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Countries and Regions Country Partnership Strategies Document
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Country Strategy and Program Update 2003-2005: Republic of Marshall Islands
V. Country Performance and Lending LevelsA. Lending Level Proposed36. The Government has been advised that the availability of Asian Development Fund (ADF) will be determined using a performance-based allocation system. Thus, the level of ADF funds allocated to the RMI is linked to the country’s performance with respect to policy, institutional reforms, and portfolio management. Accordingly, the proposed base-case, rolling 3- year allocation is fixed at $10.7 million for 2003–2005. The final allocation of ADF resources will depend on performance against agreed-upon parameters (triggers). Overall public sector performance in the RMI has not been good and commitment to reform inconsistent. While the new Government has embraced several wide-ranging reforms, an impact has yet to be achieved. The assessment will depend on success in implementing reforms, especially those reflected in the policy matrix of the FFMP, which will be completed by June 2003. 37. The key areas for improved performance will be (i) public sector financial management; (ii) overall economic policy, and planning direction and implementation; (iii) budget preparation and performance management; (iv) improved transparency and accountability; (v) assessment and collection of taxes/duties; (vi) improved service delivery, especially to outer islands; (vii) improved environment for private sector; and (viii) government responsiveness and commitment to the reform agenda. The lending levels based on evaluation of performance with the corresponding performance-based assessment triggers are given in Appendix 2, Table A2.7. 38. The 2003–2005 pipeline is consistent with the base-to-high case performance scenario and reflects the Government's priorities for improving service delivery to the outer islands. The Government has therefore requested that the OITI Project not slip to 2003 and that the OIBSS Project remain firm for 2004. With limited availability of ADF funds and loan approvals in 2000, 2001, and possibly in 2002, no loans are proposed in 2003 and 2005. The proposed assistance pipeline for lending products is in Appendix 2, Table A2.8, and the project concept papers in Appendix 3. B. Nonlending Program39. The TA associated with the FFMP loan will cover economic planning support, capacity building, and specialized inputs in areas of taxation, private sector development, improving public services, etc., until 2003, and will be supplemented with a TA for enhancing private sector development in 2002. Importance has been given to implementing the medium-term budget framework and increasing effectiveness of the public sector through assistance in 2003. Support to the Private Sector Unit is on standby for 2003 and will be initiated when the Government indicates its full commitment to the transformation of SOEs. The TAs for strengthening economic policy and planning, and for improving economic management and policy formulation are programmed for 2004. TA for economic and sector work and preparation of economic report is on standby for 2004. The assistance pipeline for nonlending products and services is in Appendix 2, Table A2.9. The TA concept papers are in Appendix 4. C. Summary of Changes to the Lending and Nonlending Programs40. The loan pipeline for 2003–2005 is unchanged from the 2001 country programming mission. The OIBSS loan has been more clearly determined through inputs from the education and health ministries, and focuses on effectiveness of service delivery and includes provision for safe water and sanitation. Should the OITI loan slip to 2003, the OIBSS will then be firm for 2005 with its corresponding project preparatory TA in 2004. 41. The TA portfolio has been substantially altered to accommodate the immediate needs of the Government and is consistent with ADB’s assessment and strategy for the RMI. Changes in 2002 include shifting from support of privatization of SOEs, to improving the environment for private sector development and increasing private sector involvement in domestic shipping and air services and tourism-related activities. One TA promotes use of land as collateral and improves access to credit for small and medium businesses, while the other supports private sector involvement in and efficient delivery of air and sea transport services. As a result, the TA to support the Private Sector Unit has been put on standby and the tourism TA delayed to 2005. The microfinance and financial institution development TA planned for 2004 has been dropped. However the Marshall Islands Development Bank component of the TA has been included in the 2002 TA program. The 2004 TA for the strategy and advisory team remains firm and could be cofinanced by the US in an arrangement similar to the earlier TA for the policy advisory team. 42. The proposed pipeline for the RMI for 2003–2005 may have to be changed pending the outcome of the Compact negotiations. The focus sectors for ADB intervention will be determined so they do not duplicate resources provided under the new Compact. The aim will be to catalyze and complement US assistance.
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