Integrated Economic Development and Community Resilience Project

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Solomon Islands is a small, fragile, remote archipelago of 997 islands in the South Pacific with a dispersed population of less than one million. Following civil conflict, which ended in 2003 after a regional intervention, real Gross Domestic Product (GDP) growth averaged 7.3 percent between 2003 and 2009. Following a modest contraction during the Global Financial Crisis (GFC), GDP grew on average by 5 percent between 2010 and 2016. Since 2003, measures of health and education have improved. Poverty rates have declined by about eight percentage points between 2005/06 and 2012/13. However, this growth performance and restoration of economic and social stability since the civil conflict masks some key problems. First, the population has continued to expand at 2.5 percent each year and per capita real GDP remains below its pre-conflict peak. Second, logging, which has been the main driver of growth, continues to decline overtime. Third, approximately 13 percent of the population live below the national basic-needs poverty line, with the incidence of poverty higher in rural areas where more than 75 percent of the population resides. There are also many more households and individuals who have expenditure only just above the basic needs poverty line and are vulnerable to rising prices and/or declining incomes/expenditure. With a per capita gross national income of roughly US$2,020 per annum, Solomon Islands is classified by the United Nations as a ‘least developed country.’ Its ranking is 151 out of 189 countries based on the 2020 United Nations Human Development Index, placing it in the ‘low human development’ category. This is similar to Papua New Guinea (PNG at 155) but below the other Melanesian countries (Vanuatu at 141 and Fiji at 98). Most people engage in subsistence farming or informal sector economic activities, such as small-scale farming, market gardening, fishing, handicrafts, and petty trading. A relatively small share of the population work in the formal sector as wage employees or employers. Fourth, providing access to basic services is extraordinarily challenging given the small, dispersed nature of the population. Fifth, there are major sources of fragility arising from the limited reach and effectiveness of the state, limited economic development opportunities, uneven development across locations, gender inequalities, and effects of weather and climate change. On November 24, what started as political demonstration from a Malaitan protest group quickly in Honiara City escalated into wider social unrest. East Honiara and Chinatown became the focus of looting of shops, burning of buildings and violence over a period of three days. Three deaths were reported. The situation triggered SIG to implement a temporary lockdown and curfew order, resulting in the arrival of the Australian Federal Police, Australian, PNG and Fijian Defense Forces to assist the Royal Solomon Islands Police to maintain law and order. The lockdown and curfew order has since been lifted and daily activities have resumed. However, widespread damage and loss to the local economy is estimated to be around SBD227 million (approximately US$28 million) with further negative impacts on employment and job losses. The situation remains tenuous. Solomon Islands has been hit hard by the Novel Coronavirus 2019 (COVID-19) pandemic due to an unprecedented level of economic disruption on the movement of people, goods, and services put in place by the Solomon Islands Government (SIG), disrupting progress on poverty reduction with demand for services and food security in rural areas increasing. For rural areas, two of the biggest changes to date have been an increased circulation of people—those who moved out of Honiara and back to the provinces, putting pressure on service delivery in rural communities—and reduced cash flow impacting food trade. Apart from cash crop harvesting, agriculture activities have been temporarily suspended or delayed, with food security issues increasing due to supply chains being disrupted. Poor communities and households will continue to bear a major share of the economic costs as incomes dry up, and access to healthcare, childcare, and services decline from an already low level. In early January 2022, community transmission was reported and lock down orders imposed in Honiara. Whilst the lockdown orders have been lifted in Honiara, a curfew remains in place, the Ministry of Public Service has advised public servants to work from home until further notice and food security remains a risk with the transport systems and markets constrained.The Integrated Economic Development and Community Resilience (IEDCR) Project (or ‘Project’) will be designed as an Investment Project Financing (IPF) operation in the amount of approximately US$19 million, of which US$13 million will Grants and US$6 million Credit with an additional grant of approximately US$4.56 million from the Least Developing Countries Fund (LDCF). LDCF resources, will be distributed across components 1 and 2 to finance climate and disaster resilience outcomes and strengthen the climate resilience and adaptation of communities.The Project will be implemented over a five-year period from 2022-2027, supporting four PCDF performance-grant cycles (FY 2023/24, 24/25, 25/26 and 26/27). The Ministries of Provincial Government and Institutional Strengthening (MPGIS) and Environment, Climate Change, Disaster Management and Meteorology (MECDM) as the Implementing Agencies. The Project will operate within existing institutional arrangements under the Provincial Capital Development Fund (PCDF).The Project will focus on two main areas. First, providing grants to the Provincial Governments (PGs) on an annual basis in accordance with the PCDF procedures and cycle; and Second, improving the capacity of subnational entities at the PG and Ward levels to support economic development and climate change adaptation, mainstream climate and disaster resilient measures into Ward development planning and the design of investments, and support the development of an integrated bottom-up planning process to execute community-informed planning of subprojects.The Project Development Objective is to increase access to economic and social infrastructure in rural wards, deliver climate and disaster resilience actions and enhance provincial governments’ accountability to citizens.The Project will have three components: Component 1: Performance-Based Grants (US$10.40 million); Component 2: Support to Subnational Entities (US$8.7 million), of which there are two subcomponents: Subcomponent 2(a): Improving Frontline Services (US$6.9 million); and 2 (b): Building Resilient Communities (US$1.8 million); and Component 3: Project Management (US$4.46 million). The Project is consistent with the IDA’s Country Partnership Framework (CPF) for 2018–2023. The CPF is organized around three areas: (i) strengthening the foundations of well-being; (ii) promoting inclusive and sustainable growth; and (iii) managing uneven development. The Project will support the second and third areas of engagement and IDA’s COVID-19 strategy for ‘Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development.’ Specifically, two pillars (protecting the poor by improving economic opportunities for the rural poor and securing foundations of the economy through infrastructure and social services development). It further supports IDA-19 priorities in the areas of governance and institutions, gender and climate change―all of which underscore key Fragility Conflict and Violence (FCV) drivers which have shaped the country’s institutional and social fragility.