Unlocking infrastructure potential in the Pacific: Challenges and strategic pathways

Co-authored by Solicitor, Jett Lobb

Home
Knowledge
Unlocking infrastructure potential in the Pacific: Challenges and strategic pathways

Unlocking infrastructure potential in the Pacific: Challenges and strategic pathways

Co-authored by Solicitor, Jett Lobb

{1B265A4F-BEED-4A06-882D-4BCFCC94229B}

August 15, 2025

Overview

Infrastructure is not just a development priority - it is the foundation of resilience, regional integration and economic sovereignty in the Pacific.

As global attention turns to climate adaptation and sustainable development, the Pacific presents a unique opportunity to align infrastructure investment with long-term strategic goals. This includes leveraging domestic capital, reforming State-Owned Enterprises (SOEs) and engaging multilateral institutions to unlock transformative infrastructure projects across sectors.

Infrastructure is also central to the Pacific’s ability to shape its own future amid shifting geopolitical dynamics, intensifying climate risks, and evolving trade and connectivity patterns. Infrastructure development in Pacific Island countries is entering a pivotal phase. While the region faces persistent challenges such as geographic isolation, limited technical capacity and constrained public finances, it also presents immense opportunities for transformative investment. A robust infrastructure pipeline is emerging across sectors including transport, energy, ICT, water and sanitation, education infrastructure, urban development and climate-resilient housing.

This article explores some of the existing barriers and the emerging opportunities across these sectors, highlighting the potential role of assets held by SOEs. It also examines how investment by Pacific superannuation funds and multilateral institutions can help unlock capital, catalyse reform and improve infrastructure outcomes for Pacific Island countries.

Key points

Pacific Island countries face persistent infrastructure challenges, including limited technical capacity, fragmented governance and constrained public finances.
Procurement processes often prioritise cost over quality, leading to inconsistent standards, reduced transparency and poor long-term outcomes.
Many infrastructure projects suffer from inadequate maintenance, poor equipment choices and lack of lifecycle planning, especially in energy projects.
Institutional constraints and vested interests in legacy systems can slow reform and hinder the adoption of resilient infrastructure solutions.
Financing remains a major hurdle, with concessional funding dominating and private investment constrained by risk perceptions and small market size.
Geographic isolation and harsh environmental conditions increase the cost, complexity and vulnerability of infrastructure assets.
Customary land ownership presents legal and cultural challenges to land access, requiring inclusive engagement and formalisation mechanisms such as SEZs.
Donor-driven standards may not align with local realities, underscoring the need for adaptable, context-sensitive approaches to infrastructure planning.
Regulatory fragmentation and lack of harmonised standards deter private investment and complicate regional cooperation.
Reliable data and digital monitoring systems are essential for effective planning, transparency and performance tracking.
Long project timelines, shifting specifications and coordination delays reduce implementation efficiency and impact.
Community engagement and local ownership are critical to infrastructure sustainability, with successful models involving churches, NGOs and local institutions.
Emerging technologies and financing models, including modular infrastructure, blockchain-based procurement and co-investment platforms offer scalable pathways for reform.
Strategic reform of State-Owned Enterprises (SOEs) and mobilisation of domestic capital through superannuation funds can unlock high-value infrastructure assets.
Multilateral institutions play a key role in enabling reform through blended finance, technical assistance and capacity building.
Regional infrastructure corridors, shared platforms and cross-border projects offer new opportunities for integration and resilience.

Key challenges

Despite the growing momentum for infrastructure investment, Pacific Island countries continue to face a range of enduring challenges that must be addressed to ensure project success and sustainability. These challenges span across all infrastructure asset classes, from energy and transport to water, sanitation and urban development.

Building institutional capacity and governance foundations

1. Limited local technical capacity

Many Pacific Island countries face constraints in local technical capacity across infrastructure sectors. This includes challenges in designing, assessing and managing projects in both traditional infrastructure such as transport and water, as well as renewable energy projects. While external consultants are often engaged, there is a growing need to build in-country expertise and institutional knowledge to ensure long-term sustainability.

The 2018 study by Michalena and Hills¹ reinforces this, showing that technical challenges are compounded by fragmented governance structures, lack of spare parts and inappropriate technology choices. Without robust local capacity, even well-funded projects risk failure within 3 - 5 years due to poor maintenance and system design.

2. Institutional and governance constraints

Local utilities and government agencies often lack the capacity to manage complex energy projects or enforce performance standards. Vested interests in existing fuel supply chains can resist the transition to renewables. There is a lack of mandated technical standards, accreditations and relevant training programs.

Despite the adoption of energy roadmaps and Nationally Determined Contributions², policy implementation remains slow. Delayed adoption of energy efficiency standards and shifting government priorities further hinder progress.

3. Regulatory and policy frameworks

Pacific Island countries face challenges in developing and enforcing comprehensive regulatory standards. For example, many jurisdictions lack harmonised standards for grid interconnection, renewable energy procurement and tariff structures.³ This regulatory fragmentation can deter private investment and complicate regional energy cooperation. Strengthening policy frameworks and aligning them with international best practices is essential to support sustainable infrastructure development.

4. Data and monitoring systems

Reliable data is essential for effective energy planning, monitoring and evaluation. Many Pacific Island countries face challenges in collecting and managing energy data, which hampers decision making and investment. Developing digital platforms and monitoring tools can improve transparency, track system performance and support evidence-based policy development.

Building local capacity is essential for the long-term success of infrastructure projects in the Pacific. This includes technical training, institutional strengthening, and knowledge transfer through regional partnerships. Programs led by multilateral institutions and universities, as well as diaspora engagement, can help develop the skills needed to manage complex infrastructure initiatives and ensure sustainability. Establishing regional centres of excellence and technical exchange programs can further institutionalise knowledge transfer, foster peer learning, and build a skilled workforce capable of managing and maintaining infrastructure systems across the Pacific.

Improving procurement, delivery and lifecycle planning

5. Procurement and tendering issues

Procurement processes in the Pacific face a range of challenges, including limited institutional capacity, a tendency to prioritise price over technical merit, and inconsistent application of procurement standards. While many dedicated professionals are working to improve outcomes, systemic issues such as resource constraints, fragmented oversight, and limited access to technical expertise continue to hinder the effectiveness of procurement systems.

Papua New Guinea has taken steps to address procurement challenges through the National Procurement Act 2018, which established the National Procurement Commission (NPC) and introduced a centralised framework for managing public procurement. The Act is aligned with international best practices and promotes principles of transparency, competition, accountability, and value for money. It includes provisions to reserve contracts below certain thresholds for national companies and citizens, aiming to build local capacity and participation in infrastructure delivery. While the Act applies to all public and statutory bodies, including SOEs, some SOEs perceive themselves as exempt due to their investment responsibilities. In practice, SOEs may only undertake procurement independently if certified by the Authority to Pre-Commit Committee. This has led to inconsistent compliance, reduced transparency, and concerns about political influence in major infrastructure contracts. The law does apply to SOEs when procurement is funded by the national budget, but enforcement remains uneven.

To improve procurement outcomes, especially for large-scale infrastructure and energy projects in Papua New Guinea, there is a growing need to

clarify the legal obligations of SOEs under national procurement laws;
strengthen the role of the NPC in monitoring and enforcing standards;
promote open and competitive bidding processes that balance cost with technical quality; and
build local capacity to manage complex tenders and contract oversight.

Reports from the Asian Development Bank (ADB) and the Pacific Region Infrastructure Facility (PRIF)⁴ continue to emphasise the importance of transparent and quality-based procurement frameworks. Independent auditing of completed projects is also essential to ensure long-term sustainability and public accountability.

6. Project sustainability and maintenance

A significant number of renewable energy projects fail prematurely due to lack of maintenance, poor-quality equipment and unsuitable designs. Long-term planning and support are essential to ensure systems remain functional beyond installation.

The PRIF cost analysis⁵ shows that efforts to minimise capital expenditure often result in higher operational costs and levelized cost of electricity, especially in solar-battery-diesel mini-grids. Lifecycle planning, including waste management for solar panels and batteries, is increasingly critical.

7. Slow project timelines

Project preparation and tendering can take years, with delays in approvals, land access and stakeholder coordination. Specifications and technical requirements often change, leading to retendering and renegotiation.

The Bougainville Infrastructure Agreement⁶ offers a model for accelerated delivery through public-private partnerships and integrated planning.

Mobilising finance and aligning expectations

8. Financing and risk allocation

Many infrastructure projects in the Pacific rely on concessional finance or grants due to Governments’ limited borrowing capacity. This creates a gap between the ambition for high-quality, climate-resilient infrastructure and the financial resources available to deliver it.

Private sector investment is essential to bridging this gap but is often constrained by high perceived risk, limited creditworthiness and small market size. Institutions such as the International Finance Corporation (IFC) are working to mobilise private capital through mini-grid tenders, blended finance and de-risking instruments. The Pacific Region Infrastructure Facility (PRIF) also recommends expanding retail lending through national development banks and microfinance institutions.⁷

A critical issue in renewable energy development is ensuring that retail electricity pricing is financially sustainable. Offtake arrangements must balance affordability for consumers with cost recovery for developers and utilities. In small island economies, where demand is fragmented and subsidies are often required, poorly designed tariffs can undermine uptake, increase business costs, and erode public support for energy transitions.

These pricing dynamics directly influence the pace of electrification, the competitiveness of local businesses, and the long-term viability of energy systems. Transparent tariff-setting mechanisms, long-term power purchase agreements (PPAs), and regulatory oversight are essential to ensure pricing supports both financial sustainability and equitable access. Development partners and Governments must also consider how pricing decisions will affect SMEs, public institutions, and vulnerable households during project design and procurement.

9. Mismatch between donor expectations and local realities

Development partners may push for high sustainability or climate standards that are difficult to implement in fragile or resource-constrained contexts. There is a need to balance ambition with practicality, especially in places with limited infrastructure or institutional support.

The 2018⁸ study critiques the focus on global climate mitigation over local adaptation, calling for culturally sensitive energy models and community-driven planning.

Navigating land tenure and environmental realities

10. Logistical and geographic challenges

Infrastructure in Pacific Island countries must contend with both geographic isolation and extreme environmental conditions. Remote island locations make project assessment, transport, and maintenance expensive and time-consuming. Harsh environmental factors such as salt air, cyclones, flooding, seismic activity, and sea-level rise demand robust engineering solutions. To ensure long-term functionality and safety, infrastructure must be designed with climate resilience in mind. This includes integrating disaster risk reduction strategies into energy planning, such as resilient system design, emergency response protocols, and adherence to engineering standards capable of withstanding natural disasters.

11. Customary land ownership

Customary land ownership presents a significant challenge to infrastructure development in Pacific Island countries. With over 80% of land held under customary tenure in many jurisdictions⁹ and approximately 97% in Papua New Guinea¹⁰, securing land access for energy projects often requires complex negotiations with local communities and traditional landowners. These processes can delay project timelines, increase transaction costs, and introduce legal uncertainties, especially where land boundaries are disputed or formal titles are lacking. In Papua New Guinea, non-citizens are prohibited from dealing directly with customary land, and while mechanisms exist for converting customary land (such as Incorporated Land Groups and lease-leaseback arrangements), they are often slow and contested. The most effective approach is for the State to compulsorily acquire land under the Land Act 1996 (PNG), creating secure underlying titles that enable infrastructure developers to engage with confidence.

Parts of the Papua New Guinea Government are advocating for Special Economic Zones (SEZs) as a strategic solution to these land challenges.¹¹ SEZs in Papua New Guinea provide a policy framework that facilitates the formalisation of customary land through recognised legal mechanisms, enabling infrastructure development while promoting inclusive landowner participation and minimising tenure-related risks. SEZs may also serve as platforms for cross-border infrastructure and regional logistics hubs, aligning with broader goals of Pacific integration and trade facilitation.

Decentralised energy solutions, such as solar-battery-diesel mini-grids, are increasingly viable. Floating solar, offshore wind and geothermal are being explored in countries like Fiji and Papua New Guinea.

Fostering community ownership and inclusive partnerships

12. Need for local engagement and ownership

Successful projects depend on strong local partnerships, including with NGOs, churches and community organisations. Projects that lack local buy-in or training components are less likely to be sustained.

All sources stress this as critical. Case studies from Papua New Guinea show that solar installations in schools and health centres are most successful when tailored to local needs and developed in partnership with community stakeholders.¹²

Emerging opportunities

Innovation in Pacific infrastructure delivery

Innovation is also reshaping infrastructure delivery in the Pacific. Modular infrastructure solutions, AI-driven asset management and blockchain-based procurement systems are being explored to enhance efficiency, transparency and scalability. Regional infrastructure corridors and cross-border projects, such as undersea cables and aviation agreements, offer new avenues for cooperation and integration. Shared infrastructure models, such as regional energy grids, joint aviation agreements, and harmonised digital platforms can reduce duplication, enhance resilience and foster deeper regional integration.

Despite the challenges, there are promising developments:

Green hydrogen is being scoped for export and domestic use in Papua New Guinea, Fiji and Vanuatu.
Battery Energy Storage Systems (BESS) are being deployed to stabilise grids.
Floating solar and offshore wind offer scalable solutions for land-constrained islands.
Digital infrastructure and smart grids are being piloted in places like Singapore and New Zealand, with potential applications in the Pacific. As digital infrastructure expands, Pacific Governments will also need to address data sovereignty, cybersecurity, and regulatory harmonisation to ensure resilience and trust in digital systems.
IFC-led mini-grid tenders and ADB’s AU$1 billion energy investment portfolio are helping scale up access and resilience.
Transport infrastructure including roads, bridges, and maritime facilities are being upgraded to improve connectivity and support economic development.
Major port and airport upgrades are underway in countries such as Fiji, Samoa and Papua New Guinea, aimed at enhancing trade capacity and regional integration.
Water supply and sanitation projects are being prioritised to improve public health and climate resilience, particularly in urban and peri-urban areas.
Urban development initiatives including climate-resilient housing and municipal infrastructure, are gaining traction through partnerships with multilateral banks and private investors.

These developments reflect a broader shift toward integrated infrastructure planning that supports sustainable growth and regional cooperation.

Role of State-Owned-Enterprises (SOES)

At the heart of the Pacific infrastructure opportunity are SOEs, which control many of the region’s most commercially viable assets. In some Pacific Island countries, SOEs may also be referred to as statutory authorities or government-owned corporations. SOEs are generally responsible for ports, airports, electricity grids and telecommunications networks. In Papua New Guinea, Kumul Consolidated Holdings (KCH) acts as the trustee shareholder for major SOEs, overseeing assets such as PNG Power, PNG Ports and Air Niugini. KCH plays a central role in corporatisation efforts and strategic investment planning. Though often underfunded and politically sensitive, the assets locked-up in SOEs are of the right scale and strategic importance needed to attract institutional investors. Reforming and unlocking these assets through corporatisation, joint ventures, long-term leases and public-private partnerships (PPPs) is one way to catalyse investment, improve service delivery and unlock capital for under-resourced Pacific Island countries. Reforming SOEs requires careful navigation of political sensitivities and vested interests. Hybrid models such as performance-based contracts, partial equity sales and management agreements can offer pathways to improve efficiency while maintaining public oversight. Successful reform efforts depend on transparent governance, stakeholder engagement and alignment with national development strategies.

Mobilising domestic institutional capital

Pacific superannuation and provident funds, collectively managing billions in assets, are increasingly seeking stable, long-term investments. These funds often face a shortage of investable assets, and unlocking high-value infrastructure held by SOEs presents a viable solution to meet their long-term investment needs. Through platforms like the Pacific Islands Investment Forum (PIIF), these funds are exploring co-investment models that allow for pooled capital deployment into infrastructure projects. This approach not only enhances liquidity and risk-sharing but also ensures that investment decisions are grounded in local expertise and long-term development goals.

Importance of project preparation

To unlock institutional capital, Pacific Island countries must also invest in upstream project preparation. This includes developing bankable feasibility studies, standardising procurement documentation and establishing project preparation facilities that can accelerate deal flow and reduce transaction costs.

Successful partnership models

Successful examples such as the PNGBC merger with Bank South Pacific and the 25-year concession between PNG Ports Corporation and ICTSI demonstrate how strategic partnerships can revitalise infrastructure, expand regional operations and deliver strong financial returns. These models offer replicable pathways for other Pacific Island countries seeking to balance public control with private sector efficiency.

Role of multilateral institutions

Multilateral institutions like the ADB, the IFC, the World Bank, the European Investment Bank and the Green Climate Fund continue to play a critical role in enabling reform. Their support includes PPP legislation, technical assistance, blended finance instruments, co-investment platforms, capacity building, feasibility studies, sovereign guarantees and climate adaptation planning. These mechanisms are designed to de-risk infrastructure projects and attract both domestic and international capital, while also strengthening institutional frameworks and long-term project viability.

Inclusive engagement and adaptive oversight

Inclusive engagement and adaptive oversight are essential to infrastructure success in the Pacific. Effective monitoring and evaluation ensure that investments deliver intended outcomes, while inclusive stakeholder engagement builds trust and relevance. This means involving communities early through consultation, maintaining transparent communication, and establishing benefit-sharing and grievance redress mechanisms. Community-led models and partnerships with NGOs, churches, and local organisations can enhance sustainability. At the same time, digital tools such as geospatial mapping, real-time dashboards, and open data platforms can support transparency, track performance and inform adaptive management.

Conclusion

The Pacific’s infrastructure transition is not just a technical or financial challenge, it is a governance, cultural and strategic one. Success will depend on aligning donor ambitions with local realities, building institutional capacity and fostering inclusive partnerships. With the right mix of policy reform, financing innovation and community engagement, Pacific Island countries can chart a resilient and sustainable future. A comprehensive approach that integrates infrastructure reform, investment readiness and regional cooperation will be essential to unlocking the Pacific’s full potential. Policymakers and development partners should consider:

strengthening local technical and institutional capacity;
reforming SOEs through hybrid investment models;
mobilising domestic capital via superannuation fund co-investment;
enhancing procurement transparency and quality standards;
investing in digital monitoring and evaluation systems;
fostering inclusive stakeholder engagement and community ownership; and
aligning infrastructure planning with regional cooperation frameworks.

The scale of the 2025 Pacific Infrastructure Conference underscores the urgency, and opportunity for a broader conversation on creating fit-for-purpose investment vehicles tailored to Pacific Island needs.