Economic Assesement for South Santo Road (Canal to Tassiriki) Project (November 2013)

Executive Summary

The Agricultural potential along the southern part of Santo has been kept at bay for the past 33 years. The result of the analysis undertakes indicates that there are substantial advantages in the construction of the new road upgrade projects and the performance of most of the indicators collected during the economic assessment feedback indicates great potential still not utilize by the southern region of Santo. The economic assessment also considers the option of the free of charge user roads. Traffic on the new road projects is much higher and as consequences both users and societies are better off, as total savings are higher and externalities lower than the user fee option. With the introduction of a user fee system, basically to generate revenues for financing the loan or maintenance purposes, the new project roads would remain under-utilized during the initial years. This is can be attributed to the fact that congestions along the existing road networks not high enough to induce a significant proportion of the demand to pay for the increased speed advantages allowed by the new road projects. The Government on the hand if decided to introduce a pricing scheme only on some links of the road, it is expected to shifts traffic from the priced modes of the road network to the other non-priced links and therefore reduces the consumer surplus. From a social welfare point of view, this will lead to a less positive effect. In order to maximize the net benefits of the investment, the analysis shows that it is better to allow usage for the proposed new roads to be user free and to postpone the idea(if any) of an introduction of a user fee at a later stage,preferably,where traffic flow growth is sustained.

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Economic Assesement for South Tanna and Malekula Road Projects (September 2013)

Executive Summary

The result of the analysis shows that there are substantial advantages in the construction of the new road projects and the performance of most of the indicators, especially the economic assessment with the option of the free of charge user roads. Traffic on the new road projects are much higher and as consequences both users and societies are better off, as total time savings are higher and externalities lower than the user fee option. With the introduction of a user fee system, basically to generate revenues for financing the loan or maintenance purposes, the new project roads would remain under-utilised during the initial years. This is due to the fact that, although there will be congestions along the existing road networks, this is not high enough to induce a significant proportion of the demand to pay for the increased speed advantages allowed by the new road projects.

If the Government decided to introduce a pricing scheme only on some links of the network, it is expected to shifts traffic from the priced modes of the road network to the other non-priced links and therefore reduces the consumer surplus. From a welfare point of view, this will lead to a less positive effect. In order to maximise the net benefits of the investment, the analysis shows that it is better to allow the usage of the proposed new roads to be user free and to postpone the idea (if any) of an introduction of a user fee at a later stage, preferably, where traffic flow growth is sustained.

The risk analysis assessment shows that all other indicators supported the economic viability of the project if the Government is resort to borrowing to finance these road projects. Furthermore, the return on goods and services export earnings and the total revenue are sufficient to meet external repayment. Together both indicators - proxy of Vanuatu‘s solvency, suggest Vanuatu‘s capacity of repayment is high and strong over the forecast horizon. In other words, Vanuatu‘s debt repayment schedule will be honoured during years of maturity.

Introduction

 The South Tanna road is located in the southern part of the island and form an important part of the Tanna Ring Road projects according to the report on Infrastructure Development Plan of Vanuatu issued by the Ministry of Infrastructure and Public Utility (MIPU) in March 2013. According to the project proposal, the South Tanna road is proposed to start from Bethel Gully, 1.2 kilometres south of Lenakel and will run along the coast to end in Manuapen. The total expected length to be covered is approximately 30 kilometres. Along this road are areas like Imai, Iepilmai, Isakwai, Green point, Yeruareng, Kwamera, Yenarpon, Yokopenan, Yaplapen, Imaki Primary and Secondary Schools and Manuapen.

The road on Malekula is also part of the Infrastructure Development Plan of Vanuatu issued by MIPU in March 2013. The current road connecting Lowet and Unmet via Kona Point 2 and then from Kona Point 2 and Mbrokus to Lambubu bay via Menjing. The road links are in the center of the island, which is part of the Malekula Ring Road Infrastructure Development Plan. These roads will link the Provincial Government Office to Rori area via Norsup Airport and wharf through a concentration of population area.

The current length of the ports’ longest wharf is 270 meters and is insufficient for providing full service for all cargo currently served and tourist boat arrivals due to wharf berth space availability. In addition, new business that require the ability to transfer certain heavy cargo off large vessels and into trucks cannot currently be served, due to the physical conditions of the wharf. The proposed rehabilitation and extension of Port Luganville main wharf project would lengthen the existing wharf at the port by 231 meters east towards samanson wharf with total length of berth at 361 meter, providing the opportunity to better serve existing customers and potentially expand customer base.

Currently there is no tarmac road in Malekula and Tanna. All roads are unsealed and in poor state although some improvement from the VTSSP project is visible (but very poorly constructed for Malekula). Similar to the road condition in South Tanna, most roads in Malekula are graded gravel pavement, with 3 meters width. Apart from several abrupt slopes, the other sections of the roads are comparatively even. In comparison, the general road condition to be constructed and rehabilitated in Malekula is slightly better than that in South Tanna. The design principle of the main technical equipment and contents of the main works in both islands include routes, pavement, subgrade, bridge and culvert.

The Priorities and Action Agenda (PAA) 2006-15 is the national development sustainable strategy and it provides an institutional framework for national planning and development. Meanwhile the four years‘ work program, Planning Long and Acting Short (PLAS) formulated and launched in 2009 continue to maintain this commitment. The PLAS sets out the policy priorities and action agenda of the Government for the next four years. It identifies the practical actions that will be undertaken by the Government in order to make a difference to the development of the nation. Unfortunately, the PLAS fail to describe all on-going activities of the Government. Instead it highlights the actions of highest priority to which the Government will develop its full attention and resources, including assistance from development partners on which it expects to be held accountable.

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Economic Assessment for Luganville Main Wharf renovation and extension Project

Executive Summary

The Agricultural and Services Sector potential in Luganville Santo has been kept at bay for the past 33 years. The result of the analysis undertakes indicates that there are substantial advantages in the construction and rehabilitation and Extension of Port Luganville Main wharf upgrade projects and the performance of most of the indicators collected during the economic assessment feedback indicates great potential still to be utilize in Santo Rural and Urban areas. The economic assessment also considers the option of the increasing wharfage fees since the last increase was made in 1992 and the fees still remain the same to date. Vessels berthing on the new wharf upgrade extension projects would be higher once completed and as consequences both users and societies are better off, as total savings are higher and externalities lower than the user fee option. With the introduction of a user fee system, basically to generate revenues for financing the loan or maintenance purposes, the new upgrade wharf would outweigh the cost of construction during the initial years. This is can be attributed to the fact that both Container and tourist boats can berth at the same time along the existing wharf networks and would be high enough to induce a significant proportion of the demand to pay for the increased stevedoring fees advantages allowed by the new wharf upgrade extension projects.

Introduction

 The new rehabilitation and extension of Port Luganville Main wharf is a commercial port that usually on average handles closed to 100,000 tons of freight annually (around 82 boats including tankers and 17 tourist boats arrive in 2012). The proposed port is accessible to existing tarsal roads and located around 1 kilometer to Luganville town.

Significant growth in the handling of the port’s primary commodities, as well as the expansion of the types of commodities received, is currently limited by the main wharf’s size and the damage wharf structure due to natural disasters. Recently the port has been approached by various tourism stakeholders (Luganville Tourism association) in improving the wharf’s deteriorating conditions in order to encourage more large tonnage capacity tourist boats to the ports.

The current length of the ports’ longest wharf is 270 meters and is insufficient for providing full service for all cargo currently served and tourist boat arrivals due to wharf berth space availability. In addition, new business that require the ability to transfer certain heavy cargo off large vessels and into trucks cannot currently be served, due to the physical conditions of the wharf. The proposed rehabilitation and extension of Port Luganville main wharf project would lengthen the existing wharf at the port by 231 meters east towards samanson wharf with total length of berth at 361 meter, providing the opportunity to better serve existing customers and potentially expand customer base.

The total cost of the proposed project would be around US 93.4 million dollars equivalent to VT 8,840 million Loan provided by bank of china as a soft loan to the Vanuatu Government with 2 percent interest with repayment over a period of 22 years including grace period of 5 years. The Benefit-Cost Analysis described in the following sections estimates the benefits and cost associated with the proposed infrastructure improvement. The construction work will be undertaken by a Chinese company (Shanghai Construction Group) schedule to commence in June 2014 and ends in June 2017, a period of 3 years.

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Lingarak- Lamap Road Economic Assesment

Executive Summary

One of the most important goals of the Government is to raise the well being of Vanuatu’s people and boosting economic activities to create employment opportunities and income. The Government believes that this goal will be achieved through a number of strategies. First, by achieving a higher sustainable economic growth to create employment opportunities and raise income levels while conserving resources and the environment for the future generation; secondly, by ensuring economic stability, and thirdly by raising the standard of service delivery , through the development of infrastructure ( such as roads, bridges, wharves, telecommunications) to the rural areas and islands throughout Vanuatu.

On that note, the Government, through the Ministry of Infrastructure and Public Utilities, has released a Report on Infrastructure Development Plan for Vanuatu. According to this report, the upgrade of Traffic infrastructure is vital to Vanuatu’s economic development and Poverty Alleviation. The Government has listed about 14 priority infrastructure projects especially the road construction with a total distance of 683 kilometers of roads in its 11 islands.

According to the list of Projects, the Lingarak-Lamap Road Rehabilitation (including the upgrade of South West Bay Airport) with total length of 80 kilometers has been listed as one of the priority project. The Lingarak to Pankumu Section is 24.6km while the Pankumu-Lamap is 52.5km. Total Loan from the Export-Import Bank of China is about 893,644,606.66 CNY which is equivalent to US$131.5 million or 11,706,744,347.25 vatu or 11.71 billion vatu at an average exchange rate of 13.1vatu/1Yuan.

The Agricultural potential along the south eastern coast of Malekula (from Litzlitz, Lingarak to Lamap has been well documented during pre Independence time and over the last 33 years since independence in 1980, particularly, in the production of copra and cocoa.

The most significant copra and cocoa producing areas include Tisman, Banan Bay plantation, Aulua, Lamap, PRV Bushman Bay plantation who produce, on average, around 600 tons of copra and about 650 tons of cocoa per month. These data have been verified and confirmed by VCCE3 and which was also reflected in the recent copra shipment of 2,000 tons between the month of January and March 2014. There are also numerous smallholders (copra and cocoa producers) from the main villages along the coast and inland. One of the significant development and contributor to the increase in smallholder production was the introduction of the NBV4 Microfinance lending scheme.

This has induced a lot of people in the villages to engage into small business activities and the majorities (about 80 percent) are smallholder farmers with more focus on Copra and Cocoa production. Other farmers diversify into the production of cattle, piggery, local poultry, root crops for the local markets, Sandalwood and other agricultural products. There is big potential in the agriculture sector but the only difficulty is lack of proper infrastructure such as roads and bridges.

One of the major problems raised during our visitation is flooding of rivers which also affect children’s access to schools as well as access to main health centers. A number of children have been reported to have been carried away by severe flooding from these rivers and a lot of pregnant mothers could not access to major health centers and hospitals thus results in death.

Pentecost Road - Central to South Pentecost Road Economic Assesment

Executive Summary

 Infrastructure development is the main source of linkage in trading and accessing potential market and sustaining production over the years. The scattered islands and remote villages with its relatively distributed population and rough road contributes to high cost of operation in terms of trading among agricultural commodities such as transport services and social economical services provided by the Government over the past 30 years.

The island of Pentecost has been known for the past years as the main supplier of kava to the main urban centers (Port Vila and Luganville) and will continue to provide and sustain income/employment for local farmers and urban retailors. The opening up of the kava trade recently in Europe (Germany) after the ban of importation for the past 10 years will contribute to the increasing demand externally for kava juice and powder. The current green kava price of VT 800 - VT1, 000 per kilo have push farmers to concentrate on kava planting and less forecast on other commodities production. For many locals the commodities nowadays label as the locals “Green Gold” have increase purchasing power within the domestic local economy.

The propose 28.8 kilometer tar seal road from Central Pentecost to South Pentecost will cost the Government through concessional loan agreement around VT 4.4 billion, However upon the cost benefit analysis under taken in assessing and evaluating the benefits and potential along the distance road the potential benefit within the medium and long term outweigh the cost. The result of the analysis undertakes indicates that there are substantial advantages in the construction of the new road upgrade projects and the performance of most of the partially indicators collected during the economic assessment feedback indicates great potential still not utilize on the propose route.

Traffic on the new road projects is much higher and as consequences both users and societies are better off, as total savings are higher and externalities lower than the user fee option. With the introduction of a user fee system, basically to generate revenues for financing the loan or maintenance purposes, the new project roads would remain under-utilized during the initial years.