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					                     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


                                                                                                          2
One IFC Strategy
•BEE
•Financial markets
•Infrastructure
•High-potential sectors
  – Tourism
  – Extractive Industries
  – Agribusiness




                            3
Investment Portfolio
•PNG Microfinance
•Digicel PNG
•Bank South Pacific (trade finance facility)
•ECOM PNG
•KULA II




                                               4
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




                                                                                                                     5
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
           •   Credit Bureaus
           •   Secured Transactions
           •   Company Registries
           •   Payments Systems
  –   Microfinance
  –   Mobile Phone Banking
  –   Sustainable energy financing
  –   Investment prospects




                                                                                                  6
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)



                                                                                                   7
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




                                                                                                  8
Timor-Leste

•Challenges
  –   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
  –   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
  –   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


                                                                                                         9
Papua New Guinea
• Challenges
   –   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
   –   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
   –   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




                                                                                                                    10
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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