IFC EAP
Pacific
Sub-Regional Strategy
December 2008
Pacific context
•Challenges
• 11 countries, 11 governments, 11 political-economies
• The tyranny of distance: small, isolated, narrowly based economies
– Extractive industries; agriculture; tourism
• The ‘Arc of Instability’: several fragile post-conflict countries
• Limited capacity
• Intensive donor coordination
•Opportunities
• Historically good growth (though expected to slow through current crisis, financial sector is
substantially shielded through presence of well capitalized Australian Banks; oil price fall a boon for
all except PNG and Timor-Leste)
• Discernable improvement in Government competence, and appreciation of private sector
• High aid environment: number one development priority for Australia & New Zealand
• Concrete examples exist of private sector solutions - telecommunications, aviation, power etc
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One IFC Strategy
•BEE
•Financial markets
•Infrastructure
•High-potential sectors
– Tourism
– Extractive Industries
– Agribusiness
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Investment Portfolio
•PNG Microfinance
•Digicel PNG
•Bank South Pacific (trade finance facility)
•ECOM PNG
•KULA II
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Business Enabling Environment
• Challenges
– isolated, narrowly-based & small economies
– Instabilty
• Opportunities
– Pacific getting more attention in IFC due to IDA country focus
– scaling-up and programmatic approach
– more effective program delivery mechanism under WBG banner
• Initiatives
– Broad BEE product coverage – regulatory simplification, investment policy and promotion, Doing Business rapid
response, ADR, Industry Specific BEE
• Regional approach through Pacific BEE Program
• Vanuatu, Tonga, Papua New Guinea and Solomon Islands, suite of four replicable BEE interventions
• A P/P Task Force in each Program country to sustain reforms
• Linkages between BEE program and A2F and Tourism programs through P/P working groups
– Using the Doing Business indicators to diagnose gender specific constraints and introduce reforms
– Examples of other BEE interventions, eg; Timor Leste PPD, PNG Informal Economy project; Gender aspects of
regulation
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Access to Finance
•Challenges
– Low Capacity & small scale
– Multiple donors
•Opportunities
– Regulatory environment little changed since independence - drive for reform
– Finance sector dominated by large multinational institutions - niche for local institutions
– Region-wide telecommunications revolution
•Initiatives
– Financial Markets Infrastructure
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Credit Bureaus
Secured Transactions
Company Registries
Payments Systems
Microfinance
Mobile Phone Banking
Sustainable energy financing
Investment prospects
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Tourism
•Challenges
– Critical sector for many client countries but development impeded by BEE, A2F and
infrastructure constraints, as well as accessibility, instability and local capacity barriers.
– Tourism investment leads exist but most ‘too small’ for IFC and/or need ‘packaging’ support.
•Opportunities
– Investment prospects identified
– Tourism accounts for 20% of GDP and employment in Pacific (world average 10% & 8.3%
respectively)
– Travel demand for Pacific is increasing [1.1m 2004  1.4m 2010]
– Investment prospects
•Initiatives
– Tourism impediments diagnostic program: seven countries (extension to two more under
consideration).
– Tourism reform program (forthcoming)
– WHL ‘Access to Market’ projects in Timor-Leste & Solomon Islands (Samoa, Vanuatu, Fiji
completed)
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Infrastructure
•Challenges
– Limited private sector interest due to:
– Small size of the deals/small economies
– Geographic dispersion and isloation
– Limited natrual resources
•Opportunities
– Newly formed Pacific Region Infrastructure Facility
– Opportunity for IFC to provide inputs on PSP across region; identify potential
infra projects
– Investment prospects
•Initiatives
– Current active mandate ( Air Vanuatu). Process currently on hold.
– Close collaboration with WB & PRIF to achieve intergration with upstream work
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Timor-Leste
•Challenges
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Fragile state
Small economy – high population growth - high (youth) unemployment
Poor doing business (168/178); limited access to finance
Weak institutions; lack of capacities in public and private sector
Budget execution; low administrative capacity
Donor-heavy environment
•Opportunities
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GoTL reform orientation (2008 = “year of reform”)
Natural resources (petroleum fund at $3bn)
Natural assets (tourism industry)
Potential investments by GoTL and private sector (infrastructure/roads; energy; telecom; coffee)
•Strategy
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Field presence 2006, co-located with World Bank
Focus on a few critical areas
Public-Private Dialogue to bring government and PS together, and assist coordination
Policy dialogue (e.g Doing Business): influence and align with National Priorities
BEE (incl. tourism), A2F
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Papua New Guinea
• Challenges
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GDP lags behind population growth; widespread poverty, growing law & order problems
Weak government entities; declining services; failing infrastructure
Economy narrowly based on resource extraction
Resource revenues not effectively contributing to grass roots development
High liquidity among financial insitutions, but A2F remains poor
Opportunities
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Relative political stability, Kina stable
Very rich resource(forestry, fisheries, minerals, oil and gas, tourism)
Good progress on GoPNG/IFC engagement on BEE, infrastructure PPP; already working with Central Bank
Private sector recognises IFC role in brokering public-private dialogue
• Strategy
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Field presence established Jan 2006, co-located with WB
Focus on A2F, BEE and Infrastructure
Leverage investment in A2F and ICT to strenghthen A2F impact
Partner with WB in designing and delivery of Country Assistance Stategy
Collaborate with WB in design/delivery of agriculture dev. program, leveraging IFC agribusiness investment
Scope and pursue investment opportunities in OGM, GMS, Infrastructure, Financial Markets and Agribusiness
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Team priorities
• Global/Local – continue to leverage Hong Kong/D.C expertise in support of Pacific programs and
transactions
• Continue roll-out of ‘new-generation’ AS programs – focus on results
– BEE, A2F, Tourism , CAS
• Finalise and implement ‘Pacific Initiative’
– Expand prospects pool
– Enhance relationships with Australian corporates
– IDA/IFC infrastructure Initiative
• Plan & prepare 2nd stage AS scale-up
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