Regions and Countries

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p. 4 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Level

Country Strategy and Program Update 2002-2004: Samoa

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IV. Country Performance and Lending Levels

A. Proposed Lending Level

55. Consistent with ADB's new policy on performance-based allocations for Asian Development Fund (ADF) funding, the level of ADF funds allocated to Samoa will be linked to the country's continued performance with respect to policy, institutional reforms, and portfolio management. As a result of its very good performance in macroeconomic management, trade and foreign exchange policies, the financial sector, and environmental protection, Samoa has achieved a relatively high level of sustainable economic growth. Samoa has achieved a relatively high level of human development through a sound, socially inclusive development policy.

56. However, a number of issues require attention. As a result of heavy borrowing in the early 1990s to finance the cyclone rehabilitation efforts, the country's official external debt remains very high at 62 percent of GDP in 2000. While this represents a significant improvement over the 91.8 percent in 1995, highlighting an almost heroic effort from the Government to bring this level to a more manageable level, more sustained effort will be needed in the years to come.

57. The Government could improve the environment for foreign investments by taking a more facilitative approach to them, updating insolvency and company laws, removing price controls, and taking measures to facilitate access land for commercial, industrial, and tourism activities. Attention is also needed with governance of public enterprises and the development of effective regulatory arrangements of monopoly activities, whether public or private.

58. ADB will continue to support the Government's reform measures, which aim to develop an enabling environment for a more private-sector led economy. ADB assistance will continue to aim to (i) help build capacity for sound economic management, (ii) improve living standards and reduce income disparity, and (iii) create an enabling environment for private sector development. More specifically, ADB's program of assistance will address the following key areas: (i) enhancing policy analysis and formulation capabilities of central agencies; (ii) improving quality and accessibility of essential services, particularly education; (iii) establishing sound policy frameworks and support services; and (iv) ensuring adequate physical infrastructure to support private sector growth.

59. The key parameters determining the level of ADF assistance will include continued progress on economic management, and public sector reform. Three scenarios for ADB's lending to Samoa are presented in Appendix 5.

60. For the 2002-2004 period, a total of $23 million of ADB loan has been programmed, including a stand-by loan for the Savaii hydro-power project in 2004. This represents an average of $7.7 million per year (Appendix 6). The project selection briefs are in Appendix 7.

B. Loan Program

61. ADB will maintain its current operational approach in Samoa. The program mix, in terms of lending and TAs, will continue to follow the general strategy described in earlier country assistance plans (CAP). The Government indicated that the sewerage and drainage project for Apia is becoming a major priority in view of the environmental impact of current practices, as well as for private sector development. In view of the magnitude of this project, the Government has asked ADB to play the lead role in a consortium of cofinanciers, which may include the European Union and the World Bank. The project, currently estimated at $15 million (ADB financing is estimated at $8.0 million), has been included in the 2002 firm loan program. A second education project has been included in the program for 2003. In addition to continuing infrastructure rehabilitation of primary and secondary schools being carried out under the first education sector project, the second project will focus on addressing the increasing problems of youth delinquency, crime, alcoholism, drug and substance abuse, and suicide by developing and promoting initiatives designed to engage young Samoans in productive income generating programs.

62. The Government has also requested ADB to consider financing a new hydroelectricity project on the island of Savaii. The Government is pursuing an energy policy to reduce its dependence on imported fossil fuel. The project has been included as a standby project in the 2004 program. This project is expected to cost about $40 million and will require a number of cofinanciers. ADB is expected to play a key role in identifying other agencies to take part in this project.

C. Technical Assistance and Economic and Sector Work Program

63. Capacity building will continue to be an important focus of ADB's TA program in Samoa. The TA concept papers are in Appendix 8. ADB will continue to assist in economic sector planning and management through a TA planned for 2002 (Appendix 9). While the TA will further enhance the Government's capacity for macroeconomic model building and use in policy formulation and implementation process, it will also aim to consolidate and develop line ministries' capacity for sector and project planning, appraisal, implementation, and monitoring. There is a paucity of accurate data and information regarding poverty and equity in Samoa. A small-scale project for a household income survey to assess socio-economic inequality was approved in 2001.¹⁰ This will provide valuable data on the living standards of Samoans.

64. Recent successes in the liberalization of the financial sector and privatization of public enterprises will be complemented through assistance in the development of nonbanking financial institutions, and continued assistance to the privatization efforts of the Government.

D. Summary of Changes

65. There are few changes in the program from the last CAP. ADB will maintain its current operational approach in Samoa. The ADB program of assistance will address the following key area: (i) enhancing policy analysis and formulation capabilities of central agencies; (ii) improving quality and accessibility of essential services, particularly education; (iii) establishing sound policy frameworks and support services; and (iv) ensuring adequate physical infrastructure to support private sector growth.

66. The sewage and drainage project planned for 2002 has been in ADB's program since 1997, albeit with various degrees of priority. In view of alarming deterioration in the urban and coastal environment around Apia, this project is now accorded the highest priority by the Government. The education and youth development project planned for 2003 was brought forward in view of good progress made in the Education Sector Project and the urgent need to address the issues among the youths. The Savaii hydropower project was reintroduced in the ADB program for 2004. This project was in previous CAP but had been postponed in view of more urgent priorities in the education and health sectors.

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