Document of The World Bank FOR OFFICIAL USE ONLY Report No. 76349 SB INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY FOR SOLOMON ISLANDS FOR THE PERIOD FY2013 - 2017 May 15, 2013 Timor-Leste, Papua New Guinea, and Pacific Islands Country Management Unit East Asia and Pacific Region The International Finance Corporation East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ÿþLast Country Interim Strategy Note: March 12, 2010 (Report No. 53496-SB) CURRENCY EQUIVALENT (as of April 29, 2013) Currency Unit: Solomon Islands Dollars (SBD) US$ 1.00 = SBD 7.22 ABBREVIATIONS AND ACRONYMS AAA Analytic and Advisory Activities J4P Justice for the Poor ADB Asian Development Bank MDGs Millennium Development Goals AusAID Australian Agency for International Development NDS National Development Strategy for Solomon CDD Community Driven Development Islands 2011 - 2020 CO Community Officer NGO Non-Governmental Organizations CEWG Core Economic Working Group NPS National Payment Systems CPS Country Partnership Strategy PAPRI Pacific Payment, Remittances and Securities CRISP Increasing Resilience to Climate Change Settlement Initiative and Natural Hazards Project PCRAFI Pacific Catastrophe Risk Assessment and DHS Demographic and Health Survey Financing Initiative DPO Development Policy Operation RDP Rural Development Program DV Domestic Violence REP Rapid Employment Project EDF European Development Fund PFM Public Financial Management EITI Extractive Industries Transparency Initiative PFTAC IMF Pacific Technical Assistance Facility EU European Union PIAC Pacific Infrastructure Advisory Center FAO Food and Agriculture Organization of the United PIFS Pacific Islands Forum Secretariat Nations PPCR Pilot Program for Climate Resilience GBV Gender Based Violence PRIF Pacific Regional Infrastructure Facility GDP Gross Domestic Product PROP Pacific Regional Oceanscape Program GEF Global Environment Facility RAMSI Regional Assistance Mission to Solomon Islands GFDRR Global Facility for Disaster Reduction and RSE New Zealand Recognised Seasonal Employment Recovery Scheme GFPR Global Food Crisis Response Program RSIPF Royal Solomon Islands Police Force GNI Gross National Income SIEA Solomon Islands Electricity Authority HIES Household Income and Expenditure Survey SMEs Small and Medium Enterprises IBRD International Bank for Reconstruction and SOE State Owned Enterprise Development SPC Secretariat to the Pacific Community ICT Information and Communications Technology SPF State and Peace Building Trust Fund IDA International Development Association UNDP United Nations Development Programme IDF Institutional Development Fund UNEP United Nations Environment Programme IFC International Finance Corporation UNICEF United Nations Children's Fund IFAD International Fund for Agriculture Development VDS Vessel Day Scheme IMF International Monetary Fund WBG World Bank Group ISN Interim Strategy Note WHO World Health Organization JDL Justice Delivered Locally WIM Women In Mining IDA/IBRD IFC Vice President: Axel van Trotsenburg Karin Finkelston Country Director: Franz Drees-Gross Sergio Pimenta Country Representative/TTL: Anne Tully Gavin Murray Co-Task Team Leader: Robert Jauncey FY2013 - 2017 COUNTRY PARTNERSHIP STRATEGY SOLOMON ISLANDS TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................... I. RATIONALE FOR A COUNTRY STRATEGY FOR SOLOMON ISLANDS ...... ...........1 II. COUNTRY CONTEXT: UNIQUE CHALLENGES ...............1................ A Transition from Stabilization to Stability................1....................... Economic Development and Outlook ............................ ..... .........7 Government Development Strategy............... .................... ......... 11 Donor Engagement ...................................................... 12 III. WORLD BANK GROUP ENGAGEMENT .................................... 13 World Bank Group Engagement in Solomon Islands ........................ 13 Outcomes and Lessons from the 2010 Solomon Islands Interim Strategy Note...... ......... 13 IV. THE WORLD BANK GROUP'S COUNTRY PARTNERSHIP STRATEGY .. .............16 Building on Gains for a Stable Solomon Islands ................. .................16 Strengthening Economic Resilience ........................ ..................18 Underpinning Improvements in Public Service Provision.............. .............22 Addressing Gender Across the WBG's Program.................. ...............25 Partnerships, Flexibility and Selectivity ........................................27 Financing Envelope and Program........................................... 28 V. RISKS AND MITIGATION MEASURES..................................... 30 Annexes: Annex 1: Solomon Islands Results Matrix ........................................... 33 Annex 2: Outcomes and Lessons Learned from the 2010 Solomon Islands ISN ....... ...................39 Annex 3: Standard CAS Annexes .......................................... .......46 Annex 4: Donor Coordination .................................................... 55 Map of Solomon Islands IBRD 33482R ................................................58 Boxes: Box 1: Regional Assistance Mission to Solomon Islands (RAMSI) .......................... 3 Box 2: Justice at the Local Level ..................................................4 Box 3: Key Results from the 2010 ISN .............................................15 Box 4: Joint WBG Program on Women's Empowerment in the Pacific.............................. 17 Box 5: Job Growth in Pacific Island Countries. .............................. .......... 19 Box 6: Pacific Payment, Remittances and Securities Settlement Initiative (PAPRI) ...... .........22 Box 7: Improving Data Analysis ....................................... ..........23 Box 8: The Women in Mining Initiative in PNG................... ...................26 Box 9: IDA and IFC Collaboration....................................... ...........28 Figures: Figure 1: Solomon Islands: GDP Growth and GNI per Capita: 1997 - 2012 (est.) ....... ............. 8 Figure 2: World Bank Group IDA, Trust Fund and IFC Commitments to the Pacific Islands by IDA Replenishment........................................................ 13 Tables: Table 1: World Bank Group Portfolio in Solomon Islands, March 2013 ..................14 Table 2: Tentative World Bank Group Pipeline in Solomon Islands, March 2013 ....... ..........29 Table 3: Proposed World Bank Analytical and Advisory Services ......... ................. 30 EXECUTIVE SUMMARY This Country Partnership Strategy (CPS) is the first full country strategy prepared for Solomon Islands, following an Interim Strategy Note (ISN) in 2010. The World Bank Group has been scaling up its assistance in the Pacific and is moving to individual country strategies, to better acknowledge country-specific challenges and priorities, while also ensuring that individual strategies are placed within a coherent broader framework for engagement with the Pacific islands given common challenges as well as differences. This CPS is being presented within a more stable political, security and economic context than that which accompanied the ISN. Solomon Islands has made significant progress in restoring stability following conflict, known locally as the "tension", from 1998 to 2003. Macroeconomic and fiscal stability has been restored since a fiscal crisis in 2009 precipitated by the global economic slowdown, development gains have been achieved in many areas, key government functions have been reestablished, and Solomon Islanders are increasingly taking leadership of government programs. During the last year, Solomon Islands effectively managed a range of high profile events, including the Festival of Pacific Arts, demonstrating an important level of cohesion and capability. Reflecting a confidence in the overall security environment, the Regional Assistance Mission for Solomon Islands (RAMSI), with the agreement of Solomon Islands Government, is about to undertake a transition, reducing its military presence, retaining a police advisory team and transitioning civilian assistance to regular bilateral and multilateral development programs. At the same time, Solomon Islands remains a fragile country; deep development challenges persist and some of the stresses that contributed to the tension a decade ago could potentially resurface without sustained effort to address them by the government and its partners. Youth unemployment, thin capacity, enclave developments, perceived spatial inequalities, a fluid political environment, and rapid social change all present challenges to the resilience of Solomon Islands' young governance institutions. In addition, Solomon Islands - as with many of the small and remote Pacific island countries - presents significant challenges of diversity, geographic dispersion with a largely rural population, and vulnerability to natural hazards. Delivering the services necessary to meet the Millennium Development Goals (MDGs) in such a situation is both challenging and costly. The sources of revenue to help address these challenges have typically been dependent upon the exploitation of a limited range of natural resources and small holder agriculture; the returns to which are vulnerable to ongoing resource availability, volatility in global prices and external and internal shocks. Sustained external financing over the long term is likely to remain important in order to address vulnerabilities and provide the additional impetus necessary to overcome major constraints. Building on the relative stability of the recent years and embedding gains achieved to date, will be key to creating the economic incentives, social cohesion and improved state-society relationships that are essential to avoiding future conflicts and reducing fragility and poverty. These objectives are fully consistent with the World Bank Group's emphasis to eliminate extreme poverty by 2030 and promote shared prosperity. The government's own strategy focuses on building a vibrant and united Solomon Islands with better livelihoods for all. Pursuing sustainable and inclusive growth, increasing social and economic opportunities and maintaining peace and stability are key elements of this strategy. This CPS is intended to support Solomon Islands in this process. In particular, the World Bank Group will support Solomon Islands in: (i) strengthening economic resiliency through programs that maximize sustainable growth and returns in agriculture, mining and fisheries while addressing key constraints to inclusive growth, particularly in the provision of power; and (ii) supporting improvements in the equitable and accountable delivery of basic services across the country. In each of these areas the Bank Group will be guided by two cross cutting principles: (i) supporting government and its partners to embed the I institutional gains achieved to date - particularly those that promote inclusion and cohesion - into the overall development effort; and (ii) ensuring that gender is mainstreamed through the portfolio with a view to one hundred percent gender informed operations. Efforts will be made to strengthen economic opportunities for women, while reducing negative impacts and harm for women in Solomon Islands. This is part of a wider WBG effort across the Pacific to enhance women's economic empowerment, reduce gender based violence and build a stronger voice for women in business. The World Bank Group's value added in Solomon Islands comes primarily from the expertise and experience of working in other fragile and capacity-constrained environments and the ability to leverage the engagement of other public and private resources and expertise. In this context, the Bank Group will work to underpin the larger investments of government and its partners in key service delivery sectors to explore, pilot and monitor efforts to improve the sustainable and accountable delivery of key public services and livelihoods across the country. The Bank Group will also draw together its global knowledge and capacity to manage the technical, social, environmental and commercial requirements - through both IDA and IFC engagements - of some key high risk-high return programs where alternative expertise is limited and where the returns may be transformational for the country and for local communities involved, particularly in the mining and energy sectors. We will also continue to monitor Solomon Islands as a fragile and conflict affected situation (FCS) to ensure relevant Bank flexibilities for FCS are applied and to mobilize additional implementation support as needed. Given the relative stability of recent years and the expertise and experience the World Bank Group has gained in Solomon Islands over the last three years, moving from an ISN to a CPS is appropriate. In that context, this CPS will: (i) provide an update on the country context and its implications for the Bank Group's operations; and (ii) reconfirm and deepen the Bank Group's strategy in the context of a more stable but continuing high-risk operating environment. ii I. RATIONALE FOR A COUNTRY STRATEGY FOR SOLOMON ISLANDS 1. This is the first full individual Country Partnership Strategy (CPS) prepared for Solomon Islands, following the preparation of an Interim Strategy Note (ISN) in 2010. Since preparing the ISN, the World Bank Group (WBG) has amassed a considerable body of analytical work, institutional knowledge, and in-country experience. Additionally, the Bank Group has established clear areas of expertise and traction upon which it can build. At the same time, Solomon Islands has demonstrated increasing resilience in several key areas, following the conflict from 1998-2003 including: recovering from the fiscal and economic crisis of 2009; addressing key structural problems especially in major utilities; demonstrating a commitment to improved transparency in the extractive sectors; and managing political transitions without recourse to significant violence. Solomon Islands is moving into its second decade since the end of conflict in 2003 in a much more stable and robust condition, although it remains vulnerable to setbacks that could undermine objectives of stability and poverty reduction. In this context, a CPS is the appropriate strategy instrument going forward, reflecting both the Bank's enhanced understanding of, and engagement in, Solomon Islands and the country's greater confidence in leading its own development agenda. This CPS for Solomon Islands builds upon the engagement and experiences of the prior ISN. It has been prepared in coordination with the Government of Solomon Islands and key development partners to reflect the specific challenges - especially related to geographical constraints, sustainable growth and state building - that the country is attempting to address. II. COUNTRY CONTEXT: UNIQUE CHALLENGES A Transition from Stabilization to Stability 2. As a relatively young, remote, widely dispersed, and linguistically disparate country, Solomon Islands faces considerable development and state building challenges. An archipelago of 997 islands, Solomon Islands has a total land area of 29,900 km2 spread over 1.34 million km2 Of ocean (an area larger than France, Germany and Poland combined). The population of 550,000 is dispersed across 90 inhabited islands and has among the lowest population densities (18 persons/kM2) and urbanization rates (17 percent) in the world. Distances between islands are significant: the north western Choiseul group is approximately 1,500 kilometers from the south- eastern Santa Cruz Islands - a distance equivalent to that between London and Rome. Distances to major export markets are even greater - with the capital Honiara over 2,000 kilometers from urban centers in Australia. 3. The island geography presents formidable and in some cases immutable challenges to service delivery, infrastructure, and economic integration. There are only 5 kilometers of roads per square kilometer, the lowest ratio in the Pacific, and travel in many areas is only by motorboat. Land and food security, combined with kinship obligations, provide an essential social safety net. Small and widely dispersed populations have given rise to significant cultural diversity, with about 70 distinct languages and numerous local dialects. The costs of governing and extending services across such a vast space are high. Poor development choices that are seen as widening gaps between and across provinces and islands potentially undermine broader state building efforts. 4. Like other countries in the region Solomon Islands has undergone enormous social and economic change over the past 50 years. This includes the introduction of the cash economy in what was previously a largely subsistence system. Social transactions and relationships were previously based on systems of exchanges and reciprocal obligation, largely rooted in kinship or other local affiliations. Monetization has qualitatively changed these relationships. These dynamics create strain 1 in general at the local level, but particularly affect intergenerational relationships. The traditional hierarchies, based generally around age and status, have been stressed in many instances. 5. Solomon Islands has made significant progress in restoring stability following conflict from 1998 to 2003. The conflict, known locally as the "tension", emerged as a result of grievances between the local Guadalcanal landowners and migrants, predominantly from the most populous island of Malaita, drawn by economic opportunities. Violent clashes involving rival militant groups led to deaths, displacement, and the widespread destruction of property'. While often characterized as an ethnic conflict, the tension had multiple political and economic causes, including the disproportionate concentration of economic development in and around Honiara compared to the rest of the country. Rapid social change associated with increasing urbanization also contributed to stresses, including the erosion of customary authority, disenchantment among young people, and a loss of social cohesion. In the decade since the tension, however, elections have been successfully held in 2006 and 2010, and the country has been largely peaceful, except for one bout of unrest when parts of Honiara's Chinatown were destroyed following the 2006 elections. 6. Engaging at the request of Solomon Islands' Prime Minister, the Regional Assistance Mission to Solomon Islands (RAMSI) played a critical role in restoring security and core state functions (Box 1). The RAMSI intervention occurred at a time when the integrity of formal state structures in Solomon Islands had been severely compromised and many technical functions had largely collapsed. By 2003, the state was virtually bankrupt, most large scale commercial enterprises had closed, government services were severely affected and public funds rapidly depleted as a result of the manipulation of the compensation process, the corrupt use of ex militants' demobilization and rehabilitation funds, and the direct theft and extortion of government finances. Fear and intimidation paralyzed the courts, prisons were emptied and the police force effectively collapsed. RAMSI moved with impressive speed to restore security and basic state functions, particularly law and order and fiscal stability. RAMSI's presence is widely seen within Solomon Islands as the guarantor of stability, and a 2011 survey found that approximately 86 percent of Solomon Islanders continued to support the mission. 7. Since the tension, the country has made a relatively successful recovery and the government continues to make progress in key areas of reform. The economy has grown relatively strongly since the end of the tension, based predominantly on commodities such as logging and mining. Institutional functionality has been restored in many areas and social indicators are improving. Several major investments have come on line or expanded, notably the Gold Ridge mine which began production after ten years of closure, and in 2011, the government successfully raised the determined price of logs to reflect international prices, a reform that had previously proved politically intractable. Financial management and budgetary processes have been much enhanced following a significant fiscal and balance of payments crisis in 2009 and improved tax collection and compliance have generated strong increases in revenues. After the challenges of the tension era, media and civil society are playing a much more robust role in public debate. Nevertheless, and as is the case with many countries, there is a need to continue building institutional capability to manage While estimates of deaths and casualties vary, it is estimated that between 100 and 200 people were killed as a direct result of fighting between late 1998 and late 2000. Around 35,000 people were displaced from their usual places of residence during this period. The Townsville Peace Agreement of October 2000 effectively ended organized military style fighting around Honiara. It is estimated that a further 50 people were killed between late 2000 and the deployment of RAMSI in July 2003. Fighting on the Weather Coast of Guadalcanal during this period saw the displacement of a further 1500 to 3000 people. (Allen, M. 2007, Greed and Grievance in the Conflict in Solomon Islands, 1998-2003, PhD thesis, The Australian National University) 2 the inevitable stresses and challenges that emerge in the transition from fragility and conflict to resilience and stability. Box 1: Regional Assistance Mission to Solomon Islands (RAMSI) RAMSI is a partnership between Solomon Islands and fifteen contributing countries from the Pacific region, led by Australia. RAMSI arrived in Solomon Islands in July 2003 at the request of the Solomon Islands Government and with the unanimous endorsement of Solomon Islands Parliament, and the countries of the Pacific Islands Forum. With a mission to help restore stability, RAMSI supported efforts to improve justice and security; more effective governance; stronger economic growth; and improved service delivery. RAMSI's capacity building strategy has moved through three phases over the last ten years: the first stabilization phase from 2003-04 focused on restoring law and order and stabilizing government finances. RAMSI technical advisers assumed line functions as a gap- filling measure. The second phase, throughout 2004-09, emphasized the consolidation of the rule of law, the beginning of public sector reform and measures to improve the economy as well as institution building. The third phase from 2009 to date has emphasized capacity development with a reduction in the number of advisers, and the transition of Solomon Island counterparts to in-line positions. Reflecting these changes, RAMSI has moved from an initial presence of 330 police officers supported by a contingent of 1800 military personnel and a significant number of in-line civilian positions, to a much smaller police presence of 146, a military presence of 160 with approximately 70 civilian advisers. Given recent stability and following Cabinet endorsement, RAMSI is again in transition. Its police component will remain until 2017. From 1 July 2013, its military component will withdraw and remaining development activities will transfer to the bilateral aid programs of Australia and New Zealand and multilateral programs of the World Bank, the ADB and the EU. 8. The political environment in Solomon Islands remains fluid. The electoral system introduced at independence in 1978 is based upon a Westminster Parliamentary system. The National Parliament consists of 50 Members of Parliament (MPs) elected from single-member constituencies. A first past the post system in a country of very small constituencies (between 2,000 and approximately 20,000 in size) and great ethno-linguistic diversity means narrow margins of victory, contest, and that elected members do not necessarily represent an aggregate of public interests in their home areas. Lack of established political parties has led to regular floor crossings, votes of no confidence and uncertainty. Only one government and Prime Minister has ever served a full term. And since independence, only two women have served in the National Parliament. The impacts of high levels of political uncertainty on the reform context and on the implementation of development programs are substantial as a result. 9. Access to the legal system is extremely difficult for many Solomon Islanders. Over the period of the tension, Solomon Islands' state justice system was barely functioning. The Royal Solomon Islands Police Force, the most visible organ of state power, was severely undermined by the partisan role played by elements of the force during the conflict. Following the RAMSI intervention in July 2003, external support to the state justice system and the Royal Solomon Islands Police Force increased to unprecedented levels. While RAMSI assistance has been critical to reviving security and justice agencies that had largely disintegrated during the conflict, the scale and form of assistance involved has raised questions about long-term sustainability. RAMSI is acutely aware of these issues with the focus now shifting from post-conflict stabilization to a longer-term development approach. State security and justice service delivery to the rural populace remains a challenge, with the vast majority of the population simply unable to access effective state, non-state or hybrid justice mechanisms (Box 2). At the same time, respect for the judiciary overall remains high. 3 Box 2: Justice at the Local Level The World Bank's recent study on Justice Delivered Locally (JDL) identified four broad areas of disputation in the sites studied: (i) social order problems arising principally from substance abuse; (ii) domestic violence (DV) and family disputes; (iii) land/natural resource related grievances; and (iv) those arising from the management of development projects at the community level. Neither state, non-state, nor hybrid justice systems has been able to address these issues effectively and legitimately. Police and courts have a limited reach outside provincial centers, while lower local courts rarely sit due to a variety of structural problems and resourcing constraints. While citizens often prefer to use non-state systems to settle disputes, these mechanisms are under immense stress due to larger processes of change, as well as newer types of stresses due in part to the involvement of local leaders in logging or other poorly managed development schemes. 10. There have been real improvements in development outcomes in Solomon Islands, particularly during the past decade; yet partly because of the tension, progress toward most MDGs remains off track2, and has been more limited than in some neighboring countries. The paucity of data however, may well hide more recent improvements in some areas, particularly child mortality and maternal health. Poverty remains a concern (showing mixed progress in MDG reporting), although there are indications of improvements in recent years. Poverty in the Solomon Islands context does not generally mean hunger or destitution, but rather households facing increasing hardship i.e. some may struggle to meet daily/weekly living expenses, particularly those that require cash payments. There are also households that experience difficulties in accessing basic social services and employment opportunities. Solomon Islands' GNI per capita has increased from about US$800 in 2003 at the end of the tension to slightly over US$1,1003 in 2012, but has yet to recover to the level of US$1,450 reached in the late 1990s. UNDP, drawing on survey data from FY06, estimated that approximately 22.7 percent of people in Solomon Islands suffered basic needs poverty4 while food poverty was 10.65 percent. Solomon Islands, like several other Pacific Island countries, has not been part of the surveys conducted by the International Comparison Project (which computes Purchasing Power Parities) until the most recent round (ICP 2011) for which results are not yet available. Initial calculations suggest that, a $1.25 poverty line (averaged over the country) will result in a poverty head count ratio lower than the one obtained from the national food poverty line. The profile of poverty differs by geography. Per-urban households around the capital of Honiara suffer from disproportionate levels of poverty, with almost one in three people unable to afford a basic minimum standard of living. In contrast, 19 percent of people in rural areas are poor. Analysis of provincial data, suggested that provinces with the highest proportion of poor households were either those which are most remote or are the most densely populated. A new household survey to update poverty measures is being conducted and a much stronger baseline on poverty dynamics is expected to be available by early 2014. In parallel, other indicators suggest broad improvements in living conditions, with commensurate reductions in poverty, since 2006. Non-extractive real production (one-quarter of which is non-logging agriculture) is expected to have grown by 17 percent between 2006 and 2013 after accounting for population growth, and urban living costs grew less rapidly than in the early 2000s. Service delivery and outcomes have generally improved, as discussed below. In addition, the 2 2012 Pacific Regional MDG Tracking Report. Pacific Islands Forum Secretariat, October 2012 Atlas method, constant US dollars. 4 Final report on the Estimation of Basic Needs Poverty Lines, and the Incidence and Characteristics of Poverty in Solomon Islands, Solomon Islands National Statistics Office and UNDP Pacific Centre Suva, Fiji, July 2008. 4 Rural Development Program, operating since 2009, has provided 300,000 beneficiaries across all the rural wards (apart from Renbel) with improved access to water supply, health posts, education, and energy services while, its extension services have helped as many as 120,000 people across 80 percent of Solomon Islands' rural wards directly benefit from improved agricultural productivity. These factors are expected to have improved livelihoods and human development outcomes. * Education has seen recent progress, although Solomon Islands is likely to fall slightly short of the MDG target of achieving universal primary education by 2015. Net primary enrolment rates have increased significantly over the past decade - from about 75 percent to 90 percent - although this follows limited growth in the early 1990s and a decline during the tension. Each year Solomon Islands allocates between 20 and 25 percent of the government budget to education, higher than most other countries at comparable income levels. Despite strong recent gains in access to primary education, the quality of learning outcomes remains of concern, with only about 30 percent of students completing primary school being functionally literate5. Secondary education enrollments have increased from about 20 percent during the midst of the tensions to over 40 percent. Still secondary education remains out of reach for many, with children in poor households half as likely to have received secondary schooling as the rest of the population. A large proportion of the government's investment in enhancing skills benefits a small number of tertiary students, with little support for those Solomon Islanders who need to gain or regain basic literacy, numeracy and livelihoods skills to increase their employability and productivity both at home and abroad6. * Health outcomes have improved significantly, as a result of free healthcare and relatively strong service provision, but Solomon Islands, like many other developing countries, will not meet ambitious MDG targets. In the two decades since the early 1990s, the proportion of children dying before their fifth birthday has almost halved, from 42 to 22 per 1,000 births - a figure below the average for all lower middle income countries - although this will fall short of MDG targets to reduce child mortality by two thirds. Similarly, maternal mortality has fallen from 150 per 100,000 live births in 1990 to about 90 in 2010, but still remains higher than most other Pacific island countries. Malnutrition rates have also fallen. Life expectancy has increased from 58 in the early 1990s to 68 years; as with other Pacific Island countries, however, a rapid increase in non-communicable diseases such as diabetes and cardiovascular disease could erode these gains over the next decade unless urgent attention is given to early prevention and treatment options. Outreach efforts have especially helped to reduce the incidence of malaria, although as the cause of 10 percent of all under 5 deaths, the disease still remains a bigger health care risk in Solomon Islands than any country outside of Africa. Despite overall gains, there are some concerns that recent spending decisions will increasingly focus service delivery on higher level health care facilities in Honiara rather than primary health care in rural areas. * Gender inequality remains a serious issue. Gains have been made in educational access, with about 95 girls now attending primary school for every 100 boys - but this drops away to about 80 girls for every 100 boys at the secondary level. Despite some modest improvement in maternal mortality, women's access to family planning services and the capacity to choose s Asia Pacific Bureau of Adult Education. Educational Experience Survey; Education, language and Literacy Experience in Solomon Islands. October 2007. 6 Skills for Solomon Islanders, Opening New Opportunities, World Bank, October 2012 5 the timing and number of children they would like is limited. This is reflected in the high fertility rate (4.2) and relatively low contraceptive prevalence (35 percent). This has an impact on the work, study and other life choices women can realistically make. While women have historically played important roles within the family and community and in dispute resolution during the tension, participation in formal institutions and employment is low. An estimated 54.3 percent of women over 15 are 'economically active,' but are concentrated in informal businesses, such as selling cooked food, handicrafts, or running micro-businesses, such as kiosks. Only 38 percent of public service positions are occupied by women, of which only 12 percent are senior positions. Women play a significant role in agriculture, but have less access than men to formal agricultural extension services. Gender based violence is endemic, with the most authoritative survey suggesting that almost two thirds of women had suffered some form of violence 7. Formal services to support women in such situations are limited and often difficult to access. * Access to basic services is very low, although this varies by location. Nationally, less than 20 percent of the population has access to electricity. However, in Honiara, this figure is over 63 percent. In many of the outer islands, less than 5 percent have access to electricity. Similarly, national figures show that only 9 percent of the population (with almost 40 percent in Honiara) has access to modern cooking fuels, with extremely low numbers in rural areas. Access to improved water sources is unequally distributed throughout the country, with over 78 percent of Honiara households having access to water piped either into the home or the neighborhood, compared to 33 percent nationally. Approximately 62 percent of Honiara households have access to flush toilets, compared to 15 percent nationally. 11. Limited employment opportunities in urban areas and a sizable youth bulge present a persistent risk. Only about 50,000 people out of a working population of over 250,000 are employed in the formal economy, with the bulk of the remaining population engaged in subsistence agriculture with periodic cash incomes. Rapid population growth - 2.3 percent per year' - with 44 percent of the population below 15 years of age has outstripped job creation in the formal economy. An estimated 7,500 young people enter the workforce each year, but only one among every six school leavers will find paid employment. Unlike a number of other countries in the Pacific region, Solomon Islands has very low rates of migration to regional job centers. Many young people make their way into the urban and per-urban areas particularly around Honiara, which have been growing at an average rate of 4.7 percent per year for the last ten years. The Bank's Justice Delivered Locally (JDL) study documents the strain placed on many communities by these dynamics. In many areas, the research found that alcohol and drug production, consumption and anti-social behavior among youth was seen as among the biggest "justice" problems facing communities - but one which neither the customary nor formal systems were able to effectively address. Youth dynamics are a challenge for many developing countries but are rendered more acute in Solomon Islands due to its small size, remoteness, and lack of opportunity. 12. Government capacity is improving and attention has turned to enhancing performance within parts of the civil service. Performance contracts have been put in place at the Permanent Secretary level and the Public Service Commission is beginning a review of remuneration levels across the public service given the decline in real public sector wages over the past decade. A 7 Secretariat of the Pacific Community (SPC). Solomon Islands Family Health and Safety Study, A Study on Violence Against Women and Children. 2009 World Development Indicators, 2009 6 particular challenge will be to strengthen institutions which, despite some notable exceptions such as the Central Bank of Solomon Islands, had virtually collapsed during the tension, following an incremental process of degradation during much of the post-independence period. State structures and functions remain poorly defined and understood, and were previously seen as incapable of stemming the conflict that befell Solomon Islands during the tension. The results of capacity building efforts under a decade of RAMSI support, with an early focus on capacity substitution, remain unclear. In key central agencies, capacity among civil servants, though growing, remains thin and centered upon donor-supported high performing units. Service delivery through government systems has been improving, although institutional arrangements to support local level delivery remain weak. 13. Further improvements in service delivery across a widely dispersed population will be critical to build confidence in the legitimacy of state institutions. Building on the relative stability of recent years, improved local level service delivery will be vital to build social cohesion and address underlying grievances which are a result of enclave economic activity, spatial inequalities brought about by longstanding patterns of uneven development, rapid social change, and perceptions of patronage in public spending. Partly in response to challenges to service delivery that a difficult geography presents, and the frustrations arising from the slow pace at which government capacity is increasing, the government has taken a high risk approach to basic service delivery at local levels. Constituency Development Funds provided to each national Member of Parliament to encourage local level investments were increased significantly in 2012, and a new Constituency Development Fund Act, passed by Parliament in 2013, institutionalized constituency development offices as parallel local development structures to provincial government. While potentially helping to ensure services in rural areas, these funds are often disbursed narrowly, opaquely, and with limited oversight. Economic Development and Outlook 14. Solomon Islands' economy has grown relatively strongly since the end of the tension, but population growth means average per capita incomes have only now recovered to the levels of the mid 1990s. After a steep contraction in economic output of 24 percent during the tensions, overall economic growth has rebounded (Figure 1). In 2010 and 2011, a surge in logging, the restart of gold mining operations, support from development partners, improved external conditions, and gains in macroeconomic management lifted growth rates. Foreign exchange reserves and government cash reserves were rebuilt, and retail price increases moderated. These conditions contrast sharply with conditions in 2009, when Solomon Islands was hit hard (more so than other Pacific island countries) by the global economic crisis, with output contracting sharply, the government running short of cash to meet recurrent obligations, and foreign exchange reserves being depleted. Still, even with the recovery in the Solomon Islands economy in the post-tension period, incomes have barely kept pace with population growth. The latter averages almost 2.3 percent a year, according to the 2009 census, meaning that by the end of 2012 per capita incomes were only slightly higher than their pre-tension level. 7 Figure 1: Solomon Islands: GDP Growth and GDP per Capita: 1997 - 2012 (est.) 15% Constant GDP per capita 2012 US$ 10% (RHS) 1,500 5% 1,200 0% 900 -5% 600 Real GDP growth (LHS) -10% 300 -15% 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e2012e 15. Gains in macroeconomic conditions slowed in 2012, as logging and mining activity stabilized and agricultural production declined in response to weaker prices. Stronger government spending provided some offset. GDP growth slowed in 2012 to around 4.5 percent, following growth near 10.5 percent in 2011. The slowdown in aggregate growth was due to flat or lower production across a range of major commodities, especially agricultural exports. Agricultural commodities such as copra, cocoa and palm oil are important sources of cash income to smallholder farmers in rural areas. Volatility in commodity prices at the global level can therefore have an important impact on farmers. Other key drivers of economic growth and government revenue stabilized in 2012. Mining, which contributed as much as 2 percentage points to 2012 growth, is now likely to have stabilized. Log production was affected by rains early in the year and prices weakened slightly with slower construction activity in the main Asian markets. Nevertheless, reported log exports of 1.9 million m3 in 2011 and 2 million m3 in 2012 were at record highs. With a total value of about US$190 million in 2011, logging made up almost 20 percent of GDP and 30 percent of all exports by value. Fisheries make an important contribution to the economy, with exports, primarily of tuna, amounting to about US$20 million, or about 5 percent of GDP. With the softening in external conditions, the number and scale of applications for foreign direct investment retreated in 2012 from recent record highs. Domestic demand remained robust through 2012. A notable boost to private consumption and government spending came from the Festival of Pacific Arts, which was held around Honiara in July, while implementation of donor-funded projects also added to domestic demand. This demand appears to have translated into more job opportunities, with the Central Bank's preferred employment indicator rising by 9 percent over 2012 (to over 46,000 people). 16. Recent macro-economic management has been essentially sound, following a severe fiscal crisis in 2008/09. The macroeconomic framework implemented by the authorities has been adequate to provide an acceptable level of price stability, maintain internal and external balances, reduce the stock of debt, and build reserves to cushion shocks. This broad framework is expected to be maintained in the coming years. An IMF review of the current Standby Credit Facility undertaken in December 2012 concluded that the Solomon Islands Government was making good progress against the program's structural benchmarks, albeit with some delays. The government has had significant fiscal surpluses (6 percent of GDP in 2010, 9 percent in 2011), due largely to improved revenue 8 collection, the commodities boom and to restrained growth in realized spending. The fiscal situation deteriorated somewhat in 2012 with increased spending and lower revenue growth leading to the overall surplus falling to 4 percent of GDP. This was due in part to one-off spending related to the Festival of Pacific Arts, as well as a significant increase in spending through constituency funds (from 2 percent to 4 percent of GDP). The 2013 budget anticipates a surplus of 0.8 percent of GDP, and balanced budgets are projected through 2015. Non-food and fuel inflation has been moderate. International reserves have been rebuilt to US$460 million (8 months of exports). The net present value of external debt fell to 13 percent of GDP in 2012. 17. In the medium-term, higher agricultural productivity, greater opportunities in urban areas, and improved public service delivery are likely to be the key sources of improvements in living standards and shared prosperity. The factors driving strong aggregate growth in economic activity over 2010 and 2011 appear to have abated, and growth is likely to return to a medium-term trend approaching 4 percent per year in the non-extractive economy. Mining and logging are expected to subtract slightly from aggregate growth, as the rate of logging is expected to decline slowly through this decade while Gold Ridge production remains near 2012 levels, which are around one fifth below expectations at the time the mine was re-opened. Agricultural production is expected to contribute to growth as various cash crop sectors revive, extension services improve, and improved intermediation by trading companies facilitates farmers' access to markets. Gradually expanding access to regional labor markets for Solomon Islanders combined with various low-cost innovations in financial services is likely to complement improved agricultural productivity to support rural incomes. In urban areas, less expensive and more reliable public utilities, and stronger human capital through investments in education and health are likely to support urban business. In addition to overall growth, these drivers are likely to support improved living standards for the bottom 40 percent of the population. 18. Solomon Islands' medium term outlook is subject to considerable risks inherent in a small, isolated and geographically dispersed economy. External developments provide the main source of macroeconomic risk. The Solomon Islands are particularly susceptible to natural disasters, which can disrupt fragile transport and production infrastructure and place additional demands on public finances to support recovery. Risk modeling under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI), supported by Japan, the Secretariat of the Pacific Community (SPC), and the World Bank, suggests that disasters are on average likely to cost the country 3 percent of GDP per year. In addition, the 'economic geography' of Solomon Islands puts communities significantly at risk to climate change. Sea level rise, soil and fresh water lens salination, increased flooding and coastal erosion are already being experienced, with some communities experiencing food shortages as crops previously grown to sustain them are no longer viable. Declines in global commodity prices also have a dampening influence on real activity, and slow the development of participation in the market economy. A deeper or more protracted global slowdown than currently anticipated, or sustained declines in gold and other commodity prices, could adversely affect exports, growth, incomes and reserves. Similarly, fuel price shocks have a significant impact upon Solomon Islands given the heavy dependence upon fossil fuels for electricity generation and for the transport of people and goods across a widely dispersed archipelago. The transition from the RAMSI program to more traditional bilateral support is expected to have limited overall impact on domestic demand, although it does present some downside risks. Conversely, there are also notable positive risks, especially from 2015, with significant investments proposed in nickel mining pending clarity on the mining tax and land access regimes, while various proposals for new fish canning operations are also under development. 9 19. Government debt has continued to decline over the last few years, and the country's risk rating improved to 'yellow light' status from 'red light' status under the Honiara Club Agreement (HCA) in 2012. This allowed the HCA to be revised, and Cabinet endorsed a debt management strategy (DMS) in May 2012. Under the DMS, the government sets a yearly borrowing limit as part of the annual budget, based on a debt sustainability assessment. The debt limit covers external borrowing by the government and all forms of SOE borrowing and guarantees (both domestic and external). The government entered its first loan under the revised HCA late in 2012, with the ADB financing a submarine fiber optic cable. The November 2012 joint IMF-World Bank debt sustainability analysis (DSA) concluded that Solomon Islands remained at a moderate risk of debt distress. Containing the risk of debt distress will require continued efforts to maintain fiscal buffers, and strengthening the budgetary process to improve fiscal discipline and the quality of spending. 20. The government continues to make progress on structural reforms to encourage investment. Perhaps the most noticeable reforms have been the liberalization of the telecommunications market, with the introduction of competition resulting in significant reductions in prices, and the number of people with mobile phones increasing from about 50,000 in 2008 to over 300,000 in 2012. Over the past few years, reforms have significantly improved the overall environment for Doing Business. In 2010, the government made it easier for firms to get credit, including the establishment of a unified credit registry, expanding the range of assets able to be used as collateral, and allowing out-of-court enforcement of creditors' rights. During 2011, Solomon Islands was one of the leading reformers globally, strengthening protection for investors and streamlining insolvency. The implementation of the 2009 Companies Act and the establishment in 2011 of an online company registry has also reduced the time required to register a company from over 50 days in 2009 to 9 days. Despite these gains, there is limited dialogue between the local private sector and the government on key constraints to broader economic development. 21. Administration of urban and peri-urban land constrains growth, fuels communal tensions, keeps standards of living low, inhibits growth of the middle class, and costs government revenue, which could otherwise support service provision. Less than 15 percent of land in Solomon Islands is registered and therefore within the formal land tenure system. The other 85 percent remains under customary tenure systems which vary from place to place. The registered land is the most commercially valuable and strategically located. It is technically owned by the government, administered by the Office of Land Commissioner and the Ministry of Lands, Housing, and Survey, and leased to individuals or commercial entities under fixed or perpetual term estates. Lack of a modern cadaster, under-valuation, negligence in collections of rents and taxes, and corruption in land titling and assignments constrain both the supply of land and the revenue collected by government. This has fueled a cycle of inflated land prices, lack of housing for Honiara's increasing population, and deteriorating infrastructure. These factors in turn constrain incomes, and place families and communities under stress. 22. Infrastructure bottlenecks present a major obstacle for further economic development, contributing to a very high-cost operational environment Electricity costs in Solomon Islands are amongst the highest in the world with current average rates at US$0.82/kWh, compared to the US average of US$0.12/kWh. According to an enterprise survey conducted by the Solomon Islands Chamber of Commerce and Industry (2011), a majority of respondents identified rising utility costs as one of the major constraints limiting further investment. Of a total estimated road network of 1,694km, only 126 km are sealed and primarily on Guadalcanal and Malaita. Only two international ports serve the country (Honiara and Noro), with Honiara port traffic growing five percent per annum 10 and struggling to cope with the existing throughput of vessels and cargo. Its capacity is expected to be reached within the next 5-10 years. Government Development Strategy 23. The government's National Development Strategy (NDS) 2011-2020 sets out a vision of a united and vibrant Solomon Islands with an overarching theme of building better lives for all Solomon Islanders. The NDS sets out three broad goals: * Increasing social and economic opportunities - through efforts to alleviate poverty; providing targeted programs to assist the vulnerable; and encouraging equitable distribution of public resources and economic benefits across the country, including the proposed development of outer island growth centers. * Securing sustainable growth - by facilitating private sector development; diversifying the economy, including new mining sector investments to replace the traditional reliance on logging for export revenue; and improving management of environmental issues and climate change adaptation. * Maintaining stability and peace - including a focus on ensuring security, law and order; and securing international partnerships. 24. Alleviating poverty and improving the lives of Solomon Islanders in a peaceful and stable society is the first objective of the NDS. In this context, the NDS focuses primarily upon addressing income poverty, through efforts to increase employment and income earning opportunities in urban and rural areas. Facilitating infrastructure development for improved service delivery in rural areas, and ensuring effective partnerships between investors and resource owners to ensure fair benefits accrue to each, are important features of the government's poverty reduction strategy in rural areas. With regard to addressing extreme poverty and hunger (MDG 1), the government plans to focus upon strengthening the subsistence sector to better achieve food security, reduce hunger and facilitate marketing of surpluses from subsistence as well as income generation from smallholder production. 25. Solomon Islands has successfully formulated several gender policies, although implementation remains a work in progress. National and political awareness of the importance of gender equality is increasing and gender disaggregated data collection is improving. Efforts to mainstream gender across the government's policies and activities including in health, education and agriculture, are beginning, and efforts to increase women's political leadership are underway. Recent performance contracts for Permanent Secretaries include requirements to oversee gender mainstreaming within their ministries. Domestic violence (DV) is now more openly discussed and the government is increasingly aligned with partners in efforts to improve services for victims of domestic violence and to understand how to work with men and women to prevent violence. 26. A key theme running through the NDS is the emphasis placed on improving the quality of public sector governance. The strategy highlights the importance of increasing the efficiency, effectiveness, and accountability of public service delivery, with a particular focus on policing, health, education, and infrastructure. Accountability institutions, including the Auditor General's office, will be strengthened to ensure compliance with laws and regulations, and public tendering and procurement procedures modernized. Following the release of the NDS, the government is now preparing a series of sectoral and provincial strategies, which are intended to set out prioritized, costed activities linked to a monitoring and evaluation framework. 11 27. Solomon Islands is a participant in the International Dialogue on State Building and Peace Building and a member of the g7+ group of countries9. Although not formally a pilot country under the g7+ "New Deal for Fragile States", Solomon Islands has prepared a Country Reportlo that details some of the challenges that have faced state building and peace building efforts and is actively engaged in the various discussions including state and peace building indicators. The Government has expressed interest in pursuing national level implementation of g7+ initiatives. Donor Engagement 28. Per capita aid flows to Solomon Islands are among the highest for any country in the world. Solomon Islands receives approximately US$300 million in official development assistance annually. This is equivalent to almost US$550 per capita, or approximately one third of annual GDP. 29. Australia is by far the largest donor to Solomon Islands, and anticipates providing about US$230 million in FY13. Of this, slightly over US$100 million funds the Australian Federal Police contribution as part of RAMSI. Other main partners include Japan, New Zealand, Taiwan China, the Asian Development Bank, the IMF, the EU, and the United Nations system. In addition, church and community groups play a significant role in delivering services, as across most of the Pacific islands, particularly in the provision of primary education. Donor programs are summarized in Annex 4. 30. Aid coordination is improving, particularly through regular policy discussions between the government and partners through the Core Economic Working Group (CEWG). The CEWG was launched in 2009 to ensure coordinated, government-led, policy dialogue to underpin flexible budget support, and to assist Solomon Islands to respond to the global economic crisis. This has been an effective coordination mechanism, and now includes the major development partners who are providing budget support. Both sector based and general budget support have been increasing in Solomon Islands (from 7 percent of recurrent budget in 2009 to 13 percent in 2012) although significant non-appropriated development expenditures remain (equivalent to approximately one quarter of the total consolidated budget). Australian and New Zealand led sector dialogue in health and education has been important, given external financing makes up a very significant portion of total spending in these sectors. Australian support to the recurrent budget for Ministry of Health and Medical Services was budgeted at 37 percent for 2012 (actuals were lower at around 33 percent) and is anticipated to increase to over half the recurrent budget in 2013. In education, New Zealand and Australian budget support provided about 12 percent of total recurrent expenditures in 2012 (lower than the 20 percent budgeted) with a little over 20 percent budgeted for 2013. The Ministry of Development Planning and Aid Coordination is attempting to improve aid coordination through efforts to incorporate the non-appropriated budget as part of the integral budget process through the introduction of medium term forecasting of the development budget. This will require all line ministries to produce a pipeline for both government-funded and donor funded projects as part of the 2013 budget process. A Donor Coordination Group also facilitates regular information exchanges among a broader group of partners. Nevertheless, aid coordination and management places considerable strain on government with over 100 separate donor financed programs spread across 26 9 The g7+ is a group of 18 fragile and conflict affected countries from across Africa, Asia and the Pacific. The group has championed the New Deal for Engagement in Fragile States as establishing new principles for development architecture and calls for new ways of working that better respond to the needs and challenges faced by fragile countries. 10 Peacebuilding and Statebuilding in Solomon Islands: Country Report for International Dialogue on Peacebuilding and Statebuilding, Dili, Timore-Leste, 9-10 April, 2010, Prepared by the Ministry of National Unity, Reconciliation and Peace 12 government agencies, and a limited amount of bilateral assistance directed through government budget processes. III. WORLD BANK GROUP ENGAGEMENT World Bank Group Engagement in Solomon Islands 31. The World Bank Group is continuing to scale up its engagement with the Pacific Island member countriesn, including Solomon Islands, as part of a renewed longer-term commitment. World Bank IDA and trust fund commitments to the Pacific, of almost US$300 million since the beginning of the IDA15 period in FY10, have been more than IDA resources in all prior years, and are expected to increase by a further US$100 million by the end of IDA16 (Figure 2). Similarly, IFC investments of over US$90 million in the same period have been more than in prior history. Figure 2: World Bank Group IDA, Trust Fund and IFC Commitments to the Pacific Islands by IDA Replenishment 350 300 250 200 IFC $ Other Pacific Islands 100 -.m Solomon Islands 50 IDA-12 IDA-13 IDA-14 IDA-15 IDA-16 (proj) Outcomes and Lessons from the 2010 Solomon Islands Interim Strategy Note 32. The World Bank Group has significantly scaled up its engagement during the ISN period. While IDA commitments to Solomon Islands have grown moderately, this has been leveraged by Trust Fund resources sign ficantly larger than IDA commitments. The ISN highlighted three areas of strategic engagement for the World Bank Group: (i) Addressing barriers to growth; (ii) Enhancing the benefits of global and regional integration; and (iii) Supporting improved public administration and management. Fiji, Kiribati, Palau, Republic of the Marshall Islands, Federated States of Micronesia, Samoa, Solomon Islands, the Kingdom of Tonga, Tuvalu and Vanuatu. 13 33. World Bank Group engagement in Solomon Islands has been highly selective, combining the strategic use of relatively modest IDA resources with trust funds and with IFC investments also encouraging responsible growth. As set out in Table 1 below, the current portfolio includes activities with a total of approximately US$20 million in IDA commitments, mobilizing almost US$36 million in trust fund resources which have been fully integrated into all aspects of strategy, planning, portfolio management, and results measurement. In 2010, IFC also made its first direct investment in Solomon Islands, a US$35 million loan to support the re-opening of the Gold Ridge mine, which was subsequently repaid in 2012. Table 1: World Bank Group Portfolio in Solomon Islands as of March 2013 Activity Year IDA TF TF Source ($m) ($m) Approved Prior to ISN Rural Development Program (RDP) FY08 3.2 5.9 Australia Health Sector Support12 FY08 1.5 Sustainable Energy FY09 4.0 Approved Durin2 ISN Period Tina River Hydropower TA FY10 3.5 Australia (PRIF)13 Mining Sector TA FY10 0.8 SPF14 Rapid Employment Project FY10 3.2 3.8 Australia, SPF Telecoms and ICT Development FY10 3.3 4.2 Australia (PRIF) RDP Additional Financing FY11 3.0 14.6 IFAD, GFRP Development Policy Operation FY12 2.0 Increasing Resilience to Climate Change and Natural Hazards Project (CRISP) FY13 2.7 Japan (PHRD) Total 20.2 35.5 IFC Investments IFC Gold Ridge Mining Ltd15 FY10 35.0 34. The growing program has been supported by a strengthened in-country presence. In 2008, the World Bank Group opened a joint office with the ADB in Honiara, which has allowed a robust engagement with government, development partners, and civil society. IFC has also hired a dedicated IFC Resident Representative, to be based in Honiara, and additional staff to support a growing business pipeline and portfolio including engagement in the fisheries, mining and economic infrastructure sectors. 35. A strategically focused program and analytical work have enabled the Bank Group to play an instrumental convening and coordinating role. While the Bank Group financing is modest compared to the significant amounts Solomon Islands receives from other donors, the Bank is valued by client, partners, and civil society for its convening power, technical expertise, and high quality analysis. The most prominent example of this role is the CEWG. The group is widely viewed as 12 Project closed December 2011. 13 Australian trust fund financing provided through the Pacific Regional Infrastructure Facility (PRIF). 14 State and Peace Building Fund. is Repaid 2012. 14 having transformed the relationship between donors and government, providing a forum for substantive policy dialogue, deepening the reform agenda, and improving overall donor collaboration. The associated reform program has been central to the turnaround in Solomon Islands' macro-economic and fiscal situation since 2009. 36. The World Bank Group's financing and analytical engagement over the ISN period made a real contribution to the gains that Solomon Islands has achieved over the past few years. Given the delicate post-conflict environment, the World Bank's engagement was designed to generate direct benefits to poor rural and urban communities through the Rural Development Program (RDP) and the Rapid Employment Project (REP). This was balanced with more technically challenging investments that encouraged broader policy reform (such as the introduction of competition in telecommunications, improving the functioning of the electricity utility, encouraging adherence to Extractive Industries Transparency Initiative (EITI) principles, and public financial management reform to improve the quality of government expenditures). Key outcomes are set out in Box 3 below, with further details on outcomes against ISN indicators and lessons in Annex 2. Among the key lessons from the ISN that will be built upon in the CPS are: the need to play to our areas of strength; engage where an in-country presence is able to provide hands-on and constant implementation support; and, ensure project/program design addresses the long term nature of thin capacity in Solomon Islands. Box 3: Key Results from the 2010 ISN Addressing barriers to growth * Investment climate reforms in Solomon Islands, supported by IFC technical assistance and ADB's Private Sector Development Initiative, have improved the enabling environment for private sector development with Doing Business 2012 listing Solomon Islands as one of the leading reformers globally. Solomon Islands has improved access to credit through the establishment of a unified credit agency, expanding the range of assets able to be used as collateral, and allowing out of court enforcement of contracts. Similarly, the time required to register a company has fallen from 50 days in 2009 to 9 days. * IFC's US$35 million investment in Gold Ridge Mining Ltd. supported the reopening of this mine, directly creating 600 jobs, and playing a role in the increase in mineral exports from 0.5 percent of GDP in 2009 to almost 14 percent of GDP in 2012. * Technical Assistance from the World Bank assisted the government to become an EITI candidate country in 2012. * The number of female owned businesses has increased from about 130 to over 180 between 2012 and 2013. * The Solomon Islands Electricity Authority has significantly improved the quality of services, and moved from a SBD 70 million loss in 2010 to a SBD 53 million profit in 2012. Enhancing the benefits ofglobal and regional integration * The number of mobile phone subscribers increased from 50,000 in 2008 to over 300,000 in 2012 (55 percent of the population) due to the introduction of competition in the telecoms market, supported by the World Bank. Supporting improved public administration and management * The REP has provided 324,000 person days of work for the urban unemployed. Women make up 57 percent of the beneficiaries, and youth 51 percent. * The RDP has supported over 200 community infrastructure projects in rural areas, including classrooms, health clinics, and water supply systems, reaching over 300,000 people, more than half the entire country. * Health sector expenditure on primary health services and provincial health programs almost doubled - from an estimated base of 17% in 2008 to 29% in 2011. 15 IV. THE WORLD BANK GROUP'S COUNTRY PARTNERSHIP STRATEGY Building on Gains for a Stable Solomon Islands 37. Since the end of the tension in 2003, Solomon Islands has made important development gains, and progress in developing key institutions for political and economic governance, provision of citizen security and service delivery. Resilience has been built in several key areas, most notably fiscal and economic management. The country came successfully through several political transitions and the media and civil society are playing a more robust role. However, as the violence that arose following the elections in 2006 demonstrated and consistent with other post conflict and fragile countries, Solomon Islands remains vulnerable to setbacks that could potentially undermine these important gains, which of themselves have been substantively supported by considerable injections of international assistance. Some of these may be sustainably addressed through policy efforts, such as urban development, while others are rooted in the immutable challenges of size and distance, and can only be effectively managed. 38. Enhancing shared prosperity in fragile and conflict affected states requires institutions that support both inclusion and cohesion. Building these institutional capabilities inevitably takes time. A key lesson of the 2011 World Development Report on Conflict Security and Development is that countries face multiple transitions on the pathway out of fragility or conflict. Pathways are often non-linear, with initial solutions often begetting new challenges. Successfully navigating these transitions distinguishes those that become more resilient from those that fail. As Solomon Islands enters its second decade after the tension, building on the relative stability of recent years while embedding and building upon gains achieved to date will be key to creating the economic incentives, social cohesion and improved state-society relationships that are essential to avoiding future conflicts and reducing poverty. 39. Solomon Islands'focus on social cohesion and improved livelihoods for all is well aligned with the World Bank Group's dual emphasis on eliminating extreme poverty by 2030 and encouraging shared prosperity, especially for the bottom 40 percent of the population. Pursuing the goals of poverty reduction and shared prosperity in Solomon Islands - in line with the Government's own objectives - will mean: ensuring that new opportunities for growth generate jobs and benefits that are equitable and inclusive of all segments of society, and particularly the poor; ensuring development expenditures and essential services reach a wide section of the population, with a focus upon the poor; and, addressing particular groups that are vulnerable to falling into poverty and potentially exacerbating tensions, including the youth in urban areas and those in rural areas far from markets. Underpinning this is the need to build a stronger analytical and evidence base of poverty within Solomon Islands so as to best target resources to addressing particular needs. Two inter related areas are key in this regard and mirror the government's own areas of priority: (i) on economic foundations, by managing a transition from an economy and public finances heavily dependent upon a limited range of depleting or non-renewable resources and a high level of aid to one that can facilitate enhanced livelihoods and jobs for a growing population and; (ii) in service provision, by improving access and transitioning from a focus on central agency functionality to delivery modalities that demonstrate quality, equitable and accountable provision. 40. The Bank Group's value-added in the Solomon Islands comes not from the financial resources it brings to the table, but primarily from the expertise and experience of working in other fragile and capacity-constrained environments and the ability to leverage the engagement of other public and private resources and expertise. The WBG strategy for the coming period will focus on a consolidation and deepening of the gains made so far, helping translate them into improved 16 economic and social well-being for a wider group of Solomon Islanders, and assisting the country in managing the challenges inherent in size, geography and thin capacity. The overall partnership strategy is focused around two broad themes: (i) Strengthening economic resiliency. As the scope for growth in the forestry sector declines, the country needs to maximize the return from other sources, to provide revenues for public services and development, and opportunities for its increasing population. These new economic activities need to be fostered in a way that provides local communities with a stake in natural resource development so as not to exacerbate tensions and conflicts over the medium term. The World Bank Group will focus on programs that support job creation, including through agriculture, fisheries and the private sectorl6. At the same time, the Bank will support the government in building institutional capacity for inclusive growth, particularly in the natural resource sectors by: helping the government to adequately shape and manage the regulatory environment; develop innovative approaches to land management and benefit sharing; ensure effective management of critical supporting utilities and infrastructure; use environmental and social safeguards effectively; and engage and support the private sector. (ii) Improved service provision. Solomon Islands faces a range of challenges in delivering effective local governance and services to its widely dispersed population. The reach of formal state institutions remains limited. Provincial governments have few resources and less capacity - and are dwarfed by constituency funds. For most people, schools, police and health posts, of mixed quality, are the only tangible evidence of the state. Within Solomon Islands, an enduring driver of conflict is a sense of inequity between different provinces, central government and different interest groups. This suggests that a focus on institutions, systems and programs that can support the equitable delivery of basic services across the country is necessary. In this context, the Bank will work to underpin the larger investments of government and its partners in key service delivery sectors (both public and private) to improve efficiency, equity and quality of expenditure, and explore, pilot and monitor efforts to improve the sustainable and accountable delivery of key public services and livelihoods across the country. In particular, the Rural Development Program and the closely aligned Rural Community Infrastructure and Service Delivery activity focus on enhancing the delivery of basic services in rural areas. Box 4: Joint WBG Program on Women's Empowerment in the Pacific A joint WBG Program on gender empowerment in the Pacific includes parallel and joint World Bank and IFC activities to help improve equality for women in the Pacific. The program is looking to: * Promote women's migration to formal sector employment; * Improve women's access to public services and financial services; * Enhance women's security and safety, in private and public spaces; and * Increase the number of women in positions of leadership in business and society. For Solomon Islands this will ensure a joint focus upon generating opportunities and minimizing harm from core sectors of growth in fisheries and mining and increasing women's voice, representation and benefits in mining. It will also support efforts to address safety and security issues around major employment areas, such as fish processing, as well as increasing employment opportunities. 16 This work will build upon earlier analysis undertaken by the World Bank: Solomon Islands Growth Prospects, Constraints and Policy Options, October 2010. 17 41. Bank engagement across these themes will be underpinned by two cross cutting policy areas - embedding institutional resilience and addressing gender inequalities. The WBG will support government and its partners to embed the institutional gains achieved to date into the overall development effort. The WBG will also ensure that gender is mainstreamed through the portfolio with a view to one hundred percent gender informed operations. Efforts will be undertaken to strengthen economic opportunities for women, while reducing negative impacts and harm for women in Solomon Islands. This is part of a wider WBG effort across the Pacific to enhance women's economic empowerment, reduce gender based violence and build a stronger voice for women in business (Box 4). 42. In preparing this strategy, the World Bank Group engaged with a range of stakeholders through formal and informal consultations over the past year. Discussions with private sector, civil society, government representatives, and development partners, offered views on priority areas of World Bank Group engagement, including: * The merits of Bank Group support for encouraging a growth strategy that supplements the logging and mining sectors and supports private sector development; * The importance of rationalizing urban land management so as to avoid potential conflicts and support development and service delivery improvements; * Encouragement that benefits from Bank Group engagement should extend beyond the main island of Guadalcanal; * The value of the Bank Group's convening power and policy dialogue capacity across a range of areas, particularly in supporting the CEWG collaboration and the government's efforts to improve the quality of spending; * The need to consolidate gains from current areas of engagement, and further strengthen the impact of continuing programs, including with the private sector; * The relevance of the Bank Group's engagement improving the performance of key economic infrastructure, including telecommunications and electricity. Strengthening Economic Resilience 43. Solomon Islands must find new areas of economic activity to support its growing population and to underpin poverty reduction. Current annual population growth of approximately 2.3 percent per year, with non-extractive GDP growth rates of around 3.5 to 4 percent, would mean only gradual improvements in average per capita incomes, continuing high rates of underemployment, and limited scope to reduce poverty and inequities. The Bank Group's engagement will support the government to maintain macroeconomic stability, strengthen the enabling environment for inclusive growth, and address key constraints. In particular, Bank Group engagement will support opportunities for new economic activity in mining, fisheries and agriculture, while enhancing the efficiency of supporting infrastructure including energy and telecommunications, and managing the impacts of natural disasters. Job creation is particularly challenging in Pacific Island Countries (Box 5) and requires innovative solutions. The Bank Group will promote a broader dialogue within the region on the likely challenges and potential opportunities. IFC will also target investments that have scope to generate significant economic opportunities and leverage IFC's experience and relationships with the private sector elsewhere in the Pacific and particularly, PNG. 18 Box 5: Job Growth in Pacific Island Countries Creating more and better jobs is a priority for small Pacific Island Countries given slow economic growth, rapid population growth and accelerating urbanization. A clear message from the 2013 World Development Report on Jobs and the IFC 2013 Jobs Study is that policy makers interested in development outcomes should be concerned about the number and types of jobs available in any economy, and that the Private Sector is the key to job creation. This focus upon jobs reinforces the 2011 World Development Report on Conflict, Security and Development as an important precursor to reducing fragility and the likelihood of a return to conflict. Work within the Pacific region points to a number of priority issues for policy makers in regard to job growth: * The need for realistic expectations regarding the trajectory of job creating economic growth; * The need for improved international labor mobility through erosion of regulatory barriers and investment in transferable human capital; * Making the most of urbanization through investment in connective infrastructure, urban services and agricultural productivity; * Ensuring that public spending - including development assistance delivers good jobs and efficient services; and, * Generating sustainable jobs from natural resource industries and linkage opportunities with local businesses. Across the CPS period, the World Bank Group will explore these and other options with Solomon Islands and its partners to maximize job opportunities for its growing labor force. 44. Outcome 1: Strengthened public expenditure and fiscal management. Maintaining macroeconomic and fiscal stability is critical to economic resilience. Progress has been made and core capacity built in key areas including budget, debt management, domestic revenue collection and financial management with the support of RAMSI advisers. The Bank Group will support the government in embedding macro-economic resilience through: (i) regular economic monitoring and analysis; (ii) ongoing participation in the policy dialogue around the CEWG, (iii) a continuing Development Policy Operation (DPO) series; and, (iv) building fiscal resilience to natural disasters into overall budgetary planning. The CEWG provides a means for coordinating budget support across donors. This engagement will be supported by a DPO17 designed to support the government's efforts to improve the quality of public financial management; strengthen financial management of key State Owned Enterprises; and generate transparency around extractive revenue. Through the PCRAFI, and potential follow on regional initiatives, support is available to the government to improve fiscal and budgetary procedures for disaster management. As government's familiarity with the DPO instrument grows, and as the CEWG moves into a new phase of policy dialogue, a future DPO series may expand beyond the current Public Financial Management (PFM) focus to other areas of high priority to the government. 45. Outcome 2: Enhanced regulatory framework, public sector capacity and community benefits in the mining sector. The mining sector is likely to play a key role in the future of the Solomon Islands economy and is expected to replace forestry as the main source of export earnings in the years to come. Regional and international experience has demonstrated the risks associated with large scale mining developments, including for women and the environment. Local economic benefits may be limited unless Solomon Islands is able to effectively enforce tax and benefit sharing regimes. The government has undertaken several initiatives to pave the way for the reform of the 17 The DPO scheduled for FY14 will be the second of a two operation series begun in FY13. 19 mining sector, including being accepted as a candidate country under the EITI. The government has requested support from the WBG for a package of reforms, including: (i) updating the mineral development policy; (ii) overhauling the legal and regulatory framework (new mining law and regulations); (iii) establishing the Mineral Development Authority; (iv) institutional capacity building for policy and sector management; and (v) a community development framework to address landowner issues, women in mining, and regularization of artisanal mining. IFC will continue to engage in the mining sector, drawing on expertise in community development around mining areas, particularly women in mining, as part of IFC's global financial sector leadership on environmental and social standards. 46. Outcome 3: Increased local economic benefits from the fishing industry by increased on- shore production capacity. There is scope for greater returns from the fisheries sector, an important source of livelihoods, revenue, biodiversity and sustenance for the people of Solomon Islands. The Western and Central Pacific tuna fishery is the source of approximately 60 percent of the total global tuna catch. Sustaining and increasing public revenues from tuna harvests while maintaining a business environment that supports a regionally and globally competitive tuna processing industry is a high priority. In addition, development of local capacity to manage coastal fisheries for food security and to increase household income levels in rural communities is a focus of attention. IFC is proposing a strategic investment in the Solomon Islands sole tuna loining and canning processor, SolTuna Ltd, based in Noro, Western Province. SolTuna is the largest employer in Noro with approximately 1,500 workers and provides jobs and training to a mostly rural area, including a high proportion of women (62 percent of the labor force). IFC's investment is expected to contribute to the improved management of the Pacific tuna fishery through better compliance with regional tuna management measures and adoption of IFC's Environmental & Social Performance Standards. IFC will support Solomon Islands to improve capacity and processes for investment analysis and approvals of new onshore tuna processing facilities. To complement the proposed SolTuna investment, IDA will provide support to Solomon Islands (along with other Pacific Island Countries) to gain a better return from fisheries and in the sustainable management of the region's oceanic fisheries, coastal fisheries and the critical habitats that support them. Support will be provided through the Pacific Regional Oceanscape Program (PROP) in coordination with other partners in the sector, to strengthen and extend a recently introduced Pacific Vessel Day Scheme (VDS) - a tradable rights based quota system intended to regulate total fishing efforts and improve returns for island countries. Analytical work to support the effective engagement of women in the fisheries sector, including female employees at the SolTuna operation, will be supported and may well be a model that can be implemented regionally. 47. Outcome 4: Increased productivity in key cash crops (cocoa and coconut) while maintaining food security. As the most important, and often sole, source of income for the rural population, the agriculture sector offers opportunities for improvements in incomes to be more inclusive. Tree crops (oil palm, coconut and cocoa) are the dominant source of agricultural income, with an estimated 60 percent of rural households growing coconuts and 40 percent growing cocoa. Export earnings from these crops have also grown significantly over the past five years, with cocoa in particular seeing a four-fold increase in export value. This trend of growth remains vulnerable to declines in global prices, however, as evidenced by a significant drop in both cocoa and copra production in 2012. Food security and nutrition remain a concern, particularly for isolated island communities, and those vulnerable to extreme weather events. Through the RDP, the World Bank Group has helped to revitalize the Ministry of Agriculture and Livestock from its debilitated state after the tension, including developing a wide-reaching program of extension services active in most wards of the country. Building upon the current RDP, a second phase project will be developed with 20 a focus on productivity and income improvements in selected crops, as well as strengthening food security in vulnerable areas. IFC will engage the private sector in partnerships around specific crops, particularly in the major export crops of cocoa and coconut (copra and coconut oil). IFC will leverage its global experience working with agribusiness companies in these particular commodity groups and will evaluate opportunities to leverage innovation in other markets to the needs of the commodity value chain in Solomon Islands. 48. Outcome 5: Lower cost and more reliable electricity from cleaner energy sources. A reliable and affordable power supply is necessary to support growth, improve living standards and reduce vulnerability to external shocks. Electricity consumption in Solomon Islands is lower than in any other Pacific Island Country and more expensive than regional comparators and many small island states. Virtually all grid electricity is generated with diesel fuel. Businesses outside the capital are generally forced to rely upon costly generators using imported diesel. Technical assistance and advisory services will be provided to the Solomon Islands Electricity Authority (SIEA) to continue improving performance. There is scope to expand this assistance to SIEA to incorporate grid extensions in and around SIEA's existing service areas, incorporate bulk metering on SIEA's network to assist in reducing electrical losses, and to provide support for power system planning, performance monitoring and investment project management capacity, including the ability to negotiate a power purchase agreement with the developers of the proposed Tina River Hydro project on Guadalcanal, the country's first hydro-power scheme. Complementing this, support will be provided to the design and engagement of a private sector investor to build and operate Tina River, with the potential to significantly reduce the price of electricity, and replace a large share of Solomon Islands' diesel fuel imports. These engagements will draw together the Bank Group's best knowledge and capacity to manage technical, social, environmental, and commercial requirements - through both IDA and IFC - for these important investments. 49. Outcome 6: Improved access to Information and Communication Technology (ICT) services and efficient ICT policy framework. Deregulation in the telecommunications sector has allowed for a rapid expansion of coverage and a dramatic drop in prices18. The market is growing and diversifying, although access to the internet remains low. The main constraints to further subscriber growth, particularly for broadband Internet, include the high-cost of international bandwidth and of end-user devices, making the total cost of ownership expensive. The WBG will build upon the early engagements in the sector, through support for the broadband enabling environment and e-Government applications that support use of ICT for development purposes. 50. Outcome 7: Strengthened business climate. In spite of recent progress improving the business enabling environment, significant challenges remain. Improvements in the Doing Business indicators have been largely concentrated around a decrease in company registration times and improved creditor rights and access to credit, with other indicators showing limited progress. There is a need to improve public-private dialogue to raise awareness and understanding of issues that limit the ability of the private sector to increase investments in their existing or new businesses. IFC is well positioned to help reconstitute the previous Public-Private Dialogue platform, building on the successful models in Timor-Leste and Papua New Guinea. Across the Pacific, the WBG will continue to engage with financial authorities in both sending and receiving countries, as well as 18 The cost of a one minute local mobile call has fallen from US$1.20 in 2009 to between US$0.13 and US$0.27 per minute in 2012. 21 commercial financial institutions, to encourage further reductions in the costs of sending remittances to Pacific islands and the use of innovative new financial products such as mobile money, which build on the rapid expansion of mobile phone access throughout the region (Box 6). Box 6: Pacific Payment, Remittances and Securities Settlement Initiative (PAPRI) In 2010 the WB and the IFC began a collaborative effort to assist with reforms to the National Payments System (NPS) in Fiji, PNG, Samoa, Solomon Islands, Tonga and Vanuatu. The objective of the PAPRI is to identify strategies to improve the safety, efficiency and integrity of the individual NPSs. The project also seeks to promote policies and actions for the harmonization of payment systems throughout the region and in line with international standards and best practices. Since the launch of the PAPRI, the WB and IFC have undertaken assessments of the NPS in Samoa, Solomon Islands, Tonga and Vanuatu and have started to work with countries to implement the reforms identified. Currently the major ongoing TA efforts under the PAPRI umbrella are focused on supporting Central Banks in the region in drafting the National Payment System Acts and the relevant regulation. In FY14 the TA will be expanded to include a study to launch the adoption of modern payment systems infrastructure in Samoa, Solomon Islands, Tonga and Vanuatu. PAPRI, combined with associated TA to improve transparency of remittance costs in the Pacific (with information now available at www.sendmoneypacific.com) has helped to reduce the average cost of sending remittances to the Pacific islands from Australia and New Zealand by a third. Given the rapid increase in mobile phone use in the Pacific, PAPRI will help to provide a foundation for innovative new financial transaction methods, including the use of mobile money. In addition to PAPRI, IFC is supporting development of a new credit bureau in Solomon Islands as part of a Pacific regional project and is engaged with two financial institutions who are interested in expanding their mobile banking platforms to the Solomon Islands. 51. Outcome 8: Greater resilience of rural communities to climate change, natural hazards and catastrophic disasters. Solomon Islands' macroeconomic and growth outlook remains highly vulnerable to extreme climate and natural hazard shocks. The economic impacts of disasters in Solomon Islands are high while climate change represents a huge potential challenge to multiple sectors, including: health, the economy, food security, water resources, agriculture, fisheries, security and land use. The government has developed a National Disaster Risk Management Plan and a National Climate Change Policy to guide its efforts. Both policies reference the importance of gender in managing risk. The Bank has supported the development of a 'Gender and Protection in Emergencies' training and Solomon Islands was one of the five Pacific countries to join the PCRAFI pilot project, funded by the Japanese Government. The Japanese financed Increasing Resilience to Climate Change and Natural Hazards Project and the Increasing Resilience to Climate Change and Natural Hazards Project (CRISP) will support more resilient development in the context of climate and hazard risks, through support to policy implementation, institutional capacity building, emergency communication and data management systems, and community driven investments to build climate and disaster resilience. Initiatives are also underway to identify tools and methods for engaging Pacific Island women in community-based resilience building. Underpinning Improvements in Public Service Provision 52. Improving access to services across the country is important for alleviating complex and periodically tense relations between the center and provinces. Solomon Islands faces multifaceted constraints to service delivery including: weak institutional capacity inside formal structures; a concentration of limited capacity in well financed parts of central ministries; varied, uneven and competing capacities and modalities across provinces and local levels; and high costs associated with challenging geography. 22 53. The Bank will work to underpin the larger investments of government and its partners across the service delivery sectors so as to understand service delivery constraints and failures, explore, pilot and monitor efforts to improve the sustainable, accountable and more equitable delivery of key public services and livelihoods across the country. Where opportunities arise, the Bank will build upon and expand existing platforms and programs, and in particular the RDP and the REP (both of which constitute more than half of the Bank's current portfolio) to extend the reach and impact of various activities, e.g. using the RDP platform to engage in climate change or early childhood activities at the community level or the REP platform to scale up skills training opportunities for the youth. 54. Outcome 9. Improved policy and budgetary processes to support poverty reduction and service delivery. Compared with many lower-middle income countries, Solomon Islands has reasonable health and education outcomes. Nevertheless, with an increasing population and modest economic growth, fiscal space will remain limited for expanding key service delivery and poverty reduction efforts over the coming years. Enhancing the efficiency, equity and quality of expenditures to achieve better services and system performance will therefore be essential. At the policy level, the Bank and partners will widen the economic dialogue with government from a focus upon short term stabilization and PFM infrastructure issues to one addressing improved service delivery outcomes. This will be supported by: (i) strengthening the capacity of selected ministries and the central finance agencies to analyze spending patterns relative to budget allocations and government priorities; (ii) implementation support to the household income and expenditure survey (HIES) and technical assistance on poverty measurement and analysis to better inform planning and policy (Box 7); (iii) support to the Ministry of Health and Medical Services (MHMS) to improve public expenditure management and essential service delivery over the next 3 years, and (iv) possible programmatic analytical work in the education sector to cover a range of areas designed to improve quality and targeting of expenditures including in the tertiary and vocational education areas. As government engages with RAMSI and donors over the transition of civilian capacity to bilateral programs, there is scope to explore key elements of civil service performance. This may be through the review of formal and informal incentives and alleviating bottlenecks in key service delivery areas. Box 7: Improving Data Analysis Data analysis in Solomon Islands, as in many Pacific Island countries, is challenging given limited capacity within national statistics offices (NSOs) and the cost of surveying across vast geographical distances. The SPC has been leading support to national statistics offices, including with preparation of HIES, while the IMF supported Pacific Financial Technical Assistance Facility has supported balance of payments and national accounts data analysis. The Bank is supporting both of these initiatives across the region with quality control and technical advice. In Solomon Islands the Bank will specifically support the government with the analysis and application of data arising from the HIES. UN agencies and SPC are supporting the government in various other survey efforts, including WHO engagement with the MHMS on the Health Information System and the SPC with NSO on the Demographic and Health Survey (DHS). The last DHS was undertaken in 2007/8 and the next one will be in 2014. As with most population based surveys, conducting a quality DHS is a substantial and costly piece of work; for this reason they are generally conducted every 5-10 years. For the HIES, WHO with others are supporting MHMS to streamline data collection on health information and to report on this in a more timely way (quarterly) to inform implementation and management. The Bank will complement this by supporting MHMS (including at provincial level) to improve their financial reporting (at least on a quarterly basis) to again inform ongoing activity implementation and broader management of resources (e.g. seeing where there are underspends and overspends and helping to address this where needed). 23 55. Outcome 10: Capacity for collective action and increased access to services for rural communities. Over the past five years, increased investments in rural development have flowed through three main channels: provincial governments, the community level, and especially constituency accounts (managed by Members of Parliament). While there are various linkages across these channels of funding, greater efforts are needed to enhance their efficiency and effectiveness as a whole and ensure they are driven by community needs and held appropriately accountable. Through analytical work and its support for the RDP, the Bank will contribute to the strengthening of rural service delivery and local governance systems in Solomon Islands. As one of the Bank's first major projects following the "tension", RDP's highly participatory design was intended to increase community capacity to take collective action. As recognized by the Peace-building and State-building Indicators, building trust and social cohesion within communities diminishes the risk of inter-group conflict.19 In the planned second phase of RDP, the Bank will apply lessons learned and the results of a planned impact evaluation to improve upon the community-driven development (CDD) design rolled-out under the first phase. In addition to continued financing from Australia and the International Fund for Agricultural Development (IFAD), government budget allocations, which started in 2013, are expected to continue and will help ensure the sustainability of such CDD mechanisms following the end of RDP II. Analytical work will respond to the evolving landscape of rural/local development financing, including drawing on global lessons about Constituency Development Funds to guide reforms in this area, as well as potential changes in center-periphery governance arrangements. 56. Outcome 11: Increased access to skills and employment opportunities for the urban population. Government concerns about youth unemployment led to the development of a jobs program targeting the urban poor as a response to both unemployment and poverty. The REP provides vulnerable communities, particularly youth (who were key actors in the previous violence) and women (who were negatively impacted), basic employment skills and work to improve their employment prospects and cash incomes. Building on this foundation, the Bank will support the government in exploring options for a social protection policy. This will include a continuation and expansion of the workfare program supported under the REP. The REP will expand its focus on basic skills for the urban poor through non-formal training and on-the-job training opportunities linked to basic infrastructure needs in urban communities, and the creation of livelihood opportunities. Bank engagement will build upon earlier work in addressing the skills mismatch between employer demand and households and supporting the transition from school to employment opportunities at home and potentially abroad. Complementing this support, the Bank will explore opportunities through analytical work, policy dialogue and partnerships with others such as UNHABITAT to engage with stakeholders on options to address the poor management of urban land which has fueled a cycle of inflated land prices, lack of housing for Honiara's increasing population, deteriorating infrastructure and lost revenue for government. 57. Outcome 12: Government support for establishment of functioning local justice mechanisms. The World Bank through its Justice for the Poor Program (J4P), and with the support of the RAMSI Law and Justice Program has been involved in the Justice Delivered Locally (JDL) initiative of the Ministry of Justice and Legal Affairs. This work has been critical to building an understanding of justice issues and state-citizen interaction at local levels. While carrying out further 19 Peace-building and State-building Indicators - Progress, Interim List and Next Steps, Document 3 - For Discussion, report produced from the "Third International Dialogue Global Meeting, "The New Deal: Achieving Better results and Shaping the Global Agenda, 19 April 2013, Washington, DC. 24 analytical work (including a possible focus on justice issues pertinent to the per-urban areas of Honiara), the Bank will support government in undertaking a pilot project supporting local level functionaries called "community officers". This responds to the demand for a state presence in community governance and service delivery at the village level, in particular for the quasi policing and enforcement function played by such officers. The project builds on the recommendations contained in both an evaluation of a previous pilot of Community Officers (CO), carried out under the previous ISN and the broader empirical work undertaken of local justice and community governance. The small-grant, recipient-executed operation will be implemented by the Ministry of Provincial Government and Institutional Strengthening. 58. Outcome 13: Enhanced access to services for survivors of Gender Based Violence (GB V). Both GBV and DV have widespread negative implications for a country's economic and social development, as affecting the health, well-being, social engagement and labor integration of women and the health, nutrition, well-being and education of their children, and that of future generations. There is a strong commitment in Solomon Islands to improve gender equality and eradicate gender based violence. In 2007, the government created the Ministry for Women, Youth, Children and Family Affairs (MWYCFA) to elevate gender issues in the country. Although small and new, MWYCFA has embarked on an ambitious policy agenda to empower women through the Gender Equality and Women's Development Policy and a national sub-policy to eliminate violence against women. The World Bank will support MWYCFA to undertake a diagnostic study on capacity constraints in institutions and services to protect and support women who are vulnerable or victims of GBV or DV. This will be followed-up by at least one sub-project to strengthen core capacity by frontline responders, in particular focused on developing a standardized provision of services; strengthening co-ordination and referral services and training responders in responding sensitively and in a timely fashion to the needs to victims. Addressing Gender Across the WBG's Program 59. Ensuring that the WBG delivers improved outcomes for both men and women is a priority of this CPS. In this context, the CPS will focus upon several key areas: (i) demonstrating concrete additional impact in our portfolio including strengthening extension services to women in rural areas and involving women in community decision making on major developments; (ii) ensuring that the Bank's support for enhanced service delivery identifies, provides for and monitors the access of such services to men, women and children and institutionalizes these practices as much as possible into government, private industry and community practices; and, (iii) identifying and delivering selective 'niche' interventions that address significant problems such as the challenge of gender-based violence. A Gender Profile has been prepared as part of preparation of this CPS and as a contributor to completion of a Country Gender Action Plan. 60. The WBG program to date has included a strong focus on gender. Key social service delivery programs, such as the REP, have specifically targeted opportunities for women and girls, who make up 57 percent of all beneficiaries. Similarly, IFC, through the gender and investment climate reform assessment, has worked closely with the Solomon Islands' Women in Business Association to improve the number of female owned businesses from 130 to over 180 in the last year alone. In partnership with AusAID, IFC is supporting the establishment of a Pacific Business Coalition for Women which will include Solomon Islands. This Coalition, is first to be developed in PNG and then expanded to other countries as the private sector interest and demand grows. It will focus on promoting women as employees particularly in management and leadership roles, as well as women as customers and suppliers of goods and services. It will also play an important advocacy 25 role within the community by leading and demonstrating the economic benefits of increased gender equity in business. 61. Looking forward, the WBG will focus on improving women's economic empowerment. Building on the experience from RDP and the government's own Women in Agriculture program, opportunities to expand extension and other services to women will be explored to enable women to improve productivity and expand engagement in small holder cropping as feasible. In the mining, fisheries and energy sectors, the WBG will build on the approach used in other parts of the Pacific (Box 8), particularly the experience from the PNG Women in Mining initiative to increase women's voice and benefits from these developments and minimize harm for women and children in the process. IFC will work with IDA to support the engagement of women in the fisheries sector, and will pilot the use of the ILO's Better Work Program to identify interventions to address potential social issues that might arise in relation to a concentrated female work force at SolTuna. In the service delivery area, the Bank will use sex-disaggregated data to monitor and promote participation and to identify and respond to constraints for greater access. For example, the CO pilot project, currently under design, will include gender specific M&E and activities to capture information around women's utilization of services and women's experiences more broadly with government service delivery at the local-level. The RDP and REP will continue to ensure women as well as men engage in the planning and implementation of activities including relevant training. In response to the limited range of services available to victims of gender based or domestic violence, the Bank is supporting the government through an Institutional Development Fund (IDF) grant in identifying gaps in service provision and piloting new delivery approaches. Box 8: The Women in Mining Initiative in PNG The PNG Women in Mining (WIM) initiative was developed based on evidence that women do not get a fair share of mining benefits, because they have no voice and little capacity. The initiative sought to address both the lack of voice and capacity challenges faced by women by offering women from mining areas a safe space to discuss issues and a platform for dialogue with the other relevant stakeholders - including government and private industry. This process has empowered women to have a stronger voice and ensured more equitable participation in benefit sharing arrangements, as well as enhancing the role of women in planning decision- making processes. The WIM Initiative helped to a) build the self-esteem and confidence of local women by allowing them to design and participate in training programs to increase their skills, contributing to the creation of several women micro-businesses in food processing and sewing uniforms to sell to companies. Training programs, although targeting women, were also open to men, which helped to strengthen the role of women as partners to their male counterparts; b) establish and strengthen linkages among women in the community and within women's associations, to recognize their legitimacy in shaping resource allocation and development decisions locally; c) increase the effectiveness and equity of community development in mining, providing a model for corporate social investment activities and helping to mitigate negative effects of the industries on women; and, d) highlight nationally how activities within a particular sector (extractives) can have an impact on women's social and economic empowerment, and raised the profile of gender issues in the national development dialogue. The WIM Initiative was extended to women in the petroleum areas, showing a potential for replication in other natural resources sectors where women are the major beneficiaries and can play a significant role. 26 Partnerships, Flexibility and Selectivity 62. The WBG is committed to working very closely with partners in Solomon Islands. This reflects the priority Pacific Island leaders placed on the 2009 Cairns compact to make better use of all resources available for development. Flexible bilateral support for the WBG's operations in Solomon Islands, and elsewhere, has been instrumental in allowing the scale up that has occurred. A partnership approach has been critical to supporting the government through the CEWG and close collaboration has enabled results to be achieved in areas such as health sector policy and education. The WBG is working very closely with the UN system in aligning support to rural communities through the RDP and the UN supported Provincial Government Strengthening Program. Collaborative efforts across the WBG under the prior ISN engagement have demonstrated the added impact of a selective program of engagement that builds upon the respective strengths of both IDA and IFC. This collaboration will continue across the CPS period (Box 9). 63. The proposed WBG program for the CPS period is focused and selective; it builds on success in areas of previous engagement and is limited to where the Bank has a distinct comparative advantage. There are no proposed investment operations in areas with significant other donor financing, (e.g. education, health, transport, water and sanitation, forestry, public administration), although the government and development partners have requested the Bank to provide targeted analytical work in areas such as health that brings in the Bank's access to global knowledge and experience in order to complement donor and government programs, with a particular focus on improving the management of public resources for improved service delivery. Reflecting good progress with much of the current program, the CPS will build upon current activities through additional financing and "repeater" operations that expand current operations. IDA investments will continue to focus on areas where the Bank has deep operational and analytical experience (e.g. community driven development, and performance of utilities), and where it can leverage donor financing and/or IFC investments (e.g. urban employment and fisheries). 64. The WBG's engagement will need to remain flexible given the generally fluid political environment and some uncertainty about the longer term donor landscape. In the context of its Debt Management Strategy, the government is discussing with IDA how to make use of IDA credits in addition to IDA grants. The Bank program will consequently need to remain flexible, and to explore co financing options in many areas. More broadly, in a highly fluid environment, WBG's engagement will need to be sufficiently flexible to accommodate internal and external changes affecting Solomon Islands and its development needs. 27 Box 9. IDA and IFC Collaboration Mining: IFC investment in the Gold Ridge Mine in 2010 enabled it to reopen after 10 years of inactivity following the tension. IFC also supported capacity building to Gold Ridge Mining Limited with regard to payments to communities, environmental and social issues, and management and establishment of a Chamber of Mines for Solomon Islands. IFC engagement was reinforced by Bank support under a mining sector technical assistance, financed by the State and Peace Building Fund, to strengthen the mining regulatory environment. Additional complementary support has been provided to support Solomon Islands EITI candidacy application to improve overall transparency in the sector. Energy: Early IFC engagement supported preparation of the international tender process and investor identification for the proposed Tina River Hydro scheme. This has been complemented by IDA support to strengthening the capacity and financial viability of the Solomon Islands Electricity Authority and for the preparation of feasibility studies, environmental and social assessments and community benefit sharing regimes for the proposed development of the Hydro project. The WBG is also engaged with a number of other parties who are undertaking feasibility studies for additional and alternative renewable energy developments in the country. Fisheries: IFC's proposed investment in fisheries (SolTuna) processing will be supported by a complementary IDA investment in the regulatory environment and associated offshore and coastal fisheries management under the Pacific Regional Oceanscape Program (PROP). Through IFC's engagement with the previous investors in SolTuna, the WBG was able to provide advice to the SolTtuna Board, and share knowledge on how to encourage and structure foreign investment in the sector. 65. The WBG will aim to streamline implementation modalities, which can be burdensome for small countries with thin capacity. Moving as much as possible towards a programmatic approach, exploring options for consolidation of implementation capacity, and the scope for using and strengthening government systems over time will be important. The East Asia and Pacific Region of the Bank has recently introduced "A New Way of Working in the Pacific" to respond to the demands of clients and partners for a more flexible and tailored approach to fiduciary management. The objectives are to make procurement and financial management for Bank financed projects more efficient and less costly and to build sustainable capacity in implementing agencies. To complement this, the Pacific department is exploring options to assign more implementation support staff to cover critical portfolios in the region. Financing Envelope and Program 66. The CPS integrates IDA financing, donor trust funds and co-financing, and IFC investments (Table 2). Financing will be deployed in a flexible and selective manner to address the country's needs and maximize development impact. The CPS period spans two IDA replenishment periods (IDA16 covering FY12-14, and IDA17, covering FY15-17). The indicative IDA16 allocation is SDR13.5 million for three years, and the CPS assumes a similar allocation for IDA1720. In addition, there is scope for Solomon Islands to access additional resources from the IDA regional program to finance eligible regional investments with cross country spillovers such as the Pacific Regional Oceanscape Program (PROP), and potentially programs in maritime safety, aviation or 20 The estimate of the IDA envelope is based on available resource from the IDA16 replenishment, and it is updated annually and may vary depending on: (i) total IDA resources available and the IDA 17 allocation framework; (ii) the country's performance rating, GNI per capita, and population; (iii) the terms of IDA assistance (grants/credits); (iv) the performance, other allocation parameters, and IDA assistance terms for other IDA borrowers; and (v) the number of IDA-eligible countries. 28 disaster resiliency following up on the PCRAFI pilot. The latest debt sustainability analysis in 2012 indicates that Solomon Islands has a moderate risk of debt distress. This has enabled Solomon Islands to move from being eligible for IDA grants only to a mixture of grants and credits with the current IDA allocation being approximately 45 percent grant and 55 percent credit21. The Bank will work with the authorities to fully explore the flexibility in IDA financing, including using the Immediate Response Mechanism that allows the inclusion of emergency related contingent components in selected investment operations, to support rapid response in eligible crisis and emergency situations when needed. Furthermore, in case of severe economic shocks and natural disasters, Solomon Islands could potentially access the IDA Crisis Response Window.22 Finally, other financing sources, including trust funds, partnerships with other donors and the private sector, or government inputs are highly anticipated across the portfolio and will be firmed up during project preparation throughout the CPS period. Table 2: Tentative World Bank Group Pipeline in Solomon Islands, March 201323 Activity Year IDA ($m) TF ($m) TF Source Proposed Additional Financin1 Rural Development Program (RDP) FY14 3.5 5.0 Australia, SIG Rapid Employment Program (REP) FY14 1.5 Australia Increasing Resilience to Climate Change FY14 8.4 GEF/GFDRR and Natural Hazards Project (CRISP) Sustainable Energy FY14 1.9 Australia, GEF Pipeline Development Policy Operation FY14 2.0 Community Officers (CO) FY14 1.0 AusAID Mining Sector Support Phase 11 FY14 4.0 Pacific Regional Oceanscape Program FY15 1.0 (PROP) Rural Development Program il FY15 4.0 Telecoms and ICT Development FY15 3.0 Tina Hydro Partial Risk Guarantee FY15 4.0 Rapid Employment Project 11 FY16 3.0 Sustainable Energy 11 FY16 2.0 Total 26.5 17.8 IFC Investments IFC SolTuna FY13 10.0 67. IFC is expanding its areas of work in the Solomon Islands. Building on IFC's lessons learned over the last five years in the Pacific region (specifically in PNG and Timor-Leste), IFC is scaling up its presence and activities in Solomon Islands to explore opportunities beyond fisheries, 21 IDA's terms of assistance (grant or credit) is based on a recipient country's debt sustainability position, and these terms are updated annually based on the latest Debt Sustainability Analysis. Currently, IDA credits have a zero interest rate, a 10 year grace period, and a 40 year maturity. 22 For details of the eligibility criteria, see Annex 3 of IDA (2011) "Additions to IDA Resources: Sixteenth Replenishment," available at http://siteresources.worldbank.org/IDA/Resources/IDA16_Report-English-Final.pdf. 23 Potential activities, particularly in outer CPS years are tentative and subject to change. Activities in the IDA 17 period will be further defined in the CPS progress report in the latter part of FY15. 29 including in the agribusiness commodity value chains (e.g. cocoa and possibly palm oil). IFC will closely follow the developments in the mining sector (e.g. Sumitomo nickel project), as well as the major infrastructure investments, such as the Tina River Hydro project. The IFC value proposition is greatly enhanced by the Bank Group leverage and there are opportunities to enhance this further across potential growth opportunities in Solomon Islands. In addition, analytical work and technical assistance will improve transparency and public sector capacity in the investment approvals process, along with expanded access to finance through better financial infrastructure (credit bureaus and payment systems) and a strong focus on local SME development (mobile banking and local supply chains). IFC will also engage existing private sector partners and relationships in other countries across the Pacific to identify their business interests and risk appetite for entering the market or expanding into new markets in Solomon Islands. 68. A selective but strategic program of analytical work and dialogue is proposed in sectors where the WBG has global expertise. Given both the staffing constraints and the approach of the CPS, it is essential that analytic support be prioritized in those sectors where the demand from government is clear, and where significant existing or new investments, financed by IDA or others, potentially exist. An indicative analytical and advisory program is set out in Table 3 below. Over the course of the CPS, the Bank will increasingly move to programmatic analytical pieces, providing just in time policy notes and technical guidance in key thematic areas. Table 3: Proposed World Bank Analytical and Advisory Services Economic Resilience Economic Dialogue and Core Economic Working Group Ongoing Agriculture commodity scoping and options FY14 EITI Implementation technical assistance FY14-15 Tina Hydro Benefit Sharing FY14 Women in Mining and Fishing TA FY14-15 Urban Land Governance TA FY14-15 Service Delivery Justice Delivered Locally Report and Policy Note FY14 Rural Community Infrastructure and Service Delivery Report and TA FY14 Solomon Islands Line Ministry Expenditure Analysis FY14 Health Facility Costing Study FY14 Health Sector PFM TA FY14-15 Portfolio Gender Review FY15 Social protection options FY15 Household Income and Expenditure Analysis and poverty mapping FY14-15 V. RISKS AND MITIGATION MEASURES 69. Risks to the effective implementation of a growing World Bank portfolio and deepened policy dialogue in the Solomon Islands are significant, and will be addressed in the CPS systematically. Risks entail both country risks - including the possibility of a resurgence in unrest, political volatility and the combination of thin capacity and vulnerability to external macro-economic uncertainty or disasters - as well as implementation risks, especially for those activities that involve sensitive reforms and complex social and economic issues. 70. Risks of a resurgence in unrest have declined over the past few years, but remain present. The transition of RAMSI reflects a broader judgment by key partners that risks of instability have fallen, although a continuing RAMSI police presence will remain. Risks to security are posed by 30 continuing inter-island migration, the breakdown of social systems, and significant numbers of unemployed and under-educated youth in urban areas. Poor service delivery particularly in rural areas, demographic changes, and perceptions about benefit sharing from resources potentially heighten these risks. The WBG will work carefully with government and partners to mitigate risks. Additional financing proposed for the RDP and REP investments are intended to address underlying inequalities. Similarly, the J4P program is principally aimed at better understanding these risks, and providing guidance for how grievances might be addressed. The Bank will engage as requested in areas that contribute to this risk, including in the area of urban land governance and gender. In the event that these risks re-emerge, the program is likely to have to be re-balanced to further strengthen the focus on directly improving livelihoods. 71. The fluid political situation in Solomon Islands means that there are risks to reform progress during the course of the CPS period. The CPS period will cover at least one election in Solomon Islands, and experience suggests that governments can often change between elections. Risks associated with political volatility are likely to especially impact on sensitive reforms underpinned by budget support, as well as socially and environmentally complex operations such as the proposed Tina River Hydro scheme. In the event that policy performance mean reform objectives are unlikely to be met, the WBG would potentially step back from budget support modalities or complex and sensitive investments - potentially with some reduction in the resources the Bank could make available for Solomon Islands - and rebalance engagement to core service delivery investments. 72. Political economy risks are compounded by thin capacity. Capacity constraints can impact on performance, even when there is strong political will for reform. Although the current portfolio is performing reasonably well, achieving outcomes from Bank investments in Solomon Islands has historically been challenging. Capacity constraints will be mitigated by efforts to carefully calibrate engagement according to existing capacity and, the provision of extensive capacity building as part of investments, and strong portfolio oversight. Nevertheless, continued engagement by the Bank and partners over the past several years on the overall reform dialogue, as well as in energy sector reform, does provide a firm basis for making a considered judgment in the CPS to pursue a limited set of such "high risk - high reward" activities in areas where there has been good experience to date. 73. Implementation risks will be managed at both the program design level and through focused activity design and enhanced implementation support. Thin capacity and broader uncertainty means implementation risks in Solomon Islands remain high. The current program is generally performing well, with 3 out of 4 investments rated satisfactory. Portfolio performance since re-engagement in the mid-2000s has similarly been reasonable, in part due to the stronger on the ground presence from a country office, with IEG confirming the single project exit in the past five years as satisfactory. Nevertheless, portfolio performance during the 1980s and 1990s highlights risks, with over half of all exits in this period rated U by IEG (as outlined in Annex B2). As noted above, these risks will be mitigated at the program design level by a focus on continuing engagement in areas in which the WBG has a strong track record, with a limited number of carefully selected "high risk-high reward" areas. At the activity level, investments will be designed with a tight focus, avoiding complex designs and "Christmas trees". Implementation support will also be further enhanced. The WBG already has a significant on the ground presence in Honiara, which has expanded considerably since 2009, and this will allow strengthened day to day engagement on implementation issues. A willingness to restructure activities if needed will also allow flexibility. Intensive supervision and training to meet Bank fiduciary and procurement standards will also be undertaken, alongside broader policy engagement through the DPO series to improve public financial management and Solomon Islands' procurement system. 31 74. Macroeconomic volatility and risks of exogenous shocks are inherent in a small, fragile, isolated, geographically dispersed, and largely subsistence economy. In recent years, the Pacific Islands have been subject to a range of exogenous shocks, being especially hard hit by fuel price spikes, as well as weather and seismic events. Risks of shocks to macroeconomic stability are mitigated by evidence of government commitment and action in building up external and internal buffers as part of the dialogue with the IMF, the World Bank and the multi donor budget support group over the last three years. During the CPS period, the Bank will continue to monitor the impact of global economic developments. Over the past few years, the Bank has been able to move quickly in collaboration with partners to provide assistance to support governments with strong policy settings faced with macro-economic volatility. Similarly, across the Pacific, the Bank has worked with the IMF to closely monitor debt sustainability in the event of shocks, and calibrate terms if required and justified. While catastrophic damage from cyclones has been more limited than in most other Pacific Island countries (since the destruction wrought by Tropical Cyclone Namu in 1986, which killed over 100 people) regular cyclones and flooding undermine development gains, particularly at the household level where they repeatedly affect the most vulnerable groups - the poor, the elderly, people living with disabilities, female headed households, and those without land entitlements. Increased support, as part of the CPS, for climate change adaptation and disaster risk reduction in Solomon Islands, as well as the introduction in 2013 of a pilot catastrophic risk insurance scheme for five Pacific island member countries, including Solomon Islands, will help to mitigate, although not remove, these risks. 32 Annex 1: Solomon Islands Results Matrix (G) = Gender-disaggregated data National Development Strategy Objectives NDS 1: To alleviate poverty and provide greater benefits and opportunities to improve the lives of Solomon Islanders in a Peaceful and Stable Society NDS 2: To provide support to the vulnerable NDS 3: To ensure that all Solomon Islanders have access to quality health care and to combat malaria, HIV, non-communicable and other diseases NDS 4: To ensure that all Solomon Islanders have access to quality education and for the country to adequately and sustainably meet its manpower needs NDS 5: To increase the rate of economic growth and equitably distribute the benefits of employment and higher incomes across all the provinces and people of Solomon Islands NDS 6: To build and upgrade physical infrastructure and utilities to ensure that all Solomon Islanders have access to essential services and to markets NDS 7: To effectively manage and protect the environment and eco systems and protect Solomon Islanders from natural disasters NDS 8: To improve governance and order at national, provincial and community levels and strengthen links between them. Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 - FY17) International Partners Strategic Area 1: Strengthening Economic Resilience Macro-fiscal stability and Weak macro-economic Outcome 1: Strengthened CEWG sustains Govt- Operations: DPO (P126740) quality of spending management and pro public expenditure and fiscal donor dialogue on cyclical spending has management as indicated by: economic and PFM AAA: CEWG dialogue, contributed to fiscal gap The number of ministries reforms linked to budget economic monitoring, Line and deteriorating balance that do not deviate by support. Ministry Expenditure (NDS 5, NDS 8) of payments. more than 10% from Line ministry Analysis, Health Sector * Poor link between original allocations expenditure analysis Support Program TA appropriation/allocation approved by Parliament. completed for at least 2 and outputs (Baseline is 9 target is additional ministries Donor Partners: IMF, 14). (from 2 current) AusAID, New Zealand, EU Economic Diversification * Over dependence upon Outcome 2: Enhanced 0 First EITI report Operations. for job growth limited non-renewable regulatory framework, public produced by May IFC investment in SolTuna resources; sector capacity and 2014 Pacific Regional Oceanscape (NDS 5) * Poor returns to govt and community benefits in the Establishment and Program (PROP) (FY14) new weak community mining sector initial staffing of a Mining TA second phase engagement in natural EITI certification achieved Mining (FY14) Development 33 Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 - FY17) International Partners resource developments;. (baseline is candidate Authority AAA: IFC Public-Private * Semi-subsistence status, target is Regulations that Dialogue, Women in fisheries agriculture provides the certification) require Community and Mining, food and income basis for * Updated mineral dev., law Development Agriculture sector scoping most of the population. and regulations in place Agreements with (baseline - outdated law, indigenous Donor and Private Sector title management, fiscal landowner Partners: SolTuna/Tri- regime and landowner marine, AusAid, IFAD, State engagement mechanisms) and Peace-building Fund Outcome 3: Increase local . SolTuna employees economic benefits from increase from 1,473 fishing industry by increased to 2,000, 65% of on-shore production capacity which are women * SolTuna processing plant (G) from 7,223 to 20,465 * Data collection on metric tons per year economic * SolTuna taxes paid opportunities for increase from $0 to women in fisheries US$2.1 million per year (G) * SolTuna wages and benefits paid increase from US$3.3 million to US$6.2 million (G) Outcome 4: Increased productivity in key cash crops Agriculture (cocoa and coconut). extension services * Increased cocoa for cash crops production from 6,000 to provided by 8,000 metric tons/ year Ministry of 34 Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 - FY17) International Partners * A 20% increase in the Agriculture and number of households Livestock increased who have received and from 7800 to 10,000 found agriculture advice farmers, 40% of useful (baseline is 0, which are women impact evaluation will (G) measure response to * Agriculture advice provided) extension services * 30% increase in total for food crops value of turnover of (58) increased from 8100 RDP-supported rural to 10,000 farmers, businesses moving from 60% of which are women (G) Improving infrastructure Low rates of access to and Outcome 5: Lower cost, 9 SIEA system losses Operations: and lowering costs high costs of more reliable electricity, from reduced from around 20% Solomon Islands Sustainable telecommunications, and cleaner energy sources to 12% Energy and Additional electricity. 9 Average outage for each 9 Electricity tariffs reviewed Financing *customer served on the in FY 14 and new tariffs (SISEP - P 1003 11) (NDS 6) * Engagement between Honiara grid reduced from implemented by FY15. (AF SISEP - P120781) public and private sectors 10 to 3 hour 9 Construction begins on Tina River Hydropower does not effectively * Maintain or reduce Tina River Hydropower Development Project and address constraints to domestic tariffs generation facility PRG (113417) and (P114317) developments. (US85c/kwh). (FY15) m Power Purchase IFC Transaction Advisory for Agreement signed between Tina River Hydro Project hydropower developer and SIEA Telecommunications and ICT Development Project ongoing Outcome 6: Improved access * New ICT policy and new to and reduced cost of ICT framework formulated services and adopted Donor Partners: Pacific Increase in mobile Independent Regional Infrastructure penetration from 55% to telecommunications Facility Trust Fund (PRIF), 80% of population regulator maintained and AusAid 35 Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 - FY17) International Partners * Decrease in tariffs for financed local mobile calls, calls to Australia and 128kpbs internet access (baseline Feb. 2010 tariffs TBD) Outcome 7.Strengthen the * E-Government business climate through: .regulatory framework * Implementation of developed additional 3 (from * Public - private baseline of 5) doing Dialogue platform with business regulatory Dept. of Commerce reforms, constituted Strengthen resilience to Climate change and Outcome 8: Improved 18 Resilient Community- Operation: Increasing impact of natural hazards disaster risks have serious resilience of rural Led Rural Pilot Resilience to Climate Change and climate change impact on economy and communities to climate Investment projects and Natural Hazards Project livelihoods change, natural hazards and completed (G) (CRISP-P129375) (NDS 7) catastrophic disasters * Establishment of a a DDRCCA incorporated climate and disaster risk AAA: Pacific Catastrophe into national and information system (G) Risk Assessment and provincial planning in at Financing Initiative least two provinces (PCRAFI) (baseline is 0) i Budget and financial Donor Partners: regulations accommodate Japan (PHRD); Global disaster risk provisions Environment Fund (GEF); (baseline is 0). GFDRR Strategic Area 2: Improving Public Service Provision Improved targeting and Budget allocations and Outcome 9. Improved * Results of HIES, HIES AAA: CEWG Dialogue, management of government processes within line expenditure management and poverty profile, line HIES Technical Assistance, resources, ministries not supporting poverty focus in key sectors, ministry expenditure jPoverty Mapping and Poverty sectoral priorities, including health and analysis, and health Profile, Line Ministry 36 Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals YInternational Partners (NDS 3, NDS 4, NDS 8) * Outdated poverty data upon education. sector financing analysis Expenditure Analysis, Health which to base policy fed into government Sector Support Program TA, decisions * Number of budget policy and budget Education Programmatic TA * No systematic budget submissions and ministry planning processes. (TBC) process for planning, expenditure reports that execution, and reporting in use new data analysis key ministries, tools (baseline is 0, target is 3) Improve access to services Provincial governments Outcome 10: Capacity for 0 300,000 beneficiaries Operations: Solomon Islands and living conditions in lack sufficient resources collective action and increased (50% women) of Rural Development Program rural areas and capacity to respond to access to services for rural completed community and Additional Financing community service delivery communities, development sub- (RDP - P089297) needs * Community infrastructure At least a 10% reduction projects (RDP - FY1) (NDS 1, NDS 5) provided by external completed in all rural Donor Partners: agencies is often poorly rural services such as: maintained by communities Pre-primary and primary wrdsiece i btraia und EU, * Geography makes it school, non-water supply Price difficult to provide services health service, and water ( Ptio popent to large parts of the supply (G) incorporated into d T F Ce l country, and for those At least a 5% increase in provincial planning areas, the cost is high capacity for collective system in 5 provinces action coAt least a 5% increase in pre-primary and primary school attendance (G) * At least a 10% increase in participation in community decision- making on projects (G) Increase employment * Limitations in the formal Outcome 11: Increased At least 5,000 Operations: Rapid opportunities for the urban labor market; access to employment beneficiaries reached, Employment Project poor, especially youth and - Disconnects between skills opportunities for urban averaging at least 30 (REP - P 114987) outcomes from education population days of employment per (REP - AF - FY14) and labor market needs in year. (G) (REP At -FY1 5) 37 Medium-term Key Issues CAS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 - FY17) International Partners women. both the formal and * At least 300,000 informal economy additional labor days AAA. Youth diagnostic (NDS 1, NDS 2, NDS 5) Urban poor, especially completed (in addition to Social protection note youth and women, are 324,000 completed by J4P conflict risks and dispute disconnected from the 2012); 50% of management in urban areas. economy and society. beneficiaries are women, 33% youth. (G) Donor Partners: Pacific Regional Infrastructure Facility Trust Fund (PRIF), State and Peace Building Fund (SPBF) Improved responsiveness of * Weak state and non state Outcome 12: Government 0 Operations. Community law and justice, and dispute resolution and support for establishment of 0 Officers (CO) program, protection of women conflict management functioning local justice 0 Improving Services for capabilities. mechanisms. 0 Victims of Gender Based and * Unresolved grievances 9 Support for community 9 Community officer pilot Domestic Violence potentially manifesting officers reflected in established in 4 provinces. (P143772) (NDS 1, NDS 2, NDS 8) as conflict, provincial government * Limited capacity across budget (baseline is 0). AAA: Justice Delivered service providers to Locally (JDL) further work address GBV/DV. Outcome 13: Enhanced GBV Service gaps on sources of conflict and access to services for identified, agreed and grievance, dispute resolution survivors of GBV communicated across and conflict management c Pilot delivery modality relevant agencies and at capabilities completed and scaled up least one pilot delivery (baseline and targets TBD modality underway. Donor Partners: AusAID, based on GBV service gap Institutional Development analysis - see milestone) Fund (IDF) 38 Annex 2: Outcomes and Lessons Learned from the 2010 Solomon Islands ISN 1. As the World Bank Group's 2010 strategy was specifically designed as an interim strategy rather than a full country partnership strategy, a full completion report was neither required nor prepared. Nevertheless, outcomes and lessons learned during the ISN period have been carefully reviewed in preparing the current Solomon Islands CPS. ISN Engagement 2. The ISN highlighted three areas of strategic engagement for the World Bank Group: (iv) Addressing barriers to growth; (v) Enhancing the benefits of global and regional integration; and (vi) Supporting improved public administration and management. 3. World Bank Group engagement in Solomon Islands has been highly selective, combining strategic use of relatively modest IDA resources with trust funds and with IFC investments. The current portfolio includes activities with a total of around $20 million in IDA commitments, mobilizing almost $36 million in trust fund resources which have been fully integrated into all aspects of strategy, planning, portfolio management, and results measurement. In addition, IFC investments have totaled $35 million. World Bank Group Portfolio in Solomon Islands as at March 2013 Activity Year IDA TF TF Source ($m) ($m) Approved Prior to ISN Rural Development Program (RDP) FY08 3.2 5.9 Australia, EU Health Sector Support TA24 FY08 1.5 Sustainable Energy FY08 4.0 Tina River Hydropower TA FY10 3.5 Australia (PRIF)25 Mining Sector TA FY10 0.8 SPF Rapid Employment Project FY10 3.2 3.8 Australia, SPF Telecoms and ICT Development FY10 3.3 4.2 Australia (PRIF) RDP Additional Financing FY11 3.0 14.6 IFAD, GFRP Development Policy Operation FY12 2.0 Increasing Resilience to Climate Change and Natural Hazards Project (CRISP) FY13 2.7 Japan (PHRD) Total 20.2 35.5 IFC Investments IFC Goldridge Mining Ltd FY10 35.026 24 Project closed in December 2011 25 Australian trust fund financing provided through the Pacific Regional Infrastructure Facility (PRIF) 26 Repaid in 2012. 39 4. Investments were supported by carefully focused technical assistance and analytical work, as set out below. Bank analytical work has not only provided advice to government and a basis for reform dialogue but also, in the absence of local universities or think tanks, contributed to better informed and increased public debate on economic issues. World Bank Group Analytical and Advisory Work 2010 - 2013 Addressing Barriers to Growth Core Economic Working Group Dialogue Solomon Islands Growth Prospects, Constraints and Policy Options IFC Regulatory Simplification and Investment Policy Promotion (RSIPP) TA IFC Access to Finance and Payment Systems Reform IFC Gender and Investment Climate Reform Assessment IFC MSME Enterprise Study IFC Tourism Impediments Diagnostic Study Extractive Industries Transparency Initiative Implementation TA Tina River Hydropower benefits Sharing Analysis Enhancing the Benefits of Global and Regional Integration Labor Mobility TA (Pacific Wide) Fisheries Engagement Strategy/ Pacific Regional Oceans Initiative (Pacific Wide) IFC Strategic Community Investment Analysis - Gold Ridge Mining Ltd. IFC Telecom Impact Study Supporting Improved Public Administration and Management Household Income and Expenditure Survey (HIES) Public Expenditure Review Line Ministry Expenditure Analysis Rural Community Infrastructure and Service Delivery Analysis Health Financing Options Note Justice Delivered Locally (JDL) Gender Institutional Development Health Sector Public Financial Management Technical Assistance 5. Key lessons learned from World Bank Group engagement during the ISN period include: * Playing to the Bank's strengths. By being selective and choosing not to be engaged in certain sectors, the Bank was able to address key issues, especially given the thin capacity in Solomon Islands. This was particularly important in a donor-rich context, where funds are not necessarily the main limitation. In such a context, the Bank Group was able to add value by focusing on core institutional strengths, including technical know-how (economy and finance, extractive industries, telecommunications), and extensive operational experience (community-driven development, energy, telecommunications). * Given the central role the Bank has played in improved coordination and dialogue, Bank in-country presence and engagement was important. An "on the ground presence" was vital to support the scaling up of financing and analytical engagement, deepen coordination, ensure successful project implementation, and engage in policy dialogue. Investing in donor coordination at the project level from the outset is also important, and allows for trouble- shooting and creates ownership and relationships that facilitate follow-on investments. 40 * "Face time" with clients and donors is expensive but essential. Successful engagement with clients in Solomon Islands, as in other fragile contexts, is time-consuming, labor- intensive and relationship based. Prioritizing implementation support builds capacity, provides incentives to clients, and creates a platform for problem solving. This means that staff costs are disproportionate to program size and population. * Communication is vital. National institutions and counterparts have limited experience of effective institutional communication. Communication needs to be included in project design, continually monitored and supported by the Bank. Similarly, experience shows the importance of developing succinct, clear messages from technical work for use by all parties in the context of reform dialogue, particularly in the very small setting with significant informal contact. * Project management units have helped achieve results although there are risks in hollowing out government capacity. In a small civil service in which key individuals have multiple roles, depending on ministry staff alone to implement is not pragmatic. Leadership and continuity is central to successful project implementation. In the Solomon Islands context, however, political fluidity and rapid turnover in senior official appointments means the Bank needs to plan for unexpected changes. Regular fiduciary training has helped strengthen national capacity. Efforts should be made to reinvent and alter these trainings, as well as introducing other innovations in implementation support. * The success of community focused projects depends on the quality of the relationship with the community. A generic feature of small traditional societies as in Solomon Islands is that property rights, individual and community entitlements need to be understood in their localized context shaped by customary laws and practices and community specific perceptions. This requires intense, continuous and a specific type of engagement. If the community does not support or understand the project, it will not move forward. At the same time, interventions that do not have high levels of local ownership may lead to conflicts and tensions. * Private sector investments must address challenges of inclusive growth and integration with the local economy. Private investments, and in particular foreign direct investment, is generally viewed with suspicion by local communities, where the legacy of logging has translated into the capturing of natural resources without any meaningful benefits flowing to the broader population New investments (and in particular those related to natural resources) must carefully take into consideration strategies to engage with local communities and landowner groups, the fragility of the State to manage and mediate between the various interest groups, and a general lack of understanding of how the private sector operates. 6. Despite the risks associated with a significant scale up in a fragile situation, the portfolio is generally performing satisfactorily, and is achieving results. Especially given country environment risk flags, difficulties in obtaining audits across the portfolio due to limited capacity, and effectiveness delays, three out of four current IDA investments are classified as being at risk. Of these, only the RDP is considered a problem project, with community projects projected to benefit 165,000 people by the planned closing date in late 2013, rather than the 300,000 originally anticipated. Disbursements remain strong across the portfolio with a current disbursement ratio of 27%. Details of performance against the ISN results matrix is provided in the outcomes table below; of 13 expected ISN outcomes, 8 have been achieved, 4 partly achieved, and only 1 not achieved. 41 Medium Term ISN Expected ISN Expected Lending/Non-Lending Status and Evaluation Summary t GActivities Intended to Country Goals Outcomes { Milestones contribute to outcome Strategic Area I: Addressing Barriers to Growth Government includes Sources of Growth AAA/TA: Sources of Partly Achieved Improved policy and policy measures to identifies binding Growth, PER, J4P, IFC 9 Growth performance averaged over 7% regulatory address constraints to constraints to inform Advisory Services between 2010 and 2012, although based on environment leading growth in next national Government's policy (RSIPP, SME study) commodities. to increased private strategy agenda and dialogue TA: Mining TA 9 Policy changes included in NDS but uneven. sector growth with public, private Operations: IFC * Between 20 10 and 2012, SIG funded sector, and donors investments development expenditures more than doubled.) Increase in women AAA: Women and Achieved entrepreneurs Sources of Growth 9 The number of female owned businesses has IFC: Gender and increased from about 130 to over 180 between Investment Climate 2012 and 2013 Reform Assessment. Improved Doing Reforms implemented IFC: RSIPP, Tourism Achieved Business indicators for: starting a business; impediments Improved access to credit (Doing Business Alternative Dispute diagnostic study 20 10). Reforms included: (i) a unified credit Resolution for registry established, (ii) expanded range of commercial disputes; assets able to be used as collateral, and (iii) out promoting investment; of court enforcement of creditors rights. registering property A Doing Business 2012 listed Solomon Islands transactions as one of the leading reformers globally, strengthening protection for investors and streamlining insolvency. Solomon Islands improved its Ease of Doing Business Rank from 113 to 92 for the period of 2010-2012. The implementation of the 2009 Companies Act and the establishment in 2011 of an online company registry has reduced the time required to register a company from over 50 days in 2009 to 9 days. 42 Fiscal Stability Key 2010 - 2011 actions * Public expenditure AAA: PER, Debt Achieved in GoSI PFM reform review completed Management * Government maintained a positive overall budget plan completed (budget * CEWG sustains GoSI- Assessment, Line balance between 2009 and 2012, although system, forecasting, donor dialogue on Ministry Expenditure significant fiscal consolidation in 2011 was procurement) economic and PFM Analysis relaxed in 2012. reforms linked to * Overall NPV of external public debt reduced from budget support Operations: DPO 23% of GDP in 2009 to a projected 13% in 2012. * 950% of reform actions under EFRP progressing (5200 accomplished). * Improved consultation between MoF and line ministries, based on WB analysis. Improved cash flow * Public expenditure AAA: PER, Debt Achieved management such that review completed Management * Budget formulation now linked to expenditure GoSI consistently able to * CEWG sustains GoSI- outcomes from previous years. 2010, 2011, 2012 meet commitments donor dialogue on Operations: DPO budgets fully funded. economic and PFM * Payroll execution strengthened through separate reforms linked to accounting warrants for each ministry, introduced budget support in April 2011, with the number of ministries over- spending on payroll declining from 24 to 18 Community Service Obligation policy for SOEs adopted in 2011, with explicit budget allocation of SBD 24m Publication of all contracts awarded by Central Tender Board, including name of bidder and amount of bid. 50%* mobile phone 9 Telecommunications AAA: Energy Strategy Achieved Improving coverage commissioner Second telecoms license awarded. infrastructure and appointed Operations: Telecom Telecoms commissioner appointed. lowering costs Reform * Mobile phone coverage increased from 50,000 people in 2008 to over 300,000 Tina River Independent * SIEA moves from loss- AAA: Energy Strategy Outcome Not Achieved, Milestone Met Power Producer making to break even * Financial performance of SIEA has improved. mobilized Operations: SISEP, From a loss of SBD70m in 20 10, SIEA made an * WBG TA for SEFP, TRHDP, IFC Tina audited profit of SBD53m in 2012, exceeding development of rural River Transaction project targets of a profit of SBD 25m by 2012. electrification strategy Advice * Steps to mobilize an IPP for Tina River are proceeding, although estimated conclusion not ____________________________________ _____________________________________ before FY15. 43 Strategic Area II: Enhancing Benefits of Regional and Global Integration New socially and 9 IFC investment AAA: Labor Migration Achieved Strengthening regional environmentally transaction (s) advice, 9 IFC investment in Goldridge Mining Ltd. ties and optimizing responsible investor(s) 9 WBG TA supports Operations: IFC supported the reopening of the mine in March benefits from trade, enter market establishment of PNA investment 2011, consistent with IFC's Environmental and investment, and labor secretariat Social Performance Standards. migration * Substantial increase in mining output (mining exports increased from 0.5% GDP in 2010 to 14% in 2012. * Over 600 jobs created directly from Goldridge i New environmentally and socially responsible investors attracted: - Fisheries: TniMarine International taking over the Soltai tuna cannery and National Fisheries Development (NFD) operations. - Palm Oil: New Britain Palm Oil /Guadalcanal Plains Palm Oil Ltd (GPPOL) achieved RSPO sustainable palm oil certified status in 2010. - Plantation Forestry: Nien Made Enterprises, FSC (Forest Stewardship Council) certified. Mining sector policy, SWBG mobilizes TA: Mining Sector Achieved regulatory, and mining sector TA Solomon Islands accepted as EITI candidate in institutional review June 2012, and is disclosing revenues from completed extractive industries as required Mimng TA supported participatory stakeholder engagement process to inform policy decisions and strengthen MMERE Solomon Islands participation in Australian Seasonal Workers scheme started in December 2012. Participation in NZ RSE scheme increased to 400 people in 2012. * Solomon Islands complying with hard limits under Vessel Day scheme, closing tuna fishery temporarily in 2011 when VDS days used. 44 Strategic Area III: Supporting Improved Public Administration and Management Improved expenditure New National Health AAA: NEAP Costing, Partly achieved management in health Strategic Plan and Education PER, Health * Under the HSSP-TA the proportion of health Effective delivery of and education Monitoring Financing Options Study sector expenditure on primary health services core services Framework, and and provincial health programs has increased Health MTEF TA: HSSP-TA, from 17% (estimated base at appraisal) to 29% completed Operations: RDP for FY 11 (target 22) NEAP Costing Component I & 11, Fast *Health costing study initially planned was complete Track Initiative delayed, although now underway, and will inform budget preparation and execution for delivery of essential health services. Improved systems and Provincial agriculture Operations: RDP Partly Achieved infrastructure for offices equipped to Component I & 11, * The Ministry of Agriculture and Livestock has delivery of some conduct training and upgraded equipment, buildings, and human agricultural extension outreach activities resources, and is delivering on monthly services activity plans in each province. * Increase in proportion of villagers with improved access to effective agriculture services from 2009 baseline of 2% will need to be confirmed through surveys. * RDP likely to directly benefit 165,000 people rather than the 300,000 originally planned. Addressing urban Increased state capacity 40,000 labor days Operations: Rapid Achieved unemployment to address urban created, gender Employment Program * 324,000 person days of work generated unemployment thCough disaggregated through REP as at March 2013. Women make public works up 5 7% of participants, youth 51 % * Approximately 5,000 trainees graduated from Pre-Employment Training Improved sub-national Policy options for local * Justice Delivered AAA/TA: J4P Justice Partly Achieved governance level justice services Locally research Delivery Locally, PER, * Rolling research and analytical activities submitted to Ministry of delivered Center-Sub-National undertaken on local justice and policy options. Justice and Legal Affairs * AAA delineates Options Paper, State Dialogue with the Ministry of Justice and options and Land Inventory Legal Affairs, judiciary and other ministries, consultation process on led to a pilot activity on a local level sub-national governance mechanisms (community officers). governance Task Force on Urban Public Land established. 45 Annex 3: Standard CAS Annexes Standard CAS Annex A2: Country At A Glance Solomon Islands at a glance 3s51 East Lower Keg Development Indicators Solomon Asia & middle Islands Pacific income Age distribution, 2011 Mile Femrale Population, mid-year (millions) 0.55 1,974 2,533 7E-B Surface area (thousand sq. km) 29 16.302 20.842 Population growth (%) 2.6 0.7 1.6 Urban population (% oF total population) 20 49 39 49 GNI (Atlas method. US$ billions) 0.6 8.387 4.488 GNI per capita (Atlas method. US$3 1.110 4,248 1,772 GNI per capita (PPP, international $3 2,350 7,266 3,837 4 4 4, , 1D El 0 S 10 GDP growth (%] 9.0 8.3 5.5 N ob: p*L5 GDP per capita growth (%) 6.2 7.6 3.9 (smost naeenf e-tAniale. 2MW~-2e1g Poverty headcount ratio at $1.25 a day (PPP,%) .. 14 30.2 Under-5mortality rate (perl,000) Poverty headcount ratio at $2.00 a day (PPP,%) .. 33 59.5 Life eHpectancy at birth (years) 68 72 66 Infant mortality (per 1,000 live births) 18 17 46 Eo Child malnutrition (% of children under 5) 12 5 24 so 40- Adult literacy, male (Y of ages 15 and older) .. 96 80 Adult literacye , female ( % of ages 15 and older) 91 62 Gross primary enrollment. male (% of age group) 146 110 106 0 Gross primary enrollment, Female (%~ of age group] 144 112 102 10 Access to an improved water source (% of population) 70 90 87 S 1ss ine ni Access to improved sanitation facilities (% of population) 32 66 47 ctolerr. isat c as Aia & adk Net Aid Flows 1980 1990 2000 2011 Net ODA and official aid 45 46 68 340 Growth of GDP and GDP per capita (%) Australia 6 11 13 254 is New Zealand 1 2 5 25 10 European Union Institutions 9 6 44 25 - 0 . Aid (% of GNI) 41.3 22.0 15.7 61.4 . Aid per capita (US$ 194 148 167 633 -0 -is Long-Term Economic Trends -oa es6 Consumer prices (annual %. change] 13.1 8.7 7.1 6.2 GDP implicit deflator (annual %. change] .. 12 10.7 7.3 - -GDP -GEPper cept Exchange rate (annual average, local per US$) 0.8 2.5 5.1 7.6 Terms of trade indeH (2000 = 100) .. .. 100 1980-90 1990-2000 2000-11 Population. mid-year (millions) 0.2 0.3 0.4 0.6 3.0 2.8 2.7 GDP (US$ millions) 169 303 435 838 3.4 4.9 Agriculture .. 28.9 34.7 JRS .. 3.1 RJ Industry .. 5.0 12.7 RI .. 5.3 aP Manufacturing .. 2.4 8.0 S .. 2.8 -49 Services .. 66.1 52.6 !5 .. 3.9 JRg Household final consumption eHpenditure 89.3 81.9 General gov't final consumption expenditure 25.2 39.2 Gross capital formation 25.1 20.3 6.6 14.6 Exports of goods and services 36.9 30.1 24.1 25.8 Imports of goods and services 79.3 64.7 38.6 49.6 Gross savings Note: Figures in italics are for years other than those specified. ..indicates data are not available. Development Economics, Development Data Group (DECDG). 46 Solomon Islands Balance oF Pagments and Trade 2000 2011 Governance indicators, 2000 and 2011 Total merchandise exports (fob) 65 145 Total merchandise imports (ciF) 98 Vl2 Voker andowunit3fy Net trade in goods and services -18 -199 Current accounr balance -30 -134qua3y as a %~ of GOP -7.0 -23.1 R~f~~S IRulear bw Personal transfers and compensation of employees (receipts) 4 2 ntmercauptim Reserves, including gold /y ./f 25 so 7S Ic Centiral Govelrnment Finance 021 COW erMW3n-C11C) Current revenue (including grants) 13.1 34.7 s Lusence, usnws Jw.Iscva Tax revenue 11.6 24.8 Current expenditure 17.1 27.2 Technologg and InFrastructure 2000 2011 Overall surplusldeficit -5.1 2.5 Paved roads (% of total) 2.4 .. Highest marginal tax rate (%) Fixed line and mobile phone Individual .. .. subscribers (per 100 people) 2 51 Corporate .. .. High technology exports (% of manufactured exports) .. ..S E.ternal Debt and Resource Flows EnVironment Total debt outstanding and disbursed 156 256 Agricultural land (% of land area) 3 3 Total debt service 3 15 Forest area (% of land area) 81.0 78.9 Debt relief (HIPC, MDRI) - - Terrestrial protected areas (% of land area) 0.1 q/ Total debt (% of GDP) 35.9 30.5 Freshwater resources per capita (cu. meters) ..44. 80,939 Total debt service (% of exports) 7.6 7.1 Freshwater withdrawal (% of internal resources) Foreign direct investment (net inflows] 13 146 C02 emissions per capita (mt] 0.40 &qS Portfolio equity (net inflows] 0 0 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) .. Conmposition of total external debt. 2011 Energy use per capita (kg of oil equivalent) .. 129 ERO 0 Eh-st arRD1140 DA, 411 Vorld Bank Group portFolio 2000 2011 IBRO Total debt outstanding and disbursed 0 0 Disbursements 0 0 Principal repayments 0 0 Interest payments 0 0 IDA Total debt outstanding and disbursed 38 40 Disbursements 1 0 Private Sector Development 2000 2011 Total debt service 0 2 Time required to start a business (days) - 42 IFC .:9s:.es Cost to start a business (% of GNI per capita) - 54.5 Total disbursed and outstanding portfolio - 35 Time required to register property (days) - 87 of which IFC own account - 35 Disbursements for IFC own account - 35 Ranked as a major constraint to business 2000 2011 Portfolio sales. prepayments and (% of managers surveyed who agreed) repayments for IFC own account - 0 n.a. n.a. .. .. MIGA Gross exposure - - Stock market capitalization (% of GDP) .. .. New guarantees - - Bank capital to asset ratio (%) .. .. Note: Figures in italics are for years other than those specified. 3115113 .. indicates data are not available. - indicates observation is not applicable. Development Economics. Development Data Group (DECDG). 47 Millennium Development Goals Solomon Islands With selected targets to achieve between 1990 and 2015 (estimate closest to date shown, +/- 2 years) Solomon Islands Goal 1: halve the rates for extreme poverty and malnutrition 1990 1995 2000 2011 Poverty headcount ratio at $1.25 a day (PPP, % of population) .. Poverty headcount ratio at national poverty line (% of population) .. Share of income or consumption to the poorest qunitile (%) .. Prevalence of malnutrition (% of children under 5) 16.3 .. .. 11.5 Goal 2: ensure that children are able to complete primary schooling Primary school enrollment (net, %) .. .. .. 87 Primary completion rate (% of relevant age group) 60 73 Secondary school enrollment (gross, %) 14 18 21 48 Youth literacy rate (% of people ages 15-24) 85 . Goal 3: eliminate gender disparity in education and empower women Ratio of girls to boys in primary and secondary education (%) 84 85 90 96 Women employed in the nonagricultural sector (% of nonagricultural employment) 31. Proportion of seats held by women in national parliament (%) 0 .. 2 0 Goal 4: reduce under-5 mortality by two-thirds Under-5 mortality rate (per 1,000) 42 36 31 22 Infant mortality rate (per 1,000 live births) 34 29 25 18 Measles immunization (proportion of one-year olds immunized, %) 70 68 85 73 Goal 5: reduce maternal mortality by three-fourths Maternal mortality ratio (modeled estimate, per 100,000 live births) 150 120 120 93 Births attended by skilled health staff (% of total) .. 85 85 86 Contraceptive prevalence (% of women ages 15-49) .. 11 7 35 Goal 6: halt and begin to reverse the spread of HIV/AIDS and other major diseases Prevalence of HIV (% of population ages 15-49) Incidence of tuberculosis (per 100,000 people) 312 240 185 103 Tuberculosis case detection rate (%, all forms) 40 41 40 70 Goal 7: halve the proportion of people without sustainable access to basic needs Access to an improved water source (% of population) .. 69 70 70 Access to improved sanitation facilities (% of population) .. 30 31 32 Forest area (% of total land area) 83.0 .. 81.0 78.9 Terrestrial protected areas (% of land area) 0.1 0.1 0.1 0.1 C02 emissions (metric tons per capita) 0.5 0.5 0.4 0.4 GDP per unit of energy use (constant 2005 PPP $ per kg of oil equivalent) 13.6 .. .. 18.0 Goal 8: develop a global partnership for development Telephone mainlines (per 100 people) 1.5 1.8 1.9 1.5 Mobile phone subscribers (per 100 people) 0.0 0.1 0.3 49.8 Internet users (per 100 people) 0.0 0.0 0.5 6.0 Households with a computer (%) Education indicators (%) Measles immunization (% of 1-year ICT indicators (per 100 people) olds) 125 100 60 1 5 4 50 50 30 25 20 0 25 1 2002 a0 2005 2010 01 1990 1995 200 2011 200 2005 2010 --- Primary net enrollment ratio OFixed + moble subscribers ----Rtio ofgids to boysin primary & secondary OSolomon Islamd s DEast Asia & Pacific internet users educationI II II Note: Figures in italics are for years other than those specified. .. indicates data are not available. 3/15/13 Development Economics, Development Data Group (DECDG). 48 Standard CAS Annex B2: Selected Indicators of Bank Portfolio Performance and Management Solomon Islands Selected Indicators* of Bank Portfolio Performance and Management As Of Date 4/30/2013 Indicator 2010 2011 2012 2013 Portfolio Assessment Number of Projects Under Implementation a 5 5 5 4 Average Implementation Period (years) b 1.5 2.5 2.7 4.1 Percent of Problem Projects by Number , 0.0 0.0 20.0 25.0 Percent of Problem Projects by Amount 8, C 0.0 0.0 21.4 37.2 Percent of Projects at Risk by Number a, d 40.0 60.0 80.0 75.0 Percent of Projects at Risk by Amount a, d 36.3 47.9 89.3 80.5 Disbursement Ratio (%) e 14.0 26.2 53.1 33.5 Portfolio Management CPPR during the year (yes/no) Supervsion Resources (total US$) Average Supervsion (US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eval by OED by Number 9 1 Proj Eval by OED by Amt (US$ millions) 45.2 1.3 % of OED Projects Rated U or HU by Number 55.6 0.0 % of OED Projects Rated U or HU by Amt 68.5 0.0 a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress(IP) d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year: Investment projects only. * All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. 49 Standard CAS Annex B5: Poverty and Social Development Indicators Solomon Islands Social Indicators Latest single year Same regionfincome group East Lower- Asia& middle- 1980-85 1990-95 2004-10 Pacific income POPULATION Total population, mid-year (millions) 0.3 0.4 0.5 1,961.6 2,518.7 Growth rate (% annual average for period) 3.2 2.8 2.7 0.7 1.6 Urban population (% of population) 12.4 14.7 18.6 45.9 39.4 Total fertility rate (births per woman) 6.3 5.2 4.2 1.8 2.9 POVERTY (%' of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (USS) .. 91f 1,030 3,696 1,623 Consumer price index (20015=110) 13 43 152 131 140 INCOME(CONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) .. 3.6 5.1 2.2 1.7 Education (% of GDP) 4.5 .. .. 3.8 4.0 Net primary school enrollment rate (% of age group) Total .. .. 82 93 85 Male .. .. 83 93 87 Female .. .. 81 94 83 Access to an improved water source (% of popfatin) Total 69 70 91 87 Urban 94 94 97 93 Rural 65 65 84 83 Immunization rate (% of chHldren ages 12-23 months) Measles .. 68 68 95 W DPT 38 69 79 94 79 Child malnutrition (% under 5years) .. .. 12 6 25 Life expectancy at birth (years) Total 57 60 67 72 65 Male 57 59 66 70 64 Female 58 60 69 74 67 Mortality Infant (per 1,000 live births) 41 32 23 20 50 Under 5 (per l,1:I) 52 39 27 24 69 Adult (15-59) Male (per 1,000 population) 202 157 244 Female (per 1,00: population) .. .. 161 115 175 Maternal (modeled, per 100,flUD live births) .. 110 1" 89 300 Births attended by skilled health staff (%) .. 85 70 91 57 Note: 0 or 0.0 means zeroor less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCEI)97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age or at any time before the survey. World Development Indicators database, World Bank - 17 April 2012. 50 Standard CAS Annex B6: Key Economic Indicators Table 1: Selected Economic Indicators, 2009-15 1/ 2009 2010 2011 2012 2013 2014 2015 Actual Est. Est Est Proj. Proj. Proj. Output and Prices 1/ Nominal GDP (millions SBD) 4,815 5,498 6,637 7,331 8,099 8,883 9,681 Nominal GDP (millions US$) 598 682 915 997 1,067 1,136 1,205 Real GDP (% change) -4.7 7.8 10.7 4.8 4.0 3.5 3.7 Real GDP, excl. logging and mineral sectors (% change) -2.6 5.4 7.3 3.5 5.5 3.8 4.0 Consumer price index (% change, period average) 7.1 0.9 7.4 5.9 6.0 5.0 4.7 Government Operations (percent of GDP) 2/ Revenues and grants 55.2 62.6 60.3 54.2 53.3 50.8 50.0 Revenues 30.5 32.0 33.1 34.6 33.4 32.9 32.0 Grants 24.7 30.6 27.1 19.6 19.9 17.9 18.0 Expenditures 53.5 56.4 51.2 50.3 52.5 50.2 49.6 Recurrent 28.6 28.2 25.6 28.5 28.2 26.8 26.6 Development 25.6 27.9 25.5 21.8 24.3 23.4 23.0 Other -0.7 0.3 0.0 0.0 0.0 0.0 0.0 Government budget balance 3/ 1.8 6.2 9.0 3.9 0.8 0.6 0.4 Non-commodity primary balance -0.7 -1.3 -1.4 -4.3 -4.0 -3.7 -2.8 Public debt 33.9 28.5 22.2 17.9 16.0 13.9 13.8 Of which, dominated in foreign currency 23.2 19.8 15.2 13.0 11.4 11.1 11.3 Balance of Payments (US$ millions) 4/ Current account balance -128 -210 -59 -1 -22 -77 -66 (% GDP) -21.4 -30.8 -6.7 -0.1 2.0 -6.5 -5.3 Goods trade balance -74 -137 -5 47 0 -7 -18 Exports 165 224 418 493 489 526 536 o/w Logging 88 125 191 180 170 158 145 Imports 239 360 423 446 488 533 554 Services balance (Net) -35 -81 -49 -58 -66 -95 -83 Income balance (Net) -166 -173 -178 -111 -123 -150 -154 Current transfers (Net) 147 181 173 120 167 175 188 Foreign direct investment 117 236 141 67 27 34 36 (% GDP) 19.5 34.6 16.2 6.7 2.4 2.9 2.9 Exports G&NFS (US$, % change) -12.9 40.6 68.6 14.9 0.4 7.3 2.6 o/w Logging (US$, % change) -20.2 42.0 53.2 -8.2 -3.3 -6.9 -8.4 Imports G&NFS (US$, % change) -15.8 59.2 11.4 6.6 8.9 11.6 2.2 Foreign exchange reserves 146 266 412 480 530 560 590 (months of forward imports) 4.1 6.4 7.6 8.5 8.4 8.6 8.6 Financial indicators 5/ Domestic credit to private sector (% change) -4.1 -4.7 4.7 4.0 6.0 7.0 7.0 Lending rate (%) 15.4 13.5 11.5 11.4 11.0 10.0 10.0 Exchange rate (SBD$/US$, cop) 8.06 8.06 7.25 7.3 7.59 7.82 8.03 Real effective exchange rate Index (2005=100) 120.6 112.0 124.5 125.4 125.4 125.4 125.4 Percent change (%) 6.9 -7.1 11.2 0.7 0.0 0.0 0.0 1. Data and projections are from IMF recent mission to Solomon Islands April 2013 and prior Country Reports No. 12/156 and No. 11/359, Central Bank of Solomon Islands publications and World Bank staff projections. 2. Includes SDR allocations made by the IMF to the Solomon Islands in 2009. 51 Standard CAS Annex B7: Key Exposure Indicators Solomon Islands - Key Exposure Indicators Actual Estimated Projected Indicator 2007 2008 2009 2010 2011 2012 2013 2014 2015 Total debt outstanding and 177 166 156 139 130 121 113 104 96 disbursed (TDO) (US$m)a Net disbursements (US$m)a 0 0 0 0 0 0 0 0 0 Total debt service (TDS) 3 4 2 3 3 3 2 2 2 (US$m)a Debt and debt service indicators (%) TDO/XGSb TDO/GDP 30.2 25.7 25.9 20.5 15.5 .. TDS/XGS .. .. .. .. .. .. Concessional/TDO 82.1 81.3 83.9 89.2 90.3 91.3 92.1 93.5 94.1 EBRD exposure indicators (%) EBRD DS/public DS .. .. .. .. .. .. Preferred creditor DS/public .. .. .. .. .. .. DS (%) BI3RD DS/XGS .. .. .. .. .. .. IBRD TDO (US$m)d Of which present value of .. .. .. .. .. .. guarantees (US$m) Share of IBRD portfolio (%) .. .. .. .. .. .. IDA TDO (US$m)d 46 44 44 42 41 40 39 37 36 IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. 52 Standard CAS Annex B8: Statement of JFC's Held and Disbursed Portfolio Solomon Islands: IFC Investment Operations Program 2010 2011 2012 2013* Original Commitments (US$m) IFC and Participants 35.00 IFC's Own Accounts only 3500 Original Commitments by Sector (%)- IFC Accounts only OIL, GAS AND MINING 100 Total 100 0 0 0 Oriqinal Commitments by Investment Instrument (%I - IFC Accounts only Loan 100 Total 100 0 0 0 * Data as of March 01,2013 53 Standard CAS Annex B8: Operations Portfolio (IBRD/IDA and Grants) CAS Annex B8 - Solomon Islands Operations Portfolio (IBRD/IDA and Grants) As Of Date 4/30/2013 Closed Projects 10 IBRD/IDA* Total Disbursed (Active) 12.89 of which has been repaid 0.00 Total Disbursed (Cosed) 6.00 of which has been repaid 10.62 Total Disbursed (Active + Cosed) 18.90 of which has been repaid 10.62 Total Undisbursed (Active) 3.88 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active + Closed) 3.88 Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements" Project ID Project Name Development Implementation Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Revd Oboectives Progress P114987 SB - Rapid Employment Project S S 2010 3.2 1.30085 -0.243429 P089297 SB-Rural Development Program MU MU ' 2008 6.2 0.00179192 0.358493 -2.930628 -1.73875 P100311 SB-Solomon Islands Sustainable Energy MS MS ' 2009 4 1.185897 1.3538659 0.293866 P113148 SB: Telecommunications & ICT Project S MS ' 2010 3.25 1.036853 -0.02897 Overall Result 16.65 0.00179192 3.882093 -1.849162 -1.44489 54 Annex 4: Donor Coordination Australia is Solomon Islands' largest development partner, with assistance of over A$220m (US$230m) million in FY13. Approximately A$100m of this amount supports the police component of RAMSI. Since 2003, Australian assistance has been made up of its bilateral cooperation (governed by the Solomon Islands - Australia Partnership for Development 2009) and its contribution to RAMSI. Australian bilateral and RAMSI support will be combined from 1 July 2013. Australia's future funding will support four priority areas: (i) improved service delivery in health and education; (ii) improved justice services, (iii) improved broad-based economic growth (including market access, transport, energy and telecommunications), and (iv) improved governance (including economic, public sector and democratic governance). Australia will continue to provide significant technical assistance including around 25 advisers in the Ministry of Finance and Treasury, 30 across the justice institutions and 10 across health, education, infrastructure and agriculture. Consistent with the focus on improved economic infrastructure, Australia financed the maintenance of over 400km of roads in 2012 enabling improved access to services and markets and providing over 200,000 person days of employment. Australia is the lead donor in the health sector, helping to significantly reduce the incidence of malaria and supporting immunization of children and maternal and child health improvements, as well as providing clean water and sanitation to 15,000 people in 2012. Australian support for education has facilitated the removal of school fees, ensuring approximately 150,000 children now attend primary school, as well as providing over 50 scholarships per year for tertiary education in Australia. Across the region, Australia is now placing a major focus on gender through the Pacific Women Shaping Pacific Development initiative announced by the Prime Minister in 2012. The Solomon Islands component is currently being designed and is likely to focus on prevention of violence against women in rural areas. The Australian Government is co-financing the World Bank's RDP and REP, supporting the J4P work program, as well as Bank-led efforts to introduce competition in the telecoms market. Japan has provided assistance to Solomon Islands since independence. Japan's 2012 Country Assistance Policy focuses on the themes of: (i) overcoming vulnerability; (ii) strengthening economic growth; (iii) improving medical services; (iv) education, particularly through scholarships; and (v) environmental conservation and climate change adaptation. Japan has provided an average of $12.5million in grant aid and technical assistance to Solomon Islands per year since 2005. Major current investments include water supply in Honiara and Auki (total value Yen 2.1 billion or $23m), the reconstruction of Gizo hospital (Yen 1.9 billion, $21million), and disaster preparedness (Yen 860 million, $9million). Japan is financing the World Bank climate change adaptation and disaster risk management project as well as the Pacific Catastrophe Risk Insurance Scheme, for which Solomon Islands is one of five pilots. New Zealand (NZ) and Solomon Islands signed a Joint Commitment for Development in September 2011. NZ's aid allocation for Solomon Islands in FY12 was NZ$38m (US$32m), including support through RAMSI. NZ is the lead donor in education, as a building block for sustainable economic development. Almost 30 percent of NZ financing goes to education, helping to train over 1,700 teachers and contributing to successful improvements in primary school access and enrolments. NZ assistance also includes a strong focus on transport infrastructure, including a NZ$25m investment to rehabilitate Munda airport in Western Province. NZ support for fisheries is aimed at helping Solomon Islands improve management of this important resource. Current technical assistance to the Ministry of Finance and Treasury in revenue collection will transition from RAMSI into the bilateral program from 1 July 2013. 55 Taiwan, China, has provided US$33m in general budget support since 2008 to finance the Rural Constituencies Livelihood Fund which provides funds for parliamentarians to spend in their electorates. Taiwan, China has also funded construction of government buildings and also supports agricultural activities in rice, vegetables and pigs and medical personal, equipment and training for the National Referral Hospital. The Asian Development Bank endorsed a new 2012-2016 Country Partnership Strategy (CPS) in February 2012. The CPS focuses on four priority areas: (i) gender equity; (ii) governance and capacity development; (iii) environmental sustainability and climate resilience; and (iv) encouraging private sector development. Over this period, ADB expects to be able to make available about $40m in grants and concessional credits (current ADB financing for Solomon Islands is 50/50 grants and credits). ADB is working with Solomon Islands to establish a public-private partnership to land a broadband cable to improve connectivity and reduce the price of bandwidth. ADB finance is also focused on improving transport infrastructure, including roads and domestic ports, improving access to electricity (with the aim of connecting over 2,000 new households in provincial centers to the grid by 2016). ADB is a key partner in the CEWG and is providing budget support to encourage public financial management reforms. Technical assistance is being provided to support the business enabling environment, SOE reform and the National Development Strategy formulation and implementation. The European Union's Country Strategy for Solomon Islands 2008-2013 sets out a framework for engagement under the 10th European Development Fund (EDF). The EC anticipates making approximately EUR 13.2 million (US$17 million) available during this period, focused primarily on macroeconomic support, and rural development (including co-financing of the World Bank Rural Development Program. A further EUR 3.3 million (US$4 million) is to cover unforeseen needs such as emergency assistance. The European Investment Bank has also provided financing to encourage private sector investment to reopen the Gold Ridge mine (in collaboration with IFC) and for renewable energy Technical Assistance. The EU is looking to consolidate its activities in a planned 2014 strategy. The International Monetary Fund is a key partner in leading dialogue on overall macro-economic reforms. In December 2012, the IMF's Board approved a three year Extended Credit Facility (ECF) arrangement for Solomon Islands, in an amount equivalent to SDR Im (US$1.6 million). This followed an IMF program supported by a Standby Credit Facility arrangement. The IMF program will be instrumental in tackling deep institutional and structural issues and is seen by the authorities as critical for supporting Solomon Islands, which remains vulnerable to external shocks associated with its undiversified export base, strong dependence on aid, and frequent natural disasters The United Nations system is active in Solomon Islands, with UNDP, UNICEF, UNFPA, UNEP, FAO, and WHO all implementing programs. UNDP has especially played a key role coordinating partners following disasters, including the recent 2013 tsunami that hit Santa Cruz. UNDP is also assisting Solomon Islands in climate change adaptation, as well as strengthening of aid coordination, provincial governments, and parliamentary exchanges. The UN is proposing a new 'One UN' US$2 million gender program (2013-2017) focussing on formulating and implementing laws and policies, women's political leadership, eliminating violence against women and children, and peace-building. Current assistance by individual donors is set out in the attached matrix, using relevant heads of expenditure in the Government of Solomon Islands' own budget framework for reporting on donor engagement by sector. 56 Donor Engagement Matrix by Sector New Australia Japan Zealand ADB EU IMF UN WBG Macro-economic Reform x x x x x x Agriculture/ Livestock Development x Commerce, Industry, and Employment x x Communication and Aviation x x x Education and Human Resource Development x x x x Energy and Rural Electrification x x Environment, Climate Change, Disaster Risk Reduction x x x x x Health and Medical Service x x x X Infrastructure Development (Transport) x x Fisheries x Forestry Police and Correctional Services x x Poverty Measurement and Analysis x x x Public Administration and Provincial Governments x x x x Rural Development x x X Water and Sanitation x x Women, Youth, and Children x x x 57 156'E 158,E 160,E 1 62°E 164°E 166°E 168°E 170°E PAP U AOntong Java Atol PA PUA °'°°"' NEW GUINEA 6°S 6°S Roncador Reef CHOISEUL Cho,seul SOUTH PACIFIC SasEn SOLOMON shor&l A LMALAITA OCEANSNDS ýMono----÷-- - - Mon no q ISABEL Vella Lvellat S0s00 0 r Kd S\$anta Isabel 8°s Kolo angar Da\ 8S RanKnda New Georg,a Dd & Buala New Georgia R angunu San Jorg&' paba Daringali Group Teeae .N99atokae CENTRALb FJon • Au , Malaita WESTERN Russell Is Tula,Igie Mava u Tarapaina GuadOacanal HONIARA ' ' Maramasike Solomon Mt. Mokarakon4buruA Ulwa Duff Is. Solmon(2,447mj- Auff Is10. 10°S AuAu Prr 10°S Sea GUADALCANAL H®r MAKIRA Reefl,. ralaraTinakula Apaorak San Cristobal Noka Lata Nendo Mwoniwoo' Santa Cruz Islands TEM O TU 0 50 100 150 Kilometers | | | | Beliona RENNELL AND *utupua 0 50 100 150 Miles J BELLONA vnaO VanikoIo Ann°ø Rennell "Tinggoa Fatutoka 12'S 156'E 158'E Tkpø Tikopia. Indispensable Reefs SOLOMON ISLANDS Coral Sea o SELECTED CITIES AND TOWNS VANUATU 14°S 14'S e PROVINCE CAPITALS ® NATIONAL CAPITAL MAIN ROADS This mop ws produced by the Map Design Unit of The World Bank. PROVINCE BOUNDARIES The boundøries, colors, denomintions and any other infoarmation shon n this mop do not imply, en the part o The Worid Bank - - -|INTERNATIONAL BOUNDARIES Grnup, any judgment on the legal status of any tertory nr any endorsement er acceptance o such boundaries. 164°E 1 °E 170°E 0C) ________________