MANILA, PHILIPPINES - ADB will help boost aviation safety and security in the Pacific, through a loan and technical assistance package approved today totaling US$1.95 million to complete the setting up of a Pacific Aviation Safety Office (PASO).

PASO is a new regional agency that will provide aviation safety and security oversight, inspections, and technical assistance to airlines, airports, and civil aviation authorities of Pacific developing member countries of ADB.

"ADB financing will enable PASO member countries to collectively meet their international obligations for aviation safety and security in the most effective and cost efficient manner," says Robert Guild, an ADB Transport Specialist.

The ADB loan will finance the complete establishment and operational inception of PASO in its new headquarters in Port Vila, Vanuatu. An associated technical assistance (TA) grant will finance regulatory and legislative harmonization and recertification of airlines.

Key features of the new organization are that it will:

• Improve aviation safety and security to the highest international standards
• Harmonize the operating environment across member countries
• Ensure compliance through the Pacific Islands Civil Aviation Safety and Security Treaty
• Reduce costs to governments, airlines, and airport operators
• Become financially self-sustaining through service fees.

"ADB is supporting the project as a new mechanism for regional cooperation, and as a solution to well-known problems of scale and capacity in the Pacific," Mr. Guild adds.

"PASO is the most effective but least costly solution to the Pacific aviation industry's needs and represents a new approach to regional finance, through a loan made directly to an intergovernmental organization."

The project will involve harmonization of aviation safety and security regulations, recertification of airlines, institutionalization of a regional surveillance and inspection system, and physical refurbishment of PASO itself.

The total cost of the project is estimated at $2.1 million, of which the PASO members will contribute $600,000 equivalent.

ADB is providing a $1.5 million loan from its concessional Asian Development Fund. The loan has a 32-year term, including a grace period of eight years. Interest is charged at 1.0% during the grace period and 1.5% subsequently. The governments of Kiribati, Papua New Guinea, Samoa, and Vanuatu have each agreed to guarantee $375,000 of the loan.

A TA grant of $450,000 comes from ADB's Cooperation Fund for Regional Transportation and Financial Security Initiative, funded by the governments of Australia, Japan, and United States. PASO and its members will provide an additional $100,000 in kind toward the TA's total cost.

PASO member countries are Australia, Fiji, Kiribati, New Zealand, Papua New Guinea, Samoa, Solomon Islands, and Vanuatu. PASO is the executing agency for the project, which is due for completion around end-October 2010.