Economic Impact of World Bank Aviation Investment in Pacific Island Countries

The World Bank Group (WBG) has provided grant and credits to support projects related to aviation and air transport including capacity building, policy and regulation, safety and security, infrastructure rehabilitation, and institutional strengthening for over 60 years. Today, the WBG remains actively engaged on aviation related project in every region of the world including the Pacific Island Countries. The purpose of this paper is to investigate the economic impact of WBG investments in aviation infrastructures in Pacific Island Countries. The preliminary results of this study show a serious deficiency in the areas of aviation infrastructure, safety and security, management efficiency, and airport environmental sustainability in the Pacific Island countries. Without a dynamic aviation industry, most developing countries would see a drastic reduction in tourism, resulting in an economic slowdown. In Pacific Island countries, if these aviation infrastructure deficiency continued to go unaddressed, they would likely lead to the end of international flight operations to the airports in this region. Therefore, the WBG investments in aviation infrastructure is necessary in this region to support tourism, economic development, job creation, and higher standard of living in for Pacific Islanders. Abstract World Bank, Pacific Islands, Aviation, Pacific Aviation ProjectWorld Bank, Pacific Islands, Aviation, Pacific Aviation Project


Introduction
The population of the Pacific Islands are spread across many small islands where tourism is a major contributor to the overall GDP. "It's estimated that the tourism industry accounts for one fifth of GDP and employment in the South Pacific". 3 The WBG Pacific Aviation Investment Project was proposed in May of 2011. The project included the Republic of Kiribati, the Kingdom of Tonga and the Pacific Aviation Security Office in Vanuatu. The first phase of the project included participants in Kiribati and Tonga. They planned for future projects in Samoa, Solomon Islands, Timor, Tuvalu, and Vanuatu. Preliminary studies in this region showed serious deficiencies in the areas of aviation infrastructure, safety and security. The Kiribati Country Assistance Strategy (CAS) proposed to the World Bank Board in March of 2011 the idea of airport rehabilitation. Initial inspections by the International Civil Aviation Organization (ICAO) found that many of the runways in the area were in abysmal condition and navigational aids were basic or missing all together.
If these issues continued to go unaddressed, they would likely lead to the end of international flight operations to the airports in that region. The Pacific Aviation Investment Project was intended to support the World Bank's Engagement Framework for the Pacific Islands that is focused on reducing barriers to trade and investment, promoting tourism, human resource development and environmental management. The basis of this framework was initially focused on climate change and transportation infrastructure with the possibility of future investments.
The statuses of WBG active investments in the Pacific Island Countries as of 2015 are presented in Table 1 and the project in the pipeline are presented in Table 2.

WBG's Project Objectives
The World Bank Group mission is to provide financial and technical assistance to under-developed and developing countries around the world by offering low-interest loans, grants, credits, and advisory services. Major objectives of the WBG is to achieve the following two goals by 2030 4 : 1. End extreme poverty by decreasing the percentage of people living on less than $1.25 a day to no more than 3 percent.
2. Promote shared prosperity by boosting the income of the bottom 40% of the population in every country.
The objectives of the WBG in Pacific Island Countries initial project were to "(1) Improve the safety, security, efficiency, management and environmental sustainability of airports, and (2) improve regional harmonization of aviation safety standards". 5 a. Restoration of airport runways, aprons and taxiways b. Implementation of discrete photovoltaic on-site power generation (a solar park).
c. Upgrades to terminals in order to reduce electrical consumption.
d. Improving runway lighting using lower power consuming equipment.
e. Improve security through access control, x-ray equipment, and building management system.
f. Harvest rain water at all airports, facilities from roof areas in order to reduce the demand for potable water and preserve natural water resources.
g. Improve navigational aids at all airports.
h. Provide fire tenders and fire equipment for all airports.
i. Establish weather monitoring observation stations for all airports.
j. Hire consultants to assist in design and preparation of technical specification on aviation equipment implementation. The Pacific Aviation Investment Program was slated to be completed by 2017. However, a two-year extension of the project was approved in early 2016. Along with the extension, additional funding was approved.

Economies of the Pacific Islands
The island economies of the south pacific have not benefited from the globalization process as have other regions around the world. They rely heavily on foreign aid and tourism. They have limited resources, thus limited exports.   Table 3 shows the economic data of the five countries highlighted in this study that are receiving grant from the World Bank for aviation projects. This table also shows their gross domestic product, GDP per capita, and gross national income.

Kiribati
The stretch of Pacific Islands known as Kiribati gained its independence from Britain in 1979, just when their deposits of phosphates had been mined out. This mining did build a $500 million Revenue Equalization Reserve Fund that continues to provide the country with significant revenue, however. The country is one of the least developed of the Pacific Island nations. They rely on foreign assistance (25 to 50 percent of GDP since 1979), exports of fish and coconuts, and tourism. 7 The economy is limited by several factors; unskilled work force, poor infrastructure, remote location, and lack of natural resources. Kiribati is listed as one of the poorer countries in the world's lower middle-income group. 8 The influx into the aviation sector from the World Bank would then help in the growth of their exports and in tourism, thus decreasing their reliance on foreign aid. Figure 2 shows Kiribati's GDP growth from 2011 to 2015 9 .

Tonga
The last Polynesian monarchy, the Kingdom of Tonga, has been independent since it withdrew from the protection of Britain. The royal family and a few other land owners control the politics of the island. Agriculture is their primary sector in their economy with tourism being the second-largest source of earnings. They have a narrow based economy that relies heavily on external aid. Foreign investment in some areas of the economy is restricted.
There are no capital markets and with their inadequately developed legal system, there is little in the way of a

Samoa
Samoa is made up of nine different islands; four inhabited and the other fie uninhabited. Upolu is the most developed and populous of the islands; where Savai'i is the largest of the islands. These two islands account for 99 percent of the total population and 96 percent of the total landmass of Samoa. 11 More than 198 thousand call Samoa home, but the majority of Samoans now live in the United States, New Zealand and Australia.  Tourism in Samoa has become an increasingly important sector of the economy. More than 132 thousand tourists visit the islands each year, contributing almost 25 percent of the GDP. In overall revenue, tourism receipts was estimated at $145,700,000 for 2014. Table 6 shows the tourism growth in Samoa for 20 years from 1995 to 2014.

Figure 4. International Tourism Receipts
The World Bank's aviation project included Samoa due to its remoteness, small population and their high dependency on air transport to connect the country to greater markets, and to assist in the tourism industry. The World Bank project plans to increase airside pavement jobs, expand airport taxiways and reconfigure the fueling infrastructure. This coincides with the Samoan governments plan to build a new airport terminal and car park at Faleolo International Airport, near the capital city of Apia. 14

Tuvalu
Tuvalu is within the British Commonwealth, but considered an independent island nation. Up until the early 2000's the economy of Tuvalu centered on limited resources, namely coconuts, fish and copra.
They also sell stamps, coins and relied on remittances from family members in Australia, New Zealand and the United States. However, in the early 2000's a group of other countries (United Kingdom, Japan, Australia, New Zealand and South Korea) set up the Tuvalu Trust Fund (TTF). The initial donation totaled $27.1 million, plus Tuvalu added an additional $38.6 million. Most recently the fund was valued at $127 million. The government now obtains more than one-fourth of their revenues from the returns on the TTF. The success of the TTF is due mainly to another fortunate development, the sale of the Tuvalu internet address ".tv". In the late 1990's the government leased the right to the ".tv" internet suffix to a California tech company for $90 million over 10 years plus 5 percent of overall revenues. This adds an additional $20 -30 million each year to the TTF. 16 The tourism industry in Tuvalu is almost nonexistent. Its remoteness discourages visitors and business travelers alike. On average, only 1300 people visit the islands every year and half of those are there on business. The primary purpose of the World Bank's aviation project in Tuvalu is to assist in revitalizing the airport and its infrastructure for safety purposes. This will help in the continued operations of the airport and ensure the imports and exports of the country continue. with be used for infrastructure improvements at the three international airports and to assist in maintaining the minimum International Civil Aviation Organization (ICAO) safety and security standards. These improvements include essential upgrades to the runways, terminals and air traffic control management. There will also be improvements made to the baggage handling and cargo screening area for improved safety and security. 20

The Global Economic Impact of Air Transport Industry
The air transport industry is the global network of aircraft manufacturers, airlines, engine manufacturers, airports, air traffic management services, and civil aviation regulators. They all work in tandem to provide a sustainable growth and an economical and reliable mode of moving passengers and cargo with no comparable substitute especially for the long-haul market. The air transport industry is responsible for connecting the global economy, supports a total of 62.7 million jobs globally, and contributes a total of $2.7 trillion to global economy including direct, indirect, induced, and the catalytic effects of tourism 21 . Air transport continues to create tremendous value for its customers and others in the value chain such as airports, aircraft manufacturers, jet engine producers, and travel facilitators.
The world's 1,402 commercial airlines operate a total fleet of 26,065 aircraft, by serving 17,678 commercial airports globally. 22 The air transport industry has been evolved over the last 40 years. Technological changes and productivity growth has spurred the number of passengers all-time high of 3.6 billion in 2015. 23 In the year 2016 this number is expected to rise to 3.8 billion passengers traveling over some 54,000 routes. The industry has transformed into a comprehensive dynamic environment with many participants which drives economic and social progress, connects people, countries and cultures, provide access to global markets, generates trade and tourism, and forges links between developed and developing nations.
The global air transport provides the following benefits 24 : 1. Vital economic benefits -Aviation provides the only worldwide rapid 5. Responsibly reducing environmental impact -Aircraft entering today's fleets are 20% quieter with 50% reduction in noise during take-off and landing. In addition, the new aircraft are 70% fuel efficient than they were 40 years ago, reducing carbon monoxide emissions by about 50%.

The Economic Impact of Airports
Although airports are part of the air transport industry, they play an eminent role in the economic development of a region, as well as the nation. Airports facilitate the fast movement of passengers and goods, thereby fostering trade and commerce. Airports offer increased accessibility which in turn fuels the tourism sector. With an increase in the number of tourism, more money flows into the local economy, increase economic activity and employment, and in turn increase the standard of living in the region. Therefore, the availability of an airport provides a boost to the GDP of region and positively impact the national economy.

Economic Impact of Investing in Aviation Operational Safety
Whether an entity is a public one or a private one, they are all challenged with economic problems. One persistent question being asked is: What capital projects should be pursued with the value that is to be derived from undertaking said project not fully being understood. Economic analysis provides an efficient way of answering these types of questions. 26 In general, projects should be undertaken only when the value resulting from the project equals or exceeds the costs.
As with the projects being undertaken by the World Bank in the Pacific Islands, the first step was to identify the effects that will occur and ascertain who will be affected as a result of the project. In looking at the types of projects the World Bank is involved with, i.e. improving runways, taxiways, etc., the typical benefits include: reduced aircraft, passenger and cargo delays, greater schedule predictability, improved efficiency of traffic flows, reduced aircraft operating costs, ability to accommodate larger, faster, more efficient aircraft, reduction of emissions, and safety improvements. 9

Conclusion
Aviation infrastructure and airports play a major role in the globalization of our economies. Airports are the major part of a country's infrastructure and foster international commerce and tourism. Airports boost employment, both direct and in-direct. They offer enhanced accessibility, which fuels tourism, which in turn, fuels more employment and economic value. With increased employment and economic movement, the standard of living in the region will change. 29 The improvements being funded by the World Bank in the Pacific Island region should lead to higher employment rates, increased tourism, thus a higher standard of living in that region.