Palau : North Pacific Regional Connectivity Investment Project

Project Name

North Pacific Regional Connectivity Investment Project

Project Number

46382-001

Country / Economy

• Palau

Project Status

Active

Project Type / Modality of Assistance

• Loan

Source of Funding / Amount

Loan 3346-PAL: North Pacific Regional Connectivity Investment Project

Source	Amount
Ordinary capital resources	US$ 16.47 million

Loan 3347-PAL: North Pacific Regional Connectivity Investment Project

Source	Amount
Asian Development Fund	US$ 8.53 million

Strategic Agendas

• Environmentally sustainable growth
• Inclusive economic growth
• Regional integration

Drivers of Change

• Governance and capacity development
• Private sector development

Sector / Subsector

• Information and communication technology / ICT infrastructure

Gender

No gender elements

Description

The North Pacific Regional Connectivity Investment Project is included in the Country Operations Business Plan: Palau, 2014-2016 which was approved by Management on 21 October 2013. The total project cost is estimated at $45.0 million equivalent. ADB will finance $22.5 million comprising $13.97 million from ADB's ordinary capital resources and $8.53 million from Asian Development Funds resources. It does not include a separate project preparatory technical assistance. Therefore, project preparatory activities will be divided between ADB and the World Bank. ADB activities include economic, social, and safeguards assessments and will be covered by TA 8257-REG: Results-Based Strategy and Sector Planning in the Pacific with allocated budget of $325,000 and PARD Staff Consultant inputs.

Project Rationale and Linkage to Country/Regional Strategy

The Republic of Palau has requested Asian Development Bank (ADB) to support a submarine internet cable project. Palau and the Federated States of Micronesia (FSM) have jointly initiated the project to establish broadband internet connectivity to Palau and Yap State, FSM by connecting to the major cable hub of Guam. Both countries have agreed to share the cost of the cable equally. The World Bank has agreed to provide support to FSM for the project. The proposed project will follow the World Bank technical assistance to FSM and Palau to strengthen the regulatory environment of the information and communication technology (ICT) sector.

Palau is an island nation of the Micronesian group of islands in the northern Pacific with a population of roughly 20,000. Palau receives substantial assistance from the United States through the Compact of Free Association. Palau's economy is highly reliant on tourism and services, with tourism accounting for more than 20% of gross domestic product (GDP) and services representing 77%. In FY2013, GDP growth was estimated at 0.2% owing to a sharp decline in tourist arrivals and construction, demonstrating Palau's vulnerability to external shocks. The International Monetary Fund (IMF) has identified economic diversification and private sector development as the key elements required for Palau to increase growth and thus protect its economy from such shocks.

The ICT sector is widely recognized as an enabler of economic growth, social stability and development. Analysis has demonstrated that increased access to ICT, particularly broadband internet services, helps to deliver improved social services such as health and education, as well as banking among others. It brings efficiency and reduces the cost of such services and in turn enables an environment conducive to private sector investments. Moreover ICT sector itself has created significant employment opportunities in many Asian countries.

At present, Palau relies entirely on geo-stationary satellite links for internet connectivity. The high cost and limited international bandwidth restricts internet penetration. Moreover, the technical limitations of capacity and the delay associated with such satellites based connectivity severely limit the quality of the service. As an interim solution Palau and FSM telecom providers have separately contracted for a five-year 150 megabit (MB) per second service from a medium earth orbit satellite broadband service starting end-2014. Once the submarine cable system is operational the satellite system will complement the more reliable cable system providing back-up in case of an interruption.

The proposed project will connect Palau and Yap to the international cable hub at Guam by fiber-optic submarine cable. It will provide a plentiful capacity of higher quality broadband internet at much lower cost to Palau and so make it accessible and affordable to the broader population. The cable with a capacity of multiple terabit per second will more than meet the broadband capacity needs of Palau for the foreseeable future.

The project is expected to enable delivery of improved public services (including online government services, health, and education), strengthen resilience to disasters through improved monitoring and response capabilities, and support regional integration objectives of improved service delivery (in banking, tourism etc.) and trade and communications between Pacific island economies. The lower communication cost will create opportunities for the private sector.

The proposed project is consistent with ADB's country operations business plan 2014-2016 for Palau and Palau's medium-term development strategy, 2009-2014. Prioritized goals of the country operations business plan and Palau's strategy are to: (i) facilitate private sector development, and (ii) improve public sector effectiveness.

Impact

Access to affordable ICT infrastructure has been achieved in Palau

Project Outcome

Description of Outcome

Decrease in cost and increase in quality of internet service.

Progress Toward Outcome

The project has already achieved its goal to provide quality internet service at an affordable price. The retail price has come down significantly with huge jump in the demand. Further improvement of the service is expected as price comes down further as demand grows.

Implementation Progress

Description of Project Outputs

A submarine cable system connecting Palau to the international internet cable hub in Guam established.

Status of Implementation Progress (Outputs, Activities, and Issues)

IRU contract was signed in 2017.The system became operational in end of 2017.BSCC has established standard operating procedure and is fine tuning it as and when needed. BSCC is implementing additional access points to maintain high availability. BSCC engaged Globe Telecom of Philippines for network operation center (NOC) and Docomo Pacific of Guam to provide customer service center.

Geographical Location

Nation-wide

Safeguard Categories

Environment

B

Involuntary Resettlement

C

Indigenous Peoples

C

Summary of Environmental and Social Aspects

Environmental Aspects

No private land acquisition was required. BSCC employed an independent safeguards monitoring consultant to ensure that the preparation, design, construction, implementation, operation, and decommissioning of the Project and all its facilities comply with all applicable laws and regulations of the Borrower relating to environment, health, and safety; the environmental safeguards, and all measures and requirements set forth in the IEE, the EMP and any corrective or preventive actions in the Safeguards Monitoring Report. All bids are compliant with safeguards and environmental plan. All safeguards reports have been uploaded.

Involuntary Resettlement

There was no need for land acquisition.

Indigenous Peoples

The project does not have a potential impact on indigenous peoples.

Stakeholder Communication, Participation, and Consultation

During Project Design

Initial stakeholders were the Office of the President's FSM Telecommunications Corporation, Department of Transport and Communication, telecom operators in Palau.

During Project Implementation

Palau FSM Telecommunications Corporation, Department of Transport and Communication, telecom operators in Palau.

Business Opportunities

Consulting Services

An interim project manager was hired during the early start of the project while the consulting firm contract was being recruited. A consulting firm to act as the project PMU was finally engaged in May 2016.

Procurement

All goods and civil works have already been awarded and completed, with only three contracts remaining expected to be completed in Q4 2023.

Contact

Responsible ADB Officer

Thomason, Kenneth C.

Responsible ADB Department

Sectors Group

Responsible ADB Division

Transport Sector Office (SG-TRA)

Executing Agencies

Ministry of Finance

Timetable

Concept Clearance

13 Aug 2014

Fact Finding

18 Feb 2015 to 27 Feb 2015

MRM

07 Oct 2015

Approval

07 Dec 2015

Last Review Mission

-

Last PDS Update

09 Mar 2023

Funding

Loan 3346-PAL

Loan 3347-PAL