Pacific Aviation Investment Project Region. EAST ASIA AND PACIFIC Country. Specific Investment Loan - Adaptable Program Loan Project ID

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB6595 Project Name Pacific Aviation Investment Project Region EAST ASIA AND PACIFIC Country Pacific Islands Sector Aviation (100%) Lending Instrument Specific Investment Loan - Adaptable Program Loan Project ID P Borrower(s) Republic of Kiribati Kiribati Kingdom of Tonga Tonga Pacific Aviation Security Office Vanuatu Implementing Agency Pacific Aviation Security Office Vanuatu Ministry of Communications, Transport and Tourism Development Tarawa Kiribati Ministry of Transport Nuku alofa Tonga Environmental Screening B Partial Assessment Category Date PID Prepared May 11, 2011 Estimated Date of Appraisal August 1, 2011 Completion Estimated Date of Board October 27, 2011 Approval Concept Review Decision Following the review of the concept, the decision was taken to proceed with the preparation of the operation. I. Introduction and Contet The Pacific Islands are characterized by small and widely disbursed populations spread across many islands. The aviation sector plays a vital role by providing essential national, regional and international particularly with Australia and New Zealand connectivity. A regional network of air links to the outside world is essential to the viability of these countries. Tourism is a major part of the Pacific Islands GDP: 40% in Vanuatu; 30% in Fiji and

2 over 16% for Samoa 1. It is estimated that the tourism industry accounts for one fifth of GDP and employment in the South Pacific. This is well above the world average of 10% of GDP and 8.3% of employment. Without a vibrant aviation industry, many developing countries would see a reduction in tourism, resulting in an economic downturn. The proposed project is Phase I of a regional aviation project. The initial participants are Kiribati and Tonga, with future potential participants including Samoa, Solomon Islands, Timor Leste, Tuvalu, and Vanuatu: all have aviation safety and security issues. Failures to address these issues will likely lead to international jet aircraft operations ceasing travel to the airports 2. Kiribati s two international airports at Bonriki (TRW) on South Tarawa and Cassidy (CXI) on Kiritimati Island serve as the main links to the Gilbert and Line Island groups respectively. Due to its location, CXI also is an emergency field for etended range twinengine operations (ETOPS) and other aircraft operating on many of the South Pacific to Hawai i/north America routes. Aviation connects Tonga with its large epatriate community: some 40% of passengers are visiting friends and relatives. Tonga also plays a key role in SAR covering the Cook Islands, Fiji, and Samoa. Tonga s geographical location within the region and agreements with regional neighbors (e.g. Fiji, Niue, and New Zealand). For both countries, the international airports also provide facilities for disaster management. Sectoral and Institutional Contet Assessments of the aviation sector in the South Pacific by International Civil Aviation Organization (ICAO) have found that many of the countries lack the proper policy, regulatory and infrastructure to comply with ICAO requirements. To help address this, the Pacific Aviation Safety Office (PASO) was established by an Asian Development Bank (ADB) regional loan in 2004 to provide safety and security oversight to the aviation sector3. All developing member countries of PASO have acceded to the Pacific Islands Aviation Safety and Security Treaty (PIASST), which requires regulatory harmonization. To maimize the efficiency and effectiveness of operations and create a least-cost operating environment for airlines, the legislation and regulations of member countries should be harmonized to create a common inspection regime and common compliance 1 Oceanic Voyages: A Study of the Aviation Sector of the Pacific Developing Member Countries. Report to the ADB, For eample, from September 2008 to June 2010 jet services to CXI ceased due to the state of the runway. The weekly Honolulu-CXI service by B737 was replaced by a 19-seat Gulfstream G1 turboprop of 1960s vintage. The consequence was: the tourism industry on the island collapsed over night creating a massive reduction in income to the island. NZAP financed temporary repairs to reopen the airport and are financing permanent repairs in a parallel project to this regional project. 3 PASO has 13 member countries: Australia, the Cook Islands, the Fiji Islands, Kiribati, Nauru, New Zealand, Niue, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu. PASO s core responsibilities are to provide oversight and advice on (i) aerodrome security and safety, (ii) flight operations, (iii) airworthiness of aircraft, and (iv) personnel licensing.

3 protocols. In early 2011 the ADB started a technical assistance project (TA 43429) to assist developing member countries of PASO to update and harmonize their legislation and regulations. The TA will also assist PASO to refine its management systems and ensure financial sustainability. The developing member countries of PASO are signatories to international and regional treaties that commit them to meeting aviation security and safety standards through the uniform application of ICAO standards. In recent years, these standards have been greatly epanded, particularly those related to security. However, most PASO members are unable to fully meet all of their oversight obligations. As a result, many Pacific island countries have received less than satisfactory results from the ICAO-mandated Universal Safety Oversight Audit Program and Universal Security Oversight Audit Program. In Kiribati recent ICAO audits have identified many significant safety and security deficiencies at TRW and Cassidy CXI airports. The runways are in increasingly poor condition and navigational aids are basic or missing. The New Zealand Aid Program (NZAP) is financing US$ 13 million in longer term CXI runway remedial works starting mid The Government of Taiwan, China has provided a loan for the TRW runway rehabilitation and a safety fence. The Ministry of Communication, Transport and Tourism Development (MCTTD) is responsible for both administration and regulation of civil aviation and operation of the airports. Combining regulatory and operational roles in a single agency is out of step with ICAO air safety recommendations and Kiribati s own Civil Aviation Act of Tonga, with the support of the World Bank financed Transport Sector Consolidation Project (TSCP), has made a number of improvements in the aviation sector, including policy reform and physical investments in Fua amoto (TBU) and Vava u (VAV) airports 4. Further investments are required to meet ICAO standards and recommended practices (SARP), as well as airline safety standards, ensuring that Tonga s access to international markets and tourism can be maintained 5. Relationship to CAS The regional aviation project supports the Bank s Regional Engagement Framework for Pacific Islands focus on reducing barriers to trade and investment, and promoting tourism, environmental management and human resources development, among 4 The TSCP created Tonga Airports Ltd. (TAL) which operates airports, leaving the Ministry of Transport (MOT) with policy and oversight functions. Investments consisted of: (i) Aviation Sector Strategic Development Plan; (ii) TAL Airports future investment study; (iii) Aviation sector regulatory surveillance and compliance obligations review and support; (iv) TBU PAPI navigational aids; (v) provision of a TBU fire tender; (vi) TBU hand-baggage screening X-ray machine; (vii) emergency power upgrades at TBU and VAV; (viii) new TBU rescue fire station; (i) TBU upgrade to passenger screening and transit facility; () TBU CCTV and access control. 5 As described in Anne 4, of critical importance to Tonga is the continuation of wide-body aircraft services. These are essential for Tonga s importing and eports (such as agricultural produce and fresh fish) and, without upgrading TBU s runway, many jet operations will cease within five years. The Vava u improvements will increase tourism and eports by allowing for flights to Suva, Nadi, Pago Pago, Niue and Samoa.

4 others. This framework sees investments initially focusing on climate change and transport infrastructure with the potential for further investments to be linked to reform momentum. The Kiribati CAS, presented to the Bank s Board on March 1, 2011, specifically identifies airport rehabilitation and adherence to safety measures as critical if air services necessary to maintaining connectivity are to continue operating. The Tonga CAS presented to the Bank s Board on October 19, 2010 notes approaches from the Government to support the rehabilitation of airports. The project also conforms to CAS themes that address Tonga s economic geography through greater regional integration, and could encourage opportunities for the epansion of temporary or seasonal labor migration. The resurfacing of TBU and VAV was identified as a priority in the 2010 Tonga National Infrastructure Investment Plan (NIIP). II. Proposed Development Objective(s) The proposed development objective is to (i) improve the safety, security, efficiency, management and environmental sustainability of airports, and (ii) improve regional harmonization of aviation safety standards. Key Results Monitoring Indicators: It is proposed that the success of the project will be monitored through four indicators: (i) Certification of project airports in accordance with ICAO standards and recommended practices; (ii) Implementation of the corrective action plan following ICAO s safety and security audits; (iii) Energy consumption at project airport terminals reduced by at least 30%; (iv) Adoption of harmonized national aviation legislation and regulations. Intermediate outcome indicators are proposed to include (by airport as appropriate): (i) specific runways, taiways, and apron areas rehabilitated; (ii) runway lights replaced with energy efficient lights; (iii) recommended air traffic navigation, surveillance and weather reporting equipment installed; (iv) percentage of airport water needs met through rain water harvesting; (v) percentage reduction in annual airport terminal power consumption; (vi) adoption of open skies policy for domestic and international competition; and, (vii) Civil Aviation Agency training and equipment needs assessment recommendations satisfactorily implemented. Beneficiaries: Primary beneficiaries are air travelers in the Pacific Islands, as well as the national and regional administrative bodies and personnel involved in air transport management, freight and passenger air service providers. Other indirect beneficiaries are tourism-related services and seasonal labor markets. III. Preliminary Description Component A: Aviation Infrastructure Investments (US$ 33.2 m incl. cont.): This component will invest in the aviation infrastructure so international airports are able to

5 meet the ICAO standards, while preserving and etending the service life of eisting airport assets. The specific activities will vary between participating airports and will include: Rehabilitation of airport pavements: The project will rehabilitate the runways, taiways and aprons and TBU and VAV. The TRW and CXI pavement rehabilitations are being financed by other donors as parallel investments (Bank safeguards apply); Provision of renewable power: Implementation of discrete photovoltaic on-site power generation that is carbon-neutral during operation at VAV, TRW and CXI; Energy optimization of terminals: Improvements to terminals to reduce electrical consumption through both passive and technological means; Upgrading of runway lighting: Runway lighting using low power consumption LED fitures, reducing the energy demand by 90%, will be installed at TBU, VAV and CXI; Security improvements: Improved access control, building management system, X-ray equipment for hand baggage, etc. at TBU, VAV, TRW and CXI; Rain water harvesting and improved efficiency: At all airports, facilities to collect and store rain water from roof areas to reduce the potable water demand and preserve natural water resources; Navigation Aids: Provision of ADS-B for all airports; PAPI and NDB where needed; Fire safety: Provision of a fire tenders, provision of fire equipment for firemen; Weather monitoring: Automatic Weather Observation Stations for all airports; Road resurfacing: Reseal the road CXI to London; and, Consulting services: (i) Procurement of design and supervision consultant; and, (ii) Specialists for preparation of technical specifications on aviation equipment. Component B: Aviation Sector Reform (US$ 3 m): This component will support sector reform both regionally, through PASO 6, and within each participating country: PASO: Assist in restructuring PASO to put it on a sustainable basis. This involves changing its business model so that it provides more targeted services; Kiribati: Finance technical assistance to the MCTTD including: (i) development of civil aviation technical regulations and manuals; (ii) preparation and adoption of a Civil Aviation Master Plan; and, (iii) a short term aviation regulatory specialist to facilitate the necessary approvals and establishment of an independent KAL and to advise aviation staff in the MCTTD on adopting and enforcing manuals, etc as they are prepared; and, Tonga: Support to the Civil Aviation Department (CAD) to adopt and implement the new Civil Aviation Regulations as well as the agreed ICAO corrective action plan. Component C: Strengthening Airport Operations and Management Capacity (US$ 2.6 m): An independent public entity (KAL) will be created for the management and operation of TRW and CXI airports. KAL will initially engage management epertise and on-site training capacity through a three-year management contract. The contract will include local staff development and preparation of a transition plan in the last year of the 6 Anne 4 describes PASO s eligibility to receive financing through the project.

6 contract. The component will also finance a small technical assistance contract to conduct an independent review and implementation support for KAL s transition plan. Component D: Project Support and Training (US$ 2.2 m): (i) Support to the Project Implementation Unit 7 (PIU); (ii) PASO support to implementing agencies; (iii) a Project Advisor to assist governments; and, (iv) a training program for government staff to address needs to carry-out regulatory oversight, and project support as necessary. Safeguard issues. The project will be Category B. All civil works are on the eisting airport lands and will not lead to any additional land acquisition. An environmental management plan (EMP) for Tonga has already been prepared and disclosed. A draft EMP for Kiribati has been prepared along with a resettlement policy framework (RPF) since small vendors at TRW airport might be impacted by the project and local residents have potential land concerns. The Kiribati EMP and RPF will apply to the parallel investments by other donors at TRW and CXI. Tentative Project cost and financing: The estimated cost of the project is US$ 41.0 m. Financing would be provided by the World Bank through an IDA Grant 8 of US$ 37.0 m, and PRIF financing for components B and C (to be confirmed) of US$ 4.0 m (incl. contingencies). Component PASO Kiribati Tonga Total A - Aviation Infrastructure Investments $0.00 $10.15 $20.03 $30.18 B - Aviation Sector Reform $1.50 $0.70 $0.50 $2.70 C - Strengthening Airport Operations and Management Capacity $0.00 $2.40 $0.00 $2.40 D - Project Support and Training $0.50 $0.80 $0.69 $1.99 Contingencies $0.20 $1.41 $2.12 $3.73 TOTAL $2.20 $15.46 $23.34 $41.00 Adaptable Program Loan (APL). The project is designed as a horizontal APL. Countries that wish to participate in the project will have to agree to: (i) implementation of an Open Skies policy providing domestic and international access to any qualified airline; (ii) separation of the policy/regulatory functions from airport operations, ecept where there are severe human capacity constraints which makes this impractical; and, (iii) implementation of a passenger safety and security fee which, in accordance with ICAO regulations, is dedicated to covering the costs of CAA operations, technical audits, etc. The choice of instrument allows fleibility for scale-up of resources and addition of other project participants. IV. Safeguard Policies that might apply 7 In Kiribati the project will use the same PMU in the Ministry of Finance established under the Road Rehabilitation Project. In Tonga the same PMU for the TSCP shall be used. Since the TSCP PMU has eperience procuring specialized aviation equipment, it is envisaged that they will take the lead in preparing the procurement documents for these items, particularly when the same goods are to be procured for several countries. 8 Proposed regional funding would be US$ 31.5 m ($7.3 m Kiribati; $22 m Tonga; $2.2 m PASO) with IDA regular funding $5.5 m ($4.7 m Kiribati; $0.8 m Tonga).

7 Safeguard Policies Triggered by the Project Yes No TBD Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Involuntary Resettlement (OP/BP 4.12) Indigenous Peoples ( OP/BP 4.10) Forests (OP/BP 4.36) Safety of Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP 7.60) * Projects on International Waterways (OP/BP 7.50) V. Tentative financing ($m.) Source: Borrower/Recipient IBRD IDA 37.0 Others (specify) Pacific Region Infrastructure Facility (PRIF) TBC 4.0 Total 41.0 VI. Contact point World Bank Contact: Christopher R. Bennett Title: Senior Transport Specialist and Task Team Leader cbennett2@worldbank.org Borrower/Client/Recipient Republic of Kiribati Contact: Tarsu Murdoch Title: Secretary, Ministry of Communications, Transport and Tourism Development tarsu@mcttd.gov.ki Kingdom of Tonga Contact: Samiu Vaipulu Title: Deputy Prime Minister, Minister of Works and Minister of Transport samv@justice.com * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas

8 Pacific Aviation Security Office Contact: Alvin Tuala Title: General Manager, Pacific Aviation Security Office Implementing Agencies Republic of Kiribati Contact: Tarsu Murdoch Title: Secretary, Ministry of Communications, Transport and Tourism Development Kingdom of Tonga Contact: Samiu Vaipulu Title: Deputy Prime Minister, Minister of Works and Minister of Transport Pacific Aviation Security Office Contact: Alvin Tuala Title: General Manager, Pacific Aviation Security Office VII. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fa: (202) Web: