March 28, 2007

ADB Aid On Hold

$212m aid on hold

FREDERICA ELBOURNE Wednesday, March 28, 2007

THE Asian Development Bank has suspended $212million in funds earmarked for capital projects.

In a statement yesterday, the bank said the interim Government must provide assurance that it would resume its international responsibilities before it could resume funding.

ADB regional director Sirpa Jarvenpaa said the matter with the interim administration was likely to be settled in the next few days which would enable the resumption of project funding.

She said the assurance needed from the interim Government included a commitment to provide an environment that would ensure the successful completion of the four major development projects the ADB had invested in.

The conditions also included counter-funding and adequate staffing in anticipation of the restoration of such terms "soon".

Part of the government commitment included covering past loans not only to ADB but to other banks and international organisations, she said.

The four projects covered by ADB include the third road upgrade, which cost about $65million of which $55.8m had been spent, the ports development project which cost $27.6million, all of which has been spent, the Suva-Nausori water supply upgrade which cost $77.3m of which $29.6m had been used and the Alternative Livelihood Project, which cost $41.4million of which several thousand dollars had been used.

Ms Javenpaa said the cost of doing business in Fiji needed to be scrutinised to improve the investment climate where better access to capital was enabled.

Other measures which served as a challenge for the economy included the need for funds for infrastructure services which would be vital for economies of scale and other benefits and relevant education, she said.

Further challenges in the need to shift gear smoothly included markets that supported labour mobility and flexibility alongside affordable social protection and arrangements that lower risks and uncertainty for business and allow new firms to enter and old firms to exit. Ms Javenpaa said the removal of at-and-behind-the-border impediments to integration were other crucial elements.

On the highlights of the ADB's outlook for 2007, she said Fiji was among two Pacific Island countries whose performance grew by 3.1 per cent and enjoyed a faster expansion while elsewhere in the region was not the same.

"Even before the coup, Fiji faced many challenges and 2007 looked as if it would be a difficult year.

"But now the attrition of confidence and loss of new aid flow may push the country into recession.

She said stabilisation was a key challenge for Fiji.

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