Utilities Reform Needed for Better Service Delivery in the Pacific — ADB | Asian Development Bank

Utilities Reform Needed for Better Service Delivery in the Pacific — ADB

News from Country Offices | 18 July 2018

MANILA, PHILIPPINES (18 July 2017) — Investments in basic services must be complemented by policy and regulatory reforms as well as capacity development to support a shift towards more commercially viable utilities in the Pacific, says the latest issue of the Asian Development Bank’s (ADB) Pacific Economic Monitor (PEM) launched today.

“It is commendable that Pacific governments are stepping up their infrastructure investments, for example, in renewable energy to help reduce electricity costs and progress towards ambitious international climate change commitments,” said ADB Director General for the Pacific Ms. Carmela Locsin. “These efforts must be complemented by critical reforms to improve the efficiency and performance of utilities responsible for providing basic services in Pacific economies, including the promotion of further private sector participation.”

Economic prospects for the Pacific remain positive, but growth will remain slow compared to other subregions, according to the report. For 2018, growth in the Pacific is expected to remain flat at 2.2%. This is partly due to the impacts of disasters including an earthquake in Papua New Guinea (PNG) and Cyclone Gita in Tonga last February. Economic recovery in PNG and rising investment in Timor-Leste are expected to push growth in the Pacific to 3.0% in 2019.

The monitor, the flagship economic publication of ADB’s Pacific Department, focuses on country issues and current policy themes. The latest issue focuses on the developments in the utilities sector, particularly electricity.

Access to electricity is low in the Pacific, particularly in the more remote and less developed parts of the subregion. This is due to the countries’ dependence on expensive fossil fuels for power generation, inadequate investment in infrastructure, and electricity services costs that can be beyond the means of rural households.

About 20% of PNG’s population, for instance, has access to electricity and that number falls to 13% in rural areas, according to the report. Without access to electricity, public services cannot be properly delivered, and business activity is constrained—resulting in unfulfilled economic growth potential. Although PNG has enviable potential to produce power, significant investment in the sector is needed to reach the country’s goal of 70% electrification by 2030. The monitor looks at how diversifying energy sources can help to lower costs by reducing dependency on expensive diesel, and how improved regulation can help attract much-needed investment and expand consumer access to electricity.

The monitor includes a series of short articles on efforts to improve electricity access in the Solomon Islands and Vanuatu; initiatives to bring innovation and international best practice to Fiji’s electricity sector; renewable energy initiatives in the Cook Islands, Samoa, and Tonga; and strategies for improving energy access in Kiribati, Nauru, and Tuvalu. The report also includes a cautionary piece on cryptocurrencies in the North Pacific, as well as an article discussing measures for increasing competitiveness in Timor-Leste.

Topical policy briefs featured in the monitor, meanwhile, include the state of access to basic utilities and services in the Pacific; a strategy for truly sustainable energy in the Pacific based on efficient and financially viable utility operations; and the importance of institutional reform to improve waters services in Timor-Leste.

ADB is working with development partners to provide greater support to help Pacific utilities modernize their business systems and eventually become financially self-sustaining, and effect change in utility sector policies and governance arrangements. The report noted that long-term partnerships with utilities beyond project implementation is vital to bring about genuine, transformational change.

PEM is a bi-annual review of economic developments and policy issues in ADB’s 14 developing member countries in the Pacific and includes policy briefs on key policy issues and interests. In combination with the Asian Development Outlook series, ADB provides quarterly reports on economic trends and policy developments in the Pacific. The monitor welcomes contributions of policy briefs from external authors and institutions.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.