Country Operations Business Plan September 2017 Fiji 2018 2020 This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.
CURRENCY EQUIVALENTS (as of 13 September 2017) Currency unit Fiji dollar (F$) F$1.00 = $ 0.4959 $1.00 = F$ 2.019 ABBREVIATIONS ADB Asian Development Bank COBP country operations business plan CPS country partnership strategy GDP gross domestic product OCR ordinary capital resources PDA project design advance TA technical assistance (i) (ii) NOTES The fiscal year (FY) of the Government of Fiji ends on 31 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2017 ends on 31 July 2017. In this report, "$" refers to US dollar unless otherwise stated. Vice-President S. Groff, Operations 2 Director General M. C. Locsin, Pacific Department (PARD) Director R. Jauncey, Pacific Subregional Office, PARD Team leader S. Singh, Senior Public Management Officer, PARD Team members T. Faletau, Safeguards Officer, PARD D. Fay, Unit Head, Project Administration, PARD M. Hazelman, Associate Project Analyst, PARD D. Ling, Transport Specialist, PARD R. Rabanal, Senior Economics Officer, PARD L. Sovea, Senior Programs Assistant, PARD L. Tora, Country Economist, PARD J. Trainor, Energy Specialist, PARD H. Uusimaa, Climate Change 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.
CONTENTS Page I. CONSISTENCY OF BUSINESS PLAN WITH COUNTRY PARTNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE PARAMETERS 2 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2 APPENDIXES 1. Country Assistance Results Areas 3 2. List of Linked Documents 4 3. Indicative Assistance Pipeline 5 4. Assistance Program for Current Year 7 5. Indicative Knowledge Publications and Events 9
I. CONSISTENCY OF BUSINESS PLAN WITH COUNTRY PARTNERSHIP STRATEGY 1. Country partnership strategy. This is the fourth country operations business plan (COBP) for Fiji under the country partnership strategy (CPS), 2014 2018. 1 The CPS was developed through close consultation between the Asian Development Bank (ADB), the government, and other stakeholders. It is aligned with the government s Green Growth Strategy 2014; 2 ADB s Pacific Approach, 2016 2020, 3 which the Board endorsed in August 2016; and ADB s Midterm Review of Strategy 2020. 4 The CPS and COBP, 2018 2020 focus on three interlinked priorities: (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 country assistance results areas are in Appendix 1. A list of linked documents is in Appendix 2. 2. Recent economic, social, and political developments. Fiji is on target for its eighth consecutive year of growth in 2017, the longest period of sustained expansion since independence in 1970. Since 2014, total investment in Fiji has exceeded the government s target of 25% of gross domestic product (GDP), largely driven by higher public expenditure to address infrastructure gaps, particularly in transport and water and sanitation. With investor confidence growing as a result of political stability and consistent economic policies, private investment remains buoyant. Fiji s bilateral and multilateral development partners are also supporting substantial investment in social and economic infrastructure. The government estimates that the incidence of poverty declined from 31.0% during 2008/09 to 28.1% during 2013 2014. 5 3. Fiji is vulnerable to natural disasters, which can undermine sustained economic growth and poverty reduction. In February 2016, tropical cyclone Winston caused $1.36 billion in damage and losses, equivalent to 31% of GDP. In response to the disaster, the government refocused its 2017 2019 expenditure program toward recovery and rehabilitation. In June 2017, the government announced the second budget following cyclone for FY2018, which targets an overall deficit equivalent to 8.0% of GDP. Revised estimates for FY2017 reflect an overall fiscal deficit equivalent to 7.3% of GDP. Higher deficit estimates reflect the government s planned reconstruction program and the possibility that incomplete reconstruction activities of FY2017 will be rolled over to FY2018. Government debt is estimated to reach about $2.55 billion in FY2018 (46.5% of GDP) and remain below 50% in the following 2 years. This is in line with government s strategy to gradually reduce its debt-to-gdp ratio in order to remain on the path to fiscal stability over the next 5 years. 4. Portfolio performance. ADB has committed $562.0 million in loans, $37.0 in grants, and $32.2 million in technical assistance (TA) to Fiji since it joined the bank in 1970. As of 30 June 2017, the investment portfolio consisted of (i) a $100 million transport sector investment, approved in December 2014; (ii) a $153 million loan for an urban water supply and wastewater management project, approved in December 2016; and (iii) $50.0 million for emergency assistance following tropical cyclone Winston, which was disbursed in early 2017. 1 ADB. 2014. Country Partnership Strategy: Fiji, 2014 2018. Manila (accessible from list of linked documents in Appendix 2). 2 Government of Fiji. 2014. A Green Growth Framework for Fiji: Restoring the Balance in Development that is Sustainable for Our Future. Suva. 3 ADB. 2016. Pacific Approach, 2016 2020. Manila. 4 ADB. 2014. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila. 5 Government of Fiji, Fiji Bureau of Statistics. 2015. 2013 2014 Household Income and Expenditure Survey: Preliminary Findings Release 1. Suva.
2 II. INDICATIVE RESOURCE PARAMETERS 5 Resource envelope, 2018 2020. Fiji, a group C developing member country, is eligible for regular OCR lending. The indicative resources available during 2018 2020 for sovereign operations total $215 million. Cofinancing and funding from other sources, including the regular OCR regional cooperation and integration set-aside, will be explored. 6. The indicative 2018 2020 lending pipeline contains commitments of $341.1 million in firm and tentative investments. The indicative lending assistance pipeline (Appendix 3, Table A3.1) includes the following: (i) A policy-based loan of $180 million to facilitate private-sector-led growth, 6 with $50 million in cofinancing from the World Bank. The World Bank is committing all their resources available for allocation to cofinance the program. (ii) Tranche 2 of the multitranche financing facility for the Urban Water Supply and Wastewater Management Investment Program 7 (an ADB loan of $111.1 million in 2019 in addition to commitments of $42.1 million approved in 2016, with cofinancing from the European Investment Bank, the Green Climate Fund, and the government). (iii) A potential new transport (ports) infrastructure investment of up to $50 million in 2020 to continue to improve access to markets. Future investments will be supported by transaction technical assistance (TA) proposed for 2018 and by cofinancing from development partners. 7. Technical assistance. Indicative TA of up to $1.0 million is committed for the preparation of investments in transport infrastructure. Fiji will continue to benefit from regional TA in line with the regional operations business plan, 2017 2019. 8 Priorities include building capacity for economic and financial management, providing economic policy advice, mitigating climate change impacts, and fostering private sector development. 9 The indicative nonlending assistance pipeline for 2018 2020 is in Appendix 3 (Table A3.2). III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 8. Major changes to the lending program for 2018 2020 include, at the government s request, a change from a policy-based loan of $200 million with three subprograms (financed by both ADB and World Bank) to a policy-based loan of $230 million with two subprograms (again financed by both ADB and World Bank). The ADB share has increased from $100 million to $180 million as a result of World Bank financing constraints. The revised PBL financing remains within ADB s global PBL ceiling. In addition, Tranche 2 of the Urban Water Supply and Wastewater Management Investment Program has been brought forward from 2019 to 2018. The transport infrastructure project, originally planned for 2019, has been delayed to 2020, with supporting transaction TA in 2018. The Assistance program for 2017 is in Appendix 4 and the Indicative Knowledge Publications and Events is in Appendix 5. 6 The government has requested $230 million to assist with its financing plans. 7 ADB. 2016. Urban Water Supply and Wastewater Management Investment Program. Manila 8 ADB. 2016. Pacific: Regional Operations Business Plan, 2017 2019. Manila. 9 ADB. 2013. Private Sector Development Initiative, Phase 3. Manila; ADB. 2011. Pacific Economic Management Enhanced Economic Management (Subproject 2). Manila; and ADB. 2014. Pacific Business Investment Facility. Manila.
COUNTRY ASSISTANCE RESULTS AREAS Key Country Development Outcomes that ADB Contributes to Key Areas of Assistance 1. Water and Other Urban Infrastructure and Services Increased access to reliable and Urban water supply and wastewater management adequate supplies of safe water in urban centers and to sanitary and Capacity development for strengthening water and environmentally safe sewerage waste sewerage sector regulation systems and treatment facilities 2. Public sector management Stronger fiscal discipline and improved delivery of public services. Stronger resource mobilization and private-sector-led growth 3. Transport Safer and more efficient movement of passengers and cargo Policy matrix to improve revenue and expenditure management and debt management beginning 2017 2020. (i) Improve the financial performance of SOEs to reduce fiscal strain, (ii) improve infrastructure service delivery, and (iii) facilitate private investment (led by PSDI). National, provincial, and rural roads Maritime berthing infrastructure ADB Indicative Resource Allocation in 2018 2020 Amount: $111.1 million (OCR) and $44.2 million (cofinancing by European Investment Bank) Share of COBP envelope: 32% Amount: $180 million (OCR) and $50 million (cofinancing by World Bank) Share of COBP envelope: 53% Amount: $50 million (standby) and $226 million cofinancing Share of COBP envelope: 15% Changes from Last COBP Multitranche financing facility with first tranche approved in 2016, second in 2019 Reduced from 3 to 2 subprograms and loan amount increased from $200 million to $230 million. The investment project is a lower priority for government and has been moved to 2020. Maritime safety: Land and maritime transport policies and reforms. ADB = Asian Development Bank, COBP = country operations business plan, CPS = country partnership strategy, OCR = ordinary capital resources; PSDI = Private Sector Development Initiative; and SOE = state owned enterprise. Source: ADB estimates. Appendix 1 3
4 Appendix 2 LIST OF LINKED DOCUMENTS http://www.adb.org/documents/cobp/?id=fij-2018 1. Country Partnership Strategy: Fiji, 2014 2018 2. ADB s Pacific Approach, 2016 2020 3. A Green Growth Framework for Fiji: Restoring the Balance in Development that is Sustainable for Our Future
INDICATIVE ASSISTANCE PIPELINE Table A3.1: Lending Products, 2018 2020 Strategic Agendas and Drivers of Change Project/Program Name Poverty Regular ADF Cofinance Sector Targeting Division Total {e} OCR COL Grants Total Gov t 2018 Firm Sustaining private-sector-led growth PSM GI GCD/IEG/PAR/ SPSO 120.0 70.0 0.0 0.0 70.0 0.0 50.0 a reform program, Subprogram 1 PSD (PBL) Urban Water Supply and Wastewater WUS GI ESG/GCD/ SPSO 2016 224.7 111.1 0.0 0.0 111.1 69.4 b 44.2 c Management Investment Program GEM/IEG/PAR (Tranche 2) Revitalization of Informal Settlements WUS GI ESG/GCD/ SDCC 3.0 0.0 0.0 0.0 0.0 0.0 3.0 d and Environment in the Greater GEM/IEG/PAR Suva Area Using a Water Sensitive Approach Total 347.7 181.1 0.0 0.0 181.1 69.4 97.2 Year of TRTA/ PDA Cost ($ million) ADB 2019 Firm Sustaining private-sector-led growth reform program, Subprogram 2 (PBL) PSM GI GCD/IEG/PAR/ PSD SPSO 110.0 110.0 0.0 0.0 110.0 0.0 TBC e Total 110.0 110.0 0.0 0.0 110.0 0.0 0.0 2020 Standby Ports Infrastructure f TRA GI ESG/GCD/GEM/ IEG/PAR PATE 2018 276.0 50.0 0.0 0.0 50.0 0.0 226.0 Total 276.0 50.0 0.0 0.0 50.0 0.0 226.0 ADB = Asian Development Bank; ADF = Asian Development Fund; COL = concessional OCR lending; GCD = governance and capacity development; GI = general intervention; Gov t = government; IEG = inclusive economic growth; OCR = ordinary capital resources; PAR = partnerships; PATE = Pacific Department s Transport, Energy, Natural Resources Division; PDA = project design advance; PSD = private sector development; PSM = public sector management; SPSO = Pacific Subregional Office; TRA = transport; TRTA = transaction technical assistance. a World Bank will cofinance. b Government funding for the multitranche financing facility will total $150.1 million. c European Investment Bank will cofinance with a $44.2 million loan. d Japan Fund for Poverty Reduction and Japan International Cooperation Agency grant. e World Bank will cofinance but the amount remains to be confirmed. f A draft technical assistance report for a ports masterplan estimated investment requirement of $276.0 million. Based on government shareholding in Fiji Ports Corporation Limited, a small allocation is made with the likelihood of some nonsovereign financing. Source: Asian Development Bank estimates. Appendix 3 5
Table A3.2: Nonlending Products and Services, 2018 2020 Assistance Type ADB Amount ($'000) Sources of Funding Others Amount ($'000) Assistance Name Sector Division Source Source 2018 Preparing the Suva Port Project TRA PATE TRTA TASF 1,000.0 0.0 1,000.0 Total 1,000.0 0.0 1,000.0 Total ($'000) 6 Appendix 3 2019 None 0.0 0.0 0.0 2020 None 0.0 0.0 0.0 ADB = Asian Development Bank; PATE = Pacific Department s Transport, Energy, and Natural Resources Division; SPSO = Pacific Subregional Office; TASF = Technical Assistance Special Fund; TRA = transport; TRTA = transaction technical assistance. Source: Asian Development Bank estimates.
Poverty Targeting ASSISTANCE PROGRAM FOR CURRENT YEAR Table A4.1: Lending Products, 2017 Strategic Agendas and Drivers of Change Division Year of TRTA/ PDA Regular OCR COL Cost ($ million) ADB ADF Grants Total Gov t Project/Program Name Sector Total Firm None 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cofinance Total 0.0 0.0 0.0 0.0 0.0 0.0 0.0 ADB = Asian Development Bank, ADF = Asian Development Fund, COL = concessional OCR lending, OCR = ordinary capital resources, PDA = project design advance, TRTA = transaction technical assistance. Source: Asian Development Bank estimates. Appendix 4 7
Table A4.2: Nonlending Products and Services, 2017 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($'000) Source Amount ($'000) Total ($'000) Public Financial Management Reform PSM SPSO KSTA TASF 800.0 0.0 800.0 Total 800.0 0.0 800.0 ADB = Asian Development Bank, KSTA = knowledge and support technical assistance, PSM = public sector management, SPSO = Pacific Subregional Office, TASF = Technical Assistance Special Fund. Source: Asian Development Bank estimates. Appendix 4 8
INDICATIVE KNOWLEDGE PUBLICATIONS AND EVENTS Table A5.1: Knowledge Publications and Events for 2018 Title of Publication or Event Subject Type Asian Development Bank and Fiji: Fact Sheet 2018 ADB administration and governance Publication or document: Awareness raising brochure or leaflet Pacific Energy Update 2018 Energy Publication or document: Awareness raising brochure or leaflet Pacific Transport Update 2018 Transport Publication or document: Awareness raising brochure or leaflet Department or Sector Group or Thematic Group DER PARD PARD Technical Assistance Asian Development Outlook, 2018 Fiji Economics Publication or document report PARD Asian Development Outlook Update 2018 Economics Publication or document report PARD Pacific Economic Monitor July 2018 Economics Publication or document report PARD RETA-8565 Pacific Economic Monitor December 2018 Economics Publication or document report PARD RETA-8565 Pacific Update Economics Conference PARD RETA-8565 PARD Total number of publications = 7 Total number of events = 1 ADB = Asian Development Bank, DER = Department of External Relations, PARD = Pacific Department, and RETA = regional technical assistance. Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event organization and training or capacity development. Source: ADB K-Nexus. Appendix 5 9
Table A5.2: Additional Knowledge Publications and Events Delivered in 2017 Title of Publication or Event Subject Type Pacific Economic Monitor (July 2017) Economics Publication or document: Technical study Pacific Economic Monitor (December 2017) Economics Publication or document: Technical study Pacific Energy Update 2017 Energy Publication or document: Awareness raising brochure or leaflet Pacific Transport Update 2017 Transport Publication or document: Awareness raising brochure or leaflet Pacific Urban Update 2016 Water Urban Publication or Document: Development Awareness raising Asian Development Bank and Fiji: Fact Sheet 2016 ADB administration and governance brochure or leaflet Publication or document: Awareness raising brochure or leaflet ADO 2017-Fiji Economics Publication or document: Technical study ADO Update 2017 Economics Publication or document: Technical study Pacific Update Conference 2017 Economics Knowledge partnership and network facilitation Department or Sector Group or Technical Thematic Group Assistance PARD RETA 8565 PARD RETA 8565 PARD PARD PARD DER PARD PARD PARD PARD RETA 8565 10 Appendix 5 Total number of publications = 9 Total number of events = 1 ADB = Asian Development Bank, ADO = Asian Development Outlook, DER = Department of External Relations, PARD = Pacific Department, RETA = regional technical assistance. Note: Publications may include databases, multimedia, and other forms of documentation. Events may include event organization 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 2017 country operations business plan. Source: ADB K-Nexus
Table A5.3: Innovation, Advanced Technology, and Pilot Initiatives to be Implemented in 2018 Item Nature Project Number Sector or Theme Division Total number of innovation, advanced technology, and pilot initiatives = 0 NA NA NA NA Source: Asian Development Bank Appendix 5 11