Closed Compact Report: Vanuatu Closed Compact | October 2020
In March 2006, the Millennium Challenge Corporation (MCC) and the Government of Vanuatu (GoV) signed a five-year, $65.69 million compact. Through the Transport Infrastructure Project, the compact aimed to reduce transportation costs, and thereby reduce poverty and increase incomes in rural areas by stimulating economic activity in the tourism and agricultural sectors. This project included two activities:
- The Infrastructure Activity included civil works for the reconstruction or construction of priority infrastructure, including roads, wharfs, airstrips, and warehouses; and
- The Institutional Strengthening Activity aimed to strengthen the Public Works Department (PWD), including the provision of plant and equipment for maintenance of the infrastructure.
Through the investment, the GoV and MCC expected approximately 14,783 people to benefit and an estimated $83.5 million in net benefits over 20 years.
At the outset, the Transportation Infrastructure Project sought to develop up to eleven infrastructure projects on eight islands throughout Vanuatu. However, in early 2008 escalating global construction costs, currency fluctuation, and other considerations led the project to be formally re-scoped. The re-scoped investment consisted of (1) construction and sealing of two national roads, the Efate Ring Road and the Santo East Coast Road, and (2) institutional strengthening of the PWD.
By the end of the compact, the GoV spent 99.5 percent of the compact budget to develop road infrastructure designed to help poor, rural agricultural producers and providers of tourist-related goods and services.
Under the Transport Infrastructure Project, 149.7 kilometers of roads were upgraded during the compact term—92.5 kilometers of the Efate Ring Road and 57.2 kilometers of the Santo East Coast Road. This work was completed with MCC funding, complemented by a funding agreement between the GoV and the New Zealand Agency for International Development (AID) in the amount of NZD 14 million (approximately US $9 million). As a result, the average travel time was reduced by up to 50 percent on Efate Island and up to 75 percent on Santo Island. In the first year of the compact, the GoV also increased its road maintenance fund by approximately $500,000, and the PWD hired seven additional officers to help ensure the sustainability of the roads.
An independent evaluation of the project, completed in 2011, included a simple recalculation of the economic rate of return (ERR), and examined benefits based on reduced vehicle operating cost attributable to road improvements and increased traffic use. The evaluator’s overall ERR for the compact took into account the sealing of both roads, which yielded a combined ERR of 10.3 percent. The evaluation showed that due to the traffic count in December 2010, with a projected annual traffic growth rate of 3 percent over a 20-year period, resealing of the road in the future would not be justified.
This report provides a summary of the tangible results of the compact program, documents changes in compact activities and the reasons behind them, details information on performance against targets in the monitoring plan and summarizes the results of the project’s independent evaluation.