Nauru Country Operations Business Plan. August 2015

Transcription

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

2 CURRENCY EQUIVALENTS (as of 1 July 2015) Currency unit Australian dollar (A$) A$1.00 = $ $1.00 = A$ ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund NSDS National Sustainable Development Strategy PSM public sector management RPC Regional Processing Centre TA technical assistance NOTES (i) (ii) The fiscal year (FY) of the Government of Nauru ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2015 ends on 30 June In this report, $ refers to US dollars, unless otherwise stated. Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Regional Director A. Iffland, Pacific Liaison and Coordination Office, PARD Team leader Team members H. Everett, Senior Country Specialist, PARD R. He, Operations Assistant, PARD P. Indrawansa, Senior Project Officer (Infrastructure), PARD J. M. Trainor, Energy 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 INTERIM PACIFIC APPROACH 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 the Current Year 7 5. List of Indicative Knowledge Publications and Events 8

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5 I. CONSISTENCY OF THE BUSINESS PLAN WITH THE INTERIM PACIFIC APPROACH 1. The country operations business plan, continues the strategic direction of the Asian Development Bank (ADB) in Nauru in the areas of public sector management (PSM), energy, and transport. It is aligned with ADB s Interim Pacific Approach, 2015, which extends the validity of ADB s Pacific Approach, ; Nauru s National Sustainable Development Strategy (NSDS), ; and ADB s Midterm Review of Strategy The Pacific Approach acts as the country partnership strategy for Nauru. 2 It includes a focus on strengthening PSM, and identifies energy and transport as key sectors. ADB is supporting the implementation of Nauru s NSDS, A key economic priority under the NSDS is to improve PSM and the use of the country s remaining scarce natural resources. The development of better utility services, including energy, and the provision of enhanced infrastructure services, are also NSDS priorities Since 2004, successive governments have been tackling the legacy of years of economic mismanagement. Since 2007, the economy has returned to growth, boosted by strong aid flows, higher phosphate and fishing revenues, and the reopening of the Australian Regional Processing Centre (RPC) for asylum seekers. ADB currently estimates 8% growth for fiscal year (FY) 2015 and 5% for FY2016, with the economic boost from the RPC being partly offset by lower phosphate exports. Government revenues tripled to more than A$100 million in 2015 compared with the 2012 budget. The government, together with Australia and Taipei,China, is establishing the Nauru Intergenerational Trust Fund (NTF) from mid-2015 with technical assistance from ADB. The fund will move some of the excess RPC revenues out of the economy and into a financial vehicle that will invest the funds productively so that they are protected and will produce stable budget support for the future Nauru exhibits most of the constraints of underlying fragility. ADB s approach to engaging with fragile countries recognizes different degrees of fragility, and emphasizes a flexible response, a longer-term engagement, and the need for capacity development. The country experiences frequent changes in government, highlighting the importance of consultative and participatory arrangements for ADB operations to ensure ownership by stakeholders. Given the country s weak performance and history of debt and economic distress, ADB operations in Nauru will require close monitoring. II. INDICATIVE RESOURCE PARAMETERS 5. Because of its recent history of debt distress, Nauru is eligible for Asian Development Fund (ADF) grants. 5 As ADF resources are limited, ADB will seek to cofinance projects with other development partners, mainly the Government of Australia and the European Union. In addition, ADB will work in a few selected areas where it has a comparative advantage. 1 ADB Interim Pacific Approach, Manila; ADB ADB s Pacific Approach, Manila; Government of Nauru Republic of Nauru: National Sustainable Development Strategy, Nauru (revised 2009); ADB Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila (accessible from the list of linked documents in Appendix 2). 2 As approved by the Vice-President, Operations 2, on 1 July Sector assessments for PSM, energy, and transport are in ADB Nauru: 2014 Strategic Country Analysis. Manila. 4 ADB Technical Assistance for a Nauru Trust Fund. Manila. 5 The proportion of grants for the country allocations in will be determined by future annual debt distress classifications.

6 2 6. Indicative resource envelope. The indicative resources available during amount to $8.9 million. The final country allocations for 2017 and 2018 will depend on the available ADF grants and concessional OCR resources 6 and the outcome of the country performance assessments. In addition, cofinancing and funding from other sources, including the ADF subregional pool, will be actively explored. ADB will provide technical assistance (TA) at an indicative annual average of $0.3 million. 7. Lending and nonlending programs. ADB approved a public financial management (PFM) reform program grant in August 2012; the second tranche was disbursed in July A follow-up fiscal sustainability reform program grant is planned for 2016 with the proceeds directed toward and expected to catalyze additional development partner support for the NTF. 8. A $4.7 million electricity supply security and sustainability project, cofinanced by the European Union, and a second phase of TA for institutional strengthening of the Nauru Utilities Corporation were approved in Australia has proposed funding the purchase of a second generator of similar specifications to the one proposed under the existing project and for the supply and installation of a new 11-kilovolt switchboard. Additional financing for the electricity supply security and sustainability project, cofinanced by Australia, is therefore planned for Nauru lacks a natural harbor. Ships dock on mooring buoys anchored 500 meters below the surface. Weather can cause significant disruption and the mooring system is vulnerable to damage and costly to repair. Also, the port facility has come under increased strain with a fivefold increase in container traffic in the past 2 years. A port development project to address these issues is therefore planned for The estimated project cost of $31 million may be financed through $9 million of ADB Special Fund resources and a $5 million government contribution; it will require at least $17 million in cofinancing. 10. A capacity development TA project for institutional strengthening of the Nauru Port Authority is planned for Capacity development TA for reviewing and strengthening NSDS implementation is planned for Regional technical assistance. To complement the TA program, ADB is including Nauru in a number of regional TA activities where feasible. For example, Nauru is receiving support from ADB for (i) reforming state-owned enterprises and reintroducing banking services, 7 (ii) improving economic management, 8 and (iii) improving infrastructure planning. 9 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 12. Funding for the port project was increased to $31 million and the follow up PFM reform program grant for 2017 was omitted. Additional financing for the Electricity Supply Security and Sustainability Project, cofinanced by Australia, is planned for Capacity development TA for reviewing and strengthening implementation of the NSDS is moved to Instead, the capacity development TA project for institutional strengthening of the Nauru Ports Authority is planned for Reflecting the approved combination of ADF lending resources with the ordinary capital resources balance sheet that will become effective on 1 January ADB Technical Assistance for Pacific Private Sector Development Initiative (Phase III). Manila (TA 8378-REG). 8 ADB Technical Assistance for Pacific Economic Management Enhanced Economic Management (Subproject 2). Manila (TA 7681-REG). 9 ADB Technical Assistance for Establishment of the Pacific Region Infrastructure Facility Coordination Office. Manila (TA 8345-REG).

7 UPDATED COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK (Board endorsement of the Pacific Approach, : 2009; COBP, : July 2015) Country Development Goals 1. Stable, trustworthy, fiscally responsible government with transparent and accountable government practices 2. The provision of enhanced social, infrastructure, and utility services, including well-maintained infrastructure 3. The development of an economy built on multiple sources of revenue and supported by a national trust fund 4. The rehabilitation of mined-out lands for livelihood sustainability Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators 1. Public sector management (Core area: Other) Strengthen public Improved revenue management, budget financial and planning processes, and overall management financial management Indicator: Improvement of procurement scores as measured by public expenditure and financial accountability assessment a Target: B (FY2016) Current value: D (FY2011) 2. Energy (Core area 1: Infrastructure, 2: Environment) Promote increased Transmission and distribution losses reliability of energy reduced supply Indicator: Transmission losses reduced Target: 25% (FY2016) Current value: 28% (FY2011) 3. Transport (Core Area 1: Infrastructure, 2: Environment) Provide enhanced Reliability of port services increased infrastructure Indicator: Annual number of ships requiring services demurrage payments Target: 6 (FY2020) Current value: 12 (FY2014) ADB Areas of Intervention Private sector development, public finance and expenditure management, SOE reform Proposed operations: Fiscal Sustainability Reform Program ($2 million) Proposed operations: Electricity Supply Security and Sustainability Project ($4.9 million) (additional financing) Proposed operations: Port Development Project ($31 million) ADB Indicative Resource Allocation in the Next Pipeline and Strategic Priorities $2 million for representing 18% of total COBP envelope, and additional cofinancing of $1.9 million, of which: ESG 0% GEM 0% PSD 100% RCI 0% Appendix 1 3 Changes from Last COBP Changes from Last COBP No change $0 for No change $9 million for , representing 82% of total COBP envelope, and additional cofinancing of $17 million (source: to be determined), of which: ESG 0% GEM 0% PSD 100% RCI 100% No change ADB = Asian Development Bank, COBP = country operations business plan, ESG = environmentally sustainable growth, FY = fiscal year, GEM = gender equity and mainstreaming, PSD = private sector development, RCI = regional integration, SOE = state-owned enterprise. a Public expenditure and financial accountability assessment indicators are graded from A (highest) to D (lowest). Sources: Asian Development Bank and the Government of Nauru.

8 4 Appendix 2 1. Interim Pacific Approach, 2015 LIST OF LINKED DOCUMENTS 2. ADB s Pacific Approach, Republic of Nauru: National Sustainable Development Strategy, (as revised 2009) 4. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and the Pacific

9 Appendix 3 5 INDICATIVE ASSISTANCE PIPELINE Table A3.1: Lending Products, Project/Program Name 2016 Firm Nauru Port Development Project Sector Poverty Targeting Strategic Agendas and Drivers of Change TRA GI IEG, PSD, RCI, PAR Division Year of PPTA /PDA Total OCR ADF Loans, Concessional OCR Loans Cost ($ million) ADB ADF Grants Total Gov t Cofinance PLCO 2015 a Fiscal Sustainability PSM GI GCD, IEG, PLCO none b Reform Program KNS, PAR Total None Total None Total ADB = Asian Development Bank, ADF = Asian Development Fund, GCD = governance and capacity development, GI = general intervention, Gov t = government, IEG = inclusive economic growth, KNS = knowledge solutions, OCR = ordinary capital resources; PAR = partnerships, PLCO = Pacific Liaison and Coordination Office, PPTA = project preparatory technical assistance, PSD = private sector development, PSM = public sector management, RCI = regional integration, TRA = transport. a ADB s project design advance may be used to support project preparatory activities to increase project implementation readiness. b Cofinancing Agreement between the Government of Australia and ADB (agreement number for A$2.5 million). Source: Asian Development Bank.

10 6 Appendix 3 Table A3.2: Nonlending Products and Services, Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($ 000) Source Amount ($ 000) Total ($ 000) 2016 Institutional Strengthening of the Nauru Ports Authority TRA PLCO CDTA TASF None Total Total Reviewing and Strengthening Implementation of the National Sustainable Development Strategy PSM PLCO CDTA TASF Total ADB = Asian Development Bank, CDTA = capacity development technical assistance, PLCO = Pacific Liaison and Coordination Office, PSM = public sector management, TASF = Technical Assistance Special Fund, TRA = transport. Source: Asian Development Bank.

11 Appendix 4 7 Strategic Agendas Sector Poverty Targeting and Drivers of Change ENE GI ESG, GCD, IEG, KNS, PAR ASSISTANCE PROGRAM FOR THE CURRENT YEAR Table A4.1: Lending Products, 2015 Year of PPTA/ Cost ($ million) ADB ADF Co- Division PDA Total OCR Loans Grants Total Gov t finance PATE a Project/Program Name Additional Financing for Electricity Supply Security and Sustainability Project Total ADB = Asian Development Bank; ADF = Asian Development Fund; ENE = energy; ESG = environmentally sustainable growth; GCD = governance and capacity development; GI = general intervention; Gov t = government; IEG = inclusive economic growth; KNS = knowledge solutions; OCR = ordinary capital resources; PAR = partnerships; PATE = Transport, Energy, and Natural Resources Division; PPTA = project preparatory technical assistance. a Cofinancing Agreement between the Government of Australia and ADB (agreement number for A$6.4 million). Source: Asian Development Bank. Table A4.2: Nonlending Products and Services, 2015 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($ 000) Source Amount ($ 000) Total ($ 000) Preparing the Port Development Project TRA PLCO PPTA TASF TBC ,000.0 Total ,000.0 ADB = Asian Development Bank, PLCO = Pacific Liaison and Coordination Office, PPTA = project preparatory technical assistance, TASF = Technical Assistance Special Fund, TBC = to be confirmed, TRA = transport. Source: Asian Development Bank.

12 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 Asian Development Outlook Small Pacific Economics Publication and documentation PARD Economies (including Nauru) Asian Development Bank and Nauru: Fact Publication and documentation PARD Sheet Pacific Economic Monitor (2 times per year) Nauru country write-up Nauru Trust Fund knowledge product Technical Assistance Economics Publication and documentation PARD TA 8565-REG: Pacific Economic Management (Phase 2) Economics, governance, and public sector management Publication and documentation PARD TA 8565-REG: Pacific Economic Management (Phase 2) Total number of publications = 5 Total number of events = 0 ADB = Asian Development Bank, PARD = Pacific Department, REG = regional, TA = technical assistance. Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event organization and training or capacity development. Source: Asian Development Bank.

13 Appendix 5 9 Table A5.2: Additional Knowledge Publications and Events Delivered in 2015 Title of Publication or Event Subject Type Department or Sector Group or Thematic Group Asian Development Outlook Small Pacific Economics Publication and documentation PARD Economies (including Nauru) Asian Development Bank and Nauru: Fact Sheet Publication and documentation PARD Pacific Economic Monitor (2 times per year) Nauru country write-up Technical Assistance Economics Publication and documentation PARD 8565-REG: Pacific Economic Management (Phase 2) Total number of publications = 4 Total number of events = 0 PARD = Pacific Department, REG = regional. Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event organization and training or capacity development. Source: Asian Development Bank.