PERFORMANCE AND LEARNING REVIEW Document of The World Bank FOR OFFICIAL USE ONLY Report No.105699-SB INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL FINANCE CORPORATION PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP STRATEGY FOR SOLOMON ISLANDS FOR THE PERIOD FY2013-FY2017 August 5, 2016 Timor-Leste, Papua New Guinea and Pacific Islands Country Management Unit East Asia and Pacific Region The International Finance Corporation East Asia and Pacific Department 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 Group authorization. i The date of the last Country Partnership Strategy was May 15, 2013. CURRENCY EQUIVALENTS Currency Unit: Solomon Islands Dollars (SBD) 1 SBD = 0.13 US Dollar ABBREVIATIONS AND ACRONYMS ASA Advisory Services and Analytics IMF International Monetary Fund ADB Asian Development Bank ISN Interim Strategy Note ANZ Australia New Zealand Bank JICA Japan International Cooperation Agency BETF Bank-Executed Trust Fund LMEA Line Ministry Expenditure Analysis BSP Bank of the South Pacific MAL Ministry of Agriculture and Livestock CCA Climate Change Adaptation MEHRD Ministry of Education and Human CDFs Constituency Development Funds Resource Development CEWG Core Economic Working Group MHMS Ministry of Health and Medical Services CPS Country Partnership Strategy NDS National Development Strategy CPF Country Partnership Framework NEAP National Education Action Plan CRISP Community Resilience to Climate Change NFD National Fisheries Development and Disaster Risk in Solomon Islands NGO Non-governmental Organization Project OBA Output Based Aid CRW Crisis Response Window ODA Official Development Assistance DCC Democratic Coalition for Change PDNA Post Disaster Needs Assessment DMS Debt Management Strategy PLR Performance and Learning Review DPO Development Policy Operation PER Public Expenditure Review DSA Debt Sustainability Analysis PFM Public Financial Management DFAT Australian Department of Foreign Affairs PMU Project Management Unit and Trade PPA Power Purchase Agreement DRM Disaster Risk Management PROP Pacific Regional Oceanscape Program ECF Extended Credit Facility RAMSI Regional Assistance Mission to Solomon EGPS Extractives Global Programmatic Support Islands Facility RDP Rural Development Program EITI Extractive Industries Transparency REP Rapid Employment Project Initiative RETF Recipient Executed Trust Funds EU European Union RSIPF Royal Solomon Islands Police Force FY Fiscal Year SCD Systematic Country Diagnostic GBV Gender-based Violence SEF Supplemental Equity Facility GDP Gross Domestic Product SOE State-owned Enterprise GFC Global Financial Crisis SORT Systematic Operations Risk Rating Tool HCA Honiara Club Agreement SIC Subproject Implementation Committee HIES Household Income and Expenditure SIEA Solomon Islands Electricity Authority Survey SIWA Solomon Islands Water Authority ICT Information and Communications SIG Solomon Islands Government Technology SIPA Solomon Islands Ports Authority IDA International Development Association SCF Standby Credit Facility IDF Institutional Development Fund TRHDP Tina River Hydro Development Project IFAD International Fund for Agricultural TWIST Training Women in SolTuna Project Development WBG World Bank Group IFC International Finance Corporation VP Vice President World Bank IFC Vice President: Victoria Kwakwa Nena Stoiljkovic Country Director: Mona Sur (Acting) Vivek Pathak Task Team Leader: Anne Tully Vsevolod Payevskiy i TABLE OF CONTENT ABBREVIATIONS AND ACRONYMS .................................................................................................... i I. INTRODUCTION ............................................................................................................................... 1 II. MAIN CHANGES IN COUNTRY CONTEXT ................................................................................ 2 A. POVERTY REDUCTION AND SHARED PROSPERITY............................................................................. 2 B. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS AND OUTLOOK............................................. 3 C. NEW OR EMERGING COUNTRY DEVELOPMENT ISSUES ..................................................................... 5 III. SUMMARY OF PROGRAM IMPLEMENTATION ................................................................... 6 A. PORTFOLIO PERFORMANCE ISSUES .................................................................................................... 6 B. OVERVIEW OF PROGRAM IMPLEMENTATION..................................................................................... 7 Strategic Area 1: Strengthening Economic Resilience ...................................................................... 7 Strategic Area 2: Improving Public Service Provision ...................................................................... 9 C. EVOLUTION OF PARTNERSHIPS AND LEVERAGING. .......................................................... 11 IV. EMERGING LESSONS ................................................................................................................ 12 V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP STRATEGY AND FUTURE WBG PROGRAM..................................................................................................................................... 13 VI. RISKS TO THE COUNTRY PARTNERSHIP STRATEGY PROGRAM .............................. 17 TABLES: Table 1: CPS Ongoing and Planned Program of Activities ........................................................................ 16 Table 2: Summary Systematic Operations Risk Rating Tool ..................................................................... 17 ANNEXES: Annex 1: Updated CPS Results Matrix....................................................................................................... 19 Annex 2: Summary of Changes to Original CPS Results Matrix of Solomon Islands CPS ........................... (FY13-FY17)................................................................................................................................ 23 Annex 3: Summary of Progress Toward CPF Objectives ........................................................................... 28 SOLOMON ISLANDS PERFORMANCE AND LEARNING REVIEW OF THE COUNTRY PARTNERSHIP STRATEGY I. INTRODUCTION 1. This Performance and Learning Review (PLR) summarizes progress in the implementation of the FY13-FY17 World Bank Group (WBG) Solomon Islands Country Partnership Strategy (CPS), which was discussed by the Board of Executive Directors on May 13, 2013. The PLR reviews the evolving context and progress carrying out CPS objectives and evaluates results achieved under each CPS engagement area, with the purpose of updating the program of support over the remainder of the CPS period. 2. During the CPS period there has been no return to the hostilities and conflict of the tensions1 of 1998-2003. Economic and political stability has been maintained despite devastating floods in April 2014, and a change in government in late 2014. The capacity and outreach of the police has continued to improve, and core government finances have remained stable. Over the CPS period, the Solomon Islands Government (SIG) has made significant progress in a number of areas with support from the WBG. Notable advances have been made in: securing the financial sustainability of the electricity authority (Solomon Power) and the reliability of electricity supply; improving access to mobile phone services; increasing access to community infrastructure in rural areas; providing employment opportunities through an emergency employment program and increasing value added and jobs from the country’s rich tuna resources. 3. Nevertheless, and as experienced in many fragile and post conflict settings, Solomon Islands faces considerable challenges over the medium-term in its transition from stability to sustained prosperity and peace. These challenges include: rapid population growth; rural to urban migration and the associated growth in informal squatter settlements; and limited formal economic and employment opportunities for the country’s growing youth population2. The geographical setting, coupled with a complex land tenure system poses a challenge to infrastructure development and the expansion of key social services across the country while political, legal and administrative institutions remain fragile. Enhanced investments in human development have shown some significant improvements including a reduction in malaria incidence and increased school enrolments, while in other areas, including the quality of learning in classrooms, and the availability of medicines in rural areas, progress has been less than expected. The government views improvements in rural development as a pre-requisite for poverty reduction and sustainable development. 4. The Bank’s portfolio has grown significantly since the opening of the WBG Office in 2008. While the number of operations grew modestly from three to six, net commitments increased from US$8.7 million in FY09 to US$78.19 million in FY16 of which IDA commitments increased from US$ 8.7 million to US$41.4 million. In addition IFC is working on a number of investment projects that will increase the committed portfolio from US$10 million in FY13 to US$25 million in FY17. 1 Solomon Islands experienced an internal conflict, known locally as the “tension” between 1998 -2003 involving violent clashes between rival militant groups, leading to deaths, displacement and the widespread destruction of property. 2 According to the 2009 Census, approximately 60 percent of the population is aged 25 or under. 1 5. Overall, the CPS remains valid and relevant to Solomon Islands’ post-conflict setting. The CPS is closely aligned with the government’s 2011-2020 National Development Strategy (NDS) and the recently launched 2016-2035 NDS3. Overall progress towards CPS objectives remains satisfactory. The WBG continues to support two strategic areas: (i) strengthening economic resilience, and (ii) improving public service provision, underpinned by two cross cutting areas-embedding institutional resilience and addressing gender inequalities. 6. The PLR does not envisage any major strategic shift in the CPS program. The WBG program will deepen its engagement in the energy sector, by supporting, with IFC and MIGA4, the preparation of the Tina River Hydro Development project (TRHDP) and continuing to support improved access to, and reliability of, energy supply. The Bank will focus on improving implementation and addressing sustainability in its ongoing program, over the remainder of the CPS period, rather than introducing major new activities. A successor project to the Rapid Employment Project (REP), will be prepared for delivery under the next Country Partnership Framework (CPF) and will explore options in other provincial centers. Reengagement in the mining sector, building on current work on the mining policy, will be accelerated as government commitment to governance reforms becomes clear. A more focused effort will be made to address the institutional sustainability of Bank engagements, particularly in rural areas, and to ensure the gender sensitivity of WBG interventions. II. MAIN CHANGES IN COUNTRY CONTEXT A. POVERTY REDUCTION AND SHARED PROSPERITY 7. Poverty is estimated to have declined in Solomon Islands in the post-conflict period of 2005- 2013. Findings from the 2012-13 Household Income and Expenditure Survey (HIES), which were not available at the time of the CPS, indicate that about 12.7 percent of the population in Solomon Islands lives below the basic needs poverty line and are classified as “poor”. This estimate is substantially lower than that estimated from the 2005-06 HIES5 of 23 percent; however, there are significant differences in data collection methods as well as in the method used in quantifying poverty that make a comparison between the two assessments extremely difficult6. When a common estimation method is applied to both 2005-06 and 2012-13 datasets, a drop of 8 percentage points in the poverty incidence is observed. 8. The prevalence of poverty varies across provinces. Makira and Guadalcanal provinces, along with Honiara City, exhibit the highest poverty rates. In Makira, almost one-third of the population is poor and in Guadalcanal about one in five persons live in poverty. Poverty rates in the other provinces (excluding Honiara) are in the 5-10 percent range, while Honiara’s poverty rate, of 15.0 percent, is slightly higher than the national average. The overall incidence of food poverty is low; only 4.4 percent of the population in Solomon Islands live under the food poverty line. At the same time, child stunting rates are estimated on average at 37.9 percent with rural areas being slightly higher than urban. Guadalcanal province, which has the combination of a higher poverty risk as well as larger population 3 The Democratic Coalition for Change (DCC) government launched a twenty year national development strategy (2016-36) in April 2016. 4 MIGA is actively partnering on the TRHDP. This is MIGA’s only engagement in Solomon Islands and given the CPS was not joint with MIGA, the PLR has not been prepared with MIGA. 5 SINSO/UNDP poverty estimate. 6 Significant changes were made in the way that the welfare indicator and poverty lines were constructed. These non-sampling differences between the 2005-06 and 2012-13 HIES mean that direct comparisons cannot be made between headline poverty rates. 2 size, accounts for the biggest share of persons living in poverty. More than two thirds of those living in poverty live in the three provinces of Guadalcanal, Makira and Malaita. 9. Given that the majority of Solomon Islanders live in rural areas, it comes as no surprise that poverty is largely a rural phenomenon. The majority of poor households, about 87 percent, and almost all of those households in the most acute poverty range (those whose members live below the food poverty line), live in rural areas. The real value of consumption for rural residents is three-quarters that of urban residents, while the gap between the richest and poorest quintiles is almost 6:1. The rural nature of poverty likely reflects long-standing and difficult-to-change factors, such as a difficult geography (992 islands dispersed over an area of 1.34 million square kilometres) and weak infrastructure which limits access to markets and opportunities for the diversification of livelihoods through enhanced cash earning opportunities. In addition, schooling has a big influence on the poverty incidence, with almost 40 percent of those who are poor living in households where the household head has less than six years of primary education. B. RECENT POLITICAL AND ECONOMIC DEVELOPMENTS AND OUTLOOK 10. Solomon Islands elected a new government in December 2014 . Elections were conducted under the auspices of a new Political Parties Integrity Act that defines the process and manner by which political parties are to be registered and administered. This change was introduced with a view to limiting the exhaustive lobbying that typically follows elections in Solomon Islands and to inject discipline into the political environment that has, since independence in 1978, endured constant realignment of political affiliations and only one prime minister who has served his full term. 11. The winning Democratic Coalition for Change (DCC) Government comprises a loose coalition of parties, along with a range of independents. Although the coalition is intact, it remains fragile and progress on its ambitious policy statement has been slow to pick up pace. The Government has launched a new 20 year National Development Strategy (NDS, 2016-2035), and has passed several important security related bills, including the Family Violence Protection Act. However, progress remains slow on the critical submarine cable project, and there has been public criticism of unorthodox management of the Solomon Islands Port Authority (SIPA). The slow progress in implementing development projects in Solomon Islands’ most populated province, Malaita, continues to be a source of political tension. 12. The Solomon Islands’ economy recovered quickly following devastating floods in 2014. Sound macro-fiscal management (supported through two IMF Standby Credit Facilities (SCF), and a subsequent Extended Credit Facility (ECF)), and public financial management (PFM) reforms under the Core Economic Working Group (CEWG) mechanism, resulted in strong growth in the post Global Financial Crisis (GFC) period. Flash flooding in April 2014 caused extensive damage and disruption to economic activity, including the premature closing of the country’s only operating gold mine, bringing GDP growth down from a projected 4 percent to approximately 2 percent for 2014. Log production remained a key driver of growth during the period, with output reaching record levels for two consecutive years in 2014 and 2015, and helping to restore growth to 3.3 percent in 2015. Growth in the production of other key export commodities has been subdued, reflecting weak demand in international markets. Private sector activity has been moderate and concentrated around Honiara, with credit growth primarily supporting consumption spending. Several steps have been taken to enable a more conducive private business environment, including introducing company registration 3 reform, secured transactions, and credit information reforms. Further reforms to competition policy and special economic zones are being considered. 13. GDP growth is expected to reach 3 percent in 2016, and is projected to grow at this rate on average over the medium term. This baseline scenario assumes a resumption of gold mining activity, increased investments in transport infrastructure, energy and telecommunications, as well as sustained levels of foreign direct investment of around 3.3 percent of GDP. Log production in 2016 is projected to stabilize at 2015 levels. The informal sector (and in particular subsistence agriculture) remains an integral source of livelihood for the majority of Solomon Islanders: a heightened focus on agricultural and rural development would likely have a significant impact on fostering shared prosperity. 14. The fiscal outcome in 2014 and 2015 was stronger than anticipated7. The 2014 fiscal surplus of 1.7 percent of GDP reflects under-execution of both recurrent and development spending, and late disbursement of donor support in response to the April 2014 floods. Similarly in 2015, and despite the incoming government’s expansionary fiscal policy, the late passing of the budget coupled with its slow implementation resulted in underspending of both recurrent and development budget allocations. The 2015 budget deficit of 0.3 percent of GDP was significantly lower than originally envisaged (5.5 percent of GDP). 15. The Government is pursuing an expansionary fiscal policy in order to stimulate growth. Overall, planned government spending in 2016 is anticipated to increase by 17.1 percent against 2015 actuals, driven by an increase in both recurrent and development expenditures – by 12.2 percent and 25.5 percent, respectively. Domestically-sourced revenue is projected to decrease from 29.3 percent of GDP in 2015 to 28.2 percent of GDP in 2016, reflecting a relative decline in both income and profit taxes, and customs and excise duties. If fully implemented, the end of year budget outcome would result in a deficit of 5.7 percent of GDP, and a sharp decline in the government’s cash reserves to SI$197 million (or 0.8 months of forward recurrent spending), increasing overall vulnerability to shocks, should these occur. However, given traditionally low development budget execution rates, it is unlikely that the deficit will fully materialize. Inflation is expected to average 2.6 percent for the remainder of the CPS period. The current account deficit is expected to widen from 2.6 percent of GDP in 2015 to 7.8 percent by end-2017, reflecting an increase in capital imports as major projects commence, as well as the underlying long-run decline in logging exports. 16. Solomon Islands enjoys one of the lowest debt-to-GDP ratios among peers and non-peers. The government published a Debt Management Strategy (DMS) in 2013, to ensure sound management of newfound access to concessional borrowing8. Borrowing has remained well below annual debt ceilings, partly reflecting delays in a number of planned investment projects. By end-2015, external debt fell to 9.8 percent of GDP (from 11.3 percent in 2013). In December 2015, the government repaid all outstanding government bonds using its cash reserves, which reduced total public debt to 10.4 percent of GDP in 2015. A Debt Sustainability Analysis (DSA) conducted in early 2016 classifies Solomon Islands at a moderate risk of debt distress, with its debt path vulnerable to shocks resulting from lower than expected growth and a change in financing terms. 7 Fiscal data presented here and in subsequent paragraphs obtained from March 2016 IMF Staff Reports 8 Following renegotiation of the Honiara Club Agreement (HCA) in 2012. 4 C. NEW OR EMERGING COUNTRY DEVELOPMENT ISSUES 17. Following a long standing constitutional review process, government is proceeding with a process of structured, and systematic decentralization. In response to the demands of a number of provinces for federalism, principally as a means for Provinces to gain greater rights to own resources, the government is proceeding with a review of the Provincial Government Act 1997. This will focus, in the first instance, on the responsibilities and organizational capacity of provinces so that they are able to manage greater autonomy over time. The proposed approach is a middle ground between those provinces that would like to move quickly to full autonomy through a federated system, those provinces with concerns about the institutional capacity required to support such a system, and parts of government that would favor a centralized system with a direct relationship between national members of parliament and their constituencies. 18. Although there has been no return to the ethnic tensions of 15 years ago, a number of conditions associated with the conflict remain prevalent in some form. Among these are the government’s inability to find a solution to the problems underlying the Bona Fide Demands9, the country’s rapidly growing youth population10, the dearth of formal employment opportunities for many of these, and the continued unequal economic development opportunities and service delivery across the country. The continued reliance upon Constituency Development Funds (CDFs)11 as a vehicle for supporting rural communities, has distracted attention from the effort to consolidate state authority and improve service delivery throughout the country. Should economic opportunities remain concentrated around Honiara, this has the potential to exacerbate challenges associated with rural-to- urban migration and the growth of urban squatter settlements. 19. Finding sustainable and equitable sources of growth in this context is important and remains a challenge. The anticipated decline in the logging industry12, and lack of developments in the mining sector13, have significant implications for government revenue, job creation and economic activity more broadly. Solomon Islands faces the challenge of developing new sources of inclusive growth to support a growing population (growth rates of around 2.3 percent per annum), of which over 80 percent reside in rural areas. The government’s plan to tackle these issues includes targeting higher levels of rural development expenditure and boosting the country’s gr owth potential. The government’s policy ambitions are clearly reflected in the annual budget, which has seen a significant increase in planned spending through the development budget, particularly through the Ministry of Rural Development, through CDFs, and the Ministry of Infrastructure Development. The government is also exploring opportunities in sectors with growth potential such as fisheries and tourism. 9 The Bona Fide Demands of the People of Guadalcanal, drafted in 1988, was a petition from a group calling themselves the ‘Guadalcanal Provincial Assembly’ to the government of the day, demanding measures to address the negative impact of mass migration into Guadalcanal. Proposed measures included, but were not limited to i) the repatriation of all illegal settlers in Guadalcanal, ii) the adoption of a state government; iii) shifting major development projects away from Guadalcanal, and iv) relocation of the national capital. 10 The 2009 census estimated that 60% of Solomon Islands population was under the age of 25 and that those in Honiara between the ages of 15 and 30 years of age were growing faster than in other centers. 11 CDFs are estimated at 7.9% of consolidated government budget and 4.2% of GDP in 2015. 12 It is not currently possible to assign a realistic time-line for the depletion of forest stocks in Solomon Islands. However, a satellite imagery study which was commissioned by the government in 2011, suggested sustainable levels of logging to be around 250,000 cubic meters, compared to 2.2 million cubic meters exported in 2015. Although the report was never publically disclosed, these figures raise concerns around pace of the impending decline in remaining stocks. 13 Future mining developments hinge on the development of a conducive legal and regulatory framework, and on clear procedures for the acquisition of land for the exploration and exploitation of natural resources. 5 III. SUMMARY OF PROGRAM IMPLEMENTATION A. PORTFOLIO PERFORMANCE ISSUES 20. Over the CPS period, the Solomon Islands’ World Bank portfolio has increased from US$55.7 million in FY13 (IDA US$20.2 million and Trust Funds (TFs) US$35.5 million) to $78.19 million in FY16 (IDA US$41.95 million and TFs US$36.24 million) with an undisbursed balance of US$ 51.65 million. The portfolio consists of six operations (IDA and recipient executed Trust Funds (RETF)) in the areas of energy, rural development, urban employment, fisheries, climate resilient infrastructure and community grievance management. Three Development Policy Operations (DPOs) have been implemented with the last benefitting from additional resources accessed for flood recovery activities from the IDA Crisis Response Window (CRW). RETFs have co-financed operations in rural development, urban employment, climate change and fisheries and supported Advisory Services and Analytics (ASA) activities in mining, health and governance. This strategic combination of IDA and TFs allowed the Bank to deliver results while reducing aid fragmentation which is critical in a small, low-capacity country. IFC made a US$10 million investment in the SolTuna Company, which is at the moment IFC’s only portfolio investment. Further transactions of US$5 million and US$10 million are in the pipeline in the retail and fisheries sectors respectively. 21. Overall portfolio performance has been satisfactory. Disbursements have increased from US$5.3 million in FY13 to US$10.6 million in FY15. As of June 22, 2016 the disbursements for FY16 were US$9 million. Implementation of the six projects has been rated as satisfactory or moderately satisfactory except for one project which was rated as moderately unsatisfactory 14. Implementation challenges have affected portfolio performance as a result of: (i) limited technical capacity within the implementing agencies; (ii) a lack of familiarity with fiduciary procedures, and contract management; and, (iii) difficulty in sustaining regular and reliable communication due to geographic dispersion. The Bank team has addressed project implementation issues, using enhanced implementation support, particularly from Sydney based operations staff, as well as project restructuring. That said, some Bank projects have not been sufficiently ready before they have gone to Board, and the Bank has at times underestimated the challenges of implementing projects in a thin capacity environment. 22. The ASA program during the CPS has been limited but delivery is on track. Some noteworthy deliverables include: a HIES and poverty analysis; an assessment of rural community infrastructure and service delivery programs; a health sector facility costing; and, diagnosis of local conflict drivers and dispute resolution mechanisms. Technical assistance was provided to the government to improve analytical capabilities in public expenditure analysis, financial literacy for women in fisheries, and a post disaster needs assessment. IFC provided advisory services to improve the economic potential of the fishing industry, payment systems and mobile banking. IFC is also providing transaction advisory services to the TRHDP. 14 Solomon Island Sustainable Energy - Implementation of the Additional Finance to the Solomon Island Sustainable Energy Project (SISEP) was rated as Moderately Unsatisfactory as a result of delays in finalizing procurement of major capital items. These delays were largely a result of the project implementing entity’s attention being directed to the completion of a major powerhouse project, and are expected to be resolved with a time extension. 6 B. OVERVIEW OF PROGRAM IMPLEMENTATION 23. Overall progress towards achievement of the CPS objectives is satisfactory. More than fifty percent of targets are either on track or achieved. The Results Matrix in Annex 3 summarizes recent progress. Although some adjustments are needed, the results matrix remains fundamentally on track. Strategic Area 1: Strengthening Economic Resilience 24. The Bank has supported the SIG in consolidating recent gains in macro-fiscal stability. The Bank has engaged in close policy dialogue with the government through the joint government-donor CEWG. Aligned to the CEWG process, the Bank formulated a programmatic series of two DPOs, and a subsequent stand-alone emergency operation which supported progress in key policy reform areas such as: (i) reforming key elements of the budget cycle and introducing a new chart of accounts; (ii) improving the financial viability of key State Owned Enterprises (SOEs) by facilitating a debt settlement between two SOE’s15; (iii) formulating a lending policy to guide on-lending and issuance of guarantees to SOEs and (iv) improving the conditions for private sector investment through establishing a more transparent process for land acquisition. 25. Some progress has been made in improving the regulatory framework in the mining sector. With WBG support, Solomon Islands became a candidate for the Extractive Industries Transparency Initiative (EITI) in 2014 and will be undergoing validation in 2016. The Bank is providing technical support to the Ministry of Mines, Energy and Rural Electrification (MMRE) in drafting a National Minerals Policy and related regulations, following an earlier engagement under the last Interim Strategy Note (ISN). As part of this process, the Bank provided assistance16 to support civil society participation in several national mining forums, including the 2014 National Mining Policy Consultation and the National Mining Forum in 2015. 26. The productive capacity of the fisheries sector has been improved. IFC’s support to the expansion and upgrade of the SolTuna fish processing plant in Noro, Western Province, has enabled the company to increase tuna processing capacity from 90 MT to 110-130 MT per day from 2013 to 2016. The program also provided technical assistance to improve SolTuna’s local supply chain, and environmental and safety performance within fishing and processing operations. The Bank is complementing this effort through Solomon Islands’ participation in the Pacific Regional Oceanscape Program (PROP) which aims to support sustainable management of offshore and coastal fisheries. Progress under the PROP remains limited due to delays with recruiting project staff within the Ministry of Fisheries and Marine Resources (MFMR) and lack of familiarity with the Bank’s fiduciary procedures. 27. Access to agricultural services has improved through the Bank supported Rural Development Program (RDP). The Bank’s support to the Ministry of Agriculture and Livestock (MAL) has provided assistance to farmers through staff-training, activity based planning and improved budget processes. About 37,000 farmers, of which 46 percent were women, participated in extension and training activities. The Bank’s program also helped to establish 65 small rural businesses through the provision of the Supplemental Equity Facility (SEF). The second phase of the RDP will support the establishment of 79 new agribusiness partnerships which are expected to increase crop yields by 25 percent through improved farming practices. 15 Solomon Island Water Authority (SIWA) and Solomon Island Electric Authority (SIEA) 16 EITI Civil Society Direct Support Grant (BE TF) 7 28. The financial sustainability of the electricity authority has been significantly enhanced, as has the reliability of electricity supply. The Bank’s technical and financial support to Solomon Power (officially the Solomon Islands Electricity Authority - SIEA) significantly improved its financial, operational and engineering capacity. Solomon Power’s improved financial performance17 has enabled it to plan and seek financing for capital investments across the country, including for the Honiara grid where 90 percent of the country’s power is produced and consumed. Honiara’s power supply reliability was maintained throughout 2015 with no rotational load shedding. This is due to higher generation availability and improvements in the capacity, operation and maintenance of the distribution grid. 29. The proposed Tina River Hydro Development Project (TRHDP) is progressing well and is expected to be presented to the Board in February 2017. During the CPS period, a number of critical milestones have been achieved, including: land owner identification and land acquisition; full feasibility and design work; tender for an international developer; and, preparation of environmental and social safeguards. The Government team is in negotiations with the proposed developer, Korea Water (K-Water), and aims to have a power purchase agreement (PPA) initialed in October 2016. A community benefit share program is under preparation. IFC is providing transaction advice on the TRHDP, while the Bank is playing an overall coordination role including support for the full feasibility study and associated assessments. 30. Telecommunications services have been extended to a majority of the population. The Bank’s support through the Telecommunication and Information and Communications Technology (ICT) Development project helped to increase tele density,18 decrease tariffs of key communication services, develop an effective legal and regulatory framework and increase the level of competition in the ICT sector. Coverage and affordability has increased significantly in remote and rural areas. Mobile subscribers per 100 people, increased from 8 percent to 66 percent and mobile network coverage across the country increased from 8 percent in 2009 to 89 percent in March 2015. This is a significant achievement given the logistical challenges of network rollout and maintenance in remote islands. The stable regulatory environment has facilitated the introduction of mobile banking, enabling financial inclusion of the previously unbanked. It is estimated that there are around 24,500 mobile banking users, including 15,500 previously unbanked, including people in all nine provinces, as well as Honiara. 31. IFC’s advisory services to expand access to finance through better financial infrastructure is making progress. IFC is developing regional credit information bureaus in those Pacific countries which do not have access to this facility. This resulted in the opening of the first credit bureau in Solomon Islands in February 2015. In addition, IFC is facilitating the roll-out of Bank of the South Pacific (BSP) and Australia New Zealand’s (ANZ’s) mobile banking models through training of users and improvement of business plans. These initiatives are expected to extend financial services to un- banked and under-banked customers in Solomon Islands. 32. IFC’s support to strengthen the business environment as envisioned during the CPS has not progressed. Only one regulatory reform “establishment of the credit bureau” out of three has been implemented. IFC is working with the SIG on various reforms that will support improvements in the business environment, including establishment of a public private partnership platform and reviewing 17 SIEA reported a net profit of US$ 11.5 million in 2015 on an operating income of US$58.2 million. 18 Teledensity is the number of telephone connections for every one hundred people living within an area. 8 the investment policy. However, more broadly, there is no ongoing support planned to implement this specific CPS objective. 33. Some progress has been made in strengthening community resilience to climate change and natural disasters. The Bank, through trust fund financing, is assisting in the selection, design and construction of targeted community and provincial led climate resilient infrastructure through the Community Resilience to Climate and Disaster Risk in Solomon Islands Project (CRISP). After a slow start, the first provincial-led program, a water supply system for the Nanglu community (Temotu Province), was completed in 2015. Four community-led sub projects are under construction and close to completion in Guadalcanal Province while 23 additional communities across Temotu and Guadalcanal provinces have been identified and had designs prepared. 34. Steps have been initiated to strengthen early warning and disaster preparedness capabilities. Emergency communication equipment and a seismic monitoring system are expected to be in place by the end of 2016. Disaster risk management (DRM) and Climate Change Adaptation (CCA) policy reform activities are underway including preparation of a draft revised DRM institutional framework. In addition, a Post Disaster Needs Assessment (PDNA) after the April 2014 flood was carried out with WBG assistance. The report assessed the socio-economic impact of the floods, including damage and losses in critical sectors of the economy, and identified priority needs with a particular focus on resilient reconstruction and costed activities where possible. Strategic Area 2: Improving Public Service Provision 35. Mixed results have been achieved in improving public expenditure management. Following a Public Expenditure Review (PER) in 2011, a Line Ministry Expenditure Analysis (LMEA) series was developed to support key ministries and central agencies in their capacity to analyze trends in expenditure against original budget allocations. During the CPS period, five LMEAs were prepared: for the ministries responsible for agriculture, education (two consecutive years), women and youth, and health. The Bank also supported expenditure management through its DPO series and the introduction of BOOST19 which is now updated on a yearly basis by the Ministry of Finance (MoF) 20. The Bank has provided technical support to budget preparation and improved financial management in the health sector, along with a range of assessments including a Health Sector Facility Costing Study (2014). The Ministry of Health and Medical Services (MHMS) has seen improvements in its operational management and resource allocation with 34 out of 35 divisions now submitting annual operational plans. An LMEA and costing of the National Education Action Plan (NEAP) supported the Ministry of Education and Human Resource Development (MEHRD) in assessing the costs of various policy options. 36. Significant progress has been made in delivering rural community infrastructure and services. The Bank’s support through the RDP helped to increase access to high priority, small scale economic and social infrastructure in rural areas. About 198,000 people benefitted from improved access to services such as education, health, energy, water supply and transport. The average travel time to access improved water supply sources was reduced by 13.5 percent and the number of villages 19 BOOST is an open budget portal is a Bank wide collaboration effort. 20 Solomon Islands is the first G7+ country to make their public expenditure datasets available in one consolidated file. 9 reporting satisfactory access to improved services21 has increased by 92 percent. Additional support provided under the RDP II will target an additional 63,099 beneficiaries comprising 87 percent of the program target, or 63 percent of Solomon Island’s rural population22. 37. Significant achievements have been made towards increasing access to employment opportunities for the urban poor. The Bank-supported REP, initiated after the GFC, has exceeded targets and generated over 645,000 person days of work, provided short term employment to over 12,000 people, transferred a total of US$2.83 million in wages and trained 11,125 people under the Pre-Employment Training component. It is effectively targeting vulnerable groups including unemployed women and youth, with 60 percent of the participants being women and 53 percent being youth between the ages of 16 to 29 years. 38. The Bank’s support in establishing a community grievance management capability at the village level is making early progress. The Community Governance and Grievance Management project started work in two provinces23. Community officers have been selected by host communities, recruited into provincial administrations and received orientation and specialist training. The program benefitted from significant analytical work24 on local disputes, drivers of conflict and the potential for empowering local authorities to regulate local disputes and to rekindle linkages with provincial and national authorities, including the police. Cross Cutting Issues 39. There has been some success in mainstreaming gender into the Bank’s ongoing portfolio. An impact evaluation25 found that the participatory approach of RDP had enabled women to influence decision-making more than other community projects and encouraged women to be more active in their communities. In 81 percent of villages surveyed, groups reported that women on the Subproject Implementation Committees (SIC) had participated more in village activities than before joining the SIC. Additionally, an innovative skills training program (the Training Women in SolTuna (TWIST)) supported by WB/IFC has provided financial literacy training to 400 women and men working in SolTuna - the largest non-government employer - with an expected eventual target of 1600 workers. 40. Nevertheless, gender mainstreaming has not been systematically addressed across the portfolio. An ongoing gender portfolio review has revealed that around one half of the projects have gender targeted interventions that include: i) advancing women’s equitable access to resources ; ii) increasing the numbers of women in local decision making; iii) strengthening gender awareness amongst the staff of PMUs through training, and, iv) gender and client sensitivity amongst front line service providers for Gender Based Violence. Some projects have gender interventions without prior gender analysis resulting in a limited understanding of the benefits and consequences, risks and opportunities. For example, a number of projects have targets for women in local decision making bodies and have neither anticipated nor prepared themselves to deal with the resistance that can result. Just over one third of the projects (37.5 percent) have a gender informed monitoring and evaluation framework with indicators that measure specific gender targets. Those that do measure gender specific 21 Calculated as a basket of services such as education, health, energy, water supply and transport 22 Rural population 415,000 according to 2009 Census. 23 Makira and Renbel. 24 Justice Delivered Locally: Systems Challenges and Innovations in Solomon Islands, World Bank, August 2013. 25 Evaluation of the Rural Development Program, Ananta Neelim and Joe Vecci, October 2013. 10 targets are limited to quantitative rather than qualitative measures so that the impact of interventions remains obscure. 41. The Bank program provided ASA support to SIG to improve sustainable and accountable delivery of key public services. Advisory support to public expenditure management reforms in the health sector, along with financial and economic reforms supported through the DPO series have been adequate in a post-conflict context. A recently released Poverty Profile has provided the basis for poverty targeting of the Government’s activities. More generally, the Bank’s engagements have not significantly addressed institutional sustainability, although the Community Governance and Grievance Management Project actively discussed ways to address it during preparation. Other than the recent requirement of the Government for designated accounts to be established in the Central Bank, there has been limited use of government systems. C. EVOLUTION OF PARTNERSHIPS AND LEVERAGING. 42. The WBG is a small partner in Solomon Islands and coordinates its efforts closely with others. The Bank has been engaged in close dialogue through the joint government-donor CEWG mechanism, helping to align those donors who provide both sector (health, education and infrastructure) and general budget support around a common economic policy framework. Following elections at the end of 2014, the incoming government has not engaged actively with the CEWGs on economic policy. 43. The government has developed a new Aid Management and Development Cooperation Policy. Both the policy and Partnership Framework are broadly aimed at bringing the recurrent and development budgets closer together to better reflect the recurrent cost implications of development programs. The policy and partnership framework mark a positive step in strengthening coordination and enhancing the effectiveness of development efforts. The government has also launched a twenty- year National Development Strategy (2016-2035) which in substance retains the primary objectives of the previous NDS, namely sustained and inclusive economic growth, poverty reduction, access to social services, resilient and environmentally sustainable development, and effective governance. It will be supported by a National Planning Act. 44. The WBG has leveraged significant financial resources to co-finance operations in energy, rural development, urban employment, infrastructure, and climate resilient infrastructure. The Bank is working closely with Australia, the EU and the International Fund for Agricultural Development (IFAD) on rural development initiatives. Australia has provided co-financing to the RDP II, Tina Hydro preparation costs, the Community Grievance and Governance project, and Bank-led efforts to introduce competition in the telecoms market. Japan is financing activities aligned to the CRISP and New Zealand is complementing activities under the Bank’s regional fisheries program. 45. The Bank is also working closely with IFC in the energy and fisheries sectors. The Bank is the lead agency supporting preparation of the TRHDP while IFC is working as a transaction advisor to the SIG. IFC’s investment in fisheries (SolTuna) complements IDA’s regional investment in the regulatory environment and offshore and coastal fisheries management. There is potential for mutual collaboration in the mining sector. 11 IV. EMERGING LESSONS 46. The Bank has a clear role as an independent partner, bringing global expertise, to small states such as Solomon Islands. This is particularly the case where the donor environment is dominated by several larger bilateral partners and where local capacity is limited. The WBG has played a critical role in supporting the preparation of the TRHDP, drawing upon a depth of experience and capacity that other partners would not have been able to access. It has also played an important role as a knowledge leader and convener in some sectors, able to prepare broad based platforms, such as the RDP, that other partners can support. It has played a key leadership role in the CEWG, providing independent technical input at times in the overall economic dialogue. 47. The Bank’s interventions need to be explicitly tailored to the very limited capacity in small states such as Solomon Islands. The implementation of projects in fisheries, climate resilient infrastructure and ICT faced several challenges such as weak government ownership, lack of knowledge of WBG procedures, and limited availability of skilled technical staff. Monitoring and evaluation systems have at times been overly complex, and have not always utilized the data collected for decision making. A greater effort needs to be made to ensure project readiness before implementation begins and to accommodate the very limited capacity on the ground to implement Bank procedures. Going forward, project readiness filters could help ensure projects will be up and running soon after effectiveness. Periodic joint portfolio reviews (government/implementing agency and Bank) can help identify bottlenecks and put in place actionable plans to improve project performance. More generally, and given the limitations on the Bank’s presence in the field, the program should continue to focus upon fewer operations, building on existing platforms, such as the RDP and REP, and avoiding small ad hoc activities that do not link to broader operational engagements with sufficient staffing. 48. Complex issues such as land and gender have been more effectively addressed through project /program modalities than through stand-alone interventions. While the complexities of reaching agreement with landowners to utilize customary land for development has been a significant challenge in Solomon Islands, the TRHDP has worked with indigenous leaders to identify rightful landowners and negotiate agreements for acquisition and compensation. Government engaged intensively with project communities over a period of five years to define a process that would be satisfactory to landowners and in line with the legal provisions. The process is now being used as an example for other development projects and may ultimately result in a modification of the legal provisions for land acquisition. On the other hand, implementation of a small Institutional Development Fund (IDF) grant to support front line service providers for victims of GBV, suffered from limited World Bank implementation support, or linkages to the wider portfolio. 49. The programmatic DPO approach in fragile states is helpful in maintaining a policy dialogue with the government. The budget support operations were embedded in the CEWG policy dialogue, drew from previous analytical work and were complemented by technical assistance. The Bank’s advisory and technical assistance ensured an ongoing dialogue with the government on public financial management and economic issues. Budget support in fragile states should continue to be complemented by evidence based policy dialogue and technical assistance. 50. At the same time, best practice models in upstream government reform programs have often not achieved the expected service delivery improvements downstream. Reforms driven through central ministries such as Ministries of Finance, Justice or the Public Service, have not always 12 been amenable to the local political economy and geographic challenges of an environment such as Solomon Islands. While best practice models have been adopted in various areas, including PFM, they have not always been well understood and implemented by line agencies and lower levels of government. Experimenting with problem based approaches, such as the Community Governance and Grievance Management project, which is using a bottom up approach to justice issues, rather than attempting to reform the overall legal/judicial system, has opened space to consider second best but sometimes more practical solutions to service delivery problems. A similar problem based approach to service delivery in the health sector is being explored. V. ADJUSTMENTS TO THE COUNTRY PARTNERSHIP STRATEGY AND FUTURE WBG PROGRAM 51. The strategic focus and expected results of the CPS remain relevant for the remainder of the strategy period. The CPS is fully aligned with the Government’s recently launched National Development Strategy (NDS) 2016-203526. The CPS continues to address WBG’s twin goals objective of reducing poverty and promoting shared prosperity through a strong focus on inclusive growth and delivery of services to rural communities. A Systematic Country Diagnostic (SCD) will be conducted in FY17 to inform the next CPF. 52. The WB and IFC will continue to collaborate over the remainder of the CPS period, including in: (i) the TRHDP through the Bank’s technical support and financing and IFC’s transaction support to the government; (ii) IFC’s investment in SolTuna will be complemented by IDA’s regional investment in oceanic and coastal fisheries management; and, (iii) payment system development activities. 53. The WBG will deepen its engagement in the energy sector through the remainder of the CPS, through its support to the proposed TRHDP and ongoing support for operational efficiency and financial sustainability of Solomon Power. The TRHDP is a high priority transformational investment that aims to significantly reduce the dependency of Solomon Islands on diesel generation as well as to improve the reliability of its supply. The project will be complemented by a parallel Community Benefit Sharing project which will provide support to effectively manage benefit streams from the TRHDP Project for affected communities. Successful implementation of the TRHDP would provide a strong signal to foreign investors that large-scale projects are viable in Solomon Islands. 54. The Bank will build on the progress made in ensuring the financial and commercial stability of Solomon Power by addressing widespread access shortfalls. A new Electricity Access Expansion project will be financed through a multi donor trust fund focusing on scaling up energy services to unconnected households in rural, peri-urban and urban areas – through development of mini and micro grid solutions. The project will support Solomon Power to deliver individual household connections through an Output Based Aid (OBA) financing scheme. The proposed program could significantly increase the number of households connected to the grid. 55. Building on momentum in the final stages of the REP, and responding to strong interest from the SIG, the Bank is preparing a successor project to the REP. The second phase will strengthen its focus on community driven urban services and small infrastructure projects directed at vulnerable urban communities in Honiara – with a possible expansion to other urban areas in Solomon 26 The Solomon Islands National Development Strategy (2016-2035) was officially launched in April 2016. 13 Islands. The program is expected to be delivered in FY18 under the IDA18 financial cycle, with additional financing in IDA17 helping to bridge to a new scaled up project. 56. Continuing to address rural livelihoods and access to services is important to reducing poverty. The ongoing second phase of the RDP will continue to support community infrastructure in rural areas, and strengthen linkages between small holder farming households and markets. In particular, the program will assist farming households to engage in productive partnerships with commercial enterprises. 57. Improving alignment of rural infrastructure programs and lessons across the portfolio will be addressed during the remaining CPS period. The RDP II and CRISP both support community based infrastructure in rural areas, while the Community Governance and Grievance Management project also works at community levels. A focus of the remaining CPS period should be to pursue opportunities for consolidating community based investment activities within the RDP and CRISP, and strengthening links with provincial government systems. In addition, the team will continue to build upon the lessons learned from projects such as the TRHDP with regard land management and benefit sharing, to ensure engagements in areas such as mining and fisheries are fully informed. 58. Scaling up implementation in fisheries will continue in the remainder of the CPS period. IFC investments in SolTuna fish processing will help to strengthen the operational efficiency of the SolTuna plant and support the flow of benefits from the fishing industry to rural communities. Additionally, IFC is considering supporting the National Fisheries Development (NFD) in purchasing a purse seine vessel to strengthen its fishing operations. The Bank will focus upon enhancing the implementation pace of the complementary IDA-financed PROP. 59. IFC is working with the MFMR to explore opportunities for private sector participation in the development of onshore processing facilities in Malaita (Bina Harbour). IFC has commissioned technical and market pre-feasibility studies to estimate the potential cost of construction of a tuna cannery and wharf and has examined scenarios with regard to markets and fisheries management. Further support to MFMR is envisaged to support their mandate in convening relevant stakeholders with an ultimate goal of launching a national Bina Harbor project. The TRHDP modality may provide useful guidance in advancing this effort 60. Building on initial progress, the Bank will support institutional and capacity development in the mining sector. This work will focus initially on updating Solomon Islands’ Mining Policy and legislation, and supporting the government in revising institutional arrangements to support improved governance in the sector. The Bank will also explore financing opportunities under the new Extractives Global Programmatic Support Facility (EGPS) to support the next stage of EITI implementation as well as legal and technical strengthening of the mining sector. Cross-Cutting Areas: 61. The Bank will support Institutional Resilience through selective ASA activities. The Bank will continue to provide knowledge and technical support to improve the efficiency and allocation of resources in the health sector for improved service delivery. Further analysis may be undertaken of the drivers of poverty and spatial dimensions to support first, better targeting of support under Bank financed programs such as the RDP, and, ultimately, better targeting of government poverty reduction efforts. In the macro and fiscal management areas, the Bank will continue to provide just in time 14 policy notes in areas such as growth, revenue, and national planning legislation. A broad program of support in the governance area is emerging with interest from government and partners in supporting a problem driven approach to bottlenecks in service delivery (beginning with the health sector), potential inputs to the review of the Provincial Government Act, and analysis and recommendations on emerging issues in public sector remuneration. The Bank will also undertake a review of government systems to identify some discrete areas where a closer alignment with Bank operations may be built over time, including audit. 62. Gender mainstreaming will be rolled out to the Bank’s ongoing and future portfolio. The ongoing gender portfolio review will provide a baseline for gender informed work in the Bank portfolio. A more structured approach to mainstreaming gender will likely include: a systematic gender analysis for all projects to identify opportunities and issues early on; inclusion of gender experts in design and supervision teams; and enhanced monitoring of gender outcomes and impacts, including through use of beneficiary assessments to capture the qualitative dimensions of gender impacts. 63. The strategic areas of the CPS remain relevant to Solomon Islands’ current development strategy. Nevertheless, some specific changes to the results matrix are recommended27:  The number of outcomes has been reduced from 13 to 10 to better reflect the actual scope of the WBG’s engagement.  Macro fiscal stability and public expenditure management outcomes (1 and 9) have been revised and merged into one outcome to better reflect the program to improve the efficiency of public expenditure management.  Outcomes, targets and milestones for the mining sector (outcome 2) have been modified or dropped to add realism and reflecting the lack of funding for further activities.  The outcome and indicators related to the fishing industry (outcome 3) have been modified to reflect clear linkages with the IFC investment.  The energy sector outcome (outcome 5) and indicators have been modified to ensure consistency with the ongoing support program. The revised matrix refrained from adding new indicators from the proposed TRHDP and Energy Access projects as implementation of these projects will start towards the end of the CPS period.  Agriculture and rural infrastructure outcomes (4 and 10) have been revised and indicators and milestones have been modified to reflect the ongoing RDP.  Strengthening Business Climate outcome 7 has been dropped as there are no specific activities in the CPS to address this objective.  The outcome for the CRISP (outcome 8) has been simplified and made more consistent with the ongoing program. One new indicator has been added.  Access to services for survivors of GBV (outcome 13) has been dropped due to very limited progress and closure of the IDF Grant for Improving Services for Victims of Gender-Based and Domestic Violence Project. 64. Financing: The CPS period spans two IDA replenishment periods (IDA16 covering FY12- 14) and IDA17, covering FY15-17). Under IDA16, Solomon Islands had an allocation of US$20 million (SDR 13.5 million) which was fully committed. The current IDA17 allocation is SDR17.6 million (approximately US$25.0 million) of which US$11.5 million (US$9.2 million of grants and 27 The updated results matrix including the updated plan of activities is shown in Annex 1. The changes to the results matrix are explained in Annex 2. 15 US$2.3 million of credit) have been committed. This leaves approximately US$13.5 million to be programmed for the remainder of the CPS period. In addition, US$6.4 million was leveraged from the regional IDA program for the PROP and US$6.7 million in CRW funds for flood related activities. It is anticipated that the remaining IDA credit of US$ 11.2 million will support TRHDP, while a US$1.9 million grant would bridge the Rapid Employment Project to IDA18. The remaining US$2.8 million credit from the CRW will be used for the TRHDP. A small grant of US$2.5 million has been secured from the Global Partnership for Output Based Aid to pilot the Energy Access Project. The WBG will begin preparation of a new programmatic DPO series and the Second Phase of REP II during FY17 for delivery in the next Country Partnership Framework (CPF) cycle under IDA 18. Table 1: CPS Ongoing and Planned Program of Activities CPS Engagement Areas IDA/TF Financing ASA IFC Economic Resilience  Sustainable Energy  Mining TA (ongoing)  SolTuna Investment (ongoing)  Economic monitoring and (ongoing)  Tina River Hydro dialogue (ongoing)  NFD Investment Development Project (proposed) (proposed)  Transaction Advice for  Tina River Hydropower TRHDP (ongoing) Benefit Sharing (proposed)  Electricity Access Expansion (proposed)  PROP Solomon Islands (ongoing)  Community Resilience to Climate and Disaster Risk (ongoing)  Increasing Resilience to Climate Change and Natural Hazards (ongoing)  Rural Development Program II Agriculture component (ongoing) Service Delivery  Rapid Employment Project  Justice Delivered Locally (ongoing) (complete)  Rural Development Program II Community Infrastructure Component (ongoing)  Community Governance and Grievance Project (ongoing) Institutional Resilience  Poverty Assessment (complete)  Poverty Mapping (proposed)  Just in Time policy notes on pay reform, fiscal sustainability, (ongoing)  Health PFM support (ongoing)  Health Governance Diagnostic (proposed)  Systematic Country Diagnostic (programmed) 16 VI. RISKS TO THE COUNTRY PARTNERSHIP STRATEGY PROGRAM 65. Most of the risks identified during the preparation of the CPS remain relevant. Based on the Systematic Operations Risk Rating Tool (SORT) analysis, the overall risk for CPS implementation remains Substantial. Table 2: Summary Systematic Operations Risk Rating Tool Risk Categories Ratings (H, S, M or L) Political and Governance S Macroeconomic S Sector Strategies and Policies M Technical design of project and program S Institutional capacity for implementation and sustainability H Fiduciary S Environment and Social M Stakeholders L Other S Overall rating S *H= High; S=Substantial; M= Moderate and L=Low 66. Political and Governance: A history of frequent changes of government and shifting allegiances in parliament suggest that the political scene will remain fluid during the CPS period. In addition, the full drawdown of the RAMSI28 Participating Police Force by mid-2017 and the limited re-arming of the Solomon Islands police will be a significant test for the government in the upcoming period. Over time, revisions to the delegated authority of provincial governments envisaged under a review of the Provincial Government Act, may place pressure on limited delivery and oversight capacity of provinces, however this is not likely to take effect during the remaining CPS period. Risks associated with political volatility are likely to impact the effectiveness of the policy dialogue, as well as some areas of sensitive engagement including the mining sector. The Bank will mitigate these risks by ensuring a broad based policy dialogue across the political spectrum, close working relationships with senior civil servants, and engagement modalities that encourage incremental change with broad ownership building. 67. Macroeconomic: The country’s macroeconomic outlook is subject to considerable risks inherent in a small, isolated and geographically dispersed economy. There are considerable risks to economic growth especially in relation to mining and logging. The country’s only gold mine remains closed and the chances of its re-opening are limited given current low gold prices, risks associated with the Tailings Storage Facility, and the absence of a credible developer. At the same time, the logging industry is expected to be adversely affected by the rapid depletion of forestry resources over the medium-term. The government has put forward ambitious policy targets, providing for significant increases in spending on rural infrastructure and rural development. If fully executed, this will place pressure on public finances over the CPS period. Deficits are expected to be financed by drawing on cash reserves built up from surpluses in previous years, as well as external loans. The Bank along with other development partners, and the IMF, will support government through policy dialogue and technical assistance to manage the fiscal situation. 28 Regional Assistance Mission to Solomon Islands 17 68. Institutional capacity for implementation and sustainability: The availability of government technical, financial and human capacity could undermine project outcomes and CPS program implementation. The Bank has strengthened its capacity in the Sydney office to provide hands on implementation support to PMUs. This will be supplemented, as possible, by staff support including strengthening of local staff operational skills. The Bank will work closely with implementation agencies to address institutional and project specific issues to mitigate implementation risks through: (i) selectivity in areas where the government’s ownership is clear; (ii) avoiding complex designs; (iii) exploring stronger linkages with government in some areas such as RDP and REP; and, (iv) provision of technical assistance and implementation support. More generally, work undertaken by the Pacific Country Management Unit and the Fragile States Cross Cutting Solutions team on delivery mechanisms in fragile states, will provide further areas for consideration with regard simplification for small, fragile states. 69. Fiduciary Risks. Fiduciary risks have decreased over the course of the CPS with the introduction of the Public Financial Management Act, and could decrease further if implementing regulations are adopted. Nevertheless, fiduciary risks remain rated as substantial. While progress has been made, procurement and financial management systems continue to be limited. The ongoing WBG projects are largely separate from Government systems. The Bank will continue to provide fiduciary support to line ministries and project management units with regard supporting capacity to implement WBG procedures, and explore scope for increasing alignment with government systems in some areas, including audit. 70. Other Exogenous risks: Solomon Islands’ vulnerability to natural hazards and climate change remains a constant threat. Most recently, flash floods in April 2014 led to at least 23 deaths, and impacted 52,000 people. Total damages and losses from the floods were estimated to at US$108 million or 9.2 percent of GDP. These risks are being partially mitigated through the Bank’s continued work on CCA and disaster risk reduction in communities, as well as work at the macro level to ensure sufficient fiscal buffers. 18 Annex 1: Updated CPS Results Matrix Medium Term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals International Partners Strategic Area 1: Strengthening Economic Resilience Improving targeting  Budget allocations Outcome 1: Improved efficiency  CEWG sustains Govt-donor dialogue Financing: and management of and processes within of expenditure management as on economic and PFM reforms DPO series (closed) government line ministries not measured by: linked to budget support. resources supporting sectoral ASA: priorities. 1.1 Number of ministries  Line ministry expenditure analysis CEWG dialogue (ongoing), (NDS 3, NDS 4,  No systematic spending over 10% of their original budget completed for at least 2 additional economic monitoring NDS 8) budget process for allocations decreases from a baseline ministries (from 2 current) (ongoing), Line Ministry planning, execution, of 10 in 2011 through to 2017. Expenditure Analysis and reporting in key (ongoing), Health Sector ministries. 1.2 Number of ministerial Support Program TA expenditure briefs included in Poverty mapping (indicative) Volume 1 of the annual budget Policy Notes on pay reform, documentation produced using new fiscal sustainability, (indicative) data analysis tools (baseline = zero, target is 28) Economic  Over dependence Outcome 2: Strengthened  First EITI report produced by May ASA: Diversification for upon limited non- regulatory framework in the 2014 Mining TA second phase job growth renewable mining sector: (ongoing) (NDS 5) resources; Direct Support Program for  Poor returns to 2.1 EITI validation achieved CSO engagement in EITI govt. and weak Baseline= candidate status, community Target = validation process engagement in recognizes moderate progress. natural resource 2.2 Updated mineral development developments; law and regulations in place. Baseline: No mineral policy. Target: Mineral Policy in place and amendments to the Mining law .drafted. Economic  Semi-subsistence Outcome 3: Increased production  Data collection on economic Financing: Diversification for agriculture capacity of fishing industry: opportunities for women in fisheries IFC investment in SolTuna job growth provides the food 3.1 SolTuna employees increase (G) (ongoing) (NDS 5) and income basis from 1,473 to 2,000, 65% of which Pacific Regional Oceanscape for most of the are women (G) Program (PROP) (ongoing) population. ASA: 19 Medium Term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals International Partners 3.2 SolTuna processing plant Pacific Gender Indicators in capacity increased from 90 MT per Fisheries (closed) day to 110-115 MT per day by 2017 Economic  Semi-subsistence Outcome 4: Promote agricultural Financing: Diversification for agriculture commercialization among small Second Rural Development job growth provides the food holder farmers as measured by: Program (ongoing) (NDS 5) and income basis 4.1 Number of agribusiness ASA for most of the partnerships established Agriculture Public Expenditure population. Baseline: 0 (2015) Review (indicative) Target: 46 (2017) Improving  Low rates of access Outcome 5: Improved reliability  Electricity tariffs reviewed in FY15 Financing: infrastructure and to and high costs of and efficiency of energy supply and new tariffs implemented by FY16. Solomon Islands Sustainable lowering costs electricity. 5.1 Average outage duration for  Purchasing power agreement for Tina Energy (ongoing) each customer served on the Hydro Initialed. Tina River Hydro Development (NDS 6) Honiara grid reduced from 10 (proposed) to 3 hour Community Benefit Share 5.2 Maintain or reduce domestic (proposed) tariffs (US85c/kwh) Electricity Access Expansion 5.3 System losses reduced from (proposed) around 20% to 12% by 2017 ASA IFC Transaction Advisory for Tina River Hydro Project (ongoing) Donor Partners: Pacific Regional Infrastructure Facility Trust Fund (PRIF), DFAT, GPOBA Improving Low rates of access to Outcome 6: Improved access to  New ICT policy framework Financing: infrastructure and and high costs of and reduced cost of ICT services as formulated and adopted Telecommunications and ICT lowering costs telecommunications measured by  Independent telecommunications Development Project ongoing 6.1 Increase in mobile penetration regulator maintained and financed and new (closed) (NDS 6) from 55% to 80% of population. 20 Medium Term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals International Partners 6.2 Decrease in tariffs for local mobile calls, calls to Australia and 128kpbs internet access ) Strengthen Climate change and Outcome 7: Improved resilience to  18 Resilient Community-Led Rural Financing: resilience to impact disaster risks have climate change and natural hazards Pilot Investment projects completed Increasing Resilience to of natural hazards serious impact on as measured by (G) Climate Change and Natural and climate change economy and 7.1 Disaster Risk Resilience and  Establishment of a climate and Hazards Project (CRISP) (NDS 7) livelihoods climate change adaptation disaster risk information system (G) ASA: incorporated into national and Pacific Catastrophe Risk provincial planning baseline in at Assessment and Financing least two provinces (baseline = Initiative (PCRAFI) (closed) zero) Post Disaster Needs 7.2 Number of people with access Assessment for Solomon to disaster risk and adaption Islands Floods in Honiara investments29 in targeted rural (closed) communities Baseline: 2000 (2015) Donor Partners: Target: 15,000 (2017) Japan (PHRD); Global Environment Fund (GEF); GFDRR Strategic Area 2: Improving Public Service Provision Improving access to  Community Outcome 8: Increased access to  300,000 beneficiaries (50% women) Financing: services and living infrastructure infrastructure and services30 in of completed community Solomon Islands Rural conditions in rural provided by external rural communities as measured by development sub-projects (G) Development Program (closed) areas agencies is often 8.1 At least a 10% reduction in  Community sub-projects completed Second Rural Development poorly maintained travel time to access rural services in all rural wards, except in Renbel Program (ongoing) (NDS 1, NDS 5) by communities such as: Pre-primary and primary Province ASA:  Geography makes it school, non-water supply health Rural Community Infrastructure difficult to provide service, and water supply (G)  Participatory planning incorporated and Service Delivery services to large into provincial planning system in 5 8.2 Additional number of (completed) parts of the country, provinces household members have access to Agriculture Public Expenditure and for those areas, community infrastructure or Review (indicative) the cost is high services Donor Partners: Baseline: 267,509 (o/w 90,473 Australia (AusAID), EU, female) (2015) International Fund for 29 Investments such as community shelters, water supply and storage systems, earthquake/cyclone retrofit strengthening building, foundation raising for flood alleviation and shoreline protection systems. These investment will be implemented up to four provinces. 30 It includes water supply, health, education facilities, transport, energy etc. 21 Medium Term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals International Partners Target: 352,509(o/w female: Agricultural Development 132,973) (IFAD), FPCR Core Multi- donor Trust Fund. Increase  Limitations in the Outcome 9: Increased access to  At least 5,000 beneficiaries reached, Financing: employment formal labor employment opportunities for averaging at least 30 days of Rapid Employment Project opportunities for the market; urban population as measured by employment per year. (G) (ongoing) urban poor,  Disconnects 9.1 At least 300,000 additional Second Rapid Employment especially youth and between skills labor days completed (in addition Project (indicative) women. outcomes from to 324,000 completed by 2012); Donor Partners: (NDS 1, NDS 2, education and labor 50% of beneficiaries are women, Pacific Regional Infrastructure NDS 5) market needs in 33% youth. (G) Facility Trust Fund (PRIF), both the formal and State and Peace Building Fund informal economy (SPBF)  Urban poor, especially youth and women, are disconnected from the economy and society. Improved  Weak state and Outcome 10: Improved  Community officer pilot established Financing: responsiveness of non state dispute government support for a in 4 provinces. Community Governance and law and justice, and resolution and functioning local justice Grievance (ongoing) protection of women conflict mechanisms as measured by ASA: management Justice Delivered Locally (J4P) (NDS 1, NDS 2, capabilities. 10.1 Support for community Managing Grievance and NDS 8)  Unresolved officers reflected in budgetary Conflict in Solomon Islands grievances allocations. (completed) potentially Baseline = zero Donor Partners: AusAID, manifesting as Target = 4 provincial government Institutional Development Fund conflict. (IDF) 22 Annex 2: Summary of Changes to Original CPS Results Matrix of Solomon Islands CPS (FY13-FY17) Current CPS Outcome Indicators/Milestones Proposed Changes to Outcome Comments Indicators/Milestones Outcome 1: Enhanced macroeconomic and fiscal Revised outcome and indicators. This outcome has been combined with outcome stability. Improved efficiency of expenditure management. 9 and revised to reflect the Bank’s engagement  Number of ministries spending over 10% of (both at policy level, analytical and project 1.1 The number of ministries that do not deviate by their budget allocations decreases from a level) in order to be more consistent. more than 10% from original allocations approved baseline in 2011 through 2017. by Parliament increases from 9 to 14. New Indicator: Milestones:  Number of ministerial expenditure briefs  CEWG sustains Govt-donor dialogue on economic included in Volume 1 of the annual budget and PFM reforms linked to budget support. documentation produced using new data  Line ministry expenditure analysis completed for analysis tools (baseline = zero, target is 28) at least 2 additional ministries (from 2 current) Outcome 2: Enhanced regulatory framework, public Revised outcome and indicators: Outcome has been revised to make it more sector capacity and community benefits in the mining Strengthened regulatory framework in the mining focused and identifying clear linkages with the sector sector. ongoing program. 2.1 EITI certification achieved (baseline is candidate  EITI validation achieved Both targets for 2.1 and 2.2 have been revised. status, target is certification)  Baseline: candidate status 2.2 Updated mineral development law and regulations Target: validation progress recognizes moderate The target for EITI certification achieved in place (baseline – outdated law, title progress (indicator 2.1) has been revised to EITI management, fiscal regime and landowner  Updated mineral development law and validation as it is unlikely that full EITI engagement mechanisms). regulations in place certification will be achieved by the end of the CPS process given inherent challenges faced in Baseline: No mineral policy Milestone: the process, including poor cooperation from Target: Mineral policy in place; amendments to the  First EITI report produced by May 2014 mining companies. Mining Law drafted. Dropped milestone: The milestones have been dropped as there is  Establishment and initial staffing of a Mining no funding to monitor the work in this area. Development Authority  Regulations that require Community Development Agreements with indigenous landowner Outcome 3: Increase local economic benefits from Revised outcome and indicators: The outcome has been revised to reflect clear fishing industry by increased on-shore production Increased production capacity of fishing industry linkages with the IFC investment. capacity New indicator: 3.1 SolTuna processing plant from 7,223 to 20,465  SolTuna employees increase from 1,473 to Indicators from the regional PROP project were metric tons per year 2,000, 65% of which are women (G) not added as it will not show any result by the end of the CPS period. 23 Current CPS Outcome Indicators/Milestones Proposed Changes to Outcome Comments Indicators/Milestones Milestones:  SolTuna processing plant capacity increases  SolTuna employees increase from 1,473 to 2,000, from 90 MT per day to 110-115 MT per day 65% of which are women (G) by 2017.  Data collection on economic opportunities for Dropped Indicators: women in fisheries (G) 3.1 SolTuna processing plant from 7,223 to 20,465 metric tons per year 3.2 SolTuna taxes paid increase from $0 to US$2.1 million per year 3.3 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 Revised outcome: The Agriculture outcome and indictors have (cocoa and coconut). Promote agricultural commercialization among been aligned to be more consistent with 4.1 Increased cocoa production from 6,000 to 8,000 small holder farmers ongoing RDP program. metric tons/ year New outcome indicators: 4.2 At least a 20% increase in the percentage of  Number of agribusiness partnerships households who have received and found established agriculture advice useful (baseline is zero, impact Baseline: 0 (2015) evaluation will measure response to advice Target: 46 (2017) provided) Dropped outcome indicators: 4.3 30% increase in turnover of (58) RDP-supported  Increased cocoa production from 6,000 to rural businesses 8,000 metric tons/ year  At least a 20% increase in the percentage of Milestones: households who have received and found  Agriculture extension services for cash crops agriculture advice useful (baseline is zero, provided by Ministry of Agriculture and Livestock impact evaluation will measure response to increased from 7800 to 10,000 farmers, 40% of advice provided) which are women (G)  30% increase in turnover of (58) RDP-  Agriculture extension services for food crops supported rural businesses increased from 8100 to 10,000 farmers, moving Dropped Milestones: from 60% of which are women (G)  Agriculture extension services for cash crops provided by Ministry of Agriculture and Livestock increased from 7800 to 10,000 farmers, 40% of which are women (G)  Agriculture extension services for food crops increased from 8100 to 10,000 farmers, moving from 60% of which are women (G) 24 Current CPS Outcome Indicators/Milestones Proposed Changes to Outcome Comments Indicators/Milestones Outcome 5: Lower cost, more reliable electricity, from Revised outcome: Outcome and outcome indicators have been cleaner energy sources Improved reliability and efficiency of energy supply slightly revised to make it more clear and 8.1 Average outage duration for each customer served consistent with the ongoing program. on the Honiara grid reduced from 10 to 3 hour New Indicator: Revised matrix refrained from adding any new 5.2 Maintain or reduce domestic tariffs (US85c/kwh)  SIEA system losses reduced from around 20% indicators from the proposed Tina River Hydro to 12% Power Development project and Energy Access 5.3 Power Purchase Agreement signed between Dropped outcome indicator: project. By the time project approves and hydropower developer and SIEA  Power Purchase Agreement signed between implementation starts it will be close to the Milestone: hydropower developer and SIEA CPS period to show any result.  SIEA system losses reduced from around 20% to Dropped milestone: 12%  Construction begins on Tina River Hydropower  Electricity tariffs reviewed in FY14 and new tariffs generation facility implemented by FY15. New milestone:  Construction begins on Tina River Hydropower  Power Purchase Agreement initialed between generation facility hydropower developer and SIEA Outcome 7.Strengthen the business climate Dropped. The WBG does not have any ongoing through: support to implement this objective. Implementation of additional 3 (from baseline of 5) doing business regulatory reforms. Milestones: Public – private Dialogue platform with Dept. of Commerce constituted. Outcome 8: Improved resilience of rural communities Revised outcome The outcome has been slightly revised to be to climate change, natural hazards and catastrophic Improved resilience to climate change and natural more consistent and results oriented with the disasters hazards ongoing program. One new indicator has been 8.1 DDR/CCA incorporated into national and New outcome indicator added to the existing indicator. provincial planning baseline in at least two  Number of people with access to disaster risk provinces (baseline = zero) and adaption investments31 in targeted rural 8.2 Budget and financial regulations accommodate communities disaster risk provisions. (baseline = zero) Baseline: 2000 (2015) Target: 15,000 (2017) Milestones:  18 Resilient Community-Led Rural Pilot Dropped outcome indicator: Investment projects completed (G) 31 Investments such as community shelters, water supply and storage systems, earthquake/cyclone retrofit strengthening building, foundation raising for flood alleviation and shoreline protection systems. These investment will be implemented up to four provinces. 25 Current CPS Outcome Indicators/Milestones Proposed Changes to Outcome Comments Indicators/Milestones  Establishment of a climate and disaster risk  Budget and financial regulations accommodate information system (G) disaster risk provisions. (baseline = zero) Outcome 9. Improved expenditure management and Combined with outcome 1. This outcome has been combined with outcome poverty focus in key sectors, including health and 1 in order to build clear linkages with the education. Bank’s ongoing program of activities. 9.1 Number of budget submissions and ministry expenditure reports that use new data analysis tools (baseline = zero, target is 3) Milestones:  Results of HIES, HIES poverty profile, line ministry expenditure analysis and health sector financing analysis fed into government policy and budget planning processes Outcome 10: Capacity for collective action and Revised outcome and indicators: This outcome has been slightly revised to be increased access to services for rural communities. Increased access to infrastructure and services in more consistent with the ongoing RDP 10.1 At least a 10% reduction in travel time to access rural communities program. Indicators from the rural access rural services such as: Pre-primary and primary New indicator: outcome indicators have been revised and school, non-water supply health service, and water  Additional number of household members added in outcome 10. supply (G) have access to community infrastructure or services Household with access to community 10.2 At least a 5% increase in capacity for collective Baseline: 267,509 (o/w 90,473 female) (2015) infrastructure and services include water action Target: 352,509(o/w female: 132,973) supply, health, education facilities, transport 10.3 At least a 5% increase in pre-primary and primary and energy. school attendance (G) 10.4 At least a 10% increase in participation in Dropped indicators: community decision-making on projects (G)  At least a 5% increase in capacity for collective Milestones: action  At least a 5% increase in pre-primary and  300,000 beneficiaries (50% women) of completed primary school attendance (G) community development sub-projects (G)  Community sub-projects completed in all rural wards, except in Renbel Province  Participatory planning incorporated into provincial planning system in 5 provinces Outcome 11: Increased access to employment No changes. A second rapid employment project is under opportunities for urban population preparation but no new indicator has been added as this will be an FY18 delivery. 26 Current CPS Outcome Indicators/Milestones Proposed Changes to Outcome Comments Indicators/Milestones 11.1 At least 300,000 additional labor days completed (in addition to 324,000 completed by 2012); 50% of beneficiaries are women, 33% youth. (G) Milestones 5 At least 5,000 beneficiaries reached, averaging at least 30 days of employment per year. (G) Outcome 12: Government support for establishment of Revised outcome: The outcome has been slightly revised to align functioning local justice mechanisms. Improved government support for a functioning with the ongoing program. Original indicator 12.1 Support for community officers reflected in local justice mechanisms and milestone remain unchanged. budgetary allocations.(baseline – zero) Milestones 6 Community officer pilot established in 4 provinces. Outcome 13: Enhanced access to services for Dropped outcome and indicator The program has closed and there has been survivors of GBV limited progress. 13.1 Pilot delivery modality complete and scaling up (baseline and targets TBD based on GBV service gap analysis, see milestones). Milestones:  GBV Service gaps identified, agreed and communicated across relevant agencies and at least one pilot delivery modality underway. 27 Annex 3: Summary of Progress Towards CPS Objectives Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners Strategic Area 1: Strengthening Economic Resilience Macro-fiscal stability  Weak macro-economic Outcome 1: Enhanced  CEWG sustains Govt-donor Financing: and quality of management and pro macroeconomic and fiscal stability. dialogue on economic and DPO series (closed) spending cyclical spending has PFM reforms linked to contributed to fiscal gap 1.1 The number of ministries that do budget support. ASA: (NDS 5, NDS 8) and deteriorating balance not deviate by more than 10% Update: Not on track CEWG dialogue, of payments. from original allocations Prior to the 2014 elections, there economic monitoring,  Poor link between approved by Parliament was strong government Line Ministry appropriation/allocation increases from 9 to 14. engagement on economic and Expenditure Analysis, and outputs Update: Not on Track PFM reforms through the CEWG Health Sector Support Ministries within 10% of original process. The Bank had based two Program TA allocations decreased from 10 DPOs (2012 and 2013) on a ministries in 2013 to 7 in 2014. jointly agreed reform matrix. Donor Partners: IMF, While this indicator has not been Following elections, the SIG has AusAID, New Zealand, achieved in the strict sense, there shown limited engagement with EU have been measurable improvements the CEWG, in budget execution when excluding  Line ministry expenditure supplementary appropriations. analysis completed for at least 2 additional ministries (from 2 current) Update: Achieved LMEAs have been prepared for the ministries responsible for agriculture, education (two consecutive years), women and youth and health. Economic  Over dependence upon Outcome 2: Enhanced regulatory  First EITI report produced Financing: Diversification for limited non-renewable framework, public sector capacity by May 2014 IFC investment in job growth resources; and community benefits in the Update: Achieved SolTuna (NDS 5)  Poor returns to govt and mining sector EITI reports were published in Pacific Regional weak community 2012, 2013 and 2014. Oceanscape Program engagement in natural 2.1 EITI certification achieved  Establishment and initial (PROP) (FY14) resource developments;. (baseline is candidate status, target is staffing of a Mining New Mining TA second  Semi-subsistence certification) Development Authority phase (FY14) agriculture provides the Update: On track. Update: Not on track ASA: 28 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners food and income basis Solomon Islands attained EITI  Regulations that require IFC Public-Private for most of the candidate status in June 2012 Community Development Dialogue, Women in population. and has published EITI reports Agreements with indigenous fisheries and Mining, in 2012, 2013 and 2014. It is landowner Agriculture sector undergoing EITI validation scoping process. 2.2 Updated mineral development Donor and Private law and regulations in place Sector Partners: (baseline – outdated law, title SolTuna/Tri-marine, management, fiscal regime and AusAid, IFAD, State and landowner engagement Peace-building Fund mechanisms). Update: On track MMERE working with WBG team to draft National Mineral Policy and related regulations. Outcome 3: Increase local economic  SolTuna employees increase benefits from fishing industry by from 1,473 to 2,000, 65% of increased on-shore production which are women (G) capacity Update: On track. SolTuna currently employs 1818 3.1 SolTuna processing plant from workers 7,223 to 20,465 metric tons per year Update: On track,  Data collection on economic 23570MT processed in 2014 opportunities for women in fisheries (G) Update: Achieved, 3.2 SolTuna taxes paid increase A study has been delivered in from $0 to US$2.1 million per 2014 but of poor quality. year Update: On track. 21.5 SBD in payments to SI government in 2016. 29 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners 3.3 SolTuna wages and benefits paid increase from US$3.3 million to US$6.2 million (G) Update: On track. No data yet. Outcome 4: Increased productivity  Agriculture extension in key cash crops (cocoa and services for cash crops coconut). provided by Ministry of Agriculture and Livestock 4.1 Increased cocoa production from increased from 7800 to 6,000 to 8,000 metric tons/ year 10,000 farmers, 40% of Update: Off track which are women (G) 4,975 metric tons produced for Update: Achieved exports in 2014 (down from 6,136 12,290 people benefitted for metric tons in 2011) agricultural services for cash 4.2 At least a 20% increase in the crops under RDP. percentage of households who  Agriculture extension have received and found services for food crops agriculture advice useful increased from 8100 to (baseline is zero, impact 10,000 farmers, moving evaluation will measure from 60% of which are response to advice provided) women (G) Update: Achieved Update: Achieved 12,077 people benefitted 85 % of beneficiary surveyed from agricultural services satisfied with agricultural services for cash crops under RDP. provided under RDP. General data is not available by the type of agricultural 4.3 30% increase in turnover of (58) services but overall 43% RDP-supported rural businesses (12,763 people) of agriculture extension service beneficiaries were women. Update: On track Accurate value cannot be calculated as Supplemental Equity Facility (SEF) recipients did not share 30 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners comparable, reliable data. However, 65 businesses were established or expanded in rural areas through SEF and 5.8 jobs were created per SEF supported businesses on average ( 350 jobs created in total). Improving  Low rates of access to Outcome 5: Lower cost, more  SIEA system losses reduced Financing: infrastructure and and high costs of reliable electricity, from cleaner from around 20% to 12% Solomon Islands lowering costs telecommunications, and energy sources Sustainable Energy and electricity. Update: On track Additional Financing (NDS 6) 5.1 Average outage duration for System losses reported to have (SISEP - P100311)  Engagement between each customer served on the improved to about 10% in (AF SISEP - P120781) public and private sectors Honiara grid reduced from 10 to October 2015. Tina River Hydropower does not effectively 3 hour Development Project and address constraints to Update: On track  Electricity tariffs reviewed in PRG (113417) and developments. Average outage duration per FY14 and new tariffs (P114317) (FY15) customer per month on average implemented by FY15. IFC Transaction improved to 7 hours in 2014. Update: On track Advisory for Tina River Tariff review ongoing. New Hydro Project 5.2 Maintain or reduce domestic tariffs to be gazette by FY16. tariffs (US85c/kwh) Telecommunications and Update: On track  Construction begins on Tina ICT Development Domestic tariff maintained at US River Hydropower generation Project ongoing and new 85c/kwh facility Update: Off track Donor Partners: Pacific 5.3 Power Purchase Agreement Construction has not begun on Regional Infrastructure signed between hydropower Tina River Hydropower Facility Trust Fund developer and SIEA generation facility. (PRIF), AusAid Update: On track PPP initialed in October 2016. Outcome 6: Improved access to and reduced cost of ICT services  New ICT policy framework 6.1 Increase in mobile penetration formulated and adopted from 55% to 80% of population. Update: 31 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners Update: On track  Independent Mobile subscriber per 100 people, telecommunications increased from 8 percent (2010) to regulator maintained and 66 percent of the population in 2015. financed Update: On track 6.2 Decrease in tariffs for local mobile calls, calls to Australia and 128kpbs internet access (baseline Feb.2010 tariffs TBC) Update: Achieved  Price of a three minute domestic mobile call has fallen from around US$1.20 to US$0.56 surpassing the end target of US$1.08.  The price of 3 minute international call to Australia fell from US$3.60 to US$2.44, surpassing the end target of US$3.06.  The price of a 128 kbps Internet services business monthly rate decreased from US$1.69in 2010 to US$108 in 2015. Outcome 7.Strengthen the business climate through: 7.1 Implementation of additional 3 (from baseline of 5) doing business regulatory reforms. Public – private Dialogue Update: Not on track. platform with Dept. of Out of 3 only one doing business Commerce constituted. regulatory reform has been Update: On track. 32 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners implemented: Credit Bureau Ongoing consultations to establishment. establish Public Private Dialog platform on the basis of Solomon Islands Chamber of Commerce and Industries. Update : Not on track Strengthen resilience  Climate change and Outcome 8: Improved resilience of  18 Resilient Community- Financing: to impact of natural disaster risks have rural communities to climate change, Led Rural Pilot Investment Increasing Resilience to hazards and climate serious impact on natural hazards and catastrophic projects completed (G) Climate Change and change economy and disasters Update: On track Natural Hazards Project (NDS 7) livelihoods 4 projects are under construction (CRISP-P129375) 8.1 DDR/CCA incorporated into and close to completion. national and provincial planning 23 additional communities have ASA: Pacific baseline in at least two provinces been identified and had design Catastrophe Risk (baseline = zero) prepared. Training for these Assessment and Update On track communities is scheduled for Financing Initiative Progress have been made on (i) March 2016. (PCRAFI) activities to integrate Disaster Risk 3 additional projects which will Management (DRM) and Climate build on RDP community-led Donor Partners: Change Adaptation (CCA) within the sub projects are also due to Japan (PHRD); Global government; (ii) a review of the commence procurement in the Environment Fund National Disaster Risk Management near future. (GEF); GFDRR (NDRM) Plan of 2010; (iii) 15 additional communities have preparation of a revised draft been identified for future RDP institutional framework. community sub project The Bank program is engaged with collaborations. the MoH to mainstream resilience in  Establishment of a climate their planning process. and disaster risk information system (G) The work on mainstreaming DRM Update: On track and CCA into sectoral planning, A draft concept note for budget and action is progressing. strengthening Geographical Risk Information Management in 8.2 Budget and financial regulations MECDM has been prepared. accommodate disaster risk Specifications for this will need provisions. (baseline = zero) to be developed with the MoFT Information and 33 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners Update: Not on Track Communications Technology The Solomon Islands, withdrew from (ICT) Support Unit who would the PCRAFI Disaster Risk Insurance facilitate the procurement and scheme in 2015 after two external installation of the proposed shocks (Santa Cruz earthquake and system. tsunami in February 2013 and the Honiara flooding of April 2014). Neither of these events triggered a payment from the scheme despite the fact that they had very severe impacts on the country socially and economically. Strategic Area 2: Improving Public Service Provision Improved targeting  Budget allocations and Outcome 9. Improved expenditure ASA: and management of processes within line management and poverty focus in key  Results of HIES, HIES CEWG Dialogue, HIES government ministries not supporting sectors, including health and poverty profile, line ministry Technical Assistance, resources. sectoral priorities. education. expenditure analysis and Poverty Mapping and (NDS 3, NDS 4,  Outdated poverty data health sector financing Poverty Profile, Line NDS 8) upon which to base policy analysis fed into government Ministry Expenditure decisions 9.1 Number of budget submissions policy and budget planning Analysis, Health Sector  No systematic budget and ministry expenditure reports processes Support Program TA, process for planning, that use new data analysis tools Update: Achieved Education Programmatic execution, and reporting (baseline = zero, target is 3)  Health Line ministry TA (TBC) in key ministries. expenditure analysis Update: On track. (LMEA) has been prepared  The number of ministries for 2007-2014. Further spending over 10% of original update is expected in budget allocations decreasing February 2016. from 10 in 2011 to 3 in 2014. The  First Health sector financing Ministry of Finance updates the analysis was prepared in BOOST database on a yearly December 2015 and is basis and includes a one-page expected to feed into 2016 expenditure report for each budget preparation. ministry in the annual budget  The LMEA for education documentation. identified sub-sectoral allocations and expenditures. 34 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners  Almost all divisions (34 out of As a result, DPO 3 35) in MHMS now submitting supported a tertiary Annual Operational Plans. scholarships policy, approved by the National Education Board to establish a clear and transparent process in the award of scholarships.  Household Income Expenditure Analysis (HIES) for 2012-13 was released in 2015 Improve access to  Provincial governments Outcome 10: Capacity for collective  300,000 beneficiaries (50% Financing: services and living lack sufficient resources action and increased access to services women) of completed Solomon Islands Rural conditions in rural and capacity to respond to for rural communities. community development Development Program areas community service sub-projects (G) and Additional Financing delivery needs 10.1 At least a 10% reduction in travel Update: On track (RDP – P089297) (NDS 1, NDS 5)  Community infrastructure time to access rural services such 267,509 beneficiaries under RDP (AF RDP – FY14) provided by external as: Pre-primary and primary (includes complete an incomplete (RDP II – FY15) agencies is often poorly school, non-water supply health sub projects) of which 90,473 maintained by service, and water supply (G) (34%) were women. Donor Partners: communities  Community sub-projects Australia (AusAID), EU,  Geography makes it Update: Achieved International Fund for completed in all rural wards, difficult to provide 13.5% decrease in travel time to Agricultural except in Renbel Province services to large parts of access improved water supply sources Development (IFAD), the country, and for those Update: On track achieved under RDP. FPCR Core Multi-donor areas, the cost is high Completed in all rural wards except for 11 wards in Trust Fund. 10.2 At least a 5% increase in capacity for collective action Guadalcanal Province and 2 wards in Central Province and Update: Not on track Value could not be calculated as except in Renbel Province. RDP program did not collect data to  Participatory planning measure capacity for collective incorporated into provincial action. planning system in 5 provinces 10.3 At least a 5% increase in pre- Update: In progress. primary and primary school Consultation with provincial attendance (G) authorities are planned under 35 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners Update: Not on track RDP2 in Choiseul, Western RDP program did not measure this. Malaita, Temotu and Isabel Provinces. 10.4 At least a 10% increase in participation in community decision- making on projects (G) Update: Achieved. 48% of people in target planning units participated in Community Development Sub-project decision making (baseline was 0%) Increase employment  Limitations in the formal Outcome 11: Increased access to  At least 5,000 beneficiaries Financing: opportunities for the labor market; employment opportunities for urban reached, averaging at least Rapid Employment urban poor,  Disconnects between population 30 days of employment per Project especially youth and skills outcomes from year. (G) (REP - P114987) women. education and labor 11.1 At least 300,000 additional Update: On track (REP – AF – FY14) (NDS 1, NDS 2, market needs in both the labor days completed (in addition to (REP II –FY15) NDS 5) formal and informal 324,000 completed by 2012); 50% of economy beneficiaries are women, 33% youth. ASA. Youth diagnostic  Urban poor, especially (G) Social protection note youth and women, are Update: Achieved. disconnected from the Donor Partners: economy and society. The project has generated over Pacific Regional 645,000 days of work and 60 percent Infrastructure Facility of the participants being women and Trust Fund (PRIF), 53 percent being youth between the State and Peace Building ages of 16 to 29 years. Fund (SPBF) Improved  Weak state and non Outcome 12: Government support  Community officer pilot Financing: responsiveness of law state dispute resolution for establishment of functioning local established in 4 provinces. Community Officers and justice, and and conflict justice mechanisms. (CO) program, protection of women management Update: On track Improving Services for capabilities. 12.1 Support for community officers 2 provinces established. The Victims of Gender Based (NDS 1, NDS 2,  Unresolved grievances reflected in budgetary remaining two will be and Domestic Violence NDS 8) potentially manifesting allocations.(baseline – zero) established by the end of the (P143772) as conflict. CPS. Update: On track 36 Medium-term Key Issues CPS Outcomes Milestones WBG Instruments and Country Goals Expected (FY13 – FY17) International Partners  Limited capacity across The two provincial governments ASA: Justice Delivered service providers to (Makira/Ulawa and Rennell and Locally (JDL) further address GBV/DV. Bellona) have allocated funding for work on sources of all Community Officer salaries and conflict and grievance, allowances. dispute resolution and conflict management Outcome 13: Enhanced access to  GBV Service gaps identified, capabilities services for survivors of GBV agreed and communicated across relevant agencies and at Donor Partners: 13.1 Pilot delivery modality least one pilot delivery Institutional complete and scaling up (baseline modality underway. Development Fund (IDF) and targets TBD based on GBV service gap analysis, see milestones). Update: Not on track Update: Not on track. 37