Country Operations Business Plan. Fiji December 2015

Transcription

1 1 Country Operations Business Plan December 2015 Fiji This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

2 ADB COBP CPS GDP MOL OCR PDA CURRENCY EQUIVALENTS (as of 01 December 2015) Currency unit Fiji dollar/s (F$) F$1.00 = $0.46 $1.00 = F$2.15 ABBREVIATIONS Asian Development Bank country operations business plan country partnership strategy gross domestic product market-based ordinary capital resources lending ordinary capital resources project design advance PPP publicprivate partnership TA technical assistance NOTES In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Regional Director R. Jauncey, Pacific Subregional Office (SPSO), PARD Team leader Team members C. Currie, Senior Country Economist, PARD T. Faletau, Safeguards Officer, PARD S. Lee, Principal Social Development Specialist (Gender and Development), PARD D. Ling, Transport Specialist, PARD M. Lototele, Senior Economics Officer, PARD M. Hazelman, Associate Project Analyst, PARD S. B. Olsson, Country Coordination Officer, PARD M. Paniagua, Unit Head, Project Administration, PARD R. Rabanal, Senior Economics Officer, PARD P. Safran, Principal Operations Coordination Specialist (Fragile Situations), PARD L. Sovea, Senior Programs Assistant, PARD C. Tinio, Associate Economics and Statistics Analyst, PARD L. Tora, Country Economist, PARD M. Trainor, Energy Specialist, PARD H. Uusimaa, Climate Change Specialist, PARD J. Wolff, Economist (Public Finance), PARD A. Woodruff, Urban Development Specialist, PARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS Page I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE PARAMETERS 1 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2 APPENDIXES 1. Updated Country Partnership Strategy Results Framework 3 2. List of Linked Documents 4 3. Indicative Assistance Pipeline 5 4. Assistance Program for Current Year 7 5. List of Indicative Knowledge Publication and Events 8

4 I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1 1. Fiji has had five consecutive years of economic growth and is on target for a sixth in Sustaining higher growth and making it more inclusive is a key challenge for government. Current strong growth of over 4% per annum has been driven in part by appropriately expansionary fiscal policies, with expenditure increasing from 28% of gross domestic product in 2012 to 36% in This level of public spending, which is below averages for both OECD countries and small states, will support essential infrastructure investments for growth. Since 2003, Fiji s poverty rate has declined from 35% to 31% of the population, and government is prioritizing programs that promote inclusion and improve living standards, including better water and sanitation, and introducing free education for all primary and secondary students. 2. The economic outlook for Fiji remains positive. investment in Fiji has increased to 26% of GDP in 2015, and has exceeded government targets of 25% of GDP since This has been driven in part by growing public investments, particularly on roads, with capital spending now making up 40% of the government budget compared to 14% a decade ago. Private investment increased to an expected 20% of GDP in 2015, compared to a low of 3.5% in 2010, as investor confidence has grown following elections in September Still, further private investment will be required to maintain current growth. 3. Country partnership strategy (CPS). The country operations business plan for Fiji is aligned with the Asian Development Bank s (ADB) country partnership strategy (CPS) discussed by the Board in December 2014, the Interim Pacific Approach 2015, and ADB s Midterm Review of Strategy The CPS focuses on three interlinked priorities of (i) raising Fiji s longer-term growth potential; (ii) building resilience and reducing vulnerability; and (iii) reducing poverty through more inclusive growth and better service delivery. The CPS marked ADB s full re-engagement with Fiji following elections in September The updated results framework is in Appendix 1. A list of linked documents is in Appendix Portfolio performance. ADB has engaged with Fiji since the country became a member in 1970, committing a total of $417.3 million in loans and $31.9 million in technical assistance (TA). The investment portfolio currently consists of a $100 million transport sector investment, approved by the Board in December 2014 immediately following the CPS. Other previous investments closed successfully at the end of 2014, including the third Fiji road upgrading project, the SuvaNausori water supply and sewerage project, and an emergency recovery project following devastating floods in early ADB investments in Fiji have generally achieved key objectives, despite some delays and cost overruns. II. INDICATIVE RESOURCE PARAMETERS 5. Resource envelope, Fiji is a Group C developing member country and eligible for market-based ordinary capital resources lending (MOL). 2 The Fiji CPS anticipated lending of $350 million over the 5 year period, of which, $100 million was committed in The indicative resources available during for sovereign operations amount 1 ADB Country Partnership Strategy: Fiji Manila. 2 Terminology reflects combination of ADF lending operations with the OCR balance sheet that will take effect on 1 January For 2016, MOL stated here should be understood as OCR lending.

5 2 to $190 million as there were no new commitments against the 2015 allocation. 3 As the firm pipeline of $217 million exceeds indicative resources, cofinancing and funding from other sources, including the MOL regional cooperation and integration set-aside, will be actively explored. TA of up to $1.3 million per annum will also be provided to develop sector plans, prepare investments, and build capacity for broader policy and institutional reform. The proposed lending and TA program is in Appendix 3. III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 6. Urban water and sewerage. The government confirmed its interest in a project design advance (PDA) of $2.7 million in 2015 to prepare a $222 million urban water and sanitation upgrade project (anticipated lending of $67 million from ADB could be adjusted depending on co-financing from the European Investment Bank, the Green Climate Fund, and the government). While the CPS envisaged this investment in 2015, the Government has decided to proceed initially with a PDA in 2015 and the loan will be presented to the Board in late In November 2015, the Green Climate Fund Board approved a $31 million grant for the project the first of eight proposals to be approved by the Green Climate Fund globally. The 2015 program is in Appendix 4 and the list of knowledge products and publications is in Appendix Programmatic policy-based lending. Fiji is carefully managing its external debt obligations. Overall public debt has fallen from 55% of GDP in 2010 to 49.5% of GDP in In September 2015 the government successfully executed a $200 million bond issue to repay a $250 million global bond due to mature in March The coupon rate of 6.6% compares favorably with the rate of 9% for the original bond. The government is now keen to explore a number of debt management options, including borrowing from development partners to support reform efforts and allow Fiji to refinance the new bond when it falls due in This COBP includes the first 2 years of a proposed 4-year programmatic series of policy-based operations the Sustaining Private Sector Led Growth Reform programwhich will start in This will be accompanied by capacity development TA aimed at improving the environment for doing business in Fiji, state-owned enterprise reform, and public financial management reforms. These reforms will help the government to rein in expenditure and increase revenue without cutting back on essential development expenditure. The aim is to see a gradual reduction of the public sector fiscal deficit as a proportion of GDP by 2020 while sustaining the growth momentum. For the first two years (2017 and 2018) of the reform program, ADB is proposing financing of $25 million per year. Additional cofinancing will be sought from the World Bank and other bilateral partners. This compares to indicative planning in the CPS for a single $50 million policy-based operation in Future infrastructure support for inclusive growth. Consistent with the focus of the CPS, the COBP envisages a potential new transport infrastructure investment of up to $50 million in 2017 to continue to improve access to markets; and an energy sector investment of up to $50 million in 2018 to improve access to electricity for people living in rural areas. 9. Fiji will continue to benefit from regional TA in line with the regional operations business plan, Priorities include building capacity for economic and financial management, and auditing; providing economic policy advice; mitigating climate change impacts; and fostering private sector development. 4 3 ADB. September 2015, Memo: Indicative Resource Available for Approval in , Office of Director General 4 ADB Private Sector Development Initiative, Phase 2. Manila. ADB Pacific Economic Management Enhanced Economic Management (Subproject 2). Manila.

6 Appendix 1 3 UPDATED COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK (Board endorsement of the CPS: 2014; COBP December 2015) ADB Key Country Development Outcomes that ADB Contributes to 1. Transport Safer and more efficient movement of passengers and cargo Key Areas of Assistance National, provincial, and rural roads Maritime berthing infrastructure Indicative Resource Allocation in a $50 million for , 26% of COBP envelope Changes from Last COBP Joint financing of $50 million from World Bank in Energy More robust power sector with higher proportion of renewable generation and greater access Maritime safety: Land and maritime transport policies and reforms Renewable power generation Transmission lines and substations $50 million in 2018, 26% of COBP envelope. Project moved from 2017 to Rural electrification Policy and regulatory reforms 3. Water and Other Urban Infrastructure and Services Increased access to reliable and adequate Water and sewerage regulation supplies of safe water in urban centers and to sanitary and environmentally safe Urban water supply and wastewater management sewerage waste systems and treatment project facilities Capacity development technical assistance for strengthening water and sewerage sector regulation 4. Public sector management (Other Area) Stronger fiscal discipline and improved delivery of public services Four year medium-term policy matrix to improve revenue and expenditure management and debt management beginning in 2017 to $67 million for (35% of COBP envelope) with cofinancing from the EIB (to be determined) and Green Climate Fund ($31 million grant) for Board approval in 2016 $50 million for , 26% of COBP envelope Project approval moved to Quarter , with project design advance in 2015 A programmatic policy based loan proposed for 2017 to Cofinancing anticipated from the World Bank and possibly bilateral partners ADB = Asian Development Bank, COBP= country operations business plan, EIB = European Investment Bank, MOF = Ministry of Finance, MOIT = Ministry of Information Technology, MPE = Ministry of Public Enterprises. a As the firm pipeline of $217million exceeds indicative resources, cofinancing and funding from other sources, including the MOL regional cooperation and integration set-aside, will be actively explored.

7 4 Appendix 2 LIST OF LINKED DOCUMENTS 1. Country Partnership Strategy: Fiji Interim Pacific Approach, Road Map for Democracy and Sustainable Socio-economic Development, Republic of Fiji: 2013 Article IV Consultation 5. Mainstreaming Climate Change in ADB Operations, Climate Change Implementation Plan for the Pacific ( )

8 Appendix 3 5 INDICATIVE ASSISTANCE PIPELINE Table A3.1: Lending Products, Project/Program Name 2016 Firm Urban water and sanitation upgrade project Sector Poverty Targeting Strategic Agendas and Drivers of Change WUS GI ESG/GCD /GEM/IEG Division Year of PPTA/ PDA MOL COL Cost ($ million) ADB ADF Grants Gov t Cofinance PATE a Firm Sustaining private sector led growth reform program (I) Transport infrastructure PSM TRA GI GI GCD/IEG/ PAR/PSD/ PSD ESG/GCD /GEM/IEG SPSO PATE b tbd Firm Sustaining private sector led growth reform program (II) Electricity project PSM ENE GI GI GCD/IEG/ PAR/PSD/ PSD GCD/IEG SPSO PATE ADB = Asian Development Bank; ADF = Asian Development Fund; COL = concessional OCR lending, ENE = energy; ESG = environmentally sustainable growth; GCD = governance and capacity development; GEM = gender equity and mainstreaming; GI = general intervention; Gov t = government; IEG = inclusive economic growth; MOL = market-based OCR lending, OCR = ordinary capital resources; PAR = partnerships; PATE = Transport, Energy, and Natural Resources Division; PDA = project design advance, PPTA = project preparatory technical assistance; PSD = private sector development; PSM = public sector management; SPSO = Pacific Subregional Office; TRA= transport, tbd = to be determined, WUS = water and other urban infrastructure and services. a Final decisions yet to be made. assumes a loan of $35 million from the European Investment Bank and a government component comprising $31 million grant from the Green Climate Fund (approved in November) and $89 million in government finance. The government is still considering whether to seek additional GCF financing or ADB/ EIB financing for part of its component. b Final decisions yet to be made. Assumes possible World Bank and bilateral cofinancing Source: Asian Development Bank estimates b tbd

9 6 Appendix 3 Table A3.2: Nonlending Products and Services, Assistance Name Sector Division 2016 Public enterprise reform/ PSM SPSO/ public financial management reform program PLCO Assistance Type CDTA ADB Amount Source ($'000) TASF 80 Sources of Funding Others Source Amount ($'000) ($'000) 80 Preparing the ports masterplan TRA SPSO PATA TASF 20 1, , Public financial management reform program Preparing the electricity project PSM ENE SPSO PATE CDTA PPTA TASF TASF , , Public financial management reform program PSM SPSO CDTA TASF ADB = Asian Development Bank; CDTA = capacity development technical assistance; ENE = energy; PATA = policy and advisory technical assistance; PATE = Transport, Energy, and Natural Resources Division; PLCO = Pacific Liaison and Coordination Office; PPTA = project preparatory technical assistance; PSM = public sector management; TASF = Technical Assistance Special Fund; TBD = to be determined; TRA = transport. Source: Asian Development Bank estimates.

10 Appendix 4 7 Poverty Targeting ASSISTANCE PROGRAM FOR CURRENT YEAR Table A4.1: Lending Products, 2015 Strategic Agendas and Drivers of Change Year of PPTA/ PDA Cost ($ million) ADB ADF Project/Program Name Sector Division OCR Loans Grants Gov t 2015 Firm Project design advance urban WUS GI ESG/GCD/ PATE water supply and wastewater GEM/IEG management project ADB = Asian Development Bank; ADF = Asian Development Fund; ESG = environmentally sustainable growth; GCD = governance and capacity development; GEM = gender equity and mainstreaming; GI = general intervention; Gov t = government; IEG = inclusive economic growth; OCR = ordinary capital resources; PATE = Transport, Energy, and Natural Resources Division; PDA = project design advance; WUS = water and urban infrastructure services. Source: Asian Development Bank estimates. Cofinance Table A4.2: Nonlending Products and Services, 2015 ADB Assistance Name Sector Division Assistance Type Source Amount ($'000) 2015 Support for energy sector regulatory capacity ENE PATE CDTA TASF 1,00 and electrification investment planning 1,00 Sources of Funding Others Source Amount ($'000) ($'000) ADB = Asian Development Bank; CDTA = capacity development technical assistance; ENE = energy; PATE = Transport, Energy, and Natural Resources Division; TASF = Technical Assistance Special Fund. Source: Asian Development Bank estimates.

11 8 Appendix 5 LIST OF INDICATIVE KNOWLEDGE PUBLICATIONS AND EVENTS Table A5.1: Knowledge Publications and Events for 2016 Title of Publication or Event Subject Type Department or Sector Group or Thematic Group Technical Assistance Asian Development Outlook, Small Economics Publication or document Report PARD Pacific Economies 2016 Pacific Economic Monitor July 2016 Economics Publication or document Report PARD RETA-8565 Pacific Economic Monitor December Economics Publication or document Report PARD RETA IMF Article IV Governance and Public Policy advice, capacity development PARD Sector Management Country Performance Assessment Governance and public Publication or document Report, Briefing PARD 2016 sector management Material or talking Points Pacific Subregional Office Brochure Economics Publication or document Report PARD 2016 Country Information Note Fiji 2016 Economics Publication or document Report PARD Asian Development Bank and Economics Publication or document Report: PARD Kiribati Fact Sheet 2016 Awareness raising brochure or leaflet number of publications = 8 number of events ADB = Asian Development Bank. PARD = Pacific Department, RETA = regional technical assistance Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event and training or capacity development. Source: ADB K-Nexus.

12 Appendix 5 9 Table A5.2: Additional Knowledge Publications and Events Delivered in 2015 Title of Publication or Event Subject Type Asian Development Outlook Launch and Economics, regional cooperation Publication and dissemination and integration documentation, event Pacific Economic Monitor (July) Economics Publication and documentation, event Pacific Economic December Economics Publication and documentation, event Country Diagnostic Study Targeted Pacific Financial Sector Strengthening: Supporting National Risk Assessments (Fiji) Briefing on the Asian Development Bank's Accountability Mechanism Policy Pacific Economic Update Capacity development, economics, private sector economics, Publication and documentation, event Department or Sector Group or Thematic Group PARD/SPSO PARD PARD ERCD Technical Assistance Capacity development Capacity development OGC TA REG: Capacity development Capacity development OSFMD Economics, regional cooperation Event and integration Fiji Green Growth Strategy Launch Climate change, environment Publication and documentation, event PARD/SPSO PARD/SPSO Training for microfinance institutions on client protection principles Capacity development Capacity development, event Regional workshop for Pacific Insurance Supervisors Capacity development Capacity development, event RSDD TA RETA Road Safety Workshop Capacity development Capacity development, event number of publications = 5 number of events = 6 ADB = Asian Development Bank. ERCD = Economic Research and Regional Cooperation Department, PARD = Pacific Department, REG = regional economic growth, RETA = regional technical assistance, SPSO = Pacific Subregional Office. Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event and training or capacity development. The table includes additional knowledge publications and events delivered outside the list of indicative knowledge publications and events included in the country operations business plan. Source: ADB K- Nexus

13 10 Appendix 5 Table A5.3: Innovation, Advanced Technology, and Pilot Initiatives to be Implemented in 2016 Item Nature Project Number Sector or Theme Project Design Advance, Urban Water Supply and Wastewater Management Project INO - Water and other urban infrastructure and services number of innovation, advanced technology, and pilot initiatives = 1 Source(s): Asian Development Bank, INO = innovation, SPSO = Pacific Subregional Office Division SPSO