The Importance of Infrastructure for Economic Growth, Jobs, and Access to Markets and Services in Solomon Islands

February 28, 2014

Bertrand Badre

HONIARA, February 28, 2014 – This week, I attended the G20 meetings in Australia, where I spoke repeatedly, and fervently, about the need to invest in infrastructure for job creation and economic growth.  I was adamant that this is central to achieving the World Bank Group’s goals of ending extreme poverty and increasing shared prosperity.

It is vital for emerging economies to realize their aspirations. It is vital for the mother who hopes that the water coming out of the pipe is clean - and available - so her children do not get sick; for the informal settlement dweller who wants his children to study but cannot afford an electricity bill; for farmers who need all weather roads and reliable shipping to get their goods to market.

Just two days later, I was on a three hour flight to Solomon Islands, a beautiful tropical country of over half-a- million people, inhabiting 30 percent of its 1,000 islands, atolls and islets which are scattered across an immense, 1.34 million square kilometers of ocean. Given the unique challenges of its geography, perhaps no other country has a deeper need for reliable and high quality infrastructure.  From air and marine transport links, to good roads, telecommunications and energy generation, all are needed for provision of reliable services, and to enable local businesses to grow and expand.

Talking to the Solomon Islanders that I was privileged to meet, their stories have imparted the reality and the magnitude of the infrastructure issues that challenge growth and progress in their country.

I heard that Solomon Islands has the lowest ratio of roads per square kilometers of land in the Pacific, and that only 16 percent of the country’s households have access to electricity, most of this powered by expensive imported diesel, and the majority of them are clustered in the capital, Honiara.

Solomon Islands was ranked 97 out of 189 countries in last year’s joint IFC – World Bank Ease of Doing Business Index. The business people I spoke with told me that the cost of doing business is extremely high, and the price of energy is a huge part of this cost. The electricity tariff is US$0.90/kWh, one of the highest in the world.

I’ve learned that shipping services to the most remote parts of the country are irregular and that the air transport system can be very unreliable. Limited infrastructure often results in the sudden cancellation of flights and boats, leaving passengers stranded for days out in the provinces, and people without goods and supplies.

I also learned that Solomon Islands is one of the world’s most at risk countries from natural hazards – like earthquakes, tsunamis, cyclones and floods. This makes it absolutely crucial to consider disaster risk management in all infrastructure project designs.  

At the same time, with supportive infrastructure, it was clear to me that Solomon Islands has great potential to increase economic returns from its vast and un-spoilt fisheries and tourism, provide better services to its far flung population and engage more regularly with its neighbors.

A lot of work has been done to improve critical roads, water and shipping infrastructure in Solomon Islands, with the support of donors like the Asian Development Bank, the Governments of Australia and Japan.

We as the World Bank Group are proud to be providing assistance to the Government and the citizens of the Solomon Islands in this area. With other donors, we have facilitated regulatory reforms in the telecommunications sector to encourage competition, lower costs, and increase the use of mobile communications. In just four years, the number of Solomon Islanders with mobile phone access has increased from 11 percent to over 54 percent. This is a remarkable achievement.

In the energy sector, the World Bank Group is supporting the Solomon Islands Electricity Authority with investments in generation and transmission lines, and breaking new ground in helping the Government develop a hydro power project that could bring transformational change to the lives of the people.

As perhaps the largest development project in the country’s history, the Tina River Hydro Project could replace around 75 percent of the diesel-powered generation capacity on the Honiara grid with clean, renewable hydropower. This would considerably reduce the cost of electricity generation, bringing tremendous benefits to households, and provide a huge stimulus for the private sector. If a project of this magnitude is realized, it promises a profound impact on Solomon Islands’ ability to attract investment.

There is no doubt that providing support for infrastructure in an environment such as Solomon Islands, as elsewhere is challenging, and evidence shows that investors in infrastructure are very sensitive to country risk.  In this sense, it is the job of institutions such as the World Bank Group to assist governments to manage such risks, whether through enabling effective regulation and policy, through increased transparency, or risk sharing through instruments such as guarantees. I am excited to see many of these issues coming together in our collaboration with the Government in Solomon Islands. 

Of course, our efforts should not stop there. More than many other places I have been to, Solomon Islands demonstrates the need for innovative solutions and effective partnerships across private, government and donor agencies, in order to build effective infrastructure that reduces poverty, raises living standards for all, and helps this country to achieve its abundant potential. 

Bertrand Badré is World Bank Managing Director and Chief Financial Officer