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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.
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