DOCUMENT OF The WorldBank FOR OFFICIAL USEONLY ReportNo: 32261-EAP INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION REGIONAL ENGAGEMENT FRAMEWORK FY2006-2009 FOR PACIFIC ISLANDS May 3,2005 PapuaNew Guinea, PacificIslandsand Timor-Leste Country Unit EastAsia and PacificRegion This document has a restricteddistribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The date of the last Country Assistance Strategy was M a y 2000. ABBREVIATIONS AND ACRONYMS AusAID Australian Agency for International NAPA National Adaptation Program of Action Development EDF European Development Fund NZAID New Zealand International Aid and Development Agency ICT Information and communications NERRDP National Economic Reform technologies IDA International Development Association OED Operations Evaluation Department MDG MillenniumDevelopment Goal OIA Office of Insular Affairs CRJ? Comprehensive Reform Program PACER Pacific Agreement on Closer Economic Relations FTA Free trade agreement PEDF Pacific EnterpriseDevelopment Facility ADB Asian Development Bank PIC Pacific Island Country EU European Union PICTA Pacific Island Country Trade Agreement FA0 Food & Agriculture Organization PSD Private sector development FDI Foreigndirect investment RAMS1 Regional Assistance Mission to the Solomon Islands FEMM ForumEconomic Ministers Meeting RMI Republic of the Marshall Islands S E A Solomon IslandsEnergy Authority FSM Federated States of Micronesia SME Small- and medium-size enterprise FIAS Foreign Investment Advisory Service SOE State-owned enterprise IBRD International Bank for Reconstruction and SPREP South Pacific Regional Environment Development Program IAEA International Atomic Energy Agency STAl3EX Stable Exports Fund(EUcompensatory finance scheme) GDP Gross Domestic Product SWAP Sector-wide approach GNI Gross national income UNCTAD UnitedNations Conference on Trade and Development IFC International Finance Corporation UNDP United Nations Development Programme GEF Global Environment Facility UNEP UnitedNations Environment Programme ICAD UNInteragency CoalitiononAIDS UNESCO UnitedNations Educational, Scientific and Development and Cultural Organization I L O International Labor Organization UNFPA United Nations Population Fund ITU International Telecommunication Union UNICEF United Nations Children's Fund IMO International Maritime Organization UNIDO United Nations Industrial Development Organization ITC International Trade Center UPU Universal Postal Union ICAO International Civil Aviation Organization WBI World Bank Institute JICA Japan International Cooperation Agency WHO World Health Organization JBIC JapanBank for International Cooperation WIPO World Intellectual Poverty Organization KAP Kiribati Adaptation Project W M O World Meteorological Organization LICUS Low-Income Country Under Stress WTO World Trade Organization FOROFFICIAL USEONLY CONTENTS EXECUTIVE SUMMARY ........................................................................................................... CONTEXT AND ROADMAP THE DOCUMENT ...i FOR ................................................................ ill I DEFININGFEATURES . OF PACIFIC ISLAND COUNTRIES ............................................... 1 A.ExogenousFactors................................................................................................... 1 B.Socio-Economic Manifestations .............................................................................. 4 I1 ROLEOFTHEWORLDBANKINTHEPACIFIC . ............................................................ 11 A Lessons from Experience ....................................................................................... 12 B Feedbackfrom Consultations................................................................................. 13 .. I11 REGIONAL 15 I V .. FRAMEWORK ........................................................................................... BALANCINGREGIONALAND COUNTRY-LEVEL FOCUS ............................................. 21 A Regional Focus....................................................................................................... . 21 B. Country-Level Focus............................................................................................. 23 V . PARTNERSHIPS ............................................................................................................ 27 A Internal Coordination ............................................................................................. . 27 B.ExternalPartnerships.............................................................................................. 27 VI RESULTS ..................................................................................................................... 31 VI1 RISKS .. .......................................................................................................................... 33 A Country Chapter: Fiji......................................................................................... 35 . ... B. Country Chapter: FederatedStates of Micronesia............................................. 41 45 D.Country Chapter:MarshallIslands .................................................................... C. Country Chapter: Kiribati .................................................................................. 51 E Country Chapter:Palau...................................................................................... . 55 F. Country Chapter: Samoa.................................................................................... 59 H.Country Chapter:Tonga..................................................................................... 75 G. Country Chapter: Solomon Islands.................................................................... 65 I.CountryChapter:Vanuatu.................................................................................. 83 Annex A Fiji 89 Annex B FederatedStates of Micronesia ........................................................................................................... ...................................................................... 97 Annex C Kiribati 105 Annex D Marshall Islands ....... ..................................................................................................................... 113 Annex E Palau ............................................................................................................... ............................................................................................ 121 Annex F Samoa ............................................................................................................. 129 Annex G Solomon Islands ............................................................................................. 141 Annex H Tonga 151 Annex I Vanuatu 161 Annex J PacificIslandsSummary of NonlendingServices .. .... .............................................................................................................. ........................................................................................................... ....................................... 169 Map This document has a restricted distributionand may be usedby recipientsonly in the performanceof their official duties Its contentsmay not be otherwisedisclosed . without World Bank authorization . ACKNOWLEDGMENTS The team greatly appreciates the collaboration and contributions of the Pacific Island governments in the preparation of this regional strategy. The consultations with representatives of business chambers, civil society, NGOs, and the private sector in the Pacific Island countries have also been very helpful in informing the strategy. The strategy has also benefitedfrom a process of consultations with a broad group of development partners in the region over the entire course of its preparation. In particular, the team wishes to acknowledge the contributions of NZAID, AusAID, and the EU through continued informal dialogue as well as for providing detailed comments and suggestions. This interaction has enriched the document by enhancing the overall accuracy of the information presented, as well as contributed greatly toward building momentum into the donor coordinationprocess inthe region. The frequent and informative discussions with colleagues inthe Sydney office were most valuable: notably Cyrus Talati, Thakoor Persaud, Ian Collingwood, Elisabeth Mealey, David Chandler, Ian Morris, and Damian Brindley contributed to the contents of this document. Additional support from Cynthia Abidin and Sheldon Lippman in Washington in consolidating the various parts of this document i s gratefully acknowledged. Valuable advice was also received from Tevfik Yaprak and Sanjay Kathuria, as well as many others who sent written comments duringinternal reviews. The overall guidance of Homi Kharas and Sanjay Dhar i s gratefully acknowledged. Vice President: Jemal-ud-din Kassum Country Director: Xian Zhu Task Team Leader: Manjula Luthria Task Team: ChrisBleakley, EsmeAbedin, Piers Merrick, EvelynNg, and Susan Shen EXECUTIVE SUMMARY 1. The nine Pacific Island countries (PICs)' covered in this regional strategy face similar development challenges today despite notable differences in history, culture, and endowments. The lack of economic growth in the face of growing populations has contributed to rising unemployment and hardship in the region. Even those countries that have seen positive growth in per capita income have been unable to fully translate this into adequate job creation and poverty reduction. With over 50 percent of the region's population under age 24, steady rural-to-urban migration, and the erosion of traditional systems of social support, all PICs recognize the importance of dealing with the issue of youth unemployment and its associated social problems. 2. In the face of these common challenges, the World Bank regional strategy focuses on creating an environment conducive to generating sustainable economic growth and employment, while recognizing that small populations and marked remoteness of the PICs pose significant development challenges to this region. This strategy should be considered a regional framework within which country-specific objectives and expected results can be specifically defined, while recognizing that the depth and composition of country-specific assistance will evolve with national priorities, institutional capacity for reform, and the strength of mutualdialogue. 3. The region i s relatively aid abundant with bilateral donors filling the resource gaps quite generously. Growing concerns about the poor development record of the Pacific and its implications for the region have elevated the importance of increasing aid effectiveness. There i s a need for policy dialogue and global knowledge products that facilitate better use of these resources and effectively address the development challenges facing the region. The Bank's role inproviding such knowledge to the regionis considered valuable andtimely. 4. In formulating its regional strategy, the Bank is faced with the challenge of exercising selectivity in the face of a broad development agenda and defining a strategic role for itself in an aid-abundant region in need of both regional public goods, as well as capacity building at the country level. 5. The design of this strategy therefore takes guidance from the recently completed Operations Evaluation Department (OED) report2 of the Bank's activities in the Pacific and focuses on the main recommendations for improving public expenditure management3 and facilitating private sector-led growth. Consultations with Pacific member countries and their feedback have further underscored these messages, which are reflected in the country assistance programs. 'Comprising 9 member countries: Fiji, Federated States of Micronesia, Kiribati, Marshall Islands, Palau, Samoa, Solomon Islands, Tonga and Vanuatu. Individual country assistance strategies are underway for Papua New Guinea, and Timor-Leste. Evaluation of World Bank Assistance to Pac@c Islands Member Countries 1992-2002 (CODE2004-0088), November 2004. Although current country demand revolves around sectoral public expenditure reviews, the Bank stands ready to conduct economy-wide public expenditure reviews. Executive Summary *. 11 6. This strategy rests on a capabilities and incentives framework with a view to making a contribution toward: (a) Strengthening government capabilities inservice delivery 0 Improving the effectiveness of public expenditures, primarily in the social sectors; 0 Improving the management of infrastructural assets; and 0 Safeguarding service delivery by improving resilience to natural hazards. (b) Improving the incentives for private sector-led growth and employment by 0 Facilitating domestic job creation through reductions in the regulatory and administrative barriers to business development, and improving service and costs in utilities; 0 Increasing sustainable revenues from resource-based sectors, such as fisheries or tourism; and 0 Improving access to regional labor markets. 7. The Bank will deliver its assistance through strategic economic and sector work, multi- donor dialogues to promote donor coordination on a thematic basis, targeted policy notes to disseminate key messages, and focused technical assistance to implement reforms. Selective lending activities will actively seek to leverage donor resources to maximize their policy impact. The assistance will balance demand-driven, country-specific initiatives with regional-level initiatives to help create regional public goods. 8. Close coordination within the World Bank Group will be a priority to harvest global and intraregional lessons on promoting growth in small states. Since the focus of the Bank's assistance i s primarily on analytical and advisory work, intensified efforts at communications outreach and dissemination will be undertaken in the course of this strategy through the Sydney office. Maintaining access to the institutional knowledge based in Washington will be essential to deliver high-quality policy advice to the region. 9. The Bank i s not in a position to,lead a broad donor coordination effort given its limited presence in the region and the multiplicity of donor objectives in delivering aid to the region. However, the Bank will offer its convening power to the development partners by intensifying dialogue on the thematic objectives and instruments central to this strategy, as well as pursuing implementationof the harmonization agenda. 10. The strategy articulates a set of desired but realistic outcomes at a thematic level in accordance with the Bank's scope of engagement. A set of medium-term results for each activity at the country-level will be identified for monitoring the effectiveness of the Bank's assistance and also for making mid-course adjustments to the assistance when warranted. CONTEXT AND ROADMAP THE DOCUMENT FOR 1. This document outlines the World Bank's Regional Engagement Framework for the Pacific region for FY2006-09. The region comprises 9 Pacific Island member countries (PICs): Fiji, Federated States of Micronesia (FSM), Kiribati, Marshall Islands, Palau, Samoa, Solomon Islands, Tonga, and Vanuatu. This regional framework provides the strategic directions for the World Bank's engagement in the Pacific region that leads into an assistance program, as well as some selected regional initiatives, for each of the member countries. 2. This strategy should thus be considered a regional framework within which country- specific objectives and expected impacts can be more specifically defined, while recognizing that the depth and composition of country-specific assistance will be primarily demand-driven and flexible-particularly inthose PICs where Bank re-engagement is at an early stage. Structureof this Paper 3. Section Istarts out with a description of the main characteristics of the PICs that pose constraints on economic growth, with many of them being recognized as unchangeable such as geography, size, or even inheritance of fragmented colonial structures. It i s in the socioeconomic manifestations of these fundamental characteristics where there i s scope for better management. The discussion inthis section sets the stage for addressing some o f them through this strategy. 4. Section I1outlines a role for the World Bank, articulating the rationale for its involvement inthe region and identifying the key issues to which its engagement would be responding. It also lists the constraints faced in defining a business model and identifies a product mix for activities going forward. In that context, lessons from experience and the recent OED evaluation of the Bank's activities in the Pacific, as well as client feedback, are discussed. 5. Section I11 spells out the regional framework, presenting the thematic pillars of this strategy and the likely focus areas within each pillar. Section IV provides an overview of the balance between regional analytical products and country-level activities, which i s expected to continue to evolve. Section V discusses the importance of partnerships in implementing this strategy, both within the Bank and with the IFC and Foreign Investment Advisory Service (FIAS) groups, as well as with our bilateral donors and multilateral financial institutions. Section VI outlines the expected thematic outcomes of the Bank's assistance during the strategy period that are appropriate for its level of engagement in the region. Section VI1presents the risks along with actions being pursued to mitigate them. 6. Section VI11contains the 9 country chapters that present the economic update, overview of donor activities, and the key issues shaping the Bank's response with details of its current and expected program in the country. Annexes A - I provide the country data at-a-glance and country social and economic indicators. Annex J includes a summary of nonlending services in the Pacific Islands. I. DEFININGFEATURES OF PACIFICISLAND COUNTRIES 1. The World Bank's Regional Engagement Framework for the Pacific region for FY2006-09 covers 9 Pacific Island member countries (PICs): Fiji, Federated States of Micronesia (FSM), Kiribati, Marshall Islands, Palau, Samoa, Solomon Islands, Tonga, and Vanuatu. This framework provides the strategic directions for the Bank's engagement that leads into an assistance program, as well as some selected regional initiatives, for each of the member countries. This strategy should thus be considered a regional framework within which country-specific objectives and expected impacts can be more specifically defined, while recognizing that the depth and composition of country-specific assistance will be primarily demand-driven and flexible- particularly inthose PICs where Bank re-engagement i s at an early stage. 2. While the World Bank's Pacific Island member countries (PICs) differ in some cultural and economic aspects, they also share several defining features that have shaped their development in similar ways. These can be thought of as the exogenous factors or "givens" that constrain any medium-term development strategy. However, these factors have important socio- economic manifestations that could potentially be better managed with appropriate policies and instruments. This section first outlines the exogenous factors, then moves on to a discussion of these socio-economic manifestations. The latter provide the startingpoint for defining a Bank role in the region, though it is important to bear in mindthat the Bank is also on a learning curve in adapting well-known policy prescriptions to the special circumstances that prevail in the Pacific Island countries. Box 1provides a brief overview of subregional differences. A. ExogenousFactors 3. Remoteness and Isolation. The constraints of geography have played a major role in shaping economic opportunities in the Pacific. The total land area of the PICs, dispersed among hundreds of small islands and atolls, i s only 88,800 square kilometers (km)-about one-third the size of New Zealand. However, the sea area controlled through exclusive economic zones exceeds the land area of the United States. Kiribati, for example, has a population of a little under 100,000 that i s spread over 33 islands that cover 4,000 km from east to west, and 2,000 km from north to south, while the 200,000 inhabitants of Vanuatu are spread over 80 islands in a 800-km chain. The total population of the PICs i s about 2.1 million, with Fiji accounting for about 40 percent and Palau for 1percent (Table 1). The PICs' physical distances from world trade centers make them among the most isolated populations in the world. For most islands, the closest major ports are Auckland, Sydney, or Tokyo, which are over 3,000 km away on average. The least remote island, Palau, i s 1,677 km from Manila. This can be contrasted with the small island states of the Caribbean, which are less than 1,000 kmfrom the huge U.S. market. 4. Legacy of Colonial Experience. The formal political systems that exist in the region reflect the interaction of traditional political systems, colonial histories, and the relatively recent re- independence experiences. Colonial history, stretching back over 200 years, has involved Australia, Britain, France, Germany, Japan, New Zealand, Spain, and the United States. The move to political re-independence in the Pacific began in 1962 when Samoa regained its independence. These are new countries still coming to terms with the overlay of colonial systems over traditional foundations. Defining Featureso f Pacific IslandCountries 2 Box 1.Subregional Differences inthe Pacific While there are some important similarities between all the Pacific Island countries, the region i s not homogenous. In particular, the recognition of the differences between Melanesia (Fiji, Solomon Islands and Vanuatu); Polynesia (Samoa and Tonga); and Micronesia (Kiribati, Marshall Islands, Federated States of Micronesia, and Palau) is important ininforming the World Bank's regional approach. Geographically, Melanesia i s characterized by larger land masses and populations; Polynesia by smaller but relatively compact land masses, and Micronesia by very small and widely dispersed land masses. Interms of natural resources, Melanesia tends to be relatively resource-rich; Polynesia generally possesses adequate resources; while Micronesia tends to be resource-poor, thereby posing some different development opportunities and challenges. Social cohesion tends to be much stronger in Polynesia than in Melanesia and i s intermediate in Micronesia primarily because, though generally sharing a language, the islands of Micronesia are much more widely dispersed. Land disputes also tend to be much more common and significant in Melanesia than in Polynesia, again a reflection of social fragmentation. Traditional social and political systems also differ among the three subregions; for example, clans are primarily a Melanesian social structure and are more extensive than the ainga of Samoa or kainga of Kiribati. As such, a key distinction between the Melanesian states and the rest of the region has to do with ethnic tensions, which are sometimes exacerbated by conflict over resource rights. Governance structures and quality vary considerably across the region. Both the Solomon Islands and Fiji have had serious problems in relations between ethnic groups inthe last five years, while Vanuatu has also hadproblems inthe past. There are also differences between the subregions in their susceptibility to natural disasters. The Micronesian islands are generally out of the typhoodcyclone path, but are more susceptible to the effects of climate change and rising sea levels, due to the low-lying nature o f the atolls. Table 1.Defining Features of Pacific Island Countries v1 2 .3 3 4 d :3 k f g G g m Population (`000,2004) 848 98 53 127 20 179 471 102 215 ,854,500 2,655,20( Kmto nearest major port 3,215 4,534 4,501 3,703 1,677 4,340 2,854 3,580 2,471 ~asGN1percapita (US$, 2003) 12,360 880 2,710 2,090 7,500 1,600 600 1,490 1,180 1,080 1,480 Avg. aid per capita (US$, 1998-2002) 40 198 1,183 911 2,308 194 113 214 187 5 8 Aid as a % of GNI (1998-2002) 2 20 52 45 35 14 16 14 16 1 1 Fertility rate I irths per woman, 2002) 2.6 3.6 - 3.5 2.5 4.0 5.3 3.4 4.3 2.1 2.1 Avg. population growth (annual %, 1998-2004) 1.1 2.3 0.9 1.9 1.5 1.0 2.8 0.6 2.6 1.o 0.9 Source: World Development Indicators, 2004. 5. Communally Focused Cultural Norms. Unlike the Indian Island and Caribbean countries to which they are sometimes compared, Pacific indigenous cultures have remained strong. They Defining Features of Pacific IslandCountries 3 continue to play a large part in national life and exert considerable influence over national policies and decision making, thus influencing asset ownership, economic mobility, and overall governance outcomes-all of which vary across the region. The existence o f a defining sense of family, clan, and ethnic identity manifests itself in two significant ways. First, social networks defined by clan, and family relations have done much to alleviate the harshest effects of poverty due to access to communally owned land for subsistence agriculture, as well as strong social norms to provide support to the needy in the community. Second, the primacy of the community places social barriers against the development of a culture of aggressive private entrepreneurship, as all successes (and failures) are viewed as belonging to the family or clan. Moreover, these cultural standards mean that there i s generally widespread support for the involvement of the public sector in many economic activities that in other countries would be regarded as solely inthe sphere of private activity. 6. Land is an asset that identifies family, clan, and lineage. It i s valued for what it symbolizes, as well as the subsistence and livelihood it provides. Nonetheless, while the social support networks that are reflected in the importance of communal land ownership have done much to ameliorate real destitution in the Pacific, this aspect of the Pacific identity does present a sizeable barrier to mobilizing investment in the PICs, as communally owned land i s generally unavailable to collateralize lending activities. This greatly limits the scale and scope of financial intermediation in the islands. In addition, the high incidence of disputes over land ownership, especially in the Melanesian states, increases the risk premium facing investors considering leasing arrangements; or conversely makes the land open to exploitation in the absence of clear ownership rights (e.g., illegal logging). 7. Susceptibility to Natural Disasters. The Pacific Island region i s vulnerable to extreme weather events. The potential impact of these events i s increasing as the islands' vulnerability rises due to growing urbanization, degradation of coastal ecosystems, and concentration of infrastructure on fragile coastal areas. In addition, climate change and the expected rise in sea levels will further exacerbate current problems. In low-lying islands (such as Kiribati, Marshall Islands, and other atolls), inundation due to storm surges could increase significantly, leading to loss of assets and salinization of groundwater sources. Climate change could also cause more intense cyclones and droughts, prompt the failure of subsistence crops and fisheries, and intensify the spread of infectious diseases. 8. Reliance on Natural Resources. Pacific countries tend to be highly dependent on natural resources for their livelihood, and resource management i s a critical factor in their economic development. The majority of the PIC populations are still dependent on subsistence agriculture andfishing to supplement money incomes. Some islands also have significant mineral resources, and many have commercially exploitable forest and fishery resources. Indeed, inresource-richbut socially fragmented Melanesia, one of the key challenges i s the development of cooperation and transparency in the exploitation of resources. The richest tuna fishing grounds in the world are found in the South Pacific. But despite the large exclusive economic zones controlled b y many of the PICs, fishing rights are leased out to foreign fishing companies at terms that are not favorable to the Pacific. Access fees represent significant components of government revenue for some of the PES,especially Kiribati (47 percent) and F S M (25 per~ent).~ Figures are for 2001 (IMFArticle IV staff reports) Defining Features of Pacific IslandCountries 4 9. Aid Dependence. With the exception of Fiji, PIC economies are generally dependent on official aid flows (refer back to Table 1). This i s in part a legacy of the decolonization process, partly a reflection of international recognition of the problems facing small island states, and partly related to donors' strategic interests inthe region. Aid levels, on both a per capita basis and relative to gross national income (GNI), are significantly higher than income-level comparators. Most aid i s provided by bilateral donors and, as illustrated in Figure 1, in the last five years the largest donors have been the UnitedStates, followed by Japan, Australia, and the European Union (EU). The U.S. aid is focused on the North Pacific, Australian aid on the Melanesia and Polynesia, and New Zealand aid on Polynesia. Figure 1. Aid Donors to the PICs (Average 1998-2002) ADB Other 6% Australia us. 43% New Zealand 6% Japan 20% Source: Intemationnl Development Statistics online database. B. Socio-Economic Manifestations 10. The interactions of the exogenous factors described above have manifested themselves in a numberof ways in the Pacific. Focusing on improvingtheir management through the appropriate policies forms the broad basis of the World Bank's engagement inthe region. Some of these could be effectively addressedthrough well-designed regional initiatives. 11. Dominant Public Sectors. Large public sectors are characteristic of many PICs, supported by the inability of small population sizes to exploit returns to scale in the provision of public sector services, communal attitudes to proper scope for state involvement, as well as the large aid flows that made feasible its financing. Government spending to gross domestic product (GDP) ranges from a low of around 20 percent in Vanuatu, up to 150 percent in Kiribati (Table 2). Government employment accounts for nearly one-third of total formal employment in Fiji and the Solomon Islands and about two-thirds inKiribati. This relative size of the public sector, combined with the sizeable involvement of state-owned enterprises in many economic activities, has led to a crowding out of private sector activity. Public sector wage levels tend to drive trends in the private sector, which makes many activities uneconomic, especially when compared to production costs in the low wage economies of South East Asia. Defining Featuresof Pacific IslandCountries 5 12. As a consequence of the large size of the public sectors in PICs, governance issues affecting the management and control of the public sector budget take on an even greater importance. Table 2 indicates the size of budget deficits over the last five years, which in some cases have been exacerbated by the effects of civil conflict (e.g., Solomon Islands and the attempts of the Fijian government to overcome the downturn associated with the coup of 2000) and the instability of parliamentary majorities (e.g., Vanuatu). In many PICs, weakness in public expenditure management has led to a recurrence of unbudgeted spending and arrears to government employees, to suppliers, or to holders of government debt. More generally, budget management has been weak, with loose procedures for enforcing public accountability and oversight. Table 2. PublicSector Indicators as a % of GDP, 2004 34.5" 150.0a 78.2 58.8 68.7 32.3 44.1 26.1 20.1 9vg. budget balance as a % of GDP, 1999-2003 -7.7 -3.1 8.6 -2.7 -17.0 -1.1 -6.6 -1.4 -4.0 ?ublic sector debt as a % of GDP, 2003, ofwhich 57.2 26.9 86.5 25.2 19.4 54.0 91.5 47.8 37.2 Domestic 46.2 - - 0.1 27.6 3.2 9 . 4 External 11.0 26.9 86.5 25.2 19.4 53.9 63.9 44.6 28.2 Proportion of external debt on concessional terms, 2003 13.3 - - 100.0 98.9 96.4 92.4 92.0 Sources: World Development Indicators, 2004, and IMF Article IV Staff Reports 'Datafor 'Datafor 2003 2002 13. Despite issues with public expenditure management, total public and publicly guaranteed debt levels have generally been stable or falling over the last five years. Exceptions to this generally positive trend include the Solomon Islands,' in which debt levels have increased by around 30 percentage points of GDP; and Fiji, which has seen a smaller, though still significant, increase in debt levels. While most debt in the PICs i s on concessional terms, the relative size of the principals outstanding has in some cases raised concerns about the sustainability of additional loans. These concerns, coupled with large bilateral grant assistance, have contributed to shifting the emphasis of the Bank's role toward nonlending services. 14. Poor Delivery of Public Services. Pacific Island governments spend comparatively large proportions of their budgets and GDP on the social sectors (Table 3); and donor support for social sectors also dominates. However, these generous resource flows have not, by themselves, shown a significant positive relationship with health or education outcomes, although there i s some evidence to suggest that a positive relationship may exist once governance structures are taken into account. Debt levels and arrears have fallen since the RegionalAssistance Mission to the SolomonIslandsinterventionin2003. Current Trends, Future Opportunities: Human Development Outcomes in the Pacijk Islands, World Bank, 2005. Defining Features of Pacific IslandCountries 6 Table 3. PublicSpendinginSocial Sectors (2001) - Marshall FSM Fiji Islands Palau Samoa Tonga Vanuatu Public expenditure on health & education as % 27.2 37.5 20.3 24.9 30.3 22.9 43.1 of total public exp. ~ _ _ _ _ _ ~ Source: Human Development Outcomesin the Pacijic Islands: Current Trends,Future Opportunities,2004-05. 15. The most important challenge for education in the Pacific region is that schooling is not adequately equipping children with the basic skills needed to pursue further studiedtraining or to succeed in the labor market. Although primary enrolment rates are generally high, many children quit before completing basic education, or complete but without the expected educational achievements. These problems are associated with the variable quality of school facilities, school management, curriculum and learning materials, teachers, and district support staff. Moreover, access to lower secondary schooling i s very low in some of the PICs, particularly in Melanesia, largely due to government's insufficient resources to meet the recurrent costs and compounded by the lack of physical facilities. These poor outcomes persist despite the relatively high levels of government expenditures and donor support to education 16. While aggregate health measures, such as life expectancy and infant mortality rates tend to compare well with countries at a similar level of development, the incidence of malaria and HIV/AIDS i s quite high and rising in some parts of the Pacific. Non-communicable diseases, such as cancer, diabetes, hypertension, and cardiovascular disease, have also become prevalent and are replacing communicable diseases as the primary cause of death in some of these island economies. The care and treatment of noncommunicable diseases constitute a large burden on households and national health budgets, with treatment often being provided b y overseas referral. The fact that a large proportion of recurrent health expenditure i s dedicated to expensive overseas tertiary care has meant that there has been limited funding for pro-poor public health programs such as reproductive health and community health care. In addition, there are on-going problems associated with the inability of governments to retain and utilize trained health personnel, as many emigrate in search of better opportunities (notwithstanding the future potential benefits from remittances and knowledge transfers from Diaspora). 17. Undiversified Exports. Due to their endowments, size, and remoteness from large foreign markets, the PICs produce a relatively narrow range of goods and services, but they consume and therefore need to import a wide range.' For some PICs, merchandise imports are a multiple of exports, implying large merchandise deficits. Table 4 shows the size o f the trade and goods and services deficits, and indicates the degree of concentration in goods exports. This reliance on a small number of export goods makes the economies susceptible to terms o f trade shocks, and in particular those economies that are almost entirely reliant on commodity exports often face correlated falls inprices. Preferential access into developed markets based on historical factors has Invisible earnings reduce the gap somewhat in most countries, except the Solomon Islands, Marshall Islands, and FSM. Of these, tourism earnings are important for Fiji, Vanuatu, Tonga, and Samoa; and remittance flows are a major contributor to the Kiribati, Tongan, and Samoan economies. Despite these flows, a large gap remains that is met through aid. Defining Features of Pacific Island Countries 7 also played a role in distorting trade competitiveness and left these small economies vulnerable to the duration of these special terms. Table 4. External Trade Indicators w CI v1 .CI CI -=g U 1 .I co i! Ev1 B od 0 a2 3i: $% 49 v1 0 Averagetrade deficit as a % of GDP, 1999-2003 -10.1 -42.6 -43.9 -39.3 -75.9 -15.2 -5.7 -32.4 -24.5 Averagedeficit inG&S as a % of GDP, 1999-2003 -5.4 -56.7 -48.0 -44.3 -35.5 -25.6 -5.8 -33.8 -5.3 Sources: WorldDevelopment Indicators, 2003; IMF Article IV Staff Reports; Central Bank Bulletins. 18. Subdued Private Sector Activity. The role of the private sector has generally been marginal in the Pacific, in large part a reflection of the constraints posed by small population sizes and the marked remoteness o f these island states. Cultural standards opposing the development of aggressive private entrepreneurship, communal ownership of land that renders it unavailable for collateralization, and large flows of foreign aid that have supported bloated public sectors have also combined to constrain private sector development. Key public utilities, such as those in the power, telecommunications, and water subsectors, are too often inefficient and unreliable, imposing large costs on private sector activity. Furthermore, planning and management in natural resource-based sectors, such as forestry and fisheries, has been weak or subject to corruption undermining the ability of these sectors to contribute to growth. 19. Recent Bank work on benchmarking the Doing Business Indicators in 2005 has illuminated some of the regulatory constraints to private sector growth. While the data do show significant variation in the performance of the individual PICs, common features include a lack of disclosure on ownership and business financials, time consuming and costly contract enforcement, and weak bankruptcy resolution practices. 20, Significant Costs Imposed by Natural Disaster Cleanup. Since 1950, the reported cost of extreme events (primarily cyclones and droughts) in the PICs has been significant (Table 5). Duringdisaster years the average economic losses are nearly half of GDPfor Samoa and a thirdof GDPfor Vanuatu, and over 40 percent of the population of Tonga and Samoa are affected. While extreme weather events will always be a major factor in the Pacific, there i s much that can be done to alleviate this risk, such as introducing appropriate adaptation measures that reduce the vulnerability of physical assets and local populations. These include setting back infrastructure from vulnerable areas, better management of coastal ecosystems, and protection of water sources. Defining Features of Pacific IslandCountries 8 During the 2004 Cyclone Heta, Samoa is estimated to have saved up to US$165 million in damages due to hazardmanagement procedures adopted inthe 1990s. Table 5. Losses Due to NaturalDisasters Average annual total Average Number affected annual total Average annual Averageannual disasters (% of total affected damages (% of total damages ( %of GDP, reported in disaster years) population population, (%Of GDP in 1950-2004) 1950-2004) disaster years) Fiji 38 10.8 5.1 7.7 2.7 Samoa 12 42.2 6.1 45.6 6.6 Tonga 37 42.0 5.3 14.2 1.8 Vanuatu 16 15.5 4.5 30.0 4.4 21. Rapid PopulationGrowth. Fertility rates inthe PICs are high, and well above both regional and income-level averages, particularly for Melanesian countries, such as the Solomon Islands and Vanuatu (refer to Table 1). In most cases these highfertility rates have generated highpopulation growth rates, although those countries for which emigration i s available (Samoa and Tonga to New Zealand, and the Northern Pacific countries to the United States) have managed to ameliorate this issue somewhat. Nevertheless, around 40 percent of PIC population are between 0 and 15 years of age (and another 20 percent i s between 15 and 24), and this expanding youth bulge i s exerting significant pressure throughout PIC societies. 22. Stagnant Economic Growth and Poverty. All the issues highlightedabove have contributed to the stagnant growth performance exhibited by the PICs over the last five years, which i s consistent with longer-run trends (Table 6). While Samoa andFijihave been the better performers in the Pacific, even they still lag behind regional and income-level comparators to a significant degree. In the case of the Solomon Islands and Vanuatu, living standards have fallen significantly over the period. In Vanuatu's case, real per capita incomes in 2004 are the same as they were at independence in 1980. 23. While the poverty data are not strictly comparable across countries because they are based on nationally defined poverty lines, Kiribati, Vanuatu, and F S M (and very likely Solomon Islands) have high percentages of their populations living in poverty. Anecdotally, there i s an understanding that with the gradual erosion of traditional support systems, rural-urban migration, and a move away from subsistence farming, poverty (or "hardship" as it is referred to in the Pacific) i s rising significantly. 24. Unemployment statistics also signal elevated risk levels in some countries. Fi ure 2 presents unemployment rates according to recent censuses in all nine Pacific countries.' The Due to the limitations of the census instrument, definitions of unemployment within the census data bases differ in some respects from those usedto calculate unemployment from labor force surveys. For example, it is not possible to distinguish active from inactive unemployed in all surveys. However, the analysis permits a consistent comparisonbetweenand within countries of the order of magnitude of unemployment. Defining Features of Pacific IslandCountries 9 results show several important patterns. First, there i s wide variation in unemployment rates among Pacific countries. The Solomon Islands and FSM report much higher levels of unemployment than the other countries, with the former registering over 30 percent unemployment. In Tonga and Marshall Islands, rates are moderate (officials have reported an increase in Tonga and Fiji since.1996). It is important to note that in countries where the measured unemployment rate i s very low (e.g., Kiribati), employment i s predominately in subsistence work. m m C Q * Z -.- CI Y "x Sf Z - l gE Z m Average growth in real GDPpercapita, 1999- 2.6 0.9 0.1 -0.1 2.0 3.0 -7.4 2.1 -2.4 5.6 3.7 2003 Percent population below poverty line 26 51 20 40 - 20 - 23 40 - (latest year available) 25. A second important pattern is the high level of youth unemployment. While expected to be relatively high in any labor market, youth unemployment is more than double the total male unemployment rate in most of the Pacific countries (Fiji, FSM, Marshall Islands, Palau, Samoa, and Tonga). At the same time, the female unemployment rate i s consistently higher than the unemployment rate o f males, except for Tonga. Figure2. YouthUnemploymentRates 45 * 40 ; mYouth (15-24) Female Male OTotal 35 : 30 25 20 : 15 10 : 5 : 0 *" Vanuatu FSM2000 RMI 1999 Solomn Tonga Palau 2000 Sama Fiji 1996 Kiribati 1999 Islands 1996 2001 2000 1999 Source: Human Development Outcomesin the Pacific Islands: Current Trends,Future Opportunities, 2004-05. Vote: Updatesandprojectionsfor youth unemploymentare estimated inthe context of the labor mobility study usinglates populationprojectionfigures andestimates of sectoraldemandfor labor inthe PICs. 11. ROLEOFTHEWORLDBANKINTHEPACIFIC 26. In the face of these common challenges, a regional strategy that focuses on creating an environment conducive to fueling sustainable economic growth and job creation i s needed. Changing demographics resulting in a large percentage of youth in the population with the backdrop of crumbling economic and social traditional structures i s worrisome for PIC governments, neighboring donors, and development partners as it threatens social stability in these economies and, possibly, inthe wider region. 27. Aid has largely reflected bilateral strategic motivations and often been directed toward service delivery-law and order, schools, hospitals, or in a few cases, rural employment creation to avoid social conflict-hence its effect on growth has been uncertain. A World Bank strategy that leverages donor resources in a way that focuses attention on economic growth i s therefore needed not only to guide the Bank's activities but also for its greatest potential to enhance the impact of donor resources. 28. While the large presence of bilateral donor grant funds in the region implies that the financing needs of the PICs are met without recourse to borrowing, there i s now growing concern regarding aid effectiveness and development outcomes among donors-underpinned by the reality of rising poverty or "hardship" levels, the risk of failing to meet the Millennium Development Goals (MDGs), and to varying degrees, by security concerns for the region. This has elevated the importance of policy dialogue and global knowledge products that facilitate better use of donor resources and effectively address the economic challenges facing the region. 29. There i s evidence of a growing donor appetite for the World Bank's ability to offer technical expertise, access to global knowledge, and international networks; and facilitation of partnerships with other development organizations, the private sector, and civil society. Although a modest level of Bank lending based on country demand and grant instruments i s feasible and appropriate, the World Bank i s unlikely to be a major source of development finance for the region. Hence, the Bank i s mindful o f the need to: exercise selectivity in the face of a broad development agenda and the backdrop of recent Bank re-engagement with Pacific clients; define a demand-driven business model based less on project finance than on knowledge dissemination o f good practices inpromoting growth in small islands; 0 determine an appropriate balance of country-focused and regional interventions- tailoring advice, analysis, and financial support to individual country needs while at the same time seeking to identify regional economies of scale and promoting regional public goods; and promote more strategic aid management to enhance aid effectiveness and encouraging harmonization, given the Bank's small financial role inthe donor community. 30. In this context, assimilating the lessons from experience, the OED evaluation, and client consultations are important and discussed next. Role of the World Bankinthe Pacific 12 A. Lessons from Experience 31. The last Pacific Regional Strategy was discussed by the Board inMay 2000. It outlined the World Bank's re-engagement in the Pacific Region, coupled with the decentralization of the Bank's country management unit to Sydney. The objectives of the strategy were to promote poverty reduction through support for the human capital, policies, institutions, and physical infrastructure needed for equitable and sustainable growth. It sought to achieve these objectives by reducing disparities within countries and promoting equitable access to the benefits of development through focused lending, particularly in the social sectors and infrastructure (transport, telecommunications), with an added emphasis on strengthening private sector capacity inthese areas. 32. Accordingly, during 2000-2003 the World Bank completed analytical work on regional environmental issues, trade policy, noncommunicable diseases, and climate change adaptation; and offered policy advice on environmental risk management and climate change adaptation. The Bank financed a small number of lending operations in the health and infrastructure (including natural hazard recovery) sectors and technical assistance grants in health, private sector development, and environmentkonservation. 33. An OED evaluation of World Bank assistance to the Pacific over the 1992-2002 period found that the Bank had not been able to make a satisfactory contribution toward fueling economic growth in the r e g i ~ n .Going forward the OED evaluation recommended that the Bank (a) focus ~ on improving expenditure management and removing bottlenecks to private activity in the region, (b) define focused and measurable country-specific objectives and interventions for countries where its engagement i s expected to continue, (c) prioritize support for a select set of regional- level initiatives, (d) deepen and broaden its relationship with other donors, and (e) ensure that its strategy i s fully funded and staffed. 34. The planned strategy incorporates the recommendations of the OED evaluation into the strategy for FY2006-09. This strategy focuses on promoting an environment conducive to fostering sustainable economic growth and job creation in the region. The regional framework emphasizes building government capabilities for service delivery by improving public expenditures in key areas, as well as improving the incentives for private sector-led job creation. The strategy also identifies a combination of regional and country-level objectives and interventions while emphasizing the importance of stronger development partnerships in order for the Bank's technical assistance to effectively leverage donor resources. A set of thematic objectives with accompanying outcomes are identified in the strategy, and country-specific outcomes will be identified for individual activities. Increased attention to dissemination that promotes dialogue with clients, bilateral donors, development partners and civil society on key issues, and follow-up implementation will be priority actions. The World Bank has increased its staff capacity in the Sydney regional office and i s strengthening a network of in-country contacts to facilitate dialogue and implementation of assistance. These issues are elaborated upon in this document. Evaluation of World Bank assistance to Pacijic Islands Member Countries 1992-2002 (CODE2004-0088), November2004. Role of the World Bankinthe Pacific 13 B. Feedback fromConsultations 35. The World Bank team has consulted with a range of stakeholders in government, private business, academia, and civil society during the preparation of this strategy and sought feedback on the analytical framework, modalities for assistance, and country-specific needs. The Bank has also consulted other development partners and Pacific regional organizations on the planned strategy, as well as on opportunities for potential partnerships. In-country workshops and follow- up dialogue have provided valuable feedback throughout the preparation of this strategy. 36. There were several key messagesreceived from these consultations: 0 The capabilities and incentives approach adopted in this strategy captures the main issues facing the region that need concerted attention from the development community. 0 Vehicles that foster donor coordination would improve the chances of tackling these challenging issues effectively, as would a stronger role by Pacific governments themselves that donors could also encourage. 0 The World Bank's analytical/technical expertise in these areas i s very valuable and hence more frequent interaction and dissemination of its global activities would be desirable. The World Bank should work closely with regional organizations inthe Pacific. 0 The Foreign Investment Advisory Service (FIAS) and IFC's Pacific Enterprise Development Facility (PEDF) and the World Bank should closely coordinate support for private sector development. Regional Framework 16 40. Consultations with client governments or donors have not yet revealed a demand for broad economywide public expenditure reviews or targeted stand-alone assistance to support public sector and financial management reforms. An emerging request from Fiji to review the general efficiency o f public expenditures i s under consideration and expected to serve as an entry point into a more specific engagement, the nature of which i s not known at this time (see Section VIII, Country Chapter A on Fiji). As the information base and country relationships expand, the Bank will make available its core diagnostic products, adopting as appropriate to the Pacific context. 41. The Bank's contributions will be in the areas of social sectors, infrastructure, and natural hazardmanagement. 1. Improvingthe Effectiveness ofPublic Expendituresinthe Social Sectors 42. The Bank will attempt to make a contribution toward understanding the causes and addressing the difficulties encountered in improving the outcomes in education and health so that they are better aligned with the large amounts of public expenditures being devoted to these sectors (refer back to Section Ifor related discussion). 43. The Bank i s preparinga regional economic report reviewing the issues inthe social sectors inthe Pacific that will identify the governance structures, policies and institutions where reforms would speed progress toward the attainment of the MDGs by improving service delivery in health and education, especially to the poor and inhabitants of outer islands. Through this report and country-level activities, the Bank will share global experience, disseminate good practice, and test the relevance of new approaches with the main donor partners, supporting implementation where appropriate (e.g., sectorwide approaches). 2. Improvingthe Managementof InfrastructuralAssets 44. While donor funding of infrastructure i s quite prevalent, insufficient attention to asset management has led to a deterioration of these investments, causing disruptions to availability of basic services. If costly rebuilding activities are to be avoided, greater attention needs to be paid to the maintenance o f these physical assets. 45. The Bank's role here would be to bring in best practice lessons and innovative public- private partnerships to help the countries implement reforms to improve coordination, accountability, and capacity in infrastructure management. This area i s being scaled up in the Pacific in response to stakeholder feedback and will take guidance from the recently completed Infrastructure Report prepared jointly b y the Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC), and the World Bank. 3. Safeguarding Service Delivery by ImprovingResilience to NaturalHazards 46. High vulnerability to natural disasters (in terms of proportion of area and population affected) has resulted in the cost of extreme events, primarily cyclones and droughts, totaling Regional Framework 17 US$2.8 billion in real 2004 value in the 1990s alone" (refer back to Section Ifor related discussion). 47. The Bank i s preparing a policy note to review the incentives, institutions, and (financial) instruments available for hazard risk management, emphasizing that being proactive in building resilience has a highpay-off. Infact, the cost of inaction i s highinterms of fatalities and economic damages. From this work the Bank will draw upon regional and international experience to build local capacity for hazard management and develop cost-effective instruments for the Pacific that can minimize the risk of various types of losses and interruptions in public service delivery, which obviously have a disproportionately larger effect on the poorer populations and retard the attainment of MDGs." B.Improving the Incentives for PrivateSector-led Growth and Employment 48. The Bank will seek to make improvements in the incentive environment for job creation by adopting a two-pronged approach: (a) b y supporting private sector development domestically by improving the business environment to make it attractive for domestic business development and inward foreign investment attraction; and (b) in recognition of the natural constraints to private sector development in the Pacific by facilitating outward labor mobility for Pacific Islanders into neighboring developed countries in the context of deeper regional integration. Both these areas are new to the Bank's assistance package in the region and reflect the concerns of countries that have successfully implemented public sector reforms but not received the expected private investment (e.g., Samoa). This work would attempt to deepen and complement those reforms. 1. Facilitating DomesticJob Creation 49. The Bank's activities in this area would fall into one of these categories: The cost of doing business could be reducedby improvingthe broad administrative and regulatory framework affecting entry and exit of firms. The DoingBusiness Indicators database benchmarks the PICs against several other countries on both cost and time taken to obtain business licenses, access credit, collect on a debt, etc. Several of the PICs have shown a keen interest in improving the performance in some of these areas. Appropriate technical assistance programs will be designed to address those requests in close partnership with other partners. In some countries, the Bank may focus on reducing costs of specific utilities (e.g., telecom), stressing regional cooperation to reap economies of scale and pooling of regulatory capacity. While small size of markets may limit privatization options, regulatory reform efforts to increase private participation in service provision will be supported. Sustainable revenues from resource-based sectors, such as fisheries, forestry or tourism, could be enhanced particularly in the smallest islands that are single-sector loFigure from EM-DAT and SOPAC, 2005. 11Guidance will be drawn from Managing the Debt Risk of Exogenous Shocks in LICs (SecM2005-0112), March 9, 2005. Regional Framework 18 economies and are either not able to secure fair deals in international negotiations that could be addressed through better regional cooperation, or where the lack of transparent frameworks has led to exploitation and threatened sustainability of the sector. Since these are where the long-term sources of growth may lie, the Bank would look for opportunities to team up with the specialized regional agencies'* to identify proposals for equitable revenue sharing, as well as avenues to support the IFC's sectoral investments (e.g., intourism) through policy dialogue. Close coordination with other development partners such as the ADB, AusAID and NZAID on private sector development issues will be a high priority given the broad agenda that needs to be tackled. 2. AccessingRegional Job Markets 50. While the business environments in the PICs have considerable scope for improvement, there are natural limitations on the size of the private sector due to small size and geography of the PICs. Yet, an immediate solution to job creation i s needed in the face of large (and growing) percentages of youth in the populations that are showing an inclination to move away from subsistence cultures. 51. As donors are becoming more "hands-on" in the Pacific, the climate is right to offer consideration of the merits of some form of labor market integration with their Pacific neighbors. The Bank i s therefore undertaking an analytical and empirical study on this topic that i s a logical extension to its previous regional economic report.13 One of the recommendations of this report ` was an expansion of the free trade area (FTA) formed within the PICs (known as the PICTA) to include the developed neighbors, New Zealand and Australia (known as PACER), in order to enhance the gains from trade ~reation.'~ Ifthe PICs do consider widening the FTA,they are likely to do so if trade in services and inparticular labor mobility i s incorporated. 52. The Bank's analysis of labor mobility attempts to quantify the costs and benefits of labor mobility with a focus on documenting the impact of remittances on poverty and income inequality reduction in recipient communities while drawing policy recommendations for both sending and receiving countries to maximize the development impact of managed migration. Frequent dialogue with New Zealand and Australia on labor mobility issues i s being maintained inorder for this study to understand the opportunities and address the constraints to labor market integration. For example, ForumFisheries Agency to raise the share of fishing revenues accruing to the Pacific from the current low of 4 percent l3 Embarking on a Global Voyage: Trade Liberalisation and Complementary Reforms in the Pa&, Report No. 24417-EAP, PREMUnit, East Asia and Pacific Region, World Bank, September 10,2002. l4The report also recommended that more attention be paid to the `behind-the-border' agenda in order to extract benefits from trade integration. The focus o f this strategy on improving the domestic business environment i s inline with that recommendation. On related areas, the lead i s being taken by other development partners (e.g. NZAid on trade facilitation. and PFTAC on tax reform). The Bank i s ready to tap into the institutional knowledge on this broad agenda-WTO accession, Integrated Framework on Trade, Small States Task Force work on trade-if the demand arises from clients or partners, and could make available capacity-building instruments in partnership with the World Bank Institute. Regional Framework 19 Table 7 summarizes the likely delivery instruments, main partners, and analytical products (combination of completed and ongoing reports) which underpin the Bank's approach. Table 7. Analytical Products, Instruments and Partners for Delivering Bank Assistance to the Region Thematicfocus Analytical product that Proposed instrument to Mainpartnersa will underpin Bank deliver assistance involvement Improve Effectiveness of Public Expenditures Social sectors I Regional Economic IDonor coordination to Australia, New Report (FY05) on HD. leverage resources, SWAPS Zealand ineducation sector Infrastructure Management Infrastructure Report, Dialogue with regional Australia, ADB, Regional Infrastructure organizations, Pacific Islands Forum Conference ( FY05) Country-level technical assistanceand operations to leverage donor resources Hazard Management Policy note on HM Capacity building Specializedregional issues (FY06) Iworkshops, Country-level agencies operations Improve environment for private sector development Reducing the cost of doing I Doing Business Country-level advisors and ADB, Australia, business Indicators (FY03, and consultative groups to FIAS ongoing updates) implement reform Increasingrevenues and Regional Economic Joint sectoral policy reviews Australia, EU,Japan, sustainability o f natural Report (FY96)b with donors or leveraging - - IFC resource-based sectors IFC investments Improving access to Migration and Discussion forums, FEMM regional labor markets Remittances analysis briefings, close dialogue Zealand, (FY06) with Australia Pacific Islands Forum, University of South Pacific 111,Country Chapters. Pacijic Island Economies: Building a Resilient Economic Base for the Twenty-First Century, Country Department 111, World Bank, 1996. IV. BALANCING REGIONAL AND COUNTRY-LEVEL FOCUS 53. Given the variety of issues identified in the analytical framework, the strategy will deploy a combination of a regional and country-level focus inits activities. A. RegionalFocus 54. The rationale for taking a regional approach to some issues is that if countries deal with regional public goods individually without internalizing the effect on other countries in the region, it may result inthe "tragedy of the commons" where everyone loses due to the lack of cooperation. Thus regional cooperation on public goods can generate largebenefits. Such a debate has begun to take shape in the Pacific. Bilateral donor partners are interested in exploring ways to test the viability of regional public goods. Given the well-known constraints of scale and capacity facing the individual island countries, a meaningful dialogue and analysis of regional cooperation i s long overdue. Working at a regional level also allows scarce Bank resources to be bundled in a way that enhances efficiency in analysis, as well as in disseminating global knowledge. Hence, the upcoming strategy would support this thinking b y undertaking selected thematic pieces of analytical work at the regional level for fostering dialogue with and discussion among Pacific Island policymakers and other stakeholders on common challenges. The Pacific Plan being developed b y the Pacific Islands Forum Secretariat presents such an opportunity. 55. The definition of the term regional often varies. A differentiation is made between activities or diagnostic work that have regional coverage in the data (such as the Doing Business indicators) (a) from activities when due to common characteristics among countries, a component i s highly portable and hence offers potential for cross learning and demonstration effects (such as hazard management practices); and (b) from activities which involve pooling of resources for provision of service (such as a regional airline) or integration (such as by forming a free trade area). 56. A description of the regional analytical work currently underway is summarized below. Given the systemic nature of the issues being addressed and the varied interactions with clients and regional organizations, these should be viewed as multi-year initiatives. In keeping with OED's recommendations, increased attention will be devoted to engaging with stakeholders during the concept and preparation stages, while sufficient resources will be dedicated to disseminating and implementing the findings emerging from such analytical work. 0 Human development services. The Review of Human Development in the Pacific Islands (FY04-05) comprises a series of discussion papers addressing the challenge of delivering more relevant, equitable, and socially inclusive human development services in the Pacific Islands. It is underpinned by the concern over high levels of funding in the health and education sectors that seem unmatched b y improvements in service quality and improved outcomes. Key to the success o f this human development review will be the depth and frequency of consultation and collaboration with regional stakeholders to determine the scope of regional initiatives in the delivery of education and health services. The World Bank team will link up with expert collaborators in the BalancingRegionaland 22 Country-levelFocus region, both to improve the analysis and to ensure that its results are relevant to current policy concerns of the Bank's clients. 0 Doing Business Indicators (first release FY04, with annual updates). The World Bank i s undertaking a survey of over 130 economies to indicate the regulatory costs of business and analyze specific regulations that enhance or constrain investment, productivity and growth. The indicators-on the cost and time required to start a business, hire and fire workers, enforce contracts, obtain credit and close a business- are being used to benchmark the Pacific Islands against global or regional best practice and identify reforms that are most pressing in order to promote domestic business formation or attract foreign investment. Some of these reforms will be at the country level, such as easing of administrative barriers for entry and exit of businesses; and others, such as credit registries or investment promotion, would encourage regional public goods. 0 Infrastructure. The World Bank (along with ADB and JBIC) are undertaking a joint study to highlightthe role that infrastructure can play inreducingpoverty by supporting economic growth and development and providing access to key services. The goal of the study i s to provide practical guidance to senior policy-makers and support a process of dialogue on infrastructure issues with development partners. Following an extensive series of consultations throughout the Asia Pacific region (FY04-05), the World Bank will undertake a review of the specific infrastructure issues and needs in the Pacific region, providing guidance to policy makers, governments, and donor agencies on available options for infrastructure service provision and financing. The scope for regional cooperation in transport services or a regional independent regulator will be explored (incollaboration with AusAID's work on this topic.) 0 Labor mobility. In order to extend regional integration beyond trade in goods, the Bank i s undertaking an analysis of the prospects for enhanced Labor Mobility from the Pacific (FY05-06). This analysis i s intended to inform policy makers in both receiving and sending countries and will provide an empirical evaluation of the benefits o f labor mobility to both migrant-receiving and migrant-sending countries. Recommendations based on existing guest worker schemes elsewhere in the world are being drawn out and discussed with key stakeholders. Specific instances where regional cooperation would be warranted would be identified, such as regional certification of qualifications for migrants. 0 Risk management and adaptation. A series of analytical work and discussioddissemination activities are proposed on the theme of Pacific Risk Management and Adaptation (FYO5-06). The objective i s to influence policymakers and development partners in the Pacific Island region to take proactive action on risk management and adaptation and thereby minimize the future costs of disasters, climate change, and sea-level rise. The analysis will consist of positive and negative lessons learned, both regional and global, providing summaries of best practices in the pilot countries andpractical recommendations on the strategic way forward. Balancing Regional and 23 0 Fisheries management. At the request of the Forum Fisheries Agency, the World Bank i s providing technical advice on the preparation of economic performance indicators for the Western and Central Pacific Tuna Fishery (FY05-07). This reflects a desire by Pacific Island countries that more attention and effort be paid to economic analysis in regional fisheries management. The project will develop a limitednumber of economic indicators that would illustrate annual changes in the impact of the tuna industry on Pacific Island country economies. Such information i s essential to develop improved management arrangements aimed at enhancing sustainable economic benefits 0 A series of short policy notes for the Pacific has recently been launchedcalled SPacifc Notes (beginning FY05 and continued with regular frequency). These are short notes disseminating key messages on a variety of topics considered to be of relevance to the Pacific audience at large. These notes are intended to share global expertise and promote dialogue in the region, while increasing Bank visibility to the clients in a low- cost manner. B. Country-level Focus 57. Country-level activities will complement the proposed regional programs. In some cases, regional analytical work will lay the foundations for subsequent interventions focused on policy advice, implementation support, and capacity building at the country level. Exploring the links between the regional and country-specific initiatives will be crucial in order to allow the Bank to cluster some activities that could otherwise be quite varied and isolated. 58. The Bank's level of engagement currently varies across the Pacific. In some countries the demand for policy advice i s evident in areas that are already identified as national development priorities and that pose opportunities for deepening Bank partnerships to leverage donor resources effectively. While this i s not the case across the region, the Bank stands ready to serve all its clients b y initiating and pursuing a development dialogue. In the interest of maximizing the development impact of Bank assistance, the scope of activities will be shaped by the Bank's ability to leverage the resources of the major development partners. 59. To support the focus on policy advice, the Bank stands ready to deliver financial assistance to its Pacific clients. Modest financing will be made available on a case-by-case basis with the following criteria serving as a guide: (a) Overall policy environment and the client's absorptive capacity for the resources; (b)Bank's ability to engage inpartnerships that effectively leverage donor resources; and (c) Progress made on the harmonization and alignment agenda. 60. Evolving client demand will continue to guide the Bank's engagement. Since this engagement in the region i s at a relatively early stage compared to other development partners, the Bank will explore low-cost innovative ways to fill the information gaps regarding its institutional knowledge base at the country-level. Individual country economic updates; the key development challenges facing each country; Bank objectives, assistance, and tentative IDA allocations; as well Balancing Regional and 24 Country-level Focus as the activities of development partners are provided in Section VIII with individual country chapters. 61. An overview of the Bank's objectives ineach of the ninePICs follows: Fiji. Inthe case of Fiji, a lower-middle income client (and IBRD-eligible borrower), the objectives of the World Bank's assistance program will be to assist the government in improving the country's growth prospects that had begun to recover a little in the aftermath of the 2000 coup. But future growth projections are again pessimistic due to imminent eroding preferences in sugar and garment exports. Alternate and sustainable sources of growth will have to be quickly found to restore economic growth but also to preserve social stability that seems quite fragile. Hence the Bank's focus would be on improving the domestic business environment by addressing the regulatory and administrative barriers to business formation while also reviewing issues in the forestry sector and supporting telecom sector reforms with a view to creating an enabling environment for the development of ICT-based services. To stimulate the economy after the slump in 2000, the government had also increased spending substantially and may need assistance in consolidating its fiscal position by enhancing public sector efficiency. 0 Kiribati. Since climate change threatens the island, the main focus of the World Bank's support will be on assisting the government with mainstreaming of risk management into national economic planning. 0 Marshall Islands, Federated States of Micronesia, and Palau. The Marshall Islands, FederatedStates of Micronesia, and Palau receive substantial assistance from the United States under the Compact of Free Association. The Bank's engagement with these countries i s at an early stage and will evolve based on the degree of leverage afforded to our assistance by the U.S. donor funds. These island countries are quite small and the Bank may offer advice on improving the prospects in the one or two sectors that could drive the economy. For example, in Palau (population of 20,000), the World Bank i s advising on environmental aspects of oil and gas exploration and natural resources valuation. 0 Samoa. Samoa has undertaken a number o f successful economic and structural policy reforms in the last decade. It now faces "second generation" challenges of boosting private investment. The World Bank will focus assistance on facilitating the environment for private sector development by addressing the regulatory and administrative barriers to investment, as well as supporting reform of the telecommunications and postal sector. Previously, the Bank has assisted Samoa in improving the effectiveness of public expenditures in the social sectors (health), infrastructure asset management, and cyclone recovery; and will continue to assist in consolidating these efforts. 0 Solomon Islands. The Solomon Islands present a different set of challenges. The country has emerged from four years of ethnic conflict and exhibits many of the BalancingRegional and 25 characteristics of a low-income country under stress (LICUS): weak government and institutions, coupled with high levels of poverty. Australia has a strong bilateral presence in security; law and justice; and economic management, including in-line government staff. The aim of the Bank's assistance program i s therefore to identify selective entry points for supporting reforms and constituencies for change, capacity building, and tailored policy advice based on global experience and communications/outreach. The Solomon Islands program consists of analytical/advisory services and small grants; and working with governments and, where appropriate, communities. The focus i s likely to be on facilitating progress toward the MDGs through education and health reform; reducing the cost of doing business through utility regulation and reform; and improving rural access to energy and telecommunications while exploring opportunities for rural income-generation, supported by overall capacity-building assistance to the government in economic management and financial sector reform, including pension reform. 0 Tonga.Tonga i s currently the only monarchy in the Pacific, and the scope for reform i s vast. The Bank's engagement in Tonga i s likely to focus on improving public expenditure efficiency in infrastructure asset management, increasing resilience to natural hazards, as well as tackling concerns in social sectors over health and education quality (particularly since Tonga enjoys some labor mobility into New Zealand and improved health and education outcomes would allow it to access overseas jobs effectively). At the same time, Tonga needs to set a level playing field for private business; hence the Bank would focus on addressing the regulatory constraints that impeded private investment, such as reducing the regulatory and administrative barriers to business development. 0 Vanuatu. The challenges of growth and job creation in Vanuatu are compounded by political instability, which has impacted the commitment to reform. The Bank i s looking to engage with Vanuatu. Dialogue thus far has pointed to addressing concerns regarding poor education outcomes and improving the environment for private business. V. PARTNERSHIPS A. InternalCoordination 62. Within the World Bank, important institutional knowledge and experience has been gathered in dealing with the small states that will be tapped into on a thematic basis, notably through the work of the Commonwealth SecretariatIWorldBank Joint Task Force on Small States and the ongoing programs in other regions in the Bank. Relevant and effective policy advice to the Pacific region will be aided by constant adaptation of the lessons emerging from other regions of the world and re-examination of their relevance for the small island states of the Pacific. Inthis context, distilling good practice lessons from within the region, among both Bank member countries and nonmembers from French Polynesia, will be a priority. The World Bank Institute could play an important role by enhancing its contribution to dissemination and capacity building b y inviting regional participants to suitable regional and global learning events, and by coordinating access to the institutional knowledge based in Washington for delivery of high- quality policy advice to the region.. 63. The IFC's focus on facilitating private investment offers an important avenue for strengthening the policy environment facing the private sector in the Pacific. The FIAS has completed a Strategic Directions 2005-07 paper that highlights the two aspects of the evolving global context for its operations: (a) greater competition among developing countries for foreign domestic investment (FDI) and improved commitment to reform from some governments; and (b) Increased demand for micro-economic focused advisory services and implementation support. In response, the FIAS strategy identifies the need for expanding their products and processes to reflect the following : 0 Reduced investment in conducting diagnostics and a correspondingly greater emphasis on relying on Investment Climate assessments and surveys coming out of the World Bank Group; 0 Continuing work on attracting and maintaining FDIwhile adding on new areas o f work on maximizing the developmental impact of FDIfor countries; and 0 Exploiting synergies with the World Bank Group in upstream (policy dialogue on broader private sector development agenda), as well as downstream activities (projects). 64. The objective of the PEDF strategy for the Pacific i s to stimulate investment growth focusing on key industry sectors, such as micro finance, tourism, and agribusiness. Selected programs targeted at providing investment support, improving access to markets, and capacity building through training are being planned. These activities would offer the necessary downstream complements to the Bank's focus on upstream policy reforms for the private sector. B. ExternalPartnerships 65. With the emphasis on leveraging donor resources, the importance of improving aid coordination and management i s paramount. The main bilateral donor partners that the World Partnership 28 Bank expects to deepen dialogue with are Australia (predominantly in Melanesia and Polynesia); the EU (predominantly in the Solomon Islands); New Zealand (predominantly in Polynesia and Solomon Islands with a focus on the education sector); and the United States (in FSM, Marshall Islands, and Palau). The Bank stands ready to engage substantively with China and Japan (in following up on the Okinawa initiative focusing on a prosperous and safer Pacific region ). 66. While the Bank's modest contribution to resource transfers in the Pacific limits the aid coordination role, the Bank will proactively offer its convening power to development partners. The Bank will also focus on outreach and communication to signal its institutional knowledge base to the development partners in the region, as well as engage with civil society and nongovernmental organizations inclient countries as appropriate. 67. The Bank will work toward improving development partnershipsinthe following ways: 0 Coordinating strategy development and implementation with the ADB, Australia, EU, Japan, New Zealand, and other partners where possible. Initial rounds of discussions and consultations have been ongoing since June 2004. These partners have agreed to collaborate in the areas of private sector development support, service delivery in social sectors, and infrastructure management. (With the ADB's regional office opening in Sydney, dialogue and coordination i s likely to be further enhanced.) 0 A deeper management-level engagement inthe region will be encouragedthrough one or two high-level visits to the region per year while fully capitalizing on venues, such as the Annual Meetings, FEMM, AusAID's Pacific 2020 Roundtable, to encourage face-to-face dialogue at the senior level on broader regional development challenges, strategic coordination, and trust funds. 0 Working closely with regional organizations, such as the Forum Secretariat, to identify priority development issues and vehicles for capacity building; maintaining dialogue on important regional initiatives, such as the Pacific Plan; coordinating closely with the specialized regional agencies, such as PFTAC, SPREP and ForumFisheries Agency on thematic issues; and participating inregional economic events, such as the FEMM. 0 Participating in donor coordination meetings on national and sectoral topics, including education, climate change, natural hazards, and natural resource management and conservation. In 2005, the Bank took the lead in organizing the pre-FEMM donor coordination meeting. 0 Contributing to the development of sector-wide approaches. The experience emerging from the recent Tonga education project with New Zealand could provide a template for a new form of partnership with donor partners and coordinated engagement with clients. 0 Supporting joint missions and dialogue with governments with the IMF and ADB where possible. This was done with the ADB in the Solomon Islands re-engagement mission in 2003 in order to provide a platform for timely exchange of information and Partnership 29 views while reducing the burden on the client government. The Bank will continue to support and enhance such efforts. 0 Contributing to the implementation of the harmonization agenda in line with the Rome and Paris Declarations," for example, through joint work with the ADB on procurement and financial management, particularly in Samoa and Tonga. l5 Search "Rome Declaration" and "Paris Declaration" at www.worldbank.org. 68. While it i s desirable to have composite measures of success for the region as a whole (e.g., average growth rate of GDP), the scope of the Bank's engagement and the variation across countries in terms of ownership and capacity for implementation, as well as variation in donor commitments, render it unrealistic at the broad regional level. Guided by the strategic directions of the regional engagement framework, activities will be tailored to fit the demands and capacity of the client members, where success-or lack thereof-of the Bank's interventions can be gauged. The objectives of the country-level engagement and the instrumentsto track progress and measure long-term impacts will also be customizedto match each intervention. 69. A preliminary overview of the outcomes the Bank expects to influence i s contained in Table 8. Corresponding indicators for measurement will be identified at the individual country level where the specific activity i s undertaken. The intended long-term impact of these outcomes i s also presented here along with some suggested indicators that lend themselves to measurement. However, the time frame for these impacts to eventuate would be considerably beyond that of the current strategy. (The following section VI1discusses overall risks.) 70. Given the paucity o f data in the region, the Bank would work closely with its donor partners to put tracking mechanisms in place. Efforts to improve the statistical information base through the Pacific Islands Forum Secretariat, South Pacific Commission; and the University of South Pacific would be supported as appropriate. Table 8. Outcomesof BankAssistanceandtheir IntendedLong-TermImpacts Outcomes the Bank expects to influence during strategy Thematic Focus period Intended long-term impact (specijic indicators to be defined at the country-level where (suggestedindicators) the artivitv ic. undPrtnkPn 1 I ~~ Social sectors Increased awareness among clients and donors of the Improvedquality of health and mismatch between the inputs and outcomes of social sector education services. More equitable financing. distribution o f services to outer islands. Better accountability frameworks inthe social sectors. Indicators: Improvement in Improvement inthe modes of delivery o f social services. population-wide education and health outcomes. Infrastructure Create conditions for private participation ininfrastructure Improvedpublic asset maintenance, improvements in service coverage management, reduced rebuilding activities, access with reliability Indicators: Savings to public budget through efficiency gains and less frequent construction activities; increase in coverage of services Hazard Management Mainstreaming riskmanagement into national economic Enhanced resilience to hazards. Results 32 Outcomesthe Bank expects to influence during strategy Thematic Focus period Intended long-term impact (specific indicators to be defined at the country-level where (suggested indicators) the activity is undertaken) Indicators: Reduction in damages Increased capacity within key ministries to conduct as a percentage of GDP, proportion vulnerability assessments and hazard-proofing. Increased awarenessof administrative & regulatory barriers doing business to private investment. private sector activity. Facilitate reduction intime and cost of doing business Indicators: Increase inlocal through implementation assistanceon reforms. business formation, increase in FDI. Create conditions for improving access, reduced cost of utilities. Increasingrevenues Increased capacity for conducting economic valuation of Improved sustainability & revenue and sustainability o f natural resources sharing innatural resource based natural resource- industries based sectors Improved legal and regulatory environment for resource exploitations, framework for optimizing revenue inplace. Indicators: Reduction inrate of logging, improved revenue- sharine. Improving access to Knowledge gaps on the benefits of enhanced labor mobility Stronger regional integration, regional labor inthe region andmeasuresto mitigate real or perceived reduction inunemployment inthe markets costs for both sending and receiving countries would be PICs, labor shortages addressedin addressed. developed markets. Active regional dialogue on labor mobility inthe context of Indicators: Number ofjobs closer regional integration. secured by Pacific Islanders in neighboring developed markets, volume and impact of remittances on migrant-sending communities VII. RISKS 71. Four main issues are identified that could pose risks to the effective delivery of the regional assistance program. The issues, their direct implication for Bank strategy, and a discussion of actions that would mitigate the risk, as much as possible, are presented in Table 9. These issues represent a mix of exogenous country-specific factors, as well as the systemic risks that emerge from the scope of the Bank's engagement inthe region. Table 9. RisksFacedinImplementingWorld BankStrategyandProposedMitigationMeasures Issue Riskfor the regionalstrategy Actions to mitigaterisk 1.Nationalownershipand client-ledcoordination National ownership of agendas for The Bank's engagement and ability Bank will identify and support reform varies considerably across to make progress on key aspectsof :hampions for reform using client countries. The small PIC the strategy may vary across client :ountry commitment as a key governments are easily countries, reflecting its ability to factor in selecting its overwhelmed by the challenge of align its assistance with receptive interventions. The Bank will managing many donor programs. counterparts. seek to work in ways which Yet there i s limited support for minimize the burden of aid using the aid coordination The assistanceprovided by the coordination, which it and other frameworks which have been Bank may be poorly coordinated donors place on client adopted inmany other countries and thus less effective. governments. (e.g., Poverty Reduction Strategy Papers). Bank will work with other donors to encourage, support, and build national ownership of reform programs. Where appropriate, it will follow the LICUS approach, as well as the principles set out by the Organization for Economic Cooperation and Development on alignment in fragile states. 2. Vulnerability Several countries in the region are Large shocks present a risk to the The framework i s flexible vulnerable to natural disasters and country program by necessitating enough to allow the Bank to volatility in commodity prices. an unpredictable change of course tailor its response to special Risk of political instability and and immediate need to divert needs, but the priorities outlined social conflict is also high as attention and resources from inthis document may needto be many are considered fragile states. previously agreedpriorities. adjusted under these circumstances. Increased access to flexible trust funds will allow the Bank to deliver specialized assistance where necessary. 3. Importanceof Partnerships ~ Successful implementation of the The Bank's ability to leverage The Bank will launch steady and strategy depends on partnerships partnerships effectively may be continuous efforts to deepen and leveraging resources from uneven across Australia, the EU, dialogue with major donors. other donors. Japan, New Zealand, and the United States. The Bank will signal its Risks 34 Issue Riskfor the regional strategy Actions to mitigate risk institutional knowledge by proactively disseminating its analytical products with a view to forging strong working partnerships with donors. 4. cost Country level needs (within the Bank assistance will be resource- The Bank will attempt to plannedregional framework) vary intensive due to the isolated mitigate by identifying common considerably across the nine activities ineach country. Limited issuespertaining to the creation clients. ability to cluster raises costs of regional public goods, relative to activities inother promoting a regional approach country programs that can benefit where possible, including widely from economies of scale disseminating cross-country learning within the region, as well as international lessons through the work of the Small States Task Force. The Bank will enhance its dialogue with regional organizations and seek to link country programs with regional initiatives The Bank will seek to leverage additional resources from key partners. VIII. COUNTRYCHAPTERS A. Country Chapter: Fiji Table 10. Country Summary Country Republic of the FijiIslands Prime Minister Laisenia Qarase (since 10September 2000) Head of State The President, RatuJosefa ILOILOVATU (appointed by the Great Council of Chiefs, 2000) independence October 10, 1970 (from the UK) Government Bicameral parliament comprising an appointed upper house, the Senate (32 members), and an elected lower house, the House of Representatives (71 members). Voting i s compulsory and preferential. Land area Total land area of 18,270 sq km. Population 848,000 (2004 est.). Population growth rate i s 1.5% (2004 est.). Cities Capital: Suva (Viti Levu) Provinces 4 divisions and 1dependency: Central, Eastern, Northern, Western and Rotuma. Languages English (official), Fijian, and Hindi. Natural Hazards Cyclonic storms can occur from November to January. Natural Resources Timber, fish, gold, copper, offshore oil potential, hydropower. Major Products Sugar and garment exports, and a growing tourist industry are the major sources of foreign exchange. 1.Economic Overview 72. Fiji's economy is the largest of the Bank Pacific Island member countries, and it is the least aid dependent of the Bank's Pacific clients (aid per capita averaging US$38 over 1999-2002). A coup in 2000 that saw the democratically elected government unseated plunged the country into economic decline. Business confidence collapsed and significant numbers of Indo Fijians emigrated, many of them skilled workers. The political fallout i s continuing as charges are brought against those involved. 73. Following the coup-induced contraction o f 2.8 percent in 2000, expansionary fiscal activities allowed a quick turnaround in Fiji's real GDP growth in 2001 (Figure 4) and the economy continued to show strong growth in subsequent years. However, growth of less than 2 percent in 2005 and 2006 i s forecast, reflecting the expected impact of the loss of preferential trade arrangements in the sugar and garment industries. Inflation declined from 4 percent in 2003 to 2 percent in 2004, as the supply-side effect of Cyclone Ami on food prices subsides. 74. The government's efforts to stimulate economic growth following the coup resulted in a strain on the budget deficit (averaging 7 percent of GDP in 2001-02) and public debt (49 percent of GDP in 2003). The budget deficit i s projected to narrow to 4 percent of GDP in 2005, reflecting stronger fiscal discipline. Country Chapter: Fiji 36 Figure4. GrowthinFiji's RealGDPduring 1997-2006 Percentagechange in real GDP 75. The current account deficit has been volatile over 2001-03, largely owing to swings in the trade balance. The deficit i s estimated to be about 6 percent of GDP in 2004. Foreign reserves stood at just about three months of imports of goods and services in2003-04. 76. Agriculture, textiles, tourism, construction and mining have been the backbone of Fiji's productive sector. Although sugar has been the most important crop (30 percent of agricultural GDPin2001), the industry faces several challenges. These include the loss in2005 of preferential trade arrangements with the EU which have subsidized the industry, deterioration in sugarcane quality and quantity from the effects of drought, the ongoing non-renewal of land leases and the unfavorable trends inworld markets. The Fiji Government has committed itself to the reformation of the sugar industry and has a package of measures in place which it hopes will address these challenges. 77. The export garment industry based on tax breaks and concessional access to the Australian and U S markets, overtook sugar as the biggest export earner in 2002, accounting for 26 percent of domestic exports. However, the industry faces increasing international competition, particularly with the termination of preferential trade arrangements with the U S at the end of 2004 (a preferential agreement with Australia has recently been extended). 78. Tourism (10 percent of GDP), Fiji's main foreign exchange earner, continues to expand. Given the growing supply of tourist accommodation and the entry of an additional airline into the regional market, a growth in tourist arrivals of 7 percent was expected for 2004. 79. Construction activity, contributing 4.3 percent of GDP in 2002, increased by 38 percent in 2003 as a result of government spending on physical infrastructure and the implementation of several large private investment projects in tourism. Higher gold production and strong international gold prices boosted gold export earnings b y 18 percentage points to 2 percent of GDP in2004, compared with the previous year. 80. Forestry, while representing just 0.6 percent of GDP in 2002, has the potential to play an increasing role as Fiji's mahogany plantations reach maturity. Harvesting commenced in 2004 and continues under the management of the Fiji Hardwood Corporation. Issues related to native Country Chapter: Fiji 37 land tenure and ethnic Fijian involvement in the industry are sensitive and require careful handling. 2. Outlook 81. Fiji's economy has probably the greatest long-term potential among the Pacific nations, but faces some major challenges in reaching this. The expected slowdown in economic growth and the steady increase in public debt suggests the need for a tighter fiscal policy. The government's program of civil skrvice and related reforms provides an opportunity to reduce the large share of the wage bill in the budget. Structural reforms focusing on lowering costs for business, improving private sector employment prospects, and encouraging sustainable strong economic growth would also boost the medium-term prospects for Fiji's economy. The expiry of trade concessions for the sugar and garment sectors may present social and economic challenges (many thousands are employed in these industries). Fiji has the opportunity to further capitalize on its tourism potential to sustain a strong and vibrant economy, provided that key reforms can be progressed and prudent economic management can be maintained. 4. Key IssuesShapingthe WorldBank'sInvolvement 82. As the most populous nation and largest regional economy, Fiji i s a key Pacific client for the World Bank. Since it became a Bank member in 1971, 14 projects have been completed, primarily in the infrastructure, telecommunications and electric power sectors. Of these, 13 were IBRD-financed (totaling US$146.4 million). Since the late 1990s the Bank's program in Fiji has been limited, in part a reflection of the ready availability of support from other development partners, but also of Fiji's status as an IBRD eligible borrower (Fiji does not have access to IDA resources). 83. The Bank i s seeking to strengthen its engagement with Fiji over the life of this strategy (2005-08) b y identifying, in consultation with the government, a number of specific areas where it can make a contribution in accordance with its comparative advantages. The government has indicated that its immediate demands will be for high quality technical advice and analytical support provided on a grant-financed basis. This i s expected to be the focus of the Bank's assistance. 84. The Bank program aims to assist the government to address two key challenges to economic growth: (a) responding to fiscal pressures which dictate an urgent need for the government to deliver services more efficiently and effectively; and (b) identifying opportunities to remove impediments to private sector development. 85. The Bank approach also recognizes that having emerged from the political upheavals surrounding the 2000 coup, promoting national stability i s a key concern. While strengthening the preconditions for sustained economic growth i s fundamental to Fiji's long-term prosperity, recent history has implications for the way in which economic reform can be undertaken. 86. The Bank's program of assistance to Fiji i s set out inTable 11. Country Chapter: Fiji 38 - YE d w e a Country Chapter:Fiji 39 0 a a a s Country Chapter: Fiji 40 4. Donor Coordination 87. Table 12describes the nature of the assistanceprovided by Fiji's other development partners. Table 12. Activities of Other Development Partners Development Primary Activities partner ADB The Country Strategy and Program Update 2005-2007 (August 2004), identifies the following priority sectors: Transport and communications, energy, agriculture, natural resources, water and sanitation and finance. The ADB has three active lending operations inFijiwith ADB commitments totaling US$103.8 million (Suva-Nausori Water Supply and Sewerage project, closing 30.06/2009; ThirdRoad Upgrading project, closing 31/12/2005; and; the FijiPorts Development project, closing 30/06/2006.). Three lending operations are scheduled in 2005 (Rural Electrification, US$lO million; Airports Rehabilitation and Upgrading, US$32 million; and Road Upgrading, US$26 million). Two further lending operations are scheduled in2006 (Urban Sector Development, US$22 million) and 2007 (Rural and Outer Islands Development, US$26 million). Australia Australia provides bilateral assistance concentrated in the health, education andjustice sectors with an emphasis on improved service delivery of public services to rural and peri- urban areas. Programs include: support to civil society groups; support of the Government's law and order strategy; planning, management, provision of monitoring of education services; Australian Development Scholarship program; training of community health staff, refurbishment of an existing hospital and construction of a new facility; capacity building support to the FijiMinistry o f Health; and a technical assistanceprogram providedby Australian volunteers. EuropeanUnion The EuropeanCommunity's Country Strategy Paper 2003-2007, identifies education as the priority or "focal" area for Euro 21 million assistancewith activities proposed to improve the quality and standard of formal and non-formal education programs (especially inrural areas). Fijii s also expected to benefit from support from the EuropeanInvestment Bank and the Center for the Development of Enterprise. Approximately Euro 525,000 has been set aside to fund related technical assistanceand analytical work. Japan InFY03 (April 1,2003-March 31,2004), JICA provided TA programs equating to US$lO.13 million involving programs inbasic education; rural health services; industrial development (volunteer programs inagriculture, livestock management, infectious disease control; marine resources development; vocational training; and S M E development); environmental conservation and waste management. During the same period, the Ministry of Foreign Affairs provided grant funding of US$7.58 million. JBIC has one active lending operation inFiji with USS7.08 million in commitments outstanding. New Zealand NZAID provides NZ$4.1 million inbilateral assistanceto Fiji with programsproviding support to the Government's priorities inlaw andjustice; community and economic development; education; training; and health. Others The following UNagencies have activities: FAO, ICAO, IFAD, ILO, IMO, ITU, UNESCO, UPU,WHO, WIPO, WMO, WTO, UNEP, ITC, UNIDO, UNFPA, UNICEF, UNDP 41 B. Country Chapter: Federated States of Micronesia Table 13. Country Summary Country: Federated States of Micronesia PrimeMinister President JosephJ. URUSEMAL (since May 11,2003); the president i s both the head of state and government. Headof State President JosephJ. URUSEMAL (since May 11,2003) Independence 3 November 1986 (from the US-administeredUNTrusteeship) Government Unicameral Congress (14 seats; one elected from each of the four states to serve 4-year terms and ten elected from single-member districts delineated by population to serve 2- year terms; members elected by popular vote.) Landarea 702 sq km Population 126,766 (2004 est.). Population growth is 1.8% (2004 est.). Cities Capital: Palikir Provinces Four states: Chuuk (formerly Truk), Kosrae ,Pohnpei ,and Yap. Languages English (official and common language), Trukese, Pohnpeian, Yapese, Kosrean, Ulithian, Woleaian, Nukuoro, and Kapingamarangi. NaturalHazards Typhoons (June to December) NaturalResources marine products, deep-seabedminerals. Major Products Economic activity consists primarily o f subsistence farming and fishing, with fish as the main export. 1.Economic Overview 88. The Federated States of Micronesia (FSM) consists of four states-Chuuk, Kosrae, Pohnpei, and Yap-which enjoy a high degree of political and economic autonomy (to date the latter states, particularly Yap, have enjoyed a higher degree of economic success). The FSM receives substantial levels of external assistance (aid per capita averaging US$963 over 1999-2002), particularly from the United States through the Compact of Free Association. Compact I(1987- 2001), provided the FSMwith grants of about half of GDP. Compact I1(2004-23) includes lower U.S. grant assistance and the creation of a Compact Trust Fundto promote economic self-reliance. 89. Real GDP fluctuated extensively over the period 1999-2004 (see Figure 3, growing at an average of 2 percent. The reduction in Compact transfers to the government budget and the delayed availability of infrastructure grants, contributed to the estimated contraction of 3.8 percent in 2004. However, the latter funds will become available in 2005 and with a slight expansion in private sector activity, growth inreal GDP i s projectedto be 0.3 percent in 2005. 90. A low inflation of 2 percent i s projected for 2005, reflecting the use of the U.S. dollar as the domestic currency. Owing to an unfavorable trade balance the current account deficit rose above 10percent of GDPin2004. Country Chapter: 42 FederatedStates of Micronesia Figure 5. Growthinthe FSM's Real GDP during 1999-2005. Percentage change inreal GDP 1999 2000 2001 2002 2003 2004/e 2005/p 91. Central government finances vary considerably with variations in grant disbursements (see Figure 6). Public debt stood at 26 percent of GDP in 2004. Figure 6. Compact Grantsand Fiscal Balance of the F S M during 2000-03. 20 2000 2001 2002 2003 8Grants Fiscalbalance 92. Economic activity in the F S M i s dominated by the public sector. Government expenditure accounted for about 70 percent of GDP in 2000-03. The private sector i s steadily increasing in importance, but currently remains mainly a provider of services to the public sector. The latest available official data indicate that commercial agriculture, fisheries, and tourism totaled only 5 percent of GDPin 1996. 93. FSM controls a large ocean area in the Pacific region with significant fish stocks. Most commercial fishing activity is licensed out to foreign vessels. License fees declined by 45 percentage points to 5 percent of GDP in 2004 from the 1994 level, owing to unfavorable weather conditions and restrictive policies faced by foreign vessels. Country Chapter: 43 Federated States of Micronesia 2. Outlook 94. In the near term, the F S M economy should recover from the initial shock of the lower Compact grant disbursement in 2004, and the fiscal deficit should narrow. Beyond that, however, some significant challenges suggest the need for decisive action. Considering that more than 60 percent of total government revenue consists of external grants, of which more than half are Compact funds, the progressive declines in Compact grants imply that the combination of a large public sector and undersizedprivate sector i s unsustainable. There i s pressing need to address the fiscal and structural problems that contribute to budgetary strains and slow growth. 95. To maximize the potential of agriculture, fishing, and tourism, structuralreforms are required in land tenure, human capital investment, the public enterprise sector, and the legal and institutional framework to foster private sector activity. The relative success of Yap and Pohnpei incomparison to the other states shows that the right directions can produce the desired results. 3. Key IssuesShapingthe WorldBank's Involvement 96. The F S Mbecame a World Bank member in 1993. Since that time the Bank's involvement in the F S M consisted of a range of regional initiatives and focused technical assistance, particularly in the fisheries sector. With GNI per capita of US$2,090 in 2003, the FSM is an IBRD-eligible country. 97. The Bank stands ready to build its relationship with the F S M over 2005-08. The Bank recognizes that the F S M has access to substantial grant assistance from other development partners, particularly the U S and Japan. Any potential Bank involvement will hinge on our ability to effectively leverage the key donor resources andbuildlocal capacity. 98. The Bank has held initial consultations with the government on areas of possible support and expects an agreement on these to be concluded in the near future. Tentatively, the discussions encompass two broad areas: (a) to assist in encouraging the growth of the private sector through targeted interventions (for example through support for tax, public enterprise or regulatory reforms), and (b) to progress the public expenditure management reform agenda, such as enhancing the government's ability to maintain key assets, particularly as the F S M strives to adapt to scheduled reductions indirect U.S. Compact funding. Country Chapter: 44 Federated States of Micronesia 4. Donor Coordination 99. Table 14 describes the nature of the assistance provided by the FSM's other development partners. Table 14. Activities of Other Development Partners Development Primary Activities partner ADB The Country Strategy and ProgramPaper 2005-2006 (Updated, August 2004) identifies three areas of strategic priority for ADB activities inthe Federated States of Micronesia: support for good governance; inclusive social development; and, pro-poor economic growth. An indicative ADF allocation of US$8 million has been set for FSM over the coming 2-3 year period. ADB has two active lending operations inFSM totaling US$33.8 inADF credits (Basic Social Services Project, US$9.2 million, closing 30/06/2007 and Private Sector Development Program) the second of which is a progam loan. To date, no further lending operations have been identified for 2005 or 2006. Australia Australia i s expected to provide about approximately A$1.9 million inbilateral assistance over 2003-04 concentrated ineducation, training, and support to policy and management reform. Inaddition, a small grants scheme supports the work of community organizations and some government initiatives. EuropeanUnion FSMhas been allocated, Euro 4.8 million under the A-envelope for financial and technical co-operation and Euro 1.4 million under the B-envelope for the period 2002- 2007 (the 9" EDF).The program aims to contribute to outer island development through the identification and use of new and renewable sources o f energy, and support to the work of non-state actors inthe areas of conservation and environmental protection. Japan JICA supports volunteer-led programs inthe areas of primary and secondary education, industrial development, development planning, environment, and regional health. In addition, the Ministry of Foreign Affairs provided US$3.62 million ingrant funding. The Government of Japanhas no active lending operations inthe Federated States of Micronesia at this time. New Zealand Support to the FSM i s included within NZAID's program to other Micronesian states, with an allocation of NZ$835,000 in2003-04. The focus is on education and with limited grant funds for self-standing community development initiatives. United States A revision to the originalCompact of Free Association (1986) was passedinto law in December 2003. This compact i s structured interms of a sector grant (providing approximately US$76 million per annum, decreasing by US$0.8 million per annum) and a Trust Fund(providing approximately US$16 million per annum, rising by US$0.8 million per annum). Fundsprovided under the sector grants are allocatedto activities in six priority sectors: infrastructure, education; health care; private sector development; environment, and; capacity building. The gradual increase intrust fund contributions are offset by a corresponding annual reduction in the sector grants. Trust funds contributions will not be utilized untilthe compact concludes in2023, by which time it is intended that accrued trust funds would replace the annual sector grants. Other The following UNagencies have activities: ICAD, ITU, UNCTAD, UNESCO, WHO, WMO, UNEP, ITC,FAO, UNFPA, UNICEF, UNDP 45 C. Country Chapter: Kiribati Table 15. Country Summary Country Republic of Kiribati PrimeMinister President Anote TONG (since 10July 2003); the president is both the head of state and government. Headof State President Anote TONG (since 10July 2003) Independence 12 July 1979 (from UK) Government A 12-member Cabinet appointed by the president from among the members of the House of Parliament. UnicameralHouse of Parliament or ManeabaNiMaungatabu (42 seats; 39 elected by popular vote, one ex officio member - the attorney general, one appointed to represent Banaba, and one other; members serve four-year terms). Landarea 811 sq km; includes three island groups - Gilbert Islands, Line Islands, Phoenix Islands Population 97,813 (2004 est.). Population growth is 1.5 % (2004 est.). Cities Capital: Tarawa Districts Tarawa, Banaba, Central Gilberts, Line Islands, Northern Gilberts, Southern Gilberts. Languages I-Kiribatiand English (official). NaturalHazards Affected by king tides and periodic drought (related to ElNino). The low level of some of the islands makes them very sensitive to changes in sea level. NaturalResources Phosphate (production discontinued in 1979). Major Products Copra, seaweed and fish represent the bulk of production and exports. 1.EconomicOverview 100. The Republic of Kiribati i s one of the most isolated countries in the world, consisting of 33 low-lying atolls spread across 3.5 million sq km of ocean. The population i s concentrated on the Gilbert Islands, which include Tarawa, the capital island (a natural disaster on Tarawa would affect the entire economy as a third of the population resides there). Kiribati receives moderate levels of external assistance (aid per capita averaging US$197 over 1999-2002). 101. The GNI16per capita declined from US$1,040 in 1999 to US$970 in 2004, reflecting the contraction inGNIin2002-04 (see Figure7) due to a decline in fishing license revenues. 102. The fiscal position i s largely determined by flows of external grants and fishing license revenues, as well as the use of the Revenue Equalization Reserve Fund (RERF) to finance government expenditure. The RERF, established in 1956, i s well diversified with investments in various currencies. The government policy of reinvesting profits made from the investments led to the financial strength of the RERF, with the value increasing from US$60.5 million in 1979 to ~ ~ _ _ _ _ _ _ _ ~~ l6Because seamen's remittances and fishing license revenues are a significant contributor to Kiribati's economy, GNI i s a more relevant measure of income than GDP. Country Chapter: Kiribati 46 US$335.7 million (six times of GDP) at end-2003. Correspondingly, the public external debt stood at an estimated 19 percent of GNIin 2004 (there i s virtually no domestic debt). Figure 7. Growth inKiribati's RealGNI during 1999-2003 6 4 2 0 -2 -4 -6 -8 103. Inflation averaged 2 percent in 2003-04, reflecting Kiribati's use of the Australian dollar as its domestic currency. 104. The external position has been strong with the current account surplus averaging 5 percent of GNIover 2000-02. However, a current account deficit of 14percent of GNIis estimated for 2003, in line with the higher budget deficit. Official reserves remain substantial at over 4 years of imports of goods and services in 2004. 105. Subsistence agriculture and fishing are Kiribati's main economic activities. The agriculture sector was affected in 2002-03 by a decline in copra and seaweed (the main exports) production. The economy i s largely dominated by the public sector which relies on foreign financial aid (averaging 27 percent of GDP over 1996-2000) and non-tax revenue, mainly fishing license fees to distant water fishing nations (38 percent), and remittances from seamen (15 percent). 2. Outlook 106. Kiribati's remoteness (the furthest Pacific Islands country from the nearest major port) and exposure to climate change pose major challenges to economic growth. However, opportunities for development could be fostered by reducing barriers to trade and investment, promoting small- scale manufacturing, tourism and marine development, environmental management and investing inhumanresources development. 3. Key Issues Shaping the World Bank's Involvement 107. Kiribati became a World Bank member in 1986. Since that time the Bank's assistance has consisted of a range of regional initiatives and the development of a major Global Environment Facility (GEF) program on adaptation to climate change (Kiribati Adaptation Program 2003- 2015). Kiribati i s an IDA-eligible country. Country Chapter: Kiribati 47 108. The Bank's main focus in Kiribati is on helping the country to prepare for the effects of climate change and rising sea levels which the government recognizes as having the potential to have major social and economic consequences. 109. Aside from adaptation, the Bank i s ready to continue dialogue with the government on its future priorities, as reflected inthe National Development Plan for 2004-07. 110. The Bank's program of assistance to Kiribati is described in Table 16. Kiribati's IDA14 allocation over FY2006-08 i s expected to be SDR 4.1 million. This amount i s indicative only. The actual amount will depend on (a) the country's own performance, (b) its performance relative to the performance of other IDA recipients, (c) the amount of overall resources available to IDA, and (d) the terms of financial assistanceprovided (grants versus loans). Country Chapter : Kiribati 48 Country Chapter: Kiribati 49 4. Donor Coordination 111. Table 17describes the nature of the assistanceprovidedby Kiribati's other development partners. Table 17. Activities of Other Development Partners Development Primary Activities Partner ADB The Country Strategy and ProgramPaper (September 2004), identifies three overarching strategic objectives inKiribati: pro-poor growth through sustainable development and generation of employment opportunities; inclusive social development; and good governance. ADB has one loan (Sanitation, Public Health and Environment Improvement project; approved in 1999,US$10.2 million ADF Credit). N o lending operations are proposed for 2005, however, one operation (Outer Island Growth Centers) i s proposed for 2006. Australia Australian support for Kiribati i s concentrated inthe areas o f education and training and public sector management while technical assistancei s providedover a wide range of sectors. Bilateral aid for Kiribati for the period 2003-04 was expected to be A$8.0 million. Activities funded include: development o f a management information system to improve government management o f financial and economic resources and to enhancerevenue collection; improvements to enhance the reliability of South Tarawa's electricity supply; support of basic education; and, specialist skills development. EuropeanUnion Under the 9fhEDF(signed inJuly 2002), Kiribati was allocatedEuro 11.0 million principally targeted to outer island social development (Euro 7.9 million), achieving the MDGs and capacity building initiatives focusing on community health and education initiatives (Euro 0.9 million). Japan InFY03 (April 1,2003 -March 31,2004) KiribatireceivedUS2.22 million in grant assistancefrom the Japanese Ministry of Foreign Affairs. JICA provided TA (totaling US$1.48 million) funding the technical training. The Government o f Japan has no active lending operations in Kiribati. New Zealand NZAIDallocatedNZ$3.14 millioninbilateral assistanceto Kiribati in2003-04, focused on improving the quality and accessibility to basic education. Inaddition, Kiribati benefits from a further NZ$2.8 million per annum through regional and thematic targeting education and health. Other NZAID program activities include: literacy initiatives; combating domestic violence; licensing o f foreign fishing interests and industrial fishing ventures; and seafarer training. Others The following UNagencies have activities inKiribati: ICAO, WHO, UNEP, ITC, UNESCO, FAO, ILO, UNFPA, UNICEF, UNDP 51 D. CountryChapter:MarshallIslands Table 18. Country Summary Country Republic of the Marshall Islands PrimeMinister President Kessai Hesa NOTE (since January 5,2004); the president i s both the head of state and government. Headof State President Kessai Hesa NOTE (since January 5,2004) Independence 21 October 1986 (from the US-administeredUNtrusteeship) Government Unicameral Parliament or Nitijela (33 seats; members elected by popular vote to serve four-year terms); Cabinet selected by the president from among the members of Parliament. Landarea 181.3 sq km; includes the atolls of Bikini,Enewetak, Kwajalein, Majuro, Rongelap, and Utirik. Population 53,000 (2004 est.). Population growth i s 1% (2004 est.). Cities Capital: Majuro Districts 33 municipalities; Ailinginae, Ailinglaplap, Ailuk, Amo, Aur, Bikar, Bikini,Bokak, Ebon, Enewetak, Erikub, Jabat, Jaluit, Jemo, Kili, Kwajalein, Lae, Lib, Likiep, Majuro, Maloelap, Mejit, Mili,Namorik, Namu, Rongelap, Rongrik, Toke, Ujae, Ujelang, Utirik, Wotho, Wotje. Languages English (widely spoken as a second language, both English and Marshallese are official languages), two major Marshallese dialects from the Malayo-Polynesian family, and Japanese. NaturalHazards Infrequent typhoons. NaturalResources Coconut products, marine products, deep seabed minerals. MajorProducts Small-scale agricultural industry i s limited to copra (leading crop export), tuna processing, and handicrafts. 1.EconomicOverview 112. The Republic o f the Marshall Islands consists of a series of 29 small atolls in the northern Pacific, with the population concentrated in Majuro and Ebeye. It has the second highest aid per capita (averaging US$1,227 over 1999-2002) of the Pacific Island countries. The Marshall Islands receives substantial assistance from the United States through the Compact of Free Association, with grants accounting for 30 percent of GDP during the Compact I(1987-2001) period. Compact I1(2004-23) includes the creation of aCompact TrustFundto replace grant fundingafter 2023. 113. The increase in government expenditure financed by higher external assistance contributed to the improvement in real GDP growth (averaging 3 percent in 2002-03), following a contraction in 2001 (see Figure 8). Real GDP is estimated to have grown by 1.5 percent in 2004. Inflation remains below 2 percent in 2004, reflecting the use of the U.S. dollar as the domestic currency. Country Chapter: MarshallIslands 52 Figure8. Growth inMarshallIslands' RealGDPduring2000-04 I Percentage change in real GDP 114. The 2002 budget was in deficit for the first time in seven years owing to the repayment of earlier accumulated debts, and the budget remains in deficit of an estimated 3 percent of GDP in 2004. External debt consequently declined from 102 percent of GDP in 1999 to 83 percent o f GDPin2004. 115. The economy i s dominated by the public sector with government expenditure averaging 70 percent of GDP over 2000-04, most of which have been financed by external grants. Agriculture and fishing together contributed an average of 13 percent of GDP over 1997-2001. Agricultural production i s primarily subsistence and concentrated on small farms. Small-scale industry i s restricted to copra (the leading crop export with 15 percent of total exports in 2000), tuna processing, and handicrafts. In recent years, copra production declined, due to irregular shipping schedules and the lagged effect of weak export prices. On the other hand, there has been some expansion inthe operations of the tuna processing plant. 116. The tourist industry, which employs less than 10 percent of the labor force, i s slowly increasing its presence in the economy and presents hope for future added income. Total visitor arrivals increased by 20 percent in 2003 from the previous year. 2. Outlook 117. The growth in the economy would be strengthened and sustained by the government's commitment to reform. Areas where improvement can be accelerated include the strengthening of public financial management, that is, to maintain prudence on expenditure and expanding tax revenues, managing infrastructure more efficiently, and developing a growth-stimulating environment for the private sector. Recent private sector developments such as the establishment of a tuna-loining plant, and private investments in black pearl cultivation and niche market tourism, have created employment opportunities. Thus, private investment, particularly in the fisheries and services sectors, offer good prospects for economic growth. Country Chapter: Marshall Islands 53 3. Key IssuesShapingthe World Bank'sInvolvement 118. The Marshall Islands became a World Bank member in 1992. Since that time the Bank's assistance has been limited to the involvement in a range of regional initiatives and a few specific technical assistance activities. The Marshall Islands i s an IBRD-eligible country (GNI per capita of US$2,710 in 2003). 119. With the presence of other donors, particularly the United States (under the Compact of Free Association), the Bank will be seeking to play a selective role in the Marshall Islands, focusing on policy advice to leverage donor resources and buildlocal capacity. The Bank has held initial consultations, which will continue, with the government. Country Chapter: Marshall Islands 54 4. Donor Coordination 120. Table 19 describes the nature of the assistanceprovidedby the Marshall Islands' other development partners. Table 19. Activities of Other DevelopmentPartners Development Primary activities partner ADB The Country Strategy and Program Paper 2005-2006, (Update, August 2004), supports the principal objectives o f enhanced public sector performance; increased access to basic services; enhanced environment for private sector development andjob creation, and; strengthened public sector governance. ADB has active or planned lending operations inthe education (US$7.6 million ADF Credit), outer island infrastructure (US$7.9 million ADF Credit), youth social services (US$6.0 ADF Credit) and urban waste (US$lO.O million, ADF Credit). Australia The Australian aid program (A$415,000 in2002-03) is concentrated inthe areas of education and training, providing scholarships for study at regional universities. A Small Grants Scheme provides funding for the activities of community organizations. European Union The Marshall Islands became eligible for Euro 3.5 million under the 9* EDF. Of this amount, 65% will be focused on developing cost effective and reliable renewable energy sources- an activity also receiving parallel support from the Government of France and the United Nations Department of Social Affairs. O f the remainder, 20% will be allocated to the area of human resource development and training; and 15% will be used to support civil society initiatives. Japan JICA assistancei s focused on training and technical assistance and equates to approximately US$2.48 million. Grant assistancefrom the Marshall Islands from the Ministry of Foreign Affairs equated to approximately US$0.96 million over the period April l,2003--March 31,2004. There are no active lending operations inthe Marshall Islands at present. New Zealand Support to the Marshall Islands is included within NZAID's programto other Micronesian states, with an allocation of NZ$835,000 in2003-04. The focus i s on education and with limited grant funds for self-standing community development initiatives. NZAIDhas funded part of the University o f the South Pacific's extension centre inMajuro. United States The original 15-year Compact of Free Association, that had accounted for an estimated 70% of GDP, was replacedby a new, amended compact inDecember 2003. The amended compact for the period 2004-2023, introduces a trust fund that is intended to substitute for US grant financing in2023. Grant programs have also been restructured in an effort to enhance accountability measures with a shift away from budgetary, to sector, grants. Sector grants will focus on education, health, environment, public sector infrastructure development and maintenance, and public sector capacity building. Oversight for medium-term expenditure plans will be providedby a Joint Economic Management and Accountability Committee in which the US has majority membership. The new 2004- 2023 compact is expected to provide financial support totaling approximately US$1,190 million. Others The following UNagencies have activities: IAEA, WHO, UNEP, ITC, UNESCO, FAO, UNFPA,UNICEF, UNDP 55 E.Country Chapter:Palau Table 20. Country Summary Country Republic of Palau Prime Minister President Tommy Esang REMENGESAU, Jr. (since January 19,2001); the president is both the head of state and government. Head of State President Tommy Esang REMENGESAU, Jr. (since January 19,2001) Independence October 1, 1994 (from the US-administeredUNTrusteeship) Government Bicameral Parliament or Olbiil Era Kelulau (OEK) consists of the Senate (9 seats; members elected by popular vote on a population basis to serve four-year terms) and the House of Delegates (16 seats; members elected by popular vote to serve four-year terms). Land area 458 sq km Population 20,000 (2004 est.) Cities Capital: Koror; a new capital is being built about 20 kmnortheast of Koror. Districts 16 states; Aimeliik, Airai, Angaur, Hatohobei, Kayangel, Koror, Melekeok, Ngaraard, Ngarchelong, Ngardmau, Ngatpang, Ngchesar, Ngeremlengui, Ngiwal, Peleliu, Sonsorol. Languages English and Palauanofficial inall states except Sonsoral (Sonsoralese and English are official), Tobi (Tobi and English are official), and Angaur (Angaur, Japanese, and English are official). NaturalHazards Typhoons (June to December) NaturalResources Forests, minerals (especially gold), marine products and deep-seabedminerals. Major Products The economy consists primarily of tourism, subsistence agriculture and fishing. Tuna i s the main export. 1. EconomicOverview 121. The republic of Palau has the highest income per capita (US$7,500 in 2003) and the highest aid per capita (averaging US$1,712 over 1999-2002) of the Pacific Island countries. Palau receives substantial assistance from the United States through the Compact of Free Association, with total direct payments of about US$410 million over 1994-2009. In recent years, annual disbursements have averaged about 20 percent of GDP, to create a Compact Trust Fundto enable Palau to become self-sustainable, and to finance government operations. 122. Due to various external shocks that affected tourism (a principal source of income for Palau), economic growth averaged 1.3 percent in 2002-03, down from a strong growth o f 4.5 percent in 2001 (see Figure 9). Forecast for real GDP growth in 2005 i s slightly higher at 2 percent. The annual inflation rate has been subdued at below 1 percent for the years 2002-04, attributable to the use of the U.S. dollar as the domestic currency. Country Chapter: Palau 56 Figure 9. GrowthinPalau'sRealGDP during 1999-2005. I 1999 2000 2001 2002 2003 2004/e 2005/p 123. The budget deficit widened from 2 percent of GDP in 2003 to an estimated 12 percent of GDPin2004. Public debt in2004 is estimated to be 14percent of GDP. 124. The external position has fluctuated extensively, with a widening of the current account deficit in 2002 following the aftermath of September 11, 2001. The current account deficit narrowed to 5 percent of GDP in 2003 as tourist activity picked up, but increased to 18 percent of GDPin2004, reflecting the growth inimports. 125. Palau's economy i s sustained mostly by tourism and external assistance, with the public sector accounting for nearly half of total employment. The tourism sector was adversely affected in 2002 by the sharp appreciation of the U.S. dollar against the Japanese yen early that year, limited air flights, and uncompetitive airfares. However, tourist earnings rebounded by 22 percent in 2003 and another 7 percent in 2004. Efforts have been made recently to introduce competition inair flights andto diversify the tourist base. 2. Outlook 126. In the near-term, economic growth will be sustained, but medium-term prospects face fiscal uncertainties, particularly with the scheduled sharp reduction in grant assistance from the United States after 2009, which would significantly affect government expenditure, domestic consumption, and economic activity. The recovery o f tourism and continuing large other donor- financed infrastructure projects should support growth. 127. To limit the potential risks faced by the economy, prudent management of the Compact Trust Fund, as well as public sector reform to limit unproductive public expenditure, including restraint on public sector wages and overall size of public sector in the economy while strengthening the tax revenue, are needed. Other steps include improving the business environment for private sector-led growth and foreign investment attraction, which i s vital for economic self-reliance and for absorbing workers from the public sector. Country Chapter: Palau 57 3. Key IssuesShapingthe World Bank'sInvolvement 128. Palau became a Bank member in 1997. Since that time, the Bank's assistance has been limited to the provision of technical assistance in a limited range of areas, principally oil and gas andnatural resource management. Palaui s an IBRD-eligible country. 129. The Bank's approach in Palau i s shaped by an awareness of three major factors. First, Palau has access to large-scale grant resources from other development partners (mainly the Japan, Taiwan Province of China, and the United States). Second, Palau has highper capita GDPrelative to other Pacific countries. And third, Palau has the potential to achieve more robust economic growth outcomes given its growing tourism industry-but will need to undertake a strong reform program to achieve such outcomes, particularly to address its fiscal challenges and to enhance the private sector enabling environment. The government has indicated its preparedness to start down this path, and the Bank will seek to support such efforts. Inthis context, the role of the Bank over 2005-08 will be to focus on the provision of targeted policy advice and analytical support in a few key areas to leverage donor resources and build local capacity. The Bank has held initial consultations with the Palau Government on areas of possible support and expects an agreement on these to be concluded in the near future. 4. Donor Coordination 130. Table 21 describes the nature of the assistance provided by Palau's other development partners. Country Chapter: Palau 58 Table 21. Activitiesof Other DevelopmentPartners Development Primary activities partner ADB Palaubecame a member of the ADB on December 31,2003. ADB's program is currently under development. Australia AusAID provided approximately A$200,000 inbilateral aid inthe period 2003-04. This was focused on education, training and community development initiatives mediated through a small grants program. European Union Under the 9" EDF, Palau received an allocation of Euro 2 million the majority of which is to be applied to the energy sector. The principal objectives of the program are to improve the overall efficiency of the energy sector; to increase the production through renewable energy sources; and, to reduce local pollution and environmental risks associated with current energy generation practices. Japan JICA supports Palauthrough a Technical Assistance program staffed by volunteers. InFY03 (April 1,2003 -March31,2004) volunteers were involvedinprogram areas that include: education and human resource development (focusing on primary and pre-school education, vocational training and education for the disabled) Japan has also provided some major infrastructure grants to Palau. New Zealand Support to Palau i s included within NZAID's program to Micronesia with an allocation of NZ$835,000 in2003-04. The focus i s on education and with limited grant funds for self-standing community development initiatives. United States In 1994, the Republic ofPalauCompactof FreeAssociation with the UnitedStates of America became law. Under the compact, Palaureceives U.S. grant assistance for a period of 15 years inreturn for furnishing the United States with military facilities. The status of free association recognizes Palau as a sovereign state with the capacity to conduct foreign affairs consistent with the terms of the Compact. The Compact places full responsibility for Palau's defense with the United States. The Compact also provides grant funds and Federalprogram assistance, principally through the Department of the Interior's Office of Insular Affairs (OIA). InFY04, PalaureceivedUS$14.07 million, andunder appropriations endorsed by the U.S. Congress, can expect to receive a total of US77.16 million over the period FY04-09. Use of the compact funds i s determined through consultations between the OIA and government representatives, however OIA encourages use of the funds insix mainareas: health, educationpublic infrastructure, capacity building, private sector development and the environment. Of these, health, education and public infrastructure represent the most significant programs. Inaddition to the fundsreceivedunder the compact of free association, Palauis also eligible for federal programs insectors including health and education. Others The following UNagencies have activities: UNEP, ITC, WHO, FAO, UNFPA, UNICEF, UNDP 59 F. Country Chapter: Samoa Table 22. Country Summary Country Independent State of Samoa PrimeMinister Sailele Malielegaoi TUILAEPA (since 1996) Headof State Chief Tanumafili I1MALIETOA Independence January 1, 1962 (from New Zealand-administered UNtrusteeship) Government Unicameral Legislative Assembly or Fono (49 seats - 47 elected by voters affiliated with traditional village-based electoral districts, 2 elected by independent, mostly Eurasian, voters who cannot, (or choose not to) establish a village affiliation; only chiefs (matai) may stand for election to the Fono; members serve five-year terms). Landarea 2,934 sq km; two main islands (Savaii, Upolu) and several smaller islands and uninhabited islets. Population 179,000 (2004 est.). Population growth is 0.6% (2004 est.). Cities Capital: Apia Districts Aana, Aiga-i-le-Tai, Atua, Fa'asaleleaga, Gaga'emauga, Gagaifomauga, Palauli, Satupa'itea, Tuamasaga, Va'a-o-Fonoti, Vaisigano Languages Samoan (Polynesian) and English. NaturalHazards Occasional typhoons and active volcanism. NaturalResources Fish,hardwood forests, hydropower. MajorProducts Agriculture employs two-thirds of the labor force, and furnishes 90% of exports, featuring coconut cream, coconut oil, and copra. 1.EconomicOverview 131. The Independent State of Samoa consists of two main islands (Savaii, Upolu) located in the Polynesian group of islands in the South Pacific. Samoa receives moderate levels of external assistance (aid per capita averaging US$189 over 1999-2002). The Government of Samoa has adopted a wide-ranging economic reform program which has transformed the economy into one of the better-performing in the Pacific. 132. Samoa's economic reforms, launched in 1993, resulted in macroeconomic stabilization and comprehensive structural reforms, which contributed to rapid economic growth in the second half of the 1990s. More recently, after two successive years of strong economic growth (over 6 percent), Samoa's real GDP declined in 2002-03 (see Figure lo), owing to a sharp contraction in agriculture (caused by unfavorable weather conditions) and a slowdown in construction activity (due to the completion of several public works projects). Growth improved in 2003, but was then affected b y Cyclone Heta at the start of 2004. The forecast for growth in 2005 i s 3.2 percent. Inflation spiked to 16 percent in 2004 due to the impact of Cyclone Heta at the start of the year.. Country Chapter: Samoa 60 Figure 10. Growth inSamoa's Real GDP during 1999-2005. I Percentagechangein realGDP I 2000 2001 2002 2003 2004/e 2005/p 133. Fiscal performance has been encouraging as the budget deficit declined from 2 percent of GDP in 2002 to an average of 0.8 percent of GDP in 2003-04. Public debt declined from 60 percent of GDP in 2001 to an estimated 50 percent of GDP in2004. 134. As a result of higher imports and lower net transfers, the current account deficit declined from 0.7 percent of GDP in 2003 to 1.0 percent of GDP in 2004. International reserves stand between four and five months of imports of goods and services. 135. The economy depends mainly on agriculture, fishing, construction, tourism and remittances. The agriculture sector, accounting for 7 percent of GDP in 2003, i s regaining its strength from the aftermath of Cyclone Heta. The fisheries sector (15 percent of GDP in 2003) has been in decline for several years due to low catch rates caused by poor weather conditions. The construction industry (value-added construction of 6 percent of GDP in 2003) has recently received a boost from preparation for the 2007 South Pacific Games and other planned private sector projects. Tourism earnings continue to grow, with an increase of 4 percent from 2002 to stand at 17 percent of GDP in 2003. Officially recordedremittances are about 40 percent of GDP and have been increasing over time (unofficial remittances are thought to be of a similar order of magnitude). 2. Outlook 136. Samoa continues to enjoy political stability and demonstrate a commitment to economic management. With the positive results from its reform program in the 199Os, including rationalization of the public sector, Samoa has laid much of the ground work for continued economic performance. The government now faces the challenge of buildingon its achievements to enhance the environment for private sector-led growth. The government has called for deregulation of the financial sector with continued fiscal discipline, and encouragement of investment, while protecting the environment. Programs are underway which should help to improve the investment climate (such as reform of key utilities and improving the regulatory regime). These and other `second-generation' challenges, such as improving the capacity to use Country Chapter: Samoa 61 land for collateral and investment, may prove to be equally if not more challenging than earlier reforms, but are critical to provide the basis for future economic advances. 3. Key Issues Shapingthe World Bank'sInvolvement 137. The World Bank has a strong historical relationship with the Government of Samoa. Since Samoa became a Bank member in June 1974, 13 IDA credits totaling US$70.5 million have been made to support the agriculture, telecommunications and power, finance, transportation, and health sectors. 138. The Bank's longstanding partnership with the Government of Samoa i s reflected in a substantive program that combines lending, technical assistance, and analytical work. This program will continue to evolve over 2005-08. The Bank will continue to assist the government in consolidating its "first generation" reforms of public expenditure management reforms with a focus on key MDG areas, such as the health and infrastructure sectors. The Bank will continue its assistance in helping the government to manage the risks of Samoa's vulnerability to natural hazards. In addition, the Bank will increasingly seek to inform and advance the government's "second generation" reforms of interventions supporting the domestic business climate and private sector development. Continued support for the liberalization of the telecommunications sector will be an important element. 139. As an IDA recipient, Samoa takes full advantage of this instrument while engaging donor partners in a program of assistance that responds to the increasing sophistication of the country's development needs. The government provides clear direction on the roles to be played by different donors, including the Bank. The Bank activities described in Table 23 have been determined through dialogue with the government, and in accordance with the priorities set out in i t s Strategyfor the Development of Samoa. 140. Samoa's IDA14 allocation over FY2006-08 is expected to be SDR 7.5 million. This amount i s indicative only. The actual amount will depend on (a) the country's own performance, (b) its performance relative to the performance of other IDA recipients, (c) the amount of overall resources available to IDA, and (d) the terms of financial assistance provided (grants versus loans). Subject to further discussions with the government, this allocation may be focused on key infrastructure or other public expenditure management priorities. - Country Chapter: Samoa 62 a a a Country Chapter: Samoa 63 e e Country Chapter: Samoa 64 4. Donor Coordination 141. The Government has highlighted the need for improved coordination given the demands arising from its interaction with a large number of donors. The Bank i s part of a sector approach in health and is cooperating with other partners in other sectors, particularly private sector development. Table 24 describes the nature of the assistance provided by Samoa's other development partners. Table 24. Activities of Other DevelopmentPartners Development Primaly activities partner ADB The Country Strategy and Program Update 2005-2006 (August 2004) identifies the following priorities for ADB assistance: enhancing access to and quality o f education; enhancing the environment and public health of Apia; meeting the growing demand for power; ensure sound fiscal and macroeconomic policies; rationalizing state-owned enterprises and; improving the institutional and policy framework for the private sector. The ADB has two active lending operations inSamoa: Sanitation and DrainageProject (US$8.3 million ADF Credit; approved 10/27/2003; closing 06/30/2009) and the Small Business Development Project (US$3.9 million ADF Credit; approved 11/21/2003; closing 08/31/2006. Two lending operations totaling US$ 15.0 million (ADF Credits) are proposed for 2005: Education Sector Project I1(US$5.0 million) and Savai'i Renewable Energy Project (US$lO.O million). N o lending operations are currently scheduled for 2006. Austra1ia In2003-04 Australia provided bilateral aid (estimated at A$ 11.8 millionfor 2003-04 plus supplementary funding of A$2 millionprovided through the Policy & Management Reform Fund), concentrated inthe areas of economic reform and governance (including assistanceto the Public Services Commission, ImmigrationDivision, Samoa Police Force and Treasury Department); education and training (including scholarship programs for Samoans to study inAustralia, assistance to the Department of Education); health services, environment and natural resources (including improvements to management of the Ministry o f Agriculture, Fisheries, Forestry and Meteorology). European Samoa receives donor assistance from the following E C institutions and sources: the Center for the Union Development of Enterprise (CDE), European Investment Bank (EIB), National Indicative Programmes (NIP) and non-programmable aid (STABEX). Under the 9" EuropeanDevelopment Fund,Samoahasbeen allocated atotal of Euro 27.1 million. The focal sector for these grant funds will remain water supply and sanitation projects which represents a continuation of previous EC involvement inthe water sector. Euro 4 million of the total will be allocated to "non-focal" micro- project activities supporting village economies. Japan InFY03 (April 1,2003 to March 31,2004) SamoareceivedUS$6.08 millioningrant fundsfrom the Ministry of Foreign Affairs. Inaddition, over the same period, JICA provided TA totaling US$5.4 million in the environment, infrastructure and agriculture sectors. Volunteers were involvedin programs that included: livestock management; fish farming; port management; telecommunications; and income generation for women. Total development assistance from Japan amounted to US$11.48 million. The Government of Japan has no active lending operations in Samoa at present. New Zealand The NZAIDSamoa program in2004/05 was $8.29 million. NZAID`sprogram focuses on education and training (52% of funds) which includes: secondary curriculum policy and resource development, a national assessmentframework, NZ and regional tertiary scholarships and short term in-country traininghocational training. Inhealth (14% of the allocation), NZAID has supported child health initiatives, nurse training, outreach service delivery and secondary and tertiary medical treatment. New initiatives include the Public Sector Improvement Facility which is a 5 year harmonized activity with AusAID (NZAIDcontributes NZ$lmillionper year) and a $1.5 million institutional strengthening project in thejustice sector. Inaddition, NZAID i s working with GoS and AusAID to develop a six-year Joint Samoa Program Strategy. Others The following UNagencies have activities: FAO, ICAO, IFAD,IMO, ITU, UNCTAD, UNE'SCO, UPU,WHO,WIPO,-WMO, UNEP, ITC, UNFPA, UNICEF, UNDP 65 G. Country Chapter:SolomonIslands Table 25. Country Summary Country Solomon Islands PrimeMinister Sir Allan Kemakeza replaced Mannaseh Sogevare as the PrimeMinister following national elections in December 2001. Headof State Queen Elizabeth I1represented by the Governor General, Sir John IniLapli. Independence July 7, 1978 Government A ParliamentaryDemocracy with a single Legislative Assembly, it has its 50 seat parliament inHoniara. Each province is administered by its own elected Premier and provincial government. Landarea Over 1.35 million sq km of sea and a land area of 29,785 sq km. Population 470,861 (2004 est.). Population growth rate is 3.1% (2004 est.) Cities Capital: Honiara Provinces Nine provinces: Guadalcanal, Central, Western, Ysabel, Malaita, Makira, Temotu, Choiseul, and Rennell & Bellona. Languages English and Solomon Islands Pidgin, plus 87 listed indigenous languages and 30 dialects. NaturalHazards Typhoons, but rarely destructive; geologically active region with frequent earth tremors; and volcanic activity. NaturalResources Fish,forests, gold, bauxite, phosphates, lead, zinc, nickel. Major Products: Copra, marine products, and timber. Subsistence activities dominate the lives of 80 percent o f Solomon Islanders. 1.EconomicOverview 142. The Solomon Islands i s the third largest archipelago in the South Pacific, comprising a scattered double chain of 992 islands, of which about one-third are populated. Beginning in late- 1999, the Solomon Islands was plunged into political turmoil and civil strife due to ethnic tensions. As the security situation worsened, public administration deteriorated and by mid-2003 had reached a state of near-collapse. Intimidation and extortion of public servants by self-styled "constables," as well as rampant corruption led to fiscal ruin. The general public was also subjected to this treatment. Duringthis period the Solomon Islands fell into arrears with respect to all its external creditors, including the World Bank, and the Asian Development Bank. 143. In July 2003, an Australian-led regional intervention force, the Regional Assistance Mission to Solomon Islands (RAMSI) was deployed at the invitation of the Solomon Islands Government under the Facilitation o f International Assistance Act (2003). Law and order was quickly restored and has been effectively maintained. In addition to the security force, RAMSI has the following components: (a) a police presence, expected to remain in place up to 10 years to maintain order and also rebuild the Solomon Islands police force; (b) technical assistance to support restoration of the budget process and more efficient and accountable public spending, and (c) development assistance to underpin peace and reconciliation. RAMSI-funded advisors and in- Country Chapter: Solomon Islands 66 line staff have been placed in the legal and judicial system and in economic and central agencies including the Ministry of Finance. 144. To date, RAMS1has enjoyed public support in the Solomon Islands because it has halted day-to-day violence, intimidation, and abuse of power. Improvements in security have boosted public confidence and reinvigorated formal business activity, particularly in Honiara. As a result of the restoration of law and order, real GDP growth rebounded sharply from an average of negative 8.6 percent over 2000-02 to 5.6 percent in 2003 (see Figure ll), supported by rising export levels, growth in primary production and construction activity. Over the near-term GDP growth i s expected to remain buoyant, averaging around 4-5 percent a year during 2004-06. Figure11.GrowthinSolomonIsland'sRealGDPduring2000-06. 2000 2001 2002 2003 2004/e 2005/p 2006/p 145. As a result of the improvement in food supply and the stabilization of the nominal exchange rate, inflation has abated to single-digit levels from 10 percent in 2002-03 to an estimated 6 percent in 2004 and 2005. 146. The restoration of fiscal discipline was reflected in the estimated budget surplus of 10percent of GDP in 2004, a turnaround from a deficit of similar magnitude in 2001-02. This outcome was mainly attributable to the significant improvement of tax collections aided b y an amnesty on penalties, the cessation of payments to the ex-militants, a tightening of expenditure controls (particularly the wage bill), and significant grant based budgetary support from the major donors. Total public debt i s expected to fall from 100 percent o f GDP in 2003 to 87 percent of GDPin2005. 147. The external position has improved sharply as reflected in the reversal of the current account deficit from an average of about 10 percent of GDP over 2000-02, to a surplus of 1.4 percent of GDP in 2003 and around 6 percent in 2004. As a result of a favorable trade balance, large inflows of foreign aid, and the depreciation of the domestic currency, international reserves have been rebuilt and are estimated to be equivalent to five months of imports of goods and services at end-2004. 148. Fishing, forestry, and agriculture are the principal productive sectors contributing to the Solomon Islands economy. In the fishing sector (9 percent of GDP in 2003) Solomon Taiyo Ltd. Country Chapter: Solomon Islands 67 (the only producer for export markets) resumedits operations at about 40 percent of capacity, after its suspension in mid-2000. Fish exports are estimated to be 17 percent of total exports in 2003- 04. 149. The forestry sector (7 percent of GDP in 2003) was relatively unaffected by the 1999-2003 unrest, Timber exports accounted for almost 70 percent of total exports in 2003-04. 150. Although agriculture accounted for only 5 percent of GDP in 2003, its economic and social significance i s far greater, as more than 80 percent of the population relies on subsistence agriculture for its livelihood. Cocoa represented about 6 percent of total exports in 2004 while copra represented around 3 percent. Overall, agriculture exports as a share of GDP are projected to grow at 3 percent in 2005-06. 2. Outlook 151. The current challenge for the government and donor partners i s to successfully progress beyond the initial focus on stabilization, and implement policies and structural reforms to sustain the buoyant recovery in economic growth. RAMS1 i s now in the second phase of its mission which involves implementing reforms, particularly in the public sector and institutional and legal framework, as well as providing support to the provinces in the sectors of law and justice, financial management and rural service delivery. 152. Inthe immediate aftermath of the crisis some consideration was given to the adoption of a new constitution based on a federal system, with a significant number of political, financial and legal powers transferred to state governments. Much of the political impetus for this proposal derived from dissatisfaction with the poor reach of government services, especially beyond Honiara. Given major concerns about the availability of skilled administrators, lack of appropriate systems and the potential costs of setting up such a structure, these proposals require careful consideration. However, the underlying service delivery issues remain and needto be addressed. 153. Given the fragility of the economic recovery and looming uncertainties about future prospects, the government's approach to fiscal management has been to maintain the necessary flexibility. For the near term the government's strategy i s to maintain a strong fiscal position by continuing to strengthen tax administration and widening the tax base, while working to strengthen public financial management and administrative capacity in the public sector. Considering the one-time nature of the recent revenue increase and the uncertainty about the level of external grants from major donors beyond 2004, tight controls on wages and cost reduction in non priority areas are vital priorities. 154. Besides implementing sector-specific policies to revitalize the main productive sectors, to rebuild infrastructure, and to improve health and education outcomes, structural reforms in the private sector are also vital. The environment supporting private activity could be improved to encourage investment and promote employment, particularly in potential growth sectors such as gold and mining, palm oil production, and tourism. Suitable policies to address the ongoing unsustainable pace of logging need to be designed and implemented. Private sector prospects have been boosted following the sale of the palm oil plantation in Guadalcanal to New Britain Oil Palm Country Chapter: Solomon Islands 68 Company which i s expected to generate up to 7000 jobs once the rehabilitation commences. Investors from Malaysia, Australia, Papua New Guinea, Japan and Taiwan have also expressed interest in mining, fishing and fish-processing, and hotel projects. Some attention will need to be paid to land ownership issues inorder to attract productive foreign investment. 3. Key IssuesShapingthe WorldBank'sInvolvement 155. Since becoming a World Bank member in 1978, the Solomon Islands has received eight IDA credits totaling US$50 million, in the infrastructure, education, health, finance, and agriculture sectors. 156. Considering the strong presence o f other partners in virtually all sectors o f the economy, the challerge for the World Bank i s to define an appropriate role in line with its comparative advantage, and to develop strategic partnerships with other stakeholders. The Solomon Islands exhibits many of the characteristics of a low-income country under stress (LICUS): weak government and institutions, recent conflict, coupled with high levels of poverty, arguing for a non-conventional approach to development support. 157. The aim of the World Bank Group's assistance program is therefore to identify selective entry points for supporting reforms and constituencies for change, capacity-building, tailored policy advice based on global experience and communications/outreach. The Solomon Islands program consists of analytical/advisory services and small grants, working with governments and, where appropriate, at the community level. A key emphasis is on coordination with other development partners to maximize leverage, particularly inkey areas for MDG attainment. 158. The Bank's assistance program has been developed in consultation with the government and other development partners and i s consistent with the government's own development priorities, articulated in the National Economic Reform, Recovery and Development Plan (NERRDP),2003-2006. 159. It is expected that the Bank's program over 2005-08 will operate primarily in two broad areas which correspond to the first two pillars o f the Bank Pacific regional strategy. First, the Bank will assist the government and other donors on public expenditure management issues to improve the delivery of basic services to communities and provide broader sector policy advice (e.g. public expenditure management, experience on the establishment of sectorwide approaches). Second, the Bank will target specific initiatives which seek to improve the climate for the private sector, such as reforms to the energy sector, telecommunications, financial sector management and foreign investment legislation. 160. Beyond these two focal areas the Bank will remain engaged and be prepared to respond flexibly. This would include, inparticular, taking advantage of opportunities to contribute to long- term capacity building, tackling the underlying causes of instability and strengthening donor partnerships. In this context, the Bank will look to make a contribution to the productive sectors, recognizing that rural'communities need to benefit directly from the recent stability in the Solomon Islands if the government and its development partners are to effectively address the underlying causes of conflict. The Bank i s also considering the preparation of an application to Country Chapter: Solomon Islands 69 access the LICUS Trust Fundfor the Solomon Islands, although further analysis and consultation i s requiredto develop options for this. 161. Further details of the Bank's program to the Solomon Islands are outlined inTable 26. The Solomon Islands i s eligible for IDA resources, expected to be grants under IDA14. The IDA14 allocation over FY2006-08 i s expected to be SDR 5.3 million. This amount i s indicative only. The actual amount will depend on (a) the country's own performance, (b) its performance relative to the performance of other IDA recipients, (c) the amount of overall resources available to IDA, and (d) the terms of financial assistance provided (grants versus loans). Subject to further discussions with the government, the allocation may be focused on rural development (agriculture/forestry), infrastructure (energy) or public expenditure management priorities. Country Chapter: SolomonIslands 70 a Country Chapter: Solomon Islands 71 .-C a a a a C .3 Country Chapter: Solomon Islands 72 e e a Country Chapter: Solomon Islands 73 4. Donor Coordination 162. Official development assistance to the Solomon Islands i s substantial and has a major impact on budget planning and development. Aid flows have increased sharply since RAMSI's intervention: about US$118 million for 2004 alone. This poses a challenge to government and partners alike in ensuring its productive use. The development budget i s entirely composed of these donor funds, which are almost entirely grants. Projections of future support are not available but it i s likely that the current levels will be maintained for the next 2-3 years. 163. Major donors (using2004 aid flow data) are Australia (about 37 percent of donor funding), the European Union (about 14 percent); Japan (30 percent); New Zealand (about 5 percent ); and Taiwan, China (about 10 percent). Donor support i s concentrated in the social and governance sectors, notably, and income-generating activities and agriculture (2 percent) are significantly under-represented in donor programs. 164. Development partners are seeking to ensure their assistance i s consistent with the priorities outlined inthe NERRDP. The Department of National Reform and Planning i s responsible for aid management; Australia i s providing advisory assistance. 165. Table 27 describes the nature of the assistance provided by the Solomon Islands' other development partners. Table27. Activitiesof Other DevelopmentPartners Development partner Primary activities ADB Since 2003, ADB has reactivated one lending project in March 2004 (Post-Conflict Emergency Rehabilitation Project) whose objective i s to help restore essential services, basic infrastructure, and community facilities affected by civil strife during the period 1999-2000. Inview of the present debt situation, and in consideration of the availability of significant external grant funding, the decision has beentaken not to pursue further lending inthe short- to medium-term. Two nonlending products have beenproposed for 2005 (Implementation of Interisland Transport Reforms, US$500,000; Business Environment Reforms, US$400,000; and Economic Development Report, US$300,000). In2006, 3 further nonlending activities are proposed: Ministry o f Infrastructure Development Reform Program (US$400,000); Private Sector Participation Program (US$400,000); and, Secured Transactions Reforms (US$700,000). Australia In2004-05 Australia is providing an estimated total official development assistance to the Solomon Islands o f A$201.6 million reflecting its commitment to the RAMSI initiative (see above). Of this, around A$93 million is provided under AusAID country program and the remainder by other agencies involved inRAMSI. In2004- 05, the priority will be for the governments of Solomon Islands, Australia and regional partners to consolidate and buildon the gains made to date through RAMSI and Australia's bilateral development cooperation program. The focus will be on supporting Solomon Islands to implement a comprehensive reform agenda to improve the accountability and affordability of government. Priorities for reform are economic governance, rebuildingthe machinery of government and strengthening the legal andjudicial sector. Substantial support will be provided for continuing peace building, community development and health services programs. Country Chapter: Solomon Islands 74 Development Dartner Primary activities European Union The Solomon Islands received an allocation of Euro 23 million under the 9" EDF. The majority of this will be targeted to continuing a microprojects program. Other priorities include education and small business development inrural areas. The EU also has available STABEX funding (Euro 60 million) and is considering the potential for involvement inthe forestry and rural development sectors. The EU budgetlines provided Euro 2.5 million for a marine conservationproject shared with PNG and Indonesia. Japan InFY03 (April 1,2003-March 31,2004) Japanprovided development assistance totaling US$1.82 million comprising Grant financing (US$0.73 million), TA (US$1.09 million). Japan has no active lending operations inthe Solomon Islands. TA activities are provided by experts inthe field of water and waste water management. New Zealand NZAID provided the Solomon Islands with NZ$16.14 million inbilateral aid (representing the largest single country allocation inits Pacific aid budget). Aid priorities include: education, the restoration of law and order, sustainable livelihoods and support to civil society. NZ$12 million will be allocated to implement the Solomon Islands Education Strategic Plan (together with the EU) which aims to provide basic education for all children by 2015. Other initiatives include support of Honiara's Small Business Enterprise Center which to date has trained 3,800 potential and existing entrepreneurs. Others The following UNagencies have activities: FAO, ICAO, IFAD,ILO, IMO, ITU, UNCTAD, UNESCO, UPU,WHO, WMO, WtrO, UNEP, ITC, UNFPA,UNICEF, UNDP 75 H.Country Chapter: Tonga Table 28. Country Summary Country Kingdomof Tonga PrimeMinister Prince Lavaka ata ULUKALALA (since February 2000) Headof State King Taufa'ahau TUPOU IV (since 16 December 1965) Independence June 4, 1970 (from UK protectorate) Government Hereditary constitutional monarchy; prime minister and deputy prime minister appointed for life by the monarch. Landarea 718 sq km; archipelago of 169 islands (36 inhabited) Population 101,803 (2004 est.). Population growth is 0.3% (2004 est.). Cities Capital: Nuku'alofa Provinces Eua, Ha'apai, Niuas, Tongatapu, and Vava'u. Languages Tongan and English. NaturalHazards Cyclones (October to April); earthquakes and volcanic activity inFonuafo'ou. NaturalResources Fishand fertile soil. Major Products Tonga has a narrow export base in agricultural goods. Squash, coconuts, bananas, and vanilla beans are the main crops. 1.Economic Overview 166. The Kingdom of Tonga consists of four main island groups located in the south Pacific (Polynesia sub-region). Tonga receives moderate levels of donor support (aid per capita averaging US$205 over 1999-2002). Annual real GDP growth averaged slightly over 2 percent in 2001-04 (see Figure 12). The forecast for 2005 i s for growth to increase to 2.8 percent, with agriculture as the main driver. Inflation for 2005 i s projected to remain in double-digits due to higher commodity and oil prices and pressure on public finances. 167. Adverse external shocks, a sharp rise in public sector wages in 2000-01, and rising difficulties with tax administration and compliance led to a fiscal deficit of 3 percent of GDP in 2003. Smaller deficits of about 0.6 and 0.8 percent of GDP are projected for 2004 and 2005. Public debt declined from 56 percent of GDP in 2003 to an estimated 45 percent of GDP in mid- 2004. Country Chapter: Tonga 76 Figure 12. Growth inTonga's Real GDP during 2000-06. Percentage change inreal GDP I 2000 2001 2002 2003 2004/e 2005/p 2006/p 168. A less favorable trade balance led to a turnaround of the current account surplus of 5 percent of GDP in 2002 to a deficit of 3 percent of GDP in 2003. The current account was in surplus again in 2004 attributable to stronger income and transfer receipts. Foreign reserves are estimated to stand at five months of imports of goods and services in 2004. 169. Tonga's economy depends mainly on agriculture (squash being the leading export), fishing, tourism, and remittances. The agricultural sector (27 percent of GDP in 2003) was adversely affected by lower squash export prices and low fish catch rates (caused b y poor regional weather conditions), with growth at below 1 percent in 2004. However, a moderate recovery in tuna fishing and higher output and price of squash are expected for 2005. The economy's heavy dependence on squash i s evident in that low prices considerably affect the performance of the whole export sector. Consequently, the government has initiated trials of domestic production of various types of vegetables to diversify the export base. 170. Tourist receipts (7 percent of GDP in 2003) increased by 33 percent in the first half of 2004 compared with the corresponding period inthe previous year. Officially recorded remittance flows of about 24 percent of GDP in 2003 from the estimated 100,000 Tongans living overseas far outweigh the earnings from commodity exports, tourism and other activities (unofficial remittances are thought to be of a similar order of magnitude). 2. Outlook 171. Although Tonga's small size and isolation present a challenge to economic development, much can still be done to promote a business environment which maximizes economic growth-as evidenced by the experience of other small island states. The government's commitment to economic reform and good governance will provide the basis to capitalize on the economy's medium-term growth prospects. Key steps include strengthening governance and accountability throughout the public sector, focusing government involvement in areas of comparative advantage, and promoting private sector development. Other areas that call for attention include managing the pressure for civil service wage increases, the importance of public enterprise reform to improve the efficiency of these enterprises and significantly reduce their share o f the public Country Chapter: Tonga 77 budget, improving public expenditure management to bolster education, health and basic infrastructure, and strengthening revenue performance through the reform of the tax system. 3. Key IssuesShapingthe World Bank'sInvolvement 172. Since becoming a World Bank member in 1985, Tonga has received four IDA credits totaling US$21.8million, primarily inthe health, hazard management, and finance sectors. 173. The World Bank has a growing partnership with the Kingdom of Tonga. With evidence that the government i s keen to progress key reforms, the Bank i s positioning itself to support these efforts. If Tonga can sustain momentum on its reform agenda, the Bank sees significant scope to provide additional financing, analytical, and technical assistance in the coming years to help the government implement its programs. 174. The Bank currently provides a range of advisory and analytical work, complemented by targeted activities in sectors that the government has identified as priorities. The Bank intends to partner with Tonga to strengthen government capabilities andfacilitate MDG attainment as well as to enhance the domestic business climate. This would entail an expansion in the Bank's involvement from the health, natural hazard management and public procurement sectors to include education, transport sector reform and tackling regulatory impediments to private sector growth. 175. Tonga i s eligible for IDA resources, likely to be grants under IDA14. The IDA14 allocation over FY2006-08 i s expected to be SDR 3.4 million. This amount i s indicative only. The actual amount will depend on (a) the country's own performance, (b) its performance relative to the performance of other IDA recipients, (c) the amount of overall resources available to IDA, and (d) the terms of financial assistance provided (grants versus loans). Subject to further discussions with the government, the allocation i s likely to be focused on infrastructure (transport sector) or on public expenditure management priorities. The Bank's program of assistance to Tonga i s described inTable 29. Country Chapter: Tonga 78 Country Chapter: Tonga 79 0 0 0 0 - Country Chapter: Tonga 80 Country Chapter: Tonga 81 5. Donor Coordination 176. Table 30 describes the nature of the assistance provided by Tonga's other development partners. Table 30. Activities of Other Development Partners Development Primary activities partner ADB The Country Strategy and Program Paper for Tonga 2005-06 (published August 2004) concentrates on the following thematic areas: strengthening public sector management and public expenditure management; inclusive social development; promoting an enabling environment for private sector development as well as more specific support to sectors including: agriculture and natural resources; education; energy; health, nutrition and social protection; industry and trade and transport. Indicative country allocations for the period 2005-07 have been set at US$10 million of ADF resources. Tonga also has limited access to the ADB's ordinary capital resources (US$2 million will be available over the period 2005-07). One loan i s proposedfor 2006 (Urban Basic Social Infrastructure, US$5.O ADF credit). Two nonlending products are scheduled for 2005 (Institutional strengthening of the agricultural sector; and integrated urban development project) with a further three nonlending activities scheduled for 2006 (Implementation o f agricultural sector road map; population study and; integrated urban services review). Australia Bilateral aid of around A$9.8 million (2003-4) focused inthe areas o f economic and public sector reform; governance; education and training; health management; solid waste management; private sector development, natural resource management; tourism and community development. EuropeanUnion The EU's 9" European Development Fund(EDF) allocation to Tonga (indicative envelope Euro 5.7 million), will be targeted to the improvement of social services inthe Vava'u group of islands ( including Euro 3 million for the Vava'u Social Services Support Project). Euro 0.3 million will be allocated for a new microprojects program. Euro 2 million will be used for emergency reconstruction inthe event of natural disasters, of which Euro 0.89 million of this amount has already been committed for rehabilitation following cyclones Ami and Eseta. Should no further fundsberequired for emergency activities, undisbursed funds will be added to the Vava'u Social Services Support Project. Japan The Ministry of Foreign Affairs (MOFA) provided US$1.17 million in grant assistanceto Tonga in FY03 (April 1,2003 - March 31,2004). Inaddition, JICA provides T A through a network of volunteers contributing to programs focusing on: human resource development, health, public services, natural resource management and economic growth. The Government of Japan has no active lending operations in Tonga at present. New Zealand NZAID is providingNZ$5.66 million inaid to Tonga (representing approximately 4.6% of its total Pacific aid budget). A five-year strategy developed jointly with the Government of Tonga focuses on five areas: education and training; development inthe outer islands; community development; support for sustainable livelihoods; support for good governance and public sector reform. Some assistance i s also provided inthe health sector. Current activities include support for the Tonga Education Support Programme; support for the Public Enterprise Division of the Ministry o f Finance to help strengthen the reform of the public sector enterprise sector; judicial assistance; a small-scale community development fund; and a household solar electric power project on Niuafo'ou island. NZAIDis also providing assistance in the upgrading of water supplies to three o f the largest villages on Tongatapu, as well as upgrading 'Eua's water supply system. Others The following UNagencies have activities: FAO, ICAO, IFAD,IMO, ITU, UNCTAD, UNESCO, UNIDO, UPU,WHO, WMO, WtrO (applicant), UNEP, ITC, UNFPA, UNICEF, UNDP 83 I.CountryChapter:Vanuatu Table 29. Country Summary Country Republic of Vanuatu Prime Minister HamLini (since December 2004) Head of State President Kalkot Matas Kelekele (since June 2004) Independence July 30, 1980 (from France and UK) Government Unicameral parliament of 52 members, elected for four-year terms on a universal franchise containing an element of proportional representation. Land area 12,200 sq km; includes more than 80 islands, about 65 of which are inhabited. Population 214,969 (2004 est.). Population growth is 2.3% (2004 est.). Cities Capital: Port-Vila (Efate) Provinces Malampa, Penama, Sanma, Shefa, Tafea, and Torba. Languages Three official languages: English, French, pidgin (known as Bislama or Bichelama), plus more than 100local languages. NaturalHazards Tropical cyclones or typhoons (January to April); volcanism causes minor earthquakes; and tsunamis. NaturalResources: Manganese, hardwood forests, fish. Major Products Small-scale agriculture provides a living for 65% o f the population. Offshore financial services and tourism are other mainstays of the economy. 1.Economic Overview 177. Vanuatu consists of more than 80 islands stretching for over 800 kilometers in the Melanesian sub-region of the Pacific. Vanuatu receives moderate levels of external assistance (aid per capita averaging US$179 over 1999-2002). 178. Vanuatu's real GDP rebounded in 2003 after two successive years o f contraction, and the recovery i s expected to continue, with a growth estimate of 3.0 percent for 2004 (see Figure 13). The growth was driven by improvements inthe forestry andbeef industries, as well as the services sector. The forecast for growth in 2005 i s 2.8 percent. 179. Partly due to a reduction in recurrent expenditures, a small budget surplus was recorded for the first three quarters of 2004, an improvement from a deficit of 2 percent of GDP in 2003. Vanuatu maintains tight controls on its public borrowings and public debt stood at just below the government's debt ceiling o f 40 percent of GDP in 2004. Inflation remained below 3 percent in 2004. The discipline of the central bank and Finance Ministry in controlling the inflation rate and fiscal deficits has contributed to Vanuatu's macroeconomic improvement. Country Chapter: Vanuatu 84 Figure 13. GrowthinVanuatu's RealGDPduring2000-05. Percentage change in real GDP 3 2 1 0 -1 -2 -3 -4 -5 2000 2001 2002 2003/e 2004/e 2005/p ~ 180. Due to rising receipts from exports, the current account deficit of 9 percent of GDP in 2003 declined to 4 percent of GDP in 2004. Foreign reserves in 2004 are estimated to stay in the vicinity of four months of imports of goods and services. 181. Agriculture and tourism are the principal productive sectors contributing to Vanuatu's economy. Nearly all domestic exports are primary goods, the main ones being copra and cocoa (26 percent of total exports in2003) and cocoa (11percent of total exports in2003). Highprices in the domestic export market contributed to the remarkable performance in copra exports (increased from 7 percent of total exports in 2003 to 12 percent of total exports in 2004). Cocoa exports declined from 7 percent of total exports in 2003 to 3 percent of total exports in 2004, reflecting the damages to tree crops caused by Cyclone Ivy in early 2004. 182. Tourism i s an expanding industry in Vanuatu (tourist arrivals increased by 25 percent in 2003 from 1997 levels). The increase in airline capacity in 2004, particularly by Air Vanuatu and Pacific Blue, boostedtourist arrivals b y 28 percent in the third quarter of 2004. 183. In May 2004 Vanuatu was one of 16 countries-and the only PIC-selected by the U.S. Millennium Challenge Corporation as eligible to apply for assistance through the Millennium Challenge Account. It i s expected that assistance under the Millennium Challenge Account would be closely linked to proposals that support economic growth, policy reform, partnerships, and widespread ownership. 2. Outlook 184. Vanuatu's current relatively healthy economic environment presents an ideal opportunity for the implementation of policies to reduce medium-term risks and to promote sustainable economic growth. In view of high development needs, population growth of around 2.4 percent, and a mounting wage bill, strategic measures need to be considered. These include re-directing spending toward productive infrastructure (including in the outer islands) while maintaining vital social spending, and reducing the size of the public sector. Such measures will be important to Country Chapter: Vanuatu 85 prevent the likelihood of deterioration in the fiscal position, a widening in current account deficits anderosion of foreign reserves. 185. In light of Vanuatu's high costs (in some sectors) relative to its regional comparators, reform to lower the cost structure for business activity, improvements in competition and oversight, and strengthening of the financial sector will be important to fuel private sector activity. A lack of opportunities for younger people and increasing social unrest are at risk when economic growth fails to keep pace with expanding populations, a challenge common to the Bank's other Melanesian client countries. These imperatives provide a strong motivation for Vanuatu and its development partners to work together to address future challenges. 3. Key IssuesShapingthe WorldBank'sInvolvement 186. Since joining the World Bank Group in 1981, Vanuatu has received five IDA credits totaling US$18.9 million (all fully disbursed) in the areas of agricultural extension and training (1983), transportation and education infrastructure (1986), primary and secondary education (1988), affordable housing (1991), and a Learning and Innovation Loan (2001). 187. Vanuatu adopted a Comprehensive Reform Program (CRP) in 1997 to pursue improvements in governance and strengthen institutions with ADB support. A Priorities and Action Agenda was subsequently developed to integrate and prioritize actions within the CRP. 188. The World Bank will be seeking to buildits relationship with Vanuatu over 2005-08 as the country strives to emerge from a period of high political turnover. Currently the Bank has a modest program of assistance (limited to one grant-financed technical assistance on public utility reform). Vanuatu has experienced several changes in government over recent years, which provides an added challenge to sustaining reform. However, the current government has given positive indications about the directions it intends to take on key governance and reform issues, which suggests the possibility of an expanded demand for Bank services. 189. The Bank will aim to develop a program of assistance which initially targets a few key areas that have the potential to promote growth and job creation. Further dialogue with the government i s needed to establish agreed priorities. However, the Bank's initial view i s that a focus on two areas may be possible: (a) helping to improve public expenditure management and service delivery outcomes in education, and (b) enhancing the environment for private sector investment. If a solid foundation can be established, the Bank would see scope for building on this to expand its relationship with Vanuatu over the life of this strategy. 190. Vanuatu i s eligible for IDA resources. The IDA14 allocation over FY2006-08 i s expected to be SDR 5.0 million. This amount i s indicative only. The actual amount will depend on (a) the country's own performance, (b) its performance relative to the performance of other IDA recipients, (c) the amount of overall resources available to IDA, and (d) the terms of financial assistance provided (grants versus loans). Subject to further discussions with the government, the allocation may be focused on rural development, infrastructure or public expenditure management priorities. The Bank's program of assistance to Vanuatu i s described in Table 32. - Country Chapter: Vanuatu 86 m 8 Country Chapter: Vanuatu 87- Country Chapter: Vanuatu 88 4. Donor Coordination 191. Table 33 describes the nature of the assistance provided by Vanuatu's other development partners. Table 33. Activitiesof Other DevelopmentPartners Development oartner Primary activities ADB The Country Strategy and Program Paper 2005-06 (prepared October 2004) identifies four thematic priorities: good governance and economic management; private sector development; infrastructure development; and, social development and the environment. An emergency credit 3f US$2.0 million was extended to Vanuatu following a cyclone in 1999 and the project was Zompleted inDecember 2000. As a result, ADB has no active loans inVanuatu at present with none identified in the pipeline for FY05-06. Two nonlending products are identified for 2005: Corporatizationof the Ports Authority; and Rural Productive Skills Development, with three additional products identified for FY06: Technical Vocational Education and Training (TVET); Preparation of Urban Sanitation and Health Project; and, Strengthening Development policies. Australia Bilateral aid of A$15 million (2003-04) - with a further A$3.5 million in support from the Policy and Management Reform Fund- has been concentrated on areas including: legal assistance (to strengthen the capacity of the legal sector); Education and training (provision of increased secondary school places, renovation and extension of existing secondary schools, support of the Vanuatu Institute of Technology); Health (provision of Australian health specialists and funds to improve health service delivery, training of local health workers) and; landuse planning inrural areas. Inaddition, Vanuatu has access to a series of other TNGrant schemesincluding: the Small Grants Scheme (assisting villages indeveloping basic infrastructure); the Pacific Technical Assistance Facility (providing Australian specialist technical support) and; the Australian Staffing Assistance Scheme (capacity building for officials inthe public service) European Union The Country Assistance Paper for Vanuatu identifies human resource development as the development priority for which Euro 20 million has been allocated under the 9" EDF. In addition, projects totaling Euro 1.0 million financed from the EUbudgetlines for Tropical Forests, HumanRights and Democracy, as well as Decentralized Cooperation, are presently under implementation. Japan JICA assistancefocuses on four priorities: basic education; health systems; rural development. InFY2003 (April 1,2003 -March 31,2004) the Japanese Ministry of Foreign Affairs provided US$0.05 million dollars in grant funds. During this period, Vanuatu made loanrepayments of US$lOO,OOO inrespect of its outstanding debts to JBIC. New Zealand NZAIDis providing NZ$6.36 million inbilateral assistanceto Vanuatu. Fundsare directed to the priority areas o f basic education (teacher training, development of curricula); law and order (working with AusAID and the Vanuatu Police Force to improve policing and prevent crime); and, work with civil society (raising awareness amongst communities of issues including human rights, the role of government, access to services and voting rights). Inaddition, NZAID operates a Small Projects Scheme (focusing on basic health, gender issues, and organizational capacity building), supports the Port Vila Youth Drop-InCenter and provides essential medical treatment inNew Zealand for patients that cannot be treated inVanuatu. Others The following UNagencies have activities: FAO, ICAD, IMO, ITU, UNCTAD, UNESCO, L O , UNIDO, UPU,WHO, WMO, WtrO (applicant), UNEP,ITC, UNFPA,UNICEF, UNDP ANNEXA. FijiataGlance 4/27/05 East Lower- POVERTY and SOCIAL Asia & mlddle- Fiji Pacific income levelopment diamond' 2004 Population, mid-year (millions) 0.85 1,855 2,655 Life expectancy GNI per capita (Atlas method, US$) 2,690 1,080 1,480 GNI (Atlas method, US$billions) 2.3 2,011 3,934 T Average annual growth, 1998-04 Population (%) 1.2 1.o 0.9 Labor force (%) 2.2 1.1 1.2 iNI Gross ter primary Most recent estimate (latest year available, 1998-04) apita enrollment Poverty (% of population below national poverty line) Urban population (% of total population) 52 40 50 Life expectancy at birth (years) 70 69 69 1. Infant mortality (per 1,000 live births) 16 32 32 Child malnutrition (% of children under 5) 15 11 Access to improved water source Access to an improved water source 1% of population) 47 76 81 Illiteracy (% of population age 15+) 7 10 10 Gross primary enrollment (% of school-age population) - 110 111 112 FI// Male 111 112 113 Lower-middle-income group Female 110 111 111 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios. GDP (US$ billions) 1.2 1.8 2.2 2.6 Gross domestic investmenWGDP 18.9 13.5 Exports of goods and serviceslGDP 42.8 56.4 Trade Gross domestic savings/GDP 17.9 14.2 Gross national savingsIGDP 15.9 14.8 Current account balance/GDP -2.3 -3.5 6.0 -5.8 interest payments/GDP 2.1 1.1 0.3 Total debWGDP 35.1 15.6 11.5 Total debt service/exports 10.5 8.5 Present value of debVGDP 1 Present value of debWexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual growth) GDP 1.9 2.5 3.0 3.8 - F/ji GDP per capita 0.8 1.5 1.5 2.2 Lower-middle-income group Exports of goods and services 1.3 STRUCTURE of the ECONOMY 1984 1994 2003 2004 1 Growth of Investment and GDP (X) (% of GDP) h Agriculture 18.0 20.9 15.4 15.4 Industry 19.5 25.6 25.9 25.9 Manufacturing 10.1 14.9 14.6 14.6 Services 64.5 53.5 58.7 58.7 Private consumption 62.9 73.2 General government consumption 19.2 16.4 Imports of goods and services -GDI -GDP 1984-94 1994-04 2003 2004 (average annual growthJ Growth of exports and imports (%) Agriculture 2.1 -0.5 3.0 3.8 15 Industry 3.3 2.6 3.0 3.8 10 Manufacturing 5.6 2.6 3.0 3.8 Services 1.2 3.4 3.0 3.8 5 Private consumption 0 General government consumption 1.9 4 5 Gross domestic investment -1.7 -Exuorts -lmDorts Imports of goods and services 0.8 Note: 2004 data are preliminary estimates. Group data are for 2003. + The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Fiji 90 Annex A PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domesticprices Inflation(%) ("7change) Consumerprices 5.3 0.8 4.2 2.4 ImplicitGDP deflator 3.0 0.8 4.2 3.2 Governmentfinance ("7of GDP,includescurrentgrants) Currentrevenue 26.3 26.0 25.1 Currentbudget balance 0.8 -0.1 -3.8 I Overall surplusldeficit -4.0 -9.5 -GDP deflator +CPI TRADE 1904 1994 2003 2004 (US$millions) Exportand Import levels (US$ mlll.) Total exports (fob) 228 497 610 555 I 1,400 T Sugar 102 172 122 127 1,200 Gold 19 43 40 56 1,000 Manufactures 123 800 Total imports (cif) 451 840 1,034 1,150 600 Food 62 129 195 210 400 Fueland energy 99 94 171 167 200 I Capital goods 80 271 350 290 0 Exportprice index (1995=100) 98 99 00 01 02 Importprice index (1995=100) Exports Imports Terms of trade (1995=100) O3 O4 BALANCEof PAYMENTS I 1984 1994 2003 2004 (US$millions) Currentaccountbalance to GDP (%) Exports of goods and services 505 1,061 importsof goods and services 519 1,086 Resourcebalance -14 -25 42 Net income -28 -86 -90 Net currenttransfers 15 48 183 Currentaccount balance -27 -63 135 -152 Financingitems (net) 34 52 -136 416 Changesin net reserves -7 11 0 -263 Memo: Reservesincluding gold (US$ millions) 273 424 478 Conversionrate (DEC,locaUUS5) 1.I 1.5 1.9 1.7 EXTERNAL DEBT and RESOURCE FLOWS 1904 1994 2003 2004 (US$ millions) Composltlonof 2003 debt (US$ mill.) Total debt outstandingand disbursed 413 284 257 IBRD 59 40 11 IDA 0 0 0 A: 11 Total debt service 55 92 30 IBRD 10 16 3 IDA 0 0 0 Compositionof net resourceflows Official grants Official creditors 8 -34 0 Privatecreditors 9 4 -6 Foreigndirect investment Portfolioequity World Bank program Commitments A - IBRD E. Biiateral Disbursements 4 6 0 B IDA D. Other multilateral F. Private Principalrepayments 4 13 2 C IMF .. G Short-term - Net flows -1 -7 -2 Interestpayments 5 3 1 Net transfers -6 -11 -3 4/27/05 Fiji 91 Annex A Fiji SelectedIndicatorsTable - Base-case (most likely) projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: Main Macro Aggregates Annual growth rates, calculatedfrom constant1989price data GDP (mp) per capita -4.1 2.1 3.5 1.5 2.2 Total consumption per capita GDP at market prices -2.8 2.7 4.3 3.0 3.8 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods 2.3 1.2 0.5 Imports (GNFS) of which Goods 3.8 3.5 2.6 Savings-investmentbalances, as percentageof GDP Gross Domestic investment 11.1 13.7 of which Government investment 2.9 3.5 Foreign savings -0.9 -1.0 -3.3 -6.0 5.8 Grossnationalsavings 11.9 14.7 Government savings -2.8 -4.6 -3.7 -3.8 Nongovernment savings 14.8 19.3 Gross domestic savings 6.8 Other GDP inflation -1.2 4.3 0.8 4.2 3.2 Annualaverageexchangerate (LCURTS$) 2.1 2.3 2.2 1.9 1.7 Index real average exchange rate (YR89 =100) 100.0 100.3 100.9 106.6 108.6 Terms of trade index (YR89 =100) 143.2 142.4 130.9 Incremental capital-output ratio (GDIbased) -4.1 Import elasticity with respect to GDP -1.4 1.3 0.6 Money growth -2.1 -3.1 7.9 25.2 PartB: Government Finance Indicators Percentage of GDP Total revenues, of which 25.9 23.9 26.2 25.1 Tax revenues 20.3 19.7 19.9 21.9 Total expenditures, of which 32.4 33.4 33.9 34.6 Consumption Deficit(-)/Surplus(+) -6.6 -9.5 -1.6 -9.5 Financing: Foreign Monetary sector 2.0 1.3 0.9 1.8 Other domestic Other Total DebVGDPmp 50.1 53.1 55.6 57.2 Total interestpaymentsiTax revenues 13.4 13.6 13.4 12.0 Part C: Debt & LiquidityIndicators TotalDOD and TDS DOD (US$millions) 209.1 188.5 209.6 257.0 DOD / GDPmp ratio 12.7 11.4 11.6 11.5 TDS (US$ millions) 32.6 26.3 27.3 30.0 TDS /exports (XGS) ratio Total gross reserves (months'imports G&S) Part D:ExternalFinancing Plan (US$, millions) Official capital grants Private investment(net) 50.9 41.9 17.3 16.0 66.8 Net Long termborrowing excl IMF -15.9 -4.8 -2.0 9.7 11.0 Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows FinancingRequirements(incl IMF) 32.3 -29.1 -100.1 -135.5 415.9 of which current account deficit -14.4 -15.9 -59.1 -135.4 152.4 Fiji 92 Annex A Fiji-SocialIndicators Latest single year Same regionlincome group East Lower- Asia & middle- 1975-80 1985-90 1997-2003 Pacific income POPULATION Total population,mid-year (millions) 0.6 0.7 0.8 1,854.6 2,655.5 Growth rate (% annual averagefor period) 1.9 1.1 1.1 1.o 0.9 Urban population(% of population) 37.8 41.6 51.7 39.1 49.8 Total fertility rate (births per woman) 3.6 3.1 2.6 2.1 2.1 POVERTY ("A of population) National headcount index Urban headcountindex Rural headcountindex INCOME GNI per capita (US$) 1,870 1,910 2,240 1,070 1,490 Consumer price index (1995=100) 43 83 127 Food price index (1995=100) 42 91 126 INCOMWCONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Publicexpenditure Health (YOof GDP) 2.7 1.9 2.7 Education (% of GDP) 5.6 3.2 3.5 Net primaryschool enrollmentrate ("A of age group) Total 100 100 93 93 Male 100 93 93 Female 100 .94 93 Access to an improved water source ("A of population) Total 78 82 Urban 92 94 Rural 69 71 Immunizationrate ("A of childrenages 12-23months) Measles 32 84 91 82 86 DPT 68 97 94 86 88 Child malnutrition (% under 5 years) 15 11 Lifeexpectancy at birth (Years) Total 63 67 70 70 69 Male 61 65 68 68 67 Female 65 69 71 71 72 Mortality Infant (per 1,000 live births) 34 25 16 32 31 Under 5 (per 1,000 live births) 42 31 20 41 39 Adult (15-59) Male (per 1,000 population) 209 220 240 179 213 Female (per 1,000 population) 152 161 180 122 131 Maternal (modeled, per 100,000live births) 75 116 121 Births attended by skilled health staff (%) 100 87 86 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23months who received vaccinations before one year of age. 2005 World Development Indicators CD-ROM, World Bank Fiji 93 Annex A FIJI -KEYECONOMICINDICATORS Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 National accounts (as % of GDP) Gross domesticproducta 100 100 100 100 100 100 100 100 Agriculture 17 16 15 15 15 Industry 26 27 26 26 26 Services 57 57 59 59 59 TotalConsumption 93 Gross domestic fixed investment 0 0 16 17 16 Governmentinvestment 3 4 Privateinvestment -3 -4 EXPOITS (GNFS)~ 60 73 Imports(GNFS) 64 66 Gross domestic savings 7 Grossnationalsavings' 9 Memorandum items Gross domestic product 1653 1655 1811 2243 2627 (US$millionat currentprices) GNIper capita (US$,Atlas method) 2050 2000 2040 2280 2690 Realannual growthrates (%, calculatedfrom 1989prices) Gross domestic productat market prices -2.8 2.7 4.3 3.0 3.8 Gross Domestic Income Realannualper capitagrowthrates (%, calculatedfrom 1989prices) Gross domestic productat market prices -4.1 2.1 3.5 1.5 2.2 Totalconsumption Private consumption Balance of Payments(US$ millions) Exports(GNFS)b MerchandiseFOB 550 498 509 610 555 Imports(GNFS)~ MerchandiseFOB 735 685 777 1034 1150 Resourcebalance -28 -39 -48 -144 Netcurrent transfers 100 121 143 183 Current account balance 14 16 60 135 -152 Netprivateforeigndirect investment 34 41 16 19 -5 Long-termloans(net) -16 -5 -2 10 11 Official -10 -7 -1 0 Private -6 2 -1 10 Other capital(net, incl.errors &ommissions) 15 -65 -114 -164 410 Change inreservesd -47 13 40 0 -263 Memorandum items Resourcebalance(% of GDP) -1.7 -2.4 -2.6 -6.4 Realannualgrowthrates ( YR89 prices) Merchandise exports(FOB) 2.3 1.2 0.5 Primary Manufactures Merchandiseimports (CIF) 3.8 3.5 2.6 (Continued) Fiji 94 Annex A Fiji-KeyEconomicIndicators (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market prices)e Current revenues 25.4 23.8 24.2 25.1 Currentexpenditures 28.3 28.4 27.8 28.8 Current account surplus (+) or deficit (-) -2.8 -4.6 -3.7 -3.8 Capital expenditure 4.2 5.0 6.0 5.7 Foreign financing Monetary indicators M2/GDP 43.0 38.9 39.9 46.6 Growth of M2 (%) -2.1 -3.1 7.9 25.2 Private sector credit growth / total credit growth (%) Price indices( YR89 =loo) Merchandiseexport price index 129.5 115.8 117.8 Merchandise import price index 90.4 81.3 90.0 Merchandise terms of trade index 143.2 142.4 130.9 Real exchangerate (US$/LCU)f 100.0 100.3 100.9 106.6 108.6 Real interest rates Consumer price index (% change) 1.1 4.3 0.8 4.2 GDP deflator (% change) -1.2 4.3 0.8 4.2 3.2 a. GDP at factor cost b. "GNFS" denotes "goods andnonfactor services." c. Includesnet unrequited transfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidatedcentral government. f. "LCU" denotes "local currency units." An increaseinUS$LCUdenotes appreciation. Fiji 95 Annex A Fiji-KeyExposure Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 209 189 210 257 disbursed(TDO) (US$m)a Net disbursements (US$m)a -16 -13 -7 -6 Total debt service (TDS) 33 26 27 30 (Us$mIa Debt anddebt service indicators (%) TDOIXGS~ TDO/GDP 12.7 11.4 11.6 11.5 TDS/XGS Concessional/TDO IBRDexposure indicators(%) IBRDDS/publicDS 36.3 25.4 21.1 14.3 PreferredcreditorDS/public 87.3 91.4 90.6 95.2 DS (%)' IBRDDS/XGS IBRD TDO (us$mld 20 15 12 11 Of which present value of guarantees (US$m) Share of IBRDportfolio (%) 0 0 0 0 IDA TDO (us$mld 0 0 0 0 IFC (US$m) Loans Equity andquasi-equity /c MIGA MIGA guarantees(US$m) a. Includespublic andpublicly guaranteed debt, privatenonguaranteed, use of IMFcredits andnet short- termcapital. b. "XGS" denotes exportsof goods andservices, includingworkers' remittances. c. Preferredcreditors are defined as IBRD, IDA, the regionalmultilateraldevelopmentbanks, the IMF, andthe Bankfor International Settlements. d. Includespresent value of guarantees. e. Includesequity and quasi-equitytypes of bothloanand equity instruments. ANNEXB. FederatedStates ofMicronesia at a Glance East Lower- POVERTYand SOCIAL Mlcronesla, Asla & mlddle- Fed. Sts. Pacific income Developmentdiamond' 2004 Population, mid-year (miliions) 0.13 1,855 2,655 Life expectancy GNi per capita (Atlas method, US$) 1,990 1,080 1,480 GNI (Atlas method, US$ billions) 0.25 2,011 3,934 Average annual growth, 199844 r 4/27/05 T ~ Population ("9) 1.8 1.o 0.9 Labor force (%) 1.1 1.2 GNI Gross per primary Most recent estlmate (latest year avallable, 199844) capita enrollment Poverty ("9ofpopulationbelownationalpovertyline) Urbanpopulation(% of totalpopulation) 29 40 50 Lifeexpectancyat birth (years) 69 69 69 I infant mortality(per 1,000livebirths) 20 32 32 Child malnutrition("9ofchiidren under5) 15 11 Access to improvedwater source I Access to an improvedwater source ("9of population) 76 81 Illiteracy (% ofpopulationage 1%) 10 10 Gross primary enrollment (% of school-agepopulation) 142 111 112 -Micronesia, Fed Sts Male 136 112 113 Lower-middle-incomegroup Female 149 111 111 KEY ECONOMIC RATIOS and LONG-TERMTRENDS 1984 1994 2003 2004 Economlc ratios' GDP (US$billions) 0.20 0.24 0.24 Grossdomestic investmenVGDP I Exportsof goods and services/GDP Trade Gross domestic savingslGDP Gross national savingdGDP T Current account balance/GDP -6.5 0.9 -10.3 InterestpaymentslGDP savings Domestic Investment TotaldebVGDP 24.7 24.8 \ /' Total debt servicelexports 4.1 Presentvalue of debVGDP I Presentvalue of debVexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannualgrowth) GDP 4.3 0.0 5.1 -3.8 -Micronesia, Fed Sts GDP per capita 2.0 -1.9 2.6 -5.1 Lower-middle-incomeoroup Exportsof goods and services STRUCTUREof the ECONOMY 1984 1994 2003 2004 1 Growth of investment andGDP (x) ("9of GDP) 1 Agriculture Industry Manufacturing Services Private consumption Generalgovernment consumption Importsof goods and services 1984-94 1994-04 2003 2004 ;fGrowthof exports and imports (%) (averageannualgrowth) Agriculture Industry Manufacturing Services Private consumption 99 00 01 02 03 04 Generalgovernmentconsumption Gross domestic investment -"`Exports *Imports Importsof goods and sefvices Note:2004data are preliminaryestimates. Groupdataare for 2003. 'Thediamondsshowfourkeyindicatorsinthecountry(inbold)comparedwithitsincome-groupaverage.Ifdataaremissing,thediamondwill be incomplete. Federated States of Micronesia 98 Annex B PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domestlcprices (% Change) Consumerprices -0.2 1.4 ImplicitGDP deflator 2.6 -0.3 1.4 Governmentfinance (% of GDP, includes currentgrants) Current revenue 80.2 69.1 52.1 Current budget balance 16.9 14.6 -1.1 Overall surplus/deficit -0.2 4.2 -6.7 -GDP deflator +CPI I TRADE 1984 1994 2003 2004 (US$millions) Export and Import levels(US$ mill.) Total exports (fob) 2 9 22 20 II Commodity1 1 0 1180 T 160 Commodity2 0 74 140 Manufactures 120 100 Total imports (cif) 38 129 144 157 80 Food 00 Fuel and energy 40 I "'I Capitalgoods 20 0 Exportprice index (1995=100) 08 09 00 01 02 03 Importprice index (1995=f00) Terms of trade (7995=1001 Exports Imports BALANCEof PAYMENTS 1984 1994 2003 2004 (US$millions) Current account balanceto GDP (Sa) Exportsof goodsand services 40 40 10 I T Importsof goods and services 172 184 8 Resourcebalance -131 -145 6 4 Net income -16 11 14 2 Net currenttransfers 125 122 107 0 2 Current accountbalance -13 2 -25 4 6 Financingitems (net) 26 -27 49 8 Changesin net reserves -13 25 -24 -10 -12 Memo: Reservesincludinggold (US$millions) 90 1.o 55 Conversionrate (DEC,local/US$) 1.o 1.o 1 .o EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ millions) :omposition of 2003 debt (US$ mill.) Total debt outstandinganddisbursed 59 59 IBRD IDA Total debt service 2 IBRD IDA Compositionof net resourceflows Official grants Official creditors Privatecreditors Foreigndirect investment Portfolioequity D: 59 World Bank program Commitments A. IBRD E. Bilateral Disbursements 6. IDA D Other multilateral - F Private - Principalrepayments C IMF G .Short-term ~ Net flows Interestpayments Net transfers DevelopmentEconomics 4/27/05 -Federated - States of Micronesia 99 Annex B FederatedStates ofMicronesia - SelectedIndicators Table Buse-case(most likely) projection Actuul Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 PartA: Main Macro Aggregates Annual growth rates, calculatedfrom constant1998price data GDP (mp) per capita 6.6 -1.4 -0.6 2.6 -5.1 Total consumption per capita GDP at market prices 8.4 0.3 1.1 5.1 -3.8 0.3 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investmentbalances, aspercentage of GDP Gross Domestic investment of which Government investment Foreign savings -0.3 5.6 -7.4 -0.9 10.3 Gross national savings Government savings 7.8 5.2 16.0 14.6 -1.1 Nongovernmentsavings Gross domestic savings Other GDP inflation 2.0 1.3 -0.1 -0.3 1.4 Annual average exchange rate (LCU/US%) 1.O 1.o 1.o 1.0 1.0 Index real averageexchange rate (YR98 =loo) Terms of trade index (YR98 =loo) Incremental capital-output ratio (GDIbased) Import elasticity with respectto GDP Money growth -1.0 6.0 -12.0 -3.7 -0.1 Part B: Government Finance Indicators Percentage of GDP Total revenues,of which 68.9 64.4 72.4 69.1 52.1 Tax revenues Total expenditures, of which 15.7 73.3 66.5 64.9 58.7 Consumption Deficit(-)/Surplus(+) -6.7 -8.9 5.9 4.2 -6.7 Financing: Foreign Monetary sector -5.3 12.7 -9.4 8.4 12.7 Other domestic 2.1 2.8 -3.3 -5.5 5.8 Other Total DebVGDPmp Total interest paymentsflax revenues Part C:Debt & Liquidity Indicators TotalDOD and TDS DOD (US$ millions) 66.6 57.8 57.2 58.5 58.9 DOD/ GDPmp ratio 31.2 26.9 26.2 24.7 24.8 TDS (US$millions) TDS /exports (XGS) ratio Total gross reserves (months'imports GCS) 8.7 7.3 9.2 6.0 3.4 Part L): External FinancingPlan (US$, millions) Official capital grants 29.9 31.0 37.4 37.5 5.2 19.3 Privateinvestment(net) Net Longterm borrowing excl IMF -17.0 -8.9 -0.6 1.4 0.4 0.4 Adjustments to scheduleddebt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows Financing Requirements(incl IW -14.2 4.0 -68.2 -27.3 48.9 54.1 of which current account deficit -0.6 12.0 -16.1 -2.2 24.5 36.5 Federated States of Micronesia 100 Annex B ~ ~ ~ ~ ~~~_~~ ~ _ _ _ _ FederatedStates ofMicronesia -Social Indicators Latest single year Same regionfincomegroup East Lower- Asia & middle- 1975-80 i985-90 1997-2003 Pacific income POPULATION Total population, mid-year (millions) 0.07 0.10 0.1 1,854.6 2,655.5 Growth rate (%annual averagefor period) 2.2 1.9 1.o 0.9 Urban population (% of population) 25.0 26.4 29.3 39.1 49.8 Total fertility rate (births per woman) 4.8 3.4 2.1 2.1 POVERTY ("7ofpopulation) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 1,760 2,070 1,070 1,490 Consumer price index (1995=100) Food price index (1995=100) INCOMWCONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) 5.7 1.9 2.7 Education (% of GDP) 7.0 3.2 3.5 Net primary school enrollment rate (% of age group) Total 93 93 Male 93 93 Female 94 93 Access to an improved water source ("7ofpopulation) Total 87 94 78 a2 Urban 93 95 92 94 Rural 85 94 69 71 Immunizationrate ("7of children ages 12-23months) Measles 81 91 82 86 DPT 85 92 86 88 Child malnutrition (% under 5 years) 15 11 Life expectancy at birth (years) Total 63 69 70 69 Male 62 67 68 67 Female 66 71 71 72 Mortality Infant (per 1,000 live births) 26 19 32 31 Under 5 (per 1,000live births) 31 23 41 39 Adult (15-59) Male (per 1,000 population) 316 243 179 213 Female (per 1,000 population) 256 188 122 131 Maternal (modeled,per 100,000 live births) 116 121 Births attended by skilled health staff (%) 93 87 86 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76to ISCED97. Immunization: refers to children ages 12-23months who receivedvaccinations before one year of age. 2005 World DevelopmentIndicators CD-ROM, World Bank Federated States of Micronesia 101 Annex B FederatedStates ofMicronesia -KeyEconomic Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture Industry Services Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS)b Imports (GNFS) Gross domestic savings Gross national savings' Memorandum items Gross domestic product 214 215 218 237 226 (US$million at current prices) GNIper capita (US$,Atlas method) 1910 1820 1840 1980 1990 Real annual growth rates (%, calculated from 1998 prices) Gross domestic product at market prices 8.4 0.3 1.1 5.1 -3.8 0.3 Gross Domestic Income Real annual per capita growth rates (%, calculated from 1998 prices) . - Gross domestic product at market prices 6.6 -1.4 -0.6 2.6 -5.1 Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFS)b 38 39 43 40 40 38 Merchandise FOB 19 22 24 22 20 18 Imports (GNFS)~ 149 156 148 172 184 188 Merchandise FOB 102 111 101 122 133 137 Resource balance -112 -117 -105 -131 -145 -150 Net current transfers 93 97 111 122 107 102 Current account balance 1 -12 16 2 -25 -37 Net private foreign direct investment Long-term loans (net) -17 -9 -1 1 0 0 Official Private Other capital (net. incl. errors & ommissions) Change in reservesd 14 8 52 25 -24 -18 Memorandum items Resource balance (% o f GDP) -52.2 -54.6 -48.1 -55.4 -63.9 Real annual growth rates ( YR98 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) (Continued) Federated States of Micronesia 102 Annex B FederatedStates of Micronesia Key EconomicIndicators - (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market prices)e Current revenues 68.9 64.4 72.4 69.1 52.1 Current expenditures 61.1 59.2 56.4 54.5 53.2 Current account surplus (+) or deficit (-) 7.8 5.2 16.0 14.6 -1.1 Capital expenditure 14.5 14.1 10.0 10.4 5.6 Foreign financing Monetary indicators M2/GDP 50.4 52.6 45.8 42.1 43.1 Growth of M2 (%) -1.0 6.0 -12.0 -3.7 -0.1 Private sector credit growth/ total credit growth (%) Price indices( YW8 =loo) Merchandiseexport price index Merchandise import price index Merchandise terms of trade index Real exchange rate (US$/LCUf Real interest rates Consumer price index (% change) 2.0 1.3 -0.2 -0.2 1.4 GDP deflator (% change) 2.0 1.3 -0.1 -0.3 1.4 a. GDP at factor cost b. "GNFS"denotes "goods andnonfactor services." c. Includesnet unrequitedtransfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidatedcentral government. f. "LCU" denotes "local currencyunits." An increaseinUS$/LCU denotes appreciation. Federated States of Micronesia 103 Annex B FederatedStatesofMicronesia KeyExposureIndicators- Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstandingand 67 58 57 59 59 disbursed(TDO) (US$m)a Net disbursements (US$m)a Total debt service (TDS) (US$m)a Debtanddebt service indicators (%I TDO/XGS~ 103.9 107.0 97.1 100.3 98.8 TDO/GDP 31.2 26.9 26.2 24.1 26.0 TDS/XGS ConcessionaliTDO IBRD exposure indicators(%) IBRD DS/publicDS PreferredcreditorDS/public DS (%)' IBRDDS/XGS IBRD TDO (us$mld Of whichpresent value of guarantees (US$m) Share of IBRDportfolio (%) IDA TDO (us$mld IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includespublic andpublicly guaranteeddebt, privatenonguaranteed, use of IMFcredits and net short- termcapital. b. "XGS" denotes exports of goods and services, includingworkers' remittances. c. Preferredcreditors are defined as IBRD, IDA, the regionalmultilateraldevelopmentbanks, the IMF, and the Bank for InternationalSettlements. d. Includespresent value of guarantees. e. Includesequity andquasi-equity types of bothloanand equity instruments. ANNEX c. Kiribatiat a Glance 4/27/05 East Lower- POVERTYand SOCIAL Asia & mlddle- Klrlbati Pacific Income 3eveiopmentdiamond` 2004 I Population, mid-year (millions) 0.10 1,855 2,655 Life expectancy GNI per capita (Atlas method, US$) 970 1,080 1,480 GNI (Atlas method, US$billions) 0.10 2,011 3,934 Average annual growth, 199844 Population (%) 2.1 1.o 0.9 Labor force (%) 1.I 1.2 3NI Gross Der primary Most recent estimate (latest year available, 199844) :apita nroilment Poverty (% ofpopulationbelownationalpovertyline) II Urban population(% of totalp0pUlatiOn) 49 40 50 Life expectancyat birth (years) 63 69 69 Infant mortality (per 1,000 live births) 49 32 32 Child malnutrition(% of childrenunder5) 15 11 Access to improvedwater source Access to an improvedwater source (% Of population) 64 76 81 illiteracy(% of populationage 1%) 10 10 Gross primaryenrollment (% of school-agepopulation) 131 111 112 -Kiribati Male 130 112 113 Lower-middle-incomegroup Female 132 111 111 KEY ECONOMIC RATIOSand LONG-TERMTRENDS 1984 1994 2003 2004 1 Economic ratios. GDP (US$billions) 0.03 0.04 0.06 0.06 Gross domestic investmenVGDP 48.8 Exportsof goods and services/GDP 39.2 36.9 Trade Grossdomestic savingslGDP -17.7 Gross national savings/GDP T Current account balancelGDP -6.0 -21.6 Domestic InterestpaymentslGDP 0.0 2.5 savings Investment TotaldebVGDP 31.4 41.0 Total debt servicelexports 0.0 2.5 1 Presentvalue of debffGDP i Presentvalue of debtlexports indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannualgrowth) GDP 2.0 4.8 2.5 1.8 .--- Kiribati GDP per capita -0.1 2.3 0.7 0.3 __Lower-middle-incomeorow Exportsof goods and services STRUCTUREof the ECONOMY (77 of GDP) Agriculture 44.3 24.0 Industry 5.7 5.4 Manufacturing 0.5 0.9 Services 50.0 70.5 Privateconsumption 91.3 99 00 01 02 03 M General governmentconsumption 47.1 W G D I iq *GDP Importsof goods and services 105.8 84.9 1984-94 lgg4-04 2003 2004 Growthof exports and imports (n) (averageannualgrowth) Agriculture -5.2 0.4 industry 0.1 17.9 Manufacturing 7.8 6.1 Services 4.1 4.5 Privateconsumption .. 0 ,, , ~ ~ I ~ Generalgovernmentconsumption 99 00 01 02 03 M Gross domestic investment ---Exports &Imports Importsof goods and services Note: 2004data are preliminaryestimates. Group data are for 2003. * The diamondsshow four key indicatorsinthe country (in bold)compared with its income-groupaverage. If data are missing,the diamond will be incomolete. Kiribati 106 Annex C PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domestic prices Inflation (%) (?? change) Consumer prices 5.4 5.3 2.5 2.3 5 Implicit GDP deflator 1.2 3.2 -11.3 -8.1 0 Governmentfinance 5 I ("9 of GDP, includes current grants) - i o Current revenue 48.4 120.8 119.8 -15 1 Current budget balance 0.1 43.8 56.8 Overall surpluddeficit -11.5 21.4 -30.2 -GDP deflator *CPI TRADE 1984 1994 2003 2004 (US5 millions) Exportand Import levels (US$ mlll.) Total exports (fob) 6 45 T Commodity 1 4 40 Commodity2 0 35 Manufactures 30 25 Total imports (cif) 20 Food 15 Fueland energy 10 5 Capital goods 0 Export price index (1995=100) 98 99 00 01 02 03 04 Importprice index (1995=100) Exporis Imports Terms of trade (1995=100) BALANCE of PAYMENTS 1984 1994 2003 2004 (US5 millions) Currentaccount balance to GDP (%) Exportsof goods and services 12 40 7 Importsof goods and services 28 Resourcebalance -16 -77 Net income 9 11 38 Net currenttransfers 26 Current account balance -2 -13 Financingitems (net) 12 14 Changesin net reserves -10 -10 -2 Memo: Reservesincludinggold (US$ millions) 0 0 Conversion rate (DEC,local/US$) 1.1 1.4 1.5 1.4 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$millions) :omposition of 2003 debt (US$ mlll.) Total debt outstandinganddisbursed 9 16 IBRD 0 0 IDA 0 0 Total debt service 0 1 IBRD 0 0 iDA 0 0 Compositionof net resourceflows Official grants a 6 Official creditors 0 0 Privatecreditors 0 0 Foreigndirect investment 0 0 Portfolioequity 0 0 World Bank program Commitments 0 0 A. IBRD E Bilateral - Disbursements 0 0 B. IDA D Other multilateral - F. Private Principalrepayments 0 0 C - IMF G Short-term ~ Net flows 0 0 Interestpayments 0 0 Net transfers 0 0 DevelopmentEconomics 4/27/05 Kiribati 107 Annex C Kiribati- SelectedIndicators Table Base-case(most likelyj projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: MainMacro Aggregates Annual growth rates, calculated from constant 1988price data GDP (mp) per capita -1.4 -0.5 -1.0 0.7 0.3 Total consumption per capita GDP at market prices 1.6 1.8 1.o 2.5 1.8 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investment balances, aspercentage of GDP Gross Domestic investment of which Governmentinvestment Foreignsavings -13.2 -3.4 -7.6 21.6 Gross national savings Governmentsavings 33.9 37.1 62.8 56.8 Non government savings Gross domesticsavings Other GDP inflation -1.3 7.4 7.2 -11.3 -8.1 Annual average exchange rate (LCUNS$) 1.7 1.9 1.8 1.5 1.4 Terms of trade index (YR88 =loo) Index real average exchangerate (YR88 =loo) 100.0 96.3 100.7 108.5 113.1 Incremental capital-output ratio (GDI based) Import elasticity with respect to GDP Money growth Part B: Government Finance Indicators Percentage of GDP Total revenues,of which Tax revenues Total expenditures, of which 109.0 139.3 135.7 150.0 Consumption Deficit(-)ISurplus(t) Financing: Foreign Monetary sector Other domestic Other Total DebVGDPmp Total interestpaymentsflax revenues Part C:Debt & Liquidity Indicators Total DOD and TDS DOD (US$millions) 8.3 4.5 3.9 DOD/ GDPmp ratio 17.1 9.5 7.2 TDS (US$millions) TDS I exports (XGS) ratio Total gross reserves(months'imports G&S) Part D:ExternalFinancing Plan (US$, millions) Official capital grants Private investment(net) Net Long termborrowingexcl IMF Adjustments to scheduleddebt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows Financing Requirements (incl IMF) -20.3 -7.4 -15.6 14.4 of which current account deficit -6.4 -1.6 -4.1 12.6 Kiribati 108 Annex C ~ ~~ Kiribati- SocialIndicators Latest single year Same regionnncome group East Lower- Asia & middle- 1975-80 1985-90 1997-2003 Pacific income POPULATION Total population, mid-year (millions) 0.06 0.07 0.10 1,854.6 2,655.5 Growth rate (%annual average for period) 1.8 2.1 2.4 1.o 0.9 Urban population (% of population) 31.7 34.6 39.5 39.1 49.8 Total fertility rate (births per woman) 4.7 4.0 3.6 2.1 2.1 POVERTY ("hof population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 670 720 860 1,070 1,490 Consumer priceindex (1995=100) Food price index (1995=100) lNCOME/CONSUMPTlONDISTRIBUTION Gini index Lowest quintile (%of incomeor consumption) Highest quintile (%of income or consumption) SOCIAL INDICATORS Publicexpenditure Health(%of GDP) 7.9 1.9 2.7 Education (% of GDP) 3.2 3.5 Net primaryschool enrollmentrate (% of age group) Total 93 93 Male 93 93 Female 94 93 Access to an improvedwater source ("7 of population) Total 48 64 78 82 Urban 76 77 92 94 Rural 33 53 69 71 Immunizationrate ("hof childrenages 12-23months) Measles 75 88 82 86 DPT 43 97 99 86 88 Child malnutrition (% under 5 years) 13 15 11 Life expectancyat birth (years) Total 57 63 70 69 Male 55 60 68 67 Female 59 66 71 72 Mortality Infant (per 1,000 live births) 65 49 32 31 Under 5 (per 1,000 live births) 88 66 41 39 Adult (15-59) Male (per 1,000population) 269 179 213 Female(per 1,000 population) 208 122 131 Maternal (modeled, per 100,000 live births) 116 121 Births attended by skilled health staff (%) 85 87 86 Note: 0 or 0.0 means zero or lessthan half the unit shown. Net enrollmentrate: break in series between 1997and 1998due to change from ISCED76to ISCED97. Immunization:refers to childrenages 12-23monthswho receivedvaccinations before one year of age. 2005 World DevelopmentIndicatorsCD-ROM,World Bank Kiribati 109 Annex C Kiribati-Key Economic Indicators Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture 17 15 14 Industry 10 12 11 Services 73 73 75 Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS)b 27 Imports (GNFS) 67 Gross domestic savings Gross national savings' Memorandum items Gross domestic product 49 47 54 58 62 (US$ million at current prices) GNIper capita (US$, Atlas method) 990 990 900 880 970 Real annual growth rates (a,calculated from 1988prices) Gross domestic product at market prices 1.6 1.8 1.0 2.5 1.8 Gross Domestic Income Real annual per capita growth rates (%, calculated from 1988prices) Gross domestic product at market prices -1.4 -0.5 -1.0 0.7 0.3 Total consumption Private consumption Balance of Payments (US$millions) Exports (GNFS)b MerchandiseFOB 4 5 5 6 Imports (GNFS)~ Merchandise FOB 40 44 52 65 Resource balance Net current transfers 23 26 Current account balance 6 2 4 -13 Netprivate foreign direct investment Long-termloans (net) 0fficia1 Private Other capital(net, incl. errors & ommissions) Change inreservesd 14 6 12 -2 Memorandum items Resource balance (% of GDP) Real annual growth rates ( YR88 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) (Continued) Kiribati 110 Annex C Kiribati-Key EconomicIndkators (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market prices)e Current revenues 128.9 L21.8 135.1 119.8 Current expenditures 94.9 84.7 72.3 63.0 Current account surplus (+) or deficit (-) 33.9 37.1 62.8 56.8 Capital expenditure 14.0 54.6 63.4 87.0 Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth/ total credit growth (%) Price indices( YRSS =loo) Merchandise export price index Merchandise import price index Merchandise terms o f trade index Real exchange rate (US$/LCU)f 100.0 96.3 100.7 108.5 13.1 Real interest rates Consumer price index (% change) 0.4 5.9 3.2 2.5 2.3 GDPdeflator (% change) -1.3 7.4 7.2 -11.3 -8.1 a. GDP at factor cost b. "GNFS" denotes "goods andnonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMFresources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase inUS$/LCUdenotes appreciation. Kiribati 111 Annex C Kiribati KeyExposureIndicators - Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 8 5 4 disbursed (TDO) (US$mIa Net disbursements (US$mla 0 0 0 0 Total debt service (TDS) (US$mIa Debtand debt service indicators (%) TDOIXGS~ TDO/GDP 17.1 9.5 7.2 TDS/XGS ConcessionaVTDO IBRDexposureindicators (%) IBRDDS/public DS Preferred creditor DS/public DS (%)' IBRDDS/XGS IBRD TDO (us$mId Of which present value of guarantees (US$m) Share of IBRDportfolio (%) IDA TDO (us$mId IFC (USSm) Loans Equity and quasi-equity /c MIGA MIGA guarantees(US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMFcredits and net short- termcapital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regionalmultilateral development banks, the IMF,and the Bank for International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. ANNEX D. MarshallIslandsat a Glance 4/28/05 East Lower- POVERTY and SOCIAL Marshall Asia & mlddle- Islands Paclflc Income Development diamond' 2004 Population, mid-year (millions) 0.05 1.855 2,655 Life expectancy GNI per capita (Mas method, US$) 2.680 1,080 1,480 GNI (Atlas method, US$billions) 0.14 2,011 3,934 Average annual growth, 1998-04 Population (%) 1.o 1.o 0.9 Labor force (%) 1.1 1.2 GNi Gross Per primary Most recent estimate (latest year available, 1998-04) capita nrollment Poverty (% of population below national poverty line) Urban population (% of totalpopuiation) 66 40 50 Life expectancy at birth (years) 65 69 69 Infant mortality (per 1,000 live births) I 30 32 32 Child malnutrition (% of children under 5) 15 11 Access to improved water source I Access to an improved water source (% of population) 85 76 81 Illiteracy (% of population age 15+) 10 10 Gross primary enrollment (% of school-age population) 111 112 -Marshall lslands Male 112 113 Lower-middle-incomegroup Female 111 111 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios' GDP (US$ billions) 0.04 0.09 0.10 0.11 Gross domestic investmentlGDP Exports of goods and services/GDP 3.5 Trade Gross domestic savings1GDP Gross national savings1GDP Current account balancelGDP 6.8 21.1 13.2 Domestic Interest payments/GDP savings Investment Total debtlGDP 167.5 Total debt servicelexports Present value of debtlGDP 1 Present value of debtlexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annualgrowth) GDP 5.8 -1.3 2.0 1.5 -Marshall lslands GDP per capita 2.6 -2.3 2.0 0.5 ...... . I nwer-middle-inmma nrniin Exports of goods and services STRUCTURE of the ECONOMY 1964 1994 2003 2004 Growth of Investment and GDP ( O h ) (% of GDP) I Agriculture .. 17.2 Industry .. 14.1 Manufacturing 1.2 Services .. 68.7 Private consumption General government consumption Imports of goods and services 71.7 1984-94 1994-04 2003 2004 IGrowthofexports and imports (%) (average annual growth) Agriculture Industry Manufacturing Services Private consumption General government consumption Gross domestic investment I -Exports +Imports imports of goods and services Note: 2004 data are preliminary estimates. Group data are for 2003 * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Marshall Islands 114 Annex D PRICES and GOVERNMENTFINANCE 1984 1994 2003 2004 Domesticprices lnflatlon (%) (% change) 3 - Consumerprices 5.7 -1.9 1.5 ImplicitGDP deflator 5.3 5.7 -1.9 1.6 Governmentfinance Is',of GDP,includes currentgrants) Current revenue* 75.0 75.4 75.1 Current budget balance 12.2 24.1 11.7 I-sl -GDP ' I O I C P I Overall SurDlusldeficit .13.1 8.8 -3.1 deflator TRADE 1984 1994 2003 2004 (US$ millions) Export and Import levels (US$ mlll.) Total exports(fob) 19 4 Commodity1 70 Commodity2 60 Manufactures 50 Total imports (cif) 68 75 40 Food 30 Fuel and energy 20 10 Capital goods 0 Exportprice index (1995=100) 98 99 00 01 02 03 04 Importprice index (1995=100) Exports Imports Terms of trade (1995=100) BALANCEof PAYMENTS 1984 1994 2003 2004 (US$millions) Current account balanceto GDP (%) Exportsof goods and services 4 35 T Importsof goods and services 75 30 Resourcebalance -51 -55 25 20 Net income 5 33 27 15 Net current transfers 40 43 10 Currentaccount balance 6 22 14 5 0 Financingitems (net) -11 -40 5 Changesin net reserves 5 18 -10 Memo: Reservesincludinggold (US$millions) Conversionrate (DEC, /ocal/US$) 1.o 1 .o 1.o 1.o EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ millions) :omposition of 2003 debt (US$ mill.) Total debt outstandingand disbursed 158 IBRD IDA Total debt service IBRD IDA Compositionof net resourceflows Official grants Official creditors Privatecreditors Foreigndirect investment Portfolioequity World Bank program Commitments 4. IBRD E. Bilateral Disbursements 3 D Other multilateral - F Private - Principalrepayments 2-- IDA IMF G. Short-term Net flows Interestpayments Net transfers DevelopmentEconomics IMFArticle 4, 2004 (fordata in 2003) Marshall Islands 115 Annex D MarshallIslands - Social Indicators Latestsingle year Same regionlincome group East Lower- Asia & middle- 1970-75 1980-85 1997-2003 Pacific income POPULATION Total population,mid-year(millions) 0.03 0.04 0.05 1,654.5 2,655.2 Growth rate (%annual average for period) 2.5 3.5 1.o 1.o 0.9 Urban population(% of population) 60.7 62.0 66.4 39.7 49.7 Total fertility rate (births per woman) 2.1 2.1 POVERTY ("A of population) National headcount index Urban headcountindex Rural headcount index INCOME GNI per capita (US$) 2,710 1,080 1,480 Consumer price index (I995=100) Food price index (1995=100) INCOMWCONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (YOof incomeor consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP)' 5.8 1.9 2.6 Education(% of GDP)' 11.3 3.2 4.0 Social security and welfare (% of GDP) Net primary school enrollment rate ("A of age group) Total 92 91 Male 92 92 Female 92 91 Accessto an improved water source ("A of population) Total 76 61 Urban 93 94 Rural 67 70 Immunization rate ("A of childrenages 12-23months) Measles 80 70 78 DPT 80 78 84 Child malnutrition(% under 5 years) 15 11 Life expectancy at birth (years) Total 65 69 69 Male 63 68 67 Female 66 71 71 Mortality Infant (per 1,000live births)b 30 32 32 Under 5 (per 1,000 live births) 66 42 40 Adult (15-59) Male (per 1,000population) 302 184 214 Female(per 1,000population) 230 129 135 Maternal (modeled,per 100,000live births) Birthsattended by skilled health staff (%) 95 68 Note: 0 or 0.0 means zero or lessthan half the unit shown. Net enrollment rate: break in series between 1997 and 1998due to change from ISCED76to ISCED97. Immunization:refersto children ages 12-23monthswho receivedvaccinations beforeone year of age. World Development Indicators database,August 2004, World Bank a. IMFArticle 4, 2004 b. Republicof Marshall Islands,Ministryof Health Marshall Islands 116 Annex D MarshallIslands - SelectedIndicatorsTable Base-case (most likely) projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: Main Macro Aggregates Annual growth rates, calculated from constant 1990price data GDP (mp) per capita -0.7 -2.6 4.0 2.0 0.5 Total consumption per capita GDP at market prices 0.9 -1.3 4.0 2.0 1.5 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS)" 3.0 3.7 of which Goods 3.0 3.7 Imports (GNFS)' 67.5 75.2 of which Goods 67.5 75.2 Savings-investment balances, as percentage of GDP Gross Domestic investment of which Government investment Foreign savings -26.2 -29.7 .19.9 .21.1 -13.2 Gross national savings Government savings 18.0 29.3 11.1 24.1 11.7 Non government savings Gross domestic savings Other GDP inflation 2.0 2.4 1.6 -1.9 1.6 Annual average exchange rate (LCURTS$) 1.o 1.0 1.o 1.o 1.0 Index real average exchange rate (YR90 =loo) Terms of trade index (YR90 =loo) Incremental capital-output ratio (GDIbased) Import elasticity with respect to GDP 16.9 37.6 Money growth Part B: Government Finance Indicators Percentage of GDP Total revenues, of whichb 75.3 84.6 76.0 75.4 75.1 Tax revenues Total expenditures, of which 66.3 66.9 79.5 66.6 78.2 Consumption Deficit(-)/Surplus(+) 9.1 17.7 -3.5 8.8 -3.1 Financing: Foreign Monetary sector Other domestic -4.4 -19.9 4.0 Other Total DebVGDPmp Total interest paymentsmax revenues Part C: Debt & Liquidity Indicators Total D O D and TDS D O D (US$millions) 68.8 67.0 58.0 D O D / GDPmp ratio 70.1 67.6 55.4 TDS (US$millions) TDS /exports (XGS) ratio Total gross reserves (months' imports G&S) Part D: External Financing Plan (US$, millions) Official capital grants Private investment (net) Net Long term borrowing excl IMF Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 A l l other capital flows Financing Requirements (incl IMF) -30.3 -24.3 -35.0 -39.8 of which current account deficit -25.7 -29.5 -20.8 -22.1 -1 A 2 Note a RMI Abstract b IMF Article 4, 2004 (for data in 2002 and 2003) Marshall Islands 117 Annex D MarshallIslands - KeyEconomicIndicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 LOO Agriculture 11 11 Industry 20 21 Services 69 68 Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS)b 3 4 Imports (GNFS) 64 72 Gross domestic savings Gross national savings' Memorandum items Gross domestic product 98 99 105 105 108 (US$millionat current prices) GNIper capita (US$, Atlas method) 2370 2200 2400 2700 2680 Real annual growth rates (%, calculated from 1990prices) Gross domestic product at market prices 0.9 -1.3 4.0 2.0 1.5 Gross Domestic Income Real annual per capita growth rates (%, calculated from 1990prices) Gross domestic product at market prices -0.7 -2.6 4.0 2.0 0.5 Total consumption Private consumption Balance of Payments (US$ millions) EXPOITS (GNFS)~ 3 4 Merchandise FOB 8 8 Imports (GNFS)~ 68 75 Merchandise FOB 59 61 Resource balance -65 -72 Net current transfers 44 52 40 40 43 Current account balance 26 30 21 22 14 Net private foreign direct investment -15 -22 Long-term loans (net) Official Private Other capital (net, incl. errors & ommissions) Change inreservesd 5 -5 14 18 Memorandum items Resource balance (% o f GDP) -61.6 -68.2 Real annual growth rates ( YR90 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) MarshallIslands 118 Annex D Marshall Islands -Key Economic Indicators (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market prices)e Current revenues 75.3 84.6 76.0 75.4 75.1 Current expenditures 57.3 55.3 64.9 51.4 63.4 Current account surplus (+) or deficit (-) 18.0 29.3 11.1 24.1 11.7 Capital expenditure 9.0 11.6 14.6 15.3 14.8 Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YWO =loo) Merchandise export price index Merchandiseimport price index Merchandiseterms of trade index Real exchangerate (US$/LCU)f Real interest rates Consumer price index (% change) 0.9 1.8 1.7 -1.9 1.5 GDP deflator (% change) 2.0 2.4 1.6 -1.9 1.6 a. GDP at factor cost b. "GNFS" denotes "goods andnonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidatedcentral government. f. "LCU" denotes"local currency units." Anincrease inUS$/LCU denotesappreciation. Marshall Islands 119 -Annex- D MarshallIslands - KeyExposure Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 69 67 58 disbursed (TDO) (US$m)" Net disbursements (US$m)a 0 0 0 0 Total debt service (TDS) (USSm)" Debt and debt service indicators (%) TDOKGS~ TDO/GDP 70.1 67.6 55.4 TDSKGS ConcessionaUTDO IBRDexposure indicators (%) IBRDDS/public DS Preferred creditor DS/public D S (%)' IBRDDSKGS IBRD TDO (us$m)d O f which present value of guarantees (US$m) Share o f IBRDportfolio (%) IDA TDO (us$mld IFC (US$m) Loans Equity and quasi-equity IC MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use o f IMFcredits and net short- term capital. b. "XGS"denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD,IDA, the regional multilateral development banks, the IMF,and the Bank for International Settlements. d. Includes presentvalue of guarantees. e. Includes equity and quasi-equity types o f both loan and equity instruments. ANNEX E. Palauat a Glance 4/27/05 East Upper- POVERTY and SOCIAL Asia & mlddle- Palau Paclflc income Development diamond' 2004 Population, mid-year (millions) 0.02 1,855 335 Life expectancy GNI per capita (Atlas method, US$) 6,870 1,080 5,340 GNI (Atlas method, US$ billions) 0.14 2,011 1,788 T Average annual growth, 1998-04 Population (%) 0.9 1.o 1.2 Labor force (%) 1.1 1.8 SNi Gross Der primary Most recent estimate (latest year available, 1998-04) :apita nrollment Poverty (77of populationbelownationalpovertyline) Urbanpopulation ("7 of total population) 69 40 76 Lifeexpectancyat birth (years) 69 73 I Infant mortality (per 1,000livebirths) 24 32 19 - Child malnutrition(77 of childrenunder5) 15 Access to imDroved water source Access to an improvedwater source (77of population) 79 76 89 Illiteracy (77of populationage 1%) 10 9 Gross primary enrollment (77of school-agepopulation) 111 111 104 Palau Male 113 112 104 Upper-middle-incomegroup Female 109 111 104 KEY ECONOMIC RATIOS and LONG-TERMTRENDS 1984 1994 2003 2004 Economicratlos' GDP (US$biillons) 0.08 0.12 0.13 Gross domestic investmentfGDP Exportsof goods and ServicedGDP 15.1 Trade Gross domestic savings/GDP T Gross national savingslGDP Current account balance/GDP 9.9 -4.3 -17.7 interestpaymentslGDP Total debVGDP Total debt servicelexports Presentvalue of debtfGDP I Presentvalue of debtfexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannualgrowth) GDP 2.0 1.5 2.0 ---Paiau GDP per capita 0.1 1.5 2.0 __Upper-middle-incomegroup Exportsof goods andservices STRUCTURE of the ECONOMY 1984 1994 2003 2004 Growth of investment and GDP (%) ("7 of GDP) 1 Agriculture 8.3 Industry 8.0 Manufacturing 0.9 Services .. 83.7 Private consumption General governmentconsumption Importsof goods and services .. 52.9 1984-94 1994-04 IGrowth (averageannualgrowth) 2003 2004 of exports and Imports (%) I Agriculture Industry Manufacturing Services Privateconsumption General governmentconsumption Gross domestic investment -Exports *Imports Importsof goods and services 1 I Note: 2004 data are preliminary estimates. Group data are for 2003. * The diamondsshow lour key indicators in the country (in bold) compared with its income-groupaverage. If dataare missing,the diamondwill be incomplete. Palau 122 Annex E c PRICESand GOVERNMENT FINANCE 1984 1994 2003 2004 Domesticprices inflation(%) ("9change) 4 T Consumerprices 0.3 0.5 Implicit GDP deflator 2.6 0.3 0.5 Government finance ("9of GDP,includescurrentgrants) Current revenue 59.5 42.1 43.5 Current budget balance 2.8 -5.2 -5.7 I -GDP deflator *CPI I Overall surplusldeficit 0.5 -2.4 -12.4 TRADE 1984 1994 2003 2004 (US$ millions) Export and Importlevels(US$ mill.) Total exports (fob) 13 12 12 I 140 Commodity1 120 Commodity2 100 Manufactures 80 Total imports (cif) 44 100 122 60 Food 40 Fueland energy 20 I I Capital goods 0 Exportprice index (1995=100) 98 99 00 01 02 03 Importprice index (1995=100) Exports Imports Terms of trade (1995=100) O4 BALANCEof PAYMENTS 1984 1994 2003 2004 (US$millions) Currentaccountbalanceto GDP (X) Exportsof goods and services 42 70 75 (20T Importsof goods and services 57 102 124 10 Resourcebalance -15 -33 -50 0 Net income 0 4 3 -10 Net currenttransfers 23 23 24 -20 4 0 Currentaccountbalance 0 -5 -23 -40 Financingitems (net) -8 9 40 -50 Changesin net reserves 0 -3 -17 Memo: Reservesincludinggold (US$millions) Conversionrate (DEC, local/US$) 1.o 1.o 1.o 1.o EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ millions) Compositionof 2003 debt(US$ mill.) Total debt outstandinganddisbursed IBRD IDA Total debt service IBRD IDA Compositionof net resourceflows Official grants Official creditors Privatecreditors Foreigndirect investment Pottfolio equity World Bank program Commitments A - IBRD E Bilateral - Disbursements B IDA - D Other multilateral - F . Private Principalrepayments C IMF ~ G -Short-term Net flows Interestpayments Net transfers DevelopmentEconomics 4/27/05 Palau 123 Annex E Palau- SocialIndicators Latest single year Same regionlincome group East Upper- Asia & middle- 1970-75 1980-85 1997-2003 Pacific income POPULATlON Total population, mid-year (millions) 0.01 0.02 1,854.5 334.9 Growth rate (% annual average for period) 3.1 1.8 1.o 1.2 Urban population (% of population) 62.0 67.7 68.7 39.7 75.8 Total fertility rate (births per woman) 4.0 2.5 2.1 2.4 POVERTY (% of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 7,500 1,080 5,340 Consumer price index (1995=100) Food price index (1995=100) INCOMElCONSUMPTlON DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (% of GDP) 8.5 1.9 3.7 Education (% of GDP) 11.o 3.2 4.4 Social security and welfare (% of GDP) Net primary school enrollment rate ("hof age group) Total 92 93 Male 92 93 Female 92 94 Access to an improved water source (% of population) Total 79 76 Urban 100 93 Rural 20 67 77 Immunization rate ("hof children ages 12-23months) Measles 99 70 94 DPT 99 78 90 Child malnutrition (% under 5 years) 15 Life expectancy at birth (Years) Total 61 70 69 73 Male 59 69 68 70 Female 63 72 71 77 Mortality Infant (per 1,000 live births) 32 24 32 19 Under 5 (per 1,000 live births) 39 29 42 22 Adult (15-59) Male (per 1,000 population) 184 197 Female (per 1,000 population) 129 103 Maternal (modeled, per 100,000 live births) Births attended by skilled health staff (%) 100 68 ~~~ Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months who received vaccinations before one year of age. World Development Indicators database August 2004, World Bank Palau 124 Annex E Palau- SelectedIndicatorsTable UnlRedSurvev Base-case(most likely) projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: MainMacroAggregates Annual growth rates, calculated from constant 1993price data GDP (mp) per capita 0.3 -0.7 1.1 1.5 2.0 Total consumption per capita GDP at market prices 0.3 4.5 1.1 1.5 2.0 Total consumption Private consumption Gross domestic investment (GDI) Grossdom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investment balances, aspercentage of GDP Gross Domestic investment of which Government investment Foreign savings 30.5 6.2 13.9 4.3 17.7 Gross nationalsavings Government savings -18.7 -9.4 -7.3 -5.2 -5.7 Nongovernment savings Gross domestic savings Other GDP inflation 1.4 -1.3 0.4 0.3 0.5 Annual average exchange rate (LCUILTS$) 1.0 1.o 1.o 1.o 1.o Index real averageexchange rate (YR93 =loo) 96.1 103.8 106.8 104.9 Terms of trade index (YR93 =loo) Incremental capital-output ratio (GDIbased) Import elasticity with respectto GDP Money growth Part B: Government Finance Indicators Percentage of GDP Total revenues, of which 52.6 44.5 42.1 52.6 56.4 Tax revenues 19.7 20.2 18.2 18.6 21.0 Total expenditures,of which 68.2 65.3 70.2 55.0 68.7 Consumption 51.3 27.3 44.5 43.6 45.1 Deficit(-)/Surplus(+) -15.6 -20.9 -28.1 -2.4 -12.4 Financing: Foreign Monetary sector Other domestic Other Total DebUGDPmp Total interest paymentsflax revenues Part C:Debt & Liquidity Indicators Total DOD and TDS DOD (US$ millions) 10.0 17.0 32.0 DOD/ GDPmp ratio 8.6 14.2 26.3 TDS (US$ millions) TDS / exports (XGS) ratio Total gross reserves (months' imports G&S) 0.0 0.0 0.0 0.0 Part D:External FinancingPlan (US$,millions) Official capital grants 20.0 22.7 13.8 22.8 26.2 Private investment (net) 2.0 1.o 2.0 1.o 0.1 Net LongtermborrowingexclIMF 18.6 0.0 0.0 -0.6 -1.1 Adjustments to scheduleddebt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows -5.6 8.9 35.1 -14.5 14.6 Financing Requirements(incl IMF) 35.0 32.6 50.9 8.7 39.8 of which current accountdeficit 35.5 7.4 16.9 5.3 22.5 Palau 125 - Annex E Palau- KeyEconomic Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture 4 4 1 Industry 12 13 16 Services 84 83 82 Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS)b 10 15 18 Imports (GNFS) 109 83 88 Gross domestic savings Gross national savings' Memorandum items Gross domestic product 116 120 122 124 127 (US$million at current prices) GNIper capita (US$,Atlas method) 6270 6260 6260 6480 6870 Real annual growth rates (%, calculated from 1993 prices) Gross domestic product at market prices 0.3 4.5 1.1 1.5 2.0 Gross Domestic Income Real annual per capita growth rates (%, calculated from 1993prices) Gross domestic product at market prices 0.3 -0.7 1.1 1.5 2.0 Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFQb 65 77 68 70 75 MerchandiseFOB 12 19 20 12 12 Imports (GNFS)~ 142 111 113 102 124 MerchandiseFOB 127 100 101 94 109 Resourcebalance -77 -34 -45 -33 -50 Net current transfers 36 21 23 23 24 Current account balance -36 -7 -17 -5 -23 Net private foreign direct investment 2 1 2 1 0 Long-term loans (net) 19 0 0 -1 -1 Official Private Other capital (net, incl. errors & ommissions) 14 32 49 8 41 Change inreservesd 0 -25 -34 -3 -17 Memorandum items Resourcebalance (% of GDP) -66.3 -28.5 -37.1 -26.3 -39.0 Real annual growth rates ( YR93 prices) Merchandise exports (FOB) Primary Manufactures Merchandiseimports (CIF) Palau 126 Annex E Palau KeyEconomicIndicators - (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market prices)e Current revenues 43.3 44.5 41.2 42.1 43.5 Current expenditures 62.0 53.9 48.6 47.3 49.2 Current account surplus (t)or deficit (-) -18.7 -9.4 -7.3 -5.2 -5.7 Capital expenditure 6.2 11.4 21.6 7.7 19.5 Foreign financing Monetary indicators M2/GDP Growth of M2 (%) Private sector credit growth / total credit growth (%) Price indices( YR93 =loo) Merchandiseexport price index Merchandise import price index Merchandiseterms of trade index Real exchangerate (US$LCU)f 96.1 103.8 106.8 104.9 Real interest rates Consumer price index (% change) 3.0 -1.3 0.4 0.3 0.5 GDP deflator (% change) 1.4 -1.3 0.4 0.3 0.5 a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includesnet unrequited transfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidatedcentral government. f. "LCU" denotes"local currencyunits."An increaseinUS$/LCU denotesappreciation. Palau -127 -- Annex E Palau KeyExposureIndicators - Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 10 17 32 disbursed (TDO) (US$m)a Net disbursements (US$m)a 0 0 0 0 Total debt service (TDS) (US$m)" Debt and debt service indicators (%I TDO~XGS~ TDO/GDP 8.6 14.2 26.3 TDSiXGS ConcessionaVTDO IBRDexposure indicators (%) IBRDDStpublic DS Preferred creditor DSIpublic D S (%)' IBRDDSiXGS IBRD TDO (us$mId Of which present value of guarantees (US$m) Share o f IBRDportfolio (%) IDA TDO (us$m)d IFC (US$m) Loans Equity and quasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMFcredits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF,and the Bank for InternationalSettlements. d. Includespresentvalue of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. ANNEXF. Samoa at a Glance 4/27/05 East Lower- POVERTY and SOCIAL Asla & mlddle- Samoa Pacific income Development dlamond' 2004 Population, mid-year (millions) 0.18 1,855 2,655 Life expectancy GNI per capita (Atlas method, US$) 1,860 1,080 1,480 GNI (Atlas method, US$ billions) 0.33 2,011 3,934 Average annual growth, 1998-04 T Population (%) 1.o 1.o 0.9 Labor force (%J 1.I 1.2 GNI Gross per primary Most recent estimate (latest year available, 1998-04) capita nrollment Poverty (nof population below nationalpoverty line) Urban population (% of totalpopulation) 23 40 50 Life expectancy at birth (years) 69 69 69 1. Infant mortality (per 1,000live births) 20 32 32 Child malnutrition (% of children under 5) 15 11 Access to imDroved water source Access to an improved water source (% of population) 99 76 81 Illiteracy (% of population age 7 5 ) 1 10 10 Gross primary enrollment (% of school-aqepopulation) 103 111 112 -Samoa Male 105 112 113 Lower-middle-income group Female 101 111 111 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios. GDP (US$ billions) 0.13 0.20 0.32 0.36 Gross domestic investmenffGDP Exports of goods and servicesiGDP 23.5 Trade Gross domestic savingsIGDP Gross national savingsIGDP Current account balanceIGDP -9.4 -9.7 -0.7 -1.3 Interest paymantslGDP 1.o 0.7 0.3 Domestic Investment Total debffGDP 56.2 79.6 115.2 savings Total debt service/exports 9.9 13.0 6.2 Present value of debffGDP I Present value of debffexports indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual growth) GDP 0.3 3.5 -1I) 3.2 -Samoa GDP per capita -0.2 2.6 -2.0 2.6 __Lower-middle-incomegrow Exports of goods and services 8.7 STRUCTURE of the ECONOMY 1984 1994 2003 2004 I Growth ofinvestment and GDP (%) (% of GDP) 1 Agriculture 23.0 13.1 I Industry 28.8 27.0 :"6; Manufacturing 19.6 16.3 16.2 Services ........ 48.1 59.9 59.4 ;1 Private consumption ,, -2 99 00 01 02 w c General government consumption Imports of goods and services -GDI -GDP 1984-94 1994-04 2003 2004 1 (average annual growth) Growth of exports and imports (x) h Agriculture -2.4 -0.6 3.2 60 Industry 3.4 4.5 3.2 40 Manufacturing 2.2 8.5 3.2 Services 5.7 -3.6 3.2 20 Private consumption 0 General government consumption 01 02 03 04 -20 Gross domestic investment I I Imports of goods and services 9.6 -Exports +Imports Note: 2004 data are preliminary estimates. Group data are for 2003. 'The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Samoa 130 Annex F PRICES and GOVERNMENTFINANCE 1984 1994 2003 2004 Domesticprices Inflation(%) (%change) I20 T Consumer prices 11.9 12.0 0.1 16.3 Implicit GDP deflator 15.9 19.2 7.8 3.7 F Governmentfinance (% of GDP, includes currentgrants) Current revenue 35.7 32.1 31.4 99 00 01 02 03 08 Current budget balance 7.9 10.7 11.2 Overall SurDluddeficit -7.6 -0.6 -0.9 -GDP deflator d C P I TRADE 1984 1994 2003 2004 (US$ millions) Total exports (fob) 4 15 160 -r Fish 0 5 140 Coconut Cream 2 1 120 Manufactures 0 6 100 Total imports (cif) 80 137 80 Food EO Fuel and energy 40 20 Capital goods I I 0 Export price index (1995=100) 98 99 00 01 02 03 Import price index (1995=100) E4 Exports Imports O4 Terms of trade (1995=100) BALANCE of PAYMENTS 1984 1994 2003 2004 1 (US$ millions) Currentaccount balance to GDP (X) Exportsof goods and services 27 46 94 0 Importsof goods and services 58 97 159 2 Resourcebalance -31 -51 -65 4 Net income -2 -1 0 6 Net current transfers 20 33 64 E Current account balance -13 -19 -2 -5 -10 Financingitems (net) 18 25 -6 .I2 Changes in net reserves -6 -6 9 Memo: Reservesincludinggold (US$ millions) 11 51 84 96 Conversionrate (DfC, local/US$) 1.9 2.5 3.0 2.8 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 ~ ~~ (US$millions) :omposltlon of 2003 debt (US$ mill.) Total debt outstandinganddisbursed 76 157 366 IBRD 0 0 0 IDA 10 43 58 Total debt service 5 6 10 IBRD 0 0 0 IDA 0 0 1 Compositionof net resourceflows Official grants Official creditors 5 9 1 Private creditors 2 -1 0 Foreigndirect investment Pottfolio equity E: 14 World Bank program Commitments 4. IBRD E Bilateral - Disbursements 1 2 3 3. IDA D. Other multilateral F Private ~ Principal repayments 0 0 1 > * IMF G -Short-term Net flows 1 2 2 Interestpayments 0 0 0 Net transfers 0 1 2 DevelopmentEconomics 4/27/05 Samoa 131 Annex F Samoa Selected Indicators* - ofBankPortfolio Performance &Management As of Date 04/18/05 Indicator 2002 2003 2004 2005 Portfolio Assessment Number of Projects Under Implementationa 2 3 4 4 Average ImplementationPeriod(years) 2.5 2.5 1.5 2.3 Percent of Problem Projects by Number a , c 0.0 0.0 0.0 0.0 Percent of Problem Projects by Amount a r c 0.0 0.0 0.0 0.0 Percent of Projects at Risk by Number a , d 0.0 0.0 0.0 0.0 Percent of Projects at Risk by Amount as 0.0 0.0 0.0 0.0 Disbursement Ratio ( O h )e 17.0 26.3 20.8 25.9 Portfolio Management CPPR during the year (yes/no) Supervision Resources(total US$) Average Supervision(US$/project) Memorandum Item Since FY 80 Last Five FYs Proj Eva1by OED by Number 7 0 Proj Eva1by OED by Amt (US$ millions) 42.1 0.0 % of OED Projects Rated U or HU by Numbei 28.6 0.0 % of OED ProjectsRated U or HU by Amt 17.8 0.0 a. As shown in the Annual Report on Portfolio Performance(exceptfor current FY). b. Average age of projects in the Bank'scountry portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursementsduring the year to the undisbursed balanceof the Bank's portfolio at the beginningof the year: Investmentprojects only. * All indicatorsare for projects active in the Portfolio,with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. Samoa 132 Annex F Samoa - SelectedIndicatorsTable Base-case(most likely)projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: Main Macro Aggregates Annual growth rates, calculatedfrom constant 1994price data GDP (mp) per capita 5.8 5.0 -0.1 -2.0 2.6 Total consumption per capita GDP at m k e t prices 7.0 6.2 1.2 -1.0 3.2 3.2 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) -11.6 8.3 of which Goods Imports (GNFS) -14.1 46.5 of which Goods Savings-inveitmentbalances, aspercentage of GDP Gross Domestic investment of which Government investment Foreign savings 2.6 11.4 7.3 0.7 1.3 Gross nationalsavings Government savings 10.7 11.7 12.1 10.7 11.2 Nongovernment savings Gross domestic savings Other GDP inflation 2.5 3.5 4.9 7.8 3.7 Annual averageexchangerate (LCU/US$) 3.3 3.5 3.4 3.O 2.8 Index real averageexchange rate (YR94 =loo) 100.0 101.7 107.9 105.7 120.1 Terms of trade index (YR94 =loo) Incremental capital-output ratio (GDI based) Import elasticity with respectto GDP Money growth 16.3 6: 1 10.2 14.0 8.3 Part B: GovernmentFinanceIndicators Percentage of GDP Total revenues, of which Tax revenues Total expenditures, of which 33.8 33.8 34.9 32.7 32.3 Consumption Deficit(-)/Surplus(+) Financing: Foreign Monetary sector 0.3 0.2 0.2 1.6 -1.0 Other domestic 0.5 0.7 0.7 0.1 0.9 Other Total DebtIGDPmp Total interest paymentsmaxrevenues Part C: Debt & LiquidityIndicators Total DOD and TDS DOD (US$ millions) 197.4 204.3 234.4 366.0 DOD / GDPmp ratio 85.5 85.2 89.4 115.2 TDS (US$ millions) TDS I exports (XGS) ratio Total gross reserves (months'imports G&S) 5.8 4.5 4.7 6.2 Part D: External FinancingPlan (US$, millions) Official capital grants 16.7 21.0 24.8 21.1 Private investment (net) Net Long term borrowing excl IMF -0.7 0.0 -0.3 -1.0 Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows Financing Requirements(incl IMF) 5.1 30.7 17.9 -6.4 of which current account deficit 6.1 27.5 19.1 2.1 4.7 2.7 0.1 Samoa 133 Annex F Samoa IFC&MIGAProgram - FY 2002-2005 ................................................................................... ........................................................................................................................................ ! i I ' ............................................. ...................................................................................................................................................................... IFC approvals (US$m) '/.......................................... I............................................... I............................................... j. 0.40 0.00 0.00 ~ ...,I................................................ ~ ............................................. ............................................... j j j ............................................................................................................................................................................... Sector (%) i j '! & ................................................................................................ j ........................................................................................................................................................................... Collective Investme 1i................................................ ,.............................................. & ................................................ 100 ;......................................... 1............................................ ~ j Total ' l o o !...............................................0 ' 0 ' 0 ........................................................................................................................... Investmentinstrument(%) I I j I Loans ~ j : j ~ ~ ...................................................................................................................................................... Equity ..... ............................................ 100 i i I ............................................... i................................................ i ............................................... ! ............................................................................................................................................................................. *j............................................ Quasi-Equity .i .......................................... ! .............................................. ........................................................................................................................................................................... *j................................................ i................................................ Other j j ..;ij............................................. !................................................ i............................................... i Total 0 , 01 01 0 MIGA guarantees(US$m) 0.00 , 0.00 , 0.00 Samoa 134 Annex F Samoa -SocialIndicators Latestsingleyear Same regionfincomegroup East Lower- Asla & middle- 1975-80 1985-90 1997-2003 Pacific income POPULATION Total population, mid-year (millions) 0.2 0.2 0.2 1,854.6 2,655.5 Growth rate (% annual average for period) 0.6 0.4 1.o 1.o 0.9 Urban population (%of population) 21.5 21.1 22.8 39.1 49.8 Total fertility rate (births per woman) 4.8 4.0 2.1 2.1 POVERN ("A ofpopulation) National headcountindex Urban headcount index Rural headcountindex INCOME GNI per capita (US$) 1,040 1,440 1,070 1,490 Consumer price index (1995=100) 28 84 131 Food price index (1995=100) INCOME/CONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (%of income or consumption) SOCIAL INDICATORS Public expenditure Health (%of GDP) 4.7 1.9 2.7 Education (%of GDP) 4.8 3.2 3.5 Net primaryschool enrollment rate ("hofagegroup) Total 95 93 93 Male 96 93 93 Female 94 94 93 Access to an improved water source' (% of population) Total 91 88 78 82 Urban 99 91 92 94 Rural 89 88 69 71 Immunizationrate ("hof childrenages 72-23months) Measles 89 99 82 86 DPT 29 90 94 86 88 Child malnutrition (% under 5 years) 2 15 11 Life expectancy at birth (Years) Total 63 66 70 70 69 Male 61 65 67 68 67 Female 64 68 73 71 72 Mortality Infant (per 1,000 live births) 70 33 19 32 31 Under 5 (per 1,000live births) 98 42 24 41 39 Adult (15-59) Male (per 1,000 population) 262 242 179 213 Female (per 1,000population) 202 151 122 131 Maternal (modeled, per 100,000live births) 130 116 121 Births attended by skilledhealth staff (%) 76 100 87 86 ~~ Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997and 1998 due to change from ISCED76to ISCED97. Immunization: refers to children ages 12-23months who received vaccinations before one year of age. 2005 World Development IndicatorsCD-ROM, World Bank Samoa 135 Annex F Samoa - KeyEconomic Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture 17 15 15 13 14 Industry 26 27 26 27 27 Services 57 58 59 60 59 Total Consumption Gross domestic fixed investment Government investment Private investment Exports (GNFS)b 34 35 33 Imports (GNFS) 57 79 76 Gross domestic savings Gross national savings' Memorandum items Gross domestic product 231 240 262 318 364 (US$millionat current prices) GNIper capita (US$,Atlas method) 1390 1410 1390 1540 1860 Real annual growth rates (%, calculated from 1994prices) Gross domestic product at market prices 7.0 6.2 1.2 -1.0 3.2 3.2 Gross Domestic Income 7.0 6.2 Real annual per capita growth rates (%, calculated from 1994prices) Gross domestic product at market prices 5.8 5.0 -0.1 -2.0 2.6 Total consumption Private consumption Balance of Payments (US$ millions) Exports (GNFS)b 73 78 82 94 MerchandiseFOB 14 15 14 15 Imports (GNFS)~ 125 147 154 159 MerchandiseFOB 91 112 125 128 Resourcebalance -52 -68 -72 -65 Net current transfers 43 56 64 Current account balance -6 -27 -19 -2 -5 -3 0 Net private foreign direct investment Long-term loans (net) -1 0 0 -1 Official 3 0 0 1 Private -3 0 0 -2 Other capital (net,incl. errors & ommissions) Change in reservesd 1 -3 1 9 Memorandum items Resourcebalance (% of GDP) -22.3 -28.6 -27.4 -20.6 Real annual growthrates ( YR94 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) Samoa 136 Annex F Samoa KeyEconomicIndicators - (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Publicfinance (as % of GDPat market prices)e Current revenues 33.1 31.5 32.8 32.1 31.4 Current expenditures 22.4 19.7 20.7 21.4 20.2 Current account surplus (+) or deficit (-) 10.7 11.7 12.1 10.7 11.2 Capital expenditure 11.4 14.0 14.2 11.3 12.1 Foreign financing Monetary indicators M2/GDP 38.2 36.9 38.3 40.9 41.4 Growth of M2 (%) 16.3 6.1 10.2 14.0 8.3 Private sector credit growth/ 84.0 100.2 89.6 68.1 157.0 total credit growth (%) Price indices( YW4 =loo) Merchandiseexport price index Merchandiseimport price index Merchandiseterms of trade index Real exchangerate (US$LCU)f 100.0 101.7 107.9 105.7 120.1 Real interest rates Consumer price index (% change) 1.o 3.8 8.1 0.1 16.3 GDP deflator (% change) 2.5 3.5 4.9 7.8 3.7 a. GDP at factor cost b. "GNFS" denotes "goods andnonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increaseinUS$LCUdenotesappreciation. Samoa 137 Annex F Samoa -KeyExposureIndicators Actual CbtlIIliite rrujecteu Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 197 204 234 366 disbursed (TDO) (US$m)a Net disbursements (US$m)a 3 0 -1 1 Total debt service (TDS) (US$m)a Debt and debt service indicators TDO/XGS~ 249.0 251.2 279.1 377.6 TDO/GDP 85.5 85.2 89.4 115.2 TDSKGS ConcessionaUTDO IBRDexposure indicators (%) IBRDDS/public DS 0.0 0.0 0.0 0.0 Preferred creditor DS/public 83.6 89.8 87.5 100.0 DS (%)' IBRDDSKGS 0.0 0.0 0.0 0.0 IBRD TDO (us$mld 0 0 0 0 O f which present value of guarantees (US$m) Share o f IBRDportfolio (%) 0 0 0 0 IDA TDO (us$mId 47 48 51 58 IFC (US$m) Loans Equity andquasi-equity /c MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use o f IMFcredits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD,IDA, the regional multilateral development banks, the IMF, and the Bank for InternationalSettlements. d. Includespresentvalue of guarantees. e. Includes equity and quasi-equity types of both loan and equity instruments. Samoa 138 Annex F d2 n sB c, WJ d 8m Q E Samoa 139 Annex F Samoa Statement ofIFC's Heldand DisbursedPortfolio As of Date 02/28/2005 (InUS Dollars Millions) Held Disbursed FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic PIIFWilex Cocoa 0.27 0 0 0 0.27 0 0 0 Total Portfolio: 0.27 0 0 0 0.27 0 0 0 Approvals PendingCommitment Loan Equity Quasi Partic 2002 PIIF SamoaVCF 0 0.4 0 0 Total PendingCommitment: 0 0.4 0 0 ANNEX G. SolomonIslands at a Glance 4/28/05 I East POVERTY and SOCIAL Solomon Asia & LOW- Islands Paclflc income Ieveiopmenidiamond' 2004 Population. mid-year (millions) 0.47 1,855 2,310 Life expectancy GNI per capita (Atlas method, US$) 550 1,080 450 GNi (Atlas method, US$billions) 0.26 2,011 1.038 Average annual growth, 1998-04 Population (%) 2.8 1.o 1.9 Labor force (%) 2.7 1.1 2.3 SNi Gross Der primary Most recent estimate (latest year availi ,1998-04) capita enrollment Poverty (% of populationbelow nationalpovefiy line) II Urban population (% of tOtalpOpulatiOn) 21 40 30 Life expectancy at birth (years) 69 69 58 Infant mortality (per 7,000live births) 20 32 82 Child malnutrition (% of children under5) 15 44 Access to improved water source Access to an improved water source (% of population) 71 76 75 Illiteracy (% ofpopulation age 1%) 10 39 Gross primary enrollment (% of school-age population) 111 92 -Solomon Islands Male 112 99 Low-income orou~ Female 111 85 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1984 1994 2003 2004 Economic ratios' GDP (US$billions) 0.17 0.30 0.24 0.24 I Gross domestic investmenVGDP 23.0 32.7 35.3 Exports of goods and serviceslGDP 60.2 62.8 40.4 43.2 Trade Gross domestic savings/GDP 19.2 34.2 34.8 Gross national savingslGDP Current account baiance/GDP 0.3 0.4 1.4 5.5 Domestic Interest payments/GDP 0.6 1.o 1.6 Investment Total debffGDP 25.3 52.4 78.7 savings Total debt servicelexports 2.0 9.1 9.4 Presentvalue of debffGDP Presentvalue of debffexports indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual growth) GDP 5.5 -2.3 5.6 3.8 4.4 1 -Solomon -Solomon Islands Islands I GDP per capita 2.3 -5.0 2.4 0.7 Low-income group Exports of goods and services I STRUCTURE of the ECONOMY 1984 1994 2003 2004 ("7 of GDP) Agriculture industry Manufacturing Services -10 -15 Private consumption 57.3 .20 General government consumption 23.5 Imports of goods and services 64.0 85.0 42.6 49.7 1984-94 1994-04 2003 2004 Growth of exports and imports (%) (average annualgrowth) Agriculture industfy Manufacturing Services Private consumption General government consumption 99 00 01 02 03 04 Gross aomestic investment -Exports *lmDOrtS imports of goods and services Note: 2004 data are preliminary estimates. Group data are for 2003. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. if data are missing, the diamond will be incomplete. Solomon Islands 142 Annex G PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domesticprices (% change) Consumerprices 11.o 13.3 10.0 5.8 Implicit GDP deflator 53.8 11.5 4.6 -1.7 Governmentfinance (% of GDP,includes current grants) Current revenue 47.1 25.3 Current budgetbalance 15.6 1.5 4.0 -GDP deflator +CPI Overall surplusldeficit -5.5 -1.2 10.0 I TRADE 1984 1994 2003 2004 (US$ millions) Export and Import levels (US$ mill.) Total exports(fob) 144 74 83 I 140 Timber 81 49 54 Fish 30 12 14 Manufactures Total imports(cif) 142 85 88 Food 20 Fueland energy 15 Capital goods 11 I 99 00 01 03 Exportprice index (f995=700) 98 02 O4 Importprice index (1995=700) I Exports .Imports I1 Terms of trade (f995=700) 7 BALANCE of PAYMENTS 1984 1994 2003 2004 (US$millions) Currentaccount balanceto GDP (%) Exportsof goods and services 103 184 95 104 Importsof goods and services 106 246 101 120 Resourcebalance -4 -62 -5 -16 5 Net income -9 -4 -5 -2 0 Net currenttransfers 13 67 13 31 5 Currentaccount balance 0 1 3 13 .IO Financingitems (net) 0 -4 -22 -44 Changesin net reserves -1 2 18 31 Memo: Reservesincludinggold (US$ millions) 45 17 37 81 Conversionrate (DEC,local/US$) 1.3 3.3 7.5 7.5 EXTERNAL DEBT and RESOURCEFLOWS 1984 1994 2003 2004 (US$ millions) Compositionof 2003 debt (US$ mill.) Total debt outstandingand disbursed 44 155 186 iBRD 0 0 0 IDA 3 22 44 G: 12 Total debt service 2 17 9 IBRD 0 0 0 IDA 0 0 1 Compositionof net resourceflows Official grants Official creditors 6 0 -3 Privatecreditors 5 -3 -3 Foreigndirect investment Portfolioequity World Bank program Commitments A - IBRD E. Bilateral Disbursements 1 2 0 B IDA . D Other multilateral . F . Private Principalrepayments 0 0 1 C IMF G ShoMerm . ~ Net flows 1 2 0 Interestpayments 0 0 0 Net transfers 1 2 -1 DeveloDmentEconomics 4/28/05 Solomon Islands 143 Annex G SolomonIslands Selected Indicators* - ofBankPortfolio Performance &Management As of Date 04/18/2005 x Indicator 1 1 1 1 PortfolioAssessment Number of Projects Under Implementationa 2.48 3.48 4.48 5.28 Average Implementation Period (years) 0.0 100.0 0.0 0.0 Percentof Problem Projectsby Number a,c 0.0 100.0 0.0 0.0 Percent of Problem Projectsby Amount a* 0.0 100.0 0.0 0.0 Percent of Projects at Risk by Number a , d 0.0 100.0 0.0 0.0 Percent of Projects at Risk by Amount 16.2 6.0 16.4 41.2 Disbursement Ratio (%) e 0.0 0.0 0.0 0.0 Portfolio Management CPPR during the year (yesho) Supervision Resources (total US$) Average Supervision (US$/project) Since FY Last Five Memorandum Item 80 FYs Proj Eva1by OED by Number 40.4 24.1 Proj Eva1by OED by Amt (US$ millions) 57.1 100.0 % of OED Projects Rated U or HU by Number 67.9 100.0 % of OED Projects Rated U or HU by Amt 0.0 0.0 a. As shown in the Annual Report on Portfolio Performance (exceptfor current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursementsduring the year to the undisbursed balance of the Bank's portfolio at the * beginning of the year: Investmentprojects only. All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes all active projects as well as projects which exited during the fiscal year. Solomon Islands 144 Annex G Solomon Islands Selected Indicators Table - UnifiedSurvey Base-case (most likely)projection Actual tistimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: Main Macro Aggregates Annual growthrates, calculatedfrom constant1980price data GDP (mp) per capita -16.5 -11.5 -4.3 1.9 0.7 Total consumptionper capita GDP at market prices -14.3 -9.0 -1.6 5.1 3.8 4.2 4.7 Total consumption Private consumption Gross domesticinvestment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investmentbalances, aspercentage of GDP Gross Domestic investment 21.7 23.0 18.1 32.7 35.3 of which Government investment Foreign savings 10.6 12.8 6.6 -1.4 0.6 Gross national savings 11.1 10.2 11.5 34.1 34.7 Government savings -6.1 -11.6 -9.8 1.5 4.0 Nongovernment savings 17.2 21.8 21.3 32.6 30.7 Grossdomestic savings Other GDP inflation 10.7 4.4 12.7 5.O -1.7 Annual average exchangerate (LCU/US$) 5.1 5.3 6.7 7.5 7.5 Index real average exchange rate (YR80 =loo) 100.0 109.2 90.8 78.5 77.4 Terms of trade index (YR80 =loo) Incremental capital-output ratio (GDI based) Import elasticity with respectto GDP Money growth 0.6 -13.6 6.0 25.4 17.5 Part B: Government Finance Indicators Percentage of GDP Total revenues,of which 22.0 23.6 18.9 39.7 48.1 Tax revenues 16.8 14.0 15.5 19.6 21.6 Total expenditures,of which 29.7 36.1 29.7 38.2 44.1 Consumption Deficit(-)/Sqlus(+) -7.7 -12.5 -10.8 1.5 4.0 Financing: Foreign Monetary sector 4.3 6.4 -0.2 -2.3 -9.7 Other domestic 0.2 8.3 8.8 7.3 Other Total DebVGDPmp 23.5 33.2 28.2 26.4 Total interest paymentsmax revenues 18.0 1.5 Part C:Debt & LiquidityIndicators Total DOD and TDS DOD (US$ millions) 155.4 162.6 180.4 185.7 DOD / GDPmp ratio 51.9 59.3 75.9 78.7 TDS (US$ millions) TDS / exports (XGS) ratio Total gross reserves (months'imports G&S) 2.7 1.8 2.5 4.1 7.7 Part D:External Financing Plan (US$, millions) Official capital grants 0.0 0.0 0.0 0.0 0.0 Privateinvestment (net) Net Longterm borrowing exclIMF 7.3 18.3 5.8 12.2 17.6 Adjustments to scheduled debt service 2.7 13.0 2.3 3.4 1.5 0.0 0.0 0.0 All other capital flows FinancingRequirements(incl IMF) 50.7 48.2 16.7 -21.6 -14.6 of which current account deficit 31.7 35.2 15.7 -3.2 1.5 Solomon Islands 145 Annex G Solomon Islands - Social Indicators Latest single year Same regiodincome group East Asia & Low- 1975-80 1985-90 1997-2003 Pacific income POPULATION Total population, mid-year (millions) 0.2 0.3 0.5 1,854.6 2,311.9 Growth rate ("41annual averagefor period) 3.4 3.2 2.8 1.o 1.9 Urban population (% of population) 10.5 14.6 21.4 39.1 30.4 Total fertility rate (births per woman) 7.1 5.9 5.3 2.1 3.7 POVERTY ("A of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 480 730 560 1,070 440 Consumer price index (1995=100) 19 58 203 Food price index (1995=100) INCOME/CONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile ("YO of income or consumption) SOCIAL INDICATORS Public expenditure Health ("hof GDP) 4.5 1.9 1.5 Education (% of GDP) 3.4 3.2 3.2 Net primary school enrollment rate (% of age group) Total 83 93 77 Male 89 93 82 Female 77 94 72 Access to an improved water source ("A of population) Total 70 78 75 Urban 94 92 89 Rural 65 69 70 Immunization rate ("7 of children ages 12-23months) Measles 70 78 82 65 DPT 46 77 71 86 67 Child malnutrition ("hunder 5 years) 21 21 15 44 Life expectancy at birth (years) Total 58 64 70 70 58 Male 57 64 68 68 57 Female 59 65 71 71 59 Mortality Infant (per 1,000 live births) 43 29 19 32 80 Under 5 (per 1,000 live births) 56 36 22 41 123 Adult (15-59) Male (per 1,000 population) 221 179 319 Female (per 1,000population) 154 122 268 Maternal(modeled, per 100,000live births) 130 116 689 Births attended by skilled health staff ("h) 85 87 38 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76to ISCED97. Immunization: refers to children ages 12-23months who receivedvaccinations before one year of age. 2005 World DevelopmentIndicators CD-ROM,World Bank Solomon Islands 146 Annex G Solomon Islands - KeyEconomic Indicators inaicaror LVVV LVVl LVVL LVV3 LVV4 LVV3 LVVD L V V l National accounts (as % of GDP) Gross domestic producta 100 100 100 100 100 100 100 100 Agriculture Industry Services Total Consumption Gross domestic fixed investment 22 23 18 33 35 Government investment Private investment E X P O ~ ~(GNFS)~ S 40 26 31 40 43 Imports (GNFS) 59 44 33 43 50 Gross domestic savings Gross national savings' Memorandum items Gross domestic product 299 274 238 236 242 (US$millionat current prices) GNIper capita (US$, Atlas method) 680 620 560 560 550 Real annual growth rates (%, calculated from 1980prices) Gross domestic product at market prices -14.3 -9.0 -2.4 5.6 3.8 4.2 4.7 Gross Domestic Income Real annual per capita growth rates (%, calculatedfrom 1980prices) Gross domestic product at market prices -16.5 -11.5 -5.0 2.4 0.7 Total consumption Private consumption Balance of Payments (US$ millions) ~xp01-t~ (GNFS)~ 114 72 75 95 104 Merchandise FOB 65 47 58 74 83 Imports (GNFS)~ 132 122 79 101 120 MerchandiseFOB 98 91 62 85 102 Resourcebalance -18 -50 -4 -5 -16 Net current transfers -13 15 -6 13 31 Current account balance -32 -35 -16 3 13 Net private foreign direct investment Long-term loans (net) 7 18 6 12 18 Official 1 17 10 -3 Private 7 2 -4 15 Other capital (net, incl. errors & ommissions) Changeinreservesd 19 -13 -1 18 31 Memorandum items Resourcebalance (% of GDP) -6.1 -18.2 -1.9 -2.2 -6.5 Real annual growthrates ( YR80 prices) Merchandise exports (FOB) Primary Manufactures Merchandise imports (CIF) (Continued) Solomon Islands 147 Annex G Solomon Islands -Key EconomicIndicators (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDPat marketprices)e Current revenues 19.0 15.6 16.7 25.3 30.0 Current expenditures 25.1 27.2 26.5 23.8 26.0 Current account surplus (+) or deficit (-) -6.1 -11.6 -9.8 1.5 4.0 Capital expenditure 4.6 8.9 3.2 15.7 18.1 Foreign financing Monetaryindicators M2/GDP 30.4 27.7 26.4 30.0 34.5 Growth o f M2 (%) 0.6 -13.6 6.0 25.4 17.5 Private sector credit growth / 4.9 -88.3 128.6 2178.6 -14.6 total credit growth (%) Priceindices(YR80 =loo) Merchandise export price index Merchandise import price index Merchandise terms o f trade index Real exchange rate (US$/LCUf 100.0 109.2 90.8 78.5 77.4 Real interest rates Consumer price index (% change) 7.1 6.9 10.2 10.0 5.6 GDP deflator (% change) 10.7 4.4 13.6 4.6 -1.7 ~ ~~ a. GDP at factor cost b. "GNFS" denotes "goods andnonfactor services." c. Includes net unrequited transfers excluding official capital grants. d. Includes use of IMFresources. e. Consolidated central government. f. "LCU" denotes "local currency units." An increase inUS$/LCU denotes appreciation. Solomon Islands 148 Annex G Solomon Islands- KeyExposureIndicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 155 163 180 186 disbursed (TDO) (US$m)" Net disbursements (US$m)a Total debt service (TDS) (US$mIa Debt and debt service indicators (%I TDOKGS~ 128.5 208.5 232.5 187.8 TDO/GDP 51.9 59.3 75.9 78.7 TDSKGS ConcessionabTDO IBRDexposure indicators (%) IBRDDS/public DS Preferred creditor DS/public D S (%)' IBRDDSKGS 0.0 0.0 0.0 0.0 IBRD TDO (us$mId 0 0 0 0 Of which present value o f guarantees (US$m) Share o f IBRDportfolio (%) 0 0 0 0 IDA TDO ws$mId 38 38 41 44 IFC (US$m) Loans Equity and quasi-equity IC MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMFcredits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD,IDA, the regional multilateral development banks, the IMF,and the Bank for InternationalSettlements. d. Includes presentvalue of guarantees. e. Includes equity and quasi-equity types o f both loan and equity instruments. Solomon Islands 149 Annex G c 2 P U ii ANNEXH. Tonga at a Glance 4/27/05 I East Lower- POVERTYand SOCIAL Asia & middle- Tonga Pacific Income Development diamond' 2004 Population,mid-year (millions) 0.10 1,855 2,655 Life expectancy GNI per capita (Atlas method, US$) 1,830 1,080 1,480 GNI (Atlas method, US$ billions) 0.19 2,011 3,934 Average annual growth, 199844 Population (%) 0.5 1.o 0.9 Labor force (%) 1.1 1.2 GNI Gross Per primary Most recent estimate (latest year available, 199844) capita nroilment Poverty (99of populationbelownationalpovertyline) Urbanpopulation (% of totalpopulation) 34 40 50 I Lifeexpectancyat birth (years) 71 69 69 infant mortality (per 1,000livebirths) 15 32 32 Childmalnutrition(99ofchildren under5) 15 11 Accessto improvedwater source Accessto an improvedwater source (% ofpopuiation) 100 76 81 illiteracy(99of populationac7e 15+) 10 10 Gross primaryenrollment p9 ofschool-agepopulation) 112 111 112 -Tonga Male 114 112 113 Lower-middle-incomegroup Female 111 111 111 KEY ECONOMICRATIOS and LONG-TERMTRENDS 1984 1994 2003 2004 Economlcratios. GDP (US$billions) 0.06 0.16 0.17 0.21 Gross domestic investmenVGDP 23.9 21.7 Exportsof goods and services/GDP 26.6 19.9 Trade Gross domesticsavingslGDP -12.4 -12.1 Gross nationalsavings/GDP -9.2 -8.0 Currentaccount balance/GDP 0.3 -11.5 -3.0 3.8 Domestic interest payments/GDP 0.5 0.4 0.5 savings investment Total debVGDP 30.0 36.8 49.8 Total debt service/exports 2.2 4.8 8.2 Presentvalue of debVGDP Presentvalue of debtlexports Indebtedness 1984-94 199444 2003 2004 200448 (averageannualgrowth) GDP 5.0 2.3 2.9 1.6 2.6 ---. Tonga GDP per capita 4.7 1.7 2.5 1.3 __Lower-middle-incomegroup Exportsof goodsand services STRUCTURE of the ECONOMY 1984 1994 2003 2004 Growthof InvestmentandGDP(%) (79ofGDP) 1 Agriculture 37.7 33.1 28.9 28.9 1' 1 Industry 16.3 15.1 15.2 15.2 Manufacturing 6.0 4.6 4.2 4.2 Services 44.9 51.8 55.9 55.9 Privateconsumption 96.6 87.7 99 00 0, 02 03 d4 Generalgovernmentconsumption 15.8 17.7 Importsof goods and services 63.0 53.6 -GDI d G D P i L 1984-94 1994-04 2003 2004 Growthof exportsand Imports(%) (averageannualgrowth) Agriculture 4.3 0.1 3.6 Industry 2.8 4.0 6.4 Manufacturing 3.2 4.8 -5.0 Services 5.8 . 0.7 -32.9 Privateconsumption 4.1 0.7 99 00 01 02 03 04 Generalgovernmentconsumption 7.4 4.0 Gross domestic investment -EXDOT~S +Imports Importsof goods and services Note:2004data are preliminaryestimates. Group data arefor 2003. * The diamonds show four key indicators in the country (in bold) comparedwith its income-groupaverage. If data are missing, the diamondwill be incomplete. Tonga 152 Annex H PRICES and GOVERNMENTFINANCE 1984 1994 2003 2004 Domesticprices ("7change) Consumerprices 0.1 1.o 11.6 11.0 Implicit GDP deflator 6.5 -48.2 9.9 14.2 Governmentfinance ("7of GDP,includes currentgrants) 1 Current revenue 42.6 27.7 25.5 98 00 01 02 03 Currentbudget balance 20.8 2.2 0.4 Overall surplusldeficit 4.7 -3.2 -0.6 -GDP deflator -CPI TRADE 1984 1994 2003 2004 (US$millions) Export and Import levels (US$ mlll.) Total exports (fob) 7 16 18 14 120 Squash 7 5 7 Fish 2 6 100 6 Manufactures 1 80 Total imports(cif) 65 88 101 BO Food 18 40 Fueland energy 9 20 I I Capitalgoods 12 0 Export price index (1995=100) 98 99 00 01 02 03 Import price index (1995=100) Exports Imports Terms of trade (7995=100) O4 BALANCE of PAYMENTS 1984 1994 2003 2004 (US$ millions) Current account balance to GDP (%) Exportsof goods and services 19 33 44 41 10 T Importsof goods and services 44 88 107 115 Resourcebalance -25 -55 -64 -74 Net income 3 3 -2 0 Net currenttransfers 22 34 60 83 Currentaccount balance 0 -18 -5 8 Financingitems (net) 6 -1 6 -9 Changesin net reserves -6 19 -1 1 Memo: Reservesincludinggold (US$ millions) 26 36 43 58 Conversionrate (DEC,local/US$) 1.1 1.3 2.1 2.0 EXTERNAL DEBTand RESOURCE FLOWS 1984 1994 2003 2004 (US$ millions) Composltlon of 2003 debt (US$ mill.) Total debtoutstandingand disbursed 19 59 84 IBRD 0 0 0 IDA 0 5 7 G: 1 6:7 Total debt service 1 3 4 IBRD 0 0 0 IDA 0 0 0 Compositionof net resourceflows Official grants Official creditors 1 6 7 Privatecreditors 0 0 0 Foreigndirect investment Portfolioequity D: 61 I World Bank program Commitments A IBRD E Bilateral Disbursements 0 1 3 B IDA D Other multilateral - F Private -- Principalrepayments 0 0 0 C IMF --- G -Short-term Net flows 0 1 3 Interestpayments 0 0 0 Net transfers 0 1 3 DevelopmentEconomics 4/27/05 Tonga 153 Annex H Tonga SelectedIndicators* - ofBankPortfolio Performance 81Management As of Date 04/18/05 Indicator 1 1 2 2 PortfolioAssessment Numberof Projects Under Implementationa 0.08 1.08 1.515 2.305 Average Implementation Period (years) 0.0 0.0 0.0 0.0 Percentof Problem Projects by Numbera,c 0.0 0.0 0.0 0.0 Percentof Problem Projects by Amount a* 0.0 0.0 0.0 0.0 Percentof Projects at Risk by Numbera,d 0.0 0.0 0.0 0.0 Percentof Projects at Risk by Amount 0.0 34.6 20.2 13.2 Disbursement Ratio (Yo)e 0.0 0.0 0.0 0.0 Portfolio Management CPPR during the year (yes/no) Supervision Resources (total US$) Average Supervision (US$/project) MemorandumItem Since FY 80 Last Five FYs Proj Eva1by OED by Number 4.3 0 Proj Eva1by OED by Amt (US$ millions) 50.0 0.0 % of OED Projects Rated U or HU by Number 52.2 0.0 % of OED Projects Rated U or HU by Amt 0.0 0.0 a. As shown in the Annual Report on Portfolio Performance(exceptfor current FY). b. Average age of projects in the Bank's country portfolio. c. Percentof projects rated U or HU on development objectives (DO) and/or implementation progress ( W d. As defined under the Portfolio Improvement Program. e. Ratio of disbursementsduring the year to the undisbursedbalance of the Bank's portfolio at the * beginningof the year: Investment projects only. All indicatorsare for projects active in the Portfolio,with the exception of Disbursement Ratio, which includes all active projects as well as projectswhich exited during the fiscal year. Tonga 154 Annex H Tonga -Selected Indicators Table UnifiedSurvey Base-case (mostlikely)projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: Main MacroAggregates Annual growth rates, calculatedfrom constant1985pnce data GDP (mp) per capita 5.0 1.3 1.7 2.5 1.3 Total consumption per capita 2.3 GDP at market prices 5.2 1.8 2.1 2.9 1.6 2.8 2.5 Total consumption 2.5 Private consumption 3.3 Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investmentbalances, aspercentage of GDP Gross Domestic investment 21.0 20.3 of which Government investment Foreign savings 5.9 8.9 -5.0 3.O -3.8 Gross nationalsavings 15.1 11.3 Government savings 0.3 2.7 4.0 2.2 0.4 Nongovemment savings 14.8 8.6 Gross domestic savings -10.9 -20.1 Other GDP inflation -0.4 3.9 9.5 9.9 14.2 Annual average exchange rate (LCUNS$) 1.8 2.1 2.2 2.1 2.0 Index real averageexchangerate (YR85 =loo) 100.0 91.6 92.7 91.0 98.9 Terms of trade index (YR85 =loo) Incremental capital-output ratio (GDI based) Import elasticity with respectto GDP Money growth 18.8 14.9 7.8 14.4 13.2 Part B: Government Finance Indicators Percentage of GDP Total revenues, of which Tax revenues Total expenditures,of which 26.8 29.1 31.3 30.9 26.1 Consumption Deficit(-)/Surplus(+) Financing: Foreign Monetary sector 0.6 3.4 -3.0 -4.7 -1.5 Other domestic Other Total DebVGDPmp Total interest payments/Tax revenues Part C: Debt & Liquidity Indicators Total DOD and TDS DOD (US$ millions) 65.6 63.3 73.6 83.9 DOD / GDPmp ratio 42.7 47.1 50.6 49.8 TDS (US$ millions) TDS /exports (XGS) ratio Total gross reserves (months impofis G&S) 4.3 4.0 4.0 4.6 5.9 Part D: External FinancingPlan (US$,millions) Official capital grants Private investment (net) Net Long term borrowing excl IMF 2.4 2.9 7.2 8.1 38.3 Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows Financing Reauirements(incl IMF) - . 13.6 11.9 -13.5 6.4 -9.2 of which current accountdeficit 9.1 12.0 -7.2 5.1 -8.0 Tonga 155 Annex H Tonga -Social Indicators Latestsingle year Same regiodincome group East Lower- Asia & middle- 1975-80 1985-90 1997-2003 Pacific income POPULATION Total population, mid-year (millions) 0.09 0.10 0.10 1,854.6 2,655.5 Growth rate (% annual average for period) 0.9 0.2 0.6 1.o 0.9 Urban population (% of population) 27.0 31.2 33.5 39.1 49.8 Total fertility rate (births per woman) 5.1 4.2 3.4 2.1 2.1 POVERTY (% of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 1,160 1,490 1,070 1,490 Consumer price index (1995=100) 31 81 161 Food price index (1995=100) 34 85 178 INCOMEKONSUMPTION DISTRIBUTION Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (Yoof GDP) 5.1 1.9 2.7 Education (YOof GDP) 4.9 3.2 3.5 Net primaryschool enrollment rate ("A of age group) Total 92 91 93 93 Male 94 93 93 93 Female 90 89 94 93 Access to an Improvedwater source ("hof population) Total 100 100 78 82 Urban 100 100 92 94 Rural 100 100 69 71 Immunization rate (% of children ages 12-23months) Measles 86 99 82 86 DPT 40 94 98 86 88 Child malnutrition (YOunder 5 years) 15 11 Life expectancyat birth (years) Total 69 71 70 69 Male 67 69 68 67 Female 71 74 71 72 Mortality Infant (per 1,000live births) 23 15 32 31 Under 5 (per 1,000 live births) 27 19 41 39 Adult (15-59) Male (per 1,000 population) 260 226 179 213 Female (per 1,000 population) 194 159 122 131 Maternal(modeled, per 100,000live births) 116 121 Births attended by skilled health staff (%) 92 87 86 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997and 1998due to change from ISCED76to ISCED97. Immunization: refers to children ages 12-23months who receivedvaccinations before one year of age. 2005 World Development IndicatorsCD-ROM,World Bank Tonga 156 Annex H Tonga -KeyEconomic Indicators Gross domestic producta 100 100 100 100 100 100 100 IO0 Agriculture 28 27 28 29 29 Industry 16 16 16 15 15 Services 55 57 56 56 56 Total Consumption 111 120 Gross domestic fixed investment 20 19 Government investment Private investment E X P O ~ ~(GNFS)~ S 15 12 Imports (GNFS) 50 57 Gross domestic savings -11 -20 Gross national savings' 17 11 Memorandum items Gross domestic product 153 134 145 169 213 (US$millionat current prices) GNIper capita (US$,Atlas method) 1630 1500 .1430 1510 1830 Real annual growth rates (%, calculated from 1985 prices) Gross domestic product at market prices 5.2 1.8 2.1 2.9 1.6 2.8 2.5 Gross Domestic Income Real annual per capita growth rates (%, calculated from 1985 prices) Gross domestic product at market prices 5.0 1.3 1.7 2.5 1.3 Total consumption 2.3 Private consumption 3.1 Balance of Payments (US$ millions) Exports (GNFS)b 27 22 34 44 41 MerchandiseFOB 10 11 18 18 14 Imports (GNFS)~ 74 75 79 107 115 MerchandiseFOB 58 57 61 76 86 Resourcebalance -46 -54 -45 -64 -74 Net current transfers 38 42 53 60 83 Current account balance -9 -12 7 -5 8 Net private foreign direct investment Long-term loans (net) 2 3 7 8 38 Official 3 1 3 7 Private -1 2 4 1 Other capital (net, incl.errors & ommissions) Change inreservesd -4 0 6 -1 1 Memorandum items Resourcebalance (% of GDP) -30.2 -39.9 -31.0 -37.8 -35.0 Real annual growth rates ( YR85 prices) Merchandiseexports (FOB) Primary Manufactures Merchandiseimports (CIF) (Continued) Tonga 157 Annex H Tonga KeyEconomic Indicators - (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Public finance (as % of GDP at market pricede Current revenues 26.4 21.5 29.8 27.7 25.5 Current expenditures 26.1 24.8 25.8 25.5 25.1 Current account surplus (+) or deficit (-) 0.3 2.7 4.0 2.2 0.4 Capital expenditure 0.7 4.3 5.5 5.4 1.o Foreign financing Monetary indicators M2/GDP 45.3 49.1 41.4 47.9 46.1 Growth of M 2 (%) 18.8 14.9 1.8 14.4 13.2 Private sector credit growth I total credit growth (%) Price indices( YR85 =loo) Merchandiseexport price index Merchandiseimport price index Merchandiseterms of trade index Real exchange rate (US$/LcU)f 100.0 91.6 92.7 91.0 98.9 Real interest rates Consumer price index (% change) 5.9 8.3 10.4 11.6 11.0 GDP deflator (% change) -0.4 3.9 9.5 9.9 14.2 ~~ a. GDP at factor cost b. "GNFS" denotes "goods and nonfactor services." c. Includes net unrequitedtransfers excluding official capital grants. d. Includes useof IMFresources. e. Consolidated central government. f. "LCU" denotes "local currency units."An increaseinUS$/LCU denotes appreciation. Tonga 158 Annex H Tonga -KeyExposureIndicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 66 63 74 84 disbursed (TDO) (US$m)a Net disbursements (US$mla Total debt service (TDS) (US$mIa Debt and debt service indicators (%I TDOKGS~ TDO/GDP 42.7 47.1 50.6 49.8 TDS/XGS ConcessionaVTDO 1,BRDexposure indicators (%) IBRDDS/public DS Preferred creditor DS/public D S (%)' IBRDDS/XGS IBRD TDO (us$mld 0 0 0 0 O f which present value of guarantees (US$m) Share o f IBRDportfolio (%) IDA TDO (us$mId 4 4 4 7 IFC (US$m) Loans Equityand quasi-equity /c MIGA MIGA guarantees(US$m) a. Includes public and publicly guaranteed debt, private nonguaranteed, use o f IMFcredits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD,IDA, the regional multilateral development banks, the IMF,and the Bankfor International Settlements. d. Includes present value of guarantees. e. Includes equity and quasi-equity types o f both loan and equity instruments. Tonga 159 Annex H LL v) I n 6 c, 0 E d# 0 N b 0 0 " 0 0 ANNEX I. Vanuatuat aGlance 4/27/05 East Lower- POVERTYand SOCIAL Asla & middle- Vanuatu Paclfic Income Developmentdlamond' 2004 Population,mid-year (millionsl 0.22 1,855 2,655 Lifeexpectancy GNI per capita (Atlas mefhod, US$) 1,340 1,080 1,480 GNI (Atlas method, US$billions) 0.29 2,011 3,934 Average annual growth, 1998-04 Population (%) 2.4 1 .o 0.9 Labor force (%) 1.1 1.2 3NI Gross per primary Most recent estimate (latest year available, 1996-04) capita enrollment Poverty (77 of populationbelownationalpovertyline) Urban population(77of fOtalpOpulafion) 22 40 50 I Life expectancyat birth (years) 69 69 69 infant mortality(per 1,000livebirths) 31 32 32 Childmalnutrition(% of children under5) 15 11 Access to improvedwater source Access to an improvedwater source (% of popu/afiofl) 88 76 81 illiteracy(% ofpopulafion aae 7.54 10 10 - Grossprimary enrollment (77 of school-agepopulafion) 117 111 112 Vanuatu Male 113 112 113 Lower-middle-incomegroup Female 121 111 111 KEY ECONOMIC RATIOSand LONG-TERMTRENDS 1984 1994 2003 2004 Economicratios* GDP (US$billions) 0.13 0.21 0.28 0.32 Grossdomestic investmenffGDP 20.1 23.8 Exportsof goods and services/GDP 58.2 46.5 Trade Gross domestic savingslGDP 17.1 19.0 Gross national savings/GDP 28.1 18.0 Currentaccount balancelGDP 2.3 -7.2 -8.6 -3.6 InterestpaymentsIGDP 0.1 0.3 0.3 TotaldebffGDP 9.7 21.8 34.3 31.6 Total debt servicelexports 1.4 1.5 1.5 Presentvalue of debffGDP Presentvalue of debffexports Indebtedness 1984-94 1994-04 2003 2004 2004-08 (averageannualgrowth) GDP 2.8 0.3 2.4 3.0 -Vanuatu GDP per capita 0.2 -2.5 0.2 0.7 Exportsof goodsandservices 2.8 STRUCTUREof the ECONOMY 1984 1994 2003 2004 I Growth of investmentand GDP(%) ("k of GDPJ 1 Agriculture 26.6 15.9 15.0 15.0 Industry 7.5 11.8 8.8 8.8 Manufacturing 3.5 4.9 3.6 3.6 Services 66.0 72.3 76.2 76.2 Privateconsumption 53.8 57.3 Generalgovernmentconsumption 30.7 27.4 Importsof goods and services 62.8 55.0 1984-94 1994-04 2003 2004 1 (averageannualgrowth) Growth of exports and imports (Oh) Agriculture -1.1 0.9 6.2 3.0 Industry 4.7 -1.9 -0.3 3.0 Manufacturing 5.3 -4.6 0.7 3.0 Services 3.7 0.4 1.8 3.0 Privateconsumption 1.6 Generalgovernmentconsumption -0.3 Grossdomestic investment 3.2 imports of goodsand services 0.1 ~ ~~~~ ~ Note:2004 data are preliminaryestimates. Group data are for 2003. 'Thediamondsshowfourkeyindicatorsinthecountry(inboidlcomparedwithitsincome-groupaverage.Ifdataaremissing,thediamondwill be incomplete. Vanuatu 162 Annex I PRICES and GOVERNMENT FINANCE 1984 1994 2003 2004 Domestic prices Inflation (%) ("7 change) l5 T Consumer prices 5.5 2.3 3.0 2.8 ImplicitGDP deflator 13.2 2.2 0.6 1.9 Governmentfinance ("A of GDP,includes currentgrants) Current revenue 37.3 20.9 20.9 99 00 01 02 03 04 Current budgetbalance -0.5 1.8 Overallsurplus/deficit -3.0 -1.8 0.9 -GDP deflator *CPI TRADE 1984 1994 2003 2004 (US$millions) Export and Import levels (US$ mill.) Total exports(fob) 25 27 34 I 140 T Copra 8 2 4 120 Cocoa 2 2 1 100 Manufactures 80 Total imports(cif) 89 103 119 BO Food 12 13 27 27 40 Fueland energy 6 15 17 20 I I Capitalgoods 26 21 27 0 Export price index (1995=100) 98 99 00 01 02 03 Importprice index (1995=100) Exports lmporls Terms of trade (1995=100) O4 BALANCEof PAYMENTS 1984 1994 2003 2004 (US$millions) Current account balance to GDP (%) Exports of goods and services 75 103 121 138 I Importsof goodsand services 72 108 141 150 Resource balance 3 -5 -20 -12 Net income -19 -32 -12 -11 Net current transfers 19 22 0 12 Currentaccount balance 3 -15 -24 -11 Financingitems (net) -6 13 19 1 Changes in net reserves 3 2 4 11 Memo: Reservesincludinggold (US$ millions) 8 44 44 62 Conversionrate (DEC, loca//US$) 99.2 116.4 122.2 111.8 EXTERNAL DEBT and RESOURCE FLOWS 1984 1994 2003 2004 (US$ millions) :omposltlonof 2003 debt (US$ mill.) Total debt outstandinganddisbursed 13 47 95 100 IBRD 0 0 0 0 IDA 0 13 14 14 G: 15 E 14 Total debt service 1 2 2 IBRD 0 0 0 IDA 0 0 0 Compositionof net resourceflows Officialgrants Officialcreditors 1 1 -1 Privatecreditors 1 0 0 Foreigndirect investment Porlfolioequity D: 57 World Bank program Commitments A IBRD E Bilateral - Disbursements 0 1 0 B IDA D -Othermultilateral F Private - Principalrepayments 0 0 0 C IMF --- G Short-term ~ Net flows 0 1 0 Interestpayments 0 0 0 Net transfers 0 0 0 DevelopmentEconomics 4/27/05 Vanuatu 163 Annex I Vanuatu-Social Indicators Latest single year Same regionlincome group East Lower- Asia & middle- 1970-75 1980-85 1997-2003 Pacific Income P0PULATlON Total population, mid-year (millions) 0.10 0.13 0.21 1,854.5 2,655.2 Growth rate (% annual average for period) 3.3 2.3 2.7 1.o 0.9 Urban population (% of population) 15.7 18.1 22.9 39.7 49.7 Total fertility rate (births per woman) 6.4 6.0 4.3 2.1 2.1 POVERTY (% of population) National headcount index Urban headcount index Rural headcount index INCOME GNI per capita (US$) 920 1,180 1,080 1,480 Consumer price index (1995=100) 56 118 Food price index (1995=100) 56 109 INCOMEKONSUMPTlON DlSTRlBUT10N Gini index Lowest quintile (% of income or consumption) Highest quintile (% of income or consumption) SOCIAL INDICATORS Public expenditure Health (YOof GDP) 2.2 1.9 2.6 Education (YOof GDP) 10.5 3.2 4.0 Social security and welfare (?/oof GDP) 0.3 Net primary school enrollment rate (% of age group) Total 93 92 91 Male 92 92 92 Female 94 92 91 Access to an Improved water source (% of population) Total 88 76 81 Urban 63 93 94 Rural 94 67 70 Immunization rate (% of children ages 12-23months) Measles 26 44 70 78 DPT 30 54 78 84 Child malnutrition (YOunder 5 years) 20 15 11 Life expectancy at birth (wars) Total 62 69 69 69 Male 60 67 68 67 Female 64 70 71 71 Mortality Infant (per 1,000 live births) 107 77 34 32 32 Under 5 (per 1,000live births) 160 110 42 42 40 Adult (15-59) Male (per 1,000 population) 240 184 214 Female (per 1,000 population) 185 129 135 Maternal (modeled, per 100,000 live births) 130 Births attended by skilled health staff (%) 68 Note: 0 or 0.0 means zero or less than half the unit shown. Net enrollment rate: break in series between 1997 and 1998 due to change from ISCED76to ISCED97. Immunization:refers to children ages 12-23 months who received vaccinations before one year of age. World Development Indicators database August 2004, World Bank Vanuatu 164 Annex I Vanuatu SelectedIndicatorsTable - UnifledSurvey Base-case (most likely) projection Actual Estimate Projection 2000 2001 2002 2003 2004 2005 2006 2007 Part A: MainMacro Aggregates Annual growth rates, calculatedfrom constant1983price data GDP (mp) per capita 0.6 -4.7 -6.9 0.2 0.7 Total consumption per capita GDP at market prices 2.7 -2.7 -4.9 2.4 3.0 2.8 Total consumption Private consumption Gross domestic investment (GDI) Gross dom. fixed investment (GDFI) Exports (GNFS) of which Goods Imports (GNFS) of which Goods Savings-investmentbalances, as percentage of GDP GrossDomestic investment of which Government investment Foreign savings -1.9 -2.0 6.0 8.6 3.6 Gross national savings Government savings 0.6 0.5 0.2 -0.5 1.8 Non govemment savings Gross domestic savings Other GDP inflation 1.2 4.1 0.9 0.6 1.9 8.5 Annual average exchange rate (LCUILIS$) 137.6 145.3 139.2 122.2 111.8 Index real average exchange rate (YR83 =loo) Terms of trade index (YR83 =loo) Incremental capital-output ratio (GDI based) Import elasticity with respectto GDP Money growth 5.4 5.6 -1.7 -0.8 7.8 Part B: Government Finance Indicators Percentage of GDP Total revenues, of which 22.0 21.6 22.3 20.9 20.9 Tax revenues 17.5 17.0 17.6 17.9 17.4 Total expenditures, of which 29.0 25.3 25.7 22.8 20.0 Consumption 17.7 16.9 18.1 17.1 15.7 Deficit(-)/Surplus(+) -7.0 -3.7 -3.5 -1.8 0.9 Financing: Foreign Monetary sector 1.9 -0.6 1.9 -0.6 0.3 Other domestic Other Total DebtlGDPmp Total interest paymentsflax revenues 4.5 4.9 5.5 5.8 5.8 Part C: Debt & LiquidityIndicators Total DOD and TDS DOD (US$millions) 74.5 71.6 90.5 94.8 100.2 DOD / GDPmp ratio 30.5 30.5 38.5 34.3 31.6 TDS (US$ millions) TDS / exports (XGS) ratio Total gross reserves (months imports G&S) 2.6 2.6 3.0 3.0 3.9 Part D:ExternalFinancing Plan (US$, millions) Official capital grants 10.7 11.8 6.1 4.8 6.0 4.2 Private investment (net) 21.0 13.7 7.9 16.7 17.0 17.7 Net Long termborrowing excl IMF -20.1 -15.9 -2.2 -4.6 -6.0 -7.8 Adjustments to scheduled debt service 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All other capital flows -16.7 -11.5 8.8 2.4 -16.4 -5.9 Financing Requirements(incl IMD -5.1 -1.9 20.6 19.3 0.6 8.2 of which current account deficit -4.7 -4.7 14.1 23.6 11.3 14.7 Vanuatu 165 Annex I Vanuatu KeyEconomicIndicators - Gross domesticproducta 100 100 100 100 100 100 100 100 Agriculture 16 15 15 15 15 . .. Industry 9 9 9 9 9 Services 75 76 76 76 76 Total Consumption Gross domesticfixed investment Governmentinvestment Privateinvestment Exports (GNFS)b Imports (GNFS) Gross domesticsavings Grossnational savings' Memorandum items Gross domestic product 245 235 235 276 317 (US$ million at current prices) GNIper capita(US$,Atlas method) 1200 1170 1070 1150 1340 Real annual growth rates (%, calculatedfrom 1983 prices) Gross domesticproduct at market prices 2.7 -2.7 -4.9 2.4 3.0 2.8 Gross Domestic Income Realannualper capita growth rates (%, calculatedfrom 1983prices) Grossdomesticproduct at marketprices 0.6 -4.7 -6.9 0.2 0.7 Total consumption Privateconsumption Balance of Payments (US$ millions) Exports (GNFS)b 157 139 101 121 138 156 MerchandiseFOB 27 20 20 27 34 39 Imports (GNFS)~ 148 151 120 141 150 165 MerchandiseFOB 78 78 75 87 92 105 Resourcebalance 9 -12 -19 -20 -12 -8 Net current transfers 9 21 11 8 12 4 Current account balance 5 5 -14 -24 -11 -15 Net private foreign direct investment 20 18 8 15 16 17 Long-term loans (net) -20 -16 -2 -5 -6 -8 Official 13 2 0 -1 Private -33 -18 -2 -4 Other capital(net, incl. errors & ommissions) -5 -4 15 9 -9 -1 Changeinreservesd 0 -3 -6 4 11 7 Memorandum items Resourcebalance (% of GDP) 3.6 -5.1 -7.9 -7.2 -3.7 Realannual growth rates ( YR83 prices) Merchandiseexports (FOB) Primary Manufactures Merchandiseimports (CIF) Vanuatu 166 Annex I Vanuatu KeyEconomic Indicators - (Continued) Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Publicfinance (as % of GDPat market prices)e Currentrevenues 22.0 21.6 22.3 20.9 20.9 Current expenditures 21.4 21.1 22.1 21.5 19.2 Current account surplus (+) or deficit (-) 0.6 0.5 0.2 -0.5 1.8 Capital expenditure 7.7 4.1 3.6 1.3 0.9 Foreignfinancing Monetary indicators M2/GDP 100.2 104.4 107.0 103.0 105.8 Growth of M2 (%) 5.4 5.6 -1.7 -0.8 7.8 Privatesector credit growth 1 total credit growth (%) Price indices( YR83 =loo) Merchandiseexport price index Merchandiseimport price index Merchandiseterms of trade index Realexchangerate (US$LCU)' Realinterest rates Consumerprice index (% change) 2.5 3.7 2.0 3.0 2.8 GDP deflator (% change) 1.2 4.1 0.9 0.6 1.9 8.5 a. GDP at marketprices b. "GNFS" denotes "goods andnonfactorservices." c. Includes net unrequitedtransfers excluding official capital grants. d. Includesuse of IMFresources. e. Consolidatedcentral government. f. "LCU" denotes "local currencyunits."An increaseinUS$/LCU denotesappreciation. Vanuatu 167 Annex I Vanuatu - KeyExposure Indicators Actual Estimate Projected Indicator 2000 2001 2002 2003 2004 2005 2006 2007 Total debt outstanding and 75 72 91 95 100 disbursed (TDO) (US$m)" Net disbursements (US$m)a Total debt service (TDS) (US$m)" Debt and debt service indicators (a) TDO/XGS~ TDO/GDP 30.5 30.5 38.5 34.3 31.6 TDS/XGS ConcessionaUTDO IBRDexposure indicators (%) IBRDDS/public DS Preferred creditor DS/public DS (%)' IBRDDS/XGS IBRD TDO (Us$m)d 0 0 0 0 0 O f which present value of guarantees (US$m) Share o f IBRDportfolio (%) IDA TDO (us$mId 13 12 13 14 14 IFC (US$m) Loans Equity and quasi-equity IC MIGA MIGA guarantees (US$m) a. Includes public and publicly guaranteeddebt, private nonguaranteed, use of IMFcredits and net short- term capital. b. "XGS" denotes exports of goods and services, including workers' remittances. c. Preferred creditors are defined as IBRD,IDA,the regional multilateral development banks, the IMF,and the Bank for InternationalSettlements. d. Includes presentvalue of guarantees. e. Includes equity and quasi-equity types o f both loan and equity instruments. ANNEX J. Pacific Islands SummaryofNonlendingServices Product Completion FY Audience Objective AAA -Recentcompletions FY Pacific Regional Strategy woo KG, PD, PS Fiji Budget ManagementTA FY04 KG, PD FijiTelecom Sector Assessment FY04 KG, PD, PS Fiji MicrofinanceTAS FY04 KG, PD, PS Palau El NinoTA (Risk Management) FY04 KG, PD, PS Tonga OPR FY03 KG, PD, PS Vanuatu FY04 KG, PD, PS Vanuatu PPIAF: Regulation -- PublicUtilities FY04 KG, PD, PS Solomon Islands - Power Utility Reform FY04 KG, PD, PS RER 2000: Cities, Seas and Storms woo KG, PD, PS Catastrophe Insurance Pilot Study: FY05 KG, PD, PS Summary "Voicesfrom the Village" woo KG, PD, PS Staying Together or Apart (tunamgmt) KG, PD, PS RER2002: Embarkingon a Global Voyage FY02 KG, PD, PS AAA Underway Pacific Islands RER 2004 Human Development Review FY05 KG, PD, PS Pacific Islands Risk Management&Adaptation FY05 KG, PD, PS FijiTelecommunications FY05 KG, PD, PS Pacific Islands FisheryAnalysis FY05 KG, PD, PS Solomon Islands Powersector Review FY05 KG, PD, PS Samoa OPR FY05 KG, PD, PS Vanuatu Education Policy Note - FY05 KG, PD, PS Pacific Islands Migration Study FY06 KG, PD, PS Pacific Islands Telecommunications Reform FY06 KG, PD, PS Solomon Islands Pension Reform: National Provident Fund FY06 KG, PD, PS Solomon Islands Telcomm Sector Reform FY06 KG, PD, PS Pacific Islands PSD Reform FY07 KG, PD, PS AAA Planned Fiji Public Sector ReformTA FY06 KG, PD, PS Pacific Islands Infrastructure FY06 KG, PD, PS Pacific Islands RER2007 FY07 KG, PD, PS Pacific Islands Natural ResourcesMonitoring FY06 KG, PD, PS Pacific Islands Social Sectors SWAP FY06 KG, PD, PS Pacific Islands: Pacific 2020 FY06 KG, PD, PS Solomon Islands LlCUS Trust Fund FY06 KG, PD, PS Tonga InfrastructureCapacity Building FY06 KG, PD, PS Fiji ForestrySector Strategy FY06 KG, PD, PS MicronesiaTax Reform FY06 KG, PD, PS Pacific Islands RenewableEnergy FY06 KG, PD, PS Palau Oil and Gas TA -06 KG, PD, PS Solomon lslands ForestrySector Strategy FY07 KG, PD, PS Solomon Islands Rural Sector Strategy FY06 KG, PD, PS a. Govemment, Donor, Bank, Public Dissemination b. Knowledgegeneration, public debate, problem-solving 140° Northern Mariana Is. (US) 160° 170° 180° 170° 160° 150° Guam (US) MARSHALL ISLANDS PACIFIC OCEAN (MONDAY) (SUNDAY) 10° 10° LINE PALAU Palikir DATE Majuro Palmyra Koror Atoll (US) FEDERATED STATES NORTH PACIFIC OCEAN OF MICRONESIA INTERNATIONAL Tarawa Howland (US) 0° Baker (US) Jarvis (US) 0° NAURU Yaren INDONESIA PAPUA KIRIBATI NEW GUINEA TUVALU SOLOMON ISLANDS Funafuti Tokelau (NZ) Honiara Millenium I. 10° Port Moresby 10° SAMOA Wallis and Apia Futuna Is. (Fr) VANUATU American Cook Samoa (US) Islands (NZ) Port-Vila FIJI TONGA Suva Niue French Polynesia 20° New (NZ) (Fr) 20° Caledonia 'Eua (Fr) TROPIC OF CAPRICORN TROPIC OF CAPRICORN AUSTRALIA SOUTH PACIFIC OCEAN 30° Lord Howe Norfolk (Aus) Kermadec Area of Map (Aus) Islands (NZ) 30° NATIONAL CAPITALS INTERNATIONAL BOUNDARY Canberra This map was produced by the Map Design Unit of The World Bank. NEW IBRD The boundaries, colors, denominations and any other information APRIL shown on this map do not imply, on the part of The World Bank ZEALAND Group, any judgment on the legal status of any territory, or any 33920 40° endorsement or acceptance of such boundaries. 2005 40° 140° 150° 160° 170° 180° 170° 160° 150°