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Description |
The aim of project is to improve the efficiency and effectiveness of interisland shipping services through provision of an integrated package of assistance. It comprises two major components:
(a) infrastructure investments in the capital of Port Vila and five outer islands, and
(b) establishment of a shipping support scheme to catalyze the provision of services to remote noncommercial destinations using an output-based aid approach.
The Project is complemented by associated TA to improve sector governance through institutional strengthening and legal and regulatory reforms, and by project management services.
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Project Rationale and Linkage to Country/Regional Strategy |
Vanuatu is dependent on maritime transport as its population of 240,000 is spread over an archipelago of over 60 populated islands. However, a number of sector constraints hold back economic growth and service delivery in Vanuatu, as inadequate infrastructure limits cargo and passenger movement and in some cases prevents vessels from reaching rural areas, and unfavorable geography and poorly functioning markets make some services commercially unviable. The Government's Priorities and Action Agenda 2006-2015 and ADB's Country Partnership Strategy 2009-2014 call for critical constraints to rural accessibility to be alleviated through improved transport infrastructure and services.
In terms of infrastructure, a new domestic terminal in Port Vila, which is the hub of the network, will eliminate a binding constraint on shipping services. A lack of berths causes long waiting times and increased costs, so a new facility will increase efficiency and facilitate growth of the sector. New rural jetties will improve access to disconnected communities and facilitate commodity exports. This improved infrastructure will allow more frequent services. The safety aspect is particularly important for people needing health care, children travelling for education, and women who usually bear the responsibility to assist them.
With respect to service provision, interisland transport is infrequent and unreliable due to a mismatch between supply and demand caused by information asymmetry. Rural producers will be more likely to ready their produce for market once voyages are guaranteed, while vessel operators will be more willing to undertake voyages when cargo and passenger volumes are known. Subsides are justified to correct this market failure and trigger positive externalities, as support for noncommercial destinations will catalyze rural production and increase reliability.
Project's direct benefits are frequent and more reliable shipping services at lower cost. Induced benefits are increased agricultural production and better terms of trade for remote communities. The project will spur economic growth and reduce poverty by facilitating access to markets and social services, and enabling rural populations to market their produce and derive income from natural resources,
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