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p. 1 of 29 BACK | NEXT Executive Summary I. Introduction II. Development Challenges III. Key Variables Influencing Development IV. External Assistance V. Review of ADB Assistance and Strategy VI. The New Pacific Strategy

A Pacific Strategy for the New Millennium

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Executive Summary

The Pacific strategy for the new millenium¹ responds to five key development challenges facing the Pacific developing members countries (PDMCs) over the medium term: (i) disappointing macroeconomic and growth performance over the last decade; (ii) increasing poverty, particularly in Papua New Guinea (PNG), Solomon Islands, and Vanuatu; (iii) continuing reliance on large government investments due to inadequate private sector response; (iv) increasing environmental degradation; and (v) little progress in strengthening the role of women in political, economic, and social spheres.

To address these challenges, the strategy examines key variables: (i) vulnerability of the Pacific island economies, because of their remote locations, narrow resource base, susceptibility to natural disasters, and the influence of the global markets; (ii) political instability and good governance; (iii) limited availability of skilled human resources; (iv) the wide range of socio-cultural factors influencing politics and productivity; (v) rising population growth rates; and (vi) inadequacy of physical, technological and financial sector infrastructure necessary to underpin sustainable growth.

In addressing these challenges, the PDMCs continue to obtain strong and coordinated support from Asian Development Bank (ADB) and various other sources of external assistance, particularly Australia, Japan, the United States, New Zealand, the United Kingdom, the European Union, and the multilaterals. Implementation of the 1996 strategy provided a variety of lessons. The most significant are the need (i) for the PDMCs to have stronger ownership of policy reform and investment programs, (ii) to design development interventions taking into account the local culture and local capacities, (iii) to pace and sequence governance and economic reforms to ensure effective institutionalization, and (iv) to use external consultants judiciously without creating dependencies.

The new Pacific strategy focuses on five broad strategic objectives: (i) continuing support for economic management, governance, and public sector reform; (ii) promoting private sector development in the region; (iii) promoting a more active role for women in social, economic, and political spheres; (iv) supporting sustainable environmental management; and (v) supporting poverty reduction as a unifying theme. Supporting objectives include (i) strengthening capacity for governance, economic management, and public services; (ii) improving physical and information technology infrastructure development; (iii) strengthening financial sector management; and (iv) supporting the role of civil society.

A subregional approach will be used to address these objectives underscoring the need to take due account of the differences between various PDMCs. The PDMCs are separated into three categories based on their resource profiles and growth prospects.

1. The Melanesian PDMCs (PNG, Solomon Islands, and Vanuatu) are resource rich, but relatively poor with high population growth rates. The strategy will support a focus on governance, public sector reform, and poverty reduction through investments in the social and infrastructure sectors. The role of women will be particularly supported.

2. The more economically advanced PDMCs (Cook Islands, Federated States of Micronesia, Fiji Islands, Samoa, and Tonga) have a high skill base, moderate resource potential, and relatively low poverty. The strategy will focus on promoting private sector growth through policy reform, and physical and financial sector strengthening.

3. The island atoll PDMCs (Kiribati, Marshall Islands, Nauru, and Tuvalu) are severely disadvantaged by their smallness, isolation, and weak resource base. The strategy will support (a) establishing and expanding trust funds to support the sustainable financing of basic services, and (b) supporting exploitation of niche markets for tourism and sustainable use of marine resources.

The strategy reiterates the importance of regional cooperation to collectively reap the benefits of economies of scale. The Asian Development Bank is currently supporting regional cooperation in fisheries; air transport; regional financial sector restructuring, including addressing money laundering; public sector management; and governance.

The strategy calls for (i) the continued use of program and sector loans to support reform programs in the PDMCs, (ii) project investments on a sector level, and (iii) technical assistance financing, particularly for capacity building and regional cooperation. Performance-based lending will be introduced to make the level of assistance dependent on economic, governance, and portfolio performance. In line with ADB's objective of enhancing the impact of its assistance and its responsiveness to client needs, ADB will review the role of resident missions in the Pacific Region.

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