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.


 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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