Country Operations Business Plan. September Maldives

Transcription

1 Country Operations Business Plan September 2012 Maldives

2 CURRENCY EQUIVALENTS (as of 31 August 2012) Currency unit rufiyaa (Rf) Rf1.00 = $ $1.00 = Rf ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund CPS country partnership strategy PPP public private partnership TA technical assistance NOTES (i) (ii) The fiscal year of the government and its agencies ends on 31 December. In this report, $ refers to US dollars.

3 Vice-President X. Zhao, Operations 1 Director General J. Miranda, South Asia Department (SARD) Director S. Bonu, Regional Cooperation and Operations Coordination Division, SARD Team leader Team members H. Huang, Economist, SARD D. Ablett, Social Sector Specialist, SARD F. Ahmed, Principal Result Management Specialist, Strategy and Policy Department N. Bertsch, Financial Sector Specialist, SARD N. Britton, Principal Disaster Risk Development Specialist, Regional and Sustainable Development Department (RSDD) A. P. Chiang, Transport Specialist, SARD H. Ear-Dupuy, Social Development Specialist (Civil Society and Participation), RSDD L. George, Energy Specialist, SARD J. Hall, Senior Investment Specialist, Private Sector Operations Department (PSOD) L. Holganza, Senior Financial Control Officer, Controller s Department (CTL) H. Hong, Senior Financing Partnerships Specialist, Office of Cofinancing Operation M. Lemoine, Investment Specialist, PSOD F. Matthew, Financial Control Specialist, CTL H. Mukhopadhyay, Public Management Economist, SARD S. Muramoto, Principal Portfolio Management Specialist, SARD K. Y. Nam, Senior Economist, Economic Research Department T. Niazi, Principal Public Management Specialist, RSDD R. V. Peri, Principal Public-Private Partnership Specialist, SARD D. N. T. Pham, Financial Control Specialist, CTL C. Santiago, Procurement Specialist, Central Operations Services Office S. Shakil, Social Sector Specialist, SARD D. Taneja, Treasury Specialist, Treasury Department Y. Tatewaki, Financial Control Specialist, CTL A. Tayyab, Principal Portfolio Management Specialist, SARD F. Tornieri, Senior Social Development Specialist (Gender and Development), SARD J. Tsunoda, Principal Portfolio Management Specialist, SARD J. Versantvoort, Senior Counsel, Office of the General Counsel G. Wignaraja, Principal Economist, Office of Regional Economic Integration J. Zheng, Urban Development Specialist, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 CONTENTS Page I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE PARAMETERS 1 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 1 APPENDIXES 1. Updated Country Partnership Strategy Results Framework 3 2. Indicative Assistance Pipeline 5 Table A2.1: Lending Products, Table A2.2: Nonlending Products and Services, Assistance Program for Table A3.1: Lending Products and Services, Table A3.2: Nonlending Products and Services,

5 I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1. Since the country partnership strategy (CPS), , the Asian Development Bank (ADB) has taken a sequential approach to the provision of ADB support to the Maldives. ADB first concentrated on providing much-needed capacity development assistance, after which it was to move to the second phase of assistance, i.e., resumption of investment lending. The country's readiness had to be secured by meeting certain criteria to resume investment lending, such as (i) reduction in the government s ratio of external debt to gross domestic product, to be used as evidence of progress made in fiscal consolidation and sound debt management; (ii) increase in the ratio of disbursements to outstanding commitments of ADB assistance; and (iii) progress made in developing a medium-term fiscal framework, to ensure that new public investment is prioritized and can be realistically financed. In 2011, ADB developed an interim CPS for and thus moved to the second phase of assistance, the resumption of investment lending. 2. Maldives is a small, and open island economy. It has an established reputation as a highquality destination of tourism. Tourism sector directly accounts for about 30% of total gross domestic product (GDP). The susceptibility of the economy to external factors was exacerbated the devastation brought about by December 2004 tsunami and decline in tourism following the 2008 global financial crisis. With assistance from IMF, World Bank and ADB, the economy has shown recovery with average yearly growth of 6.3% during the past five years, on account of a vibrant tourism industry and related sectors such as construction, transport, and communications. However, the fiscal and current account deficits have been persistently high during recent years. Prospects of growth for the tourism sector remain strong in the medium-term, although it has been affected by the political unrests in early 2012 and the weakening of the European economies. The long term sustainability of the growth will be highly dependent on the Government s efforts of rebalancing the economy by fiscal consolidation and currency stabilization, diversifying the economy from overdependence on tourism, and boosting regional connectivity, and population consolidation in order to achieve economies of scale. 3. The interim CPS provides a strategic direction for ADB s future operations in the Maldives, even if it does not cover the whole programming period of It focuses on developing small and medium-sized enterprises, and the energy and transport sectors, and on key thematic priorities of private sector development and capacity development for policy reform and project implementation. The interim CPS will also support interventions in human resource development for key government agencies. II. INDICATIVE RESOURCE PARAMETERS 4. For planning purposes, the indicative Asian Development Fund (ADF) resource envelope for ADB's sovereign lending program for the Maldives during totals $18 million. The biennial allocation of ADF resources for will be determined according to the outcomes of the performance-based allocation exercise at the end of Actual allocation will depend on the availability of ADF resources and will be subject to the annual review of the debt-distress classification. III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 5. Lending program. The Renewable Energy Project linked to the Scaling Up Renewable Energy Program in Low-Income Countries (SREP) proposed in the pipeline for 2013, is estimated at $6 million from ADB resources, with cofinancing expected from the Islamic Development Bank and SREP. Strengthening Education for Youth Development Project (estimated at $6 million) is planned for Transport Development Project, proposed for 2015, will boost national and regional connectivity, with a targeted amount of $18 million, of which $6 million will be from the country s

6 2 resource envelope and remainder will be sought through ADF Subregional Pool Allocation 1. ADB and the government have also discussed possibility of including provisions for public private partnership (PPP) in this project. 6. Nonlending program. There are two technical assistance (TA) projects in the 2013 pipeline. A combination of the policy and advisory technical assistance (PATA) and project preparatory technical assistance (PPTA) is planned to prepare and support the 2014 lending project: Strengthening Education for Youth Development Project. The other PPTA is proposed for preparing the Transport Project, which is in the lending program for In the 2014 pipeline, Capacity Development for Education Development Project Implementation, a capacity development technical assistance (CDTA), will support the 2014 lending project. A PPTA is reserved for preparation of the 2016 lending project. Likewise in the 2015 pipeline, a CDTA is planned to support the implementation of the 2015 lending project, and a PPTA is also reserved for preparation of the 2017 lending project. 7. The infrastructure requirements of the Maldives are substantial, yet the Government s ability to fund these investments out of the national budget or government borrowings is limited. The government would thus need to catalyze and leverage private sector investments to fund specific projects. Some of the iconic PPP projects discussed include Thilafushi port, Gan airport, and a bridge connection between Malé and Hulu Malé. In addition, the government is interested in exploring PPP in technical and vocational education and training, industrial development, and diversification of the economic base. These developments need a clear framework, policy, and legal structure for attracting and sustaining private investments. To enable private sector development and PPPs, ADB and the government will examine the need and timing for development partner funding in form of TA grants to develop such frameworks and policies. ADB will also assist the government, as needed, in structuring projects and syndicating funds for specific projects. 8. ADB is looking at the possibility of increasing the volume of its non-sovereign operations in the country operations business plan period. The interventions will focus on priority areas, particularly on clean energy and small and medium-sized enterprise finance. Investments in other areas, such as education and food processing, will be examined on a case-by-case basis. It must be noted, however, that the lack of effective convertibility of the rufiyaa and the country's weak sovereign rating remain deterrents to private investments and ADB's non-sovereign operations. 1 The ADF Subregional Pool Allocation represents the 10% of the ADF allocation earmarked for subregional projects.

7 Appendix 1 3 UPDATE OF COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK (President s approval of the interim country partnership strategy, on December 2011) COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK Country Development Goals 1. Good governance 2. Social justice 3. Economic development 4. Other areas Sectors Selected for ADB Support Government's Sector Objectives Sector Outcomes that ADB Contributes to and Indicators ADB Areas of Intervention 1. Energy (2020 Core Area 1: Infrastructure, Core Area 2: Environment) 1. Reliable, affordable, and Reduced emissions from sustainable energy supply to all the energy sector in the citizens as a basic right Maldives. Indicators: 2. Promotion of renewable energy technology applications, energy efficiency and energy conservation, and greater energy security of the country 3. Protection of the environment and people's health from hazardous effects of energy production 4. Reduction of greenhouse gas emissions Up to 80% reduction in electricity sector emissions by 2020 through renewable energy and energy efficiency measures targeted (2009 baseline: 0.9 kilograms of carbon dioxide/kilowatt-hour) Transformational program for sustainable energy development to reduce diesel usage for electricity supply up to 70% in outer islands (compared to 2012 baseline) initiated by Increased private sector investment in renewable energy through tariff mechanisms, infrastructure support. Renewable energy, energy efficiency and conservation, and energy sector development ADB Indicative Resource Allocation in the Next Pipeline and Thematic Priorities $6 million in COBP, with additional cofinancing from IDB ($10 million) and SREP funds routed through ADB (amount to be determined), of which: ENV 100% 2. Human Skills Development (2020 Core Area 5: Education) 1. Stronger employment and social participation opportunities for Maldivian youths 2. Better education with focus on life skills and employmentlinked outcomes, with consideration for gender 3. More opportunities for employment and more activities for Maldivians in the tourism sector Strengthened TVET (including National Vocational Qualification, and employer-based apprenticeships) delivery Expanded career guidance starting at secondary education level Revised and improved secondary education curriculum to better align it with employment outcomes and transition to National Vocational Framework. Strengthened TVET system and support for general education $6 million (in 2014) during COBP, of which: SOD 100% Expanded programs for

8 4 Appendix 1 strengthening youth participation in employment in partnership with the private sector 3. Transport (2020 Core Area 1: Infrastructure) 1. Connection of services, markets, people, and harbors through an integrated transport system with greater accessibility and affordability for all citizens. 2. Public private partnerships in the development and operation of airports and regional ports. 3. Greater safety and security of the transport sector 4. Development of the transport sector to support and promote national and regional economic growth. Improved access to outer islands. Indicators: Increased number of provinces connected by public transport by 1. (Number of provinces: 7; 2008 baseline: 0) Increased number of routes covered by regular ferry service. (2008 baseline: 3) Maritime transport master plan, maritime transport policies, ports, PPPs. $18 million lending in COBP, of which: RCI 100% ADB = Asian Development Bank, COBP = country operations business plan, ENV = environmental sustainability, IDB = Islamic Development Bank, PPP = public private partnership, RCI = Regional Cooperation and Integration, SOD = social development, SREP = Scaling Up Renewable Energy Program in Low-Income Countries, TA = technical assistance, TVET = technical and vocational education and training. Source: Asian Development Bank.

9 Appendix 2 5 INDICATIVE ASSISTANCE PIPELINE Table A2.1: Lending Products, Year Cost ($ million) Targeting of ADB Project/Program Name Classification Theme Division PDA Total OCR Loans Grants Total Gov t finance Primary PPTA / ADF Co- Sector 2013 Renewable Energy Project linked to SREP Energy GI ENV SAEN TBD IDB 10 million b Total TBD Strengthening Education for Education GI SOD SAHS TBD TBD Youth Development Project Total TBD TBD 2015 SASEC Transport Project Transport GI RCI SATC a TBD TBD Total TBD TBD TBD ADB = Asian Development Bank, ADF = Asian Development Fund, ENV = environmental sustainability, GI = general intervention, IDB = Islamic Development Bank, OCR = ordinary capital resources, PDA = project design advance, PPTA = project preparatory technical assistance, RCI = regional cooperation and integration, SAEN = Energy Division, SAHS = Human and Social Development Division, SASEC = South Asia Subregional Economic Cooperation, SATC = Transport and Communications Division, SREP = Scaling Up Renewable Energy Program in Low Income Countries, SOD = social development, TBD = to be determined. a $12 million outside the $6 million country allocation is subject to financing from ADF Subregional Pool Allocation. b In addition, an allocation from SREP to be routed through ADB is expected to be confirmed during IDB co-financing is based on ADB-IDB co-financing agreement in Source: Asian Development Bank.

10 6 Appendix 3 Table A2.2: Nonlending Products and Services, Primary Assistance Name Division Origin Theme Type PPTA for Preparing Transport SATC COBP RCI PPTA/ Project CDTA Source ADB Amount ($'000) Sources of Funding Source Others Amount ($'000) Total ($'000) TASF PATA a /PPTA for Strengthening Education for Youth Development Project SAHS COBP SOD PPTA/ PATA Total 1, , PPTA for Energy Project 2016 b SAEN CPS ENV PPTA TASF Capacity Development for Education Development Project Implementation TASF JFPR SAHS COBP SOD CDTA TASF Total 1, , PPTA for Transport project 2017 c SATC CPS RCI PPTA TASF Capacity Development for Transport SATC CPS RCI CDTA TASF Project Implementation Total 1, , ADB = Asian Development Bank, CDTA = capacity development technical assistance, COBP = country operations business plan, CPS = country partnership strategy, ENV = environmental sustainability, JFPR = Japan Fund for Poverty Reduction, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance, RCI = regional cooperation and integration, SAEN = Energy Division, SAHS = Human and Social Development Division, SATC = Transport and Communications Division, SOD = social development, TASF = Technical Assistance Special Fund. a Deferred from b The sector of the PPTA is indicative only for preparation of 2016 lending project, which will be determined in the future COBP.. c The sector of the PPTA is indicative only for preparation of 2017 lending project, which will be determined in the future COBP. Source: Asian Development Bank.

11 Appendix 3 7 Targeting Classification ASSISTANCE PROGRAM FOR 2012 Table A3.1: Lending Products, 2012 Primary Theme Year of PPTA Cost ($ million) ADB ADF Loans Grants Total Cofinance Project or Program Name Sector Division Total OCR Gov t 2012 Firm Inclusive Micro, Small, and IND GI PSD SAPF Medium-Sized Enterprises Development Project Total ADB = Asian Development Bank, ADF = Asian Development Fund, GI = general intervention, Gov t = government, IND = industry and trade, OCR = ordinary capital resources, PPTA = project preparatory technical assistance, PSD = private sector development, SAPF = Public Management, Financial Sector and Trade. Source: Asian Development Bank.

12 8 Appendix 3 Table A3.2: Nonlending Products and Services, 2012 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($'000) Source Amount ($'000) Total ($'000) 2012 PPTA for Renewable Energy Project linked to ENE SAEN PPTA TASF SREP PATA for Strengthening TVET and Higher EDU SAHS PATA TBD Education a Total ADB = Asian Development Bank, EDU = education, ENE = energy, PATA = policy and advisory technical assistance, PPTA = project preparatory technical assistance, SAEN = Energy Division, SAHS = Human and Social Development Division, SREP = Scaling Up Renewable Energy Program in Low-Income Countries, TASF = Technical Assistance Special Fund, TBD = to be determined, TVET = technical and vocational education and training. a Deferred to Source: Asian Development Bank.