengths of 3-5 m and 5-7 m widths. costs for these facilities, inflated by 8 percent 2.8 However, a basic asset depreciation per annum, have been used to derive a 1991 register was set up for the Port of Santo as part replacement cost estimate. Of the other 21 of the project agreement with the ADB for the facilities, 9 appear to be privately owned and a construction of a new overseas wharf and further 4 are only minor structures.' A nominal ancillary facilities. The existing facilities at value of 30 million Vatu for each of the Santo, including the existing overseas wharf, remaining 8 facilities has been assumed. The Simonsen's Wharf, pilot boat, weighbridge and estimated replacement cost of marine facilities is transit sheds were revalued at 1 January 1987, in set out in Table 7. aggregate, in line with the project cost estimates for the new facility. The 1987 value has been Aviation Infrastructure Inventory inflated by 8 percent per annum to give a 1991 replacement cost and added to the cost of the 2.10 The Civil Aviation Department has not new works (790 million Vatu). General developed an asset inventory in a form which estimates of the replacement cost of government provides the basis for an asset management marine assets at Port Vila have been based on system. A listing of assets has been compiled the project costs at Santo. for insurance purposes and the insurance valuations have been used as the replacement 2.9 The National Transport Plan identified 29 cost. However, these valuations do not include wharves and jetties in outlying areas. Of these, the runway and apron area at Santo nor the civil 6 were constructed through ADB Multiproject works and runway surfacing at the outer island Loan Funding during 1988-1989 and 2 through airstrips. Japanese aid during 1987-1988. The project - 38 - ANNEX I Table 7: VANuATu-EsFIMATED RELAcEENT Cosrs GOVERNMENT MAIuNE FACIuTIES, 1991 La (million Vatu, 1991 prices) Location Fadlity Replacement Cost Santo * Overseas wharf, Simonsen's Wharf, pilot boat, weighbi'lge, transit sheds 1,166 * New wharf and ancillary facilities 790 Subtotal 1,956 Port Vila * Wharves and hardstand 1,037 * buildings and sheds 98 * Tugs and workboats 168 Subtotal 1,303 Wharves and Jetties (a) ADB Multiproject: - Nduindui - Narovorovo 40 - Lolopuepue 49 - Liro 47 - Lamen Bay 18 - Sola 67 (b) Japanese aid: 12 - Litzlitz - Lenakel 293 (c) Other wharves and 277 jetties eight facilities 240 Subtotal 1,043 Total Marine Infrastructure Replacement Cost 4,302 Source: Ports and Marine Department and Mission estimates. La Excludes navigational aids. 2.11 The replacement cost of the outer island Luganville have been estimated by a pro rata of airstrips have been based on costs of similar the assessed value of the runway and associated projects listed in the National Transport areas at Bauerfield. The total replacement value Development Plan. An estimated replacement of govermment aviation assets is estimated at cost of 50 million Vatu has been assumed for 6,418 million Vatu (1991 prices) (see Table 8). grassed strips and 70 million Vatu for coral surfaced strips. For the 26 airstrips the assumed replacement value is 1,580 million Vatu. The runway, taxiway and apron replacement costs at -39- ANNEX 1 Table 8: VANUATU- SrP.ATeD REACERWIf CoMr GOVERNME AVIAMTIN FACnIIES, 1991 (illion Vatu, 1991 prices) Location/Item Facility Plant and Total l ________________________ Cost Content Cost Cost |Bauerfield Runway 1,011 - 1,011 Terminals 1,381 85 1,466 Control Tower 24 62 86 Other Buildings 52 6 58 Fire Tenders 88 88 Subtotal 2,468 241 2,709 Runway 556 5 556 Terminal 25 1 26 Control Tower 8 4 11 Other Buildings 20 2 23 Fire Tenders . 25 25 Subtotal 609 32 640 Navigation, Radio Eguipment and Beacons 8 1,356 1,364 Outer Islands Airfields Airstrips 1,580 . 1,580 Terminals 106 19 125 Subtotal 1,686 19 1,705 Total Aviation Infrastrn;cture Replacement 4,771 6,418 Cost Source: Vanuatu Civil Aviation Department and mission estimates. B. ASSESSED MAEANCE Cost/Kilometer (million Vatu) Roads * Sealed roads and graveled roads 0.77 2.12 Annual average road maintenance costs * Earth roads 0.23 are estimated by using costs per kilometer formed roads 0.36 reported in the National Transport Development seasonal track Plan, inflated to 1991 values. These are: (provisional estimate) 01 Separate unit maintenance costs for sealed and graveled roads were not available. The average unit cost for these two classes of road of 0.77 million Vatu (or US$6,800) per kilometer -40- ANNEX 1 is inordinately high and is suspected to stem replacement cost of the road system. To clear from incomplete disentanglement of maintenance the backlog of rehabilitation needs in five years and rehabilitation expenditures. and to adequately maintain the system during the period would require an annual expenditure of Seasonal tracks are deflned in the National 1,289 million Vatu (1991 prices). This is Transport Development Plan as being roads equivalent to 7 percent of GNP in 1991 (the which are only passable during the dry season of latter being estimated at 18 billion Vatu). the year. The resulting average annual maintenance cost for the network is estimated at Marine Infrastructure 968 million Vatu (1991 prices). 2.14 Annual average maintenance costs for the 2.13 The estimated annual maintenance cost marine subsector have been calculated by assumes that the road system is in good applying industry wide guideline percentage maintainable condition and that maintenance is factors to the estimated replacement values of directed at preserving design standards. This is marine structures and equipment. Because not the case, although no pavement or structure costings of replacement value are aggregated, inventory exists from which to calculate the rather than individually detailed, general bacldog of the rebabilitation or reconstruction percentages have been used (see Table 9). On costs. However, inspection of the National the basis of these data, the estimated average Transport Development Plan inventory indicates annual maintenance cost is 48 million Vatu that less than 20 percent of the road system (1991 prices) for facilities at the main ports of (excluding seasonal tracks) was rated as good, Port Vila and Santo and 11 million Vatu (1991 with about equal proportions of the remainder prices) for outer island wharves and jetties (see rated as fair or poor. If the condition rating is Table 10). This represents a total annual assumed as 20:40:40 corresponding to maintenance requirement of 59 million Vatu good:fair:poor, and that half of the roads classed (1991 prices). as fair require rehabilitation and all roads classed as poor require rehabilitation or reconstruction 2.15 There is evidence of a backlog of in equal proportion, the cost of bringing the road maintenance and rehabilitation needs in the system to a good maintainable standard is some marine subsector, but the requirements cannot be 2,160 million Vatu (1991 prices). This figure is fully quantified. The National Transport approximately 25 percent of the estimated Development Plan notes some corrosion of the Table 9: VANUATU-ANNUAL AVERAGE MAINTENANCE COST AS A PERCENTAGE OF REPLACEMENT VALUE FOR MARINE FACILMTES Fadlity Percent of Capital Cost * Quay, wharf structures - reinforced concrete deck with steel piles 1.0 - hardwood deck and steel or reinforced concrete piles - mass concrete 1.5 * Buildings, offices, sheds 0.15 * Mobile equipment and boats 1.5 10.0 Source: Ports Authority of Fiji and UNDP. - 41- ANNEX 1 Table 10: VANuATu-EsMATED AVERAGE ANNUAL MNNTENANCE CoSr GOVERNMNT MAmNE FACILITIES, 1991 (million Vatu, 1991 prices) Item Value Factor Average Annual (percent) Maintenance Major ports: - structures 2,993 1.0 29.93 - buildings 98 1.5 1.47 - equipment 168 10.0 16.80 Outer ports: (a) ADB 233 1.0 2.33 (b) Japanese Aid 570 1.0 5.70 (c) Other 180 1.0 1.80 60 1.5 0.90 Total 4,302 58.93 Source: Ports and Marine Department and mission estimates. steelwork and spalling of concrete and broken percentage factors to the estimated replacement piles at the Ocean Wharf, Port Vila. The Star cost of facilities. No specific source document Wharf is reported to be in a poor state of repair has been identified which provides indicative with corroded steelwork and concrete showing values, as is the case for marine infrastructure. extensive spalling. The new wharf at Santo has Percentage values have been based on general been completed recently but the structural figures for building maintenance, building plant condition of the other facilities is not clear. The maintenance and civil works maintenance in the outer island wharves constructed through ADB case of major airports. For regional airports the and Japanese funding are less than five years old annual costs of maintaining the runway and and are presumed to be in reasonable condition. general cleared area have been estimated as a Of the other government-owned wharves only lump sum amount per airfield of 0.4 million two appear to be in good condition. The Vatu (1991 prices). These figures include remainder are in poor condition or have periodic as well as routine maintenance (see deteriorated to the extent of requiring Table 11). The estimated average annual replacement. The National Transport maintenance requirement for aviation Development Plan indicates an amount of 50 infrastructure at the two major airports, million Vatu for outer island wharf Bauerfield and Santo, is 76 million Vatu (1991 rehabilitation, and 270 million Vatu for repair prices) and for the twenty six regional airstrips and upgrading of the Star Wharf, Port Vila 10 million Vatu (1991 prices). The total for all (1989 prices). It is likely therefore, that the facilities is 87 million Vatu (1991 prices). backlog of maintenance and rehabilitation needs exceeds 400 million Vatu at current prices. 2.17 Runway and drainage rehabilitationneeds have been identified by the Civil Aviation Aviation Infrastructure Department at seven of the regional airfields and a further three airfields require repair or 2.16 Annual maintenance costs for the aviation replacement of terminal buildings. The subsector also have been calculated by applying estimated cost for initial repairs (excluding - 42 - ANNEX 1 Table 11: VANUATU-ANNUAL AVERAGE MAINTENANCE COST GovERNMENT AVIATION FACILITIES, 1991 (million Vatu, 1991 prices) Fadlity Value Factor Average Annual Vatu (percent) Maintenance million Vatu million MJor Facilities: Bauerfield and Santo * Terminal and other buildings * Terminal and other building plant 1,510 1.0 15.1 * Runway/aprons/taxiways 160 3.0 4.8 * Navigation, radio equipment 1,567 1.5 23.5 * Fire tenders, mobile equipment 1,364 2.0 27.2 113 5.0 5.6 Subtota Subtotal_______________________________ 4,713 76.2 Regional Airfields * Lump sum estimate 1,705 n.a. 10.4 Total 6,418 _ 86.6 Source: Mission estimates. major upgrading) is about 12 million Vatu (1991 for example, combine all expenditure on labor. prices). Rehabilitation costs resulting from An estimate of total expenditure on road previous inadequate maintenance at Bauerfield maintenance has been prepared (see Table 12), and Santo has not been assessed. Major new but a more detailed examination is required to construction and refurbishment works have been fully delineate costs. The estimates indicate that completed recently at Bauerfield and outstanding actual expenditure has been relatively constant in rehabilitation needs are unlikely to be nominal terms since 1988; given average annual significant. The runway at Santo was overlaid inflation of about 8 percent, expenditure on in 1978 and is showing signs of stress. It will maintenance has declined significantly in real require rehabilitation in the next several years. terms during the period. Estimated maintenance expenditure in 1991 of 168 million Vatu compares with 968 million Vatu estimated as C. MAINTENANCE PRACTICES being required to sustain the existing road system in good condition (para. 2.12). Roads 2.19 The maintenance of the road system is 2.18 Readily available data pertaining to the generally undertaken by the Department of Public Works Department consist of aggregate Public Works. The responsibility for the expenditure for all of its functions, including maintenance of roads in the urban areas of Port water supply and electricity in addition to roads. Vila and Luganville was clarified during 1990. The line budgeting procedures of Government The Department is now responsible for specified separate expenditure on materials for roads in the urban networks which are generally maintenance in individual functional areas, but, of an arterial nature. The urban councils are - 43- ANNEX 1 Table 12: VANUATu-RECURRENT INCOME AND EXPENDrrURE FOR PUBLIC WORKS DEPARTMENT, 1988-1991 ('000 Vatu, current prices) 1988 1989 1990 1991 l __________________________________ _________ _________ (budget) (budget) Income: * Water Charges 44,184 81,000 104,000 * Electricity Charges 7,349 .. 7,000 2,400 * Other 1,581 Total 53,114 . . . . . . Expenditure: * Staff and Labor Costs 119,304 114,355 112,600 122,902 * Office and Staff Support 7,680 7,077 6,700 6,885 * Fuel and Utilities 18,994 14,569 16,800 16,553 * Spare Parts and Plant Maintenance * Building Maintenance and Minor Works 156 819 1,000 1,043 * Maintenance of Houses * Maintenance of Buildings 196 61 200 209 * Maintenance of Water Supply 34,918 20,024 13,000 13,750 * Maintenance of Roads 35,542 6,856 7,000 7,303 * Mobile Roads Unit 45,264 45,139 38,000 48,089 * Hire Charges, Vehicles and Plant 85,990 86,714 94,000 118,860 * Other Purchases and Incidentals 16,774 12,004 13,000 14,291 3,183 2,051 2,000 2,618 Total 10,462 8,172 8,200 7,825 Of which road maintenance is estimated as: 378,463 317,841 312,500 360,328 ..________________________ _ ._ _168,420 Source: Public Works Department. responsible for the remainder, although in 2.20 The allocation of available maintenance practice the maintenance of council roads in funds to the two regions (Northern Region and Luganville is carried out by the Department. Southern Region) is determined centrally. The The responsibility for the maintenance of rural regions are responsible for the allocation of access roads requires clarification. Government funds to their maintenance programs. In the policy is that maintenance of local roads is the Northern Region maintenance is carried out by responsibility of Local Councils. Some roads two Departmental mobile teams. In the have been constructed and are maintained by Southern Region maintenance work is carried local councils using labor-intensive methods. In out by Departmental labor from regional depots practice, most of the maintenance which is done or by contracting out, using period maintenance on rural roads is carried out by the Department. contracts. The use of private contractors Is confined to Efate (the main island) but is -44- ANNEX 1 proving an effective means of providing routine expenditure (see Table 13). Income and and periodic maintenance services. Expansion expenditure for port operations is not readily of the contract maintenance system is inhibited separated from operations of the government by the level of funding for maintenance, fleet and other activities of the Department. available contractor resources, and the Expenditure on maintenance cannot be derived 'unattractiveness' of work in the outer islands to from the line budgeting and accounting system private contractors due to the isolation of these used by the Department, but has been estimated areas and the difficulties in transporting by the Department at 9.6 million Vatu in 1991. equipment and materials to work sites. This compares with an estimated average annual 59 million Vatu required to adequately maintain 2.21 The present system of budget allocation existing infrastructure (para. 2.14). and cost reporting does not provide information on a program or project cost basis and the actual 2.24 Total Departmental expenditure declined expenditures attributable to road maintenance substantially in 1989, but was budgeted to rise in cannot be defined. In addition the plant hire subsequent years at a rate of little Iess than rates for maintenance works, historically, have inflation. No significant change in maintenance been set at levels well below real operating policy occurred in this period, and the estimated costs. Until 1991 rates were set at 67 percent of maintenance expenditure in 1991 is likely to be rates usedfor constructionpurposes, which were typical, if a little less in real terms, than in less than full operating costs. In 1991 hire rates previous years. Income from port dues, for plant were increased by 90 percent but the wharfage, storage fees and pilotage has been discount for equipment used for maintenance erratic, increasing in one year and declining the was increased to 50 percent. The Department next. has completed a major review of plant hire rates as part of a review of the plant hire 2.25 Past maintenance of port infrastructure scheme. Rates proposed for 1992, which are has been inadequate. Design faults, together based on full cost recovery, would increase with negligible maintenance, have left all but present rates by up to 80 percent for wto of the older jetties (excluding recent ADB construction works. and Japanese funded facilities) on outer islands in poor condition. A new international wharf in Ports Santo is nearing completion. Its construction was necessitated by observation in the early 2.22 The Ports and Marine Department is 1980s of severe deterioration of the existing responsible for the maintenance of port facilities wharf which was built in 1955. Major wharves at Port Vila and Santo but there is no clear should have effective lives of at least 40 years. authority responsible for the maintenance of The shorter life of the international wharf in public wharves and jetties outside of the main Santo is attributable in part to damage resulting ports. Funds for maintenance of the main from major earthquakes in 1965 and 1971, facilities are appropriated to Ports and Marine. cumulative damage from other minor seismic The Public Works Department undertakes activity and major berthing accidents in 1973 maintenance of fixed facilities on request from and 1974. Data are not available on Ports and Marine Department. Other general maintenance of the wharf during its lifetime, but maintenance works are carried out by Ports and it is believed to have been minor, and its Marine personnel. absence has contributed to the rapid deterioration of the wharf. 2.23 During the period 1988 to 1991, income to the Department of Ports and Marine is expected to be 76 percent greater than recurrent -45- ANNEX 1 Table 13: VANUATU-RECURRENT INCOmE AND EXPENDITURE FOR DEPARTMENT OF PORTS AND MARINE ('000 Vatu, current prices) 1988 1989 1990 1991 (budget (budget estimate) estimate) Income: * Port and Berthing Dues and Line Handling Fees 28,094 22,439 26,630 25,300 * Wharfage TaxLa 34,884 31,515 37,110 34,660 * Storage Feoi 11,591 14,159 16,950 15,200 Subtotal (Income from Fixed Assets) 74,569 68,113 80,690 75,160 * Pilotage and Tug Hire 26,876 25,481 32,850 29,600 *Other 16,509 13,160 25,550 15,050 Total 1179S4 106,754 139,040 119.,10 Expenditure: * Staff and Labor Costs 36,026 34,770 33,732 36,327 * Office and Staff Support 1,714 1,328 1,480 1,598 * Fuel and Utilities 8,438 6,987 7,660 7,992 * Spare Parts and Plant Maintenance 15,198 12,126 13,000 14,055 * Building Maintenance and Minor Works * Hire Charges, Vehicles and Plant 2,646 1,996 2,200 2,953 * Marine School Running Costs 640 488 710 929 * Other Purchases and Icidentals 514 659 900 939 6,914 4,467 7,200 7,432 Total 72,090 62,821 66,882 72,225 Of which maintenance is estimated as: - Wharves and Hardstand - Buildings - and Workboats 3,276 - ao . .. 121 .. .. .. ~~~~~234 Total Maintenance . . .. 6,000 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _9 ,6 3 1 /a Levied at rates of 359 Vatu per tonne of import cargo and 179 Vatu per tonne of export cargo. /b Includes Freight and Passages, Marine Fees, Vessel Charter Fees and other miscellaneous income. Source: Ports and Marine Department. Aviation and repairs to buildings and civil works are undertaken through the Public Works 2.26 Funding for the maintenance of aviation Department. facilities is appropriated to the Civil Aviation Department. Routine maintenance of general 2.27 About 93 percent of income collected by facilities is carried out by Departmental staff or tle Civil Aviation Department is derived from in the case of some regional airports by contract airport passenger departure taxes and landing with the local agents or the Local Council. fees. In the period since 1988 this income has Maintenance of navigation aids, communications risen substantially, and has exceeded recurrent equipment and electrical services are carried out expenditure of the Department in each year. As by in-house personnel or using private enterprise for the other modes, the line budgeting system resources in Port Vila. Specific maintenance of Government does not indicate expenditure on .46 - ANNEX I Table 14: VANuATu-REcuRRENT INCOME AND ExPENDITURE FOR CIVIL AVATION DEPARTMENT, 1988-1991 ('000 Vatu, current prices) 1988 1989 1990 1991 (budget (budget estimate) estimate) Income: * Airport Taxes 36,942 40,875 56,000 66,653 * Landing Fees 27,238 32,032 56,000 51,840 * Air Traffic Rights and Other Charges * Other 3,057 2,982 3,000 7,200 4,238 811 3,000 2,500 Total 71,475 76,700 118,000 128,193 Expenditure: * Staff and Labor Costs 33,589 37,364 37,678 46,505 * Office and Staff Support 6,850 7,838 3,558 1,928 * Fuel and Utilities 7,669 7,805 6,500 9,035 * Spare Parts and Plant Maintenance * Airfield Maintenance 2,025 2,288 2,000 2,579 * Communications, Licenses and 6,638 5,918 5,500 5,905 Standards * Other Purchases and Incidentals 5,114 5, 45 10,000 9,645 3,585 2,832 3,200 3,545 Total Of which maintenance is estimated 65,497 69,190 68,436 82,420 as:La __________________.________________ 21,643 22,543 20,820 24,627 La Includes spare parts and plant maintenance, airfield maintenance, 30 percent of staff and labor, 20 percent of office and staff support, and 20 percent of fuel and utilities. Source: Vanuatu, Civil Aviation Department. maintenance of aviation assets. It has been locations with serviceability of tractors and estimated that expenditure on maintenance in mowing equipment, the lack of maintenance 1991 will be 24.6 million Vatu (see Table 14). effort by some contractors and the generally it is estimated that an annual average of 86 high cost of meeting basic maintenance needs. million Vatu is required to adequately maintain aviation infrastructure (para 2.16). Summary 2.28 The Civil Aviation Department is 2.29 The estimated replacement value of investigating alternative methods of providing transport infrastructure, maintenance overhang, maintenance services at regional airfields, assessed maintenance needs and actual because of difficulties experienced at some maintenance expenditure derived in this and -47- ANNEX 1 preceding sections are summarized in Table 15. accrued maintenance liability for the current Data on replacement cost are drawn from Tables infrastructure, an additional 910 million Vatu 6, 7 and 8, data on assessed maintenance would be required annually for optimum requirements from Tables 9 and 10 and maintenance of the infrastructure. The current maintenance overhang from paras 2.13, 2.15 and maintenance overhang will require expenditure 2.17. The estimates are derived from a very greater than the assessed maintenance need of limited database. The objective of the estimates 1,113 million Vatu per year if the average is to provide an indicative quantified perspective condition of infrastructure is to be improved. of the present situation for the purpose of illustrating the nature and scale of the transport 2.31 Inadequate maintenance results in more infrastructure maintenance issue. The current rapid deterioration of infrastructure than need be replacement value of transport infrastructure has the case. An estimate of the increase in the been based on data assembled on the quantity of equivalent annual cost of infrastructure resulting infrastructure and unit construction costs. The from poor maintenance is also prosented in maintenance overhang (i.e. rehabilitation Table 15. This item is discussed in the next requirements resulting from past inadequate section. maintenance) is derived from past studies which have identified infrastructure rehabilitation needs; however, none of these is comprehensive D. ImCATIONS OF INADQUATE or up-to-date, and rehabilitation needs are M MANCE greater than presented in Table 15. The expenditure required to adequately maintain 2.32 The limited maintenance effort applied to current infrastructure, suitably rehabilitated so roads in Vanuatu has reduced their effective that it is maintainable, is estimated on the basis lives to about eight years for sealed roads and of unit maintenance costs for roads and a much less for unsealed roads. The cost of proportion of the replacement value of marine restoring deteriorated roads has been estimated and aviation infrastructure. This level of at three to five times greater than the cost of expenditure is used as an approximation of the timely and effective maintenance (World Bank, amount assessed as being necessary for optimal 1988). Increased expenditure on timely and maintenance (maintenance expenditure which effective maintenance can reduce the total life results in a minimum life cycle cost for the asset cycle replacement, maintenance and user costs at a given design standard). Assessed for the continuing service of road maintenance does not imply that it is warranted; infrastructure.' The same principle applies to this requires a benefit-cost analysis of individual maintenance of infrastructure in the maritime assets. The optimal level of maintenance and aviation sectors. expenditure cannot be established. Current maintenance expenditure is derived from budget 2.33 Reduced expenditure on maintenance is data. offset by more rapid deterioration of infrastructure than would be the case with 2.30 The replacement value of Government assessed maintenance. Indicative estimates of transport infrastructure is estimated at 136,000 the equivalent annual capital cost of Vatu/capita. The infrastructure has, however, infrastructure with current and optimal deteriorated considerably, and road rehabilitation maintenance is set out below. The increase in needs are equal to 25 percent of the total the cost is summnarized in Table 15. The cost to replacement value of the road system. Current the Government of more rapid deterioration of maintenance expenditure on transport its transport infrastructure is 5 percent higher infrastructure is only 18 percent of that than the cost of improved maintenance (i.e., 910 estimated as being required. If there was no million Vatu compared with 870 million Vatu). -48- ANNEX 1 Table 15: VANUATU-SUMMARY OF INFRASTRUCFURE AND MAINTENANCE COM, 1991 La (mllilon Vatu, 1991 prices) Road Marine Aviation Total Replacement Cost 9,025 4,302 6,418 19,745 Maintenance Overhang /b 2,160 40 12/c 2,572 Assessed Average Annual Maintenance 968 59 87 1,113 Requirements Ld Estimated Current Annual Maintenance 168 10 25 203 Expenditure as percentage of assessed requirement 17 17 29 18 Additional Expenditure to Achieve Optimal 800 49 62 910 Maintenance /e l___________ Additional Annual Capital Expenditure arising 504 93 64 870 from Inadequate Maintenance Lf I /a Tbe assessed road maintenance costs indicated here were subsequently regarded by the Government (Public Works Department) as excessive. Tbis issue had been anticipated as is noted in Volume One of this report. The actual maintenance expenditures for aviation are also regarded as inordinately high. 1 Cost required to rehabilitate infrastructure to a sound standard, i.e. the standard through time which would have been the case with optimal maintenance and for which the assessed annual maintenance expenditure is sufficient to adequately maintain the infrastructure. LG Excludes cost of rehabil.tation of the runway at Saato. Ld Expenditure required for optimal maintenance. La Difference between current annual expenditure on maintenance and the equivalent annual expenditure assessed as being optimal. Lf Difference between equivalent annual capital cost for replacement of assets with optimal and current maintenance - see Annex 1. Source: Mission estimates. This differential is reversed in the case of roads, maintenance, users of the transport system incur reflecting the very high reported cost of higher costs. For road users, this includes maintaining roads in proportion to their low increased vehicle operating costs; these in turn capital cost and a situation in which traffic may result in further decline in economic volumes are low and the economic life of road efficiency through reduced accessibility and is heavily influenced by environmental factors. increased spoilage of products, and suppressed foregone productive economic activity, if the 2.34 In addition to the higher costs which increased costs make a potential industry accrue to the Government from inadequate unviable. The current poor road conditions - 49- ANNEX 1 increase road user costs by around 13 percent delay of a flight results in economic loss. through increased fuel mid tire use and Airports may be closed for minor maintenance additional wear and tear on vehicles (see Box problems, for example, uncut grass. Such 2.1 on Vehicle Operating Costs). Similarly, deficiencies can be remedied at low cost increases in port costs which result from compared with the loss accruing to aircraft inadequately maintained port infrastructure will passengers. International tourism is a major add to the cost of imported goods and make economic activity in Vanuatu, with tourism exports, most of which pass through sea ports expenditure reported at 2.0 billion Vatu in 1989. less competitive on international markets. For Allowing for an import multiplier of 0.55, net example, inadequate maintenance of ;.harves foreign exchange earnings were about 0.9 billion and jetties may result in reduced safe working Vatu in 1989, and will be higher now given loads for forklifts and vehicles and consequent continued growth in tourist arrivals. increases in the costs of handling cargo. Deterioration or closure of Bauerfield Airport Tourism could be severely affected if deficient because of poor maintenance could have a maintenance results in unreliability and delay of serious effect on tourism earnings both through services due to closure of airports - deterioration cmAcellation of specific flights and loss of of the airport terminal could also have an confidence in the industry. In contrast, the adverse effect on user perception and marketin& shortfall in maintenance expenditure for airports credibility. in Vanuatu in 1991 is estimated at 60 million Vatu. The implied net benefits to the economy 2.35 Passengers pay a considerable premium of Vanuatu are higher to the extent that domestic to travel by air compared with sea to save travel wage levels exceed the shadow wage. time. It can be concluded that cancellation or Box 2.1: VEHICLE OPERATING COSTS Vehicle operating costs rise rapidly as roads deteriorate, more so on gravel than sealed roads as shown below: Road Condition Grave! Road Sealed Road Good 30.1 28.5 I/ Fair 33.4 (115%) Z/ 29.5 (3%) Poor 39.0 (30%) 33.9 (19%) There is an almost complete absence of data on traffic volume by road type and condition. Therefore, it is not possible to estimate, with any measure of accuracy, the total cost of operating vehicles over the road network in its current condition and the cost with roads in good condition. however, working assunptions, based on judgment, have been made to provide an indicative estimate of such vehicle operating costs. Based on aboui 4,700 registered vehicles travelling an average of 14,000 km per year (say, 50 percent of which is on gravel rotes) and the proportion of road in good, fair and bad condition as indicated in Paragraph 2.16, total annual economic vehicle operating costs will be 21.7 billion Vatu. The equivalent cost if rods are in good condition is 1.93 billion Vatu, i.e. current vehicle operating costs are 12 percent higher than would be the case if roads were in good condition. Foreign costs account for 78 percent of these costs. The 240 million Vatu difference between vehicle operating costs on good and poor roads thus represents an incremental import bill of 190 million Vatu per yesr (equal to 2 percent of estimated curent imports). 1/ Averae economic vehicle operting costs in Vatu/km (see Chapr 4, below). Z/ Increm compared with the cost on a road in good condition. - 50 - ANNEX 1 2.36 There are opportunities for agricultural cost of Road Worthiness Certificates is development in Vanuatu, mostly in copra. considered in the present analysis a user charge Transport constraints to increased smallholder to recoup the cost of the inspection rather than development are related mostly to improved contribute to the cost of providing the road accessibility between farms and copra buying system. points and movement of the copra to export ports. The connection between development of 2.39 Revenue from the annual road tax, the such transport links and economic development tax on purchase and transfer of ownership of needs to be better understood to ensure that vehicles and driving license fees was 52 million agricultural development is sustainable. Vatu in 1990. Based on data from other Moreover, the relative importance of countries, it is estimated that collection costs are improvement of these two links should be about 1,000 Vatu per vehicle per annum. With assessed. Development of local transport links collection costs of a little under S million Vatu, will incre&e producer surplus and may have a net revenue from the taxes is thus estimated at significant effect on the propensity to produce. 47 million Vatu. However, the reduction in the total cost of delivery of agricultural output overseas is likely 2.40 The Government of Vanuatu obtains to be small, unless there are avoidable about 57 percent of its income from import constraints elsewhere in the transport system, duties and an accompanying service tax. The and may not secure significantly greater sales. charges are imposed on all imports excepting those exempted for a variety of reasons - in the transport sector for example, vehicles imported E. MAiNTEANCz FUNDING for aid projects and vehicles imported for use in rural areas are exempted from the charges. The 2.37 There is no hypothecation of revenue to rate of import duty and service tax varies by maintenance of road, marine or aviation item, though the latter is generally at a rate of infrastructure in Vanuatu; nor is there a formal five percent, except for fuel for which it is five policy on cost-recovery in the road sector where Vatu per liter. Together, import duties and specific fees for use of the road system are not service tax are equal to 60 percent of the value imposed. of imports of vehicles and fuel, and 40 percent for all other imports into Vanuatu (see Roads Table 16). The fiscal efficiency of imposing a higher rate of these duties in the transport sector 2.38 There are no specific charges for use of is an open matter; broadening of the tax base the road system in Vanuatu. Road users would be desirable (World Bank, 1991a). contribute to the cost of developing and Imposing tax 'mark-ups' where price elasticities maintaining the road system indirectly through: are relatively low ("Ramsey" pricing) might (a) annual road tax paid for each vehicle; (b) a justify higher tariffs for the road transport tax on purchase or transfer of ownership of a subsector, with higher tariffs for road transport vehicle (equal to one percent of the purchase resources being a fiscal measure and not treated price of the vehicle); (c) driving license fees; (d) as cost-recovery. Alternatively, all income from a Public Vehicle License for buses and taxis; duties can be considered as contributing to cost- and (e) import duty and an associated service tax recovery, to the extent that the duties are on vehicles, spare parts and (f) fuel excise. Bus, imposed on road transport users, and revenue taxi and truck operators must also hold a from the duties is less than that required for full Business License-this license must be held by cost-recovery. The analysis piasented in this all commercial establishments, and is considered Annex is based on only that revenue from the a tax rather than a user charge. Simnilarly, the duty on road transport resources in excess of the -51- ANNEX I Table 16: VANuATu-INCOME FROM IMPORT DUrY AND SERVICE TAx, 1990 (nominal prices) CIF Value of Imports (mnllion Import Duty Average Vatu) and Service Rate of Total Exempt Tax (m. Duty and Imports from Dutiable Vatu) Tax ( LA ___ __ __ __ __ _ __ _Duty Vehicles * Cars 312 107 205 86 42.0 * Trucks 276 78 198 47 23.7 Fuel * Petrol 139 8 131 178 135.9 * Distillate Lb 435 237 198 131 66.2 Total 1,162 430 732 442 60.4 Total Imports * Including Vehicles and Fuel 11,315 4,978 6,337 2,703 42.7 * Excluding Vehicles and Fuel 10,153 4,548 5,605 2,261 40.3 La Percent of CIF value of imports subject to duty. Lb Distillate fuel is used by Umelco for power generation, by vehicles involved in agriculture, and by other off-road vehicles-fuel used for these purposes is exempt from Import Duty and Service Tax. Fuel used by interisland shipping is subject to Import Duty at only half the normal rate - it is not possible to isolate fuel used for this purpose, but it is not expected to be large, and is thus ignored in the present analysis. Source: Customs Department, Ministry of Finance. average rate of duty for all other imports as on road users of 147 million Vatu in that year. contributing to cost-recovery. (The regional There is no incremental cost associated with analysis presented in Volume One of this study collection of the higher rate of tax applied to presents the effect of all revenue from duties vehicles and fuel. Thus the amount of 147 being attributable to cost-recovery.) At this million Vatu can be viewed as additional charge stage, the revenue from these duties, in excess to road users to meet the cost of development of the average rate for other imports, is viewed and maintenance of public roads, in the context as a specific levy on road users. An import of a fiscal/general revenue raising measure. duty/service tax of 40 percent of the value of vehicles and fuel would produce revenue of 295 2.41 If the incremental import duty/service tax million Vatu in 1990 (assuming elasticity of is regarded to contribute to cost recovery, and demand equal to zero). The 60 percent import inflating 1990 data by 8 percent to 1991 prices, duty/service tax thus results in an additional levy costs and revenue associated with development -52 - ANNEX 1 and maintenance of the road system are considered as a significant fiscal burden already estimated for 1991 at: falls on road users and raises transport cost. At the same time, the Government needs to give Million Vatu attention to rationalization of the existing stock Net Revenue: of infrastructure; priorities for which assets * Road Taxes, ransfer Fees warrant maintenance should be established. and Driving Licenses 51 * Import Duties and 2.43 Two key equity issues relate to cost Service Tax 147 recovery in the land transport subsector: (a) the Total 198 geographical distribution of sources of receipts and disbursements of expenditure; and (b) the Expenditure: apportionment of costs and revenue by vehicle category. Eighty-four percent of vehicles in * Curret Maintenance 168 Vanuatu are located on the islands of Efate Lid * Incremental Maintenance Santo/Malo, compared with only 38 percent of Requirement 800 the road network by value (but including all * Annual Capital sealed roads). It is estimated that the long term Charge 904 cost of maintenance and annual capital charges Total 1,872 for the roads is 471 million Vatu and 71 million Vatu respectively in these two regions. Assuming revenue to be in proportion to the 2.42 Notwithstanding the difficulties of number of vehicles,' this indicates revenue of treating some vehicle import duties as indirect 166 million Vatu and costs of 542 million Vatu charges to road users, total revenue from the for the two provinces, a rate of cost recovery of sector exceeds current government expenditure 31 percent. Cost recovery for the remaining on maintenance but is much less than the total regions is estimated at 7 percent. The increase long run cost of sustaining the present road in road user charges in Efate and Santo/Malo to system. The extent to which donors have meet the full cost of road, construction and financed construction of roads in Vanuatu (and maintenance is thus relatively modest. The currently fund road rehabilitation required as a substantial gap between revenue and expenditure result of inadequate maintenance) represents an for roads in the other regions, and the limited external transfer and implicit subsidy to the land financial resources in them, reinforces the need transport sector in the country. The present to carefully establish that part of the road serious deterioration of existing roads represents network which has key economic and social a substantial contingent and unfunded liability. values and to seek the most efficient means for It is problematic that future grant assistance ensuring maintenance of the road network - from donors will be available to cover this including adoption of appropriate standards. A accrued liability and the financing gap of 801 major proportion of the road network involves million Vatu (1991 prices) required to sustain low traffic volumes (less than 100 vehicles per the road network in the long term. This day). Such roads, typically gravel and earth financing gap will be higher if inadequate formed, provide accessibility as a social service. maintenance is undertaken. Therefore, Fixed costs for maintaining these roads are Government will need to initiate means to high-over 75 percent. In such circumstances, increase sources of funds, in particular by a lower share of revenue for cost recovery will careful selection of road maintenance priorities, derive from specific vehicle-related fees; a by improved maintenance efficiency and by higher share will need to be supported by more increasing the charges imposed on road users. indirect and general taxes.' Increased road user charges need to be carefully -53- ANNEXi 2.44 The second equity issue pertains to the in 1991 from fixed infrastructure is ostimated at attribution of cost and revenue to vehicle types. 62 million Vatu (see Table 13). Trucks cause considerable damage to the road system, disproportionately more than their share 2.46 In summnary, costs and revenue associated of total vehicle kilometers by all road vehicles. with development, operations and maintenance Road user charges should be designed to reflect of the ports and other activities of the this incremental cost to the system. To the Department of Ports and Marine are estimated contrary, the average rate of import duty and for 1991 at: service tax for trucks is only 24 percent (see Table 16) - this is less than the average rate of MilUon Vatu tax for all imports, and implies no contribution Income 62 from this source towards cost recovery for roads. The present fivefold difference between Operating Exponditure the annual registration tax for trucks in excess of * With Currmnt Madintme 72 ten tonnes and cars with engine capacity between * Incremental Maintenance Needs 49 1.1 and 1.5 liters makes only a minor contribution to the difference in damage imposed Operating Surplus (Loss) (59) on the road system by the two types of vehicle. Less: Annual Capital Charge 325 The immediate urgency of this issue is lessened Net Surplus (Loss) (384) by the small number of large vehicles in use in Vanuatu at present - trucks and buses make up only nine percent of the vehicle fleet, and many 2.47 Current revenue would need to be of them are small in size (3 tonne trucks and increased substantily to generate sufficient mini-buses). revenue to cover the cost of developing, maintaining and operating port infrastructure. Ports Further revenue is required to fund the rehabilitation of current port infrastructure which 2.45 The Wharfage Tax collected by the has deteriorated due to inadequate maintenance Department of Ports and Marine (see Table 13) in the past. All current revenue is derived from has elements of a fee for service and a tax. The activities at the two principal ports which excess charge for imports compared to that for account for 82 percent of the replacement cost of exports can be considered a form of import Departmental assets. The distribution of costs taxation, and Ramsey pricing to take advantage and revenue between the most intensively used of the likely lower elasticity of demand for assets and assets on outer islands is thus not as imports than for exports. The revenue from the imbalanced as is the case with roads. Wharfage Tax is not retained by the Department of Ports and Marine and the revenue from the Airports higher charge on imports is not considered as contributing to cost-recovery in the present 2.48 Income collected by the Civil Aviation analysis. In 1987 (the latest year for which data Department is all in the form of user fees with are available), imports to Vanuatu were 91,030 no explicit taxation component to them. The tonnes and exports were 60,480 tonnes (World revenue is almost entirely attributable to aviation Bank 1991). Assuming this ratio of imports to activity at Bauerfield Airport in Port Vila. exports to have continued, the Wharfage Tax attributable to exports and to imports (if imports 2.49 In summary costs and revenue associated were taxed at the same rate for exports) in 1991 with development, operation and maintenance of is estimated as 21.7 million Vatu. Net income Civil Aviation Department airports and activities are estimated for 1991 at: -54 - ANNEX 1 Million Vatu prices). The annual assessed maintenance is on Income 128 average equal to some 5 percent of the replacement value of the assets; this requirement Operating Expenditure ranges from 10 percent for roads to 1.4-1.5 * With Current Maintenance 82 percent for marine and aviation infrastructure. * Incremental Maintenance Needs 62 2.53 The estimated annual outlays required for Operating Surplus (Loss) (16) asset maintenance presume that the system has Less: Annual Capital Charge 667 been well maintained in the past and that Net Surplus (Loss) (683) rehabiitation or reconstruction requirements should only relate to the general ageing of the 2.50 Revenue would need to be increased system. This is not the present situation in substantially to generate sufficient revenue to Vanuatu. cover the cost of developing, maintaining and operating airport infrastructure. Further revenue 2.54 Much of the infrastructure has been built is required to fund the rehabilitation of current or reconstructed in the past 10 years and airport infrastructure which has deteriorated due possibly little remains of original investments to inadequate maintenance in the past. As with made more than say 30 years ago, which can be ports and marine, there is an equity issue in taken as the average life of transport respect to the distribution of revenue and costs infrastructure. The expected value of one year's between Bauerfield Airport and the other airport replacement of assets would be about 700 and airstrips in the country. Revenue from million Vatu (1991 prices), if the construction of landing fees and other sources at Santo and outer the assets had been spread uniformly over the island airfields is minimal, but together with past 30 years. By comparison, the present airways equipment they account for 82 percent estimated rehabilitation and replacement needs of the Civil Aviation Department's airport are valued at more than 2,500 million Vatu assets. (1991 prices). It needs to be reiterated that this estimate is based on imprecise data; nevertheless, it is indicative of the backlog in F. SrrUATION SUMMARY restoration needs. To clear the backlog in reconstruction or rehabilitation in say the next 2.51 The previous sections of this survey five years, whilst meeting annual maintenance indicate the problems facing the Government of needs, would require in the order of 1,500 Vanuatu in providing for the maintenance and million Vatu per year (1991 prices). rehabilitation of the nation's transport infrastructure. The analysis reflects the 2.55 The historic levels of actual maintenance rudimentary nature of the information which is expenditure are difficult to establish and hence to available to assess asset management needs, even assess. Departmental budget allocations and from the most general perspective. costing procedures are not designed to provide information on a program/functional basis (for 2.52 The replacement value of Vanuatu's example, maintenance task). The lack of transport infrastructure (excluding the vehicles, function based financial data is a constraint to vessels and aircraft which use the system) is understanding and managing maintenance. An estimated to be close to 20,000 million Vatu apportionment of recurrent Departmental (US$200 million at 1991 prices). The average expenditures for all transport modes indicates equivalent annual assessed maintenance for the that some 203 million Vatu was spent on transport system is estimated conservatively at maintenance in 1991, which represents only 18 1,100 million Vatu (US$10 million at 1991 -55S - ANNEX 1 percent of assessed average annual maintenance separation of manaement and technical requirements. activities, and has resulted in almost exclusive emphasis on the latter. The approach also places 2.56 It is evident that the capacity of the heavy demands on the limited number of Government to sustain infrastructure, in financial qualified staff in Departments, and fails to take and institutional terms, has not been assessed advantage of the greater flexibility available in sufficiently in project feasibility studies. private companies and the community. Moreover, some projects may have been implemented in the expectation of economic 2.58 An indication of cost recovery with benefits which have not eventuated (see assessed maintenance for each transport mode Box 2.2). Assessment of future projects should (as presented in Table 17) indicates substantial under-recovery of costs for road, marine and aviation transport. Current m dainance Box 2.2: ECONOMIC JUITcsATioN expenditure and the higher anual equivaleot, OF RURAL RoADS capital replacement costs imply a lower level of Rural road development is eennally cost recovery. justified pnmmnly on the bass of mcreased agicultuia production and social benefits. A 2.59 The Government needs to give serious road justified on the blttr will genrat only indirect economic benefits through acces to attention, not only to higher cost recovery ervices and facilities and, given limited tax through user charges, but also to assessment of incidence on the mral opulation, will generate all existing infrastructre and determination of little increased revenue orr overnment - in these cases there will be a continuing need for net what assets warrant maintenance (and at what Government funding to sustain the road and the standard); priorities for rationalization of social benefits. existing infrastructure should be established. Agricultural production is more diversified in Vanuatu than most other South Pacific countries. Evaluations for feeder road projects on five islands in Vanuatu indicated about one quarter (24 percent) of benefits from increased cattle production, one quarter (22 percent) from copra and one half (54 percent) from cocoa. There appears to have been no ex-post-project evaluations of projects to verify if production has increased as forecast. The responsiveness of agricultural production to improved accessibility is important to the success of such projects and the Government's ability to adequately fund maintenance of the road. examine the viability of sustaining infrastructure (for example, on the basis of cost recovery or general budget support) together with the appropriate standards and mechanisms for effective implementation. 2.57 At present, about one-quarter of all maintenance is undertaken by Government Departments using force account and Government-owned equipment. This approach fails to give sufficient consideration to the - 56 - ANNEX 1 Table 17: VANUATU-SUMmARY OF Co&r RECOVERY, 1991 (Vatu million, 1991 prices) | Roads Marine Aviation Income * Direct 51 62 128 * Indirect La 147 - Total 198 62 128 Operating Expenditure * With Current Maintenance 168 72 82 * Incremental Maintenance Needs 800 49 62 Operating Surplus (Loss) (770) (59) (16) Less: Annual Capital Charge 904 325 667 Net Surplus (Loss) (1,674) (384) (683) La Share of import duty in excess of average rate of duty for all imports. Source: Mission eatimates. -57- ANNEX 1 CHAPTER 3 EQUIVALENT ANNUAL VALUE FOR TRANSPORT ENFRASTRUCTURE 3.1 Introduction. Inadequate maintenance Typical lives of the renewable components of results in more rapid deterioration of transport infrastructure with current maintenance and infrastructure than would be the case with optimum maintenance are also presented in optimum maintenance. This Annex estimates the Table 18. extent of this effect. 3.4 Equivalent Capital Cost. The 3.2 Infrastructure Value. The value of equivalent annual capital cost of infrastructure current infrastructure estimated in Section A of with current maintenance patterns and with Chapter 2 is summarized in Table 18. The cost optimum maintenance are shown in Table 18. of this infrastructure comprises two parts; a An opportunity cost of capital of 7 percent is fixed component and a renewable component. used. The data illustrate that the current The former includes, for example, clearing and equivalent annual capital cost with current construction of the base for a road. The maintenance patterns is about 46 percent greater renewable component of infrastructure is that than would be the case of optimum maintenance part which periodically requires reconstruction, was undertaken (i.e., 2.7 billion Vatu compared for example the surface of a road. The with 1.9 billion Vatu). The data also shows the approximate proportion of the total cost of importance of adequate maintenance of infrastructure which is fixed and renewable is engineered, unsealed roads, with the incremental described in Table 18. The estimates are drawn capital cost of this item alone accounting for from construction cost estimates for typical over 50 percent of the incremental capital cost construction projects. for all infrastructure. 3.3 Economic Life. With optimum maintenance, the fixed component of infrastructure should have a life of at least 50 years. By definition, all elements of the fixed component of infrastructure should not be affected by the level of maintenance. This is not necessarily thc case, however, in practice. For example, poor maintenance of a road may result in inadequate drainage and pot-holing. Water can then penetrate the base structure of the road and result in deterioration of this element of the fixed component. The lives of the fixed components of infrastructure adopted for the current assessment are presented in Table 18. Table 18: VANUAT-SUMMAY OF INw3ASIUCMRE VALE AND MAWDANCE COs, 1991 (muilon Vatu) _ead, bairn. bvi*tit 1In % arws Eqip- TXL Sle eared Eartb Totl , Words Np. & Oe 2r 1tal _ ys amd. & Otbar Total heet wlace_mat value 1.817 5.701 1,507 9.tl5 32976 154 140 4.302 3.147 1.795 1.476 6,416 19.7?5 Nulata . .O-ra f .. .. .. 2.160 .. .. .. 400 .. .. .. 12 2.572 &aaed_ _Al NIh.iatensoc Ib 19 713 166 Ms 40 2 1 59 33 21 33 67 1.113 COrrent alltenene *apenditur .16. .. 1 .. 25 203 2 f eee .. .. .. I .. .. .. I 292 100 Incremental Naintenasc tepediture for Optimal Eait_aae IC .. .. .. of .. .. .. 49 .. .. .. 62 19 Eqivalent nual Capital Costs Id With Opt im t. we a 153 609 142 9 2 13 24 325 312 145 210 667 1.605 ltt Currnt aitn 195 998 215 1.401 360 11 41 416 469 197 274 940 2.746 Itarematal Capital Coat 42 390 72 54 72 5 17 93 157 52 64 273 e70 ltepeztia ad Capital Coat# Flas C _apee 652 6o0 100S 202 IOOS 0x 202 1002 Ox assumable C _ornaat 352 20S O0 60Z Ox 1002 0 02 1002 CA emenie Lifes (year.) 15usd C _emaot Vith Opti,m Ubimtom ce 50 50 20 50 30 0 5e 30 With cOrret itec 40 30 L0 40 15 0 40 15 Ienmhla Ca8pspnat With Option Maintance 16 5 _ 54 10 16 10 Witb Curroet Wintemmee 8 2.0 20 _ 6 7. La Coat reqired to rehbtlitate lnfretructure to a *cud tandard. I.e. tbh staekrd thrih tim th mml_ hao been the caes with optimal a1iatensuce ao for Wiebh the a* _aoe mial .eiatenuc*e expenditurfe to ufficent to adquately maaita the ldraa etnre. n leudttre require for optil _ittc-. Le Diff arenae batwae curreat sal efpeniture n maintenane and the equvalent _s1a epanditure aaaaeed as bre _ptlml. Ld haee en eppowty ceat of capital of 7 percet ed parawtara described ia the lenr part of the table. -59- ANNEX 1 CHAPTER 4 ROAD VEHICLE OPERATING COSTS 4.1 Introduction. Vehicle operating costs average annual cost over the economic have been established using the RTIM2 life of vehicles. model,"0 with two exceptions: 4.2 Vehicle Features. Representative vehicle (a) The model to determine road roughness types for the most commonly found types of (based on, for example, the number of vehicles in use in Vanuatu are: vehicle passes since the last grading on unpaved roads) has not been used as * Car (Toyota Corolla) traffic volumes are commonly very low, * Light Utility (Nissan pickup) and the rate of road deterioration will be * Four Wheel Drive (Toyota Hilux) heavily affected by environmental * Light Truck (3 tonne Nissan Cabstar) conditions in addition to traffic activity. Moreover, no systematic data are Most other vehicle will have operating costs available on the present condition of similar to these vehicles. Features of these roads. For indicative purposes three vehicles which influence operating costs are road conditions have been adopted, as presented in Table 20. nhe data has been shown in Table 19. obtained from investigations in Vanuatu and comparative data presented in ADB (1990)." Table 19: VANUATU-ROAD ROUGHNESs The share of each vehicle type is based on the AND CONDITION share of registered vehicles and the annual distance travelled by each vehicle category. The Road Condition Road Roughness number of vehicles registered in 1988 was: (mm/km) Gravel Sealed Cars 2,186 Road Road Pickups 1,733 Trucks 184 Good 3,000 2,000 Buses 210 Fair 5,000 3,000 Motor Cycles 287 Poor 8,000 5,000 Other 6 Total 4,624 Source: Mission estimates. Vehicle resource consumption for travel on good sealed ro. ls derived from the RTIM model is (b) Data on the age profile of vehicles in also presented in Table 20. Vanuatu and scrappage rates are not available, and the cost of capital and 4.3 Vehicle Operating Costs. Total vehicle depreciation have been based on the operating costs, in Vatu per kilometer (1991 -60 - ANNEX 1 prices), for travel on sealed roads in good 4.4 Sufficient detail is not available to condition are described in Table 21. (Note that accurately establish the foreign cost component the difference between financial and economic of vehicle operating costs, but for the principal operating costs is comparatively small.) These items with a substantial imported component are figures are used as a datum from which vehicle fuel, oil, tires, spare parts for maintenance and operating costs are estimated for sealed roads in depreciation. About a quarter of these costs can fair and poor condition and unsealed roads (in be attributed to local distribution and retailing; each of the three conditions) using road however, there is an import component to these roughness as described in Table 19, and latter costs. Taking the import component of relationships in the RTIM model.'2 Traffic distribution and retailing costs as 47 percent (this volumes are low (see Box 4.1) and being the share of imports in GDP in representative values have been used in Vanuatu),"S 87 percent of the cost of fuel, oil, estimating total annual vehicle operating cost tires, spare parts and depreciation is estimated to savings. The vehicle operating costs are be foreign. A similar percentage is applied to summarized in Box 2.1. interest as it is occasioned by the capital cost of the vehicle, and Vanuatu is a net importer of capital. A part of insurance costs will be Box 4.1: TRAmC VOLUME foreign in nature as they will be directed to the importation of vehicle parts, however data is not The distribution of traffic volume. over available. The foreign cost component of the road network is higly skwed. Th National insurance and of labor is taken as 47 percent in Transport Planning Stud reported traffic volumes of less thn 100 vehicfes per day on the main line with the share of imports in economic cimcuminlar road on Efate within 20 km from activity in Vanuatu. On this basis, it is Port Vila. On Santo and Malekaula islands, traffic volumes are less than a hundred vehicles per day estimated that the Imported cost component of outside (but in the vicinity of) the urban centers. financial vehicle operating costs is estimated to Traffic volumes elsewhere, and even on main be 74 percent. roads on or iWands can be u low as only a few lvehicles per day. vehcles per day. 4.5 Average vehicle operating costs on gravel and sealed roads in the three conditions described in Table 19 are presented in Box 2.1. -61- ANNEX 1 Table 20: VANUATU-VECLz OmERATNG PARAmeRS: SELED RoADs IN GOOD CoNDmoN, 1991 Car Light 4WD Light l ______________________________ _ __________ U tility Truck Physical Data Free Speed 60 S0 60 45 Power-Weight Ratio (BHP/t) - - 25 Gross Vehicle Weight (t) 1.0 1.0 1.5 3.0 Arnual Use: Distance (km) 12,500 14,750 12,500 17,000 Time (hours) 500 600 500 680 Effeedv Life (years) 10 10 10 10 Average Vehicle Age (years) 4 4 5 5 Vehicle Crew: Driver 0 1 1 1 Other 0 1 1 1 Traffic Composition 38% 39% 11% 11% Unit Pice Data (1991 prices) (i) Financial Prices la Vehicle 1,666,500 1,212,000 2,024,040 2,206,850 Tire 9,500 9,500 13,800 13,800 Fuel 87.7 87.7 63.5 63.5 Oil 250 250 250 250 Driver Time (/hr) 60 60 60 70 Crew Time (/hr) 30 30 30 30 Maintenance Labor (/hr) 100 100 100 100 Insurance 72,850 102,630 125,340 136,660 Annual Registration 10,000 7,500 18,000 20,000 Real Interest Rate 7% 14% 14% 14% (ii) Ecoriomic Prices Lb Vehicle 1,266,600 1,044,200 1,743,900 1,901,400 Tire 7,980 7,980 11,590 11,590 Fuel 50.7 50.7 46.5 46.5 Oil 240 240 240 240 D;erived Data/ Average Speed (kph) 58 48 59 44 Fuel Consumption (/'000 km) 72 67 113 134 Oil Consumption (1/'000 km) 1.2 1.8 1.8 4.0 Tires ((onsumed/'000 km) 0.139 0.139 0.139 0.331 Spare iirts (%/'000 km) 0.001 0.001 0.001 0.001 Maintenance Labor (hrs/km) 0.001 0.001 0.001 0.001 la Includes Retail Purchase Tax of 1 percent Lb Excludes taxes and duties. L& Derived from RTIM for sealed roads with roughness of 2,000 mm/km. Source: Mission estimates. -62- ANNEX 1 Table 21: VANUATU-VEHCLE OPERATING COSTS ON PAVED ROADS IN GOOD CONDITION, 1991 La (Vatu/km, 1991 prices) Car Light 4WD light Average Utility Truck Pived Road Financial Cost Fuel 6.3 5.9 7.2 8.5 6.4 Oil 0.6 0.9 0.9 2.0 0.9 Tires 1.3 1.3 1.9 3.4 1.6 Maintenance 2.0 1.8 3.0 4.4 2.3 Interest and Depreciation 19.0 11.7 23.1 18.5 16.3 Licenmes and Insurance 6.6 7.5 11.5 9.2 7.7 Driver and Crew 0.0 1.9 1.5 2.3 1.1 Total 35.8 30.9 49.1 48.4 36.4 Economic Cost Fuel 2.7 2.5 4.3 5.1 3.0 Oil 0.6 0.9 0.9 1.9 0.9 Tires 1.1 1.1 1.6 2.9 l l Maintenance 1.5 1.5 2.6 2.4 ..i Interest and Depreciation 14.4 10.1 19.9 15.9 13.3 Insurance 5.8 7.0 10.0 8.0 6.9 Driver and Crew 0.0 1.9 1.5 2.3 1.1 Total 26.2 24.9 40.8 40.0 28.5 L.a Vehicle operating costs for paved roads in good condition (roughness index 2,000 mm/kim) are used as the datum, against which vehicle operating costs for other road types (unsealed and earth) and road conditions (fair and poor) are estimated. The total annual cost of owning and operating vehicles is expressed in Vatu/knm; variations in operating costs with road condition are tested only for fuel, oil, tires and maintenance. Source: Mission estimates and RTIM model. - 63 - ANNEX 1 Endnotes 1. The survey of the maintenance situation presented here is based upon a World Bank mission visit to Vanuatu September 9-13, 1991. 2. Thiese tables are based on a classification system outlined in Volume One, Part 11. The notional classifications used in the marine and aviation subsectors are subject to further refinement. 3. The information is derived from two sources. A questionnaire setting out the data required was circulated prior to the mission visit and used as the reference for discussions with the relevant Ministries and Departments. In addition to the information from the mission, data are drawn from previous sectoral and subsectoral reports on transport in Vanuatu. 4. By using a 'replacement' value for the asset, no consideration has been given to the condition of the asset. In most cqses the actual value of the asset would be considerably lower than the replacement cost, due to age and lack of maintenance. 5. A full road inventory has been commenced recently (1992) and this is completed for Efate and covers about one-half of Santo. 6. Transport infra.ructure in this report is limited to assets within the public sector. While the majority of transport infrastructure in Vanuatu is publicly owned, the public/private distinction is an arbitrary one from the standpoint of provision of transport services. 7. At the same time the costs (in addition to maintenance expenditure) of putting in place effective maintenance, such as the administrative and management of personnel, training and information, need to be factored in. Implementation of improved maintenazice needs to be cost effective and the costs should be less than the direct savings in infrastructure costs. This issue is addressed in Volume One, Part 11 of this report. 8. This assumption overallocates income to the remaining nine regions in Vanuatu given the exemption of vehicles imported for use on them from import duty and service tax. 9. The structure of road user charges and other fees/taxes for road cost recovery is more complex in such situations. This issue of providing reliable access to small, often remote, communities also arises in maritime and aviation with small wharves and airfields. 10. Transport and Road Research Laboratory (1982). 11. Asian Development Bank, (1990). 12. The vehicle operating costs are summarized in Box 2.1 in Volume One of this report. 13. Based oti data for 1987 when imports and GDP were 6.3 billion Vatu and 13.5 billion Vatu respectively. __________________________________. IBRD 24570 bfi.m -- MIOTA LAVA (\ .YANUATU am""MS ±080..VANUATU VANUA PACIFIC ISLANDS ..S LAVA TRANSPORT SECTOR REPORT \_,, ~ ~ PAP r, A/ C-7 . ± + Air Strips (not all shown) ,* International Airport (inset) _._ s11 _ b_dwtss GAUA IL Pwh ldr :; 'tSurfaced Roods ........ .Unsurfoced Roods LOint, kN W4 Me;ntaeO <4; , /_ Yakukak7 VAN LJATU h I - I I _ \ - _a_ Yaouarung 1680