Regional Partnership Framework For Kiribati, Republic of Nauru, Republic of The Marshall Islands, Federated States of Micronesia, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu Cover photo: A woman with a small raft and a man wade through the ocean at sunset - Abaiang Atoll, Kiribati. Photo credit: World Bank / Vald Sokhin (Panos Pictures) Regional Partnership Framework For Kiribati, Republic of Nauru, Republic of The Marshall Islands, Federated States of Micronesia, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu FY17 – FY21 II Regional Partnership Framework CURRENCY EQUIVALENTS As of December 8, 2016 Country Currency 1 USD equivalent Kiribati Australian dollar (AUD) 1 USD = 1.34 AUD Republic of Nauru AUD 1 USD = 1.34 AUD Republic of the Marshall Islands United States dollar (USD) n.a. Federated States of Micronesia USD n.a. Republic of Palau USD n.a. Independent State of Samoa Tālā (WST) 1 USD = 2.52 WST Kingdom of Tonga Paʻanga (TOP) 1 USD = 2.19 TOP Tuvalu AUD 1 USD = 1.34 AUD Vanuatu Vatu (VUV) 1 USD = 109.00 VUV FISCAL YEAR Country FY Kiribati 1 January–31 December Republic of Nauru 1 July–30 June Republic of the Marshall Islands 1 October–30 September Federated States of Micronesia 1 October–30 September Republic of Palau 1 October–30 September Independent State of Samoa 1 July–30 June Kingdom of Tonga 1 July–30 June Tuvalu 1 January–31 December Vanuatu 1 January–31 December IBRD/IDA IFC MIGA Victoria Kwakwa Dimitris Tsitsiragos Keiko Honda Regional Vice President Vice President Executive Vice President & Chief Executive Officer Michel Kerf Vivek Pathak Merli Baroudi Director Director Director Lasse Melgaard Daniel Street Paul Barbour Task Team Leader Task Team Leader Task Team Leader Regional Partnership Framework III ACKNOWLEDGEMENTS This Regional Partnership Strategy (RPF) is the product of input from the entire World Bank Group Pacific Country Team. Team Leaders were Lasse Melgaard (IBRD), Dan- iel Street (IFC) and Paul Barbour (MIGA) working under the supervision of Franz Drees-Gross and Michel Kerf. The core RPF team comprised Annette Leith, Anne Tully, Milena Petrova Stefanova, Anuja Utz, Michelle Manzanillo, Jane Millicent Sprouster, Abigail Blenkin and Lorraine James. Other country team members who provided valuable advice and inputs and/or participated in consultations include the following: Mona Sur, Pierre Graftieaux, Venkatesh Sundararaman, Robert Utz, Sean David Michaels, Chris- topher Bennett, Christopher De Serio, Maeva Natacha Betham Vaai, Nancy Wells, Akka Rimon, Tatafu Moeaki, Imogen Cara Halstead, Lucy Pan, Anthony Obeyesekere, Kim Alan Edwards, David Knight, Virginia Ann Horscroft, Helle Buchhave, Gayatri Acha- rya, James Reichert, Jesse Doyle, Ross Butler, Nick Valentine, Robert Gilfoyle, Zhentu Liu, Stephen Hartung, David Whitehead, Toomas Palu, Hong Chen, Isabel Neto, Brenna Moore, Kofi Nouve, Kanya Raj, Michael Bonte-Grapentin, Iain Shuker, Habiba Gitay, Olek- siy Ivaschenko, Ben Brighouse, Tom Perry, Kara Mouyis, Deva de Silva, Simone Esler, Eric Blackburn, Oliver Whalley, Loren Atkins, Denis Jordy, Artessa Salvador-Sali, Guido Rurangwa, Renee Walmsley, Tevi Obed and Myrna Machuca-Sierra. Special thanks to Zafar Ahmed for his work on the Completion and Learning Reviews. Special acknowledge­ ment also goes to Jane Distelhorst Sansbury (IBRD) who was co-TTL until her retirement. A group sail on a Te Wa (traditional canoe of Kiribati) - Kiribati Photo credit: World Bank / Artessa Saldivar-Sali IV Regional Partnership Framework ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Assistance ADB Asian Development Bank APL Adaptable Program Lending ASA Advisory Services and Analytics B40 Bottom 40 percent CAS Country Assistance Strategy CCA Climate change adaptation CCPE Clustered Country Program Evaluation CEN Country Engagement Note CGAP Consolidated Gender Action Plan CIF Consolidated Investment Fund CLR Completion and Learning Review CPF Country Partnership Framework CPS Country Partnership Strategy CROP Council of Regional Organisations in the Pacific DFAT Department of Foreign Affairs and Trade DPO Development Policy Operation DRFI Disaster Risk Financing Insurance DRM Disaster risk management DRR Disaster risk reduction ECD Early childhood development EFA-FTI Education For All-Fast Track Initiative EGRA Early Grade Reading Assessment ERAP Enhanced Road Access Project ERO Economic Recovery Operation ESW Economic and sector work FCV Fragility, conflict, and violence FFA Forum Fisheries Agency FSAP Financial Sector Assessment Program FSM Federated States of Micronesia GBV Gender-based violence GDP Gross domestic product GEF Global Environment Facility HIES Household Income and Expenditure Survey HSP Health Sector Management Program Support Project ICAO International Civil Aviation Organization ICT Information and communication technology IFC International Finance Corporation ILO International Labor Organization IPP Independent power producer LCDF Least Developed Country Fund MDG Millennium Development Goal MDTF Multi Donor Trust Fund MGP Matching grant program MIC Middle-income country MIGA Multilateral Investment Guarantee Agency Regional Partnership Framework V MTDS Medium-term debt strategy OECD Organisation for Economic Co-operation and Development PAILS Pacific Island Labor Sending Countries PAIP Pacific Aviation Investment Program PASO Pacific Aviation Safety Office PCRAFI Pacific Catastrophe Risk Assessment and Financing Initiative PDNA Post-Disaster Needs Assessment PEARL Pacific Early Age Readiness and Learning PEFA Public Expenditure and Financial Accountability PER Expenditure Review PFM Public financial management PFTAC Pacific Fiscal Technical Assistance Center PIC Pacific island country PIC9 Kiribati, the Republic of the Marshall Islands, Federated States of Micronesia, Republic of Nauru, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu PIF Pacific Islands Forum PIFS Pacific Islands Forum Secretariat PIU Project Implementation Unit PNA Parties to the Nauru Agreement PPA Pacific Power Association PPP Purchasing power parity; public-private partnership PRDR Pacific Regional Data Repository PREP Pacific Island Resilience Program PRIF Pacific Region Infrastructure Facility PROP Pacific Islands Regional Oceanscape Program RERF Revenue Equalization Reserve Fund RFM Road Fund Mechanism RMI Republic of the Marshall Islands RPC Regional Processing Centre RPF Regional Partnership Framework RSE Recognized Seasonal Employer scheme SCD Systematic Country Diagnostic SDR Special Drawing Rights SDS Strategy for the Development of Samoa SEU Seasonal Employment Unit SMEs Small and medium enterprises SOE State-owned enterprise SPC Pacific Community (formerly South Pacific Commission) SPREP Secretariat of the Pacific Regional Environment Programme SPTO South Pacific Tourism Organisation SWAp Sector-wide approach SWP Seasonal Worker Programme TFSU Technical Fiduciary Service Unit TSCP Transport Sector Consolidation Project USP University of the South Pacific VDS Vessel Day Scheme WDI World Development Indicators 6 Regional Partnership Framework EXECUTIVE SUMMARY This Regional Partnership Framework (RPF) outlines the World Bank Group (WBG) stra- tegic program for nine Pacific island countries (PIC9): Kiribati, the Republic of the Mar- shall Islands (RMI), Federated States of Micronesia (FSM), Republic of Nauru, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu. Seven of these countries are IDA-eligible and have seen a substantial increase in WBG presence and engagement in recent years. The RPF builds upon the deepening engagement with Samoa, Tonga, and Kiribati, and the ability to channel significantly more resources to FSM, RMI, Vanuatu and Tuvalu following their recent reclassification as IDA eligible. The RPF also outlines options for engagement with Nauru and Palau, which are IBRD countries. This RPF (FY17–21) comes at a time when IDA support to the Pacific Island Countries (PICs) is rising to unprecedented levels. In IDA15, the annual minimum base IDA allocation per country was SDR1.5 million, rising to SDR 3 million in IDA16 and SDR4 million in IDA17. IDA18 will see an increase of the base allocation to SDR15 million, which will have a poten- tially transformative impact on the IDA-eligible PIC9, including the most fragile. In Kiribati, Tuvalu, RMI and FSM, all on the WBG harmonized list of fragile and conflict-affected situ- ations, the resources available will almost quadruple. The development of regional initia- tives has provided additional scope to leverage substantial regional IDA resources, which now constitute almost one-third of the portfolio. The mobilization of significant trust fund resources from large bilateral development partners in the Pacific, notably Australia and New Zealand, has also been instrumental in expanding support. The unique features that define the PIC9—and which consequently have a direct bearing on their development agenda—are their small size (they are among the 25 smallest inde- pendent states on earth), remoteness, geographic dispersion and environmental fragil- ity, and high degree of exposure to a volatile mix of economic shocks, climate change, and natural disasters. Largely owing to their economic geography, growth in almost all PICs is lagging behind growth in other developing countries. Although extreme poverty is relatively uncommon in the PIC9, poverty and hardship are fairly widespread in six of the nine countries, and access to cash incomes, basic infrastructure, social services, and nu- tritious food is uneven. Because the population is widely dispersed, often across archipela- gos, the costs of public administration and service delivery are high, limiting the quantity and quality of services available. Even those PICs with significant development assistance have persistent gaps in service provision. This RPF reflects the results of a significant body of analytical work, including a System- atic Country Diagnostic (SCD) undertaken for all the RPF countries, except Nauru (which was not a member of the World Bank at the time of its completion). The SCD identified the critical constraints and opportunities facing these countries in sustainably attaining the WBG’s twin goals. An important conclusion of the SCD analysis is that advancing toward those goals requires both regional and country-specific approaches. The RPF also draws on the emerging findings of the Pacific Possible report, currently being completed, which assesses the long term growth impact of more fully exploiting a few available opportuni- ties and more effectively addressing major threats such as the impact of climate change and the epidemic in non-communicable diseases (NCDs). Regional Partnership Framework 7 This RPF is also informed by the lessons from implementing programs across the Pa- cific over the past decade. It takes into account the WBG’s comparative advantage and the activities of key development partners in the Pacific. The resulting framework sup- ports the PICs in maximizing their potential by drawing on regional lessons and solutions, while providing flexibility at the individual country level to tailor the Bank’s engagement in alignment with national strategies. Using the SCD and Pacific Possible as the key analytical foundation, the RPF defines the following four focus areas: • Focus Area 1: Fully exploiting the available economic opportunities. The thrust of the WBG program in this area is improved management of fisheries, increased in- comes from agriculture, expanded tourism opportunities. • Focus Area 2: Enhancing access to employment opportunities. The key interven- tions outlined in this area focus on broadening opportunities for labor mobility and improving education outcomes. Together with constraints placed on development by gender-based violence, the PIC9 countries experience gender inequality. This will be addressed in a cross cutting manner, while entry points to address Gender-Based Violence will be identified. • Focus Area 3: Protecting incomes and livelihoods. A key focus will be on strength- ened preparedness and resilience to natural disasters and climate change. Interven- tions will also help countries strengthen health systems and address NCDs. • Focus Area 4 (Cross-cutting): Strengthening the enablers of growth and opportu- nities (macro-economic management, infrastructure and addressing knowledge gaps). The WBG interventions in this area will support the efforts of the PIC9 to strengthen macroeconomic management, improving access to basic services and connective infrastructure and addressing the prevailing knowledge gaps. The IDA18 scale up will enable a more substantive WBG engagement to help address the unique challenges faced by the PICs. Notably, it will enable scaled up support to help ad- dress drivers of fragility (e.g., climate change and natural disasters, youth unemployment, NCDs), and also exploit opportunities in the maritime and tourism sectors that will help create longer term growth. The focus areas under the RPF are closely aligned to the IDA18 themes of jobs and economic transformation; climate change; gender and development; fragility, conflict and violence; and governance and institutions. IDA18 will allow the WBG to embark on a far more ambitious program of support, both in terms of investments as well as through increased capacity building. IFC will seek to capitalize on the IDA18 scale up to enhance its engagement by developing a pipeline of potential investments that could draw on the IDA18 Private Sector Window. Ensuring that projects are ready to be imple- mented, even if it requires longer project preparation time, will be an important considera- tion in the management of the portfolio going forward. The WBG will increase the scope of its support for preparation and implementation of activities, providing more hands-on implementation support from WBG staff, particularly in fragile situations. Greater WBG presence in the field will be facilitated through a progressive rebalancing of operational and technical positions to a new hub in Fiji and to other field offices where possible. 8 Regional Partnership Framework The WBG will explore opportunities to further regional approaches that benefit the Pacific region. Regional approaches are critical in the Pacific because solutions to many of the development challenges are regional in nature, e.g. connectivity through aviation, maritime or internet, climate change, fisheries and labor mobility. By using regional ap- proaches, the PIC 9 can also benefit from economies of scale through bulk procurement, centralized implementation arrangements, and WBG resources can effectively be de- ployed to support multiple countries. The WBG will continue to work closely with development partners to coordinate its en- gagement across the Pacific. The WBG will continue to make use of critical trust fund resources from Australia and New Zealand. In Kiribati, Samoa, Tonga, and Vanuatu, the WBG shares Liaison Offices with the Asian Development Bank, and a new joint Liaison Office is being opened in Tuvalu. Regional organizations across the Pacific also constitute critical partners for the WBG. The Results Framework in this RPF identifies key results on the basis of the existing pro- gram and key planned activities and will be adjusted during the Program and Learning Review to take changing country realities into account. Risks to the implementation of the RPF in the PIC9 are assessed as Substantial and include: (i) exogenous macroeconomic shocks; (ii) political and governance risks; (iii) natural disasters and climate risk; and (iv) implementation and capacity constraints. In summary, this RPF will guide a WBG engagement in the Pacific which will build on what has been achieved so far but also seek to achieve further impacts in three main ways. First, increased IDA18 allocations will provide opportunities to finance projects that are larger in size and scope. Second, building on the results of the SCD and other recent analytical work, the WBG program will be highly selective and focused on helping the PICs make the most of a few key opportunities and effectively mitigate the main risks to in- comes and livelihoods which they are facing. Third, the WBG program will put special emphasis on addressing the drivers of fragility in the Pacific (issues related to institutional capacity, growth in youth population and urbanization, climate change and natural dis- asters, as well as gender) to enhance the sustainability of the activities being carried out and of the progress being achieved. Regional Partnership Framework 9 FY17 – FY21 REGIONAL PARTNERSHIP FRAMEWORK FOR KIRIBATI, REPUBLIC OF NAURU, REPUBLIC OF THE MARSHALL ISLANDS, FEDERATED STATES OF MICRONESIA, REPUBLIC OF PALAU, INDEPENDENT STATE OF SAMOA, KINGDOM OF TONGA, TUVALU, AND VANUATU Workmen fixing a footpath under the Enhanced Road Access Project - Apia, Samoa. Photo credit: World Bank / Conor Ashleigh 10 Regional Partnership Framework CONTENTS CURRENCY EQUIVALENTS ......................................................................................................... II FISCAL YEAR ................................................................................................................................. II ACKNOWLEDGEMENTS .............................................................................................................. III ABBREVIATIONS AND ACRONYMS .......................................................................................... IV EXECUTIVE SUMMARY ................................................................................................................ 6 1 INTRODUCTION ......................................................................................................... 15 2 COUNTRY CONTEXT AND DEVELOPMENT AGENDA ............................... 19 2.1 COUNTRY CONTEXT ......................................................................................... 20 2.2 RECENT ECONOMIC DEVELOPMENTS AND OUTLOOK FOR THE REGIONAL PARTNERSHIP FRAMEWORK PERIOD ...................................... 21 2.3 REGIONAL EFFORTS TO ADDRESS DEVELOPMENT CHALLENGES ......... 29 2.4 POVERTY PROFILE ............................................................................................ 31 2.5 THE DRIVERS OF POVERTY AND DEVELOPMENT CHALLENGES ............. 33 2.5.1 Three Fundamental Constraints to Ending Absolute Poverty and Increasing Shared Prosperity .................................................................. 33 2.5.2 Fragility in the Pacific 9 ....................................................................... 34 2.5.3 Gender Inequality as a Barrier to Development ............................... 37 2.5.4 Persistent Knowledge Gaps Limit the Development of Solutions 40 3 WORLD BANK GROUP PARTNERSHIP STRATEGY .................................. 41 3.1 GOVERNMENT PROGRAMS AND NATIONAL DEVELOPMENT STRATEGIES ....................................................................................................... 42 Regional Partnership Framework 11 3.2 PROPOSED WBG REGIONAL PARTNERSHIP FRAMEWORK ...................... 42 3.2.1 Lessons from the Country Partnership Framework Completion Reports, Independent Evaluation Group (IEG) evaluation, and stakeholder consultations .................................................................... 42 3.2.2 Overview of World Bank Group strategy ........................................... 46 3.3 OBJECTIVES AND FOCUS AREAS SUPPORTED BY THE WORLD BANK GROUP PROGRAM ............................................................................................... 48 3.3.1 Focus Area 1: Fully exploiting the available economic opportunities ........................................................................................... 48 3.3.2 Focus Area 2: Enhancing access to employment opportunities .. 51 3.3.3 Focus Area 3: Protecting incomes and livelihoods .......................... 53 3.3.4 Focus Area 4 (Cross-cutting): Strengthening the enablers of growth opportunities (macroeconomic management, infrastructure and addressing knowledge gaps) ............................. 55 3.3.5 WBG program in Nauru and Palau ................................................... 58 3.4 IMPLEMENTING THE FY17-21 REGIONAL PARTNERSHIP FRAMEWORK . 59 3.4.1 Financial Envelope and Key Instruments .......................................... 59 3.4.2 Use of Regional Approaches ................................................................. 62 3.4.3 Addressing Capacity and Implementation Challenges .................. 63 3.4.4 Coordination and Partnerships ........................................................... 64 4 MANAGING RISKS TO THE REGIONAL PARTNERSHIP FRAMEWORK 66 12 Regional Partnership Framework ANNEX ANNEX 1: OPERATIONS PORTFOLIO (IBRD/IDA AND GRANTS) AS OF JANUARY 4, 2017 ................................................................................................................................. 70 ANNEX 2: ANALYTICAL AND ADVISORY ASSISTANCE (AAA) PORTFOLIO AS OF JANUARY 4, 2017 .......................................................................................................... 72 ANNEX 3: SELECTED INDICATORS OF BANK PORTFOLIO PERFORMANCE AND MANAGEMENT ............................................................................................................... 73 ANNEX 4: INTERNATIONAL FINANCE CORPORATION PROJECT AT A GLANCE, INSTITUTION VIEW, AS OF DECEMBER 31, 2016 ................................................. 73 ANNEX 5: PIC9 REGIONAL PARTNERSHIP FRAMEWORK—RESULTS FRAMEWORK ... 74 ANNEX 6: CURRENT AND PLANNED PROGRAM OF ACTIVITIES BY FOCUS AREA ......... 89 ANNEX 7: DEVELOPMENT PARTNERS’ AREAS OF ENGAGEMENT ...................................... 95 ANNEX 8: REGIONAL INSTITUTIONS IN THE PACIFIC ISLANDS .......................................... 97 ANNEX 9: COUNTRY ANNEXES ................................................................................................... 99 FEDERATED STATES OF MICRONESIA (FSM) ............................................................. 99 KIRIBATI .............................................................................................................................. 104 REPUBLIC OF THE MARSHALL ISLANDS (RMI) ......................................................... 108 REPUBLIC OF NAURU ....................................................................................................... 114 REPUBLIC OF PALAU ........................................................................................................ 117 INDEPENDENT STATE OF SAMOA ................................................................................. 121 TONGA ................................................................................................................................. 126 TUVALU ............................................................................................................................... 131 VANUATU ............................................................................................................................ 136 ANNEX 10: OVERVIEW OF PIC6 CAS/CPS COMPLETION AND LEARNING REVIEWS ..... 141 SUMMARY OF KEY FINDINGS ........................................................................................ 142 HIGHLIGHTS OF ASSESSMENT ..................................................................................... 144 WORLD BANK GROUP PERFORMANCE AND LESSONS .......................................... 153 ALIGNMENT WITH WORLD BANK GROUP CORPORATE STRATEGY ..................... 158 ATTACHMENT 1: PIC6 PLANNED AND ACTUAL DELIVERIES-OPERATIONS (AS OF AUGUST 5, 2016) ................................................................................................. 162 ATTACHMENT 2: PIC6 PLANNED AND ACTUAL DELIVERIES-ASA (AS OF AUGUST 5, 2016) ................................................................................................. 165 Regional Partnership Framework 13 TABLES TABLE 2.1: PIC9 POPULATION AND SPATIAL, FISCAL, AND ECONOMIC INDICATORS ... 20 TABLE 3.1: LINKS BETWEEN SCD HIGH PRIORITY SOLUTION AREAS AND RPF PRIORITIES ......................................................................................................... 49 TABLE 3.2: IDA18 SCALE UP (IN US$M) .................................................................................... 60 TABLE 4.1: TYPES AND SEVERITY OF RISKS TO THE IMPLEMENTATION OF THE RPF IN THE PIC9 ............................................................................................................... 68 FIGURES FIGURE 2.1: THE PIC9 ARE AMONG THE WORLD’S SMALLEST AND MOST REMOTE COUNTRIES ............................................................................................................... 22 FIGURE 2.2: GROWTH IS LAGGING IN NEARLY ALL PICS (AVERAGE ANNUAL GDP GROWTH IN PICS AND COMPARATORS, 2004–14, IN CONSTANT PRICES IN LOCAL CURRENCIES) ......................................................................... 23 FIGURE 2.3: FISHING LICENSE REVENUES FOR SELECTED PICS (US$ MILLION), 2007–15 .................................................................................................................... 24 FIGURE 2.4: TOURIST ARRIVALS RELATIVE TO POPULATION, SELECTED COUNTRIES, 2015 ........................................................................................................................... 24 FIGURE 2.5: DOMESTIC REVENUES AND EXPENDITURE, EXCLUDING GRANTS, AS A PERCENTAGE OF GDP IN PICS AND COMPARATOR COUNTRIES, 2010–13 AVERAGE .................................................................................................................. 26 FIGURE 2.6: IMPORTS OF GOODS AND SERVICES AS A SHARE OF GDP IN PIC9 COUNTRIES AND COMPARATORS, 2013 .......................................................... 28 FIGURE 2.7: EXPORTS OF GOODS AND SERVICES AS A SHARE OF GDP IN PIC9 COUNTRIES AND COMPARATORS, 2013 .......................................................... 28 FIGURE 2.8: PRESENT VALUE OF PUBLIC DEBT AS A PERCENTAGE OF GDP IN PIC9, 2014 ........................................................................................................................... 29 FIGURE 2.9: INCIDENCE OF POVERTY IN SIX PACIFIC COUNTRIES .................................... 31 FIGURE 2.10: PREVALENCE OF GENDER-BASED VIOLENCE IN THE PIC9 .......................... 37 FIGURE 2.11: WOMEN HOLD FEW SEATS IN PIC9 PARLIAMENTS .................................... 38 .... 14 Regional Partnership Framework BOXES BOX 1.1: IDA18 SCALE UP ............................................................................................................. 17 BOX 1.2: THE WORLD BANK GROUP’S EXPANDING ENGAGEMENT WITH THE PACIFIC 18 BOX 2.1: GEOGRAPHY AND CAPACITY CONSTRAINTS CREATE HARD CHOICES BETWEEN ADVANCED MEDICAL TREATMENT AND BASIC HEALTHCARE IN TUVALU ........................................................................................................................... 33 BOX 2.2: PLANNING FOR RISING SEA LEVELS IN KIRIBATI ................................................. 34 BOX 2.3: LAND IN THE PACIFIC .................................................................................................. 36 BOX 3.1: DEVELOPMENT POLICY OPERATIONS IN THE PACIFIC ......................................... 42 BOX 3.2: PACIFIC POSSIBLE ....................................................................................................... 46 1 INTRODUCTION A boy jumps into the ocean - Nuku’alofa, Tonga. Photo Credit: World Bank / Conor Ashleigh 16 Regional Partnership Framework This Regional Partnership Framework (RPF) outlines the World Bank Group (WBG) stra- tegic program for nine Pacific island countries (PIC9): Kiribati, the Republic of the Mar- shall Islands (RMI), Federated States of Micronesia (FSM), Republic of Nauru, Republic of Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu and Vanuatu.1 The RPF comes at a time when the WBG presence and engagement across the Pacific is larger than ever before, reflecting a concerted effort to increase its presence in some of the world’s most remote and fragile countries. While the RPF outlines and consolidates the WBG strategy for engagement in each of the PIC9, which in many cases requires regional solu- tions, the RPF primarily focuses on avenues to support each of the countries rather than presenting a consolidated regional strategy. The RPF builds upon the deepening engagement with more established clients, such as Samoa and Tonga, and the strengthened partnership and increase in resources chan- neled to FSM, RMI, Vanuatu and Tuvalu made possible by their relatively recent reclas- sification as IDA eligible. These are IDA-eligible countries, having benefited from favora- ble financing trems under IDA’s small states island exception (40 years maturity with 10 years grace period) during IDA17, which will be extended to IDA18. Nauru and Palau are classified as IBRD countries ineligible for IDA18 resources. Access to IBRD financing for these two countries is possible only through guarantee schemes or engagements that would provide the appropriate credit enhancement. WBG engagement with Nauru is in its infancy due to its recent membership (April 2016). Similarly, the WBG has had limited engagement with Palau since its membership in 1997. WBG engagement in these countries, which have a significant higher per capita income than the remaining countries in the PIC9, will therefore be different from the other countries included in the RPF. The WBG will first and foremost seek to increase its knowledge base of the two coun- tries and explore innovative entry points that build on the WBG’s comparative advantage and for which resources, such as Trust Funds, may be available to support both Nauru and Palau in their development objectives. Moreover, the World Bank will continue to work with other partners to support regional projects that may directly or indirectly support Nauru and Palau. In recent years the WBG engagement of the WBG has increased markedly across the Pacific. World Bank commitments in the IDA eligible countries among the PIC9 totaled US$48.56 million in 2010 and have since risen more than tenfold to US$ 553.48 in 2016 (Pacific-wide, totaled US$235 million in 2010 and have since risen fourfold, to US$1.06 billion in 2016). Up to US$500 million in new private sector investment has been mobi- lized through IFC interventions, including US$30m in additional direct or co-investment by IFC. IFC’s Advisory program since 2010 has been valued at US$25m. An increase in the annual minimum base IDA allocation (from SDR1.5 million in IDA15 to SDR3 million in IDA16 and SDR4 million in IDA17) was central to this growth, which will continue as the IDA18 minimum base allocation increases to SDR15 million. The resulting scale up in financing will enable a more substantive engagement in the IDA-eligible PICs to help address their unique challenges (Box 1.1). 1 Nauru and Tuvalu are not member countries of IFC. Regional Partnership Framework 17 BOX 1.1: IDA18 SCALE UP The increase in the base allocation for IDA18 will provide significantly more resources for IDA-eligible coun- tries among the PIC9. This will allow the WBG to embark on a far more ambitious program of support, both in terms of investments as well as through increased support for capacity building. Implementation support will be increased with a view to ensuring enhanced project readiness, additional regional programs will be embarked upon in new areas such as maritime engagements, partnerships with regional actors and development partners will be expanded as will be support for climate change and disaster preparedness The wide ranging body of analytical work undertaken in preparation of the RPF, including the Pacific Pos- sible study, allows the WBG to target especially transformative opportunities for the PIC9. The support in the RPF period will therefore allow an increased focus on supporting the PICs more fully exploiting select economic opportunities (Tourism, Fisheries, ICT, Labor mobility), addressing the drivers of fragility (cli- mate change and natural disasters, youth unemployment and the NCD crisis) with gender and strengthen- ing of institutional capacity, as cross-cutting issues. IFC will seek to capitalize on the IDA18 scale up to enhance its own support, particularly of FCV countries (those grappling with fragility and sometimes conflict and violence). IFC will seek to increase the total volume of financing and number of investment projects by catalyzing support, resources and thought leadership from across the WBG, other multilaterals, NGOs, IFC clients and other stakeholders to meet the challenges of fragility. A dedicated lead for FCV and IDA investment will make technical resources available and identify opportunities for cooperation across WBG to help transaction teams, advisory and country staff deliver more meaningful projects in these most difficult markets. To develop a pipeline of potential investments, teams will draw on the Private Sector Window using blended finance, project risk guarantees and currency risk management products. The development of regional initiatives in information and communication technology (ICT), aviation, fisheries, and climate change resilience across the Pacific has provided scope for the World Bank to leverage substantial resources from the IDA regional pro- gram, which now constitute almost one-third of the portfolio. The mobilization of signifi- cant trust fund resources from large bilateral development partners in the Pacific, notably Australia and New Zealand, was also highly instrumental in expanding support. Box 1.1 describes the regional and country strategies that defined the WBG’s program of engage- ment during this period of expansion. Fishing boats at sunset - Republic of the Marshall Islands. Photo Credit: World Bank / Vlad Sokhin (Panos Pictures) 18 Regional Partnership Framework The period covered by this RPF—Fiscal Years (FY) 2017–21—will see the completion of a range of activities initiated during IDA17, followed by an increase of WBG support to the IDA-eligible PICs to historically unprecedented levels during IDA18. The increase in the IDA18 base allocation will significantly benefit most Pacific countries and in some of the PIC9 it will almost quadruple the national IDA resources available. The program of support envisioned in this RPF will build on a significant body of recent analytical work exploring options to harness regional synergies, while recognizing the unique characteristics of each of the PIC9 to tailor country-specific solutions. This RPF defines a broad program of engagement that will benefit from the strengths and opportu- nities of Pacific institutions, traditions, and customs and draw upon the combined capac- ity of the World Bank and IFC to facilitate increased collaboration across the region and respond to the priorities of individual countries. The proposed framework for WBG engagement in the Pacific is also well aligned with the IDA17 and IDA18 themes. During IDA17, in countries with active programs, there was increased focus on inclusive growth, climate change and fragile and conflict-affected states. IDA18 presents a set of policy and financing commitments to match the global ambition of fulfilling the Sustainable Development Goals by 2030, and the engagement in the Pacific will reflect this goal. The focus on climate change, gender, fragility, labor mobility/employment, and economic governance in this RPF is fully aligned with the IDA18 themes. BOX 1.2: THE WORLD BANK GROUP’S EXPANDING ENGAGEMENT WITH THE PACIFIC From 2000 to 2005, the WBG program was defined in a Pacific Regional Strategy (May 2000) covering nine PICs (diverging slightly from the group covered in this proposed RPF)† It reflected the findings of a combined Commonwealth Secretariat–World Bank Joint Task Force on Small States, which assessed the development challenges specific to small states and the best ways to meet those challenges. Between 2005 and 2009, the WBG program was governed by the Regional Engagement Framework for Pacific Islands FY2006-2009 (May 3, 2005). That framework maintained the focus on the nine PICs targeted in the Pacific Regional Strategy. It aimed to strengthen government capabilities for delivering services and sought to improve the incentives for private sector-led growth and employment. The WBG goal was to deliver its assistance primarily through strategic economic and sector work and targeted technical assistance; selective lending was envisioned for activities that would leverage donor resources to maximize their policy impact. Toward the end of the period covered by the Regional Engagement Frame- work, to support its deepening engagement in the Pacific, the WBG initiated country-specific strategies. Between 2010 and 2014, the WBG initiated the first-ever country strategies in six of the PIC9: King- dom of Tonga (2010), Kiribati (2011), Tuvalu (2011), RMI (2013), FSM (2014), and the Independent State of Samoa (2012). Undertaking country-specific strategies afforded the WBG the opportunity to establish a well-informed relationship, dialogue, and operational program with each of the countries and take a “deep dive” into the specific development challenges and opportunities in each of the countries. † Fiji, Kiribati, RMI, FSM, Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu. Regional Partnership Framework 19 2 COUNTRY CONTEXT AND DEVELOPMENT AGENDA A man casts a fishing line off the end of a jetty - South Tarawa, Kiribati. Photo credit: World Bank / Conor Ashleigh 20 Regional Partnership Framework 2.1 Country Context The PIC9 have substantial resource endowments, especially in fisheries, and also ben- efit from natural and cultural riches but face common development challenges. These include small size and remoteness, geographic dispersion and environmental fragility, and high exposure to a volatile mix of economic shocks, climate change, and natural disas- ters. The PIC9 are among the 25 smallest independent states on earth. They range from Tuvalu, with a population of around 10,000, to Vanuatu, with 250,000 (Table 2.1). Most of these countries are archipelagos, and range from 1 inhabited island (Nauru) to more than 70 (Vanuatu), with most islands separated by large tracts of ocean. Most of the PIC9 have an average population per inhabited island of less than 5,000 individuals. Kiribati’s popula- tion of 110,000 extends across an area as large as India—yet the combined land mass of its islands is less than the area of New Delhi. TABLE 2.1: PIC9 POPULATION AND SPATIAL, FISCAL, AND ECONOMIC INDICATORS FSM Kiribati Nauru Palau RMI Samoa Tonga Tuvalu Vanuatu Spatial and situational indicators Population 104,044 110,470 10,051 21,097 52,898 191,845 105,586 9,893 258,883 Population growth -0.1% 1.8% 0.2% 1.1% 0.2% 0.6% 0.5% 0.4% 2.3% Land area (km2) 2014 700 810 21 460 180 2,830 720 30 12,190 EEZ (km2) 2,992,597 3,550,000 293,079 604,289 1,992,232 131,812 664,853 751,797 827,891 Inhabited islands 65 21 1 8 24 4 36 9 72 Remoteness (km) 10,307 10,886 10,943 9,852 10,470 11,886 12,463 11,610 12,101 Avg. population per island 1,601 5,260 10,051 2,637 2,204 47,961 2,933 1,099 3,596 Fiscal indicators (ratio to GDP) Total public spending 60.2% 95.4% 51.9% 39.8% 53.9% 43.3% 28.2% 86.8% 22.3% General government revenue 71.4% 115.6% 68.9% 43.3% 54.5% 38.1% 28.9% 123.1% 23.3% Trust fund assets 131.0% 321.2% 3.5% 78.1% 128.6% 0.0% 0.0% 335.1% 0.0% Public sector debt (PV) 21.7% 9.6% 53.2% 34.0% 45.2% 64.5% 34.5% 78.5% 21.7% Economic indicators GDP per capita (PPP $) 3,347 1,941 11,394 13,985 3,852 5,819 5,309 3,793 3,046 GDP per capita growth 0.3% -0.2% 9.4% 0.1% 0.6% 2.3% 1.0% 1.2% 0.4% GDP (PPP, $ millions) 348 214 115 295 204 1,116 561 38 789 Share of agriculture 27.0% 25.5% 3.9% 3.9% 18.7% 9.5% 20.5% 22.2% 28.2% Share of industry 6.3% 8.1% 21.5% 8.4% 10.5% 24.3% 18.8% 9.1% 9.1% Share of services 66.8% 66.5% 63.5% 87.7% 70.8% 66.2% 60.7% 68.7% 62.7% Imports, ratio to GDP 72.2% 110.8% 60.0% 87.7% 95.0% 52.5% 53.5% 133.2% 49.4% Exports, ratio to GDP 25.1% 10.8% 35.7% 63.1% 34.9% 28.2% 17.8% 57.4% 48.0% Remittances, ratio to GDP 6.9% 7.8% - - 11.9% 17.5% 26.3% 10.7% 3.0% Source: Data on government revenues is from IMF’s WEO database and are estimates for Tonga, Kiribati, Tuvalu, and RMI. Imports and exports for FSM and MHL are from PITI-VITI, and for Tuvalu from World Bank estimates. Share of GDP from industry for Kiribati is for 2013. Trust fund assets are from joint WB/IMF Article IV consultation documentation. Nauru public expenditure and economic statistics are from 2013/14 budget documents and World Bank estimates. Remittances data are from World Bank bilateral remittances matrix dataset. All other data are from the Word Bank’s World Develop- ment Indicators. Note: Data are for latest year available (2014) except GDP per capita growth and population growth, which are the 10-year average for Nauru and 20-year average for all other countries. GDP and GDP per capita are in PPP current international dol- lars, except for Nauru which is in current US dollars. Remoteness is measured as the average distance from other economies, weighted by their GDP. PV (present value); EEZ (Exclusive Economic Zone). For Nauru and Palau, nominal public debt (not PV) is shown. Regional Partnership Framework 21 The Pacific islands fall broadly into three cultural areas, each covering a subset of in- dependent states: Melanesia (Vanuatu, Solomon Islands, Fiji, Papua New Guinea), Mi- cronesia (FSM, Kiribati, RMI, Nauru, Palau), and Polynesia (Samoa, Tonga, Tuvalu, New Zealand). Cultural traditions vary across the PICs, yet in most countries indigenous cul- tures are a strong presence in national life, policies, and decisions. All of the PIC9 are de- mocracies (some more stable than others) and experience varying degrees of influence by traditional leaders. The PIC9 tend to retain close ties to countries with which they have had significant his- toric relationships. RMI, FSM, and Palau have entered into “Compacts of Free Association”2 with the United States of America (USA). Under the Compact, the three countries receive yearly financial transfers as well as access to other United States services and programs. The USA has full authority and responsibility for the defense and security of the Compact countries, whose citizens can live, work, and study in the USA without a visa. In the South Pacific, many Tongans and Samoans possess dual nationality with New Zealand, reflect- ing their close historical relationship with that country. Twenty-nine percent of Australia’s development assistance is channeled to the Pacific. For New Zealand, the figure is 59 per- cent. 2.2 Recent Economic Developments and Outlook for the Regional Partnership Framework Period The extreme smallness and remoteness of PIC9 economies powerfully affect local op- portunities for business and economic expansion (Figure 2.1 highlights their remote na- ture). A telling comparative statistic is distance to markets, weighted by the size of those markets. According to that metric, the Pacific islands are 12,000 km from centers of eco- nomic activity, versus 8,000 km for the Caribbean islands and 10,000 km for some of the most remote Indian Ocean islands. Constraints inherent in the small domestic markets of the PIC9—low purchasing power and challenges in capturing economies of scale—are compounded by excessive distance from foreign suppliers, which increases the unit cost of inputs while pushing up the costs of exports. These factors drive up the costs of private production and reduce returns for private firms, while narrowing the set of feasible eco- nomic opportunities. The high frequency and intensity of natural disasters adds another substantial layer of risk to starting or expanding a business. Smallness, remoteness, internal dispersion, and vulnerability to natural disasters trans- late into specific macroeconomic outcomes. They include low and volatile economic growth, structural budget deficits (excluding grants), structural trade deficits, vulnerability to external shocks (such as shocks to commodity prices), and elevated risks of debt distress. 2 Following World War II, in 1947 RMI, FSM, and Palau passed from Japan’s control to the U.S. under United Na- tions auspices as part of the Trust Territory of the Pacific Islands. In 1986, RMI, FSM, and Palau entered into Compacts of Free Association with the US. 22 Regional Partnership Framework Growth in almost all PICs is lagging behind growth in other developing countries. Over the last ten years, none of the PICs (except for Nauru) has been able to generate per capita income growth of more than two percent, and several of the PICs are experiencing almost no growth in real GDP per capita (Figure 2.2).3 As a result, few new jobs are being created and in most of these countries, less than half of the working-age population is employed. Given low growth and limited employment opportunities, labor migration to neighboring countries and remittances are critical drivers of increased living standards in the PIC9. Remittance flows to Tonga and Samoa are among the highest worldwide in relation to the countries’ GDPs, at 26 percent and 18 percent, respectively. The already relatively high cost of transferring money to Pacific countries could further increase due to reduction in correspondent banking services by global banks in recent years. The withdrawal of cor- respondent banking relationships, as well as the limited number of Banks generally oper- ating in Pacific island countries is affecting the ease and cost of remittance transactions. The increase in the cost of sending remittances combined with closures of Money or Value Transfer Services’ bank accounts including in Samoa, Tonga, RMI among others, remains a source of concern. FIGURE 2.1: THE PIC9 ARE AMONG THE WORLD’S SMALLEST AND MOST REMOTE COUNTRIES Source: World Bank estimates (WDI data) and CEPII Database. 3 It is important to bear in mind that the occurrence of natural disasters frequently distorts the growth picture in these economies. Regional Partnership Framework 23 FIGURE 2.2: GROWTH IS LAGGING IN NEARLY ALL PICS (AVERAGE ANNUAL GDP GROWTH IN PICS AND COMPARATORS, 2004–14, IN CONSTANT PRICES IN LOCAL CURRENCIES) Source: World Bank estimates, based on WDI data. Note: EAP (East Asia and Pacific); MICs (middle-income countries) These countries specialize in a few economic activities in which they are globally compet- itive, notably fisheries, to some extent agriculture, and tourism. Revenues from fisheries as a share of GDP have risen rapidly since 2007, with Kiribati and FSM seeing the biggest increases in absolute terms (Figure 2.3). The importance of tourism is highlighted by the very considerable share of GDP coming from the services sector—often exceeding two-thirds of GDP (as seen in Table 2.1). The fastest-growing economies, Vanuatu and Samoa, have seen a rapid expansion in their trade, transport, and hospitality sectors with rising tourist arrivals from Australia and New Zealand. Tourism-related services have sustained growth in Palau in the absence of other sustained drivers of growth, and they have supported some growth in Tonga (Figure 2.4). 24 Regional Partnership Framework FIGURE 2.3: FISHING LICENSE REVENUES FOR SELECTED PICS (US$ MILLION), 2007–15 Source: Asian Development Bank Pacific Economic Monitor database. FIGURE 2.4: TOURIST ARRIVALS RELATIVE TO POPULATION, SELECTED COUNTRIES, 2015 Source: World Bank estimates, based on data from SPTO and national authorities. Note: * denotes SPTO estimate. Regional Partnership Framework 25 In most of the PIC9, public expenditure and investment funded through domestic taxes, natural resource revenues, and especially development assistance, is a significant con- tributor to GDP. While Nauru experienced a sharp, temporary boost in growth from 2011 to 2014 after the resumption of phosphate mining, the reopening of Australia’s Regional Processing Centre for asylum-seekers, and an increase in revenues from fishing licenses, growth is projected to revert to more modest rates in coming years. In addition, growth in the PICs tends to be highly volatile. Short-run volatility is typically the result of external economic shocks and natural disasters, with their characteristic cycles of decline and recovery, as well as the funding of infrastructure projects through foreign aid, which can lead to a temporary acceleration in growth. Of the PIC9, only Tonga, Samoa, and Vanuatu have their own currencies (pegged to cur- rency baskets). Palau, RMI, and FSM use the US dollar, while Kiribati, Nauru, and Tuvalu use the Australian dollar. The scope for independent monetary policy in the PIC9 is thus very limited, with the exchange rate serving as the nominal anchor for these economies. Inflation has been moderate in recent years, with volatility typically being a result of changes in import prices or supply shortages in the wake of natural disasters. The financial sectors of the PIC9 tend to be small and weak financial sector regulation and supervision puts them at heightened risk of being cut off from the international financial system in the context of global de-risking. After 9/11 there has been a tighten- ing of international anti-money laundering/counter-terrorism financing (AML/CTF) rules that impose significantly heightened compliance requirements on the PICs. This affects incoming remittances, donor funding, imports and outgoing transactions as well as some niche activities that are important for some of the PICs such as offshore financial cent- ers (Nauru, Palau, Samoa, Vanuatu) and registration of ships (the Marshall Islands). While all of the PIC9 are affected by global de-risking, Vanuatu, RMI, Nauru and Tuvalu already have lost correspondence bank relationships or are under threat of losing access. While average revenues as a percentage of GDP in the PICs are at a similar level to those in other small states and comparator countries, public expenditures are systematically higher, even though in most cases only a minimum level of public services is delivered (Figure 2.5). This outcome is largely explained by the inability of the PICs to achieve econo- mies of scale, given their size and the scattered distribution of their populations, as well as by the high cost of imported inputs. At the same time, however, government expendi- ture has a dual role in many of the PICs, which is not only to provide public services to the population but to directly create employment and distribute aid flows. The result in some cases may be inefficient levels of recurrent expenditure (particularly on the public sector wage bill). 26 Regional Partnership Framework Development assistance plays a critical role in funding public expenditure in most of the PIC9, and on a per capita basis, is among the highest in the world (largely due to their small populations). Development assistance helps to support economic activity by pro- viding the public goods and services—including key infrastructure—that sustain private sector production, business development, and trade. It also supports economic growth by facilitating government procurement of goods and services from the private sector. Such procurement, when correctly mobilized and deployed, prevents aid funds from crowding out private sector participation in the economic development agenda and opens greater opportunities for the private sector in areas such as energy generation and other infra- structure services. FIGURE 2.5: DOMESTIC REVENUES AND EXPENDITURE, EXCLUDING GRANTS, AS A PERCENTAGE OF GDP IN PICS AND COMPARATOR COUNTRIES, 2010–13 AVERAGE Source: World Bank estimates, IMF WEO, and WDI data. Notes: “Pacific” includes Papua New Guinea, Solomon Islands, and Fiji; MICs are middle-income countries; data for Nauru are 2011–13 average for Nauru. Even with significant development assistance, the PIC9 have persistent gaps in the pro- vision of services. Development assistance has helped raise living standards, particularly by supporting public sector provision of critical health and education services. However, because the population is so widely dispersed across the islands in many of the PIC9, the cost of public administration and service delivery is high, affecting both the quantity and quality of services available. Some services are not performed at all, or not provided to an adequate standard. Regional Partnership Framework 27 While for most countries structural budget deficits are likely to persist over the RPF period, increased revenue from fisheries has generated significant fiscal surpluses in a few countries, including Kiribati, Tuvalu, and FSM. For these countries, the critical chal- lenge over the RPF period will be to devise a strategy that creates an appropriate balance between using some of the increased revenue to address current development challenges, building fiscal buffers to be able to deal with volatility, and saving for the future. The Com- pact countries in the North Pacific face the additional challenge of adjusting revenue and expenditure to avoid a potential “fiscal cliff” in 2024 (RMI,FSM)/ 2025 (Palau), when USA Compact grants are scheduled to expire and income from the Trust Funds of these coun- tries is unlikely to fully replace the grants. Six of the eight PICs (Nauru, Palau, FSM, RMI, Kiribati, and Tuvalu) have sizeable trust funds, which have in some cases also played an important role in financing public expen- ditures, given a shortfall of revenues from other sources. The trust funds in FSM, RMI, and Palau were established as part of the Compact of Free Association with the USA, and their main purpose is to fully replace Compact grants upon their expiration at the end of the compact period. Kiribati has a trust fund that was built with phosphate tax revenues, while Tuvalu has a donor-funded trust fund. The objective is that the investment income from these funds—which are invested in foreign financial assets—will eventually help the PICs to achieve a measure of budgetary self-reliance, in recognition of the reality that the PICs will not be able to generate sufficient revenues on their own to meet long-term development financing needs. Nauru also had a large sovereign wealth fund built from the country’s phos- phate resources. However, following the exhaustion of primary phosphate reserves, poor investment decisions led to a rapid loss in value of the country’s sovereign wealth fund, which is now being dissolved. With the support of development partners, Nauru estab- lished a new Trust Fund in 2016 funded from government as well as development partner resources. The objective of the Trust Fund is to provide Nauru with a sustainable source of income in the event that income from the Australian Regional Processing Center and the exploitation of secondary phosphate resources declines. Structural trade deficits are also the norm in the PICs. The import bill in the PICs tends to be relatively high compared with that of other small states due to their narrow and un- diversified domestic production bases, which can meet only a small proportion of the de- mand of the domestic population (Figure 2.6). On the other hand, high trade costs coupled with dispersion of population and low economic density mean that it is also difficult for firms to achieve economies of scale in the production of traded goods, so export receipts tend to be relatively low compared with those of other small states (Figure 2.7). 28 Regional Partnership Framework FIGURE 2.6: IMPORTS OF GOODS AND SERVICES AS A SHARE OF GDP IN PIC9 COUNTRIES AND COMPARATORS, 2013 Source: World Bank estimates and WDI data. FIGURE 2.7: EXPORTS OF GOODS AND SERVICES AS A SHARE OF GDP IN PIC9 COUN- TRIES AND COMPARATORS, 2013 Source: World Bank estimates and WDI data. Regional Partnership Framework 29 Debt sustainability is another clear challenge for the PIC9, owing to their susceptibility to external shocks, small economic bases, low levels of exports, limited budgetary resources, and modest growth perspectives. Levels of public debt vary significantly across the PIC9 (Figure 2.8) Four of the PIC9 (FSM, RMI, Kiribati, and Tuvalu) are currently classified as having a high risk of debt distress, and three (Samoa, Tonga, Vanuatu) are classified as having a moderate risk. To take advantage of productive investment opportunities while maintaining aggregate debt sustainability, it is important that the PICs have robust rules around the contracting of new debt. FIGURE 2.8: PRESENT VALUE OF PUBLIC DEBT AS A PERCENTAGE OF GDP IN PIC9, 2014 Source: World Bank estimates and IMF/WB Debt Sustainability Analyses. Notes: A discount rate of 5 percent is used to calculate the present value. Nominal public debt (not PV) is shown for Nauru and Palau. 2.3 Regional Efforts to Address Development Challenges To overcome the challenges inherent in their economic geography, the PICs rely on various kinds of regional collaboration. A number of organizations promote political and technical collaboration in the region, notably the Pacific Islands Forum (PIF) and the Pacific Commu- nity (SPC, an abbreviation that stems from its original name—South Pacific Commission). PIF—the principal political grouping—is an intergovernmental organization established in 1971 to enhance cooperation between the independent countries of the Pacific Ocean. The Pacific Islands Forum Secretariat (PIFS) implements PIF decisions, harmonizes regional positions on political and policy issues, and operates technical programs in economic de- velopment, transport, and trade. SPC is the principal scientific and technical intergov- ernmental organization in the Pacific region. Established in 1947, it promotes effective, innovative applications of science and knowledge across the Pacific. 30 Regional Partnership Framework To prevent duplication in the aims of these organizations, the Council of Regional Or- ganisations in the Pacific (CROP) was created in 1988. It is chaired by the PIFS Secretary General and aims to improve cooperation and collaboration among key regional bodies such as the Forum Fisheries Agency (FFA), the Pacific Islands Development Programme (PIDP), the SPC, the Secretariat of the Pacific Regional Environment Programme (SPREP), the South Pacific Tourism Organisation (SPTO), the University of the South Pacific (USP), the Pacific Power Association (PPA), and the Pacific Aviation Safety Office (PASO). Outside the CROP agencies, the Pacific Islands Private Sector Organization (PIPSO) is focused on supporting private sector development and the Pacific Islands Development Forum (PIDF), established in August 2014 through an initiative by the Government of Fiji, is focused on establishing a South–South platform for collaborative action on green economic policies. In 2014, PIFS began to develop a new strategic framework to streamline the develop- ment agenda and prioritize the key challenges for the region. The resulting Framework for Pacific Regionalism articulates an overarching vision for the region and streamlines the regional agenda by focusing on key priorities, including areas key to WBG support, such as fisheries, climate change and ICT. It builds upon, and integrates with, the Small Island Developing States (SIDS) Accelerated Modalities of Action [S.A.M.O.A.] Pathway, a blueprint for achieving sustainable development in SIDS that was adopted by 115 SIDS leaders at the Third UN Small Island Developing States conference in September 2014 in Apia, Samoa. The Pacific region was a strong supporter of the Sustainable Development Goals (SDG’s) in the UN deliberations. Advocacy by the Pacific, and other small islands states, was instrumental in the inclusion of a separate oceans goal. Many Pacific governments are integrating implementation of the SDGs at the national level as national development plans are reviewed and updated. Capacity to deliver on, and monitor, the SDGs is limited in the Pacific, as it was with the Millennium Development Goals. With oversight by the CROP Sustainable Development Working Group, the National Sustainable Development Strate- gies (NSDS) Partnership Group, is providing technical support to member countries in tai- loring and integrating the SDGs in their national plans, budgets, and monitoring and evalu- ation frameworks. At the regional level, there is also effort in tailoring the global indicators to better reflect the Pacific context and to use these regional indicators to monitor the region’s progress on the SDGs. Joining together to form regional and international cooperative solutions continues to hold promise for offsetting challenges stemming from the small size, limited financial and human resources, and other constraints besetting the PIC9. Among other achieve- ments, regional approaches have delivered gains in fisheries (as seen from the rapid growth in revenues depicted in Figure 2.3), education (through the University of the South Pacif- ic, for example), ICT, and shared governance and resource management services. Yet the results of these strategies and efforts have been mixed and building sustainable coopera- tive solutions remains a key development challenge in the Pacific. Regional Partnership Framework 31 2.4 Poverty Profile Extreme poverty is relatively uncommon in the PIC9. Based on internationally comparable estimates using the 2011 purchasing power parity (PPP) poverty line of US$1.90 per day, extreme poverty is estimated to surpass 10 percent in only three countries: Kiribati, Vanuatu, and FSM (Figure 2.9). No data are available for RMI, but proxies indicate that its poverty levels are similar to those in FSM. The prevalence of extreme poverty is negligible in Samoa, Tonga, and very likely Palau, and it is just above 3 percent in Tuvalu. No estimates of the incidence of extreme poverty are available for Nauru, but most segments of the population will likely have benefited to some extent from the rapid economic growth in recent years. Relatively high per capita incomes in the PIC9, reasonably widespread access to land for subsistence agriculture, and the existence of informal, community-based social safety nets have generally kept the incidence of extreme poverty low. The extreme poor often live outside traditional social networks. Many of the individuals who are socially excluded live in urban areas, without jobs, and may be homeless and suffer from physical or mental disabilities. FIGURE 2.9: INCIDENCE OF POVERTY IN SIX PACIFIC COUNTRIES Source: World Bank PovCalNet and World Bank staff calculations reported in the PIC8 SCD, based on country HIES Extreme poverty may be limited, but poverty and hardship are fairly widespread in six of the nine countries. Internationally comparable estimates based on the less austere 2011 PPP poverty line of US$3.10 per day suggest that poverty is relatively widespread in the PIC9, except for Tonga, Samoa, and probably Palau. It appears likely that about 90 percent of the poor are concentrated in FSM, Vanuatu, Kiribati, and possibly RMI. In the Pacific, many of the poor inhabit the outer islands, where poverty is structural and persistent. As in Kiribati, some inhabited islands are coral atolls where very little subsistence agriculture is possible and more extreme deprivation is likely, particularly compared to 32 Regional Partnership Framework typical levels in rural areas. Across the Pacific more generally, a broad sense of hardship prevails, experienced as a lack of access to even basic services (including quality education), economic opportunities, cash for meeting basic needs (sometimes including customary obligations to traditional support networks). Hardship is also increasing owing to the impacts of NCDs. Across the region, a significant share of the population remains on the edge of poverty. Many paths lead households into poverty—the loss of a job, a crop failure, illness, an economic crisis that reduces tourism, a natural disaster that deprives them of housing and land—. Even relatively minor events can push a poor household into extreme poverty, and drive the extremely poor into destitution. Often the poor come from groups that have specific social disadvantages and economic vulnerabilities, such as the elderly, individuals living with disabilities, children, or female household members. Robust evidence is not yet available, but converging trends in related indicators suggest that poverty has stagnated or increased in most of the PIC9 since the last data were collected. The household surveys used to estimate incomes and poverty levels are administered infrequently in the PIC9, and much of the data is not recent. To some extent, poverty is likely to have been exacerbated by the 2008–10 global economic crisis, the surge in food and fuel prices around the same time (which markedly depleted real purchasing power in the Pacific), and the effects of major natural disasters in the PIC9 countries in recent years. The limited data available suggest that incomes have grown more slowly among the bottom 40 percent in the PIC9 than in other countries in East Asia and the Pacific (EAP), while the gap between those who can meet modern basic needs and those who cannot is growing. Data on income trends among the bottom 40 percent (B40) are scant and unreliable-a fundamental limitation that is addressed in detail later. Given that overall growth in per capita income across the PIC9 has been so low in the past two decades, however, incomes of the B40 have almost certainly grown very little. Time-series data for estimating changes in the income/expenditure share ofthe B40 are available only forVanuatu, Samoa, Tonga, and Tuvalu. Over multi-year periods in the early 2000s, only in Vanuatu did average incomes of the lowest four income deciles increase more rapidly than average incomes of the population as a whole. In Tonga, B40 incomes grew at roughly the same pace as average incomes; in Samoa, growth in B40 incomes was only slightly lower than for the wider population; and in Tuvalu, the differential was more pronounced, consistent with the loss of job opportunities for Tuvaluan seafarers (the majority of whom were recruited from the outer islands). The PIC9 experience contrasts sharply with the median experience in EAP over the 2000s, when incomes of the B40 grew modestly faster than overall economic growth. While the traditional social structures in the PIC9 are mostly effective in ensuring that people have basic food and housing, the disparity between the “haves” and “have nots” is increasing with regard to modern basic needs such as cash incomes, basic infrastructure, social services, and nutritious food. Only some members of society are able to meet those modern basic needs. Progress in extending access to all has been uneven. Regional Partnership Framework 33 2.5 The Drivers of Poverty and Development Challenges The SCD provides the major analytical foundation for this RPF. Undertaken for eight of the PIC9 countries4 and completed in December 2015, the SCD identifies the critical constraints and opportunities facing the PIC8 in sustainably attaining the WBG’s twin global goals of ending absolute poverty and boosting shared prosperity. The diagnostic benefitted from the experience of the WBG in the region since 2000, particularly the learning gained from implementing country-specific strategies over the past five years. 2.5.1 Three Fundamental Constraints to Ending Absolute Poverty and Increasing Shared Prosperity The SCD identified three fundamental constraints to ending absolute poverty and boosting shared prosperity in the PIC95. All three are correlated with the unique economic geography of the PIC9. The first constraint is the small size and remoteness of the PIC9, which limits economic opportunities. As discussed, the islands’ long distance from markets and major shipping routes increases the cost of trade and limits integration in global value chains. The second constraint relates to the geographic dispersion of the PIC9. A particularly important consideration is that people living on outer islands have even more limited access to employment and public services than their counterparts on the major islands. In these circumstances, employment is often literally out of reach. The lack of economies of scale in administration and service delivery drives up the cost for the government to perform its essential public service functions in education, health, and other sectors. Tuvalu’s experience with its overseas medical treatment scheme is a case in point (Box 2.1). BOX 2.1: GEOGRAPHY AND CAPACITY CONSTRAINTS CREATE HARD CHOICES BETWEEN ADVANCED MEDICAL TREATMENT AND BASIC HEALTHCARE IN TUVALU The Government of Tuvalu is committed to providing Tuvaluans the highest attainable standards of health. Given the economic geography of the country, as well as its small population, the country instituted the Tuvalu Medical Treatment Scheme (TMTS) in 2005 with the aim of funding tertiary health treatment for patients who needed advanced surgical procedures overseas that could not be provided at Tuvalu’s only hospital. By 2013, spending under the scheme consumed 45 percent of the national health budget, leaving fewer resources for providing basic health services, including prevention. This expenditure hobbled the government’s efforts to achieve its key policy objective of providing balanced, cost-effective, equitable healthcare, particularly basic healthcare, to all Tuvaluans. 4 The SCD covered Kiribati, Republic of the Marshall Islands, Federated States of Micronesia, Palau, Independent State of Samoa, Kingdom of Tonga, Tuvalu, and Vanuatu. Nauru became a member of the World Bank only on April 12, 2016; therefore it was not included in the SCD but is covered in this RPF. Due to Nauru’s recent membership and the lack of statistics about its economy, the knowledge gaps with regard to the country’s poverty and shared prosperity profile are significant. They will be addressed during the RPF period. 5 Although the SCD covered 8 of the PIC9 countries, for overall consistency, the discussion herein refers to the PIC 9. 34 Regional Partnership Framework The third constraint is high exposure to economic crises and natural disasters. While economic openness is an essential response for small economies to grow and function, itleaves them exposed to the volatility of global markets. With their narrow economic bas- es, the PIC9 are hampered in building sufficient reserves against catastrophic economic and natural events. Their vulnerability is worsened by poor development planning and the countries’ limited ability to respond to and manage the risks of economic and natural threats. Tropical storms, earthquakes, volcanic activity, floods, droughts, and landslides are frequent events in these countries, and their frequency and intensity continue to in- crease. Recent estimates show that the expected losses (as a share of GDP) on an annual- ized basis far exceed those in almost all other countries in the world. The highest eleva- tions in the atoll nations of Kiribati, RMI, and Tuvalu are only a few meters above sea level, and these countries may become submerged by 2100 (Box 2.2). The average annual direct losses caused by natural disasters in the South Pacific region are estimated at US$88 million. BOX 2.2: PLANNING FOR RISING SEA LEVELS IN KIRIBATI Some Pacific countries believe it may already be too late to save themselves from the effects of climate change, including rising sea levels and the increased frequency of king tides. The Government of Kiribati has purchased 20 square kilometers of land on Vanua Levu, one of the Fiji islands, located about 2,000 km from Kiribati’s capital, Tarawa. An important conclusion of the SCD analysis is that an appropriate balance of regional and country-specific approaches is required across the PICs. The analysis affirmed the reality—recognized throughout these countries—that similar, overarching development opportunities and challenges can benefit from regional approaches, especially to expand tourism, increase revenue from fisheries, broaden opportunities for labor mobility, and strengthen disaster risk preparedness. The RPF takes into account the WBG’s compara- tive advantage and the activities of key development partners in the Pacific. The resulting framework supports the PIC9 in maximizing their potential by drawing on regional lessons and solutions, while providing flexibility at the individual country level to tailor the Bank’s engagement to the local reality. 2.5.2 Fragility in the Pacific 9 Fragility in the PIC9 has multiple facets but is not characterized by widespread civil or political conflicts (which are largely absent). In FY17, the WBG classifies four of the PIC9 as “fragile situations”—FSM, RMI, Tuvalu, and Kiribati6. These countries have limited state capacity and remain extremely vulnerable to external shocks. The risk and resilience as- sessment of the PIC9 conducted for this RPF concludes that fragility in these countries stems from their extreme geography and limited economic viability, thin institutional ca- pacity, urbanization and youth unemployment, poor land governance, and gender-based violence. In some cases, elite capture and weak state legitimacy constitute additional challenges. Climate change and natural disasters pose an existential threat to the atoll nations of the PIC9. 6 Fragile Situations” have: either a) a harmonized average CPIA country rating of 3.2 or less, or b) the presence of a UN and/or regional peace-keeping or peace-building mission during the past three years. See http://pub- docs.worldbank.org/en/154851467143896227/FY17HLFS-Final-6272016.pdf. Regional Partnership Framework 35 2.5.2.1 Thin institutional capacity and lack of state legitimacy A key development challenge for these countries is to ensure adequate capacity to sup- port effective public service delivery and regulation. With a limited pool of human re- sources and weaknesses in providing secondary and tertiary education, the PICs often cannot rely on local labor markets to supply the skills required for some public sector functions. Often they lack staff to perform all of the functions of a particular department or ministry, requiring individuals to cover a range of functions. The public sector also faces competition for human resources from the local private sector and development partners. Capacity-building efforts are undermined when individuals with newly acquired skills and qualifications move to new roles within or outside the public sector or move overseas. Elite capture, lack of state legitimacy, and corruption further reduce prospects for eco- nomic development. In some PICs, political coalitions are frequently built around a pyra- mid of patronage, with politicians competing for key posts that provide opportunities for distribution to coalition supporters down to the constituency level. Entrenched patronage threatens the delivery of national policy by encouraging frequent policy shifts, leading to inconsistency and a lack of commitment to policy analysis, formulation, and application. A common outcome is that the government cannot equitably deliver essential services to the public. Communities, especially in outer islands, often express high levels of frustra- tion about the distance they feel from government. Moreover, anti-corruption systems in some PIC9 experience deficiencies and institutional challenges. 2.5.2.2 Rapid growth in the youth population and urbanization Demographic data for the PIC9 point to a rapidly growing population of young people that will ultimately demand employment. On average, 57 percent of the population in the PICs is below the age of 25—a higher proportion than the average for the developing world and more similar to rates in least-developed countries. The number of people aged 0–14 substantially exceeds those aged 14–25, so the number of working-age youth will grow quickly over the next decade. This youth bulge will place increasing pressure on policy makers to generate employment opportunities in a context where jobs are already few and far between. Migration from the outer islands to urban spaces entails a variety of risks that increase fragility. Urban spaces offer a range of social and economic opportunities for social mobil- ity, particularly for women and young people, yet migrants from the outer islands cannot rely on making a smooth transition to urban life. Urban settings, though exhibiting better economic indicators and service provision rates, are beleaguered by overcrowding, defi- cient sanitation, lack of jobs, unsafe water sources, and substance abuse, which in some (although not all) of these countries provokes a general sense of hopelessness, especially among marginalized youths. 36 Regional Partnership Framework Many of the PIC9 lack the institutional capacity to deal effectively with the challenges generated by rapid urbanization. Overcrowding is becoming a major concern in several PIC9 countries, and it is not clear that all capital cities are economically or environmental- ly prepared to support the population growth they will experience. Very little detailed data is available to pinpoint, understand, and address these problems; for example, statistics on the numbers of people living in squatter areas or inadequate housing are limited and in- consistent. Left unaddressed, urban drift may speed the decline of public services, increase insecurity and crime, and reduce investment and productivity in cities with high youth unemployment. 2.5.2.3 Inequitable management of land and natural resources Poor governance of land and natural resources is another complex, enduring problem that threatens the resilience of PIC9 communities. In addition to the pressure exerted by climate change and urbanization, customary land is also threatened by the lack of robust frameworks for equitably managing land transactions (Box 2.3). The pressure to release communally held land for foreign investment, large-scale infrastructure development, and commercial agriculture exacerbates competing claims over land and weakens the ability of traditional governance systems to resolve them effectively. Deep sea mining is now emerging as a concern for some countries, given the associated environmental and social risks. BOX 2.3: LAND IN THE PACIFIC Customary ownership, the dominant form of land tenure in the Pacific, is being subjected to a range of new and rapidly changing forces. The pressure to commercialize land for development is testing the abil- ity of old systems to adapt and provide adequate tenure security for both members of customary groups and people outside the groups. In some of the PICs, acceleration of investment in tourism, agriculture, infrastructure and natural resources, and associated land development will increase, which could heighten social tension. In addition to climate change and urbanization pressure, customary land is threatened by the lack of robust legal frameworks and institutional supervision of customary land transactions. Lack of appropriate land records similarly pose significant challenges. 2.5.2.4 Climate change and natural disasters The Pacific region is one of the most prone to natural disasters in the world. The region combines high exposure to frequent and damaging natural hazards with low capacity to manage the resulting risks. Moreover, the PIC9 have limited macroeconomic tools at their disposal to counter external crises that destabilize the larger economy and undermine household welfare. Poorer households and individuals are even less equipped to rebound from the negative effects of climate change, natural disasters, and externally driven price fluctuations. Food production systems can be particularly affected by extreme variability in weather, which can in turn exacerbate disputes over arable land and sea resources. Regional Partnership Framework 37 2.5.2.5 Gender-based violence Gender-based violence (GBV) is extremely high in a number of countries in the region. The statistics available indicate that women in more than half of the PIC9 suffer either partner or non-partner violence to a greater extent than elsewhere in the world; all but one of the PIC9 is above the global average (Figure 2.10). In Kiribati, among women aged 15–49 who have ever been married, 68 percent have been subject to GBV; in Vanuatu, the figure is 60 percent. Violence against women has major traumatic and disempowering ef- fects. It negatively affects women’s health, well-being, and the development, education, and nutrition of their children. FIGURE 2.10: PREVALENCE OF GENDER-BASED VIOLENCE IN THE PIC9 Source: SCD for Eight Small Pacific Island Countries (World Bank 2016); data for Nauru from Nauru Family Health and Sup- port Study (http://countryoffice.unfpa.org/pacific/drive/NauruFHSSReportweb.pdf). Beyond the human costs, violence imposes major costs throughout the economy, including expenditures on service provision, income forgone by women and their families, decreased productivity, and negative effects on human capital. 2.5.3 Gender Inequality as a Barrier to Development Alongside the constraints placed on development by gender-based violence, the PIC9 countries experience gender inequality. Gender inequality is reflected in uneven access to economic opportunities and resource endowments, limitations on women’s voice and agency, and women’s vulnerability to emerging risks.7 7 The Consolidated Gender Action Plan (CGAP) for the PIC9 includes detailed analysis and data on the key ine- qualities between men and women in these areas, as well as policies and innovative interventions undertaken by PIC9 governments and donors to address them. The action plan was developed in line with the framework laid out in the EAP Region’s Companion Report to the World Development Report 2012 (World Bank 2011). 38 Regional Partnership Framework Women in the PIC9 do not have equal access to productive and economic resources. Female participation in the labor force is consistently lower than that of men – ranging from 23% in Samoa, compared to 58% of men (2015 data) to 61% in Vanuatu compared to 81% of men (2009 data). Women work predominantly in the informal sector and are fre- quently home-based, focusing on subsistence agriculture, marketing agricultural products, and petty trading. Within the limited set of economic opportunities available, women’s employment is concentrated in agriculture, tourism, and selected parts of the fisheries sector. Women in the PIC9 also face constraints on their control of assets. They are less likely to have land titles and can be disadvantaged by family, marriage, and inheritance law and practices.8 Women’s voice and agency are limited in the PIC9 countries. Women are underrepre- sented in the PIC9 parliaments (Figure 2.11); on average women hold only around 1 in 30 seats, compared to an average of about 1 in 5 across developing nations. FIGURE 2.11: WOMEN HOLD FEW SEATS IN PIC9 PARLIAMENTS Source: World Bank Gender Statistics database, January 2016. 8 The constitutions of RMI, FSM, Palau, and Vanuatu all recognize customary law as a valid legal system (see Women, Business and the Law 2016: Pacific Regional Gender Diagnostic, World Bank, 2016 (mimeo). Regional Partnership Framework 39 Emerging trends in the Pacific present risks and opportunities for women and for pro- gress toward gender equality. Women are disproportionately vulnerable to the effects of natural disasters and climate change where their socio-economic status is not equal to those of men, and where they have less voice and influence than men in shaping policies.9 Urbanization presents risks and opportunities; it can transform women’s lives with bet- ter access to infrastructure, education and health services, and a wider range of eco- nomic opportunities, but taking advantage of these opportunities depends on whether gender-sensitive policies and service delivery have been considered. Migration has poten- tial gender-specific benefits, but seasonal worker programs also carry social costs and impacts for migrants, their families, and their communities. Moreover, risks associated with globalized resource extraction industries in the Pacific, such as mining and fisher- ies, may potentially have socially destabilizing impacts on women. Finally, the increasing availability of ICTs has the potential to increase access to services and markets for men and women in the PIC9. The PIC9 governments, in partnership with the development community, are working to reduce gender inequalities. They are pursuing policies to reduce gender inequalities in education and health, increase women’s role in politics, and are investing in interventions that promote women’s skills and to provide access to jobs and services for victims of GBV. However, overall analysis and policy making to address gender inequality is severely con- strained by the paucity and low quality of data. Gender-disaggregated data are even more difficult to come by. A Consolidated Gender Action Plan (CGAP) for FY17–21 was developed to support im- plementation of the RPF. The action plan is the product of consultations with the Pacific country teams and a portfolio review of active projects. It supports actions to address the following five priority areas of gender inequality: (i) low female labor force participation and limited access to markets (focus area 1); (ii) high prevalence of gender-based violence (focus area 2); (iii) low participation in public decision making (focus area 2); (iv) dispropor- tionately high degree of women affected by NCDs (focus area 2); and (v) women’s vulner- ability to emerging risks (focus area 3).10 Given the prevalence of GBV in the PIC9, the WBG commissioned a review of promising approaches in those countries and identified how the WBG could engage more effec- tively. The review identified five high-priority interventions and innovative approaches, and suggested that the WBG seek entry points to address them where appropriate.11 The five priorities are to: (i) strengthen the response to GBV through advocacy and policy; (ii) create safe and inclusive workplaces; (iii) establish and support knowledge-sharing; (iv) 9 Gender & Climate Change: 3 Things You Should Know, World Bank (2011). 10 The portfolio review was undertaken as of November 2015. The CGAP serves as a practical tool for teams to (i) track gender-related commitments and the contribution of the PIC9 portfolio in aligning with WBG guidelines and goals on gender, and (ii) identify priorities for influencing gender inequality, as well as human resources, working processes, budget, knowledge work, and training that can help to ensure that WBG targets related to gender are reached. The priority actions for the CGAP also align with the three pathways of the RPF and with the framework of the EAP Region’s Companion Report to the World Development Report 2012. 11 The review included an analysis of GBV in each of the nine countries. It identified country-level needs, as- sessed evidence from international best practice in GBV prevention and response, and considered prevention and response specifically in the context of the PIC9. 40 Regional Partnership Framework 2.5.4 Persistent Knowledge Gaps Limit the Development of Solutions Lack of data and information across the PIC9 is a major challenge. The SCD emphasized that efforts to pursue poverty reduction and shared prosperity in the Pacific are consid- erably hampered by the lack of concrete information on the prevalence and severity of poverty and the specific nature of constraints faced by the poor in improving their liveli- hoods. While Household Income and Expenditure Surveys (HIESs) have been carried out in most countries, these have been sporadic and of uneven quality. Further, variations in methodological approaches and welfare standards used in poverty assessments make it difficult to monitor progress over time, to make inter-country comparisons, and to estab- lish regional benchmarks of results and progress. In addition, in some countries, there are additional problems arising out of restricted and delayed access to survey data. The Bank is undertaking a regional program in collaboration with regional agencies and PIC develop- ment partners to help improve the capacity of national statistical agencies to undertake reliable and regular household surveys, and to analyze the resulting data needed to inform policy decisions. A man constructing a house under the Cyclone Ian Reconstruction and Climate Resilience Project - Ha’apai, Tonga. Photo credit: World Bank / Conor Ashleigh Regional Partnership Framework 41 3 WORLD BANK GROUP PARTNERSHIP STRATEGY A girl stands on a boat - Federated States of Micronesia. Photo credit: World Bank / Vlad Sokhin (Panos Pictures) 42 Regional Partnership Framework 3.1 Government Programs and National Development Strategies The key priority areas of the PIC9 National Development Strategies are outlined in the country summaries (Annex 9). Common priorities include good governance, ensuring macroeconomic stability, building climate resilience, safeguarding the environment and natural resources, investing in human development, improving infrastructure, and foster- ing private sector growth. There is no disconnect between the findings of the SCD, the thrust of the RPF, and the national priorities set out by the PIC9. The WBG program in each country will be adjusted to the local context to ensure alignment with national priori- ties. 3.2 Proposed WBG Regional Partnership Framework This section describes the foundations and content of the proposed regional partner- ship framework. It begins by summarizing recommendations and lessons emerging from a series of country-level reviews and from consultations with a wide range of national, regional, and international stakeholders. An overview of the strategy follows. 3.2.1 Lessons from the Country Partnership Framework Completion Reports, Independent Evaluation Group (IEG) evaluation, and stakeholder consultations A consolidated Completion and Learning Review (CLR) was undertaken for the six coun- tries (Kiribati, RMI, FSM, Samoa, Tonga, and Tuvalu) in the PIC9 for which an independ- ent Country Assistance Strategy (CAS) or Country Partnership Strategy (CPS) had been developed (Annex 10). The CLR found that the WBG program in the Pacific has mostly been well-aligned with the respective country development frameworks and visions and that the strategies were selective and well-structured. Overall, the strategies are well aligned with the twin corporate goals of reduced poverty and shared prosperity. The choice of instruments was appropriate with a mix of Development Policy Operations (DPOs) (Box 3.1), investment projects, additional financing, repeater and phased projects, multi-coun- try regional programs, Technical Assistance (TA), and other Advisory Services and Analyt- ics (ASA). The IFC has made good progress against goals set out in the IFC Pacific Partner- ship Agreement with Australia and New Zealand. BOX 3.1: DEVELOPMENT POLICY OPERATIONS IN THE PACIFIC An internal review of DPOs in the Pacific, which have all been rated moderately satisfactory or better by the Independent Evaluation Group and have constituted less than 10 percent of the portfolio, found that they have contributed to significant reform programs. With regard to reforms in macro-fiscal manage- ment, DPOs have supported stronger revenue mobilization in Samoa and Tonga, and better oversight of fisheries revenue in Kiribati and Tuvalu. They have also helped strengthen procurement and debt manage- ment in several PICs and improve the management of Kiribati’s Revenue Equalization Reserve Fund. In the area of structural reform, DPOs have helped advance the reform of state-owned enterprises in Kiribati (in telecommunications) and Tonga (hotel privatization). DPOs have also had an impact on human develop- ment and social protection and have supported free primary schooling in Samoa, measures to address NCDs in Tonga, and the expansion of vocational training opportunities in Tuvalu. Regional Partnership Framework 43 The CLR concluded that country risks were well identified; many actually materialized, posing challenges for implementing the programs. They included risks related to the coun- tries’ thin capacity and limited Bank staff in-country; exogenous shocks; weaknesses in public financial management (PFM); difficulties in securing political consensus for reforms; lack of familiarity with WBG procedures; extreme remoteness, imposing high transport costs and logistical challenges; weak economies of scale for most development activities; and severe skill and technical constraints. These risks, as they materialized to various degrees, contributed to the slower-than-expected pace at which many activities could be implemented. Despite accurately identifying the risks, the CLR found that the Bank still underestimated the challenges of implementing activities in countries new to its proce- dures. Many of the CASs/CPSs were overly ambitious and complex in terms of the results that could be achieved within the various timeframes, given the limited experiences of sev- eral clients with the WBG. The overall performance of the CAS/CPS programs in contribut- ing toward the achievement of selected country goals was assessed to be satisfactory for Samoa and Tonga, moderately satisfactory for FSM and Tuvalu, moderately unsatisfac- tory for Kiribati, and unsatisfactory for RMI. The fact that some CASs and CPSs are not yet complete poses difficulties for accurately measuring the results of those programs. The CLR identified a range of lessons that are reflected in this RPF. The lessons include avoiding complex and overly ambitious results frameworks, adequately estimating com- plexity and time required to develop projects, as well as the challenges of implementing projects in countries new to WBG. The CLR also founds that the mix of instruments were appropriate. The results framework in this RPF has been streamlined and made more re- alistic and will be adjusted during the Performance and Learning Review to take changing country realities into account. The Bank will continue to make use of a mix of investment projects, development policy lending, repeater projects, and additional financing for initia- tives that perform well, along with regional engagements and phased projects. Options to explore options to further consolidate project management functions in several of the PIC9, support the targeting of training activities, and maintain know-how in the imple- mentation of Bank-financed projects. Ensuring that projects are ready to be implemented, even if it requires longer project preparation time, will be an important consideration. This will necessitate careful assessment of capacity constraints and especially of contrac- tors’ willingness to engage in operations in remote countries. The Bank will continue to support macroeconomic and fiscal resilience through coordinated budget support with other development partners. It will also continue working to improve face-time between clients and staff to ensure a sustained and open working relationship. IFC, learning from its experience in the small PICs, will endeavor to mobilize donor funding to implement an integrated advisory and investment program in the PIC9 that would focus on building bankable opportunities for private sector investment. The approach would be to replicate successful regional models used in the telecoms and banking sectors to expand into other sectors such as tourism and renewable energy. 44 Regional Partnership Framework In June 2016, the Independent Evaluation Group (IEG) completed a “clustered” Country Program Evaluation (CCPE) to assess the relevance and effectiveness of WBG support during FY05-FY15 in helping selected small states improve their resilience and their com- petitiveness. The CCPE in the Pacific examined the WBG engagement in FSM, Fiji, Kiri- bati, Palau, RMI, Samoa, Tonga, Tuvalu, and Vanuatu, with a particular focus on Tonga and Samoa. The CCPE considered the WBG program in the Pacific to be highly relevant and rated the effectiveness of the WBG contribution to the development of the PICs as satis- factory. The program was found to be strategically selective and a good reflection of the Bank’s comparative advantages in raising difficult policy issues, undertaking key analytic studies, supporting regional approaches, and promoting effective donor coordination. The CCPE concluded that the WBG program supported a number of genuinely transfor- mational institutional outcomes in the Pacific. Those outcomes included directly sup- porting the development and enhancement of New Zealand’s and Australia’s temporary migration programs; improving connectivity throughout the region by introducing compe- tition in the provision of telecommunications services and supporting underwater cables to promote quality and faster access; building awareness among governments and donors of the need to build environmental resilience into investments in infrastructure; and persuad- ing governments in some PICs to outsource road maintenance contracts to promote more efficient use of public resources, better road management, and development of the private sector. The CCPE identified some shortcomings in implementation arrangements that persist in the context of very limited capacity. Despite the Bank’s considerable efforts to simplify various processes, many PICs still find a range of Bank operational procedures challeng- ing, including procurement and management of consultants. The evaluation also deter- mined that some issues such as land management could benefit from a more systemic ex ante approach from the Bank when engaging in different areas. There was broad ap- preciation for the speed with which the Bank responds to concerns from clients and other donors, and for its willingness to listen. The effective partnerships built with key bilateral partners, Australia and New Zealand, through the Pacific Facility and the Pacific Partner- ship have been particularly important in growing and enhancing the WBG’s engagement in the region. The CCPE identified five broad areas for enhancing WBG engagement in the Pacific, going forward, and they are all being factored into the RPF. The CCPE recommendations encourage the WBG to: (1) address systemic issues such as land acquisition, governance, education policy, domestic violence, and the role of local government as priority areas for analytical work; (2) ensure that sufficient staff and resources are directed toward Kiribati and Vanuatu to address relatively high poverty levels; (3) examine the costs and benefits of increased regional integration in the Pacific and the role that regional institutions are (and could be) playing; (4) develop a more explicit joint World Bank–IFC approach for PSD support, starting with analytical work to identify areas of strong potential; and (5) con- tinue to shift positions from Sydney to the Suva office for both efficiency and effective- ness objectives, and expand the liaison offices with the Asian Development Bank (ADB) to other countries. Regional Partnership Framework 45 The design of the RPF has benefited from consultations with many levels of government, the private sector, academia, civil society, regional organizations, and international de- velopment partners. The consultations concurred with the overall findings of the SCD and the proposed RPF framework. There was broad agreement on the key impediments to growth in the PICs and a view that to stimulate drivers of growth, investments in public in- frastructure, especially connective infrastructure (for aviation, maritime operations, and ICT, for example), would be essential for the wider economy. Stakeholders also found that climate change and recurring disasters constituted an existential threat, and investments in coastal protection would be critical for the continued survival of several of the nine countries (such as Tuvalu, RMI, and Kiribati). WBG support was also encouraged in such areas as agriculture and fisheries, transport and maritime infrastructure, ICT, education and skills development, and private sector development. Farmers taking part in the Samoa Agriculture Competitiveness Enhancement Project - Upolu, Samoa. Photo credit: World Bank / Mayeta Clark 46 Regional Partnership Framework 3.2.2 Overview of World Bank Group strategy Informed by the opportunities and constraints identified in the SCD as well as the lessons from implementing programs across the Pacific over the past decade, this RPF outlines the WBG support program for the PIC9, while specifying a separate approach for Nauru and Palau (where the engagement will remain relatively limited). The program of engage- ment also benefits from the long-term analyses conducted through the Pacific Possible initiative (Box 3.2). BOX 3.2: PACIFIC POSSIBLE Complementing the SCD, the WBG launched Pacific Possible, which looks ahead 25 years to quantify the increases in incomes, government revenue, and employment that would be possible if economic oppor- tunities are fully exploited and risks appropriately managed. Pacific Possible balances the analysis of potentially transformative economic opportunities (tourism, labor mobility, tuna fisheries, deep-sea min- ing) with an assessment of major threats to the economic outlook in PICs (NCDs and climate and disaster resilience), as well as ICT-enabled opportunities and financing governments for Pacific development. For stakeholders in Pacific development—the PICs themselves, development partners, and the broader in- ternational community—the findings provide specific insights into the scope of the opportunities as well as the tasks that must be undertaken to realize them. Key messages emerging from the ongoing study include: • Tourism: The potential exists for an additional one million tourists to visit the Pacific by 2040. Careful and sustainable planning around emerging tourism markets could potentially deliver US$1.8 billion per year in additional tourist spending and up to 130,000 additional jobs. • Labor mobility: Continuous expansion of labor mobility opportunities could generate a triple-win for labor-sending and labor-receiving countries as well as for migrants. Proposed reforms could generate US$13 billion in income for about 240,000 migrants from the Pacific as well as an increase in remit- tances by up to US$800 million and 80,000 additional jobs by 2040 for Pacific Islanders. • Tuna fisheries: Maintaining firm and shared catch limits, and increasing economic value through col- laborative access regimes, could help countries gain as much as US$345 million per year in additional sustainable revenues, and create an additional 15,000 jobs by 2040. • Deep-sea mining: Governments are encouraged to take a precautionary approach to this nascent form of mining. There is the need to take stock of known and unknown costs, impacts, and potential revenue to develop a more thorough understanding of each before an informed decision can be made. • ICT enabled economic opportunities: Improved connectivity and ICT penetration could enhance pro- ductivity in a number of ways (for example, in public service delivery, improved monitoring of fisheries, and other activities), improve the quality and attractiveness of existing activities (tourism, education, health), and create new market opportunities, leading to additional national income of US$1.5 billion and 147,000 jobs. • Health and NCDs: The “NCD epidemic” facing the Pacific region will have potentially costly impacts, including impacts on the quality and quantity of labor force participation. The analysis presents posi- tive interventions to address NCDs and mitigate their costs to Pacific countries. In the absence of such interventions, the annual economic NCD burden could range from 3 to 10 percent of GDP. • Climate and disaster resilience: Pacific Island countries need to better incorporate climate and dis- aster risk management into planning and development across all sectors, while considering the cost of priority investments and policies to boost resilience to the year 2040. Annual costs range from US$400 million to US$1.2 billion for coastal protection and adaptation of infrastructure to changes in rainfall and temperature are a possible outcome by 2040. Realizing the opportunities and managing the threats highlighted in the Pacific Possible series will require collaboration between Pacific Island governments, development partners, and countries on the Pacific Rim. Regional Partnership Framework 47 Taking into account all the factors that constrain efforts to reduce poverty and boost shared prosperity, the SCD identified three broad pathways to reduced poverty and shared prosperity, as well as key enablers of progress along those pathways. The SCD also pinpointed 12 very high priority solution areas as being most important to achieve the twin goals. The pathways and enablers identified in the SCD form the foundation of the Focus Are- as-the four broad areas of WBG engagement-for this RPF. Within the framework of the Focus Areas, the specific elements of the WBG program in the nine countries (individually, and collectively if appropriate) will be drawn from the very high priority solution areas identified in the SCD. The Focus Areas are: 1. Fully exploiting the available economic opportunities. The unique economic geography of these countries calls for a sharp focus on those few avenues to growth that are avail- able, with an emphasis on opportunities that improve livelihoods and provide subsist- ence goods (such as agriculture and coastal fishing), generate income (such as tourism, overseas employment, and remittances), or increase government revenue (such as oce- anic fisheries). 2. Enhancing access to employment opportunities. The highly dispersed people of the PICs, particularly those living on the outer islands, need better access to public services and broadened opportunities for labor mobility. Targeted efforts are required to reduce the significant skill and education gap between the poor and non-poor and to reduce gender inequality and address gender based violence. 3. Protecting incomes and livelihoods. The PICs are already among the most disaster- prone countries in the world, and the incidence of natural disasters is set to increase as climate change intensifies. By mainstreaming disaster risk management into pol- icy-making and development efforts, the PICs can better protect incomes and liveli- hoods from the depredations of natural disasters. Strengthening health systems and addressing the causes of the growing prevalence of NCDs are other essential measures to protect livelihoods in the Pacific and maintain countries’ abilities to take advantage of the economic opportunities available to them. 4. Strengthening the enablers of growth opportunities (macroeconomic management, infrastructure and addressing knowledge gaps). These cross-cutting areas are a criti- cal element of the RPF. They build the foundation for improving access to economic opportunities and services, building resilience, and ultimately fostering shared pros- perity and reducing poverty across the region. To determine the specific set of activities that will constitute the WBG program in a given country, the RPF uses three selectivity criteria. In aggregate, the WBG will sup- port interventions in most of the high-priority areas identified in the SCD. In each indi- vidual country, the selectivity criteria will be applied to define priorities and corresponding activities, based on the specific country context: 48 Regional Partnership Framework 1. Alignment with government priorities and demand for WBG support. The activities pursued by the WBG will be determined by the priorities and strategic directions set forth by the individual countries. The activities will be demand-driven, undertaken in response to specific requests by the client, although the scope for undertaking activi- ties on a regional basis will also be explored. 2. Alignment with the SCD. As noted, the 12 very high priority solution areas are the basis for specifying the elements of the WBG program. Table 3.1 shows how the SCD solution areas relate to ongoing and planned RPF priorities for individual countries as well as regionally. 3. Scope for successfully addressing the drivers of fragility in the Pacific and ensuring sustainability. The WBG will prioritize activities that can help address or mitigate is- sues related to institutional capacity, growth in youth population and urbanization, land, climate change and natural disasters, as well as gender, which have been identi- fied as the main drivers of fragility in the region so as to ensure that WBG-supported activities and the benefits which they yield can be sustained over time. 4. The comparative advantage and experience of the WBG in the Pacific, and comple- mentarity with programs of engagement supported by other development partners. Based on a careful examination of the proposed activities, the WBG will determine its comparative advantage in relation to other actors, including development partners, non-governmental and civil society organizations, and the private sector. Past experi- ence of what is feasible in different situations will be a key basis for selectivity given the other criteria. The WBG will also carefully consider activities that require regional solutions, promote regional collaboration, and build on its global experience in other regions. 3.3 Objectives and Focus Areas Supported by the WBG Program This section takes a closer look at how the program of WBG support will be structured around the four Focus Areas. The sections that follow highlight the key challenges faced and objectives to be achieved in each area. 3.3.1 Focus Area 1: Fully exploiting the available economic opportunities Under this focus area, the WBG will contribute to addressing 3 very high priority areas identified in the SCD: (a) improve management of oceanic and coastal fisheries, (b) in- crease incomes from agriculture, (c) and expand tourism. Objective 1.1: Improved management of oceanic and coastal fisheries Regional Partnership Framework 49 The region’s oceanic fisheries supply much of the world’s tuna, and global demand is steadily increasing. The wider Western Central Pacific Ocean area produced 2.6 million tons of tuna in 2013, representing over half of the world’s tuna catch and yielding revenues at first sale on the order of over US$6.3 billion. Roughly 60 percent of this tuna catch was taken from PIC waters, or some 35 percent of the world’s tuna catch. The total first sale value of the tuna caught in PIC waters was estimated to be some US$3.4 billion in 2013, of which PICs received roughly seven percent through access fees paid by (mostly) for- eign fleets. Coastal fisheries throughout the region do not generate significant amounts of national revenue, but they support local livelihoods, food security, and dietary health in all PICs. Fish and seafood are a primary source of animal protein in PIC diets, and in some countries per capita consumption exceeds 100 kg per year (compared to a global aver- age of 16 kg per year). PIC coastal fisheries are relatively small and localized and support only a few viable (although extremely valuable) export fisheries. Women are particularly dependent on coastal fisheries for informal economic opportunities, including from handi- crafts. The WBG program will support strengthened management of fisheries through the Pacific Islands Regional Oceanscape Program (PROP). PROP aims to strengthen the management of oceanic and coastal fisheries and the conservation of the natural habitats upon which the fisheries depend. Strengthened and more sustainable man- agement of the tuna fisheries would increase their size and value and raise additional public revenue for PICs. Better-managed coastal fisheries will enhance rural livelihoods and food security, particularly for the B40. Among the PIC9, currently FSM, RMI, and Tuvalu participate in PROP, together with Solomon Islands and the FFA. It is expected that during the period covered by this RPF (FY17–FY21), PROP will expand to additional countries. IFC, through its efforts to expand market opportunities, will seek to help countries retain a greater share of the revenue from tuna sales and to increase trans- parency in fisheries management. TABLE 3.1: LINKS BETWEEN SCD HIGH PRIORITY SOLUTION AREAS AND ONGOING OR PLANNED RPF PRIORITIES (GREEN INDICATES SIGNIFICANT WBG ENGAGEMENT, YELLOW INDICATES SOME WBGENGAGEMENT, AND WHITE INDICATES LITTLE WBG ENGAGEMENT) Regional Marshall Vanuatu Kiribati Islands Samoa Tuvalu Tonga SCD solution area FSM Increase sustainable fisheries revenue Increase incomes from agriculture and coastal fisheries Expand tourism Expand labor mobility opportunities Close education and skill gap between poor and non-poor Close other gaps in service delivery Prevent non-communicable diseases Stop gender-based violence Strengthen disaster risk preparedness Maintain and develop economic infrastructure Improve public expenditure management Ensure macroeconomic stability and sustainability 50 Regional Partnership Framework Objective 1.2: Increased incomes from agriculture Agriculture (generally subsistence agriculture) is the cornerstone of food security in PIC9 such as Vanuatu and Samoa. Given the growing impact of climate change, farm- ers need to adopt climate-smart agricultural practices and crop varieties, drawing on the extensive research of Pacific regional organizations in this field. Opportunities to increase crop and animal productivity, encourage diversification, and enable agriculture to adapt to a changing climate could have a direct impact on household food security, reducing hardship. More productive agriculture that supports small-scale local trade and food pro- cessing, substitutes for imports, supplies the tourism sector, and even contributes to ex- ports of selected niche and cash crops could potentially benefit many individuals. Improv- ing infrastructure to expand access to markets and strengthening food safety practices will help small-scale farmers tap into the growing demand from the tourism industry for fresh local produce. The WBG program will build on the current agriculture activities in Samoa, where the Samoa Agriculture Competitiveness Enhancement Project (SACEP) works with small- scale fruit and vegetable growers and livestock producers to improve productivity and take greater advantage of market opportunities. Drawing on lessons from earlier sup- port to restore lost production capacity following Tropical Cyclone Evan (2012), the WBG will continue to enhance disaster preparedness in the agricultural sector. In Ton- ga, the WBG will support the country’s efforts to gain access to resources from the Global Agriculture and Food Security Program (GAFSP). Objective 1.3: Expanded tourism opportunities Tourism is the mainstay of private sector economic activity in many of the PICs. Many PICs offer a pristine environment, a variety of recreational opportunities, and a cultural diversity that differentiates the region from other destinations. Tourism brings an export market to the PICs, promoting tourism-related businesses and stimulating demand for the domestic supply of fresh produce and local artwork and handicrafts. As a labor-inten- sive service sector with relatively low barriers to entry, tourism could potentially create a significant number of local jobs. It is one of the few industries in the Pacific in which women and young people form a high percentage of job holders. Although the atoll nations of Kiribati, RMI, and Tuvalu have a more limited prospect to develop tourism, some oppor- tunities may exist to develop the visitor economy. Building a viable, sustainable tourism destination demands significant investment in infrastructure, destination management, marketing, upgraded hotel stock, and capacity building for the sector. To develop tourism, the Bank and IFC will explore opportunities for a joint program to support tourism initiatives on a regional basis. IFC will provide advisory services to those PIC governments and private sectors where tourism is a key driver of growth (Va- nuatu, Samoa, and Tonga) to ensure the industry’s sustainable development through the generation of investment and jobs, and by strengthening linkages between the in- dustry and communities. Regional Partnership Framework 51 Improving air and telecommunications connectivity, as outlined in further detail in ob- jective 4.2 on providing connective infrastructure will also provide critical foundations to achieving this objective. 3.3.2 Focus Area 2: Enhancing access to employment opportunities Objective 2.1: Broadened opportunities for access to labor markets Under this objective, the WBG will seek to address 3 very high priority areas identified in the SCD: (a) expand labor market opportunities and (b) close education and skills gap between the poor and non-poor and (c) address gender inequality and gender based vio- lence. In many of the PIC9, domestic labor markets are not growing fast enough to absorb all new entrants, especially the unskilled who are most likely to be poor or in the B40. Migration channels follow three country groupings. RMI, FSM, and Palau—countries that have Compacts of Free Association with the USA—enjoy open labor market access and have relatively high rates of migration. Tonga and Samoa have the highest outward mi- gration rates of the PIC9, mainly through historical ties as well as bilateral agreements providing access to New Zealand. Kiribati, Nauru, Tuvalu, and Vanuatu have some of the lowest rates of outward migration in the region, despite having preferential access to Australia and New Zealand through the Seasonal Worker Program (SWP) and Recognized Seasonal Employer (RSE) scheme. Kiribati, Nauru, and Tuvalu also have access to a new multi-year visa in Australia, as well as the Pacific Access Category in New Zealand. Travel costs and skill level determine the opportunities for the poor and B40 to participate in mi- gration schemes. The institutional capacity of the labor-sending countries is an additional determinant. A growing body of evidence demonstrates that improved labor mobility for the PIC9 provides benefits to migrants as well as to their households, communities, and sending countries, by increasing remittances, building human capital, and transferring knowledge. Continuing analytical work on labor mobility occurs under the comprehensive pro- grammatic ASA program to deepen the understanding of the constraints, benefits, and opportunities of increased access to regional labor markets by Pacific countries. The program focuses on regional knowledge sharing, maximizing the development impact of existing schemes, and developing new opportunities for labor mobility. It includes several specific activities including preparing a development impact evaluation to as- sess the gains of the SWP for labor-sending households and communities and learn how they may be enhanced, as well as conducting a study to assess the productivity gains of Pacific seasonal workers, which will help build the business case for hiring them over other categories of workers. A case study will examine the likely impacts and potential benefits of open labor market access for the atoll nations most severely impacted by climate change (Kiribati and Tuvalu), and a market assessment will examine the poten- tial of the aged care sectors in Australia and New Zealand to provide employments for PIC nationals. 52 Regional Partnership Framework Objective 2.2: Addressing education and skills gap Education is widely recognized as a key driver of employment and opportunity in the Pacific. While governments across the Pacific are making good progress in ensuring broad access to education, an increasing body of evidence finds that serious problems with qual- ity undermine the value of the education received. Many children have not attained cogni- tive, socio-emotional, and physical development milestones when they reach school age. The limited quality of teachers and remaining inequalities in access to education are major impediments to delivering learning. Many of the PIC9 face public policy challenges, includ- ing inadequate and inequitable service delivery. Many of the PICs face a youth bulge. On average 57 percent of the population in the PICs is below the age of 25—a higher proportion than the average for the developing world and more similar to rates seen in the least-developed countries. The number of people aged 0–14 substantially exceeds those aged 14–25, so the number of working-age youth will grow quickly over the next decade. With high rates of youth unemployment, a range of social problems are emerging among the new urban generation presenting challenges, which many public institutions in the PIC9 have little experience in addressing. The WBG will contribute to achieving this objective by continuing and, where possible, expanding programs such as the Pacific Early Age Readiness and Learning (PEARL) and Early Grade Reading Assessment (EGRA). In addition, the WBG will continue to use DPOs to support education sector dialogue and reform The Bank will prepare a regional ASA on skills to help PIC9 countries develop the mix of skills required by their workforces to take advantage of domestic and international job opportunities. Building on previous analytical work, as well as experience gained elsewhere in the Pacific, the Bank will support the development of a skills development and youth employment project in Tonga. It is intended for the project to provide critical lessons for a possible expansion to other countries in the Pacific. The Bank will also support investments in education infrastructure by rebuilding schools damaged by Cyclone Pam in Vanuatu and renovating primary schools in Tonga. Objective 2.3: Addressing gender inequality and gender-based violence Unequal gender roles, lack of voice and political participation, and violence against wom- en in the PIC9 perpetuate poverty and exacerbate women’s hardship. Evidence shows that the twin goals can be achieved only when the private and public sectors include women in the economy and eliminate barriers to their full participation. IFC recognizes the poten- tial of women—as entrepreneurs, employees, and leaders—to drive economic growth and enhance business performance. Regional Partnership Framework 53 The WBG will continue to mainstream gender into WBG projects and will determine the scope for undertaking specific activities to reduce the incidence of GBV. In the Pa- cific, 100 percent of operations will systematically consider gender inequalities in the underlying analysis, actions, and/or monitoring and evaluation arrangements. On the basis of a detailed mapping of measures that have been successfully adopted across the Pacific to reduce gender based violence, undertaken as part of the RPF, avenues will be identified through which these can be promoted by the WBG in its operations. For example, in line with IDA 18 commitments, the Vanuatu Aviation Investment Project is planning to pilot test a GBV training program and code of conduct for construction workers in early 2017 which will form the basis of a program to be rolled out on future major civil works projects in the transport sector across the Pacific. To promote female participation in the private sector, IFC aims to improve employment and income-earning opportunities for women through demonstrating the business case that can mobilize the private sector to implement gender programs that benefit their bottom line, as well as women as employees and producers. IFC intends to implement a Pacific-wide initiative to catalyze positive change for women by the private sector. The proposed program on women’s employment acknowledges the considerably smaller size of the private sector in the Pacific Islands without existing dedicated bilateral programs, seeking to maximize the reach and impact of the road-tested tools and approaches already developed. This will be done through knowledge sharing among the business community across the Pacific, e.g. by establishing a website/portal to disseminate evi- dence on the business case for investing in women along with tools to help business take proactive steps to promote women’s economic empowerment, and through offer- ing webinars and regional events focused on women’s role in the private sector. 3.3.3 Focus Area 3: Protecting incomes and livelihoods Under this focus area, the WBG will seek to address 2 very high priority areas identified in the SCD: (a) strengthening resilience to natural disasters and climate change, and (b) strengthening health systems and addressing NCDs. Objective 3.1: Strengthened resilience to natural disasters and climate change The WBG will continue to support regional and single-country activities that help the PIC9 strengthen their resilience against natural disasters and climate change. PICs com- bine high exposure to frequent and damaging natural hazards with low capacity to man- age the resulting risks. Vulnerability is exacerbated by poor planning, which has increased losses and exposure to natural disasters, and by climate change, which is predicted to am- plify the magnitude of cyclones, droughts, and flooding. Sea level rise will worsen coastal erosion and salinization of freshwater resources and increase the severity of storm surges, which will be particularly damaging in atoll islands and low lying areas. All these impacts adversely affect agriculture, fisheries, coastal zones, water resources, health and ecosys- tems and the communities that rely upon them. The cost of inaction is substantial. Invest- ments in disaster proofing and climate resilience cost substantially less than rebuilding after a disaster. The WBG will ensure that at least 35 percent of the total portfolio will directly or indirectly support climate-related co-benefits. 54 Regional Partnership Framework At the regional level, the WBG will contribute to this objective by further institution- alizing the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), through the establishment of a permanent facility to be based in the Cook Islands. The program helps reduce the financial vulnerability of participating countries (RMI, Samoa, Tonga, and Vanuatu) to natural disasters. It employs parametric insurance as a mechanism to inject a limited supply of cash immediately following a major tropical cyclone, earthquake, or tsunami to help the affected government launch early recovery efforts. Building on PCRAFI, the Pacific Islands Resilience Program (PREP) aims to help participating PICs (Samoa, Tonga, Vanuatu and RMI) to strengthen early warning and preparedness; create a framework for stronger, prioritized investments in resilience, including investments to retrofit key public buildings to international standards; and improve the financial capacity of countries to respond after a natural disaster strikes. Countries now use the IDA allocation under the PREP to finance the PCRAFI premium and will make an increasing contribution from their own budgets. A Climate Vulnerability assessment, recently undertaken in the transport sector in Samoa, will be scaled up to other islands. It will identify where priority should be given to integrating climate and disaster risk planning into the road sector. Technical as- sistance will be provided for post disaster needs assessment, improved spatial plan- ning and vulnerability assessment related to coastal zones, schools infrastructure, and flood risks and urban areas as well as innovation in a multi-hazard impact forecasting and use of drones for disaster risk management. Country-specific operations (in Kiribati, Samoa, RMI, and Vanuatu, for example) aim to help communities increase their resilience amid climate change by mitigating the effects on crops and water supplies and strengthening coastal infrastructure. During the RPF period, the WBG will discuss options with the new government in Kiribati for a successor to the ongoing Kiribati Adaptation Program (KAP) Phase III and prepare a climate resilient water and sanitation project jointly with ADB. Climate adaptation investments would include the protection of groundwater lenses vulnerable to surface contamination and long term salinization as well as the development of new water sup- ply, likely from desalinization. In RMI, a second phase of PREP will be prepared with additional investments in early warning preparedness, coastal resilience and financial protection. Objective 3.2: Strengthening health systems and addressing NCDs The general improvement in life expectancy and some other key health indicators across the PIC9 masks uneven progress and increasing pressures on health expenditure. Per capita health expenditure in real terms has increased over recent years and, with the exception of Vanuatu and Kiribati, is consistently higher in the PIC9 than the average for Lower Middle Income Countries. While these investments have enabled the PIC9 to suc- cessfully address some communicable diseases and most basic maternal and child health services, challenges remain. Among them, rapidly increasing non-communicable diseas- es (NCDs), and their related impact on acquired disability and reduced productivity, are increasing budgetary pressures for the PIC9. Inequities are also evident between under- served rural populations and those living near urban centers. Regional Partnership Framework 55 Health systems in the Pacific have struggled to reorient themselves away from acute communicable disease responses and towards more effective long term chronic health care services that NCDs require. Except for Vanuatu, in the PIC9 over 40 percent of adults are obese, and 80 percent are overweight, leading to a higher occurrence of NCDs such as cardiovascular disease, diabetes, and cancer. It is estimated that up to half of all prema- ture deaths are linked to weak health systems unable to cope adequately with the needs of people with NCDs. Yet some estimates claim that 40-60 percent of government health spending is for addressing NCDs (notably for the higher cost curative and palliative care services, including expensive overseas medical referrals). The current situation is already unsustainable for some countries. The WBG will continue its ASA program in Vanuatu and Kiribati to strengthen govern- ment-led analysis, operational planning, budgeting, management, and monitoring for better use of finite resources and improved health service delivery. The WBG will identify opportunities to help countries implement the Regional NCD Roadmap adopted by a joint meeting of Pacific Finance and Health Ministers in Honiara in June, 2014. In Kiribati, the WBG will assist the Ministry of Health to adapt the Pack- age of Essential NCD Interventions to its local context, to improve both the efficiency and quality of expenditure in this priority area. Lessons learned from this activity may help inform NCD response plans in other PICs. Addressing NCDs and improving health outcomes requires a multi-sectoral approach that includes support for increased fruit and vegetable production (as in Samoa) and improved access to drinkable water and sanitation, which would have a significant impact on improving health outcomes. In recent years, the WBG has also supported tax measures to reduce the consumption of tobacco and unhealthy food and drinks (e.g., Tonga and Tuvalu). During the RPF period, the WBG will continue to support such reforms through DPOs. The WBG will opportunistically explore options for greater engagement in health ac- tivities in Kiribati, building on lessons from a joint multi-donor effort to improve re- source management in the health sector. An engagement in the health sector in IDA18 is also expected in Samoa. 3.3.4 Focus Area 4 (Cross-cutting): Strengthening the enablers of growth opportunities (macroeconomic management, infrastructure and addressing knowledge gaps) Objective 4.1: Frameworks to improve fiscal management developed and maintained Under this objective, the WBG will seek to address 2 very high priority areas identified in the SCD: (a) improve public expenditure management and, (b) ensure macro-economic stability and sustainability. Given the important role and large size (in relation to the size of the economy) of the public sector in the PIC9, sound public expenditure management is essential to the achievement of most of the PIC9 objectives. Frequent external shocks pose a significant challenge to macro-economic management and sustainability. In addi- tion, over the RPF period several countries will have to adjust fiscal and macro-economic management to ensure that the increases in revenue from fisheries access fees are well used. FSM and RMI face the additional challenge of adjusting revenue and expenditures in anticipation of a more constrained fiscal environment after the scheduled termination of Compact grants in 2023. 56 Regional Partnership Framework Over the past several years, the Bank has worked with key development partners in the Pacific (European Union, Australia, New Zealand, ADB) to prepare DPOs in four of the PIC9 countries (Samoa, Tonga, Tuvalu, and Kiribati; see Box 3.1). Those operations have sup- ported public financial management reforms, greater private sector participation, im- proved governance, and macroeconomic resilience, and they benefited from TA to prepare policy actions in priority areas. During the period covered by this RPF, the Bank expects to continue budget support in Samoa, Tonga, Tuvalu and Kiribati and possibly expand to others to foster economic growth, improved governance (including public financial management), and progress in selected sectoral priorities. The Bank will also support strengthening PFM systems in RMI and FSM. A programmatic, multiyear, regional Public Expenditure, Financial Management, and Public Sector ASA will be conducted in parallel with the DPOs to provide analytical in- put. Objective 4.2: Increased access to basic services and improved connective infrastructure The growth opportunities identified under Focus Area 1, as well as protecting livelihoods emphasized in Focus Area 3, depend heavily on the availability of basic water, sanitation, and electricity and financial services in addition to connective infrastructure, including infrastructure for ICT as well as road, air, and maritime transport. As emphasized in the discussion in Section 2.5 of the economic geography constraints to ending absolute pov- erty and increasing shared prosperity, the challenge of service delivery and connectivity in PIC9 countries is fundamentally about their internal dispersion and remoteness. Most PIC9 countries have succeeded in providing basic water, sanitation, and electricity services in urban areas, but many peri-urban areas as well as remote islands remain underserved. The exception is Kiribati, where even dense urban settlements on the main island of South Tarawa receive only intermittent supplies of water and very limited sanitation services. In terms of energy, only about half of the PIC9 have near-universal access to electric- ity and high costs remain a significant barrier. Mobile phone coverage is critical to help remote communities remain connected. Harnessing the power of technology is also key for developing tourism, ensuring effective early warning of natural disasters, and facilitating access to e-services. Based on provisional data, road coverage per capita is very low in some of the PIC9, and maintenance is often inadequate to keep even these limited networks in reasonable condition. The costs of sea freight are high. Airport infrastructure in many PICs requires upgrading to ensure passenger safety, maintain regional connectivity, and pro- mote tourism. Access to finance is limited in most of the PIC9 and global de-risking poses the real threat for many countries to be cut off from global financial markets Given the common economic geography underpinnings of this focus on key areas of essential service delivery and connective infrastructure, the two areas of service delivery and connectivity are kept together under this objective. The WBG will contribute to improving access to basic infrastructure services through the development of a water and sanitation initiative in Kiribati, rural electrification and peri-urban electricity supply in Vanuatu, installation of solar photo-voltaic systems in Tuvalu, and upgrades to electricity generation and increased access to renewable en- ergy in the four states of FSM and in RMI. Regional Partnership Framework 57 To improve air connectivity, building on the Pacific Aviation Investment Program (PAIP) which currently covers Kiribati, Samoa, Tonga, Tuvalu, and Vanuatu, the Bank will con- tinue to work with the PIC9 to improve operational safety and oversight of interna- tional air transport infrastructure, which would directly support the development of tourism in the participating PICs. In ICT, the WBG will support legal and regulatory reform to improve the enabling en- vironment for private investment in ICT infrastructure. It will also provide catalytic financing for “backbone” infrastructure—such as submarine cables or satellite con- nections that provide international connectivity (for example, in FSM, Kiribati, Samoa, Tonga, Tuvalu)—as well as applications that use the new ICT infrastructure particularly for the expansion of the tourism industry, fisheries management, labor mobility and disaster risk management. The WBG will look for opportunities to mobilize ICT for ser- vice delivery and e-government in Tonga, Vanuatu and FSM. The WBG will continue its support for financial market development in the PIC9 through the ongoing Pacific Payment Systems and Remittances program as well as IFC investments in and advisory services for financial sector institutions. The WBG will consolidate its support to the transport sector and launch a regional maritime program. Over the RPF period, the WBG will continue to develop transport in- frastructure through PAIP (described earlier). It will also support operations in the road subsector to strengthen planning and maintenance (in Kiribati and Tonga, for example) and help countries respond to and prepare for the effects of severe weather on critical transport infrastructure (in Samoa). The regional maritime program will cover Tonga and Tuvalu in a first phase and consider RMI for the second phase. Additional analytical work will study the influence of port and hinterland connectiv- ity (including infrastructure and services) on domestic supply chains in PICs, measur- ing the effects of connectivity on the availability and affordability of essential goods and their impact on household incomes, using Tonga as an initial pilot. Objective 4.3: Address knowledge gaps The substantial knowledge gaps and data issues across the PIC9 are increasingly ur- gent to resolve as the WBG scales up its engagement. To support the poverty reduction and shared prosperity agenda, the SCD identified a number of knowledge gaps to address through analysis and data collection. An important activity is to improve the availability of data to understand not only the drivers of fragility, but also poverty and inequality in countries for which such information is inadequate. The WBG will seek to fully exploit op- portunities for data collection, sharing, and analysis created by the improved ICT infra- structure in several of the PIC9. To contribute to this objective, and specifically to enable PICs to craft and implement poverty alleviation policies that are anchored in effective poverty monitoring systems, the Pacific Poverty Programmatic Analytical and Advisory Assistance (AAA) will sup- port the provision of quality analytic and advisory services in the Pacific region. The program will focus on activities that address gaps and constraints by: (i) providing technical assistance to national statistical offices as well as the Statistics Unit of the SPC to enhance capabilities in data collection and analysis; (ii) generating evidence- 58 Regional Partnership Framework based knowledge to support poverty reduction policies; and (iii) engaging in policy dia- logues with national governments, regional organizations and development partners. The initiative will also seek to develop and pilot low-cost survey approaches that are financially sustainable and permit poverty monitoring at higher frequency to provide more timely feedback on results and policy outcomes. Another example of an activity supported through the program is the development of household surveys (HIES) in RMI and Kiribati. Analytical work will also be conducted to better understand the drivers of urbanization in some PICs as well as the best approaches to address the needs of urban migrants as well as of those who remain in rural areas and in particular on outer islands. Accelerat- ing urbanization in some PICs is altering the demographic composition of urban and rural areas. The SCD analysis revealed large gaps in access to economic opportunities and public services between the major islands and outer islands, which result in signifi- cant differences in progress toward the twin goals and encourage internal migration, especially by young people. Further data gathering and analysis is needed to better understand how intra-country geography and remoteness affect livelihoods, assess the costs of “spatially blind” service delivery policies, and estimate the additional costs linked to remoteness (including implications for the WBG’s own ability to prepare and supervise work). 3.3.5 WBG program in Nauru and Palau WBG support to Nauru and Palau requires a different engagement strategy from the rest of the member countries in the Pacific. The WBG partnership with Nauru is at an early stage as it only became a member of IBRD in April 2016. Given the challenges associated with providing the country with financing, WBG engagement with Palau has been relative- ly limited since its membership in 1997. Nauru is a high-income country and Palau is an up- per-MIC, with per capita income levels significantly above that of the other PIC9 countries, and are not eligible for IDA. In light of current creditworthiness assessments, they can only access IBRD with significant credit enhancements. To date, neither country has pursued this option. During the RPF period, WBG will pursue all opportunities for providing support to Nauru and Palau. As members of IBRD, they are able to benefit from WBG administered trust funds, including those which support increasing resilience to climate change and natural disasters. The WBG is also able to promote the inclusion of Nauru and Palau in regional projects, as with the ongoing submarine fiber optic cable linking Kiribati, Kosrae (FSM), Nauru and Pohnpei, where the WBG is financing the Kiribati and FSM share of the project. A second cable is linking FSM and Palau, with WBG financing the FSM share of the initia- tive. In both cases, financing Palau and Nauru’s share of the projects has been secured from ADB. In the course of the RPF period, the WBG will also explore avenues for collabo- rating with other donors to secure IBRD financing through guarantee schemes, or engage- ments that would provide the appropriate credit enhancement. In the case of Palau, the Bank’s will continue to support three important areas, including technical assistance to address challenges with national payment systems, technical assistance for the ICT sec- tor specifically to support the regulatory reforms and allow Palau to maximize the benefit Regional Partnership Framework 59 from the upcoming cable project. Opportunities for assistance in the area of public private partnerships with a focus on strengthening the enabling environment will also be explored. For Nauru, a country where labor mobility will be critical in the future, the WBG engage- ment will initially start by including the country in an evaluation of the Seasonal Workers’ Program Development Evaluation. 3.4 Implementing the FY17-21 Regional Partnership Framework There are significant differences in the nature of the relationship between the WBG and the individual PICs that will have an impact upon implementation modalities, however common themes will be explored. The WBG has a mature relationship with Samoa, Tonga, Kiribati, and Tuvalu, a younger relationship in Vanuatu, FSM, and RMI, and a limited rela- tionship with Palau and Nauru. Lessons learned in the existing engagements will be critical to chart the path forward and inform how to effectively support newer clients. The WBG will also ensure its engagement modality with those PIC9 countries that are fragile states, is tailored to address some of the underlying drivers of fragility including the challenges of urbanization and youth employment and the institutional capacities around manag- ing climate change impacts. The WBG will also ensure that implementation support is particularly strengthened for the fragile PIC9 countries. Overall, the WBG program will be designed to enhance impacts by taking advantage of the increased IDA18 allocation to finance more sizeable operations, by enhancing selectivity and focusing on the core ob- jectives discussed under section 3.3, and by paying particular attention to the drivers of fragility in the Pacific in order to improve sustainability. 3.4.1 Financial Envelope and Key Instruments The timeline for this RPF comprises the remaining period of IDA17, the IDA18 period and the beginning of IDA19. During the RPF period, IDA18 will see a major increase to the base allocation to SDR15 m per year per country, which will have a potentially transformative impact on the PIC9. The indicative IDA18 allocation compared to the IDA17 resource enve- lope for the PIC9 is outlined in Table 3.2. The eligibility to access financial resources from the WBG differs across the PIC9, and the engagement will be tailored accordingly. The terms of the resources that countries receive from IDA are based on the risk of debt distress in a given year. In FY17, FSM, Kiri- bati, RMI, and Tuvalu were eligible for IDA grants, whereas Samoa, Tonga, and Vanuatu receive 50 percent of IDA on grant terms and 50 percent on credit terms. This may well in- fluence how countries wish to allocate IDA resources to different sectors. Palau and Nauru are IBRD countries. At the same time, given current IBRD creditworthiness assessments, they would only have access to resources from IBRD with significant credit enhancements. 60 Regional Partnership Framework TABLE 3.2: IDA18 SCALE UP (IN US$M)12 Country IDA17 planned program (1 SDR = US$1.4) Indicative IDA18 allocations Kiribati 15.5 60-70 Republic of Nauru – – Republic of the Marshall Islands 20 60-70 Federated States of Micronesia 11 60-70 Republic of Palau – – Independent State of Samoa 24.9 65-75 Kingdom of Tonga 19.1 60-70 Tuvalu 13.5 60-70 Vanuatu 23.8 65-75 WBG instruments to implement the RPF are expected to include investment and policy based financing, IFC resources, and trust funds administered by the WBG. The WBG will take advantage of innovative instruments that could benefit the PIC9 and, to the extent possible, leverage private sources of capital and knowledge. Development policy lend- ing is expected to continue in Kiribati, Samoa, Tonga, and Tuvalu based on the positive experience during IDA17, provided the countries maintain an adequate macro-economic framework. In FSM and RMI, the new engagement in PFM may create an opportunity to explore the use of this instrument toward the end of the RPF period. Under IPF, the WBG will assess the early lessons in using Disbursement Linked Indicators in the Pacific, and also consider introducing a Program-for-Results Financing arrangement. The WBG will continue to look for financing opportunities in both Palau and Nauru. The WBG will use its global expertise to support these efforts, in close coordination with other development partners in the region. A feature of the IDA18 scale up in most PIC9 will be a greater emphasis on agreed reform benchmarks in key areas, continued policy dialogue with government and development partners on priorities and on monitoring results. The special themes in IDA18 on Climate Change, Gender and Development, and Fragility, Conflict and Violence, together with the new proposed themes on Jobs and Economic Transformation, and Governance and Insti- tutions all have resonance for the PIC9, though with varying emphasis across countries. Together with the proposed scaling up of IDA, the proposed IDA18 IFC-MIGA Private Sector Window (PSW) and the scaled up regional window in IDA18, the PIC9 should be in a strong position to explore opportunities for addressing these proposed new global commitments. 12 Actual allocations are determined on an annual basis. Regional Partnership Framework 61 Of particular importance to the PIC9, in the context of IDA18 special themes, is the rec- ognition that climate change and the rising incidence of natural disasters represent a serious threat for all of the PIC9 and an existential threat for the atoll nations. The WBG will seek to use the full range of instruments available to support the anticipated increase in frequency and severity of natural disasters in the PIC9. The applicability of new financ- ing instruments such as a Catastrophe Deferred Drawdown Option (CAT DDO), which will be available for IDA countries under IDA18, will be fully assessed. In the Pacific, DPOs have been used to rapidly provide access to resources, but they are not designed for post-dis- aster situations. In addition, the PIC9 that are IDA eligible will continue having access to the Crisis Response Window (CRW), which is especially important in light of the prevailing fragility aspects in the region. The CRW therefore will remain an important source of re- sources for post-disaster reconstruction and recovery. The Bank will also explore ways to assist PICs in accessing global climate funds. A wave crashes on the rocks - Nuku’alofa, Tonga. Photo credit: World Bank / Conor Ashleigh 62 Regional Partnership Framework IFC will proactively seek to help the PIC9 exploit the full gamut of private sector develop- ment opportunities, primarily through its Advisory Services activities. On the investment front, PIC9 challenges of small scale and remoteness will likely restrict direct investment volumes. However, IFC has a track-record of small, highly developmental investments in the region, which should allow IFC to invest up to US$25 million over the RPF period to help drive sustainable economic growth across the Pacific region, further supporting the IDA 18 theme on jobs and economic transformation. It will achieve this result by financing private investment, mobilizing capital, and advising businesses and governments on improving the enabling environment for private sector investment and trade and projects that gen- erate returns for investors and provide societal value to communities. Strategic areas of focus will be accelerating access to infrastructure, including potential opportunities for public-private partnerships (PPPs) for delivery of key services, new renewable off-grid and small grid solutions, increasing access to finance for micro, small and medium enterprises, the fisheries sector, and seeking to attract a higher volume long haul tourist arrivals to the Pacific. IFC will aim to make investments where there is the potential to bring scal- ability and replicability, and making investments where technology and supply chains can be harnessed to accelerate access, spanning new delivery channels and markets to de- liver services. These efforts will build on IFC’s comparative advantage in the Pacific, which encompasses a track record of financing transactions and long-established reputation for delivering private sector solutions. IFC will take a solutions approach to its client engage- ment, leveraging Advisory and Investment Services to respond to client needs. IFC will also seek opportunities to leverage the Private Sector Window (PSW) from the IDA18 Re- plenishment in an effort to enhance the scale and scope of the WBG support to crowd in private sector investment in eligible IDA and FCS markets among the PIC-9: Kiribati, RMI, FSM, Samoa, Tonga, and Vanuatu. The PSW will enable IFC to explore select opportunities, where suitable sponsors with scalable models can help IFC reach markets where they are currently unable to go, or create new markets where these are currently unavailable. Nei- ther Tuvalu nor Nauru are IFC members. MIGA has no current engagement in the PIC9, but will continue to opportunistically pursue opportunities as they arise. 3.4.2 Use of Regional Approaches The WBG will continue to promote regional and platform-based approaches and col- laboration with regional organizations to address common issues and exploit efficien- cies. This will be especially relevant in cases where regional solutions will be deemed to have greater impact than country specific engagements. Examples of this include existing regional programs (such as the Pacific Aviation Investment Program, the Pacific Regional Connectivity Program, the Pacific Regional Oceanscape Program and Pacific Resilience Program) which have been designed as platform-based approaches offering a menu of in- vestment and technical assistance options which support a common objective and are tai- lored to country contexts. Regional approaches allow economies of scale and the WBG has gained valuable experience working with a range of regional organizations during IDA17. This includes SPC, PIF, FFA, the Pacific Aviation Safety Office, Pacific Power Association and SPREP. During the RPF period, the WBG will build on, and strengthen, these partner- ships. The Framework for Pacific Regionalism provides an opportunity for WBG to align its work with the regional priorities, including ICT connectivity, climate change and fisheries. Regional Partnership Framework 63 Where possible, the WBG will explore opportunities to use regional IDA resources across to supplement their regular IDA allocations and implement programs that benefit the Pacific region. An IDA project may be eligible to receive additional regional IDA when (a) it involves three or more countries, all of which needs to participate for the project’s objec- tives to be attainable (two countries if at least one is classified by IDA as fragile), (b) the benefits spill over country boundaries, (c) there is clear evidence of country or regional ownership which demonstrates commitment of the majority of the participating coun- tries, and (d) provides a platform for high level of policy harmonization between countries and is part of a well-developed and broadly supported regional strategy. Currently region- al programs in fisheries, ICT, aviation infrastructure, and disaster risk management have such spillover effects and benefit from financing from the regional IDA allocation. 3.4.3 Addressing Capacity and Implementation Challenges Programming of new initiatives in IDA18 will require adjustments to the WBG operational model to ensure appropriate support for the PIC9 in implementing a substantially larger program of IDA support. To ensure that the transaction cost on the part of the PIC9 does not overwhelm institutions already affected by limited capacity, the WBG will increase the scope of its support for preparation and implementation of activities. The Procurement Framework for Investment Project Financing that became effective on July 1, 2016 will enable the WBG to create more tailored, country-specific approaches and allow hands-on implementation support from WBG staff when necessary. With Governance and Institu- tions a key theme of IDA18, opportunities will be explored to strengthen government’s own oversight of the use of funds, by factoring institutional fiduciary capacity building into project design. Similarly, the new Environmental and Social Framework (ESF), adopted in August 2016, has been designed to meet the varied needs of countries. The ESF will help borrowers manage their environmental and social risks more effectively and efficiently and will be implemented during the RPF period. Among other things, the ESF will be accompanied by capacity strengthening activities and stronger strategic partnerships with development partners. Reflecting differences in the WBG’s engagement with individual countries and the les- sons from the past, projects will be designed to reflect country capacity. The Bank’s portfolio will focus upon a limited set of priorities and avoid fragmentation within and across countries as much as possible. This may mean building first upon existing plat- forms for delivery and expanding outside these only as capacity increases. Given the thin capacity in many domains in this region, including financial management and procure- ment, complex project design poses a higher-than-average risk to implementing projects successfully and will be avoided. Projects will also anticipate the attrition of capacity due to outward migration and plan to mitigate that risk through enhanced training efforts. Greater collaboration with regional organizations that the Bank has previously worked less with, will be fostered (such as the Pacific Association of Supreme Audit Institutions) and the Confederation of Asian & Pacific Accountants, and implementation modalities of a regional nature, along the lines of those currently in place to manage regional programs, will be considered where relevant. 64 Regional Partnership Framework The WBG will continue to look for ways to support government implementing agencies. For example, as appropriate the WBG will undertake frequent implementation support missions, take advantage of simplified procedures, integrating to the extent possible with government fiduciary systems, pilot various regional implementation schemes (one ex- ample is the TFSU, which supports implementation of aviation projects in five PICs), and explore a consolidated/centralized approach to support the fiduciary aspects of project management, such as the approach taken Kiribati through the Kiribati Fiduciary Support Unit (KFSU) and in FSM and RMI coordinated by the Finance Ministry/Department. To maintain a strong engagement in the Pacific, the WBG will continue to have a sub- stantial presence across the region. This will be essential to provide stepped up imple- mentation support to countries. The WBG will gradually move some staff from the Sydney office to Suva, Fiji to have a greater presence in the South Pacific. In Samoa and Vanuatu, separate liaison officers have been recruited in anticipation of a significantly larger port- folio and a new joint WB/ADB liaison office will be established in Tuvalu. In addition to the increase in staffing in Fiji, there will continue to be an in-country presence in Kiribati, Samoa, Tonga Tuvalu and Vanuatu (in addition to Timor-Leste, Papua New Guinea, and Solomon Islands, which are not covered by this RPF9). In order to manage the regular de- mands upon staff time and resources of supporting disaster responses, a pool of qualified consultants who can be on call for engagement in Post Disaster Needs Assessments will be progressively built up so that these events do not take away from the regular resilience and preparedness work program. 3.4.4 Coordination and Partnerships The WBG enjoys strong collaboration and coordination with its development partners in the Pacific. In support of the PIC9, the Bank has received significant trust fund resources from Australia and New Zealand, including (i) the Pacific Facility IV, a Multi Donor Trust Fund (MDTF) managed by the Bank that provides core funding for such Bank-executed activities as lending, supervision, and ASA; (ii) the Pacific Region Infrastructure Facility (PRIF), an MDTF established in 2009 to support infrastructure development in the Pacific; and (iii) the Australia Pacific Islands Strategic Partnership Trust Fund, a single-donor trust fund established in FY16 that supports recipient-executed activities and associated Bank supervision and preparation costs. These resources provide a robust framework for con- tinued collaboration. The Bank will continue to work closely with development partners to coordinate its en- gagement across the Pacific. In Kiribati, Samoa, Tonga, and Vanuatu, the WBG shares Liaison Offices with ADB, and a new joint Liaison Office is being opened in Tuvalu. The new WBG office in Fiji is co-located with ADB’s Pacific Sub-regional Office, which will further enhance coordination across the PIC9. Opportunities for joint programming will be sought, continuing the successful efforts in IDA17 to co-finance critical pieces of infrastructure (such as ICT in Tonga, Palau, and Samoa, the roads project in Kiribati as well as in Fiji, where a waiver was obtained for the first time ever for the World Bank to adopt ADB’s procurement rules). Other important partners in the Pacific include the United Nations, European Union, France, Japan, the USA, and the International Monetary Fund (IMF). Regional Partnership Framework 65 The Bank has initiated the development of a “Common Approach” to safeguards in association with other donor partners and SPREP. The purpose of the Common Approach is to facilitate effective integration of environmental and social considerations into pro- ject design and implementation by having a generally agreed approach for safeguard ap- plication across the major development partners. In addition to increasing efficiency and effectiveness of safeguard application, the Common Approach will support improved ca- pacity development. The development of policy matrices in budget support operations provide an additional framework through which participating development partners collaborate on the key development priorities in recipient countries. New opportunities for collaboration with other development partners will be identified during the RPF period, particularly in in- frastructure, climate resilience (including water and sanitation), and development policy lending. Good coordination across the array of development partners, together with adop- tion of harmonized procedures, will remain critical in reducing the transaction costs for governments challenged with capacity constraints. IFC is recognized as a key delivery partner for regional donors. Australia, New Zealand, and IFC work together under the Pacific Partnership to promote inclusive growth and support global integration in the Pacific region. Since December 2012, this US$32 mil- lion Partnership has funded 31 projects across financial markets, corporate governance, gender, tourism, PPPs, extractives and fisheries sectors across the region. It has also fa- cilitated a committed investment portfolio of US$183 million and helped build a pipeline in excess of US$115 million in investments across the banking, mining, clean energy, trans- port, private equity and agribusiness sectors. Since inception, the Pacific Partnership has also facilitated: over US$145 million in direct IFC investment in the Pacific; helped increase incremental lending of US$106m to over 725 SMEs; helped 1.1 million people by providing improved access to infrastructure; delivered over $US45 million per annum in private sec- tor cost savings from improved ease of doing business; and helped 1.2 million people gain improved access to basic financial services. Discussions have already commenced with Australia and New Zealand around the development of a successor arrangement to the highly successful Pacific Partnership. While still under development, a new 5-year US$25 million partnership to commence in 2017 is expected to help strengthen the Pacific’s busi- ness enabling environment, strengthen financial infrastructure, improve access to energy, grow the tourism and fisheries sectors and strengthen infrastructure and service delivery. 66 Regional Partnership Framework 4 MANAGING RISKS TO THE REGIONAL PARTNERSHIP FRAMEWORK PROGRAM A man working on the Kiribati Road Rehabilitation Project - South Tarawa, Kiribati. Photo credit: World Bank / Conor Ashleigh Regional Partnership Framework 67 Risk to the implementation of the RPF in the PIC9 is assessed as Substantial. The Bank has been operating in some countries for several decades, while in others the relationship is relatively new and institutions are not broadly familiar with Bank modalities. A range of risks could significantly affect the implementation of WBG programs in the PIC9 (Table 4.1). The risks include: (i) exogenous macroeconomic shocks, (ii) political and governance risk, (iii) the risk of recurring natural disasters of increased frequency and intensity; and, (iv) implementation and capacity constraints. • Macroeconomic risks. The PIC9 are highly vulnerable to economic shocks, a risk that is particularly pronounced due to the small size and openness of their economies. Com- monly occurring price shocks to commodity imports and exports increase hardship substantially and the costs of doing business. This vulnerability is most pronounced in the coral atoll countries where there is little arable land. Households are consequently dependent on imports of basic foods and vulnerable to volatile prices. The prospects for increased economic growth and domestic revenue generation are challenged as a result of limited opportunities, and structural rigidities, that leave little room to maneuver through economic policies. Like many other small states, debt sustainability is a chal- lenge, although varies significantly across the PIC9, and as a result part of the WBG program will continue to be provided as grants, with the remainder on concessional terms. The WBG program aims to address these risks through sustained and stepped up macroeconomic policy dialogue, including through its DPO series, addressing effec- tive public expenditure management and revenue generation, as well as close partner- ships with key partners to help sustain long term donor financing in the region. • Political and governance risks. Risks of political insecurity and weak governance vary across the countries. Where most significant, constant changes in governments or po- litical alliances may disrupt or delay decisions with regard priorities and programs as well as undermine commitment to policy reforms. Successive governments may have differing priorities that in the short term lead to changes in programmatic directions. On the whole, however, it is not envisaged that political changes will fundamentally alter the strategic priorities laid down in the existing national development strategies, and the most significant challenges facing the countries are unlikely to change sub- stantially. In addition, the WBG would plan to maintain a broad dialogue across the political spectrum in countries, working where there is broad bipartisan support for policy reforms and program activities. • Natural disaster and climate risks. The PIC9 are among the countries most prone to natural disasters in the world. Extreme weather related events can be catastrophic and eliminate years of development progress. Climate change will continue to add pressure on fragile island systems by increasing average ocean and land temperatures and in- ducing changes in seasonality, duration of rainfall and increasing sea levels. In addition to the threat to human lives, natural disasters pose a significant threat to infrastruc- ture and agriculture, affect fiscal balances, and limit tourist arrivals, which are integral to the economies of several of the PIC9. The RPF program is designed to help mitigate many of the core disaster and climate risks to development through regional and coun- try specific initiatives to support climate resilience and disaster management. Extreme 68 Regional Partnership Framework weather events may nevertheless impact implementation across sectors. This risk would be addressed by rapid response, including the WBG’s engagement in support- ing Post Disaster Needs Assessments (PDNA), mobilizing resources through the Crisis Response Window when possible and through the reallocation of resources to facilitate disaster recovery where needed. In addition, the WBG is planning to scale up support for environmental and social safeguard in the region – not only through scaling up its own capacity in the field, but also through establishing safeguard learning centers and adopting a common safeguards framework with other donors. • Implementation and capacity constraints. Thin capacity in the Pacific poses a con- siderable risk to the implementation of the program as well as its sustainability. Thin capacity can contribute to a lack of decision making on the part of governments and delays implementation of key actions. Small and stretched public administrations have generally led to reliance upon project/program management units for Bank financed activities. Limited familiarity with Bank operational procedures in a number of the countries, and limited capacity in core areas such as auditing and accounting, add to implementation delays. In response, the Bank is planning to scale up capacity build- ing of staff working on Bank-financed projects and will look for opportunities to con- solidate fiduciary capacity where feasible to limit the demand for scarce skills in small countries. Project fiduciary risks will continue to be subject to ongoing assessment, forming the basis for implementation of relevant mitigation and (risk-based) monitor- ing measures. Similar management capacity constraints among local businesses and very limited opportunities for scalability in the domestic market impact the growth of the private sector and limit the number of bankable deals that the IFC can consider for investment on commercial terms. Regional expansion has helped the telecommunica- tions sector and the banking industry in the Pacific to gain scalability, which IFC will pursue more rigorously, supported by a closely aligned advisory services program. TABLE 4.1: TYPES AND SEVERITY OF RISKS TO THE IMPLEMENTATION OF THE RPF IN THE PIC9 Risk Categories Rating (H, S, M, L) Political and governance High Macroeconomic Substantial Sector strategies and policies Moderate Technical design of project or program Moderate Institutional capacity for implementation and sustainability Substantial Fiduciary Substantial Environment and Social High Stakeholders High Overall Substantial Regional Partnership Framework 69 The implementation risks identified here cannot be fully mitigated and it is therefore essential to prepare for the possibility that some of these risks will materialize in at least one or more of the PIC9. The WBG will need to be able to navigate and manage these risks and adapt accordingly. It may need to place greater emphasis on the sequencing of WBG support and on the capacity to make adjustments to the program as it is implemented. Any changes to the lending program and results framework will be articulated during the Performance and Learning Review, as well as during regular portfolio discussions. Recognizing the capacity constraints, the WBG has also put into place a series of meas- ures to mitigate to the extent possible the adverse impact that these constraints could generate for the portfolio. These mitigation measures include (i) a focus of the program on a few key priorities, (ii) deployment of staff on the ground and enhanced implementation and hands-on support through dedicated implementation support staff across sectors; (iii) structured collaboration between key government counterparts and development partners aimed at building sustainable fiduciary capacity, (iv) deliberate adaptation of Bank policies to fit the operating environment to the maximum extent possible; (v) the use of regional approaches to support implementation, such as PROP, PREP, and PAIP; (vi) the use of DPOs that focus on strengthening PFM and governance, transparency and ac- countability; and (vii) a focus on managing financial risk for disaster-related events. A traditional ceremony - Federated States of Micronesia. Photo credit: World Bank / Loren Atkins 70 ANNEX 1: Operations Portfolio (IBRD/IDA and Grants) as of January 4, 2017 Project ID Project Name Date, DO IP IBRD IDA Net Tot Tot Tot Board Rating Rating Comm Commit Comm Cancel Disb Undisb App * Amount ($m) Amt ($m) ($m) Bal ($m) ($m) ($m) Kiribati P155540 Third Economic Reform DPO 9/13/2016 0 2 2.00 0 0.00 2.10 P112615 Kiribati:GEF Adaptation Phase III (LDCF) 09/15/2011 MS 0 0 10.70 0 6.51 4.19 P122151 Kiribati Road Rehabilitation Project 03/01/2011 MS S 0 26 26.00 0 24.78 0.24 P126324 KI: Telecomms and ICT Development 07/26/2012 S S 0 1 1.00 0 0.72 0.32 Regional Partnership Framework P128938 Pacific Aviation Investment - Kiribati 12/13/2011 S S 0 30.01 30.01 0 9.64 17.70 Marshall Islands P151760 PROP for Marshall Islands 12/22/2014 S MS 0 6.75 6.75 0 0.70 5.49 P155257 Pacific Resilience Program - RMI 06/19/2015 S S 0 1.5 1.50 0 1.00 0.53 P132119 MH: ICT TA Project 08/07/2013 MU MU 0 0 0.95 0.3 0.10 0.85 Micronesia, Federated States of P148560 Energy Sector Development 5/29/2014 S MS 0 14.4 14.40 0 4.58 8.44 P151754 PROP for Federated States of Micronesia 12/22/2014 S S 0 5.5 5.50 0 0.52 4.82 P130592 Palau-FSM Connectivity Project 12/17/2014 MS MS 0 47.5 47.50 0 6.36 37.33 Pacific Islands P098423 Pac Isl-GEF-Sustainable Energy Finance 6/12/2007 S 0 0 8.45 0.456159 6.65 1.80 P152653 Sustainable Energy Industry Development 09/29/2015 S S 0 0 5.66 0 0.20 5.46 P131655 Pacific Island Regional Oceans Program 12/22/2014 MU U 0 3.97 3.97 0 0.55 3.24 P153429 Pacific Islands Regional Oceanscape Prog 12/22/2014 U 0 0 2.19 0 0.10 2.09 P147839 PACIFIC RESILIENCE PROGRAM - SPC 06/19/2015 S MS 0 3.68 3.68 0 0.34 3.32 P155542 PACIFIC RESILIENCE PROGRAM - PIFS 06/19/2015 S MS 0 1.32 1.32 0 0.03 1.38 P145057 Pacific Aviation Safety Office Reform 9/30/2013 MS MS 0 2.15 2.15 0 1.60 0.56 P148238 Pacific Reg ICT Regulatory Dev. Project 07/30/2014 MS MU 0 4.5 4.50 0 0.67 3.45 Samoa P115351 Samoa Agriculture Competitiveness Enhanc 3/29/2012 S MS 0 8 8.00 0 3.00 4.10 P145938 Agriculture & Fisheries Cyclone Response 10/17/2013 S S 0 5 5.00 0 4.40 0.50 P126596 Enhancing Climate Resilience of Coastal 12/27/2013 MS MU 0 0 14.60 0 3.46 11.14 P155118 Second Fiscal and Economic Reform DPO 9/13/2016 0 5 5.00 0 0.00 5.02 P154839 Pacific Resilience Program - Samoa 06/19/2015 S MS 0 13.793 13.79 0 1.66 12.12 P126504 Enhancing Climate Resilience-West Cst Rd 12/18/2012 MU MU 0 0 14.80 0 1.11 13.69 P128904 WS: Pac Reg Connect Phase III: Samoa 6/19/2015 S S 0 16 16.00 0 1.71 13.86 P143408 Samoa Aviation Investment Project 03/06/2014 MS MS 0 41.62 41.62 0 2.14 35.99 P145545 Enhanced Road Access Project 10/17/2013 S MS 0 20 20.00 0 11.07 7.35 Tonga P155133 Tonga First Inclusive Growth DPO 3/16/2016 0 2 2.00 0 2.25 0.00 P150113 Tonga Cyclone Reconstruction 05/28/2014 MU MU 0 12 12.00 0 9.49 1.54 P154840 Pacific Resilience Program - Tonga 06/19/2015 S S 0 10.5 10.50 0 1.50 9.15 P156334 Pacific Resilience Program - Tonga 6/19/2015 S 0 0 4.58 0 0.20 4.38 P096931 TO-Transport Sector Consolidation 07/28/2008 S S 0 9.44 9.44 0 5.69 3.68 P113184 Pacific Regional Connectivity Program 08/30/2011 S S 0 17.2 17.20 0 13.72 2.34 P128939 Pacific Aviation Investment - Tonga 12/13/2011 S S 0 34.46 34.46 0 22.24 9.46 Tuvalu P144573 Energy Sector Development Project 1/26/2015 MS MS 0 7 7.00 0 0.36 6.39 P151780 PROP for Tuvalu 12/22/2014 S S 0 7 7.00 0 0.70 5.93 P155066 Third Development Policy Operation 12/09/2016 0 3.3 3.30 0 0.00 3.35 P128940 Pacific Aviation Investment - Tuvalu 12/13/2011 S S 0 20.79 20.79 0 13.18 5.92 Vanuatu P133701 GPOBA Improved Electricity Access 5/16/2014 S MS 0 0 4.85 0 0.55 4.30 P145311 Energy Sector Development Project 06/21/2013 0 0 2.73 0.0195866 2.14 0.59 P150908 Rural Electrification Project 11/07/2014 S S 0 0 4.70 0 0.53 4.17 P112611 Increasing Resilience to Climate Change 12/4/2012 MU 0 0 9.74 0.0103548 6.08 4.68 P129376 Mainstreaming Disaster Risk Reduction 9/26/2012 MS MS 0 0 2.73 0 2.38 0.35 P155256 Pacific Resilience Program 06/19/2015 S S 0 1.5 1.50 0 1.00 0.53 P156505 Vanuatu Reconstruction Project 06/17/2016 S S 0 50 50.00 0 0.00 49.43 Regional Partnership Framework P118895 VU: Telecommunications & ICT TA 8/31/2009 0 0 5.26 0.2842544 5.16 0.10 P154149 Vanuatu Aviation Investment Project 5/8/2015 MS MS 0 59.5 59.50 0 4.23 52.62 71 72 ANNEX 2: Analytical and Advisory Assistance (AAA) Portfolio as of January 4, 2017 Task ID Task Name Prod. Processing Group Processing Track Parent AIN (AA) / AIS ACS Total Lifetime Line (Standalone, (1,2) / Type (JIT, Task Sign-Off Expenditure (K$) Parent, Subtask) Discrete, Parent) ID FY BB BETF Total Pacific Islands P130347 Pacific Disaster Risk Financing TA Standalone Discrete 24-Jan-2012 2017 0.00 1513.87 1513.87 P130441 PACIFIC CAT RISK ASSESS - PHASE 3 TA Standalone Discrete 19-Jan-2012 2017 0.21 1315.55 1315.76 P145154 Pacific Early Age Readiness and Learning PA Parent Parent 31-Jul-2013 2017 -0.18 1954.88 1954.70 P150648 Pacific Poor Inclusive WSS Approaches PA Parent Parent 17-Apr-2014 2019 0.00 1293.34 1293.34 P151797 Pacific Poverty Programmatic AAA PA Parent Parent 10-Jul-2014 2018 149.57 473.89 623.46 P151959 Australia SWP Development Evaluation EW Standalone Discrete 23-Jul-2014 2017 23.28 263.40 286.68 P152037 Building Climate and Disaster Resilience PA Parent Parent 31-Oct-2014 2019 14.86 671.09 685.95 P152866 Programmatic AAA for Pacific Agriculture PA Parent Parent 28-Jan-2015 2017 128.44 474.38 602.81 Regional Partnership Framework P153190 PRDR for SE4ALL TA Standalone Discrete 14-Oct-2014 2017 0.06 215.04 215.11 P153778 Pacific Health TA/AAA PA Parent Parent 26-Nov-2014 2018 0.00 448.84 448.84 P155135 Regional [Pacific Health Subtask] TA Subtask JIT P153778 23-Mar-2015 2018 46.00 46.00 P154324 Pacific Possible EW Standalone Discrete 13-Feb-2015 2017 883.03 62.23 945.26 P154352 Pacific PEFM Program PA Parent Parent 13-Jan-2015 2019 0.79 85.25 86.05 P155609 Pacific Labor Mobility Programmatic AAA PA Parent Parent 30-Apr-2015 2017 1.15 291.11 292.26 P158922 Resilient Investments & Spatial Planning TA Subtask Discrete P152037 2-Sep-2016 2019 0.00 0.00 P159592 Disaster Responsive SP in Pacific TA Standalone Discrete 11-Mar-2016 2018 374.36 374.36 P161581 Early Warning, Preparedness & Response TA Subtask Discrete P152037 2-Sep-2016 2019 0.00 P161700 PCRAFI Technical Assistance AA Standalone Track 2 20-Sep-2016 2022 10.10 10.10 P161926 Pacific Islands CRVS and ID management TA Subtask JIT P157694 14-Oct-2016 2018 10.98 10.98 Kiribati P155137 Kiribati [Pacific Health Subtask] TA Subtask JIT P153778 24-Mar-2015 2018 271.64 271.64 Samoa Samoa P155138 Samoa [Pacific Health Subtask] TA Subtask JIT P153778 24-Mar-2015 2018 26.62 26.62 Tonga P159996 Tonga PEARL Project TA Subtask JIT P145154 26-Apr-2016 2018 1591.63 1591.63 Tuvalu P162838 Sea Level Rise and Infrastructure AA Standalone Track 1 7-Dec-2016 2017 0.00 Vanuatu P132550 Equity, Land PA Parent Parent 1-Aug-2012 2016 35.21 690.22 725.42 P157414 Affordable Resilient Housing Settlements TA Standalone Discrete 11-Sep-2015 2018 73.79 73.79 P155134 Vanuatu [Pacific Health Subtask] TA Subtask JIT P153778 23-Mar-2015 2018 367.12 367.12 Regional Partnership Framework 73 ANNEX 3: Selected Indicators of Bank Portfolio Performance and Management Refreshed: 01/04/2017 Portfolio Trends Region: EAP | Country: Pacific Islands; Federated States of Micronesia; Kingdom of Tonga; Republic of Kiribati; Republic of Palau; Republic of the Marshall Islands; Republic of Vanuatu; Samoa; Tuvalu | Data as of 01/04/2017 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 @ Dec 31 PORTFOLIO AND DISBURSEMENTS Active Projects # 11 11 20 24 35 51 48 46 Actual Problem Project # 1 2 2 3 1 5 4 7 US$m problem projects 8.766 14.206 14.206 34.766 31.666 82.434782 79.699645 60.56 Problem Projects by Amount (%) 17% 17% 8% 18% 10% 16% 14% 10% Problem Project % 9.1 18.2 10.0 12.5 2.9 9.8 8.3 15.2 Potential Problem Project # 0 0 0 0 2 3 3 0 Projects At Risk # 1 2 2 3 3 8 7 7 Projects At Risk % 9.1 18.2 10.0 12.5 8.6 15.7 14.6 15.2 Commitments At Risk $m 8.77 14.21 14.21 34.77 31.67 72.48 75.89 62.75 Commitments at Risk % 16.6 17.1 7.9 17.6 10.0 13.9 13.1 10.7 Disbursement Ratio for IPF only % 31.1 30.7 26.6 17.1 19.6 20.0 17.6 6.4 ANNEX 4: International Finance Corporation Project at a Glance, Institution View, as of December 31, 2016 Institution: Bank of Vanuatu Project Id Project Department Project Approval Net Undisbursed Outstanding Cancelled Short Code Status Volume- IFC Commitment-IFC -IFC (USD) -IFC (USD) -IFC (USD) Name (USD) (USD) 28058 NBV CFG Hold 2,187,425 2,482,602 133,933 1 0 30363 NBV Equity CFG Active 2,187,425 2,482,602 133,933 1 0 Equality Valuation Data reported at Institutional Level Unrealized Capital Gains Current Exit Value Percentage IFC Ownership -1 0 15.00 74 Regional Partnership Framework ANNEX 5: PIC9 Regional Partnership Framework- Results Framework FOCUS AREA 1: Fully exploiting available economic opportunities The combined challenge of small size, remoteness from major markets and internal dispersion increase the costs of private production and public administration, lower the return to market activities and narrow the feasible set of economic opportunities. Given low growth and limited employment opportunities, the PICs need to fully exploit the limited set of available economic opportunities. Objective 1.1 Improved management of oceanic and coastal fisheries Intervention Logic Fisheries are essential to the economies and development of the PIC9, and are of significant value to the international community. The Pacific islands ocean region covers 11 percent of the world’s oceans and their shared fisheries resources include: (i) oceanic fisheries (largely tuna) that provide public revenues; (ii) coastal fisheries that directly sustain rural livelihoods and contribute to food security and sometimes ex- ports; and (iii) the natural habitats and biodiversity that sustain them. Women are particularly dependent on coastal fisheries for informal economic opportunities including handicrafts. CPF Objective Indicators Supplementary Progress WBG Program Indicators Management of Fisheries Management of Fisheries Management of Fisheries Percentage of oceanic tuna catch FSM, RMI, Tuvalu: Ongoing within a country’s waters that is A similar system to the VDS is FSM, RMI, Tuvalu and Pacific encompassed within the Vessel introduced for managing access Regional: Day Scheme (VDS) or to the two long-line fisheries Pacific Islands Regional a compatible system (tropical long-line fishery and Oceanscape Program (PROP) southern albacore long-line fishery) Baseline Target Pipeline (09/2016) (09/2020) Baseline Target Tonga PROP (tbc) FSM 89% 100% (09/2016) (09/2020) RMI 90% 100% FSM No Yes Kiribati PROP (tbc) Tuvalu 94% 100% RMI No Yes Tuvalu No Yes FSM AF PROP (tbc) Number of additional coastal fisheries legally managed by RMI AF PROP (tbc) stakeholders in each country, with support from the govern- ment Baseline Target (09/2016) (09/2020) RMI 0 24 Tuvalu 0 7 13 The VDS succeeds previous methods to curb overfishing by trading vessel days fishing at sea in places that are subject to the Parties to the Nauru Agreement (PNA). The indicator covers PIC9 where the Pacific Regional Oceanscape Program is currently being implemented (FSM, RMI and Tuvalu) Regional Partnership Framework 75 Objective 1.2 Increased incomes from agriculture Intervention Logic Agriculture and coastal fishing play an important role in meeting the subsistence needs of the poor. Low- cost and low quality food imports crowd out domestic production and contribute to non-communicable diseases. Opportunities for exports of agricultural products are likely to remain limited, but opportunities for small scale local trade, import substitution to supply the tourism sector and selected niche and cash crop exports offer possible gains for many. CPF Objective Indicators Supplementary Progress WBG Program Indicators Increased Incomes from Increased Incomes from Increased Incomes from Agriculture Agriculture Agriculture Samoa: Client days of training provided Ongoing Percentage increase in the value to farmers (male/female) on Samoa Agriculture of sales of fruit and vegetable technologies and practices for Competitiveness Enhancement growers participating in the more resilient agriculture Project (SACEP) Matching Grant Program Baseline 0 Target 300 Pipeline Baseline 36% Target 40% (03/2016) (02/2017) Samoa SACEP Phase II (tbc) (03/2016) (03/2018) Vanuatu Agriculture/Food Percentage increase in the value Security Project (tbc) of sales of livestock producers participating in the Matching Grant Program Baseline 21% Target 30% (03/2016) (02/2018) Objective 1.3 Expanded tourism opportunities Intervention Logic Tourism is central to private sector economic activity in several of the PIC9 countries. Tourism, as a service sector with relatively low entry barriers and its supply chain stimulates demand for domestic produce, lo- cal artwork and handicrafts. It is labor-intensive and supports significant domestic job creation and is one of the few industries in the Pacific in which women and young people form a high percentage of job holders. For young people, especially those who are unskilled, tourism is a potential pathway to productive employ- ment. It is the cause of significant infrastructure demand, providing a rationale for increased investment into airport, port and road infrastructure without which the industry cannot flourish. Regional approaches would help enhance air access and the marketing of Pacific island destinations in new markets such as Asia. Cruise shipping has the potential to offer benefits through greater local linkages, especially in the South Pacific. 76 Regional Partnership Framework CPF Objective Indicators Supplementary Progress WBG Program Indicators Expanded tourism opportunities Expanded tourism opportunities Change in tourist (non-resident) Ongoing international arrivals both air and Pacific Regional Tourism Initiative cruise tourism. Indicative Phase 1 (IFC) Vanuatu: Pipeline 108,000 Target 130,000 Baseline Pacific Regional Tourism Initiative Phase 2 (starting July 2017) (IFC) Samoa: 131,000 Target 145,000 Baseline FOCUS AREA 2: Enhancing access to employment opportunities Improving access to employment opportunities and basic social and infrastructure services, with a par- ticular emphasis on enhancing educational attainment and skills of the poor is key to improving the well- being of PIC9 populations. Objective 2.1 Broadened Opportunities for Access to Labor Markets Intervention Logic International labor mobility has already delivered significant and generally pro-poor benefits for some of the PIC9; evidence suggests improved labor mobility for some of these island countries provides benefits to not only to migrants, but also their households, communities and sending countries; remittances are an important income source that helps to bring many households out of poverty. Pursuing agreements to scale up existing seasonal migration schemes would offer critical opportunities for low-skilled workers. Expanding quotas for permanent migration, better targeting opportunities towards the poor and towards countries that have only limited participation, and creating new opportunities for higher skilled workers, such as nurses, are priorities and require joint action by labor sending and labor receiving countries. CPF Objective Indicators Supplementary Progress WBG Program Indicators Labor Mobility Labor Mobility Labor Mobility Increase the number of Pacific Ongoing seasonal workers participating in Pacific Labor Mobility Program- the SWP annually over the RPF matic ASA – aims to inform and period. influence the debate on labor mobility with a view to enhanc- ing employment opportunities Baseline Target for low-income workers in se- lected PICs. (06/2016) (06/2021) Kiribati 11 20 Pipeline Nauru 17 30 ASAs to help PIC9 countries de- velop the skills mix workforces Samoa 185 330 need to take advantage of both Tonga 2,179 3,900 domestic and international job Tuvalu 7 10 opportunities: • SWP Development Impact Vanuatu 567 1,000 Evaluation • SWP Productivity Study • Skilled Migration Pathways in ANZ/USA Regional Partnership Framework 77 Objective 2.2 Addressing education and skills gap Intervention Logic Closing gaps with regard to access and quality of education is vital because of the correlation this gap has to hardship. The absence of access to quality education translates into unequal access to economic opportunities, especially with respect to overseas employment opportunities and public sector jobs. Edu- cational attainment is shown to contribute to higher rates of economic growth by increasing the avail- ability of skilled labor, and increasing opportunities for the most marginal and most vulnerable to escape poverty. Enhanced skill development and training opportunities, especially related to the tourism sector, is important to allow the poor to take advantage of employment opportunities and for the development of the sector. Educating girls is particularly important for gender equality. CPF Objective Indicators Supplementary Progress WBG Program Indicators School Readiness and Early Grade School Readiness and Early Grade School Readiness and Early Literacy Literacy Grade Literacy No. of ECCE and school readiness Production of country diagnos- Ongoing interventions completed tic reports on ECCE services and Pacific Early Age Readiness and early grade reading levels Learning (PEARL) ASA– aims to Baseline Target improve evidence-based policy (06/2016) (06/2017) Baseline Target and programming decisions on Kiribati 0 1 (03/2016) (06/2017) school readiness and early grade Tuvalu 0 1 Samoa 0 2 reading in PICs. No. of early grade reading im- Early Grade Reading Assessment provement interventions com- (EGRA) ASA – aims to provide a pleted Baseline Target picture of education quality in (06/2016) (06/2017) primary education and will be Kiribati 0 1 used to inform policy dialogue, Tuvalu 0 1 guide investment decisions, im- prove curriculum and curriculum resources and improve teacher training. Pipeline DPOs will continue to support key education sector reforms Tonga Skills for Employment Project 78 Regional Partnership Framework Increased Access to Education Increased Access to Education Increased Access to Education Vanuatu: Ongoing No of schools reconstructed and Vanuatu Infrastructure Recon- upgraded to higher structural struction and Improvement Pro- safety standards ject Baseline 0 Target 40 (03/2016) (06/2021) Enhanced skills development Enhanced skills development Enhanced skills development Tonga: Tonga: Pipeline Number of beneficiaries graduat- Percentage of beneficiaries who Tonga Skills for Employment ing from pre-employment training report an increase in knowledge, Project (tracked by gender) skills and confidence to partici- pate in the labor market ASA to help PIC9 countries de- Baseline 0 Target 40 velop the skills mix workforces (08/2018) (06/2021) Baseline Target need to take advantage of both – TBC (08/2016) (06/2021) domestic and international job - TBC opportunities planned Male 0 60% Female 0 60% Regional Partnership Framework 79 Objective 2.3 Addressing gender inequality and Gender Based Violence Intervention Logic The PIC-9 countries suffer from gender inequalities in terms of access to economic opportunities, access to endowments, women’s voice and agency, especially gender-based violence and vulnerability to emerging risks. In addition, the PIC-9 are plagued with some of the highest levels of gender-based violence (GBV) in the world. Violence against women significantly and negatively affects their health, well-being, and agen- cy, and beyond the human costs, violence incurs major economy-wide costs such as expenditures on ser- vice provision, forgone income for women and their families, decreased productivity and negative effects on human capital. The overwhelming majority of abused women in the Pacific report they have not sought help from formal services or from people in positions of authority such as police, non-government organi- zations, religious or local leaders. CPF Objective Indicators Supplementary Progress WBG Program Indicators Gender Gender Gender Percentage of active IDA projects in the country portfolio that are Stock-take and analysis of GBV Ongoing (Cross-cutting) gender informed in the PIC-9 and identification of Samoa Agriculture Competitive- specific WBG activities on GBV ness Enhancement Project Baseline 66% Target 66% Samoa – Pacific Regional Con- (06/2016) (06/2021) nectivity Phase III Project Percentage of all projects under Pacific Resilience Program implementation that have one or (PREP) more gender related indicators in the results framework Tuvalu – Energy Sector Develop- ment Project Baseline 72% Target ≥66% Vanuatu Aviation Investment (06/2016) (06/2021) Project ASA: Work is being undertaken on quantitative and qualitative evidence of social and economic impacts of the Seasonal Worker Program (SWP) on women and men in Tonga and Vanuatu, in- cluding gender impacts. IFC: Creating opportunities for knowledge sharing among the business community across the Pacific Pipeline Vanuatu Aviation Investment Project AF 80 Regional Partnership Framework Focus Area 3: Protecting incomes and livelihoods Protecting incomes and livelihoods of the poor and the bottom 40 percent is particularly important in the context of climate change, frequent natural disasters and economic shocks. The low-lying atolls of the Pacific are vulnerable to sea level rise. Though the timeframe and severity of the impacts of climate change are uncertain, concern for the lives and livelihoods of the people of the Pacific is paramount given that cli- mate change outcomes encompass the displacement of human settlements by sea-level rise, reduced food production, water scarcity and increased disease. Objective 3.1 Strengthened resilience to natural disasters and climate change Intervention Logic There is a need to mainstream disaster risk reduction policy among the PIC9 into many areas of policy making and development efforts. This includes strengthening policy, institutional and evidence-based de- cision making capacity including via easy-to-access and relevant data and inclusive, participatory ap- proaches, as well as strengthening disaster early warning, preparedness, and response. Mainstreaming disaster risk and climate change considerations into development planning and investments (including infrastructure plans, land use plans, building codes and environmental impact assessments, as well as sec- tors such as agriculture, health, education, fisheries, is along important, together with strengthening the financial resilience of countries to climate and disaster shocks. The need for a long-term strategy for the atoll islands, as they have their own unique resilience needs, is also apparent. CPF Objective Indicators Supplementary Progress WBG Program Indicators Disaster and Climate Resilience Disaster and Climate Resilience Disaster and Climate Resilience RMI, Samoa, Tonga, Vanuatu: Multi hazard early warning sys- Ongoing Direct project beneficiaries tems are established and operat- RMI, Samoa, Tonga, Vanuatu: (male/female) ing Pacific Catastrophe Risk As- sessment and Financing Initia- Baseline Target Baseline Target tive (PCRAFI) – helps reduce the (11/2016) (11/2020) (11/2016) 11/2020) financial vulnerability of partici- Samoa 38,000 75,000 Samoa No Yes pating countries. Tonga 24,000 60,000 Tonga No Yes Pacific Islands Resilience Pro- Increased coverage of hazard gram (PREP) in RMI, Samoa, forecast and warning messages Tonga, and Vanuatu – aims to to population at risk strengthen early warning, resil- Baseline Target ient investments, and financial (11/2016) (11/2020) protection in countries. Samoa 50% 80% Tonga 30% 70% Pipeline RMI Climate Resilient Coastal Participating PICs have received Protection Project payment within a month of the occurrence of a covered (insur- PCRAFI Recipient Executed Ac- ance) event. tivities Baseline Target (11/2016) (11/2020) RMI 0 100% Samoa 0 100% Tonga 0 100% Vanuatu 0 100% Regional Partnership Framework 81 Objective 3.2 Strengthening health systems and addressing NCDs Intervention Logic The Pacific faces an urgent health challenge in the form of non-communicable diseases (NCDs). The top seven most overweight countries in the world are PICs; the prevalence of obesity in adults is high among adults. The transition away from traditional foods and towards high sugar, fat, salt and highly processed imported foodstuffs is a major factor contributing to the increase of NCDs. Diabetes rates are far above those seen in other low and middle income countries. The proportion of premature deaths from NCDs among men and women in the Pacific are far higher than the lower-middle-income country average. In ad- dition to reducing life expectancy and quality of life, NCDs also limit peoples’ capacity to lead productive lives and the cost of treatment threatens to overwhelm the budgetary resources. CPF Objective Indicators Supplementary Progress WBG Program Indicators Health Health Health Kiribati, Samoa, Vanuatu: Ongoing Annually completed/updated DPOs to support health sec- health public expenditure analy- tor reform and specifically, the sis used to inform policy dialogue adoption of fiscal measures to address NCDs Baseline Target (12/2016) (06/2018) Pacific Health Technical Assis- Kiribati Yes Yes tance – aims to assist countries Samoa No Yes and development partners im- Vanuatu Yes Yes prove health service outcomes in the Pacific islands through more Vanuatu: efficient, equitable, and qual- Timely and accurate production ity expenditure. This includes of monthly, quarterly, and an- helping to build a broader base nual financial reports to inform of evidence to inform decision- annual business plan and budget makers, at both a country and regional level, on how the man- Baseline: No Target: Yes agement, financing, and delivery (12/2016) (06/2018) of health care can be improved in a sustainable way. Pipeline DPOs to support health sec- tor reform and specifically, the adoption of fiscal measures to address NCDs Financing Programs to Address the PIC NCD Epidemic (tbc) Samoa Health Project (tbc) 82 Regional Partnership Framework FOCUS AREA 4: Strengthening the enablers of growth opportunities (macroeconomic management, infrastructure and addressing knowledge gaps) Analysis and policy making with respect to poverty reduction and shared prosperity in the PIC9 are se- verely constrained by the paucity and low quality of data. In particular, none of the PIC9 fields regular household surveys that would allow policy choices to be informed by a good understanding of the poor and the key drivers of poverty. It also constrains the evaluation of which policies have the most impact on pov- erty reduction. Investment in improved information on the situation of the vulnerable and poor would also be essential to design social protection programs in the PIC9. Objective 4.1 Frameworks to improve fiscal management developed and maintained Intervention Logic Macroeconomic management affects the welfare of the poorest and most vulnerable through a number of channels. By providing a stable and low-inflationary macroeconomic environment, improved macro- economic policy can provide a necessary (though not sufficient) condition for sustained growth in aggre- gate economic activity, which in turn is generally linked to the income growth of the bottom 40 percent. Strengthened public financial management systems are key to improving the management and efficiency of public expenditure. There are important weaknesses in accountability and efficiency in the management of public resources across the PIC9. Establishing systems that build accountability, improve technical and allocative efficiency, and ensure a dependable flow of resources to service delivery units is vital. Improved macroeconomic management would also provide insulation against the effects of exogenous shocks, which tend to hit the B40 hardest, while ensuring that adequate public resources are allocated to welfare-en- hancing expenditures on social sectors at all points in the economic cycle. Frequent external shocks pose a significant challenge to macro-economic management and sustainability. In addition, over the RPF period several countries will have to adjust fiscal and macro-economic management to ensure that the increases in revenue from fisheries access fees are well used. FSM and RMI face the additional challenge of adjust- ing revenue and expenditures in anticipation of a more constrained fiscal environment after the scheduled termination of Compact grants in 2023. CPF Objective Indicators Supplementary Progress WBG Program Indicators Improved Macroeconomic Improved Macroeconomic Disaster and Climate Resilience Management Management Ongoing Kiribati’s Revenue Equalization RMI, Samoa, Tonga, Vanuatu: Reserve Fund is managed ac- Pacific Catastrophe Risk As- cording to the prevailing market sessment and Financing Initia- standards with substantially re- tive (PCRAFI) – helps reduce the duced costs. financial vulnerability of partici- Baseline: Costs of 0.2 percent pating countries. (12/2015); Target: Costs of no more than Pacific Islands Resilience Pro- 0.08 percent (12/2018). gram (PREP) in RMI, Samoa, Tonga, and Vanuatu – aims to Tonga: Improve wagebill afford- strengthen early warning, resil- ability ient investments, and financial Indicator: Public wagebill as a pro- protection in countries. portion of domestic revenue Baseline: 57 percent (06/2014) Pipeline Target: 53 percent or lower RMI Climate Resilient Coastal (07/2019) Protection Project The oversight of the banking sec- PCRAFI Recipient Executed Ac- tor in Tuvalu in increased. tivities Baseline: No regular monitoring reports (01/2015); Target: Monitoring reports are produced regularly, including information on nonperforming loans, and tabled to the Cabinet for information (12/2019). Regional Partnership Framework 83 Objective 4.2 Increased access to basic services and improved connective infrastructure Intervention Logic Disparities in basic services-spanning access to water and sanitation to electricity and information and communication technologies-are particularly pronounced among the PICs. In some PICs in particular, ser- vices are often limited to the main islands, while the outer islands, where most of the poor reside, have very limited access. Given the high cost of providing services to populations in remote islands, it is important to close gaps in service provision wherever this is feasible and economical. In order to support progress against both of the twin goals, infrastructure coverage gaps need to be ad- dressed; much of the population in countries such as Vanuatu, Kiribati, and FSM lack access to basic ser- vices like sanitation facilities and electricity. Land transport infrastructure on larger outer islands and outer-island shipping services also need to meet a basic standard. The efficacy of domestic shipping ser- vices is quite variable around the region, and it is a priority to address market failures which result in rural areas being cut off by high-cost, infrequent or sporadic shipping services. Improved connectivity and better infrastructure will be critical to help advance the well-being of the people of the Pacific and their access to growth. The most important connectivity improvement for the air tourism sector is to create more con- venient flight connections from key markets. CPF Objective Indicators Supplementary Progress WBG Program Indicators Basic Services Health Basic services Generation Capacity of Renew- Ongoing able Energy FSM, Tuvalu, Vanuatu: Energy (other than hydropower) con- Sector Development Projects structed in Tuvalu Pacific Islands Sustainable En- d to inform policy dialogue ergy Financing Project Pacific Islands Sustainable Ener- Baseline: No Target: 1.13 gy Industry Development Project (12/2016) (03/2019) mw Kiribati Adaptation Project III Vanuatu Rural Electrification Kiribati: Number of people pro- Project vided with access to improved GPOBA Improved Energy water sources Pipeline Baseline: No Target: 62,000 Planned water and sanitation (06/2016) (06/2021) (32,000 project in Kiribati - TBC female) Vanuatu Rural Electrification Project Stage II RMI Sustainable Energy Devel- opment Project Vanuatu Geothermal Energy De- velopment (TBC) FSM AF Energy Project 84 Regional Partnership Framework Connective Infrastructure Connective Infrastructure Connective Infrastructure Aviation Aviation Aviation Kiribati, Samoa, Tonga, Tuvalu Kiribati, Samoa, Tonga, Tuvalu, Kiribati, Samoa, Tonga, Tuvalu, and Vanuatu: Vanuatu: Vanuatu: Regulatory certification of safety Navigation and safety aids fully Pacific Aviation Investment Pro- and security at project airports operational gram (PAIP) – aims to improve operational safety and oversight BaselineTarget Baseline Target of international air transport in- Kiribati No Yes x 2 Kiribati 10% 100% frastructure. airports (12/2016) (06/2016) (12/2018) (12/2018) Samoa 0% 100% Samoa Yes Yes-re- (07/2016) (06/2018) (07/2016) validation Tonga 70% 100% (06/2019) (12/2016) (12/2018) Tonga No Yes x 2 Tuvalu 75% 100% 12/2016) airports (10/2016) (06/2017) (12/2018) Vanuatu 0% 100% Tuvalu No Yes (12/2016) (06/2017) (10/2016) (09/2017) Vanuatu Yes Yes-re- (12/2016) validation (06/2019) Airport terminals/runways upgraded or rehabilitated Baseline Target Kiribati No Both (Bon- (12/2016) terminals riki and upgraded Cassidy (12/2018) termi- nals Vanuatu No Bauerfield (Bau- (12/2016) runway re- erfield habilitated runway) (06/2018) Regional Partnership Framework 85 Connective Infrastructure Connective Infrastructure Connective Infrastructure Improved Roads Improved Roads Improved Roads Kiribati, Samoa, Vanuatu: Samoa: Ongoing Direct project beneficiaries Climate-resilient policies, codes Tonga Transport Sector Consoli- (male/female) and standards for road construc- dation tion and maintenance developed Baseline Target and adopted by government. Kiribati Road Rehabilitation Pro- Vanuatu 0 14,000 ject (03/2016) (7,000 Baseline: Identified (FY17) female) Target: Adopted (FY20) Samoa Enhanced Road Access (06/2021) Project Roads rehabilitated (km), rural Samoa Enhancing Climate Resil- ience-West Coast Road Baseline Target Kiribati 3.48 5.80 Vanuatu Infrastructure Recon- (06/2016) (06/2018) struction and Improvement Pro- Tonga 24.5 35 ject (09/2016) (06/2018) Pipeline Roads rehabilitated (km), Pacific Island Regional Road non-rural Safety Project Baseline Target Tonga Rural Roads (tbc) Kiribati 34.8 56 (06/2016) (06/2018) Samoa 2 33 (06/2016) (04/2019) Tonga 5 5 (09/2016) (06/2018) No of km of roads under regular road maintenance Baseline Target Kiribati 34.8 56 (06/2016) (06/2018) Tonga 462 462 (09/2016) (06/2018) Samoa: Bridges rehabilitated to im- proved standards Baseline: 0 Target: 6 (06/2016) (04/2019) 86 Regional Partnership Framework Connective Infrastructure Connective Infrastructure Connective Infrastructure Maritime Maritime Maritime Regulations in place with im- Number of maritime assets im- Pipeline proved monitoring enforcement proved for safety/resilience/ac- Maritime Projects Tonga and Tu- and compliance mechanisms cess (tentative) valu Baseline Target Baseline Target (06/2016) (06/2021) (06/2016) (06/2021) - TBC - TBC Tonga No Yes Tonga 0 3 Tuvalu No Yes Tuvalu 0 3 Connective Infrastructure ICT Connective Infrastructure ICT Access to broadband Internet Ongoing Services (number of subscribers Samoa, RMI, Tonga, FSM and per 100 people %) Palau Connectivity Projects Fixed Fixed Pipeline Baseline Target Kiribati, FSM (Kosrae) and Tuva- (06/2016) (06/2021) lu: Connectivity Projects - TBC Kiribati 2 10 Tonga eGovernment Project (tbc) FSM 2 3 Palau 2 3 Tuvalu 3 10 Mobile Mobile Baseline Target (06/2016) (06/2021) - TBC Kiribati 55 60 FSM 1 35 Palau 1 35 Tuvalu 30 45 Reduction in internet wholesale bandwidth price (international bandwidth cost/Mbps (US$)) Baseline Target (06/2016) (06/2021) - TBC Kiribati 950 <500 FSM 900 141 Palau 650 400 Tuvalu 1,000 <600 Regional Partnership Framework 87 Objective 4.3 Address knowledge gaps Intervention Logic Analysis and policy making with respect to poverty reduction and shared prosperity in the Pacific are severely constrained by the paucity and low quality of data. In particular, none of the PIC9 fields regular household surveys that would allow policy choices to be informed by a good understanding of the poor and the key drivers of poverty. It also constrains the evaluation of which policies have the most impact on pov- erty reduction. Investment in improved information on the situation of the vulnerable and poor would also be essential to design social protection programs in the PIC9. CPF Objective Indicators Supplementary Progress WBG Program Indicators Most recent Household Income Health Ongoing and Expenditure Survey (HIES) data available for analyzing pov- Pacific Possible erty in RMI and Kiribati are less Pacific Poverty Programmatic than five years old AAA Pipeline Baseline: No Target: Yes Outer Island (06/2016) (06/2021) Study completed on Outer Island challenges, including an exami- nation of service delivery, infra- structure, migration, connectiv- ity, etc. Baseline: No Target: Yes (06/2016) (06/2021) 88 Regional Partnership Framework A woman holding a child - Vanuatu. Photo credit: World Bank / Tom Perry Regional Partnership Framework 89 ANNEX 6: Current and Planned Program of Activities by Focus Area Focus Area 1: Fully exploiting the available economic opportunities Objective 1.1 Improved management of oceanic and coastal fisheries Current Planned Knowledge • Pacific Possible: Harnessing the Riches of the Pacific Financing • RMI-PROP (P151760) • Tonga PROP (tbc) • FSM-PROP (P151754) • Kiribati PROP (tbc) • PIC-Pacific Island PROP (P131655) • FSM AF for PROP (tbc) • Tuvalu-PROP (P151780) • RMI AF for PROP (tbc) Objective 1.2 Increased incomes from agriculture Current Planned Knowledge • Programmatic AAA for Pacific Agriculture (P152866) • Competitive Industries and Competition Program - improving competitiveness in the tourism and agriculture sectors (tbc) Financing • Samoa-Agriculture and Fisheries Cyclone Response (P45938) • Samoa Agriculture (tbc) • Samoa-Agriculture Competitiveness Enhancement (P115351) • Vanuatu Agriculture/Food Security (tbc) • Tonga Maritime Investment Project (P161539) • Tuvalu Maritime Investment Project (P161540) Objective 1.2 Increased incomes from agriculture Current Planned Knowledge • Pacific Possible: Host to the World • Competitive Industries and Competition Program – improving competitiveness in the tourism and agriculture sectors (tbc) • Tonga Maritime Investment Project (P161539) Financing • Samoa - Aviation Investment Project (P143408) • Tuvalu Maritime Investment Project • Kiribati - Pacific Aviation Investment (P128398) (P161540) • PIC - Pacific Aviation Safety Office Reform (P145057) • Vanuatu Aviation Investment Project • Tonga - Pacific Aviation Investment (P128939) Additional Financing • Tuvalu - Pacific Aviation Investment (P128940) • Vanuatu - Aviation Investment Project (P154149) 90 Regional Partnership Framework Focus Area 2: Enhancing access to employment opportunities Objective 2.1 Broadened Opportunities for Access to Labor Markets and Economic Activities Current Planned Knowledge • Australia SWP Development Evaluation (P151959) • Pacific Possible: Labor Mobility • Pacific Labor Mobility Programmatic AAA (P155609) Financing • Tonga Skills for Employment Project (P161541) Objective 2.2 Addressing education and skills gap Current Planned Knowledge • Pacific Early Age Readiness and Learning (P145154) • READing in the PICs (tbc) • Gender Disparities-Access, Equity and Quality in Educa- tion (tbc) • Determinants of secondary school participation (tbc) • Transforming Education-The Role of ICT (tbc) Financing • Tonga Cyclone Reconstruction (P150113) • Tonga Skills for Employment • SamoaEnhanced Road Access Project (P145545) Project (P161541) • Samoa-Enhancing Climate Resilience-West Coast Road (P126504) • Regional READ Project (tbc) • RMI-Pacific Resilience Program (P155257) • PIC-Pacific Resilience Program-SPC (P147839) • PIC-Pacific Resilience Program-PIFS (P155542) • Samoa-Pacific Resilience Program (P154839) • Tonga-Pacific Resilience Program (P154840) • Vanuatu-Pacific Resilience Program (P155256) • Kiribati: GEF Adaptation Phase III (LDCF) (P112615) • Samoa-Enhancing Climate Resilience of Coastal Communities (P126596) • Tonga Cyclone Reconstruction (P150113) • Vanuatu-Increasing Resilience to Climate Change (P112611) • Vanuatu-Mainstreaming Disaster Risk Reduction (P129376) Vanuatu Reconstruction Project (P156505) Regional Partnership Framework 91 Focus Area 3: Protecting incomes and livelihoods Objective 3.1 Strengthened preparedness and resilience to natural disasters and climate change Current Planned Knowledge • Vanuatu Affordable Resilient Housing Settlements (P157414) • Climate Vulnerability Assess- • Pacific Possible: Managing increasing stress on Pacific livelihoods ments for all PIC9 islands to • Pacific Disaster Risk Financing (P130347) inform areas of priority for the • PACIFIC CAT RISK ASSESS-PHASE 3 (P130441) integration of climate and dis- • Building Climate and Disaster Resilience (P152037) aster risk into different sec- • Disaster Responsive Social Protection in Pacific (P159592) tors (tbc) • Building Climate and Disaster Resilience in the Pacific (P152037) • Analysis of Land Reclamation - subtask TA on safer schools options in atoll islands (tbc) Financing • Pacific Resilience Program • RMI Climate Resilient Coastal • Samoa-Enhanced Road Access Project (P145545) Protection Project (P160096) • Samoa- Enhancing Climate Resilience-West Coast Road (P126504) • PCRAFI Recipient Executed • RMI-Pacific Resilience Program (P155257) Activities (P161533) • PIC-Pacific Resilience Program-SPC (P147839) • PIC-Pacific Resilience Program-PIFS (P155542) • Samoa-Pacific Resilience Program (P154839) • Tonga-Pacific Resilience Program (P154840) • Vanuatu-Pacific Resilience Program (P155256) • Kiribati: GEF Adaptation Phase III (LDCF) (P112615) • Samoa - Enhancing Climate Resilience of Coastal Communities (P126596) • Tonga Cyclone Reconstruction (P150113) • Vanuatu-Increasing Resilience to Climate Change (P112611) • Vanuatu-Mainstreaming Disaster Risk Reduction (P129376) • Vanuatu Reconstruction Project (P156505) Objective 3.2 Strengthening of health systems and addressing NCDs Knowledge Current Planned • Pacific Possible: Bending the Non-communicable disease cost curve • Financing Programs against in the Pacific the PIC NCD Epidemic (tbc) • Pacific Health TA/AAA • What works in the fight (Programmatic, with subtasks for Vanuatu, Kiribati, Samoa) (P153778) against NCDs in Small Island Developing States? (tbc) • The opportunity of tele-medi- cine in the PICs (tbc) • HR Strategies for Health – A regional approach • Forecasting, Quality, Financ- ing and Procurement of Phar- maceuticals in Small Island Economies (tbc) Financing • Financing Programs to Com- bat the PIC NCD Epidemic (tbc) • Samoa Health Project (tbc) • RMI NCD project (tbc) 92 Regional Partnership Framework Focus Area 4 (Cross-cutting): Strengthening the enablers of growth and opportunities (macro-economic management, infrastructure and knowledge gaps) Objective 4.1- Frameworks to improve fiscal management developed and maintained Current Planned Knowledge • Pacific PEFM Program (P154352) • Programmatic Public expenditure, public sector, public financial man- agement ASA (tbc) • EFI policy notes series Financing • Tuvalu - Supplemental DPO (P156169) • Tuvalu - Third Development Policy • Tuvalu - Second Development Policy Operation (P150194) Operation (P155066) • Tonga First Inclusive Growth Development Policy Operation (P155133) • Samoa -Second Fiscal and Eco- • Third Economic Reform Development Policy Operation (P155540) nomic Reform Operation (P155118) • Tuvalu Third Development Policy Operation (P155066) • Tonga - First Inclusive Growth • Samoa - Public Private Partnership Policy TA (P145839) Development Policy Operation (P155133) • Kiribati - Third Economic Reform Development Policy Operation (P155540) • Tonga E-Government Support Pro- ject (P154943) • Samoa Second Fiscal and Econom- ic Reform Operation (P155118) • Tonga Second Inclusive Growth Development Policy Operation (P159626) • FSM – Strengthening budget ex- ecution and financial reporting (P161969) • RMI – Strengthening budget ex- ecution and financial reporting Objective 4.2 Increased access to basic services and improved connective infrastructure Current Planned Knowledge Energy • Waste Management in the PIC9. • Strengthening the PRDR SE4ALL initiative (P153190) (tbc) • Kiribati - Utility Services Reform TA (P148300) • Maritime Transport – expansion to Connective infrastructure other countries of pilot study be- • Vanuatu - Telecoms and ICT Development TA (P117720) ing conducted in Tonga to examine the impact on consumer prices of remoteness and distance, com- pounded by the lack of proper in- frastructure and reliable transport Financing Energy services • FSM Energy Sector Development (P148560) • Pacific Reg ICT Regulatory Dev. Project (P148238) Water and sanitation • Pacific Islands- Sustainable Energy Industry Development (P152653) • Kiribati water and sanitation • Tuvalu Energy Sector Development Project (P144573) Energy • Pac Isl-GEF-Sustainable Energy Finance (P098423) • Vanuatu Rural Electrification Pro- • Kiribati: GEF Adaptation Phase III (LDCF) (P112615) ject Stage II (P160658) • Sustainable Energy Industry development (P152653) • RMI Sustainable Energy Develop- Regional Partnership Framework 93 • Institutional and Regulatory Framework [Energy] (P131250) ment Project (P160910) • GPOBA Improved Electricity Access (P133701) • Sustainable Energy Development • Vanuatu Energy Sector Development (P145331) Project (P160910) • Vanuatu Rural Electrification Project (P150908) • Vanuatu Geothermal Energy Devel- • Tuvalu - Energy Sector Development Project (P144573) opment (TBC) FSM - Energy Sector Development (P148560) • FSM AF energy project Connective infrastructure Connective infrastructure • Tonga - Transport Sector Consolidation (P096931) • Tuvalu- Telecommunications and • Kiribati - Road Rehabilitation Project (P122151) ICT Development (P159395) • Samoa - Enhanced Road Access Project (P145545) • Tuvalu Maritime Investment Pro- • Samoa- Enhancing Climate Resilience-West Coast Road (P126504) ject (P161540) • Vanuatu Infrastructure Reconstruction and Improvement • Kiribati ICT (P159632) Project (P156505) • Tonga Maritime Investment Project • Samoa - Aviation Investment Project (P143408) (P161539) • Kiribati - Pacific Aviation Investment (P128398) • Vanuatu Aviation Investment • PIC - Pacific Aviation Safety Office Reform (P145057) Project- Additional Financing • Tonga - Pacific Aviation Investment (P128939) (P161454) • Tuvalu - Pacific Aviation Investment (P128940) • Pacific Island Regional Road Safe- • Vanuatu - Aviation Investment Project (P154149) ty Project (P151159) • WS: Pac Reg Connect Phase III: Samoa (P128904) • Pacific Aviation Safety Office Ad- • Pacific Regional Connectivity Program (P113184) ditional Financing (P155066) • VU Telecommunications & ICT TA • Samoa Transport (TBC) • Kiribati - Telecoms and ICT Development (P126324) • Tonga E-Government (P154943) • Palau ICT TA Grant • Vanuatu ICT (TBC) • FSM - Palau-FSM Connectivity Project (P130592) • FSM – Domestic connectivity and • PIC - Pacific Regional ICT Regulatory Development Project (P148238) demand side applications (TBC) • Samoa - Pacific Regional Connectivity Phase III (P128904) • Palau-FSM Connectivity Project: • Tonga - Pacific Regional Connectivity Program (P113184) AF Kosrae Connectivity (P161363) • Marshall Islands- ICT TA Project (P132119) • RMI Maritime Investment Project (P161382) • FSM Maritime Investment Project (TBC) Objective 4.3 - Address knowledge gaps Current Planned Knowledge • Pacific Possible: Working Together (enhanced regional and sub-regional • Study on WBG support to Outer Is- cooperation in a number of well-defined areas and a look at the evolv- lands (service delivery, infrastruc- ing financial architecture in the Pacific). ture, migration, social issues, and • Programmatic poverty ASA - including (i) supporting countries in im- economic analysis for large scale plementing HIESes; (ii) preparing poverty profiles and assessments; (iii) infrastructure). (tbc) preparing policy notes on poverty issues; (iv) supporting project teams • Study on drivers of business suc- in using poverty data to strengthen the link of projects to the twin cess and failures in the Pacific. goals; and (v) capacity building for poverty analysis at the regional (tbc) level • Country Economic Memorandum for Vanuatu (tbc) • Urbanization trends in the PIC9 - find the right balance between in- vestments in rural and urban areas (tbc) Financing • RMI – HIES (TF) 94 Regional Partnership Framework A boy walks along a seawall - Apia, Samoa Photo Credit: World Bank / Conor Ashleigh ANNEX 7: Development Partners’ Areas of Engagement Area of Engagement Country and Development Partner Kiribati RMI FSM Nauru Palau Samoa Tonga Tuvalu Vanuatu PFM WB; ADB; ADB; US; US; ADB; ADB US; IMF WB; ADB; WB; ADB; ABD; EU; Australia; EU; WB Australia; Australia; EU; Aus- Australia Australia; EU IMF NZ tralia; NZ China; NZ Energy WB; EU; Australia; ADB, EU, NZ, ADB; UAE; ADB; ADB; NZ WB; ADB; Japan EU; WB; Japan; UAE; EU; Japan; UAE Australia; NZ NZ; Austral- IFC; ADB; Italy UN; WB; NZ; Japan; EU; ia; Japan; Australia; UAE; ADB; Taiwan, UAE; China Japan; NZ, Taiwan, China; NZ. China Health Australia; US; WHO; US; China Australia US; Taiwan, ADB; Australia; NZ; Australia; NZ; UN; EU; Taiwan, China Australia; WHO; NZ; Taiwan, UN; WB; SPC; WB; China China; NZ; Japan; China France; ADB WB China Japan; NZ Social Protection WB UN Japan WB WB WB; ADB; Australia; NZ; UNDP; China; IFAD Water and sanitation ADB; EU; Australia; Australia; ADB; Japan EU ADB; Aus- NZ; Aus- US; ADB; Russia; Tai- EU ADB; Japan; tralia; Japan tralia Japan wan, China. EU Agriculture Taiwan, China; SPC Australia Taiwan, Taiwan, EU; Austral- IFAD; Tai- China; FAO China ADB; WB WB; Aus- China ia; France; wan, China; tralia; NZ; Japan; GEF; FAO; China; FAO; China; NZ SPC; SPREP IFAD Transport Japan; ADB; Japan; ADB; Japan; ADB; Tai- ADB; NZ IFC; WB; ADB; Taiwan, China Australia; wan, China WB; ADB; ADB; Australia; Japan; Aus- China NZ Japan; Australia; Japan; US; tralia; SPC; China China; WB NZ Taiwan, China. Public Administration ADB ADB ADB; ADB Australia; EU; WB; UN; Taiwan, Australia; Australia SPC; UN; WB; ADB WB; ADB; Japan; NZ; Australia; Environment China; WB, SPC; UN, PEW Trust Australia; TANGO Japan (natural resources) UN WB NZ; EU Japan; NZ; Australia; China; Regional Partnership Framework Education ADB; US Japan; US; Australia US; Japan Japan Australia; EU; WB; China WB; ADB; EU; Japan; ADB; Australia; WB; NZ Australia; NZ; China Australia France; 95 Japan; NZ, Area of Engagement Country and Development Partner 96 Kiribati RMI FSM Nauru Palau Samoa Tonga Tuvalu Vanuatu Private Sector ADB; UN; US US ADB ADB; IFC; WB; EU; WB; Development NZ Australia; ADB; NZ; Australia UNESCO, Financial Sector ADB; UN; US ADB WB WB; ADB; ADB; WB; Australia; EU; UN; WB, Development Australia; IMF; PIFTAC ADB Australia NZ Disaster Risk WB ADB; Japan; US; Japan; Australia UN; IOM; WB; WB; Japan; Australia; Management Taiwan, SPC; IOM; US, SPC Australia China; Japan; NZ; China; UN; UN Australia; UN; TANGO US; WB, IOM NZ Human resources EU; Japan; ADB Japan; MFAT; Australia, Regional Partnership Framework Taiwan, Taiwan, Australia NZ China; UN; China; US US Gender UN; UN; Australia SPC UN UNDP; Australia EC; WB; UN; Australia Australia Australia; Australia; NZ Japan; NZ MFM ADB; ADB; IMF; ADB; IMF; IMF; US ADB; ADB; (incl. budget support) Australia; US; WB; EU US; WB Australia; Australia; WB; NZ New EU; NZ; Tai- Zealand; WB wan, China Infrastructure/ Rural/ WB EU; Japan; ADB; Japan ADB; ADB; Japan ADB; WB ADB; WB; Community Development UN; US; Australia Australia; Taiwan, China; China Japan ICT WB WB ADB; WB ADB ADB; WB WB; ADB WB; ADB; WB; ADB; Japan;China NZ Tourism Australia; ADB ADB; PEW NZ; EU Japan; Tai- Trust wan, China Skills Australia EU Australia EU Australia; NZ; WB Solid waste management Japan Japan Japan ADB; IFC ADB Regional Partnership Framework 97 ANNEX 8: Regional Institutions in the Pacific Islands PIFS: The Pacific Islands Forum Secretariat was set up in 1971. It is the Secretariat to the annual Pacific Island Forum meeting of Pacific leaders. At the Forum, leaders agree on priorities for the region as part of the Pacific Plan. The Secretariat’s approximately 100-member staff is based in Suva, Fiji. CROP: The Council of Regional Organizations in the Pacific is an inter-organizational consultative process that aims to prevent either overlaps or gaps between the work pro- grams of its various members. In addition to the Forum Secretariat, the members of CROP are: • FFA: The Pacific Islands Forum Fisheries Agency is an advisory body established to help countries sustainably manage their fishery resources. FFA provides expertise, technical assistance and other support to its members, who make sovereign decisions about their tuna resources and participate in regional decision making on tuna man- agement. It is based in Honiara, Solomon Islands. • PASO: The Pacific Aviation Safety Office is a regional international organization over- seeing advising on aviation safety and security regulations in the Pacific Islands using guidelines provided by in accordance with the International Civil Aviation Organiza- tion (ICAO) Standards and Recommended Practices. PASO was established on 11 June 2005 through the Pacific Island Civil Aviation Safety and Security Treaty, and is based in Port Vila, Vanuatu. PASO comprises ten Member States: the Cook Islands, Kiribati, Nauru, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu; as well as three Associate Member States: Australia, Fiji, and New Zealand. All develop- ing member countries of PASO have agreed to regulatory harmonization with the New Zealand Civil Aviation Regulations. • PIDP: The Pacific Islands Development Programme was established in 1980 to assist Pacific islands leaders in advancing their collective efforts to achieve and sustain equi- table social and economic development consistent with the goals of the Pacific islands region’s people. PIDP began as a forum through which island leaders could discuss criti- cal issues of development with a wide spectrum of interested parties. It is based at the East-West Center in Honolulu, USA. • PPA: The Pacific Power Association is an inter-governmental agency to promote the direct cooperation of the Pacific island power utilities in technical training, exchange of information, sharing of senior management and engineering expertise, and other activities of benefit to the members. Its headquarters are located in Suva, Fiji. • SPC: The Secretariat for the Pacific Community is a regional intergovernmental or- ganization that serves 22 Pacific Island countries and territories through technical as- sistance, policy advice, training and research. It operates in a wide range of sectors with the aim of achieving three development outcomes – sustainable economic devel- opment, sustainable natural resource management and development, and sustainable human and social development. Its headquarters are in Noumea, New Caledonia. 98 Regional Partnership Framework • SPTO: The South Pacific Tourism Organisation, established in 1983 as the Tourism Council of the South Pacific, has as its mission to market and develop tourism in the South Pacific. It has 18 government members and maintains a head office is in Suva, Fiji. • SPREP: The Secretariat of the Pacific Regional Environment Programme promotes the protection and sustainable development of the Pacific region’s environment. It is based in Apia, Samoa. • USP: The University of the South Pacific is a provider of tertiary education in the Pacific region and an international center of excellence for teaching, research, consult- ing, and training in all aspects of Pacific culture, environment, and human resource development needs. Established in 1968, USP is jointly owned by the governments of 12 member countries: Cook Islands, Fiji, Kiribati, RMI, Nauru, Niue, Solomon Islands, Toke- lau, Tonga, Tuvalu, Vanuatu, and Samoa. The university has campuses in all member countries. The Pacific Islands Private Sector Organisation (PIPSO). PIPSO was established in 2007 to promote the private sector’s role in policy making and to encourage business develop- ment through effective partnerships with governments, regional organizations, develop- ment partners and NGOs. Its headquarters are in Suva, Fiji. PIPSO is a regional umbrella organization whose members are mainly national private sector organizations from each of the fourteen Pacific Islands Forum countries, together with that from American Samoa. It aims to assist members to formulate national private sector strategies and to advocate the interests of the private sector and also provides business development services for the Pacific. Pacific Island Development Forum (PIDF). PIDF, based in Suva, Fiji, was established in 2013 seeks to bring together leaders from the public and private sectors and civil society to address regional development challenges. Member states of PIDF include Fiji, Federated States of Micronesia, Kiribati, Marshall Islands, Nauru, Solomon Islands, Tonga and Va- nuatu. A woman preparing for harvest - Vanuatu. Photo Credit: World Bank Regional Partnership Framework 99 ANNEX 9: Country Annexes FEDERATED STATES OF MICRONESIA (FSM) Sociopolitical and Institutional Factors A sovereign country since 1986, FSM is a voluntary federation of four semi-autonomous states, each with its own executive and legislative bodies and considerable autonomy to manage its domestic affairs. Most public services are delivered at the state level. The loose federation structure presents challenges for decision making, building consensus, and im- plementing national reforms or programs. FSM maintains deep ties and a cooperative re- lationship with the USA, with which it has a Compact of Free Association that provides yearly financial transfers to FSM and permits open migration to the USA, among other arrangements. Compact financing includes “Compact sector grants” (which help sustain the delivery of public services) and contributions to the Compact Trust Fund (CTF), which was established to replace the Compact sector grants when they terminate at the end of FY2023. Fiscal adjustments are required over the next seven years as Compact sector grants come to a close. It will be a major challenge to carry out those adjustments without reducing the quality of public service delivery or limiting access to services—especially to the poorest 40 percent of the population. The open migration allowed under the Compact provides opportunities for overseas employment, which can generate remittances to sup- port households in FSM. The drawbacks of migration is that it depopulates poorer parts of the country, increases the dependency ratios among those who remain, and reduces the economy’s long-run productive potential. Recent Economic Developments and Outlook Economic activity in FSM consists primarily of subsistence farming and fishing and de- pends heavily on external assistance. Real GDP declined by 3.6 percent in FY2014 (ending September 30) following a 3.4 percent contraction in FY2013. GDP declined in each of the four states in both fiscal years for the first time since GDP was recorded. This contrac- tion is largely explained by the decline in domestic fisheries and construction. Domestic fisheries declined during the period because much of the fishing fleet underwent mainte- nance. Employment dropped by 4.1 percent, with private sector employment falling by 7.7 percent and public employment by 2.1 percent. Construction declined because of delays in implementing some infrastructure projects, and the completion of the majority of airport improvement projects funded by the USA. Inflation continued to decline from the recent peak in FY2011 to around to -0.2 in FY2015, as food and fuel prices decreased. FSM achieved an estimated fiscal surplus of US$35.6 million (or 11.2 percent of GDP) in FY2014. The surplus was largely explained by the rising fishing license fees) and a one- time payment associated with the captive insurance market. A portion of the surplus was invested into the FSMs own Trust Fund to support the 2023 transition. Tax receipts, excluding one-off revenue, remain low compared to regional peers, at around 12percent of GDP. Legislation supporting the tax reform initiative (including the proposed introduc- tion of a value-added tax) failed to pass. The fiscal outturns also differed significantly 100 Regional Partnership Framework between the FSM national and state governments. The national government ran a surplus of US$42.9 million, while all states recorded small deficits, amounting to US$7.3 million. The FSM state governments, where service delivery occurs, have been constrained by the declining real value of Compact grants, while the national government has benefited from booming revenues from fishing fees and, to a lesser extent, the one-time payment from the captive insurance market, both of which are mostly kept at the national level. Should this level of surplus persist in the medium term, its accumulation in the FSM Trust Fund, the Compact Trust Fund or an alternative fund could buffer against volatilities in the fi- nancial markets and reduce the pending fiscal shortfall after FY2024, when the Compact of Free Association grants are scheduled to end. The current account reached an estimated surplus equivalent to 6.8 percent of GDP in FY2014 (from a deficit of 9.9 percent in FY2013), mainly due to the income associated with the one-time captive insurance industry payment. Excluding that payment, the current account deficit would have narrowed to 7.7 percent of GDP in FY2014. The weakness in the economy and falling fuel prices are reflected in weak imports, which fell by 11 percent compared to FY2013. On the other hand, strong fishing license fees continued to sup- port the decline in the trade deficit in FY2013 and FY2014. The current account deficit is expected to remain at around 10 percent of GDP in the medium term, largely financed by the inflow of official transfers. The 2015 Debt Sustainability Analysis also found FSM to be at a high risk of debt distress, although tax- and growth-enhancing reforms could help contain debt risks while ensuring the country’s development needs are met. Poverty and Shared Prosperity FSM has the highest estimated rates of poverty among the PIC9. Estimates from the 2013/14 HIES suggest that 17 percent of the population lives below the internationally comparable Extreme Poverty consumption benchmark of US$1.90 per person per day (in 2011 PPP terms). The situation appears to have deteriorated since 2005, when Extreme Poverty was estimated at 11 percent (although the comparability of consumption aggre- gates is limited by changes in the methodology over time). The national basic-needs poverty line derived from the 2013/14 HIES sets a higher welfare benchmark than the international Extreme Poverty standard, implying 41 percent of the FSM population struggles to meet basic needs (with 10 percent living on consumption levels below the food poverty line). Multidimensional indicators suggest a more positive long-term trend in well-being, how- ever. Between 2005 and 2013, the proportion of households with no access to electricity fell from 32 percent to 24 percent and the proportion of dwellings without sanitary facili- ties fell from 46 percent to 21 percent. There is stark regional variation in poverty across the Federation. Basic-needs poverty is both most common and most severe in Chuuk (with a national basic-needs poverty rate of 46 percent), followed by Pohnpei and Yap (each with a headcount rate of 39 percent), while it is somewhat lower in Kosrae (21 percent). Poverty in Pohnpei and Yap reflects a particularly high cost of living, while the cost of living is relatively low in Chuuk, suggest- ing poverty there (as measured by real consumption levels) reflects lower incomes, or more modest subsistence production levels. Regional Partnership Framework 101 Multidimensional indicators on access to electricity, improved water sources, schools, and assets in general suggest deprivation is most widespread in Chuuk (though Yap has a much higher proportion of households with poor-quality housing, and also a higher proportion with no improved sanitation). In general, the incidence of basic-needs poverty is higher for larger households; it is lower for households headed by a male, for households with a more highly educated household head, and for households where the head is employed in the public sector. The national Gini coefficient on nominal per capita consumption across the population is estimated at 0.43, but no estimates currently exist on the changing income share of the B40 over time. Development Agenda FSM faces challenges in securing economic growth and sustainability in the medium to long term. Growth is expected to remain below 1 percent in the medium term, and the expiration of Compact sector grants poses a major challenge to the economy. In the short to medium term, declining public sector demand from the reduction in Compact sector grants is expected to act as a drag on economic growth. Limited private sector growth is not expected to fully offset this effect. Remoteness from major markets and the small scale of the economy make it costly to operate, difficult to attract foreign investors, and challenging to retain skilled workers. These circumstances could limit the government’s ability to provide services to its citizens, with negative effects on living standards. The current trajectory of the Compact Trust Fund is not on track to fully offset expiring U.S. grants after FY2023, although the FSM Trust Fund will partially offset the shortfall. In this context, the risk of lower than anticipated trust fund returns underscores the importance of strengthening fiscal buffers. Pursuing the goals of poverty reduction and shared prosperity in FSM—in line with the government’s own objectives—will require the government to find new opportunities to generate revenue and growth to create jobs and provide equitable benefits to society. Pur- suing those goals will also require expenditures to be managed effectively to ensure that essential services reach a wide share of the population, with a focus upon the poor and un- derserved. To support that approach, FSM must build a stronger evidence base on poverty to target resources to address particular needs. Strengthening economic infrastructure and improving the investment climate are cen- tral to fostering economic growth and protecting service delivery as FSM prepares for the 2023 transition. The upgrading of airports supported by the USA will be completed in 2017. A slowdown in the implementation of infrastructure projects affects the living standards of the population and medium-term economic outlook. Investments and policy reforms to enhance ICT, energy, and transport infrastructure are important government priorities. With the support of IFC, in 2013 FSM developed an action plan to facilitate in- vestment. The plan focuses on fostering economic growth and sustainable development by improving the business climate and enhancing the financial literacy of the private sec- tor, which should in turn build the confidence of financial institutions to lend to the private sector. Implementation has remained stagnant. 102 Regional Partnership Framework On the other hand, FSM has significant opportunities to increase the economic return on its natural resources. The country’s substantial endowment of natural resources includes its natural beauty (an asset for tourism) and fisheries. Despite having the world’s best div- ing site (situated in Chuuk), poor infrastructure, land tenure issues, the weak investment climate, and vested interests impede development of the tourism sector. The Exclusive Economic Zone (EEZ) also happens to be situated in one of the world’s last viable tuna fish- eries. Efforts to extract a higher economic return from this fishery has increased revenues and savings in recent years, but more could be done. The open access of FSM citizens to the USA under the Compact is another economic opportunity that could be better utilized to benefit both nations. The key to facilitating migration, however, is to provide an adequate education to produce a qualified and ap- propriately skilled labor force. National Strategy and Its Key Pillars/Focus The government’s vision for achieving economic growth is detailed in the FSM Strategic Development Plan (SDP) 2004–2023, completed in 2004. This plan, an output of the Third FSM Economic Summit held in 2003, reflected the input of more than 400 participants with a wide range of perspectives from the government, traditional leaders, industry, and civil society. The growth strategy focuses on six key areas: (i) macroeconomic stability; (ii) good governance; (iii) developing an outward-oriented, private sector-led economy; (iv) investing in human resources (improved health and education services); (v) investing in infrastructure; and (vi) long-term environmental sustainability. Recognizing the impor- tance of women’s contributions to the future of FSM, the SDP devotes an entire chapter to gender. The national government have recently developed updated strategy documents collabo- ratively with the four states that draw from align and in some cases replace sections of the SDP and also provide an updated focus reflecting changes in the country’s envi- ronment since 2003. These include the Overseas Development Assistance (ODA - 2015) policy; the Infrastructure Development Plan (IDP 2016-2023) which replaces volume III of the SDP and the 2023 Action Plan (2015) – a three year plan focusing on the economic sectors and the enabling environment; other strategy documents include State level stra- tegic plans and the Joint National/State Action Plans (JNAP). The ODA has six nationwide priority areas (i) Food and water security; (2) Health – diagnostic facilities; (3) Renewable Energy; (4) Private Sector Support Facility; (5) Infrastructure 2016- 2023; (6) Health and Education - (to be endorsed by congress in early 2017). World Bank Group Program The World Bank program has been developed through consultations with national and state governments and key stakeholders, it is aligned with the strategic documents of the FSM to support their development needs and provides a balance of working at the national and state level. Regional Partnership Framework 103 During the CPF period, the indicative areas of engagement in FSM include: • Improving electricity supply and efficiency while setting the stage to increase the use of renewable energy; • Improving connectivity through enhancing telecommunications access and affordabil- ity and improving the safety and sustainability of maritime services; • Supporting the government prepare for the 2013 Transition for Compact Sector Grants to funding from the CTF through strengthened PFM systems; improving the targeting of service delivery; and increasing sustainably the revenue from fisheries; • Enhancing food security and livelihoods for communities through coastal fisheries and improved connectivity. ACTIVE PROJECTS Project ID Project Name Date, Net % Disb Lst Rev Lst Board App Comm Closing DO IP ($m) P148560 Energy Sector Development Project 05/29/2014 07/31/2018 14.40 31.8% S MS P151754 PROP for Federated States of Mi- 12/22/2014 09/30/2020 5.50 9.4% S S cronesia P130592 Palau-FSM Connectivity Project 12/17/2014 01/31/2020 47.50 13.4% MS MS INDICATIVE PROGRAM FY17-21 (INDICATIVE – TBC) Project Name IDA (US$ million) 14 Year Palau-FSM Connectivity Project Additional Financing 14 FY17 Strengthening Budget Execution and Financial Reporting 7-9 FY18 ICT: Demand Side Applications/Domestic Connectivity (tbc) 16-17 FY18 Energy Sector Development Project II (tbc) 16-17 FY19 Regional Maritime (tbc) 16/17 FY20/21 PROP (Fisheries) Additional Financing (tbc) FY20/21 Total 66-71 ADVISORY SERVICES AND ANALYTICS Product Line Project Name Delivery Date P151797 Poverty Analysis FY17 14 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of SDR to USD. 104 Regional Partnership Framework Development Partners The Bank will work collaboratively with other partners during the implementation of the program. For PFM, the Bank will focus on strengthening the financial management and reporting systems and associated business processes which will complement the broader PFM reform efforts underway by the IMF and the EU. The current Energy project will provide government with a framework to coordinate and prioritize investments by the government and development partners such as the EU, NZ and ADB and the follow on Bank project. Financial support provided by the USG is programmed through the FSM government’s budget and planning process or directly provided by US federal agencies. It is primarily focused on the sectors of education, health and infrastructure. There may be opportuni- ties during the CPF period for collaboration particularly in the area of ICT demand side applications such as e-health/telemedicine for example. KIRIBATI Recent Economic Developments and Outlook Growth in Kiribati has been strong and is expected to remain above-trend this year. Real GDP growth reached an estimated 3.7 percent in 2014 and around 3.4 percent in 2015, driven by donor-financed infrastructure projects (in the road, port, and aviation sectors) and an increase in credit to households. Inflation has remained below 2 percent as lower food and commodity prices offset the pressures from the higher domestic demand and weaker Australian dollar. Despite large trade deficits (40–47 percent of GDP over the last five years), the current account balance has remained in a large surplus thanks to record fishing license fee revenue paid by foreign companies to fish in Kiribati’s vast Exclusive Economic Zone and, to the lesser degrees, steady remittances and investment incomes from the Revenue Equalization Reserve Fund (RERF), Kiribati’s sovereign wealth fund. The fishing license fee revenue recorded AUD 198 million in 2015, about 90 percent of GDP and more than double the level seen in 2013, driven by the favorable El Nino effect, the imple- mentation of the Vessel Day Scheme (a regional agreement that establishes the minimum price of a vessel day and limits the total number of vessel and fishing days sold) and the appreciation of the US dollar against the Australian dollar. Reversing the decades’ trend of continual drawdowns, the government made a net transfer of AUD 50 million to the RERF in 2015. The new government which came in power in March 2016 made the decision to transfer additional AUD 70 million to the RERF to safeguard intergenerational equity. The outlook remains positive, although the fishing license fee revenue is expected to come down from recent peaks with changing climate cycle and migration patterns of tuna. Growth is expected to gradually moderate toward the potential growth, averaging around 2-3 percent per year, but commencement of new major infrastructure projects with de- velopment partners, if materializes, will shift upward the medium term growth forecast. Risks to the outlook includes disorderly slowdown in China, which could result in growth in Asia Pacific Region and could negatively affect fishing license fees and seamen’s re- Regional Partnership Framework 105 mittances. A heightened volatility in global financial markets—in response to an interest rate hike by the United States government, for example—could have a negative impact on returns to RERF assets. Making the RERF sustainable to protect the country’s overall economic stability remains a key policy challenge, given Kiribati’s large structural trade deficits, highly volatile fishing license revenues, and large spending needs to address wide- spread poverty and the severe infrastructure backlog. Kiribati remains at high risk of debt distress, according to the latest IMF/ World Bank Debt Sustainability Analysis. As of end-2015, public domestic debt was estimated at 2.4 per- cent of GDP, while gross public external debt was estimated at about 22 percent of GDP. The assessment of high risk of debt distress reflects Kiribati’s limited capacity to take on debt, given its low potential growth and narrow export base. Containing the risk requires securing grants rather than concessional loans to finance the country’s large development needs, invest in physical and human capital to raise productivity, diversify exports, and raise long-term growth. Poverty and Shared Prosperity Poverty estimates for Kiribati are among the highest in the region, although they are based on results of the HIES, last conducted more than 10 years ago. A new HIES is slated for 2017, and the World Bank is engaged in a coordinated dialogue to support this effort. In 2006, 14 percent of the population lived in extreme poverty, according to the international benchmark of per capita consumption of 2011 PPP US$1.90 per day. The national welfare benchmark is implicitly somewhat more generous; 22 percent of i-Kiribati were estimated to be living below the national basic-needs poverty line in 2006 (with 5 percent below the food poverty line). Estimates in the SCD (from the 2006 HIES) indicate a nationwide Gini coefficient on per capita nominal consumption expenditure across the population of 0.38, which is relatively low by Pacific standards. Estimates of the incidence of national basic-needs poverty are comparable across South Tarawa and the rest of the Gilbert Islands (24 and 22 percent, respectively, in 2006), but considerably lower (9 percent) in the far flung Phoenix and Line Islands, home to roughly 10 percent of the population. Drawing on the 2006 HIES data, 2010 census data, key informant interviews, and focus group discussions with i Kiribati, a recent analysis by Australia’s Department of Foreign Affairs and Trade (DFAT)15 highlights differences in the nature of hardship in the capital compared to the islands. Residents of South Tarawa tend to have limited access to land and are more likely to have health is- sues from poor water, sanitation, and overcrowding. At the same time, they derive greater benefit from remittances from seafaring and salary incomes (which contribute 71 per- cent of their household income, compared with 35 percent for households on the islands). Households on the islands tend to have a larger share of young and old members, as well as poorer access to education, health, and communication services. While food security is relatively robust for people living outside the capital, natural resources (including potable water) are increasingly under strain. 15 Kiribati Program Poverty Assessment 2014. 106 Regional Partnership Framework Development Agenda Strengthening assets and capabilities of the bottom 40 percent. The most important asset of the poor is human capital, and education and health are its main determinants. Apart from nearly achieving universal primary education, Kiribati has not achieved any of the Millennium Development Goals (MDGs). Progress toward the health MDGs is par- ticularly poor; Kiribati has the region’s highest under-five, infant, and maternal mortality rates. Better access to water and sanitation is necessary to achieve the health MDG out- comes. With donor support, the government is investing in infrastructure. Improving public sector effectiveness. Kiribati’s economy is dominated by the public sec- tor, which accounts for as much as 50 percent of GDP and nearly 80 percent of jobs in the formal sector. The private sector remains small, mostly consisting of small firms in the wholesale, retail, and transport sectors. The country has 24 state-owned enterprises (SOEs) operating in sectors where private firms would normally be expected in other coun- tries—including hotels, shipping, inter-island transport, and retailing. The private sector has struggled to make inroads in many of these areas in part because of inherent disecon- omies of scale, high costs, and severe infrastructure deficits (roads, ports, and airports). The public provision of goods and services through SOEs has resulted in limited supply or coverage and high costs, despite huge fiscal costs. Creating jobs and economic opportunities. Public sector employment and traditional sea- faring cannot be the solution to high and rising unemployment, with an estimated 2,000 young people entering the labor market each year. While expectations about the viability of the private sector need to be realistic, Kiribati’s potential for private sector growth has not been fully exploited because of the difficult investment climate. In the near term, ex- panding employment opportunities through seasonal work in other countries provides the best opportunity for many i-Kiribati, most of whom rely on the government’s expensive copra subsidy scheme. Given the country’s unique disadvantages—distance, high costs of air transport, and lack of the colonial ties that give other PIC9 countries some level of migration or trade with Australia, New Zealand, and the USA—special windows may need to be negotiated bilaterally with the host countries. National Strategy and Its Key Pillars/Focus Kiribati has recently launched its 5-year National Development Plan (2016–19). The plan focuses on 6 key priority areas-human resource development, economic growth and pov- erty reduction, health, environment, governance and infrastructure. World Bank Group Program The World Bank program has been developed through wide consultations with government and key stakeholders, it is fully aligned with the Kiribati Development Plan and builds on recommendations from the SCD. MoF will continue to be instrumental in ensuring the program is aligned with government priorities and is endorsed by the leadership and the Kiribati Fiduciary Services Unit will be further strengthened in the RPF period to assume a stronger role in the implementation of projects financed by the World Bank as well as other development partners. Regional Partnership Framework 107 ACTIVE PROJECTS Project ID Project Name Date, Board Rev Net % Disb Lst Lst App Comm Closing DO IP ($m) P155540 Third Economic Reform DPO 09/13/2016 12/31/2017 12.00 0.0% P112615 Kiribati:GEF Adaptation Phase III 09/15/2011 02/28/2018 10.70 58.1% MS MS (LDCF) P122151 Kiribati Road Rehabilitation Project 03/01/2011 06/30/2018 29.65 90.2% MS MS P128938 Pacific Aviation Investment-Kiribati 12/13/2011 12/31/2018 30.01 30.3% MS MS P126324 KI: Telecomms and ICT 07/26/2012 06/30/2017 1.00 72.2% S S Development INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 16 Year Pacific Regional Connectivity Program Phase 4 20 FY17 Water and Sanitation (tbc) 14-15 FY18 Fourth Economic Reform Development Policy Operation 5 FY18 PROP Fisheries (tbc) 14-15 FY19 Development Policy Operation 5 FY19 Regional Maritime (tbc) 10-15 FY20 Development Policy Operation 5 FY20 Total 73 - 80 Development Partners The Bank will continue to work collaboratively with other partners during the implementa- tion of the program, seek synergies where applicable and avoid overlaps in sectors where others have a comparative advantage. In the ICT sector, the World Bank will work closely with ADB to bring a high speed fiber optic cable to the country (linking Nauru and FSM as well). A water and sanitation investment for Tarawa and potentially the outer islands will similarly be undertaken in partnership with ADB. Cooperation will continue with Australia, especially in the area of climate resilience and synergies will be sought to complement planned efforts with New Zealand in support of the fisheries sector. Building on the ongo- ing renewable energy project, the World Bank will collaborate with partners to prioritize investments by the government and development partners. There may be opportunities during the RPF period for collaboration particularly in the area of maritime investments in the outer islands, where any engagement will be closely coordinated with the EU, which is channeling significant support to Christmas Island. 16 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of SDR to USD 108 Regional Partnership Framework REPUBLIC OF THE MARSHALL ISLANDS (RMI) Sociopolitical and Institutional Factors Along with other North Pacific Islands, the RMI was consolidated into the Trust Territory of the Pacific Islands governed by the USA during the Second World War. The Marshall Islands became self-governing in 1979 and achieved formal independence in 1986. Upon independence, it entered into the original Compact of Free Association with the USA; the Compact provides regular financial transfers to the RMI. The RMI is governed as a mixed parliamentary-presidential system. General elections are held every four years with each of 24 constituencies electing one or more representatives (Senators) to the lower house of the bicameral legislature (Nitijela). The President, and Head of State, is subsequently elected by the 33 senators. The upper house (Council of Iroij) is an advisory body comprising 12 tribal chiefs. The RMI maintains deep ties with the USA, and although it is gradually reducing its reli- ance on the USAwith the tapering off of Compact sector grants, capacity remains thin. In FY2004, the amended Compact came into effect. Under this agreement, the RMI re- ceives yearly financial transfers in the form of Compact sector grants, which have greater accountability requirements. RMI initially struggled to adjust to the new requirements, partly due to capacity issues. The amended Compact also comes with financing in the form of contributions to the Compact Trust Fund (CTF), which will replace the Compact sector grants when they terminate at the end of FY2023. Unlike many other countries that rely on development assistance, the RMI experiences higher certainty with respect to the flow of resources under the Compact arrangements. Capacity is gradually being built, as the country transitions from Compact dependency, although it remains thin. The RMI also enjoys an open migration policy for citizens to go to the USA, although this has also contributed to depopulation, reducing the productive potential of the economy. Recent Economic Developments and Outlook The public sector dominates the Marshallese economy, accounting for approximately half of GDP, and transfers to SOEs have been a significant drain on public resources. The size of the public sector partly reflects the inability of a very small country to exploit econo- mies of scale in public administration and service provision. Agriculture and fisheries are the main economic activities, contributing a little over one-fifth of GDP, with small-scale service industry such as wholesale and retail trade constituting the remainder of the economy. With private sector development limited by remoteness, small market size, SOE dominance in some sectors and a weak business climate, growth is highly dependent on government spending and fiscal policy overall. Because RMI has no central bank and uses the US dollar as its national currency, fiscal policy is the only tool for macroeconomic management. Government revenues are dominated by foreign grants (generally Compact related) and characterized by a narrow tax base. With Compact sector grants scheduled to expire in FY2023, the RMI needs to capitalize its trust fund adequately to sustainably support government spending at reasonable levels in the long term. Regional Partnership Framework 109 Economic growth recorded a positive, but lackluster performance in FY2015 (ending September 30) with a 0.6 percent increase in GDP, an improvement over the previous year’s decline of 0.9 percent. However, the economy was largely flat; fisheries output was unchanged on the prior year as well as construction activity, which remained at low levels reflecting the continuing absence of Compact infrastructure grant usage. While activity in the wholesale and retail trade fell, financial intermediation and education services showed signs of growth. Reflecting the large reductions in international fuel prices, inflation as recorded through the CPI, fell by 2.2 percent, but by the first quarter of 2016 had returned to positive territory. Preliminary data for FY2015 indicates the RMI achieved a fiscal surplus in FY2015 equiva- lent to 2.9 percent of GDP. Tax revenues grew by 6 percent, which mainly reflected a sig- nificant increase in ship registry fees. Without the ship registry fees, tax revenues grew by 0.5 percent reflecting the weak growth in the economy. Receipt of grants grew although use of the Compact infrastructure grant fell. A large increase of $3.5 million was recorded in the use of fishing royalties. The major growth item of expense was a large increase in subsidy payments to the SOE sector of $5.6 million. Transfers to local government’s also increased by $1.5 million. A joint World Bank-IMF debt sustainability analysis conducted in November 2013 conclud- ed that RMI is at high risk of debt distress. The country’s vulnerability to debt distress is exacerbated by contingent liabilities associated with subsidies to poorly performing SOEs, unfunded pension liabilities, and the lack of fiscal buffers. Kids fish in the ocean - Republic of the Marshall Islands. Photo Credit: World Bank / Vlad Sokhin (Panos Pictures) 110 Regional Partnership Framework Poverty and Shared Prosperity The quantitative data available on the incidence of poverty in RMI are extremely limited but suggest that poverty is a serious issue. The last HIES (in 2002) identified an official national income poverty rate of 53 percent. Some sources have suggested incorrectly that 20 percent of Marshallese live in extreme poverty, but that is incorrect.17 The World Bank is working with the government to prepare a new HIES for 2016/17 to gather updated in- formation. According to 1999 census data, the Gini coefficient for the distribution of household-level cash income in RMI was 0.54 (note that this figure is not comparable with measures of inequality that reflect the value of consumption per capita). An ADB and Asia Foundation report issued in 200618 concluded that the consequences of long-term economic stag- nation included social and health problems such as crime, domestic violence, unemploy- ment, malnourishment, and substance abuse. A 2009 report by the World Health Organi- zation cited evidence of increasing poverty and hardship in RMI.19 Government revenue and expenditure policies to counter existing inequalities have not achieved the expected objectives and could be strengthened through more effective execution and monitoring. The problem is acute in the outer islands, which are isolated from the mainstream and experience extremely limited access to capital or opportunities and poor service delivery (especially in health and education). The incidence of squalor and inequality appears to be increasing in urban areas; the traditional social bonds and extended family ties that provided some protection against poverty appear to be weakening. On the positive side, whereas past survey data suggested a net outflow of remittances to support emigrants to the USA (many of whom were reportedly living below the US poverty line), anecdotal evidence suggests that remittance inflows have started to pick up in recent years. Development Agenda Pursing the goals of poverty reduction and shared prosperity in RMI—in line with the gov- ernment’s own objectives—will require additional reforms and political will. Political will is required to advance critical reforms such as restructuring SOEs and address the key is- sues of SOE governance, efficiency, pricing policies, and cross-subsidization. Such reforms could reduce the drain on public resources, which could then be redirected to priority areas, including poverty reduction. Poverty data could be strengthened to inform government and development assistance and enhance development outcomes. 17 This figure appears to be based on government estimates from the 1999 census, which indicated that about one-fifth of all households had cash incomes below US$1 per day. This benchmark is not directly comparable to the Extreme Poverty line, which was set during 1999 at total consumption (including subsistence) valued at 1993 PPP US$1 per day per person. 18 Ahmad and Weiser (2006). 19 Marshall Islands: Demographics, Gender, and Poverty Report, 2009. Regional Partnership Framework 111 To weather future shocks, including climate related ones, the RMI needs to build a suf- ficiently large fiscal buffer. RMI faces many vulnerabilities, including substantial fiscal risks from SOEs and the social security system, the sizable public debt (one of the highest among the PICs), the expiration of most Compact grants after FY2023, uncertainty about Compact Trust Fund returns, and future costs from climate change. To secure longer-term sustainability, the government needs to build a sufficiently large fiscal buffer, yet the ris- ing revenues from higher fishing license fees have not translated to higher savings in re- cent years but rather to increased subsidies and transfers. The public sector of the RMI plays an important role in service delivery, economic growth, development, and sustainability. An effective government is therefore critical to ensure ef- ficiency, effectiveness, accountability of public expenditure, and adequate service delivery to the poor. Strengthening public sector capacity, PFM, and transparency and account- ability are some of the channels which could support a more effective government. The education sector could be strengthened. Adequate and correctly oriented education to produce an appropriately qualified labor force could help facilitate increased economic opportunities, including through open migration (labor market access) under the Com- pact, and contribute to reducing poverty. Other social issues, such as malnutrition, gen- der-based violence, and high rates of teenage fertility could also be addressed through programs in the school system. Consultations in RMI highlighted the high levels of teenage pregnancies as a key factor influencing women’s likelihood of obtaining employment and remaining out of poverty. As part of improvements to public service provision, SOE reforms should be a priority. The limited data on access to essential services such as water, energy and telecommunica- tions suggest that a significant proportion of the population remains without access to these essential services due to remoteness or high cost. SOEs are likely to continue to play a role in providing essential services, given RMI’s unique market structure, but services should be provided in an efficient manner and not crowd out the private sector. Advancing SOE restructuring by addressing the key issues of governance, efficiency, pricing policies, and cross-subsidization could reduce the drain on public resources, which could be reori- ented to priority areas, including poverty reduction. Where applicable, reforms to increase private sector participation should also be considered. National Strategy and Its Key Pillars/Focus Vision 2018, the RMI national strategic development plan, aims to achieve a “country with- in an interdependent world, with enhanced socio-economic self-reliance, and an educated, healthy, productive, law abiding and God-loving people.” The strategic development frame- work, drafted in 2001, addresses ten challenges essential to fulfilling the vision. Recently, drawing on Vision 2018, the government introduced a three-year RMI National Strate- gic Plan 2015–17 (NSP) to improve quality of life in all areas, including health, education, energy, food security, law and order, gender equality, employment opportunities, and dis- aster mitigation. The NSP Vision considers both the RMI Constitution and Vision 2018; its objective is to achieve “Sustainable, Equitable and Measurable Development Reflecting 112 Regional Partnership Framework the Priorities and Culture of the Marshallese People.” Coordinated with the RMI planning and budgeting cycle, the NSP is designed as a three-year rolling plan that government leaders will use as the roadmap for development and progress in the medium term (2015– 17), it includes five sectors: (1) Social Development; (2) Environment, Climate change and Resilience; (3) Infrastructure Development; (4) Sustainable Economic Development; and (5) Good Governance. The plan will be updated continually to meet longer-term objectives as the RMI moves toward scheduled completion of the Compact in 2023. The new government (January 2016) has developed Agenda 2020: A Framework for Pro- gress (Agenda 2020) that identifies the major national challenges and priority reforms to be addressed by Government toward the year 2020. It aims to strengthen the results- focus, proactively address the most pressing problems, and develop a culture of customer service in the public sector. World Bank Group Program The World Bank program has been developed through wide consultations with govern- ment and key stakeholders, it is fully aligned with the NSP, will support many of the key actions identified in the Agenda 2020 and builds on recommendations from the SCD. MoF has been instrumental in ensuring the program is aligned with government priorities and is endorsed by the leadership. The Division of Interational Development Assistance (DIDA) within the MoF has been established to coordinate and facilitate development programs of the multi-lateral agencies to ensure complementarity. DIDA will be a key a partner during implementation with it providing centralized coordination and fiduciary support. ACTIVE PROJECTS Project ID Project Name Date, Board Rev Net % Disb Lst Lst App Comm Closing DO IP ($m) P151760 PROP for Marshall Islands 12/22/2014 09/30/2020 8.58 10.4% S MS P155257 Pacific Resilience Program - RMI 06/19/2015 11/30/2020 1.50 66.7% S S P132119 ICT Technical Assistance Grant 08/07/2013 08/15/2018 .95 10.5% MU MU INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 20 Year Pacific Resilience Program Phase II – RMI 20 FY17 Sustainable Energy Development Project 25-30 FY18 Strengthening Budget Execution and Financial Reporting 6-7 FY18 Regional Maritime Project 15-17 FY20 PROP (Fisheries) Additional Financing (tbc) 7-8 FY19 Total 73-81 20 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of SDR to USD Regional Partnership Framework 113 ADVISORY SERVICE ANALYTICS Project ID Activity Name Delivery P151797 Household Income and Expenditure Survey and Analysis FY18 Development Partners The Bank will work collaboratively with other partners during the implementation of the program. For PFM, the government have identified large needs in this area and have sought support from both ADB and the World Bank and are ensuring complementarity with our engagement, the ADB will provide ongoing support to strengthening SOE performance and monitoring. The Government are proactively coordinating donor support to the en- ergy sector, the Bank’s support will complement proposed and ongoing activities by New Zealand, ADB, EU and JICA. SPC and the Bank will work jointly with the government on the HIES. The Bank’s proposed project for resilience will help strengthen coordination of actors engaged in this area, in addition the project design is such that the government will work with and draw on experience from SPC, PIFs and IOM during implementation. The support provided by the USG is programmed through the RMI government’s budget and planning process or directly provided by US federal agencies. It is primarily focused on the sectors of education, health and infrastructure. There may be opportunities during the RPF period for collaboration particularly in the area of NCDs. Two men with Riwut canoes (miniature traditional canoes often used for racing) - Republic of the Marshall Islands. Photo credit: World Bank / Vlad Sokhin (Panos Pictures) 114 Regional Partnership Framework REPUBLIC OF NAURU Sociopolitical and Institutional Factors The Republic of Nauru (formerly known as Pleasant Island), located in Micronesia, has a population of about 9,378 residents on 21 square kilometers, making it the smallest state in the South Pacific. A German colony in the 19th century, Nauru and was administered by Australia, New Zealand, and the United Kingdom following the First World War. During the Second World War, Nauru was occupied by Japanese troops. After the war, it entered again into trusteeship until gaining independence in 1968. Nauru was among the world’s richest countries during the late 1960s and early 1970s. Its wealth was generated by exports of phosphates, but primary deposits have now been exhausted and mining of secondary deposits has resumed only recently. While revenues from phosphate mining were invested in a trust fund to help provide for Nauru’s econom- ic future, the fund lost value due to poor investment decisions, and heavy government spending depleted it further. In April 2014, the government applied for membership in IMF and IBRD. (The Articles of Agreement require a country to become a member of the IMF before joining the WBG.) Nauru was admitted as a member of the IMF and IBRD on April 12, 2016. Recent Economic Developments and Outlook The Government of Australia maintains a Regional Processing Centre (RPC), opened in 2001 and designed for up to 800 people, to process applications of asylum seekers who have attempted to enter Australia by boat. The RPC and phosphate mining are currently the only industries generating significant revenue and employment opportunities in Nauru. Establishment of the RPC was accompanied by a pledge from the Government of Australia of A$20 million for development activities. The center was closed in 2008, but reopened in August 2012. In July 2013 several buildings were destroyed by fire during a riot. The resumption of phosphate mining in 2011, the reopening of the RPC in 2012, and an increase in revenues from fishing licenses have spurred economic activity, created jobs, and provided substantial fiscal revenues in recent years. Estimates indicate that real GDP grew by around 25 percent annually over the four years to FY2014, boosted by phosphate exports and various activities (hotels, construction, trade, transport) related to operat- ing the RPC. Nauru’s economy is estimated to have contracted in FY2015 after damage to port facilities disrupted phosphate exports (which declined by two-thirds) as well as imports of fuel and other supplies. Government revenues fluctuate depending on visa fees from the RPC, fishing license fees, collection of customs duties, and revenues from phosphate mining. Relatively high rev- enues in recent years have allowed the authorities to repay salary and rental arrears and raise the wage bill to prevent public servants leaving for the RPC, which offers higher sala- ries. In FY2015, however, the fiscal balance deteriorated, mainly on account of lower phos- phate revenues. Regional Partnership Framework 115 Nauru is facing enormous challenges in sustaining growth and ensuring fiscal and debt sustainability over the medium term. The biggest challenge is to diversify the economy beyond reliance on phosphate and the RPC, neither of which is sustainable in the long run. Without substantial fiscal adjustments, the decline in visa fees after the RPC scales down over the medium-term will jeopardize fiscal sustainability. To help build fiscal buffers, the government established an Intergenerational Trust Fund in 2015, which will be capital- ized with contributions from development partners and windfall revenues and is intended eventually to provide a stable source of budget financing. Nauru’s seaport is antiquated and has been dysfunctional, hampering trade and creating frequent fuel shortages. The power infrastructure is nearly at the end of its life, resulting in power outages. Health infrastructure is limited, while Nauru has the highest obesity rate in the world and about 40 percent of the population age 45 and above has diabetes. Poverty and Shared Prosperity No estimates of poverty according to the internationally comparable PPP benchmarks (2011 PPP US$1.90 and US$3.10 per person per day) are available for Nauru. A poverty analysis based on the 2012/13 HIES estimated that 24 percent of households were living on expenditure levels below a national basic-needs benchmark (but zero percent below the food poverty line). A Gini coefficient of 0.52 is also reported, based on the per capita distri- bution of expenditure, which is very high by Pacific and global standards. Children and young people are among the most vulnerable groups in Nauru. This is in part because poorer households tend to have a significantly larger number of children than bet- ter-off households. Moreover, less than half of young people aged 15 to 29 are employed by government or the private sector, while a relatively high proportion of the remainder (students and young people who are unemployed or engaged in unpaid family work) have consumption below the basic-needs benchmark. In general, poverty in Nauru is primarily characterized by a lack of opportunities, socio- economic exclusion, and/or inadequate resources to meet cash needs. Because of the lim- ited area of arable land, agriculture consists largely of fishing, with minimal subsistence agriculture. Households are relatively dependent on imported food and consumer goods, and thus vulnerable to price volatility. Nauru is just one island, so access to local public services—at least in physical terms—is generally equitable. Reach and/or quality of ser- vice provision appears to have improved over time by some measures, but health and edu- cation outcomes remain poor. In the decade leading to 2011, the net primary school enrol- ment rate increased from 70 percent to 95 percent, although enrolment rates for children of secondary-school age are much lower at 68 percent. Between 2001 and 2011, the infant mortality rate declined from 89 to 21 per 1,000. Nonetheless, poor quality diets, low levels of physical activity, and high rates of smoking and alcohol consumption have contributed to levels of NCDs that are among the highest in the world. 116 Regional Partnership Framework Development Agenda Nauru is IBRD’s newest and smallest member country. Nauru does not intend to apply for membership with IDA or any other WBG institution at this time. Nauru’s two critical sourc- es of foreign exchange (phosphate mining and the RPC) and are unlikely to be sustainable revenue sources from which to repay a long-term IBRD loan. Any IBRD loan would have to be secured by significant credit enhancements via “ring fencing” foreign exchange future cash flows for the repayment of IBRD. Given Nauru’s high per capita GDP of $11,394, it does not qualify for IDA funding, even under the small states exception. Nevertheless, through its IBRD membership, Nauru would be able to access various trust funds administered by the Bank including those which support increasing resilience to cli- mate change and natural disasters. Nauru may also qualify for support through regional projects, such as regional maritime support for the ports sector as well as regional avia- tion support for the rehabilitation of the country’s runway. National Strategy and Its Key Pillars/Focus The Republic of Nauru has a long-term National Sustainable Development Strategy (NSDS) that sets out policies and plans to 2025. The 2005 NSDS, updated in 2009, developed Nauru’s long-term vision for ‘a future where individual, community, business and govern- ment partnerships contribute to a sustainable quality of life for all Nauruans’. The NSDS focusses upon ‘partnerships for quality of life’ and sets out five long term goals for Nauru: 1. Stable, trustworthy, fiscally responsible government 2. Provision of enhanced social, infrastructure and utilities services 3. Development of an economy based on multiple sources of revenue 4. Rehabilitation of mined out lands for livelihood sustainability 5. Development of domestic food production World Bank Group Program Due to its recent membership of the World Bank, Nauru does not as of yet have a World Bank program. As a result of the constraints posed by the inability of Nauru to access IDA and IBRD financing, the program will rely on the possibilities to mobilize trust fund resources for the country as well as encouraging Nauru’s inclusion in regional projects, where possible using resources from other development bilateral and multilateral develop- ment partners or identifying opportunities for IBRD financing through guarantee schemes or engagements that would provide the appropriate credit enhancement. Development Partners The World Bank will work closely with other partners, including Australia, ADB and Japan during RPF period to identify opportunities for support to the Government of Nauru. Sup- port will be opportunistic and limited to those areas where resources can be mobilized for investments or technical assistance despite the constraints on the World Bank’s ability to provide IDA or IBRD financing. Regional Partnership Framework 117 REPUBLIC OF PALAU Sociopolitical and Institutional Factors Palau is a representative democratic republic in which the president is both head of state and head of government. The country is a de facto non-partisan democracy; currently it has no political parties, although no law prevents the formation of political parties. Execu- tive power is exercised by the government. Legislative power is vested in both the gov- ernment and the Palau National Congress. The judiciary is independent of the executive/ legislature. A sovereign country since 1994, Palau maintains deep ties and a cooperative relation- ship with the USA. The Compact of Free Association between the USA and Republic of Palau, which entered into force in 1994, provided several types of assistance aimed at promoting Palau’s economic advancement and eventual self-sufficiency. In addition to es- tablishing Palauan sovereignty and USA–Palau security and defense arrangements, the Compact provided economic assistance which comprised, among other things, direct eco- nomic assistance for 15 years to the Palau government; the establishment of a trust fund intended to provide Palau US$15 million annually from 2010 through 2044; investments in infrastructure, including a major road; and the provision of federal services, such as postal, weather, and aviation services. The Compact also established a basis for United States agencies to provide discretionary federal programs related to health, education, and infrastructure. Provisions under the proposed September 2010 agreement between the United States and Palau governments, among other things, extended economic as- sistance to Palau beyond the original 15 years and included modified trust fund arrange- ments. The bill to approve the Agreement has not yet been passed by the United States Senate, however, and an interim agreement is put forward to Congress each year. Recent Economic Developments and Outlook Unlike many other PICs, Palau has a thriving tourism sector, but the unpredictability of tourist arrivals complicates economic management. Tourist arrivals depend greatly on external factors and are influenced by global economic performance, which has caused significant volatility in the growth of Palau’s tourism sector over the past decade. In this context, it becomes difficult for the government to ensure a consistent level of service delivery and living standards for its citizens. An added complication is that Palau has no central bank or monetary policy and uses the US dollar as its national currency, so fiscal policy is the only lever to respond to shocks. Economic growth surged to an estimated 8.0 percent in FY2014 (ending September 30) following an unexpected rise in tourist arrivals from China, with new foreign investment also contributing to growth. The bigger than expected rise in tourism arrivals (which was supported by expanded accommodation capacity) was partly due to new air links with Hong Kong SAR, China. In the first half of CY2015, tourist arrivals had grown by 40 per- cent compared to the same period in 2014, again driven by increased arrivals from China. Arrivals from Palau’s traditional tourism markets such as Japan and Taiwan, China are declining, so Palau’s dependence on a single tourism market (China) is increasing. Con- 118 Regional Partnership Framework tinued strengthening of the US dollar and uncertainty in the Chinese economy pose risks to the tourism sector. Inflation continued to moderate, falling from 4 percent in FY2014 to 0.4 percent in the second quarter of CY2015, driven by stable international food and falling fuel and utility prices. The current account deficit widened from 8.75 percent of GDP in FY2013 to 13 percent of GDP in FY2014, largely owing to tourist arrivals and con- struction related imports. A fiscal surplus equivalent to 1.25 percent of GDP is estimated for FY2014. Tax revenue continued to rise, thanks to increases in the volume and rates of tourism-related taxes, higher prices in the tourism industry, and improved tax compli- ance. Recurrent expenditure, on the other hand, fell owing to careful management of the public sector. With the scheduled end of Compact grants in FY2024, fiscal adjustment remains necessary over the medium term to build adequate government deposits and en- sure long-term fiscal sustainability. Poverty and Shared Prosperity No estimates of poverty according to the internationally comparable 2011 PPP bench- marks (US$1.90 and US$3.10 per person per day) are available for Palau, but extreme pov- erty is likely very rare. GNI per capita in Palau is high relative to other small PICs, and the inequality implicit in the distribution of consumption is around the middle of the range for the region (estimates from the 2006 HIES suggest the national Gini coefficient is 0.39 for the distribution of nominal per-capita expenditure across the population). One in four peo- ple in Palau live below the national basic-needs poverty line according to analyses of the 2006 HIES (though reportedly food consumption was considerably underreported in this survey, so the welfare benchmark is difficult to interpret). In any case, poverty and hard- ship in Palau do not mean hunger or destitution, but in a high-cost society which enjoys a comparatively high standard of living, people do sometimes struggle to meet their cash needs. Reliance on subsistence production is apparently relatively low compared to many other Pacific countries (the 2006 HIES suggests only 13 percent of the value of household food consumption derives from subsistence), which leaves households vulnerable to in- ternational food price shocks. Malnutrition is also widespread due to a poor quality diet, and the incidence of obesity is high. As in many Pacific countries, educational attainment provides some protection against hardship through its association with higher levels of consumption (particularly for households where the head has a post-secondary educa- tion), as well as increased migration opportunities to the USA. Development Agenda The rise in tourist arrivals should be managed to ensure sustainability and translated into improved lives for the Palauans. In FY2014, Palau experienced a 13.4 percent increase in tourist arrivals (largely because numbers of Chinese tourists doubled from FY2013 lev- els), and an additional 1,000 new rooms are needed to satisfy demand going forward. Al- though rising tourism can increase government revenues, the domestic value added from this new source of tourism is expected to be limited, given that the structure of the value chain for packaged tours may not have trickled down to Palauans. The government has the opportunity to increase the domestic content of tourism and to introduce policies that would foster more equitable distribution of tourism revenues to its people. A careful bal- ance between tourism growth and the impact on environment and culture also needs to be established to ensure the sustainability of the industry. Regional Partnership Framework 119 Other priority areas for strengthening the tourism industry are to address human resource planning and management issues and labor laws. Palau has a service-based economy, requiring well-trained people to serve the tourism market. Private sector employers have highlighted the difficulty of hiring Palauans due to their lack of skills and work ethics. For- eign labor in the interim has supplemented the domestic labor force. On the other hand, open migration to the USA, partly as a result of uncompetitive domestic wages, has re- sulted in a “brain drain.” The inadequate number of professionals being produced locally also increased the need for foreign labor to fill the gap. As the tourism industry expands, the government is conscious of the need for a comprehensive labor policy. One way of re- taining more of the tourism dollar domestically is through further training of the domestic workforce to increase their participation. Strengthening and tailoring vocational train- ing programs and increasing the quality of education (up to secondary) are two poten- tial avenues to increase domestic workforce participation. A comprehensive labor act to provide fair compensation, safe working conditions, and labor protection to all could help to protect employees and improve the business climate. The initiative to improve foreign workers’ flexibility to switch jobs would also improve productivity and promote inclusive growth. Improving investment and the business climate would help to diversify the economy, reduce economic vulnerability, and support growth. The expansion of basic infrastructure, such as water and sanitation systems, is essential to develop the tourism industry and ensure its long-term sustainability. Although Palau compares favorably to peers, further improvement in the road network, aviation connectivity arrangements, and telecommu- nications infrastructure would support economic diversification and enhance growth po- tential. Weak enforcement of the existing foreign investment laws has resulted in contin- ued foreign investment with limited domestic value added and limited requirements for investors to protect the environment. Simplification of the investment approval process and opening all business activities to foreign investment through joint ventures could also support economic growth. Finally, significant fiscal challenges remain. The fact that the renewed Compact has not been endorsed definitively by the USA Senate creates uncertainty about a key source of inflow. The renewed Compact, while favorable in comparison to the alternative (no re- newal), includes a declining level of nominal resources. Another consideration is that the CTF has not been designed as a perpetual fund (it is meant to supplement the budget until 2044), and additional resources must be found to maintain the real level of public services. To address these challenges, the government could consider increasing revenue through the adoption and implementation of a modern tax regime; reducing expenditures through more efficient delivery of services; or growing the economy by capturing a greater share of the tourism dollar. 120 Regional Partnership Framework National Strategy and Its Key Pillars/Focus The Republic of Palau has a long-term National Master Development Plan (NMDP) that sets out policies and plans to 2020. The NMDP is a comprehensive document covering virtually all sectors, institutions, and policies in Palau that were relevant at the time it was initiated (1996). The vision established in the NMDP was “to substantially enhance the quality of life of Palauans and future generations of Palauans.” An important limita- tion of the NMDP, is that it provides limited guidance on priorities to reach Palau’s long term goals, hence a medium term development strategy (MTDS) described as Actions for Palau’s Future was formulated to address these weaknesses. The MTDS sets out the key strategies and actions to help achieve economic, social, environmental and cultural goals over a five-year period 2009 – 2014. It is consistent with the NMDP 2020 but takes into account change in circumstance and legislative and policy development. The overall goal of the MTDS is a sustained and widespread improvement in general standards of living while preserving cultural and environmental values. Five Priority Policy Actions have been identified to ensure meaningful focus and effective commitment these are: (1) Agriculture and Fisheries; (2) Tourism (3) Infrastructure; (4) Private Sector Development; and (5) Sus- tainable Government. World Bank Group Program Palau has been a member of the Bank since 1997, and is classified as an IBRD eligible coun- try. However, any IBRD loan would have to be secured by significant credit enhancements via “ring fencing” foreign exchange future cash flows for the repayment of IBRD. Through its IBRD membership, Palau is also able to access various trust funds administered by the Bank including those which support increasing resilience to climate change and natural disasters. The Bank’s program with Palau is focusing on support in three important areas, including support to address challenges with their national payment systems, technical assistance for the ICT sector specifically to support the regulatory reforms needed in this sector and allow Palau to maximize the benefit from the upcoming cable project. The Gov- ernment has also asked for assistance in the area of public private partnerships with a focus on strengthening the enabling environment. ACTIVE PROJECTS TA for National Payment systems (BE) PIPELINE ICT TA Grant (RE) TA for Public private partnerships (tbc) Development Partners As a result of the constraints posed by the inability of Palau to access IDA or IBRD re- sources the Bank will work closely with other development partners to identify areas of opportunity to provide support to Palau. The Bank is working closely with ADB on the Palau-FSM connectivity project, ADB is providing the financing for the Palau portion of the project and WB is providing the financing for the FSM portion. The WB is also providing complementary technical assistance to Palau to support the implementation of the cable project, through TF resources made available from DFAT. Regional Partnership Framework 121 INDEPENDENT STATE OF SAMOA Sociopolitical and Institutional Factors Since gaining independence from New Zealand in 1962, Samoa has been a stable democ- racy. The Human Rights Protection Party has been in power for most of the past 30 years, most recently winning office in March 2016 with a five-year mandate. The World Bank has had a longer relationship with Samoa than any other Pacific island country, and the scope of this engagement has grown in recent years. Samoa’s Country Policy and Institutional Assessment score is one of the highest among the Bank’s Pacific Island member states and among all IDA borrowing countries. Strong policy settings for almost two decades have resulted in MDG outcomes and economic performance well above the average for com- parable island countries. Samoa is a very cohesive and structured society, with a strong traditional culture. Recent Economic Developments and Outlook From the mid-1990s until the late 2000s, Samoa was the star economic performer in the Pacific, pursuing structural reforms that helped to increase growth to an average of over 4 percent in the decade to 2008, and prudent fiscal policies that significantly reduced public debt from a peak of over 100 percent of GDP in the late 1990s. The events of recent years have highlighted the disadvantages facing even island states such as Samoa that are small and remote but perform well—particularly the fact that the economy remains narrowly based and highly vulnerable to external shocks. The Samoan economy contract- ed in 2009 as a result of the cumulative effects of the 2008 food and fuel price spikes, the global slowdown, and a devastating tsunami in September 2009. A major cyclone in December 2012 added to pressure on the fiscal position and balance of payments. Samoa’s response to these shocks, including expansionary monetary policy and a signifi- cant fiscal stimulus, provided a solid foundation for the economy to recover, while expand- ing its productive capacity in the medium term. Growth has picked up modestly over the last few years, initially supported by construction activity and more recently by tourism earnings, remittances, and lower fuel prices. Economic growth is projected to continue in the medium term at an average rate of around 2 percent, supported by increases in tour- ism and agriculture, although the exit of a major manufacturer in 2017 will temporarily lower growth. As a result of continued fiscal deficits and only modest economic growth, Samoa’s external public debt as a proportion of GDP has increased quite rapidly in recent years, from around 30 percent at end FY2008 to about 55 percent at end December 2015, well above the authorities’ medium-term target of 50 percent of GDP. Looking ahead it is important that fiscal consolidation proceeds as planned to ensure overall sustainability and sufficient buffers to respond to future external shocks. 122 Regional Partnership Framework Poverty and Shared Prosperity Extreme poverty is very rare in Samoa. Estimates from the 2008 HIES suggest that less than 1 percent of the population lives below the internationally-comparable 2011 PPP US$1.90 extreme poverty line, and 8 percent below the 2011 PPP US$$3.10 pover- ty line—both well-below small PIC averages. Using national poverty lines, food poverty was assessed to be rare in 2008, with only 5 percent living below the food poverty line, a significant decline from the 2002 HIES. On the other hand, 27 percent of the population reportedly experienced basic-needs poverty in 2008, with the incidence marginally higher than average in Apia and marginally lower than average in the less-populated island of Savai’i, although the incidence of poverty in rural areas may have been understated. This rate is a modest increase from the previous 2002 estimate (23 percent), although these numbers are not strictly comparable over time due to the use of a relative poverty line. A more recent HIES was conducted in late 2013 and early 2014, and while summary tables have been released, poverty estimates are not yet available. Estimates from the SCD suggest that inequality in Samoa is higher than in other small PICs, with a Gini coefficient on the population distribution of per capita nominal consump- tion of 0.43 as at 2008. Moreover, incomes of the B40 are estimated to have deteriorated slightly relative to average incomes nationwide in the preceding years. Development Agenda Given the constraints posed by smallness and remoteness, prospects for longer-term eco- nomic development in Samoa are likely to depend significantly on greater economic inte- gration with neighbors, maximizing the gains from tourism and agriculture, and continued external remittance and aid flows. Samoa already has a significant expatriate population in New Zealand, the USA, and Australia, although further labor market integration, includ- ing through increases in short-term employment opportunities, offers potential benefits for both Samoa and receiving countries. Better transport and communication links (in- cluding improvements in broadband connectivity) could mitigate the cost of distance and encourage integration, as can aligning and harmonizing regulatory rules and standards. Tourism is an important contributor to the economy of Samoa, with its distinctive geo- graphical and cultural features allowing it to charge premium prices that cover its relative- ly high production costs. Although visitor earnings were equivalent to around one-fifth of GDP in 2015, Samoa’s tourism industry remains underdeveloped in comparison with some of its neighbors, and hence a critical priority is to strengthen it. Agriculture (particularly coconut products and fishing) is extremely important from a livelihood point of view—it is the main activity for about one-third of the economically active population—with the potential for future growth dependent on improving supply links to the tourism sector, pursuing other opportunities for import substitution, and developing niche markets. Regional Partnership Framework 123 Given the recent increase in debt, the need to build fiscal buffers, and the need to ensure the longer-term sustainability of public finances, it is very important that fiscal consoli- dation proceed as planned in the period ahead, including through a sustained focus on ensuring value-for-money across all public sector expenditure. As well as ensuring alloca- tive efficiency and sound public expenditure management, it will be important to continue structural economic reform to improve Samoa’s competitiveness and encourage longer- term growth. Opportunities for greater private sector development remain, particularly by contracting out operation and maintenance services currently performed by SOEs. Further structural reforms could also help to increase access to finance and encourage new investment. Compared with other lower-middle-income countries, Samoa performs relatively well on measures of life expectancy and infant and maternal mortality rates. These gains are being offset by the increased prevalence of NCDs such as diabetes, heart disease, and stroke, which now account for around 70 percent of all deaths. An effective strategy to target NCDs is essential, including through the reorientation of health expenditures to- ward prevention and primary care. While Samoa has made significant gains in boosting the accessibility of education in recent years, the focus now needs to shift toward improv- ing its quality by implementing professional standards, increasing training, and providing incentives for teachers to improve their qualifications. Natural disasters pose a substantial risk in Samoa, while climate change is a major long- term threat. Vulnerabilities are compounded by the fact that 70 percent of Samoa’s popu- lation and infrastructure are located in low-lying coastal areas. Continued efforts are nec- essary to “climate proof” roads and protect coastlines, including through the development of a coordinated national climate adaptation plan. National Strategy and Its Key Pillars/Focus The Government is currently in the process of finalizing an updated Strategy for the De- velopment of Samoa (SDS), which will cover the four-year period from FY2017 to FY2020. The theme of the new SDS will be “accelerating sustainable development and creating opportunities for all,” which emphasizes the national commitment to revitalizing sustaina- ble, pro-poor growth while rebuilding buffers to help protect the economy from the effects of future shocks. While the priorities—economic sustainability and business development, improved education and health outcomes, better access to infrastructure, and climate and disaster resilience—are in line with the existing SDS, there is an increased focus on public-private partnerships as a means of promoting investments for social and economic developments, and an explicit attempt to integrate climate resilience and disaster man- agement into each of the priority areas. 124 Regional Partnership Framework World Bank Group Program The World Bank partnership with Samoa predates that of any other Pacific island coun- try. The current program therefore builds upon a strong engagement and experience im- plementing projects in the country. It has been developed through wide consultations with government and key stakeholders, it is fully aligned with the SDS and builds on recom- mendations from the SCD. MoF has been instrumental in ensuring the program is aligned with government priorities and is endorsed by the leadership. The program also builds on strong liaison with other development partners, avoiding duplication of their ongoing ef- forts and collaborating where possible. Workmen sweeping Vaitele Street, expanded under the Enhanced Road Access Project - Apia, Samoa. Photo Credit: World Bank / Conor Ashleigh Regional Partnership Framework 125 ACTIVE PROJECTS Project ID Project Name Date, Board Rev Net % Disb Lst Lst App Closing Comm DO IP ($m) P115351 Samoa Agriculture 03/29/2012 03/28/2017 8.00 28.6% MS MS Competitiveness Enhancement P145938 Agriculture & Fisheries Cyclone 10/17/2013 03/31/2017 5.00 84.2% MS MS Response P126596 Enhancing Climate Resilience 12/27/2013 12/31/2018 14.60 22.6% MS MU of Coastal P155118 Second Fiscal and Economic Re- 09/13/2016 12/31/2017 5.00 0.0% form DPO P154839 Pacific Resilience Program-Samoa 06/19/2015 11/30/2020 13.79 12.1% S MS P126504 Enhancing Climate Resilience-West 12/18/2012 08/31/2018 14.80 7.5% MU MU Coast Rd P143408 Samoa Aviation Investment Project 03/06/2014 06/30/2019 41.62 3.9% MS MS P145545 Enhanced Road Access Project 10/17/2013 04/30/2019 20.00 53.1% S MS P128904 WS: Pac Reg Connect Phase III: 06/19/2015 07/31/2020 16.00 3.1% S S Samoa INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 21 Year First Growth and Resilience Development Policy Operation 5 - 7.5 FY18 Health 10 FY18 Transport and Maritime 30 - 34 FY19 Agriculture 12 - 15 FY19 Development Policy Operation 5 - 7.5 FY20 Total 62 - 74 Development Partners 14. The World Bank will work closely with other development partners during the RPF period. The commitment to collaboration is highlighted by the intention of key partners to continue to work together with the Government of Samoa to develop an agreed policy matrix as a foundation for budget support. The World Bank and ADB will continue to iden- tify opportunities for jointly co-financing investments, coordinating closely with other key donors in the country, including the EU, Japan, China and the UN system. 21 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of SDR to USD. 126 Regional Partnership Framework TONGA Sociopolitical and Institutional Factors Tonga transitioned from an absolute to a Constitutional monarchy in late 2010, following major constitutional reforms that changed the legislative assembly to become majority democratically elected. The transition to a democracy has not been entirely smooth, but two elections have been held since the reforms. In November 2010, a party led by the nobles formed a government; the next election (November 2014) brought a party led by elected representatives into power for the first time in Tonga’s history. The current Cabi- net consists of 11 elected people’s representatives and 1 noble representative. Like many other PICs, Tonga has a strong cultural identity. Nearly all of the population belongs to the Christian faith and forms part of a traditional system of highly elaborate familial and reciprocal relationships that have an important bearing on almost all aspects of life in Tonga and for Tongans overseas. The WBG Country Policy and Institutional Assessment found that Tonga’s institutions and policies had improved rapidly owing to a concerted government effort over the past 10 years and were conducive to development in most areas, although institutional impediments to women’s economic participation remained. Other weaknesses were related to the fact that very small states such as Tonga generally have limited capacity to maintain the level of public services and governance needed for a developing nation-state. Recent Economic Developments and Outlook Tonga’s economic growth potential is hindered by the innately high cost structures and exposure to shocks that are common to many of the small Pacific island nations. Over the last 20 years, per capita GDP has grown by 1.0 percent per annum, compared to 2.4 percent globally. While this rate is lower than any other region, it is still better than the average for the group of small Pacific islands, which on average grew at 0.9 percent per annum over the same period. In any given year, it is likely that Tonga is either hit by a major natural disaster or is recovering from the previous one. Small size and remoteness push up the cost of economic activity in Tonga, limiting the competitiveness of its exports of goods and services in world markets. These same factors also raise the cost of provid- ing public services. A high dependence on imports and an insufficient size for meaningful diversification make Tonga highly vulnerable to external economic shocks. These factors combine to make growth, inclusive or otherwise, particularly elusive in Tonga. Tonga has for the most part exercised appropriate macroeconomic and fiscal manage- ment, and the macroeconomic framework is adequate to support DPOs. In the last year, private sector credit growth started to rise after a long decline triggered by a housing market crash. Tonga has a structural current account deficit, which is mostly financed by development grants and personal remittances. The current account deficit was 7.9 percent of GDP in FY2014 and is expected to remain around that level. Development as- sistance enabled the government to build up foreign exchange reserves, which have in- creased to seven months, an appropriate level given Tonga’s high vulnerability. Foreign Regional Partnership Framework 127 direct investment inflows remain low at around 3 percent of GDP. The fiscal balance has significantly improved, and debt levels have stabilized with prudent fiscal management. The government has maintained the deficit below 2 percent of GDP or turned a small sur- plus in each of the last three fiscal years. Domestic revenue mobilization has progressively improved, increasing by 3 percent of GDP over the four years to FY2015. Nevertheless, it is still a serious challenge to provide adequate financing for delivering public services. Development grants financed 33 percent of government expenditure in FY2014. Tonga’s risk of debt distress was recently reduced and has remained moderate, aided by continued vigilance by the authorities. The government has been successful in controlling debt in recent years, with public and publicly guaranteed external debt in present value terms to GDP gradually declining from 35.7 percent in FY2012 to 34.1 percent in FY2015. Poverty and Shared Prosperity Extreme poverty is negligible in Tonga, but many people still experience some form of hard- ship. Estimates from the 2009 HIES suggest that just 1 percent of Tongans (the order of 1,200 people) live below the 2011 PPP US$1.90 extreme poverty line, with 8 percent of the population below the 2011 PPP US$3.10 per day poverty line. The Second National MDG Report estimates that 23 percent of Tongans are living below a national basic-needs benchmark as at 2009. This finding is consistent with local views that while there are very few people in abject poverty in Tonga, “hardship” or lack of access to basic services, eco- nomic opportunities, and cash for basic needs—including to meet customary obligations to extended family, the village community, and/or the church—is more widespread. The SCD estimates that incomes of the B40 kept pace with average incomes nationwide in the years leading to the 2009 HIES, and the Gini coefficient on the distribution of nominal per capita consumption is 0.38, which is around the lower end of the range for the PIC9. The incidence of national basic-needs poverty is estimated to be roughly similar across three geographical regions: Nuku’alofa, the rest of Tongatapu, and other islands. Although reliable data for more recent years are not available for most income and non-income measures, there are indications that hardship, in its different forms, remains. Among non- monetary indicators, health outcomes are a particular concern, with the high incidence of NCDs already eroding life expectancy. Development Agenda A new political era in Tonga offers the opportunity of improved governance and public service delivery. To achieve the goal of shared prosperity, the government and partners will need to actively ensure that benefits are evenly spread. An especially important task it to redress gender disparities—in traditional Tongan systems women often achieve good outcomes indirectly via their male relations, but it is critical to ensure that women are not excluded because they lack direct access to assets and voice. While domestic reform efforts will give Tonga the best chance of capitalizing on growth opportunities, a press- ing development need is to identify ways of increasing income-generating opportunities for Tongans in the challenging economic environment of the Pacific. Exports of labor and tourism offer the potential to make use of Tonga’s natural and human resources—a unique and beautiful country, and an able English-speaking workforce. A number of other sectors 128 Regional Partnership Framework hold potential for growth, particularly those that are based on natural resources (such as seabed minerals) or cultural capital (such as those exploiting a unique Tongan brand). Consistent with the recommendations of the SCD, good quality and relevant education and well as connective infrastructure will be important. Seeking ways to reduce the risk or impact of shocks (economic and natural) will also be important. This is a multi-level challenge, calling for the government and donor partners to take direct action to improve fiscal resilience and create policies and markets that will help communities, firms, and individuals better protect themselves. Finally, Tonga has strengthened its international reputation as a well-functioning, modern nation-state in recent years, but private en- terprise is challenged by a perceived volatility of policy, which increases sovereign risk. Evidence-based, consultative reforms appropriate for Tonga will help to show that Tonga is “serious about business.” National Strategy and Its Key Pillars/Focus The new government has set out Tonga’s national development strategy in the Tonga Stra- tegic Development Framework (TSDF), 2015–25, approved in April 2015. The TSDF sets out a medium-term vision that builds directly on the preceding TSDF 2011–2014 and is un- derpinned by an extensive consultation process. The vision of the TSDF is for “a more pro- gressive Tonga supporting a higher quality of life for all.” This vision is translated into sev- en high-level National Outcomes to achieve over the next 10 years. They aim to achieve: (i) a more dynamic, knowledge-based economy; (ii) more balanced urban-rural development; (iii) more empowering human development and gender equality; (iv) responsive and good governance, including law and order; (v) successful provision and maintenance of infra- structure and technology; (vi) effective land administration, environmental management, and resilience to climate and risk; and (vii) consistent advancement of Tonga’s external interests, security, and sovereignty. This new strategic framework includes a heightened emphasis on sustainability, good governance, and shared prosperity. The national out- comes are to be achieved via a set of 29 organizational outcomes, grouped by five pillars: economic institutions, social institutions, political institutions, infrastructure and tech- nology inputs, and natural resource and environmental inputs. World Bank Group Program The current program builds upon a strong engagement and experience implementing pro- jects in Tonga. It has been developed through wide consultations with government and key stakeholders, it is fully aligned with Tonga’s Development Strategy and builds on recom- mendations from the SCD. MoF has been instrumental in ensuring the program is aligned with government priorities and is endorsed by the leadership. The program also builds on strong liaison with other development partners, avoiding duplication of their ongoing efforts and collaborating where possible. Regional Partnership Framework 129 ACTIVE PROJECTS Project ID Project Name Date, Board Rev Net % Disb Lst Lst App Closing Comm DO IP ($m) P155133 Tonga First Inclusive Growth DPO 03/16/2016 06/30/2017 2.00 112.5% P150113 Tonga Cyclone Reconstruction 05/28/2014 06/30/2018 13.80 70.6% MU MU P154840 Pacific Resilience Program-Tonga 06/19/2015 11/30/2020 12.00 13.1% S MS P156334 Pacific Resilience Program-Tonga 06/19/2015 11/30/2020 4.58 4.4% S MS P096931 TO-Transport Sector Consolidation 07/28/2008 06/30/2018 9.44 59.0% S S P128939 Pacific Aviation Investment-Tonga 12/13/2011 12/31/2018 34.46 63.5% S S P113184 Pacific Regional Connectivity 08/30/2011 07/23/2018 17.20 79.8% S S Program RECIPIENT EXECUTED TRUST FUNDS Project Name Approval Closing Date Net Total Total Undisbursed Date Commitment Disbursed Balance ($m) Amount ($m) ($m) TO-Transport Sector Consolidation 07/28/2008 06/30/2018 9.4 5.0 4.5 Pacific Regional Connectivity Program 08/30/2011 08/23/2016 17.2 13.5 2.6 Pacific Aviation Investment - Tonga 12/13/2011 12/31/2016 27.2 15.0 9.4 Institutional and Regulatory Framework 06/25/2012 12/31/2015 2.9 1.3 1.6 Tonga Cyclone Reconstruction 05/28/2014 06/30/2018 12.0 6.7 4.3 Second Economic Reform Support Operation 10/29/2014 12/31/2015 5.0 5.0 0.0 Pacific Resilience Program - Tonga 06/19/2015 4.6 0.0 0.0 INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 22 Year Second Inclusive Growth Development Policy Operation 2 FY17 Youth Skills for Employment 15 FY18 Tonga Transport Project 18 – 20 FY18 Development Policy Operation 5 FY18 E-Governance (tbc) 5 FY18 PROP Fisheries (tbc) 5 FY19 Development Policy Operation 5 FY19 PREP (Coastal Protection) AF (tbc) 6-7 FY19 Development Policy Operation 5 FY20 Total 66 - 69 22 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of the SDR to USD. 130 Regional Partnership Framework Development Partners The World Bank will work closely with other development partners during the RPF period. The commitment to collaboration is highlighted by the intention of key partners to con- tinue to work together with the Government of Tonga to develop an agreed policy matrix as a foundation for budget support. The World Bank and ADB will continue to identify opportunities for jointly co-financing investments, coordinating closely with other key do- nors in the country, including the EU, Japan, China and the UN system. A small plane traveling to outer islands - Tonga. Photo credit: World Bank / Conor Ashleigh Regional Partnership Framework 131 TUVALU Sociopolitical and Institutional Factors Tuvalu is a parliamentary representative democratic monarchy, whereby the British mon- arch is the head of state, represented by the Governor-General, while the Prime Minister is the head of government. Executive power is exercised by the Government of Tuvalu. The 15 Members of Parliament (MPs) each serve a four-year term in the unicameral legislature. Tuvalu has no formal political parties, and floor-crossing by MPs is possible, although this situation has not led to frequent changes in government. MPs tend to have very close ties to the island they represent, and election campaigns are conducted largely on the basis of personal and family ties and reputation. Traditional chiefs also still play a significant role in island affairs, particularly on the outer islands. The last General Election was held in March 2015, and the Cabinet was formed in April. The March 2015 elections returned 7 out of 8 caretaker Cabinet members. The election results ensured continuity in the admin- istration and continued commitment to the reform agenda. Recent Economic Developments and Outlook Tuvalu has experienced uneven economic growth, which has been low since the global fi- nancial crisis. Growth is expected at over 3 percent in 2015 on the back of large increases in capital investment (including investments related to Tropical Cyclone Pam). Inflation was expected to pick-up to around 4.7 percent in 2015 before moderating, reflecting growing government expenditure (partly offset by falling fuel prices) and a potential shortage of essential items owing to disruptions caused by the cyclone in transport and the domestic supply of agricultural products. The current account of the balance of payments moved from a surplus of 26 percent of GDP in 2014 to a deficit of around 6 percent of GDP in 2015 due to reconstruction following Tropical Cyclone Pam and other capital investment activities. Boosted by the output of a fishing joint venture, exports doubled in just a few years. With the introduction of a new fishing licensing scheme, license fees more than tripled, accounting for two-thirds of GDP in 2015. Foreign aid has been substantial, standing at around 28 percent GDP in 2015. De- clining work opportunities on merchant ships since the global crisis caused remittances to fall from around 17 percent of GDP in 2008 to around 10 percent of GDP in 2015. Limited cash earning opportunities domestically, particularly outside of the capital, and the fall in remittance flows led to a deterioration in the population’s access to basic goods and services. Other income sources such as investment income from the Tuvalu Trust Fund (TTF) and official grants remain variable and dependent on global economic conditions. As current account deficits are largely financed by Consolidated Investment Fund (CIF) buffer assets, maintaining the fund’s balance above the sustainable target is critical to macro- economic stability in Tuvalu. The 2014 joint IMF-World Bank Debt Sustainability Analysis concluded that Tuvalu is at a high risk of debt distress, although the government does not face debt servicing risks. The government is committed to returning its debt to sustain- able levels through prudent fiscal policy and effective debt management. 132 Regional Partnership Framework Tuvalu was expected to achieve a budget surplus in 2015 owing to high fishing license fees. With taxes funding a relatively small proportion of Tuvalu’s budget, the volatile na- ture of Tuvalu’s other sources of revenue (such as fishing license fees) and vulnerability to external shocks frequently result in unpredictable fiscal outcomes. Unlike other countries, Tuvalu has limited channels to finance fiscal deficits and relies heavily on buffer assets and grants (see the box). In recent years, through higher than expected windfall revenues, grants, and fiscal prudence, the government was able to rebuild the CIF from near deple- tion in 2011 to around A$30.8 million in November 2016, above the minimum sustainable target balance. FISCAL SUSTAINABILITY IN TUVALU In the Tuvalu context, fiscal sustainability is measured by the ability of financial assets in the TTF and CIF to continuously finance post-grant deficits, even though periods of shock. Based on historical information (length of shock and average deficit), a sustainable level of assets in the CIF is numerically expressed as 16 percent of the maintained value of the TTF. This level can be sustained when the government achieves pre-grant deficits of around 21 percent of GDP going forward. With grants expected at around 16 percent of GDP, the remaining deficit (around 5 percent of GDP) could be sustainably financed by drawdowns from CIF assets, which is fully replenished by distributions from the TTF even at an assumed lower rate of return. People offloading barrels on a boat - Tuvalu. Photo Credit: World Bank / Nora Weisskopf Regional Partnership Framework 133 Poverty and Shared Prosperity Extreme poverty is relatively uncommon in Tuvalu. The SCD estimates that 3 percent of the population lived below the extreme poverty line (2011 PPP US$1.90 per person per day) in 2010, when a HIES was last administered. According to the less austere national basic-needs poverty benchmark, 26 percent of the population are struggling to meet a lo- cal standard of basic needs as of 2010 (with 3 percent living below the food poverty line). This figure is up from 21 percent in 2005 (“food poverty” is down from 5 percent). However, the basic-needs poverty benchmark is not strictly comparable over time (a general im- provement in living standards is likely to lift the poverty benchmark and will tend to bias estimates of the incidence of poverty upward in later years relative to earlier years). A new HIES is expected to be administered in 2017. Poverty in Tuvalu is concentrated in the outer islands and the welfare gap with the capital Funafuti appears to have grown in recent years. The SCD estimates a relatively high Gini coefficient on the per capita nominal consumption distribution of 0.41 as at 2010. Oth- er related measures published in the Tuvalu poverty report suggest inequality increased between 2005 and 2010. This finding is consistent with evidence presented in the SCD indicating that incomes of the B40 have fallen relative to the nationwide average (with a growth differential of the order of 4 percentage points). Particularly in the outer islands, poverty is exacerbated by lack of access to services and employment (and hence remit- tances), coupled with vulnerability to shocks. Tuvalu has experienced a diverse series of adverse shocks in recent years—including natural disasters, global economic crises, more localized economic shocks (such as the loss of job opportunities for seafarers), and food price shocks. Development Agenda The economy faces challenges in achieving more robust growth in the medium term, and growth is expected to remain dependent on public sector and donor-funded expenditure over that period. Dispersion, remoteness from major markets, and the small scale of the economy create a large and costly public sector and also raise the cost of delivering ser- vices, which is why the efficiency of the public sector (including public enterprises) is im- portant. Strengthening public financial management and ensuring the efficient use of public resources are critical to achieving development priorities. In the absence of monetary policy and given the tight fiscal situation, the authorities will have limited policy space to respond to external shocks—which further highlights the importance of maintaining adequate buffer assets to absorb inevitable future shocks. Efforts to strengthen climate resilience will also support the country in facing future cli- mate shocks. To ensure sustained increases in living standards, Tuvaluans need to be better prepared for overseas job opportunities. With limited domestic employment opportunities and demand for Tuvaluan international maritime seafarers declining in the face of greater competition from other countries, education and vocational training systems need to be strengthened to enable Tuvaluans to compete effectively for overseas income-earning opportunities and to overcome the tyranny of distance. 134 Regional Partnership Framework There is scope to improve the provision of essential services. Further investment in essen- tial infrastructure, including investment by development partners, will support improved service provision. SOEs are also likely to continue to play a role in providing essential ser- vices, given the unique structure of the Tuvaluan market. In recent years, some SOEs have not operated in cost-effectively. Advancing the restructuring of SOEs by addressing the key issues of governance, efficiency, pricing policies, and cross-subsidization could reduce the drain on public resources, which could then be reoriented to priority areas, including poverty reduction. Tuvalu also has significant opportunities to increase the economic return on its natural resources, including fisheries. Tuvalu’s EEZ is situated in one of the world’s last viable tuna fisheries. Although revenues and savings have increased in recent year, more could be done. Recent consultations with the department of resources and development revealed interest in deep-sea mining in Tuvalu’s EEZ for rare-earth mineral deposits. A passenger plane stopped in Tuvalu. Photo credit: World Bank / Oliver Whalley Regional Partnership Framework 135 National Strategy and Its Key Pillars/Focus The government’s vision for sustainable development and “a more protected, secure, pros- perous and healthier Tuvalu” is outlined in Te Kakeega III: National Strategy for Sustain- able Development 2016-2020. The strategy was endorsed in 2016 and is rooted in a com- mitment to attaining the SDGs and protecting Tuvalu from global and natural threats. The strategy is underpinned by twelve strategic areas: (i) climate change; (ii) good governance; (iii) the economy: stability and growth; (iv) social development and health; (v) falekaupule and island development; (vi) private sector, employment and trade; (vii) education and human resources; (viii) natural resources; (ix) infrastructure and support services; (x) en- vironment; (xi) migration and urbanisation; and (xii) oceans and seas.  ACTIVE PROJECTS Project ID Project Name Date, Board Net % Disb Lst Lst Rev App Comm Closing DO IP ($m) P144573 Energy Sector Development Project 01/26/2015 03/31/2019 7.00 5.1% S S P151780 PROP for Tuvalu 12/22/2014 09/30/2020 7.00 10.0% S MS P150194 Second Development Policy Operation 03/26/2015 12/31/2016 4.50 102.6% P156169 Supplemental DPO 09/15/2015 0.00 0.0% P128940 Pacific Aviation Investment - Tuvalu 12/13/2011 06/30/2018 20.79 59.0% S S P155066 Third Development Policy Operation 12/09/2016 3.00 0% INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 23 Year Telecommunications and ICT Development 15 FY18 Fourth Development Policy Operation 7.5 FY18 Tuvalu Maritime Investment Project 20 - 23 FY18 PROP (Fisheries) Additional Financing 8 - 10 FY20 Development Policy Operation 7.5 FY20 Total 58 - 63 23 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of the SDR to USD 136 Regional Partnership Framework VANUATU Sociopolitical and Institutional Factors Vanuatu has a hybrid political system consisting of a capital-focused Westminster sys- tem of government and a system of chiefly governance across the country at the local lev- el. The political situation has become increasingly unstable over the past few years, partly reflecting the fragmentation of Vanuatu politics. The main post-Independence parties split, the number of independents and small parties rose, and the government changed hands numerous times between 2011 and 2015 (six times in the first half of 2011 alone). Since June 2015 a corruption scandal has seen 14 government MPs sentenced to prison terms. The President recently dissolved Parliament, and a national election was scheduled for early 2016. This political instability, coupled with the prevalent view that a range of state institutions are ineffective and in some cases illegitimate, imposes a number of stresses: on doing business (by making business transactions more uncertain); on the delivery of public as- sets (with disputes over rights, compensation, and payments resulting in higher costs and delays); and on social cohesion (with intra-community and inter-generational tensions re- sulting from contests over benefit-sharing arrangements). Recent Economic Developments and Outlook The Vanuatu economy is characterized by a formal sector driven by tourism and agri- culture, and widespread informal subsistence activity outside the main urban centers of Port Vila and Luganville. In Vanuatu, as in other small PICs, economic remoteness, internal dispersion, and small size sharply curtail the set of viable economic strategies and the potential for export-led growth. Agriculture and tourism, which are relatively less affected by these constraints, each contribute an estimated one-quarter of GDP. GDP growth over the past decade has been among the highest in the region, driven primarily by tourism, but very high population growth (due to high fertility rates and limited migration oppor- tunities) means that per capita growth has been more modest at around 1.3 percent per annum. The government supported macroeconomic stability with a prudent fiscal stance over the past decade, but low public expenditure has contributed to inadequate public services and infrastructure. Vanuatu collects the least revenue of any country in the region, and it imposes no personal or corporate income tax. The government in recent years embarked on a substantial infrastructure development program, including new roads, seaports, and airports, financed with a mix of development grants and investment loans. Natural disasters severely constrain economic activity in Vanuatu. As a recent reminder, Tropical Cyclone Pam (which struck in March 2015) was one of the strongest cyclones ever seen in the Pacific. Eleven lives were lost, while around 75,000 people needed emergency shelter. The cyclone inflicted widespread damage to Vanuatu’s capital stock, including infrastructure, livestock, and household assets, with damages and losses equivalent to almost two-thirds of GDP. Because of cyclone damage, tourism and agricultural output Regional Partnership Framework 137 declined sharply in 2015, although reconstruction activity and the commencement of sev- eral large infrastructure projects partially offset those losses. GDP was expected to be flat or increase only slightly in 2015, compared with the pre-cyclone forecast of 4.3 percent growth. As a result of Tropical Cyclone Pam, inflation was expected to be close to 4 percent in 2015, reflecting cyclone-induced shortages and increases in the prices of materials to be used in reconstruction activities. Exports were expected to decline relative to the pre-cyclone forecast owing to damage to cash crops, including kava and copra. Tourism earnings were expected to be dramatically affected, with a number of major hotels temporarily closing for repair and renovation. The net effect was projected to be a 2015 current account defi- cit of close to one-quarter of GDP, with the impact of the deterioration in the trade balance partially offset by insurance receipts and external assistance. Supporting the vulnerable population and restoring public facilities and infrastructure will require a considerable expansion in government expenditure. If undertaken efficiently, publicly funded investments should help foster future growth in Vanuatu, and the govern- ment’s conservative fiscal stance in recent years allows it some scope to take on moder- ate levels of concessional debt. Poverty and Shared Prosperity According to internationally comparable benchmarks, the incidence of extreme poverty (per capita consumption below 2011 PPP US$1.90 per day) was 15 percent in Vanuatu in 2010, while the incidence of poverty (per capita consumption below 2011 PPP US$$3.10 per day) was 38 percent—both among the highest in the PICs. The national benchmark for basic-needs poverty falls somewhere in between these two standards, with an estimat- ed 13 percent of ni-Vanuatu in poverty according to this measure. Inequality is relatively modest compared with other countries in the region. The SCD presents evidence suggest- ing that the B40 experienced relatively strong income growth in the years leading up to the 2010 HIES, and the Gini coefficient on the nominal per capita consumption distribution across the population is estimated at 0.37. Consumption-based poverty in Vanuatu is highly correlated with other indicators of dep- rivation. While access to education has improved, 30 percent of children do not complete primary school and most do not attend secondary school. The majority (70 percent) of households outside the two main cities do not have electricity, and access to improved water and sanitation is also low. The vast majority of the poor are based in the rural outer islands and depend on subsistence farming. Many rural populations also reportedly face severe constraints in accessing markets, schools, and hospitals because roads are either not available or of poor quality. 138 Regional Partnership Framework Development Agenda Despite those challenges, Vanuatu has significant potential to increase shared prosperity and reduce poverty. The abundance of agricultural land and Vanuatu’s attractiveness as a tourist destination both provide opportunities. Vanuatu can further develop its tourist attractions and accommodation to increase spend per tourist and repeat visits. The other priority lies with building external demand, using savvy marketing and good product de- sign to enter new markets, especially in emerging Asia. The development of agricultural markets as a source of income for rural households faces multiple obstacles. Lack of infrastructure impedes market access, inadequate basic edu- cation limits farmers’ productivity, and frequent natural disasters reduce the incentive to make longer-term investments. Actions by the government in coordination with develop- ment partners, the community, and the private sector can help to alleviate each of these constraints. It is critical to continue to strengthen disaster early warning and prepared- ness, mainstream disaster risk and climate change considerations into planning and in- frastructure investment, and enhance financial resilience to climate and disaster shocks. To improve public service delivery, Vanuatu will need more public resources and stronger public financial management systems. With development assistance, efforts are already taking place to increase education and health services in the outer islands, and the sub- stantial public investment program currently underway should help meet critical infra- structure needs. To maintain this higher level of services and investment, Vanuatu will need to raise additional domestic revenues as well as access continued assistance from development partners. Robust systems to manage these flows and distribute resources nationwide will be essential. National Strategy and Its Key Pillars/Focus The government’s development strategy is contained in Vanuatu’s Priorities and Action Agenda 2006–15 (PAA) and in the Planning Long Acting Short Plan (PLAS) 2013–16. The PAA 2006-15 sets out a national vision of “an educated, healthy and wealthy Vanuatu.” Seven national strategic priorities support the achievement of that vision, including pri- vate sector development and employment creation; macroeconomic stability and equita- ble growth; good governance and public sector reform; primary sector development (natu- ral resources and the environment); provision of better basic services, especially in rural areas; education and human resource development; and economic infrastructure and sup- port services. The PAA is a high-level set of priorities and strategies with a ten-year time horizon. It is accompanied by the PLAS, which lists a set of priority actions for the govern- ment and development partners. An important overarching objective is to improve the environment for private sector-led economic growth, particularly in agriculture, forestry and fisheries, and tourism. This ob- jective can be achieved by improving the investment, operating, and regulatory environ- ment for the private sector and by providing necessary infrastructure in both rural and urban areas. Measures to improve quality and access to education and health services, and to ensure women’s equitable participation in social, economic, and political decision- making, are also viewed as key contributors. Regional Partnership Framework 139 ACTIVE PROJECTS Project ID Project Name Date, Board Rev Net % Disb Lst Lst App Closing Comm DO IP ($m) P112611 Increasing Resilience to Climate 12/04/2012 12/31/2018 9.74 60.7% MU MU Change P155256 Pacific Resilience Program 06/19/2015 11/30/2020 1.50 66.7% S S P156505 Vanuatu Reconstruction Project 06/17/2016 04/30/2022 50.00 0.0% S S P154149 Vanuatu Aviation Investment Project 05/08/2015 12/31/2019 59.50 5.0% MS MS P161454 Vanuatu Aviation Investment 01/10/17 14.1 0.0% Project AF RECIPIENT EXECUTED TRUST FUNDS Project Name Approval Closing Net Total Total Undisbursed Date Date Commitment Disbursed Balance ($m) Amount ($m) ($m) VU: Telecommunications & ICT TA 08/31/2009 06/30/2016 5.3 4.7 40.6 Mainstreaming Disaster Risk Reduction 09/26/2012 12/31/2016 2.7 1.1 1.6 Increasing Resilience to Climate Change 12/04/2012 12/31/2018 10.1 2.1 3.6 Energy Sector Development Project 06/21/2013 06/30/2016 2.8 1.8 0.9 GPOBA Improved Electricity Access 05/16/2014 06/30/2018 4.9 0.2 4.6 Rural Electrification Project 11/07/2014 12/31/2019 4.7 0.4 4.3 Pacific Resilience Program 06/19/2015 11/30/2020 1.5 0.5 1.1 INDICATIVE PROGRAM FY17-21 (TBC) Project Name IDA (US$ million) 24 Year Rural Electrification Project Stage II 4 FY17 Development Policy Operation (tbc) 7.5 FY18 Energy (Geothermal) (tbc) 12 - 15 FY19 E-Government (tbc) 5-7 FY19 Transport (Aviation) 25 FY20 Espiritu Santo Road (tbc) 8 - 10 FY20 Development Policy Operation (tbc) 7.5 FY20 Total 69 - 76 24 All figures are indicative and will be dependent upon final project design, confirmed IDA allocations and sub- ject to exchange rate fluctuations of SDR to USD 140 Regional Partnership Framework Men sail on a Te Wa (traditional canoe) - Kiribati. Photo credit: World Bank Regional Partnership Framework 141 Annex 10: Overview of PIC6 CAS/CPS Completion and Learning Reviews This overview summarizes the assessments of the individual Country Assistance Strategy (CAS) or Country Partnership Strategy (CPS) Completion and Learning Reviews (CLRs, provided in Attachments 3A–8A of this annex) for the six Pacific Island Countries (referred to here as the PIC6) for which individual country strategies were prepared starting about FY2011. In a departure from the previous umbrella Regional Strategy, stand-alone CASs/ CPSs were developed for the Federated States of Micronesia (FSM), Kiribati, the Republic of the Marshall Islands (RMI), Samoa, Tonga, and Tuvalu for various periods (mostly four years) spanning FY2011-17. Because several country strategies or partnerships cover peri- ods that remain to be completed or were completed very recently, it is not surprising that some results are unmet and that full results remain to be achieved in the younger, ongoing CPSs. These strategies were joint World Bank-IFC strategies, except for Tuvalu (which was for IDA only as Tuvalu was not a member of IFC). Even without an umbrella regional strategy, the individual CASs/CPSs reflect the features and challenges commonly encountered among most of the PIC6, including their relative isolation and remoteness, distance to markets, dispersion over wide oceanic areas as ar- chipelagos, fragility and vulnerability with respect to climate change, small economies and populations, economic dependence on external aid, large public sectors, and susceptibility to external shocks. Thus each country strategy and partnership was shaped by the four overarching themes identified as the framework for WBG engagement with the PIC6: (i) strengthening regional/global integration; (ii) building resilience to economic shocks, nat- ural disasters, and climate change; (iii) encouraging economic reform and private sector development; and (iv) improving education, health, and social services. These four themes were interpreted for the individual country strategies and partnerships in light of each country’s specific circumstances, the country specific development challenges and priori- ties, ongoing WBG activities and implementation experience, and the complementarity of WBG assistance with the activities of development partners. The PIC6 country strategies also aligned with the twin goals of the WBG: eliminating ex- treme poverty by 2030 and boosting shared prosperity, measured as the income of the bottom 40 percent in any given country. These goals strongly complemented the coun- tries own visions, enunciated in various national development strategies and frameworks, of achieving economic growth and development; addressing poverty, employment, quality of life, reduction of hardships, and equity issues; and meeting specific social, environmen- tal, and sustainability objectives. 142 Regional Partnership Framework SUMMARY OF KEY FINDINGS This overview summarizes the assessments undertaken within the individual CLRs (At- tachments 3A–8A) for the six PICs and refrains from arriving at any single assessment for the PIC6 group as a whole. Details on progress related to the individual CAS/CPS outcomes and related indicators and milestones are presented in six separate Results Frameworks (RFs), consolidated in Attachments 3B-8B. Each RF also presents information on relat- ed WBG activities that support the CAS/CPS objectives, identifies the key development partners, and where relevant summarizes lessons from the design and implementation of the engagements and offers indicative suggestions for ongoing and future engagements and strategies to inform the Regional Partnership Framework (RPF). Attachments 1 and 2 summarize the planned and actual WBG deliveries for the PIC6. The CLR results are based on self-assessments by the members of the WBG PIC6 country teams (both IDA and IFC) using the CAS/CPS outcomes as the units of accounting and taking into consideration progress on key indicators and milestones. The ratings scale follows the current OPCS guidelines for CLRs. The CLR guidelines require outcomes to be rated with one of the given categories. As a result, some outcomes and milestones have had to be rated within that scheme as “partially achieved” or “not achieved.” Those ratings were correct at the time of the CLR, because the related strategy was ongoing, but wher- ever appropriate, the team noted that good progress had been made toward achieving the results initially promised. The team also assessed the performance of the WBG in achiev- ing results and implementing various WBG-supported engagements. Even though the twin corporate goals of eliminating poverty and boosting shared prosperity were articulated after some of the PIC6 strategies had been developed, the team highlighted instances in which WBG activities in the six countries were aligned with those corporate goals. Development Outcomes The overall performance of the CAS/CPS programs in helping to achieve the subset of se- lected country goals was assessed as satisfactory for Samoa and Tonga, moderately sat- isfactory for FSM and Tuvalu, moderately unsatisfactory for Kiribati, and unsatisfactory for RMI (Table 1). The ratings for the individual country development outcomes are drawn from the evidence-based assessments of the CAS/CPS outcomes as the unit of account- ing (in most cases, using equal weights). In Samoa and Tonga (and to some extent Tuvalu), many outcomes were either fully or mostly achieved. In Kiribati and RMI, a large number of outcomes were partially or not yet achieved. For FSM, where the CPS has more than a year to go before it ends, the moderately satisfactory rating takes particular account of the trajectory and results achieved so far. Of the total 64 outcomes across the 6 countries, 13 are considered fully achieved and 18 mostly achieved, for an aggregate achievement rate of about 48 percent, or about half of the outcomes. About one-third of the outcomes are partially achieved. Regional Partnership Framework 143 World Bank Group Performance The performance of the WBG in designing and implementing the CAS/CPS programs in the PIC6 during this period is considered good in Samoa, Tonga, and Tuvalu and fair in the other countries (Table 1). The themes and strategic areas selected for the country programs aligned well with country priorities, the WBG regional framework, and the twin goals. The choice of instruments as well as the program of support were judicious and appropriate. Performance was hampered mostly by implementation issues. As evidenced by the one-third of outcomes that are partially achieved, projects often took much longer than anticipated to get off the ground. Two considerations are relevant for understanding this assessment. First, the engage- ments reviewed here often were the first to be undertaken by the WBG in these Pacific Is- land Countries, so WBG operations had a limited track record, and clients were unfamiliar with the WBG. Second, some strategies are still in progress or have just reached the end of their timeframe, so further results and milestones will be attained after supporting pro- ject components and activities are initiated or move beyond the preliminary stages when (for instance) staffing is ongoing, contracts are being placed, and procurement is proceed- ing (and sometimes encountering delays). Table 1: PIC6: Overall CAS/CPS Performance FSM Kiribati RMI Samoa Tonga Tuvalu TOTAL CAS/CPS period FY2014-2017 FY2011-2014 FY2013-2016 2012-2016 FY2011-2014 FY2012-2015 IDA/IFC Joint Joint Joint Joint Joint IDA CAS/CPS CPS CAS CPS CPS CAS CAS Number of themes 2 2 1 3 3 2 13 Number of outcomes 5 14 5 16 19 5 64 Achieved 0 2 0 2 8 1 13 Mostly achieved 1 4 0 2 9 2 18 Partially achieved 2 7 1 9 2 1 22 Not achieved 2 1 4 2 0 1 10 Not available/Not verified 0 0 0 1 0 0 1 Development outcome MS MU U S S MS World Bank Group performance Fair Fair Fair Good Good Good Note: FSM (Federated States of Micronesia); RMI (Republic of the Marshall Islands); S (Satisfactory); MS (Mod- erately Satisfactory); MU (Moderately Unsatisfactory); U (Unsatisfactory). 144 Regional Partnership Framework IFC has made good progress against goals set in the IFC Pacific Partnership Agreement: the formal platform of engagement between IFC and its core donors in the Pacific (the Governments of Australia and New Zealand). The Partnership Agreement, launched in 2012, lays out clear development goals and set objectives, and is focused on driving eco- nomic growth, spurred by the private sector development in the Pacific, to help promote new jobs, opportunities, prosperity and reduce poverty. The development of a successor arrangement is currently being discussed with the core donors. In Tonga and Samoa, IFC has directed its efforts toward tourism, seeking to increase the development of new source markets. IFC has supported Tonga develop the first Tonga Tourism Yearbook was launched in 2014, and conducted a review for Samoa on how the island’s air connectivity affects tourism, as well as its tourism marketing strategy. Also in Samoa, IFC has supported the government establish a PPP concession to develop an integrated solid waste management system and in establishing a cost-effective, sustainable alternative for commercial dis- pute resolution (to complement to the formal court system). Through the Pacific Payment Systems project, IFC successfully provided the central banks of Samoa and Tonga with a Summary Note on the Request for Interest process for the payment systems infrastruc- ture reforms, and increased basic financial services to the unbanked and underbanked populations in remote areas of those two countries. HIGHLIGHTS OF ASSESSMENT The PIC6 CASs and CPSs reviewed here were prepared as country-specific strategies from 2010 in a departure from the previous umbrella strategy for the region. As noted, owing to the commonalities in terms of economic geography and other traits such as isolation and remoteness, spatial dispersion, small size of the economy and population, fragility, vulner- ability to natural and economic shocks, and the similar human development challenges faced by the PIC6, WBG engagement in these countries remained highly focused on four overarching themes: (i) strengthening regional/global integration; (ii) building resilience to economic shocks, natural disasters and climate change; (iii) encouraging economic reform and private sector development; and (iv) improving education, health, and the social ser- vices. Because the strategic themes or strategic areas or priorities of the individual CASs and CPSs fit well within these overarching themes, they are used to structure the follow- ing discussion of the highlights of the assessments. Theme 1: Strengthening Regional/Global Integration Most of the PIC6 CASs/CPSs reflected this theme in one or more priority strategic areas or clusters of outcomes. Typically, these included outcomes or outcome clusters related to infrastructure development and maintenance of road, airport, and maritime facilities as well as aviation safety and institutional development; improved access to and lower costs of information and communication technology (ICT) services, including mobile te- lephony and internet use and regulatory reforms; and temporary labor migration schemes for employment opportunities and facilitation/lowering of remittance costs. These out- comes were supported well by country and regional projects on aviation (such as the Pa- cific Aviation Investment Program, PAIP), ICT connectivity (such as the Pacific Regional Connectivity Program), Technical Assistance (TA) on labor migration, and support for reg- Regional Partnership Framework 145 ulatory reforms. In particular, the targets for building and maintaining roads, including developing local maintenance capacity, were usually met or exceeded, while ICT projects also had good results. Results linked to aviation outcomes are proving slow to accrue in some instances, as frequently it has taken longer than anticipated in the CAS/CPS to install infrastructure and safety facilities and conclude contracts. The objectives of ob- taining International Civil Aviation Organization (ICAO) certification for major airports are being flexibly addressed by using third-party support for accreditation. Temporary labor migration schemes supported by Australia and New Zealand also have good traction and are contributing to poverty reduction and the WBG has contributed to the policy discus- sion in both countries. In Kiribati, outcomes related to ICT development (increased mobile penetration, reduced price for telecom services, and a stronger, more competitive ICT regulatory environment) have been fully or mostly achieved. Mobile penetration reached about 30 percent, the state-owned monopoly was privatized, and pricing for 3G mobile services has fallen. The Samoa Pacific Regional Connectivity Phase III project is in the early stages of implementa- tion. The ICT cluster of outcomes in Tonga (increased internet use, wholesale connectivity cost reductions) has been achieved or mostly achieved. In RMI, IDA operations supporting the population’s improved access to ICT services have not yet yielded results due to lo- cal opposition to market reforms and liberalization. The FSM-Palau Connectivity Project, conducted in partnership with Asian Development Bank (ADB), is in its early days, and the related outcome is not achieved but on track. The PAIP series of projects has supported Kiribati, Samoa, Tonga, and Tuvalu in address- ing the challenges of geographic isolation by promoting opportunities arising from closer regional and global integration. PAIP is providing support for rehabilitating the aviation infrastructure of these countries and bringing the facilities into compliance with interna- tional safety regulations and standards. The Pacific Region Infrastructure Facility (PRIF), a multi-donor trust fund, has supported PAIP, with the primary focus of supporting sus- tainability and ensuring funding for regulatory oversight. An AU$5 “security and safety levy” for each departing international passenger has been implemented in all PAIP coun- tries to help ensure fiscal sustainability for managing air transport and infrastructure assets. This levy is providing significant revenue to high-traffic countries such as Tonga and Samoa. Runway repairs have been completed in Tonga and Tuvalu and will soon start in Samoa. Improvements to navigation aids, weather monitoring, rescue fire services, and more have progressed. Advisors are supporting several countries to address their regu- latory and operational standards. Tonga has mostly achieved the outcome of improving compliance of its civil aviation and maritime sector with international safety standards. The Ministry of Infrastructure (MoI), with support of the Tonga Transport Sector Consoli- dation Project (TSCP), has drafted one civil aviation, two land transport, and 18 maritime policies, as well as a dedicated MoI Act. Tuvalu has achieved the labor migration outcomes of the CAS, supported by the WBG, by taking greater advantage of temporary employment opportunities in New Zealand and Australia, and it has met the milestone of providing training opportunities to Tuvaluans. The specific target of increasing women’s participation in these schemes was not met. 146 Regional Partnership Framework Aside from the supply- and demand-side barriers to boosting women’s participation in the temporary agricultural labor schemes, sociocultural barriers and preferences make it challenging for women to work as seafarers. The goal of increasing the number of Samoan workers participating in temporary labor migration schemes in Australia and New Zea- land, with higher returns per worker as efficiency increases, is partially achieved. Theme 2: Building Resilience to Economic Shocks, Natural Disasters, and Climate Change Kiribati, Samoa, Tonga, and Tuvalu all have strategic priorities in their individual CASs/ CPSs that address the overall theme of building resilience to shocks, natural disasters, and climate change. The strategies have focused particularly on improving the supply of petroleum and reducing volatility in supply and pricing. Given the vulnerability of the PIC6 to natural disasters, disaster risk reduction (DRR) measures and measures to address the effects of climate change also received attention. Efforts to improve the petroleum supply chain to reduce volatility in the energy price and supply in Kiribati have achieved only partial results so far, and results related to increas- ing renewable energy to the grid and directly reducing greenhouse gas (GHG) emissions have also been slow to gain traction. These efforts are supported by the Kiribati Grid- Connected Solar Photo-Voltaic (PV) Project, which has been delayed. Tonga had better success in improving petroleum supply chains through support from the Tonga Energy Sector Development Policy Operation (DPO) as well as the Economic Recovery Operations (EROs). The operation, which was integral to the Bank’s ongoing overall engagement in the energy sector, supported policy and institutional measures that helped Tonga sustain the momentum of energy sector reforms and implement recommendations from the 2010 Public Expenditure and Financial Accountability (PEFA) Assessment. Tonga also partially achieved results under the outcome on increased efficiency of grid power system, including the reduction of technical and non-technical losses on the Tongatapu grid. The outcome and milestones formed part of a phased program for the Tonga Energy Road Map (TERM), and their achievement depended on initial activities in TERM program that remain to be evaluated conclusively. Renewable generation capacity has been increased, with a 1 MW solar plant now dispatching to the Nuku’alofa grid and providing lower-cost energy than existing diesel plants. This achievement contributes to improved service delivery and in- creases resilience against shocks. Kiribati launched the Kiribati Joint Implementation Plan (KJIP) for Climate Change and Disaster Risk Management in August 2014. The KJIP mainstreams disaster risk reduc- tion in national planning and investment programming. Greater integrated capacity to manage DRR and climate change adaptation (CCA) issues is partially achieved. Kiribati has been active in responding to the impacts of climate change and disasters at all levels. KJIP ensures that climate variability, climate change, and disaster risks (related to me- teorological, geological, or environmental risks) are incorporated in all development plan- ning processes. It also ensures that tangible, on-the-ground actions are identified for all sectors in order to reduce risks. Climate risk profiles were applied to four major coastal protection works on South Tarawa. Regional Partnership Framework 147 In Tonga, the post-cyclone Niuatoputapu reconstruction targets have been achieved with support from the Post-Tsunami Reconstruction Project. A total of 127 buildings have been rebuilt or repaired, with improved auxiliary water supply and sanitation facilities. Water supply and road access to the new settlement areas outside the tsunami danger zone have been established, and 13 km of the main spine road across the island underwent resurfacing and preventive maintenance. A social survey found high levels of satisfaction among the beneficiaries of these efforts. In addition, the objectives of improved national disaster management and planning capacity have been met. The project strengthened in- stitutional capacity for DRM. Capacity improvements include improved technical capabil- ity and skills for hazard assessment and mapping, increased availability and accessibility of improved hazard and risk information, and improved community-level awareness of and preparedness for disasters. The Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) pilot insur- ance scheme (a joint Secretariat of the Pacific Community and World Bank initiative, funded by Japan) triggered an insurance payout to Tonga in the amount of US$1.27 million to fund immediate relief and recovery in response to Tropical Cyclone Ian and to Vanuatu in the amount of US$1.9 million following Tropical Cyclone Pam. The positive outcome of the pilot led PCRAFI member countries to establish an independent PCRAFI facility to provide disaster and climate risk insurance, domiciled in the Cook Islands and established by August 2016. Following COP21 in Paris, development partners have so far committed US$35 million toward the facility. Tuvalu intended to pursue CCA measures focusing on effective medium-term planning and sustainable water resource (drought) management, but they did not eventuate, which con- stitutes a major missed opportunity in light of Tuvalu’s critical vulnerability to the impacts of climate change and natural disasters. No WBG-supported operations or TA were under- taken that would lead to CAS outcomes in drought and water resource management. The PCRAFI and Disaster Risk Financing Insurance (DRFI) programs developed risk profiles (earthquakes and cyclones) but did not address water resource or drought management. The aviation project had planned to create climate resilience and adaptation co-benefits by using the runway as water catchment and creating water storage facilities, but later that scheme was not considered to be viable for potable water. A set of outcomes in the Kiribati CAS related to improving coastal resilience, strengthening water resource management with greater access to clean water, and increasing capacity to manage DRR and CCA. They were mostly achieved through support from the Kiribati Adaptation Program (KAP) II and III. The government has strong support at the policy level for water resource management in South Tarawa. The sustainability of the physical improvements to the network and ongoing reliability of the water supply are accompa- nied by behavior-change interventions aimed at improving water saving and management as well as improving willingness to pay for the supply. Technical capacity has been built within the Ministry of Public Works and Utilities for improved shoreline protection. Capac- ity for the selection of appropriate measures has been built through the projects, and it is being utilized in coastal resilience programs in other parts of the country. Rainwater harvesting systems in Banabaand North Tarawa (six sites in four villages), which provide 5.3 m3 of potable water per day (toward the project target of 6.1 m3 per day) have been completed thus far. 148 Regional Partnership Framework Samoa fully met its goal of completing 5 km of inland coastal road. The road, which pro- vides access to and for relocated communities in tsunami-stricken areas, supports the government’s priority of better preparing communities to respond to natural disasters. The country has also adopted a modern and comprehensive disaster risk management (DRM) framework that features greater community engagement. Also in Samoa, 16 dis- tricts are completing high-priority coastal protection initiatives (such as mangrove plant- ing), and milestones related to developing the Integrated National Climate Change Adap- tation Strategy and accessing regional risk pooling and catastrophe insurance schemes have been achieved. Theme 3: Encouraging Economic Reform and Private Sector Development The key objectives of fiscal consolidation and rebuilding of reserves in Samoa are mostly achieved. A tight fiscal stance, stronger revenue collection, and restraints on current ex- penditures have led to lower deficits in recent years, although deficits have still exceeded the government’s target of 3.5 percent of GDP. Two DPOs were declared effective and dis- bursed over the CPS period (in March 2013 and June 2015, respectively), and a further DPO is under preparation for FY17 delivery. These DPOs each added to progress toward fiscal sustainability by including actions specifically targeting debt management, revenues, and public expenditure (particularly procurement reforms), as well as by helping to motivate the maintenance of a sound macroeconomic framework overall. As a prior action for the 2013 DPO in Samoa, the government approved and made public an updated medium-term debt strategy (MTDS), and it began to publish quarterly debt bulletins on the Ministry of Finance (MoF) website, which allow the government and the public to monitor key aspects of the debt portfolio. As a prior action for the 2014 DPO, the MoF established formal pro- cedures for contracting loans and issuing government guarantees (with TA from the World Bank), to strengthen overarching control of debt and contingent liabilities and ensure that new borrowing is consistent with the MTDS. The World Bank responded to Tuvalu’s request for support to strengthen fiscal man- agement and adjustments. The objective of reducing fiscal pressure and improving the economic outlook by reorienting and rationalizing government expenditure was mostly achieved: the Consolidated Investment Fund (CIF) was rebuilt by managing expenditure and reorienting expenditure to priority areas, and these efforts, although somewhat at- tenuated by recent natural disasters, better equip the government to address future shocks. The Tuvalu Consumption Tax also increased from 3 percent of GDP to 7 percent in 2013 (exceeding the CAS target of 6 percent). The country fell short of its important milestone of reducing expenditures for the Tuvalu Medical Treatment Scheme (TMTS); the objective was for the scheme to move from consuming 57 percent of the health budget in 2009 to 17 percent (equivalent to 2005 levels), but expenditure had declined only to 45 percent by 2014 (note however that expenditures for Primary and Preventive Health Care increased by more than 5 percent over the past several years). The supplement to the Second DPO provided additional financing to meet an unexpected need resulting from Tropical Cyclone Pam. The operation ensures that reforms supported under the Second DPO remain on track and are implemented without the risk of delay due to competing capacity or budgetary priorities arising from post-disaster recovery. Regional Partnership Framework 149 RMI did not achieve the goal of introducing cost-reflective fuel tariffs. Discussions were held with the government and Marshalls Energy Company (MEC), but during the CAS pe- riod, WBG support was not available to MEC or the energy sector; the government at the time requested its program to focus fully on ICT reform and allocated all of its IDA re- sources to a DPO in the ICT sector. In government and World Bank discussions of IDA17 programming in July 2015, MoF reported that the government did not support the Bank’s involvement in the energy sector, noting that sufficient support was available from the European Union (EU). Also in RMI, the overall outcome related to the Compact Trust Fund (CTF) objectives—strategic asset allocation and investment management strategies re- viewed, and options identified to improve long-term sustainability in response to econom- ic and financial market volatilities—is rated partially achieved. Samoa made satisfactory progress toward achieving public financial management (PFM) outcomes. The government achieved the goal of strengthened PFM through recent reforms (building on nearly two decades of progress) that have established an appropriate legisla- tive framework, introduced program budgeting, and instituted government-wide sector planning. The World Bank has also maintained a strong dialogue on revenue reform issues with the government in the context of the Public Expenditure Review (PER), as well as the 2014 DPO, which supported revisions to the Customs Act to facilitate trade and improve- ments to the customs information system. These legislative changes have allowed Samoa to remove red tape in customs operations and employ risk management techniques, im- proving transparency and predictability for traders and reducing the cost of doing busi- ness. In recent years, Samoa has also created a new Procurement Division in the MoF, an administrative arrangement that has driven the wider procurement reform process. Sup- ported by the 2013 and 2014 DPOs, the government has ensured all tender notices and all contract awards for procurements above SAT500,000 are publicly available. The objectives of strengthening the investment climate and business environment across the PIC6 have mixed ratings. In Samoa, the goal of improved competitiveness, including improvements in the World Bank Doing Business (DB) indicators, is assessed as partial- ly achieved. Development objectives of the 2014 DPO aimed to strengthen the payment system, tourism sector policy, and private sector development opportunities as founda- tions for more robust economic growth over the medium term. Contributing to these ob- jectives were reforms to modernize the payment system and introduce a new PPP policy framework to increase opportunities for private participation in the large state-owned enterprise (SOE) sector. These reforms have helped (and will continue to help) to boost the competitiveness of the Samoan economy. The PPP framework developed with WBG assistance was endorsed by the Cabinet. In Samoa, IFC has also assisted the government in establishing a PPP concession to develop an integrated solid waste management sys- tem (to cover all waste generators—household, commercial, industrial) in both Upolu and Savali Islands, covering 100 percent of the population. IFC also successfully established the Samoa Alternative Dispute Resolution, which was a cost-effective, sustainable alter- native for commercial dispute resolution (to complement to the formal court system). In Tonga and Samoa, central to IFC’s focus has been advancing the tourism industry, which fuels growth and employment, not least because of its multiplier effect: the tenta- cles of tourism touch a myriad of other economic activities, catalysing the development of 150 Regional Partnership Framework small businesses in related production and service sectors, with the important corollary being job creation. In 2013 IFC initiated an Advisory project aimed at addressing both the demand and supply side and increasing the development of new source markets. With IFC support, the first Tonga Tourism Yearbook was launched in 2014, and IFC will continue to work with the ministry and the Statistics Office in implementing the Tourism Core Data- set Roadmap. The Government of Samoa also requested IFC’s support in reviewing how the island’s air connectivity affects tourism, and in turn exploring options for Samoa to improve air connectivity, as well as its tourism marketing strategy; this review has been completed and presented to the Government of Samoa. Some progress was seen in Tonga for the outcome cluster related to improving the busi- ness environment (improved business environment, as reflected in DB indicators; reduced cost of connectivity translating into reduced business transaction costs; and reduced number of procedures for obtaining a business license). The DPOs supported DB reforms with explicit links to DB indicators in their RFs. Some significant results (for instance, reductions in the cost of starting a business and simplification of the small business tax) and a number of more recent reforms have yet to be reflected in the DB scores but will have a big impact when they become fully effective (examples include reforms in receiver- ship and foreign investment law). There have been specific instances of movement. For ex- ample, the Central Bank of Samoa invited a WBG Finance & Market (F&M) team to assist in developing a credit bureau for the country. The objective of reduced cost of connectiv- ity is well served by the Tonga-Pacific Regional Connectivity Program, resulting in lower transaction costs for businesses, households, and the government. Through the Pacific Payment Systems project, IFC successfully provided the central banks of Samoa and Tonga with a Summary Note on the Request for Interest process for the payment systems infrastructure reforms, and increased basic financial services to the unbanked and underbanked populations in remote areas of those two countries. Beyond helping improve access to electronic payment services for the unserved and underserved populations in Tonga and Samoa, IFC strengthened legal frameworks, regulations and oversight of payment systems between these countries, together with other islands that fall outside the scope of this assessment. In Tonga, IFC also completed project implemen- tation for the creation of a remittances unit of the Tonga Development Bank (TDB), along the TDB to offer accounts for remittances transfers from New Zealand and Tonga at low cost. The objective of legislative and regulatory improvements to the investment climate in RMI is not achieved, although the RMI Chamber of Commerce has requested IFC to provide as- sistance in improving the country’s investment regime. Discussions revealed that the RMI government needs to further clarify its goals and the objectives of the investment policy regime, and the parties decided to put the request on hold temporarily. These challeng- es are exacerbated by the lack of funding for investment policy work in Northern Pacific countries through the IFC Investment Climate Rapid Response Project. In any case, WBG involvement in activities contributing to improvements in the investment climate in the remaining period of the CPS are unlikely. Regional Partnership Framework 151 In FSM, improvements in the business regulatory environment goals are rated partially achieved on the strength of progress on the related indicators and milestones. Concerted efforts and dialogue by the IFC created momentum for harmonizing foreign investment approval processes at the national and state levels. The President and government agreed with the approach that only the national government should have jurisdiction over invest- ment matters, and the states would cease to exercise their jurisdictions. In the energy sector, Samoa partially achieved the objective of concessions being tendered for new private investment in energy generation following liberalization and the develop- ment of a framework for independent power producers (IPPs). Two IPP concessions have been awarded (2 MW and 3 MW) to a strong international private sector operator, and the project is being developed. In FSM, the World Bank approved the Energy Sector Develop- ment Project, which became effective in October 2014 with the aim of financing urgent replacement of old and inefficient diesel generation units in Yap, Kosrae, and Pohnpei, and financing solar generating units and efficient street lighting in Chuuk. Longer-term en- ergy goals (including helping FSM to develop master plans for the four states and the national government to move to renewable energy and energy efficiency projects) remain unachieved because project activities have been slow to take off. Progress toward the goal of establishing maintenance microenterprises for the road sec- tor in Kiribati has been slow, partly because the original scheme had to be modified; it now focuses on a few larger contractors to avoid overburdening the already overstretched public service with a larger number of contracts to manage. In Tonga, the objective of consolidating the transport- related departments under MoI is achieved. The TSCP has successfully supported restructuring of the infrastructure ministry, which has devolved several non-key business areas to focus on its role of policy and planning. The goal of strengthening domestic private sector road maintenance capacity is also fully achieved. TSCP succeeded in providing routine maintenance on the full road network of Tongata- pu. The project ultimately helped to create a road maintenance industry in Tonga and strengthened capacity toward that end. In Kiribati, IFC provided transaction advisory support to the Government of Kiribati by preparing and implementing a tender for the selection of private investors/operators for the development of the Otintaii Hotel, a 40-room facility on the main island, Tarawa. The project was IFC’s first engagement in Kiribati, and a significant private sector activity for a country dominated by SOEs. Outcomes in Samoa related to agricultural productivity and marketing have been mostly or partially achieved through the Samoa Agriculture Competitiveness Enhancement Pro- ject (SACEP). Yields of selected vegetable crops have increased (although not yet doubled), and a greater share of locally produced fruits, vegetables, and beef is sold through do- mestic channels. The RMI component of the Pacific Islands Regional Oceanscape Program (PROP) became effective only in September 2015, and thus RMI has not yet achieved the outcome on increased percentage (from 10 percent to 12 percent) of the landed value of the tuna caught in national waters that is retained by the country via sales of access rights. Similarly, the milestone on introduction of a market mechanism permitting the 152 Regional Partnership Framework trade of fishing licenses at international market rates is also not achieved. A key factor in these achievement ratings is that the start-up time needed for the project in RMI was underestimated. In Samoa, IFC tourism investments to support 4,000 new arrivals across three pilot coun- tries by 2016 remain only partially achieved. The PPP framework developed with WBG as- sistance will improve air services and encourage new private sector investments in tour- ism. The CPS noted that Samoa-specific indicators would be developed as the initiative progressed and would be included in the CPS Progress Report. In the absence of a Progress Report, however, those indicators remain unspecified. Theme 4: Improving Education, Health, and the Social Services Samoa partially achieved the outcome related to improved efficiency and effectiveness of service delivery to strengthen health financing and address education quality. The Samoa Health Sector Management Program Support Project responded to the National Health Strategic Plan’s priorities but progress was mixed, with certain indicators reflecting nega- tive trends and others having more positive outcomes. Results were partially achieved for improvements in policy, planning and implementation, efficiency in public health, commit- ment and ownership of the sector-wide process, harmonization, and quality of consulta- tions and processes. Health sector management has improved, although it could improve further with additional delineation between the Ministry of Health’s oversight and regu- latory functions and by allowing the National Health Service to manage health service delivery. Education sector outcomes in Tonga—net enrolment, dropout, retention rates, and stu- dent test performance improved from 2005 baselines; local participation and account- ability increased through introducing school-based management, with schools engaging communities in planning, budgeting, and results assessment—are mostly achieved. The World Bank’s contribution to Tonga’s education sector during the period enabled the gov- ernment to achieve its National Strategic Planning Framework 2009-2013 theme of “Fa- cilitating community development by involving district and village communities in meet- ing their service needs.” Tonga Education Support Project (TESP) outcomes have clearly demonstrated progress toward local-level resolution of school service delivery needs. Edu- cation investments have also benefitted from close donor coordination. Regional Partnership Framework 153 WORLD BANK GROUP PERFORMANCE AND LESSONS Lessons from CAS/CPS Design Most of the individual CASs and CPSs for the PIC6 are well aligned with the respective country development frameworks and visions. Applying filters (such as the key challenges and priorities; sequencing; development partner presence, plans, and roles in the area of engagement; and demand and commitment from the clients) and building on previous experience and projects in those countries with a legacy of WBG engagement, the strate- gies were selective and well structured. They accommodated the increasing level of re- sources available from the WBG to develop expanded programs of engagement and also took on board potential regional resources available for various activities. The strategies are tightly couched within the East Asia and Pacific (EAP) regional framework and over- arching themes, and they are also aligned well with the WBG corporate goals of reduced poverty and shared prosperity. They also benefited from wide-ranging and close consul- tations with key stakeholders during their preparation. The Bank’s Pacific Futures study influenced the design of these strategies in substantive ways—for example, by highlight- ing continued reliance on remittances and aid flows over the longer term, and expansion of budget support from the donors. The choice of instruments was appropriate, with a mix of DPOs where warranted (based on the experience of recent budget support operations in these and similar countries), investment credits, sector-wide approaches (SWAps), additional financing, repeater and phased projects, multi-country regional programs, TA, and other Advisory Services and Analytics (ASA). The design of many programs included the use of budget support op- erations in several of the PIC6. Regional operations were a strong feature in the unique microstate context of the Pacific islands. Although regional engagements are sometimes complex and difficult to manage, the risks can be substantially mitigated and regional IDA operations (as well as regional ASA and TA) proved to be effective and efficient in the use of WBG resources. Regional operations encouraged partnership between culturally aligned but physically distant countries – including joint learning and collective approaches to common problems (PCRAFI is a good example of catalyzing development assistance and can offer lessons for disaster and crisis response operations). No MIGA operations were undertaken in any of the countries during the period under review. A key weakness common to several strategies is the complex design of the RFs. Given the small sizes of the economies and populations, limited WBG engagements (in most cases pre-existing WBG portfolios and ongoing projects were absent), and the need for simplified results chains, having large numbers of outcomes and related indicators and milestones was perhaps unwarranted in several cases. While the identification of the strategic ar- eas and themes was judicious, the RFs should have included fewer individual outcomes, which in turn become the units of accounting for exercises such as the CLR and Independ- ent Evaluation Group (IEG) evaluations. The CASs/CPSs also were often overambitious in terms of the results that could be achieved through activities that would be developed, appraised, negotiated, approved, made effective, and implemented within the timeframe. However, recognition needs to be given to the unfamiliarity of the WBG in many of these 154 Regional Partnership Framework countries at the time the frameworks were developed, weak capacities on the ground, the inherent intention to recalibrate and adjust results as experience was gained, and the use of regional approaches to mitigate individual capacity constraints. These country strategies and partnerships represent the WBG’s first-ever systematic and strategic engagements with the PIC6 as individual clients, and they also include the first WBG financing for some of them. Unlike most CASs/CPSs, in most of these countries the WBG started from a zero base, with no ongoing portfolio or even solid ongoing relation- ships. A further consideration is that some of the CAS/CPS engagement periods are in- complete or have been completed only recently. For that reason, it is somewhat unrealistic to expect that measurable results specified in the various RFs should be fully achieved at this time. Perhaps some of the RF outcomes should not have been specified as achievable within this timeframe and within three-four years of initiating activities to support the new strategies. Perhaps alternative frameworks should have been considered for the first country-specific engagement, such as Country Engagement Notes (CENs), which would have outlined a two-year plan to initiate engagement and a program, without expecta- tions about larger results. Despite these caveats, the identification of risks to CAS implementation was candid and realistic. Several common threads run through each of the strategies. They include program delivery risks due to the thin capacity in the countries and minimal WBG staff in-country; political risks; the ever-present risks of exogenous shocks inherent in small, fragile, isolated, and geographically dispersed island economies; weaknesses in PFM; dif- ficulties of securing political consensus for reforms; unfamiliarity of the client with WBG procedures; extreme remoteness imposing high transport costs and logistical challenges; spatial dispersion increasing the cost and complexity of providing public services; weak economies of scale for most development activities; and severe skill and technical con- straints. Many of these risks materialized to various degrees in these countries and con- tributed directly to the slower-than-expected pace of implementation of many activities. The WBG aimed to mitigate these risks through close partnerships and communications with the governments, development partners, and a broad range of civil society organiza- tions, and by strengthening capacity and country systems as well as enhancing its sup- port for implementation. The need for well-managed transitions of WBG Task Team Lead- ers (TTLs) is a recurrent recommendation from the country teams. Lessons of Implementation The individual CLRs presented in Attachments 3A–8A detail the specific implementation experiences with the six CASs/CPSs. The commonalities emerging from that experience are highlighted here, without going into project particulars and individual circumstanc- es, to provide the key overarching lessons that can be drawn from implementing the six CASs/CPSs. The key challenge to implementation stemmed from underestimating the complexity and time required to design, appraise, negotiate, approve, make effective, and implement the WBG-supported projects. In reality, the anticipated results can come only later in the pro- Regional Partnership Framework 155 ject cycles, often beyond the CPS period. Although CPS targets in the RF often are cali- brated from the end-project targets to be met within the CPS period, frequently they are still ambitious. As a result, a large number of outcomes are partially achieved, and quite a few are not achieved. The number of fully achieved (or mostly achieved) outcomes remains limited by the end-point of the CAS/CPS period. Equally, the WBG underestimated the challenges inherent in implementing activities in countries new to WBG procedures, where clear limitations on capacities and remoteness and isolation added to the burden of supervision. It is no surprise that some outcomes remain unachieved at the end of the CAS period, as many initiatives were only getting off the ground toward the end of the CAS period or beyond. In this regard, an important lesson is that the use of a single Technical and Fiduciary Services Unit (TFSU) in support of the aviation projects proved useful in the PIC6. The unit, based in Tonga, was able to combine procurement packages for different countries and obtain more competitive pricing during bidding than would be possible under individual contracts. They also provided technical expertise that was unavailable to the participating countries, particularly in such areas as aviation, procurement, and financial and contract management. The economies of scale from the TFSU resulted in a lower implementation cost than stand-alone project manage- ment units for individual projects. In several cases (involving aviation or marine fisheries, for instance), the use of multi-country platforms was useful in addressing transaction costs, both for the clients and the WBG, and capacity constraints. The WBG’s performance in promoting macroeconomic and fiscal resilience through its DPOs and coordinated budget support with other development partners has been sound. The Bank has supported the DPO prior actions with extensive TA and good ASA. The Bank’s DPOs have provided important government-led mechanisms under which policy develop- ment support and budget support from development partners have been coordinated and prioritized. In particular, the use of a single Joint Policy Action Matrix reduced the trans- action costs imposed on the government and enabled close consultation and cooperation among development partners, including, for example, by ensuring that the sector-specific expertise of individual development partners can be best leveraged. The policy matrices are developed jointly with other donors and have provided an important platform around which to agree on the key reform priorities in the various countries. Most DPOs have also leveraged co-financing with other donors, such as ADB, Australia and New Zealand, who have played a strong role in the policy dialogue with the governments. The WBG’s joint ADB/WBG liaison offices in Kiribati, Samoa, Tonga (and Vanuatu though it is not covered by this CLR) are good examples of close collaboration with the other major development bank in the region. This arrangement has in fact fully matured in the CLR period. For DPO prior actions related to PFM, the Bank provided effective support in the form of extensive TA (for example, in the case of procurement and debt management reforms) and analytical work (for example, the Public Expenditure Review). The Bank also ensured that the development objectives and associated reform actions of the proposed operations were closely aligned with the priorities and strategic areas in the economic development arena and the government’s own PFM reform agenda. 156 Regional Partnership Framework The Bank found that adequate investment in policy dialogue is vital but resource intensive. Furthermore, close coordination and engagement with other development partners in the identification of policy priorities is useful in sectors where the Bank has limited knowledge and engagement. However, the experience with attempts to implement reforms in certain sectors (such as ICT in RMI) is a reminder of the difficulties of sector reforms and points to the need for a deeper assessment of political economy realities. Starting engagement in a country with a DPO (and one that focuses on a difficult reform area) may not be the best decision. The WBG may need to continue exploring ways to engage citizens in reform processes and designing engagements with broader support as ways to recalibrate its standard approach to the demands of relatively smaller countries while not underestimat- ing the significance of political economy issues. A major issue that affected several projects during preparation was the underestimation of costs, resulting in extensive administrative efforts to bring on additional finance. This is- sue came about in large measure because no history of comparable projects was available and also because contractors placed a “remoteness” premium on works to reflect the risks perceived in undertaking them. These issues will continue in the future and cannot be fully mitigated. Similarly, projects suffered from the lack of detailed implementation arrange- ments for procurement, legal clearances, staffing, contract administration, land acquisi- tion, and so on, which needed to be developed as part of project preparation. In-country capacity proved to be a continuing challenge. Projects could draw upon only a very small domestic population to meet local staffing needs, and often this pool of potential project staff lacked experience in donor projects. In Tuvalu, the PAIP program addressed this issue by training interns in skills that they could use on future development projects. The Bank did well by responding swiftly to requests from governments to provide coordi- nation, analytical, and financial support in a timely manner to assess the effects of dis- asters—the tsunami (Samoa and Tonga 2009), Cyclone Evan (Samoa 2012), Cyclone Ian (Tonga 2014), and Cyclone Pam (Tuvalu 2015)—and assist with recovery and reconstruc- tion. For example, the Bank fielded an identification mission within 10 days of the tsunami that hit Samoa. The Bank coordinated and facilitated two comprehensive multi-sectoral Post-Disaster Needs Assessments (PDNAs) following the tsunami and cyclone Evan to support Samoa in resource mobilization and recovery planning, and it conducted a rapid damage assessment following Cyclone Ian in Tonga. The Bank mobilized additional re- sources from its IDA Crisis Response Window for these unanticipated events and targeted the additional IDA resources to the key sectors affected as follows: US$10 million for a Samoa Post Tsunami Reconstruction Project (P120594); US$5 million for a Tonga Post Tsunami Reconstruction Project (P120595); US$10 million contribution to US$15 million Samoa Development Policy Operation (P144377); US$5 million contribution to a US$20 million Samoa Enhanced Road Access Project (P145545); US$5 million for a Samoa Ag- riculture and Fisheries Cyclone Response Project (P145938); US$12 million for a Tonga Cyclone Ian Reconstruction and Climate Resilience Project (P150113); and US$3 million through a supplemental DPO for Tuvalu. Supervision was close and the task team provided counterpart staff with timely feedback on technical, procurement, and safeguard issues, facilitating fast decision-making and smooth implementation. The regular and consist- ent missions helped to build a collegial working relationship with counterpart officials and helped ensure that the project was implemented relatively smoothly and fully achieved its development objectives. Regional Partnership Framework 157 Partnerships and coordination with other donors and key development partners have been fully pursued and utilized, particularly given the small-country contexts where any over- laps are not only wasteful but potentially disruptive. WBG partnerships and collabora- tion are a necessity in this congested environment, where ODA per capita is high, and the WBG approach was exemplary: engaging in areas where it held comparative advantage and could complement existing bilateral, multilateral, and regional partners; promoting donor coordination; and accommodating small implementation capacities. What may best epitomize donor coordination in the Pacific is the Pacific Region Infrastructure Fa- cility (PRIF), a multi-agency mechanism coordinating the delivery of development assis- tance from donors and development partners to the infrastructure sector in the Pacific region. Through the PRIF, representatives of the Japan International Cooperation Agency (JICA), WBG, ADB, EU, and European Investment Bank (EIB) meet on a quarterly basis to exchange views on their respective programs, share knowledge, and agree on the financing of pieces of analytical work and research that are requested by client countries and that also contribute to the identification and justification of new donor-funded projects. At the technical level, five sector working groups (Water, Energy, Urban, ICT, and Transport) also meet every three months for technical discussions, often piggybacking on larger learning events or summits. Coordination exists both between multilaterals, and between multilaterals and bilaterals. For example, in Kiribati, the Aviation Investment Project benefited greatly from the joint work between the Bank team and the New Zealand High Commission in Tarawa, which led to the resumption of a project that had been paralyzed for about a year. New Zealand Ministry of Foreign Affairs and Trade (MFAT) presence on the ground, combined with ad- ditional funds from Wellington to bridge a financing gap, was instrumental in restarting a Bank-funded project and creating the conditions required to meet the objectives of the project. A girl walks along a seawall - Apia, Samoa. Photo credit: World Bank / Conor Ashleigh 158 Regional Partnership Framework ALIGNMENT WITH WORLD BANK GROUP CORPORATE STRATEGY The country CLRs at the end of this annex provide discussions and examples of how the PIC6 CASs/CPSs are aligned with the WBG’s twin goals of reducing poverty and boosting shared prosperity. While the twin goals had not yet been articulated when some of these strategies were prepared, retrospective and brief reviews of the various WBG engage- ments indicate that the programs and results are indeed well aligned with the twin goals. Examples of that alignment are provided below; further details are in the individual CLRs. Extreme poverty is negligible in Tonga, but significant numbers live in hardship, and the country faces serious challenges in securing prosperity for all. The WBG program in Tonga supports the twin goals through a number of interventions. The Tonga Pacific Regional Connectivity Program has helped to reduce the cost of internet connectivity, which con- tributes in turn to reducing transaction costs for businesses, households, and the gov- ernment. It has also facilitated the development of new platforms for business and ser- vice delivery (in health and education, for example) and potentially new job opportunities (e-commerce, online work). The support for the Consumer Information Bureau improves access to finance for small and medium enterprises (SMEs), which represent the largest source of employment in most PICs. The TERM Implementation Unit (TERM-IU), supported by the Bank-financed DPO, reduces the impact of volatility in prices of diesel, which in turn will reduce fluctuations in electricity prices. Lower and more stable energy prices reduce the share of household income required for energy needs, increasing households’ capacity to meet other basic needs and reducing their exposure to severe hardship during periods when energy imports are high. The improvements in the transport sectors under the Tonga Transport Sector Consolida- tion Project have created a domestic road construction industry, and are expected to have a significant positive impact for users of domestic transport in Tonga by providing more reliable access to markets and to education and health services, as well as by facilitat- ing tourism. Given the unique geographical characteristics of Tonga, air connectivity is a crucial economic enabler, delivering major benefits from the provision of services that support activities linked to tourism, trade of goods and services, investment, and remit- tances. These economic benefits from improved transport connectivity are essential for boosting shared prosperity. In education, the positive outcomes of Tonga Education Support Program (TESP) are strongly relevant to the twin goals of reducing poverty and boosting shared prosperity. The project promoted a practical, sustainable approach to participatory school-based management to improve access to education services for disadvantaged communities and make service providers more accountable to community members. The project also reduced the disparity in access to learning materials across schools: prior to the project, schools in poorer villages had few or no materials. While extreme poverty is very rare in Samoa, it is difficult to get a clear sense of the inci- dence and dynamics of basic needs poverty. The poorest 40 percent of Samoa’s population face significant spending constraints, and as a result they tend to rely heavily on publicly funded health and education services. Promoting the quality and accessibility of these services is critical to the welfare of the most vulnerable, and at the macroeconomic level this task hinges on the country’s capacity to maintain fiscal stability and rebuild buffers Regional Partnership Framework 159 to insulate these social sector expenditures from external shocks. Through the DPOs, the achievement of these objectives has been strengthened by Bank-supported reforms to improve debt management, strengthen revenue collection, and ensure value-for-money and transparency in public procurement. In the aftermath of Cyclone Evan, funds provided under the 2013 DPO prevented cutbacks in the frontline service delivery that particularly benefits the poor. Analytical advice and input provided by the Bank in ASA products (such as the PER), along with the PFM engagement, have helped the government to maintain expenditure on those public services that the poorest and most vulnerable tend to rely upon the most. The activities supporting the agriculture sector outcome will enable beneficiary farmers to increase their productivity (yields) for selected vegetables that are in demand on the local market. These activities are complemented by support to help farmers run a suc- cessful commercial enterprise (for example, training in business planning) and connect to local markets (including restaurants and hotels). By supporting farmers not only to increase the productivity of fruit, vegetable, and animal production but to increase the sales of their production and therefore incomes, the project is helping to reduce food and income poverty. The project’s focus on farmers helps to add to wealth in rural areas, which have historically lagged behind the urban center, thereby sharing prosperity across the population. By measuring women’s participation in the project, the project team will be able to assess whether benefits from the project (increased incomes for commercial farm- ers and increased productivity for subsistence farmers) are being shared equitably across the population. The data collected through the World Bank’s impact evaluations of the Seasonal Worker Program (SWP, Australia) and Recognized Seasonal Employer scheme (RSE, New Zealand) suggest that these programs have opened up significant seasonal migration opportunities to poor, rural households. The participation of poorer and more rural households in the pro- gram suggests that these programs are reducing poverty and boosting shared prosperity in Samoa. To the extent that the TA provided by the World Bank has allowed Samoa to maintain its numbers in these schemes (given program caps), the CPS program as imple- mented has had a strong alignment with the twin goals. Kiribati is the poorest of the PIC6, with the highest poverty rate. The country’s ability to respond to climate risks is hampered by its highly vulnerable socioeconomic and geo- graphical situation. In addition to strengthening resilience against climate change, WBG projects will also be helping to reduce Kiribati’s vulnerability to external economic shocks, such as food and fuel price increases. The proposed 516 kW grid-connected solar PV gen- erator for South Tarawa will help diversify electricity generation and, with the help of the energy project, assist the poor by leading to lower energy costs. The Kiribati Road Reha- bilitation Project addresses the poor condition of the South Tarawa road network, which disproportionately affects poor residents. To a certain extent, these improvements will also address shared prosperity. A reliable network of air links, within and among island countries and onwards to major hubs such as Australia, Fiji, New Zealand, and beyond, is essential to dissipate the economic vulnerability of Kiribati by providing needed access to employment, medical treatment, and education to reduce poverty and boost shared pros- perity. The outcome on labor employment directly benefits poverty reduction and shared prosperity, as employment places unemployed and largely unskilled laborers in a better position to meet their basic needs and those of their families. 160 Regional Partnership Framework The CPS for FSM is explicitly aligned with the WBG’s twin goals of eliminating extreme poverty by 2030 and encouraging shared prosperity, especially for the bottom 40 percent of the population. The CPS identified the need to build a stronger analytical and evidence base on poverty within FSM to best target resources to address particular needs. Accord- ingly, a PER and poverty/gender and Household Income and Expenditure Survey (HIES) and analysis were undertaken to fill information gaps and ensure that fiscal consolidation could be as pro-poor as possible in the two largest sectors of education and health. The poverty- and gender-disaggregated analysis complements the PER by enabling effective targeting of all public expenditures to ensure that the bottom 40 percent and the poorest segment of the population benefit from the programs. The results area related to improved targeting and management of the fiscal adjust- ment process is critical to supporting the RMI in its effort to reduce poverty and boost shared prosperity. With no monetary policy and limited fiscal policy (given the utilization of the US dollar and high aid dependence), RMI faces a critical imperative to ensure fiscal sustainability and build adequate assets to buttress the economy against the variety of shocks it faces. At the same time, ensuring adequate and equitable service delivery as programmed under the CPS is also critical for supporting the twin goals. Although the CPS was designed prior to the WBG’s adoption of the twin goals, the set of priorities and outcomes contained within the CPS reflects these objectives. The review of the FY12-15 Tuvalu CAS demonstrates that several of its strategies aligned well with achieving greater shared prosperity and reducing poverty, which is distributed unevenly in Tuvalu (despite its per capita income level). Only limited data on poverty are available to assess Tuvalu’s performance against the twin goals. The World Bank is en- gaged in a coordinated dialogue on this front, and a HIES should be completed in 2015/16. The programmatic series of operations for Tuvalu is designed to support the government’s development objectives and contribute to the improved wellbeing of Tuvaluans in both Funafuti and the outer islands. Reforms to strengthen PFM can help to improve poverty and social outcomes in Tuvalu indirectly by making the budget a more effective tool for re- sponding to national poverty and social needs. Reforms to improve revenue and expendi- ture efficiencies will enable the government to maintain a sustainable fiscal buffer, which in the medium term will ensure continued service provision even through periods of shock. Better management of both the overseas scholarship and medical treatment programs is expected to free scarce resources and allow the government to start rebalancing its ex- penditure in education (toward more equitable, employment-oriented vocational training) and to increase the expenditure on basic healthcare (on which poorer households depend heavily). The aviation sector is particularly important for these objectives, as it allows Tuvaluans to take advantage of international job and education opportunities while re- maining connected to and contributing to their country and the region. Full rehabilita- tion of critical air transport infrastructure and ancillary services is part of the program. Ensuring that Tuvaluans will continue to be employed overseas will contribute to the goal of reducing poverty and promoting shared prosperity, particularly for the outer islands, where poverty rates are higher. The full Completion and Learning Review of the Country Partnership Strategies for FSM, Kiribati, RMI, Samoa, Tonga and Tuvalu can be found on the following website: http://bit. ly/2pm0EMa Regional Partnership Framework 161 A river in the federated States of Micronesia. Photo credit: World Bank / Loren Atkins 162 ATTACHMENT 1: PIC6 PLANNED AND ACTUAL DELIVERIES-OPERATIONS (as of August 5, 2016) PLANNED STATUS FSM CPS FY14-17 • Energy Sector Development Project • Delivered (P148560, FY14, US$14.4m) • FSM-Palau ICT Regional Connectivity Project • Delivered (P130592, FY15, US$47.5m) • Pacific Islands Regional Oceanscape Project (PROP) • Delivered (P151754, FY15, US$5.5m) • Technical Assistance Project • Not developed yet • Regional Disaster Risk Management Program • Not delivered; government recently declined participation in PCRAFI • IFC: Foreign Investment Law Review • Delivered • IFC: Investment climate assessment—fisheries • Did not proceed • IFC: Diagnostic of potential of on-shore fisheries investments • Did not proceed Kiribati CAS FY11-14 Regional Partnership Framework • Kiribati Road Rehabilitation Project • Delivered (P122151, FY11, US$20m; TF US$5.79m), AF (P154012, FY15, US$6m) • GEF Kiribati Climate Adaptation KAP III • Delivered (P112615, FY12, Multiple TFs, US$10.55m) • Food Price Crisis Response • Delivered (P118552, FY11, US$2m) • Kiribati Airport Rehabilitation • Delivered as Kiribati Aviation Investment • Tarawa Solar Energy (P128938, FY12, US$22.9m; AF FY16, US$7.1m) • Kiribati Telecommunications Reform • Grid Connected Solar PV Power Plant (P121878, FY13, US$1m; TFs US$3.9m) • Telecoms and ICT Development (P126324, FY13, IDA and TF US$2.1m) Additional Deliveries • Kiribati Economic Reform Operation (P144602, FY14, US$5.2m) • Second Economic Reform DPO (P149888, FY15, US$3m) • Improving Services for Victims of Gender Based and Domestic Violence (FY13, US$0.4m) • Kiribati Food Crisis Response (FY11, TF US$2.0m) RMI CPS FY13-16 • ICT DPOs • First ICT Sector DO (P128013, FY13, US$3m) • Pacific Islands Regional Ocean Operation • PROP for Marshall Islands (P151760, FY15, US$6.8m, TF US$1.83m) • Energy Sector Development Project • Did not proceed; currently preparing a Renewable Energy Project in RMI • Addressing Gender-based Violence • Did not proceed Additional Deliveries • Pacific Resilience Program – RMI (P155257, FY15, US$1.5m) • ICT Technical Assistance Project (FY14, TF US$1.25m) PLANNED STATUS Samoa CPS FY12-16 • DPO Series • Samoa DPO (P144377, FY14, US$15m) • Agricultural Competitiveness • Agriculture Competitiveness Enhancement Project (P115351, FY12, US$8m) • West Coast Road Climate Resilience • Enhancing Climate Resilience – West Coast Road (P126504, FY13, US$14.8m) • Community Coastal Resilience • Enhancing Climate Resilience of Coastal Resources (P126596, FY14, US$14.6m)? • Infrastructure Asset Maintenance • Samoa Infrastructure Asset Management II (P075523, FY08, FY13, US$21.07m) • Pacific Aviation Safety • Delivered as Samoa Aviation Investment Project (P143408, FY14, US$25m; AF • Broadband Connectivity FY16 US$16.62m) • Samoa Regional Connectivity Phase III (P128904, FY15, US$16m) Additional Deliveries • First Fiscal and Economic Reform Operation (P149770, FY15, US$7.5m) • Pacific Resilience Program – Samoa (P154839, FY15, US$13.8m) • Enhanced Road Access Project (P145545, FY14, US$20m, TF US$6.35m) • Agriculture and Fisheries Cyclone Response (P145938, FY14, US$5m) • Agriculture and Fisheries Cyclone Response (P145938, FY14, US$5m) Tonga CAS FY11-14 • Energy Development Policy Operation • Delivered (P121877, FY11, US$5m) • Energy Roadmap Project • Institutional and Regulatory Framework Strengthening Project (P131250 FY13, • Post-tsunami Reconstruction US$2.9m) • Pacific Regional Connectivity – Tonga Broadband Conn. • Delivered (P120595, FY14, US$5m) • Transport Sector Consolidation Project • Delivered (P113184, FY12, US$17.2m, TF US$0.5m) • Development Policy Operation DPO1 • Delivered (P096931, FY09, US$5.4m) • Development Policy Operation DPO2 • Economic Recovery Operation (P126453, FY12, US$9m) • Transport Sector Follow-up • Economic Recovery Operation II (P130824, FY13, US$1.8m)) • Delivered as Tonga Aviation Investment (P128939, FY12, US$27.2m, Regional AF FY13 US$1.32m and AF FY16 US$7.25m) Additional Deliveries • First Economic Reform Support Operation (P144601, FY14, US$5m) • Second Economic Reform Support Operation (P149963, FY15, US$5m) • Tonga First Inclusive Growth DPO (P155133, FY16, US$2m) • Pacific Resilience Program – Tonga (P156334, FY15, US$4.6m) • Pacific Resilience Program – Tonga (P154840, FY15, US$12m) Regional Partnership Framework 163 164 PLANNED STATUS • Tonga Cyclone Ian Reconstruction and Climate Resilience (P150113, FY15, US$12m and AF FY15 TF $1.8m) • Improved Project Management Processes and Opportunities for Environmentally Sustainable Procurement in Transport Investments (P125086 FY12, US$0.2m) • Pacific Catastrophic Risk Insurance Pilot Program (P133255 FY15 US$0.25m) Tuvalu CAS FY12-15 • Pacific Aviation Investment Program • Delivered as Tuvalu Aviation Investment (P145310, FY14, US$6.1m) • DPO • Delivered (P145488, FY14, US$3m) Supplemental (P156169, US$3m) Additional Deliveries • Energy Sector Development Project (P144573, FY15, US$7m and TF US$2.1m) Regional Partnership Framework • Second DPO (P150194, FY15, US$1.5m and FY16, US$3m) • PROP for Tuvalu (P151780, FY15, US$7m) Note: GEF (Global Environment Facility); TF (Trust Fund); AF (Additional Financing). ATTACHMENT 2: PIC6 PLANNED AND ACTUAL DELIVERIES-ASA (as of August 5, 2016) PLANNED STATUS FSM CPS FY14-17 • Poverty/Gender Analysis • HIES under Pacific Poverty Programmatic AAA, (P151797, FY18 • PER • Public Expenditure Analysis EW (P154605, FY16) • Aviation Supply and Linkages Review (Regional) • Pacific Aviation Sector Analysis (P153342; dropped FY15) • Maritime Safety Study (Regional) • Supporting Safe, Efficient, and Sustainable Maritime Transport (P143662) • Deep Sea Mining Activities TA (Regional) • Pacific Islands Offshore Mining (P112571, FY11) Additional Deliveries • FSM and RMI Telecoms Assessment (P122736, FY14) • IFC Pacific Rapid Response Project Kiribati CAS FY11-14 • Telecoms: Regulatory Support and Transaction Advice for • Telecommunications/ICT Development (P118200, FY14) Market Liberalization • Did not proceed • Climate Change Adaptation/ Water Masterplan for South • Bank participated in all IMF Article 4 and DSA missions Tarawa • Pacific Islands Regional Fisheries (P112571, FY11) • Participation in 2010 IMF Article IV; Debt Sustainability • Review of Import Levy Fund (P127619, FY14) Assessment • Did not proceed • (Regional) Fisheries Engagement Strategy: Support to the • Bank did not participate in the PEFA but in reform implementation PNA Additional Deliveries Secretariat • Support to Economic Reforms (P131403, FY13) • Import Levy Fund Reform Options Study • Telecoms Reforms TA (P122888, FY14) • IFC Business Enabling Environment TA • Participation in PEFA Assessment RMI CPS FY13-16 • HIES under Pacific Poverty Programmatic AAA (P15177, FY18) • Poverty Assessment • Did not proceed • World Bank Treasury Asset Management CTF Diagnostic • IFC Investment Climate Rapid Response Project • Investment Climate Diagnostic • Did not proceed • Beneficiary Impact Assessment on ICT Reform with Gender Additional Deliveries Focus • FSM and RMI Telecoms Assessment (P122736, FY14) Regional Partnership Framework 165 166 PLANNED STATUS Samoa CPS FY12-16 • DPO Analytical Work • Samoa PER (P144365, FY14) • Procurement Review • Delivered (FY11) • Early Grade Reading Assessment • Delivered, Regional (P118877, FY13) • Early Childhood Development Analysis • Early Childhood Development (P130712, dropped FY13) Additional Deliveries • Samoa Post-Disaster Needs Assessment (P144463, FY14) • Samoa FSAP (P151168, FY15) • Samoa Reform Plan (P133607, FY15) • Samoa Reform Plan Follow-up (P149869, FY15) • Development of a Public Private Partnership Policy and Pipeline Screening Regional Partnership Framework (P145839, FY16) Tonga CAS FY11-14 • Joint Public Expenditure Review • Medium-term Expenditure Mapping TA (FY12, P127973) • Energy Roadmap Support • Renewable Energy Development TA (FY11, P116305) • Broadband Connectivity Least Cost Options • Did not proceed • IFC Business Enabling Environment TA • Did not proceed • Early Grade Reading Assessment • Delivered, Regional (P118877, FY13) • Non-Communicable Disease Prevention Options • Melanesia Health Advisory Assistance (P130475, FY16) Additional Deliveries • Tonga Reform Plan TA (FY14, P133609) • Pacific Futures TA, Regional (P117120, FY14) Tuvalu CAS FY12-15 • (Regional) Fisheries Engagement Strategy: Support to the • Pacific Islands Regional Fisheries (P112571, FY11) PNA • Did not proceed Secretariat • Delivered • Drought Risk Management Strategy Additional Deliveries • Participation in the IMF Missions • Telecommunications and ICT TA (P146205, FY15) Note: AAA (Analytical and Advisory Activities); ESW (Economic and Sector Work); IMF (International Monetary Fund); PNA (Parties to the Nauru Agree- ment); FSAP (Financial Sector Assessment Program). Regional Partnership Framework 167 In addition, the following ASAs were delivered under Pacific Islands: FY12 • P109094 Trade Facilitation and Strategy for Labour Exports • P117025 Pacific Petroleum Supply TA • P120712 Identifying Delivery Strategies for Sexual and Reproductive Health • P122344 Pacific Catastrophe Risk Assessment and Financing TA • P125720 Pacific Catastrophe Risk Assessment Geonode • P126868 Coconut Oil for Diesel Fuel Substitution • P127318 Pacific Islands Telecoms Evaluation (IFC) FY14 • P126058 PRAXIS 2011-2014 • P131402 PFM Design under Capacity Constraints • P144446 Pacific Hardship and Vulnerability Study FY15 • P127935 AusAID Education Partnership • P127936 Pacific Early Education Advisory Services (PEEAS) • P130478 Institutional Strengthening for Labor Migration • P133619 Appropriate Social Protection Policy in the Pacific Island Countries • P146664 P4: Options Assessment on ICT for Jobs in the Pacific FY16 • P118670 Pacific Regional Regulatory Resource Center • P145802 Strengthening Local Capacity and Improving Project Implementation • P147920 Asset Management Advisory for Pacific Trust Funds and Sovereign Wealth Funds • P153894 Pacific Payment Remittances and Securities Settlement Initiative • P155515 Tourism and Connectivity in the Pacific Bonin Islands p. ) (Ja CHINA s (Jap.) Daito- nd I sla Shoto Volcano kyu (Jap.) Islands Ryu N O R T H P A C I F I C O C E A N (Jap.) Hawaii (U.S.) PALAU FEDERATED STATES MARSHALL Northern Mariana OF MICRONESIA ISLANDS Islands (U.S.) Guam (U.S.) PHILIPPINES TUVALU KIRIBATI MELEKEOK PALIKIR MAJURO BRUNEI A AYSI NAURU AL TARAWA equator equator YAREN INDONESIA PAPUA Tokelau FUNAFUTI (N.Z.) TIMOR-LESTE NEW GUINEA HONIARA American Wallis and APIA Samoa Futuna (Fr.) (U.S.) PORT-VILA SUVA French Polynesia New Caledonia NUKU'ALOFA (Fr.) (Fr.) AUSTRALIA VANUATU FIJI TONGA SAMOA S O U T H P A C I F I C The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank NEW O C E A N Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. ZEALAND IBRD 41416 JAN VIER 2015 World Bank Group Level 4, Ra Maramara Building 91 Gordon Street, Suva, Fiji W: www.worldbank.org/pi E: pacificislands@worldbank.org F: www.facebook.com/worldbankpacific T: @WB_AsiaPacific