AusAID Infrastructure for Growth Trust Fund 69765 Project Status as of November 12, 2009 1. Name of Activity (use name in GFR) and TTL. Pacific Infrastructure Diagnostics – TTL Charles Feinstein 2. Summary of Key Outputs and Outcomes to date. With the establishment of the PRIF in 2007, and in line with a decision reached among the Pacific Region Infrastructure Facility (PRIF) partners (AusAID, NzAID, ADB and the World Bank) teams were assembled to do a rapid diagnostic of infrastructure needs in a sample of Pacific countries so as to identify generic principles and specific areas that could be supported by PRIF in its initial year while more of the detailed design of the Facility was being worked out. It was decided to have two pilot RSEs done to firm up the ToRs, methodology, report format and content, etc. before deciding upon the next phase of the RSE initiative. Kiribati and Samoa were chosen as two cases which covered a representative spectrum of the Pacific Island countries. The draft RSE mission reports were circulated and discussed among the PRIF participants and there was a wide range of comments regarding the approach, methodology, format, length, analysis and conclusions. Questions such as focus also arose, i.e., more on infrastructure public expenditure (looking more at macro-economic planning, legal framework, resource mobilization, resource allocation, pricing, subsidies and cost recovery, etc.) versus infrastructure investment prioritization and institutional needs assessment (identifying major policy and capacity gaps in terms of infrastructure service demand and quality of service, sectoral planning and investment prioritization, economic, financial and social cost- benefit analysis, and appropriate models for project packaging and financing and identification accompanying policy and capacity gaps). After reviewing various options to address the above issues, the PRIF Infrastructure Working Group (IWG) decided to hire the Castalia firm to conduct stakeholder consultations on the way forward, reorganize and edit the Kiribati report to serve as a model and to establish a common framework for future such efforts. Castalia produced a revised Kiribati RSE which represented a substantial advance in terms of clarity of presentation and main messages over the original draft. The report was revised once more based on feedback from the IWG and the final report was transmitted to the government of Kiribati in September 2009. In parallel, the IWG also held a workshop in November 2008, in Brisbane attended by representatives of the PICs, and it was decided to establish a technical assistance component of PRIF (Pacific Islands Advisory Center, PIAC) to be operated by the ADB to help clients needing infrastructure technical assistance, and to engage these clients in a regular dialog on themes of public resource allocation and sustainability in infrastructure development. The PIAC’s functions are therefore expected to effectively displace the need for a series of intense RSE exercises. Nevertheless, Kiribati RSE has been of value in orienting the evolution of the PRIF, and the final report serves as a solid foundation for infrastructure dialog, planning and investment in Kiribati and a model for other PICs. The Kiribati RSE was discussed with the Government by the PIAC Director during his mission to Tarawa in November 2009. Regarding the Samoa RSE, a substantial aide memoire and workpapers/draft chapters were provided to PIAC and were found to be very helpful in the context of the PIAC Director’s mission to Samoa in October and his infrastructure dialogue with the GoS. The World Bank did, however, make a recommendation that was accepted by the IWG that with the passage of time (and now changed post-tsunami circumstances in Samoa) the effort required to bring this work up to a final and polished presentational standard was probably not worth the cost and associated benefits. Lastly, an RSE Guidance Note detailing the underlying methodology and data requirements for Pacific infrastructure sector analyses has been produced and shared with the IWG and PIAC so as to enhance the replicability and learning value of the experience. 3. Is the activity expected to lead to increased investment in infrastructure, and if so would this be: a. IBRD/IDA lending or lending from other multilaterals. If so, please include expected amount and co-financing from government. b. Mobilization of additional investment from government/private sector. If so, please indicate estimated amount. Yes, this activity is expected to lead to increased country/regional investments in infrastructure, telecom and energy sectors though AusAID co-financing (AusAID has committed approximately AU$ 9.0 million in new infrastructure financing through the PRIF/World Bank for FY’09, and at least an equal amount is anticipated for FY’10). While the RSEs have not been the basis for the identification of the present investments, they increase the confidence of AusAID and the other PRIF participants in the soundness of the partnership, and will serve as a foundation for future infrastructure dialog and investment. 4. Is the activity leading to new or improved policies and/or new or improved legal frameworks for the provision of infrastructure services? If so, please provide information on these as well as likely timelines. The Kiribati RSE report makes some powerful recommendations on appropriate levels of infrastructure services, means for the reduction of the cost of infrastructure service delivery, and alternative policies for the financing of infrastructure operations and maintenance. The latter discussion is of key significance to the donor community and especially AusAID, as it advocates a role for the donors in the financing of recurrent costs for maintenance; this is a key problem in the Pacific, as donor-financed infrastructure capital tends to rapidly degrade due to lack of technical capacity but also due to lack of adequate resource allocation for O&M. The Kiribati RSE report was presented to the Kiribati authorities this month. It is too early to comment on the degree and pace of uptake of the recommendations. 5. Is the activity strengthening capacities in government (e.g. to improve the regulatory environment)? If so, please provide information on these and expected timelines. See the response to #4 above. 6. Does the activity involve collaboration with AusAID, or does it support a program that AusAID is involved with or is financing? Please indicate and describe collaboration with AusAID. The activity is one of the first concrete outputs of the major collaboration with AusAID under the PRIF.