Grant Assistance Report

Project Number: 40037 November 2007

Proposed Grant Assistance Papua : Port Livelihood and Social Improvement Project (Financed by the Japan Fund for Poverty Reduction) CURRENCY EQUIVALENTS (as of 31 October 2007 )

Currency Unit – kina (K) K1.00 = $0.357 $1.00 = K2.797

ABBREVIATIONS

ADB – Asian Development Bank IPBC Independent Public Business Corporation JFPR – Japan Fund for Poverty Reduction NGO – nongovernment organization MPA – Morobe Provincial Administration MPG – Morobe Provincial Government PMU – project management unit PNG – PPCL – PNG Ports Corporation Limited SOE – statement of expenditures

NOTES

(i) The fiscal year (FY) of the Government of Papua New Guinea ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2007 ends on 31 December 2007.

(ii) In this report, “$” refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations Group 2 Director General P. Erquiaga, Pacific Department (PARD) Director I. Bhushan, Pacific Operations Division, PARD

Team leader L. Cai, Infrastructure Specialist, PARD Team members K. Schmidt-Soltau, Social Development Specialist (Safeguards), Regional and Sustainable Development Department Map 1 o o 4 00'S 10 00'S Arawa BOUGAINVILLE N Buka Kilometers 0 50 100 150 200 PAPUA NEW GUINEA PAPUA o o LAE PORT LIVELIHOOD AND LAE PORT LIVELIHOOD 152 00'E 152 00'E EAST NEW BRITAIN SOCIAL IMPROVEMENT PROJECT SOCIAL CORAL SEA MILNE BAY NEW IRELAND SOLOMON SEA WEST NEW BRITAIN National Capital Provincial Capital City/Town National Road River Provincial Boundary International Boundary ORO Boundaries are not necessarily authoritative. CENTRAL Project Area BISMARCK SEA o 0 Lae o o 20 00'S 10 00'S MOROBE MANUS DISTRICT o COOK 20 00'N ISLANDS KIRIBATI NATIONAL CAPITAL o o ver EASTERN HIGHLANDS 170 00'W 170 00'W PACIFIC REGION TONGA Ramu Ri GULF International Dateline MADANG SIMBU Gulf of Papua FIJI TUVALU OF THE ISLANDS REPUBLIC WESTERN HIGHLANDS o o ri River South Pacific Ocean Mt. Hagen 144 00'E 144 00'E Kiko ISLANDS SOLOMON MARSHALL ISLANDS

ENGA iver Sepik River VANUATU SOUTHERN HIGHLANDS

EAST SEPIK Bamu R MICRONESIA o o Aitape Coral Sea 150 00'E 150 00'E FEDERATED STATES OF North Pacific Ocean

r PAPUA WESTERN

Rive NEW GUINEA ly F SANDAUN Ok Tedi OF PALAU REPUBLIC INDONESIA o Sea o o 400'S o 20 00'S 20 00'N INDONESIA 0 Philippine 07-3981 RM Map 2

144o 00'E 152o 00'E

Lorengau Kavieng Aitape Bismarck Sea 4 o 00'S 4 o 00'S PAPUA NEW GUINEA Rabaul Madang LAE PORT LIVELIHOOD AND Mt. Hagen Goroka Kimbe SOCIAL IMPROVEMENT PROJECT Lae Kieta PAPUA NEW GUINEA Project Area Marobe Solomon Sea

Gulf of Popondetta Daru Papua PORT MORESBY Oro Bay 10o 00'S 10o 00'S

Coral Sea o 144 00'E 152o 00'E Resettlement Site

MALAHANG

ERIKU

BUSU HANTA YANGA RAUNWARU

BUTIBAM

Papuan Compound

PROJECT AREA China Town BUMBU Market Stadium WAGAN Markhan Riv Old New er

Canoe Landing Site

Huon Gulf

Project Area National Highway Built-up Area Main Road Affected Settlement Area Secondary Road N Canoe Landing Site River National Capital City/Town Boundary City/Town International Boundary Boundaries are not necessarily authoritative. 0 0.5 1 1.5

Kilometers

07-4142a HR JAPAN FUND FOR POVERTY REDUCTION (JFPR) CITY O JFPR Grant Proposal Papua N

I. Basic Data Name of Proposed Activity Lae Port Livelihood and Social Improvement Project Country Papua New Guinea Grant Amount Requested $1.5 million Project Duration 3 years Regional Grant { Yes / z No Grant Type z Project / { Capacity building

II. Grant Development Objective(s) and Expected Key Performance Indicators Grant Development Objectives:

The key objective of the JFPR Project is to extend the benefits of the Asian Development Bank’s (ADB) Lae Port Development Project to some of the poorest communities in Lae in Papua New Guinea, and to strengthen the port Project’s impact on poverty reduction. The JFPR Project will provide: (i) enhanced social infrastructure and services to people resettled from a swamp and other poor communities, (ii) income-generating opportunities to three Labu villages that live on subsistence agricultural and fishery, (iii) livelihood enhancement training for women and men, and (iv) independent monitoring by a nongovernment organization (NGO). Expected Key Performance Indicators :

(i) Three schools and one health clinic expanded; (ii) Microcredit provided to up to 200 families; (iii) Training provided for 700 women and 150 men in health and vocational skills; (iv) Training and assistance given for home food processing, agricultural demonstration plots with marketing support for the raising of chickens, pigs and rabbits and the cultivation of vegetables, and assistance and demonstration trials provided for floating fish cages in lagoons for the Labu villages; and (v) Independent monitoring reports produced.

III. Grant Categories of Expenditure, Amounts, and Percentage of Expenditures Amount of Grant Allocated Percentage of Category in $ Expenditures 1. Civil works 695,218 46 2. Goods 69,450 5 3. Consulting services 400,290 27 4. Training 152,071 10 5. Contingency 182,971 12 Total 1,500,000 100 2

JAPAN FUND FOR POVERTY REDUCTION

JFPR Grant Proposal Background Information

A. Other Data

Date of Submission of 1 June 2007 Application Project Officer Cai Li, Infrastructure Specialist Project Officer’s Division, PAHQ, [email protected], 632-5254 E-mail, Phone Other Staff Who Will Need Access to Edit/Review the Cecile Bantugon, Neille-Ann Aurora Villanueva, Elizabeth Li Report Sector Education; health, nutrition, and social protection; agriculture and natural resources Subsector Basic education, health programs, fishery Themes Inclusive social development, gender and development Subthemes Human development, gender equity in opportunities Targeting Classification Targeted intervention (non-income MDGs [TI-M]) Was JFPR seed money used Yes [ X ] No [ ] to prepare this grant proposal? Have SRC comments been Yes [ X ] No [ ] reflected in the proposal? Name of Associated ADB Lae Port Development Project Financed Operation(s) Executing Agency Morobe Provincial Administration Grant Implementing Agency Morobe Provincial Administration Mr. Patilius Gamato Phone: (675) 473 1822 [email protected]

B. Details of the Proposed Grant

1. Description of the Components, Monitorable Deliverables/Outcomes, and Implementation Timetable

Component A Component Name Improving Social Infrastructure and Services for the Poor Communities Cost ($) 649,048 Component Description A1. Expanding School and Health Facilities

Education and health are basic social services, and are important for poverty reduction. The relocation of 482 households with a population of 2,912 to as part of the Lae Port Development Project will stretch existing school and health facilities in that area. The component will expand 3

the Bowali elementary and primary schools, Malahang Technical School, and Malahang clinic to accommodate 473 more pupils and additional demand for health services.

A2. Providing Community Infrastructure for All

Urban populations in the resettlement area do not have community infrastructure. This component will build a sports area and a community center, and will provide a roof, and water and electrical service to improve an existing market.

Monitorable Deliverables/ A1. Expanding School and Health Facilities for Children’s Outputs Education

1. Four hundred seventy-three additional children enrolled in the schools. 2. Six class rooms built for three schools. 3. Ten houses for teachers constructed at the schools. 4. Additional teachers provided by the government. 5. Malahang clinic expanded.

A2. Provision of Community Facilities

1. A 200-square-meter community center and a sports area provided. 2. A roof provided for the existing market. 3. Service utilities provided for the community center. Implementation of Major Activities: Number of months 36 Months for grant activities

Component B Component Name Income Improvement Cost ($) 430,471 Component Description B1. Agricultural Extension for Resettlers

Income generation is fundamental to alleviating poverty. This component will assist in small-scale agricultural and animal husbandry. It will set up demonstration plots for the husbandry of chickens, ducks, rabbits, and fish, and provide training and extension services to the communities in home processing of food products for sale, including chips, jam, dried fruits, snacks, fruit juices, and cookies. The National Agricultural Research Institute will provide most of these services.

B2. Agricultural Extension for Labu Villages

The people of the three Labu villages, about 2 kilometers from the project area, are poor. The crops they cultivate and the animals they raise are used mostly for subsistence. Their 4

productivity can be increased to respond to high demands for vegetable and meat products through improved cultivation and husbandry techniques and the marketing of their products to provide them with cash income. The National Agricultural Research Institute will provide most of these services.

B3. Community-Based Floating Fish Cages for Labu Villages

The Labu people are primarily engaged in fishing. The component will help them increase their incomes by establishing community fish cages in the lagoons near their villages. Activities will include: (i) construction and operation of the demonstration floating fish cages, (ii) provision of resources to set up 10 community-managed floating fish cages, and (iii) assistance in fish processing and marketing. A fishery specialist with the appropriate technical knowledge will be engaged to provide assistance.

B4. Microcredit Program for Resettlers and Labu People

Microcredit has proved to be an effective means to alleviate poverty. Wau Microbank Limited is the only bank in Lae providing microcredits. Under this component, the Morobe Provincial Administration (MPA) will provide a grant to the bank as a deposit to ensure that applicants from the two communities to be affected can access credits to set up and finance businesses without collateral. An NGO will be engaged to give business training and help applicants fill in the necessary bank forms and documents with the extensive information required. Wau Microbank Limited will be required to target women applicants from the two communities for 3 years. After 3 years, it will be allowed to open the program to poor applicants from other communities to increase the impact on poverty reduction. The exit strategy will be spelled out in the memorandum of understanding that will be signed between the Morobe Provincial Administration and Wau Microbank Limited. Monitorable Deliverables/ B1. Income Improvement for the Resettlers Outputs 1. Demonstrations for animal husbandry and demonstration plots for vegetable production. 2. Demonstrations and training in the small-scale home processing of food products. 3. Volume of pigs, chickens, rabbits, and vegetables sold monthly.

B2. Agricultural Extension for Three Labu Villages

1. Demonstrations for animal husbandry and vegetable production. 5

2. Volume of pigs, chickens, rabbits, and vegetables sold monthly.

B3. Community-based Floating Fish Cages for Labu Villages

1. Aquaculture extension assistance. 2. Ten community-managed floating fish cages for community operation. 3. Advice and assistance in processing fish for sale. 4. Assistance to the communities to market these fish products.

B4. Microcredit Program

1. Wau Microbank Limited in Lae determining eligible borrowers, providing credit to small-scale businesses from the targeted communities with no collateral and no individual deposits, and monitoring the businesses and repayment. 2. NGO providing business training and assisting in completing the required bank forms.

Implementation of Major Activities: Number of 36 Months months for grant activities

Component C Component Name Livelihood Enhancement Training for the Resettlers Cost ($) 87,510 Component Description C1. Livelihood, Health, and Nutrition Training for Women

Women have an important role in families and society. The component will give women skills training and short courses on child care, HIV/AIDS awareness, health, nutrition, sanitation, community responsibilities, sewing, and cooking. Activities will include livelihood and skills training for female trainers in a 1- year program to be carried out by the Catholic Women’s Association. The women will take courses in sewing, tourism, basic English, and basic math. The trained women will assist others. Women will also receive 6-week courses at the community center on HIV/AIDS awareness, health, nutrition, sanitation, sewing, cooking, child care, and community responsibilities.

C2. Vocational Training for Men

Based on market demand, the component will equip men with vocational skills so that they can contribute to their families and society. Activities will include (i) vocational training of 1 6

year for young men at the Youth Development Center at 3- Mile, and (ii) technical training lasting 1 year for men at the St. Joseph Technical School in the metal work, motor mechanics, carpentry and joinery trades. Monitorable Deliverables/ Livelihood Training Outputs 1. Candidates selected by the communities. 2. Skills training provided to 40 women each year for 2 years. 3. Twenty-four short training courses conducted for women—26 women at a time. 4. Three 1-year vocational training courses provided to 75 young men at the Youth Development Center. 5. Three 1-year vocational training courses for 75 men provided at the St. Joseph Technical School. Implementation of Major Activities: Number of 36 Months months for grant activities

Component D Component Name Monitoring of Resettlement and Livelihood Improvement Cost ($) 150,000 Component Description External independent monitoring is a good way to enhance project effectiveness. JFPR offers an opportunity for ADB to engage a monitoring agency directly, which will ensure independent monitoring and evaluation, and timely identification and correction of problems. Under monitoring financed by an ADB loan, the contract would be between the Executing Agency and the monitoring agency, which could subject monitoring and evaluations to the Executing Agency’s influence. Monitorable Deliverables/ Monthly and quarterly monitoring reports, and a final evaluation Outputs report to the Implementing Agency, and to ADB for review and disclosure on ADB website. Implementation of Major Activities: Number of 36 months months for grant activities

2. Financing Plan for Proposed Grant to be Supported by JFPR

Funding Source Amount ($) JFPR 1,500,000 Government 271,000 Community Contribution 19,000 Total 1,790,000 ADB = Asian Development Bank, JFPR = Japan Fund for Poverty Reduction, HIV/AIDS = human immunodeficiency syndrome/acquired immune deficiency syndrome, NGO = nongovernment organization. 7

3. Background

1. At the request of the Government of Papua New Guinea (PNG), and in line with the Asian Development Bank’s (ADB) country strategy and program (CSP) for PNG 2006–2010,1 ADB is preparing the Lae Port Development Project (the Loan Project) to relieve a key infrastructure bottleneck. The Project involves construction of new port facilities in a swamp area now occupied by 482 households with a population of 2,912 from various provinces of PNG. They are among the poorest of PNG’s people and have lived in an unhealthy environment for more than two decades. They will be relocated under the Loan Project, and are qualified as directly affected people, according to ADB’s Involuntary Resettlement Policy (1995).

2. The Labu people with a population of about 3,000 live about 2 kilometers (km) from the project area, existing mainly on subsistence agriculture and fishery. They will lose a canoe landing site and a nearby fish market under the Loan Project, and are qualified as indirectly affected people, according to ADB’s Involuntary Resettlement Policy.

3. The Loan Project will provide 700 square meters of land and a basic one-bedroom house for each resettled household. It will also compensate Labu people with an alternative landing site and a fish market. The land for resettlement will be leased by the Government of PNG (the Government) from the Ahi people at full replacement costs.

4. The JFPR Project will target the resettlers and the Labu people. It is linked closely with, and complements, the resettlement program of the Loan Project to ensure livelihood sustainability for resettlers, and to help the Labu people transform their production system and move from a subsistence to a cash-based economy. It will have positive externalities, and spread benefits to contractors, consulting firms, training institutes, and communities. It will also reduce social tensions.

5. The Project’s design is based on broad consultations. Although education and health care are basic social services, schools and health facilities in the resettlement site area are already overcrowded. To accommodate 482 resettled households, and provide better social services to the surrounding communities, they will be expanded. To improve living standards and give people opportunities to participate in economic development, the Project also includes training in agriculture and animal husbandry, a microcredit program, the establishment of a community fish culture enterprise, and vocational training for women and men.

4. Innovation

6. The JFPR Project will engage a NGO to document the effort of ADB’s Loan Project to enhance the living condition of landless populations in the project area. This innovation will reinforce the effort of the Loan Project to introduce international best practices in resettlement programs to PNG and enable the Government to formulate laws and regulations on resettlement. The resettlement in Lae could serve as a model for the Government’s administration of development projects, and for its management of the growing problem of landlessness in the country.

7. A second innovative feature will be the introduction of floating fish cage aquaculture as a new approach to improve the livelihood of poor fishermen in the country.

1 ADB. 2006. Papua New Guinea: Country Strategy and Program for Papua New Guinea, 2006–2010. Manila. 8

8. Independent external monitoring is also an innovation, and important to ensure that the intervention programs under the Loan and JFPR Projects are executed properly and funds are spent on the intended purposes. The JFPR financing will allow the monitoring agency to be accountable, and report, directly to ADB and the Government of Japan, and to provide unbiased implementation assessment.

5. Sustainability

9. The JFPR Project will be sustainable because it is built on the Five-Year Development Plan (2003–2007) of the Morobe Provincial Government. The plan’s goals include:

(i) Increasing the number of farmers involved in organized cash crop farming and livestock activities, and expanding marketing facilities; (ii) Increasing commercial small-scale fishing activities by people in coastal and inland areas; (iii) Increasing small-scale industry development in all districts, and implementing microfinance schemes; (iv) Reducing maternal and child mortality rates, and the incidence of five diseases common in the province; (v) Increasing the number of health facilities, including aid posts and rural hospitals; (vi) Increasing health awareness in district and local government health programs; (vii) Improving access to education for all, and increasing appropriate skill development training, based on employment needs in the public and private sectors; and (viii) Increasing organized activities for women.

10. The provincial government has agreed to partner with ADB to provide teachers and health workers to sustain the social services. With knowledge transfer and virtuous cycles established, livelihood training and income enhancement components will be self-sustainable.

6. Participatory Approach

11. The JFPR Project was based on wide consultation with a broad range of stakeholders, including provincial government agencies, resettlers, and the Labu people. Three meetings were held with the people to be resettled, and their leaders, during visits to the affected communities of Maus Markham, Wara Tais and Sodas. A public hearing attended by 200 members from the three resettling villages and the three Labu villages was held in January 2007. Consultations with the leaders of Ahi and Labu people occurred on a daily basis.

12. ADB missions and the project preparatory technical assistance consultants met more than 30 times with the NGOs, including Soroptimist International, Habitat for Humanity, Morobe Provincial HIV/AIDS Council, Catholic Education Center, Adventist Development Relief Agency, Lae Chamber of Commerce and Industry, Save the Children, the Young Women Christian Association, and the Wau Microbank Limited.

13. Frequent meetings were held with officials from the Morobe Provincial Administration, Morobe Planning Board, Administration, Department of Police (community liaison unit and the community policing unit), Department of Education, Provincial Administration’s community development unit, and others. 9

Primary Beneficiaries and Other Affected Other Key Stakeholders and Brief Groups and Relevant Description Description (i) The resettlers: 482 households with a (i) Morobe Provincial Administration and Lae population of 2,912 from the three District Administration, who have the settlements of Maus Markham, Wara Tais, responsibility to provide social services, and Sodas. and promote economic and social (ii) The Labu people with a population of development in the province and Lae city. 3,000 living on the western side of the (ii) Independent Public Business Corporation . (IPBC), the Executing Agency for the Loan Project. (iii) PNG Ports Corporation Limited (PPCL) that has the mandate to manage port infrastructure. (iv) The Government of PNG.

7. Coordination

14. In the process of preparing the Loan and JFPR Projects, ADB project team coordinated and consulted closely with major agencies to coordinate and complement the efforts and maximize the comparative advantages of the organizations. At an early stage, the ADB Mission made a joint presentation about the Project, with Australian Agency for International Development, to a wide range of agencies, and sought their insights. They included World Bank, International Monetary Fund, Japan International Cooperation Agency, World Health Organization, and UNDP.

15. Consultation meetings with Mr. Tomonori Mashita, Third Secretary from the Japanese Embassy in PNG, were held three times. Mr. Koki Okawa, First Secretary, joined once. At the meetings, the Mission briefed on the progress of the Loan Project, the preparation of the JFPR Project, and its rationale and components. The Mission also sought guidance on eligible costs. The draft Memorandum of Understanding of ADB’s Loan Fact-Finding Mission, which included a draft JFPR program, was sent to the Japanese Embassy for prior review and comments.

8. Detailed Cost Table

16. Please refer to Appendix 2 for the detailed cost estimates, and Appendix 3 for the Fund Flow Arrangement.

C. Link to ADB Strategy and ADB-Financed Operations

1. Link to ADB Strategy 17. PNG is an island nation in the Pacific region. Its territory comprises the eastern half of New Guinea and 600 offshore islands, with a landmass of 462,000 square kilometers. It accounts for more than 80% of the total land area in the South Pacific, and has the largest fishing zone in the Pacific, formed by more than 17,000 km of coastline and 17 million hectares of reef-covered coastal waters. Of its 20 provinces, 15 are located on the coast. More than 60% of its 6 million people are widely dispersed across islands, coral atolls and along the banks of major rivers. There is no national rail or road network. Although 46 airports and many airstrips serve a network of scheduled, charter, and missionary air services, including some to very remote communities, the costs of air transport prohibit all but emergency trips. 10

18. The port sector plays a crucial role in the social and economic development of PNG. It is important not only for adequate and efficient handling of exports and imports, but also for the efficient movement of goods and people between the centers of economic activities and the country’s remote and sparsely populated areas, both on the mainland and on the islands. Lae port is PNG’s largest, busiest, and most important port. It handles about half of the total throughput of the 22 declared ports and more than 60% of the total international and coastal trade registered in the ports managed by PPCL, and generates over 50% of PPCL’s total revenue. It serves as a gateway linking the world market with a large hinterland comprising the city of Lae, which is PNG’s industrial and commercial center, , and five resource-rich Highlands provinces. The region is home to about half of PNG’s population and represents 50% of PNG’s territory.

19. Since 1995, Lae port has experienced rapid annual growth in containerized cargo of more than 5%. General cargo has increased by 2.5% per annum. Cargo volume reached 2.4 million revenue tons in 2005, stretching Lae port to its limits. With PNG’s economic prospects remaining strong, and the region experiencing a boom in development, the problem is expected to get worse. Unless capacity is expanded and management efficiency is improved, the bottleneck in Lao port will stifle PNG’s economic growth.

20. ADB’s CSP for PNG 2006–2010 focuses on four strategic areas: (i) public financial management, (ii) private sector development, (iii) the transport sector, and (iv) health and HIV/AIDS. It recognizes that the maritime subsector is critical to PNG’s economy, and that ADB should continue to focus on road and maritime subsectors. Specifically, ADB would support the Rehabilitation Project and Lae Port Development Project.

Document Date of Last Document Objective(s) Number Discussion ADB Country Sec. M58- June 2006 Key objective is to help the Government to Strategy and 06 meet its Mid-Term Development Strategy Program goals of (i) good governance, (ii) export-driven (CSP) 2006– economic growth, (iii) rural development, 2010 poverty reduction, and human resource development. Five-Year Five key objectives: Development Plan 2003– (i) To improve the health of the people, 2007 of (ii) To increase access to educational Morobe services and provide more appropriate Provincial education and better operated schools in Government the province, (iii) To encourage and promote opportunities for income earning and business development in the communities, (iv) To improve and increase agriculture and livestock production, and (v) To promote development of fisheries and marine resources for income-earning opportunities for both coastal and inland fishing populations. 11

2. Link to Specific ADB-Financed Operation

Project Name Lae Port Development Project Project Number 40037 Date of Board Approval 18 December 2007 Loan Amount ($ million) $100 million

3. Development Objective of the Associated ADB-Financed Operation

21. ADB’s Loan Project will aim at promoting trade and industrial and commercial development by relieving a key port infrastructure constraint for PNG. It will finance new port facilities that will bring long-term benefits to the Government, local communities, and the business sector. Resettlement and JFPR activities will extend benefits to settlers and other segments of society, and improve the impact of the Loan Project on poverty reduction.

4. Main Components of the Associated ADB-Financed Operation

No. Component Name Brief Description 1. Port Infrastructure Construction of: a tidal basin (700x400 meters [m]) located to the northwest of the existing port facilities with a dredged depth of 13 m below Chart Datum; a multi-purpose berth (240 m long and 45-50 m wide); and terminal works including all buildings, storage area, roads, drainage, water, electrics, and sewerage services. The tidal basin and berth are designed to accommodate vessels with an overall length of 200 m, beam of 32.2 m, and fully laden draft of 12 m. Flexibility has been built in for: (i) extending the berth by another 150 m without incurring dredging cost, (ii) introducing rail-mounted quayside gantry cranes, heavy mobile cranes, and heavier handling equipment, and (iii) fufure deepening of depth to 15 m below Chart Datum. 2. Resettlement Resettlement site preparation, house provision, relocation, and alternative landing site preparation. 3. Project Management International and national consulting services for project implementation, financial management, construction supervision, resettlement, and socioeconomic impact monitoring.

5. Rationale for Grant Funding versus ADB Lending

22. PNG is a poor country with limited debt repayment capacity. For sound macroeconomic management, the Government is continuing with its debt reduction strategy and limiting its borrowing for strategic projects only. Resettling landless urban dwellers is not the Government’s priority and execution is generally below international standards. Based on an extensive policy dialogue, the Government is willing to finance the resettlement costs from the ADB loan; however, it wishes to receive grants to finance activities that it considers luxuries but which, in 12

ADB’s view, are necessities. Without the JFPR grant, livelihood restoration and income generation activities are at risk, and the number of beneficiaries will be reduced.

D. Implementation of the Proposed Grant

1. Provide the Name of the Morobe Provincial Administration Implementing Agency

23. All procurements under the JFPR grant will be conducted in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Local NGOs and consultants will be contracted by Morobe Provincial Administration in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).

2. Risks Affecting Grant Implementation

Type of Risk Brief Description Measures to Mitigate the Risk

Procurement and The Implementing Agency may (1) Procurement training; Construction not be familiar with ADB’s (2) Appropriate packaging of Risks. procurement policies. contracts; (3) Using the standard bidding documents and contracts developed by the Implementing Agency, to the extent possible. The standard bidding documents need to be approved by ADB; and (4) Using consulting services for construction supervision.

3. Incremental ADB Costs

24. No incremental ADB costs are expected.

4. Monitoring and Evaluation

Key Performance Indicator Reporting Mechanism Plan and Timetable for M&E 1. Expansion of school facilities Progress reports by the Monthly progress report. and health center. Implementing Agency.

NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 2. Government’s provision of Progress reports by the Monthly progress report. additional teachers and nurses, and Implementing Agency. operation and maintenance budget. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 13

Key Performance Indicator Reporting Mechanism Plan and Timetable for M&E 3. Attendance at schools by Progress reports by the Monthly progress report. children from the resettled families. Implementing Agency.

NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB 4. Provision of skills training for Progress reports by the Monthly progress report. women, short course for women, Implementing Agency. vocational training for young men and technical school for men. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 5. Provision of funds to Wau Progress reports by the Monthly progress report. Microbank Limited to set up an Implementing Agency. account to provide micro credits. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 6. Provision of agricultural, animal Progress reports by the Monthly progress report. husbandry, and food process Implementing Agency. training, demonstration trials, and extension assistance. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 7. Provision of assistance and Progress reports by the Monthly progress report. demonstrations for the floating fish Implementing Agency. cages in the lagoons near the Labu villages. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB. 8. Construction and operation of 10 Progress reports by the Monthly progress report. community-based floating fish Implementing Agency. cages, and fish marketing. NGO’s independent Monthly monitoring and monitoring reports. reporting to ADB.

5. Estimated Disbursement Schedule

Fiscal Year (FY) Amount ($) FY2008 0.7 million FY2009 0.5 million FY2010 0.3 million Total Disbursements 1.5 million

------Appendixes 1. Summary Cost Table 2. Detailed Cost Estimates and Contract Packages 3. Fund Flow Arrangement 4. Implementation Arrangements 14 SUMMARY COST TABLE ($) Appendix Appendix 1

Component A: Component C: Component D: Grant Components Improving Social Livelihood Monitoring of Component B: Total Infrastructure and Enhancement Resettlement and Income Improvement (Input) Inputs / Expenditure Category Services for the Poor Training for the Livelihood Communities Resettlers Improvement

1. Civil Works 602,218 93,000 695,218

2. Equipment and Supplies 31,000 23,250 15,200 69,450

3. Training, Workshops, Seminars, and Public Campaigns 79,761 72,310 152,071

4. Consulting Services 15,830 234,460 150,000 400,290

5. Grant Management 0

6. Other Inputs 0

Subtotal JFPR Grant Financed 649,048 430,471 87,510 150,000 1,317,029 7. Contingencies (0–10% of total estimated grant fund): 182,971 Use of Contingencies requires prior approval from ADB. Total JFPR Grant Financed 1,500,000

Government Contribution (salaries for government staff) 271,000

Community Contribution 19,000

Total Estimated Costs 1,790,000 ADB = Asian Development Bank, JFPR = Japan Fund for Poverty Reduction. Source: ADB estimates. DETAILED COST ESTIMATES AND CONTRACT PACKAGES ($) Costs Contributions Quantity Cost Total JFPR Other Code Supplies and Services Rendered Unit Government Communities Units Per Unit $ Amount MOP Donors

A. Component A1: Expanding School and Health Facilities Subtotal 426,623 426,623 0 0 0

1. Civil Works a. School expansion 3 382,000 NCB b. Expansion of Malahang Clinic 1 34,218.0034,218 34,218 Shopping

2. Consulting Services a. Construction supervision 10,405 SSS

B. Component A2: Providing Community Infrastructure for All Subtotal 222,425 222,425 0 0 0

1. Civil Works a. Sport area 1 31,000.00 31,000 Shopping b. Market 1 62,000.00 62,000 Shopping c. Community center (200 square meters) 1 93,000.00 93,000 Shopping

2. Equipment and Supplies a. Service utilities year 31,000

3. Consulting Services a. Construction supervision 5,425 SSS

C. Component B1: Agricultural Extension for Resettlers Subtotal 96,906 96,906 SSS 0 0 0

1. Training, Workshops, and Seminars a. Broiler and vegetable production, duck, rabbit husbandry, aquaculture, program 7 5,814.00 40,701 and food processing

2. Consulting Services a. Extension/outreach program and assistance in marketing products year 1 56,205

D. Component B2: Agricultural Extension for Labu People 93,000 93,000 SSS 0 0 0

1. Training, Workshops, and Seminars a. Broiler and vegetable production, duck and rabbit husbandry, aquaculture, and food processing 39,060 Appendix 2 2 Appendix 2. Consulting Services a. Extension/outreach program and assistance in marketing products 53,940 15 16 Appendix 2

Communities Other Donors 00 0 00 0 00 0 Government JFPR Amount MOP Cost Total Costs Contributions Units Per Unit $ Quantity women 120 201.00 24,120 s women 104 62.29 6,478 weeks over 2 year over weeks ses on child care for women forses on child care for 6 women f. Four short course on community responsibilities for 6 weeks over 2 women 104 62.00 6,448 f. Per diem for technical staff day 100 31.00 3,100 c. Four short courses on HIV/AIDs for forwomen 6 weeks over 2 years women 104 62.00 6,448 c. Per diem for aquaculturist day 60 108.50 6,510 d. Four short courses on health, nutrition, and sanitation fore. 6 weeks Four short courses on sewing, cooking, and child care for 6 weeks women women 104 104 62.00 62.00 6,448 6,448 a. Skills training (TOT) for 1-year program forb. 3 yearsover women Four short cour a. Grant to Wau Microbank Limited for revolving fund grant 1 41,300.00 41,300 a. Initial survey to determine fish speciesb. Aquaculturist for fish cage cultivationd. Fish marketingspecialist e. Technical staff forassistance extension Survey day 1 day 5,255.00 60 100 5,255 620.00 day 46.50 37,200 25 4,650 620.00 15,500 a. NGO assisting applicants for credit month 36 300.00 10,800 a. 500 fingerlings per cageb. Fish foodLae producedin cage kg 30 15,000 310.00 0.93 9,300 13,950 a. Single cage floating fish cages cage 30 3,100.00 93,000 Code and Services Rendered Supplies Unit 1. Training, Workshops, and Seminars Workshops, and Training, 1. G. Component C1: Livelihood, Health, and Nutrition for Women Health, and G.Livelihood, C1: Component Subtotal 56,390 56,390 SSS 2. Inputs (Specify) Other Project 3. Consulting Services F. B4: Component Micro-Credit Program for Resettlers PeopleLabu and Subtotal 52,100 52,100 SSS 1. Consulting Services 2. Equipment and Supplies and 2. Equipment 1. Civil Works 1. Civil E. Component B3: Community-Based FloatingE. B3: Component Fish Cages forCommunity-Based Labu Villages Subtotal 188,465 188,465 ICS Appendix 2 17 Communities Other Other Donors 00 0 00 0 Contributions Government JFPR = method of procurement, SSS = single source 000 271,000 19,000 ion or an individual), TOT = training of trainers. Amount MOP 150,000 1,500,000 1,500, Cost Total Subtotal 31,120 31,120 SSS Subtotal 150,000 150,000 CQS Costs Units Unit Per $ Quantity men 52 249.16 12,956 Portable machines, welding hand drills, grinder, etc. center) (youth Portable machines, welding hand drills, grinder, etc. (technical school) tools toolsVocational training for 2 years 1 year over Technical training in metal work, carpentry mechanics, for over 1 year 2 years 1 1 12,000.00 3,200.00 12,000 3,200 men 52 57.00 2,964 Consulting Services Components A to D = Subtotal to D A Components Contribution) of total JFPR 12% (Maximum Contingency Total 182,971 Subtotal 1,317,029 a. b. a. b. a. H. Component C2: Vocational Training for Men 1. Equipment and Supplies and 1. Equipment Seminars and Workshops, 2. Training, I. Component D: Monitoring of Resettlement and Livelihood Improvement I. Monitoring of D: Resettlement Livelihood Component and Code Rendered Services and Supplies Unit CQS = consultants’ qualifications selection, ICS = individual consultant election, JFPR = Japan Fund for Povertyselection, ICS = individual consultant CQS = consultants’ Reduction, qualifications MOP either because the amountselection (justified is less than $100,000 or because the expertise is only with a specific organizat Source: Asian Development Bank estimates. 18 Appendix 3

FUND FLOW ARRANGEMENT

1. The Asian Development Bank (ADB) will channel the Japan Fund for Poverty Reduction (JFPR) funds directly to a JFPR imprest account, which will be opened and maintained by IPBC’s project management unit (PMU), at a bank endorsed by IPBC and acceptable to ADB, to facilitate day-to-day local expenditures of the JFPR Project. The imprest account will be established, managed, replenished and liquidated in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time). IPBC will keep records of all transactions, prepare all financial statements, and have them audited. The JFPR imprest account will be managed by the PMU on the principles of a co-signatory arrangement with Morobe Provincial Administration for withdrawal applications, initially based on the first 6-month activity plan and the related budget, and afterwards based on the approved annual work plan and budget.

2. Interest earned on the JFPR imprest accounts can be used for the Project, subject to ADB's approval, within the approved total amount of JFPR. Upon completion of the JFPR Project and before closing of the JFPR imprest account, any unutilized interest should be returned to the JFPR fund account maintained at ADB. If the remittance fee and other bank charges are higher than the amount of interest earned, there will be no need to return such interest to the JFPR account maintained at ADB.

3. The initial amount deposited into the imprest account as advance for day-to-day project implementation during the inception period will be 10% of JFPR amount, or equivalent to 6- month expenditure, whichever is lower. The imprest account will be replenished every 3 to 6 months, based on the replenishment requests from the PMU in accordance with ADB’s statement of expenditures procedure. The statement of expenditures (SOE) procedure will apply for all payments and transactions under $10,000 to ensure speedy project implementation. The payment in excess of the SOE ceiling will be replenished based on full supporting documentation. Detailed implementation arrangements, such as the flow, replenishment, and administrative procedures, will be detailed in the grant implementation manual and be established between ADB and the Government of Papua New Guinea through the JFPR Letter of Agreement. The schematic fund flow for the JFPR Project is shown in Figure A3. Appendix 3 19

Figure A3: Fund Flow Arrangement for the JFPR Project

Asian Development Bank

NGO for Independent $150,000 JFPR Imprest Account Monitoring Managed by PMU, IPBC

Morobe Provincial Administrationa

$649,048 $87,510 Component A Component C Improving Social Livelihood Enhancement Infrastructure and Services Training for the Resettlers for the Poor Communities $430,471 Component B Income Improvement

JFPR = Japan Fund for Poverty Reduction, NGO = nongovernment organization, PMU = project management unit, IPBC = Independent Public Business Corporation. a Only for the co-signature purpose. The actual money will flow straight to beneficiaries. 20 Appendix 4

IMPLEMENTATION ARRANGEMENTS

1. The Japan Fund for Poverty Reduction (JFPR) Project will be implemented by the Morobe Provincial Administration (MPA). MPA is the administrative arm of the Morobe Provincial Government (MPG). MPG was established under The Organic Law on Provincial Governments and Local-level Governments in 1995. It has political and administrative structures, between which, there is a clear demarcation of responsibilities. The two structures and their relationship are indicated in Figure A4.1.

2. In the past, MPA has successfully implemented other donor-funded projects without political interference, such as Kamlawa Water Supply, Malahang Health Centre, Lae City Water Supply, Lae City Roads Rehabilitation, and Mutzing Water Supply. The implementation of the JFPR Project will come directly under the office of the provincial administrator. A project management committee headed by the deputy provincial administrator will be established to organize and carry out various activities, including bidding, contract awards, and progress monitoring and reporting. The project coordinator will be the manager of the management of information unit, who is a development economist by background. Professional assistance will also be drawn from the planning, works, tenders board, health, education, Lae district and Lae urban local-level-government divisions of MPA. Regular project progress reports will be provided to the MPG, Independent Public Business Corporation, and Asian Development Bank. The organizational structure for implementing the JFPR Project is in Figure A4.2

3. The JFPR Project will be implemented over a period of 3 years from 2008 to 2010. Procurement of goods, services, and works will follow ADB’s Procurement Guidelines (2007, as amended from time to time). The contract packages and procurement methods are indicated in Appendix 2. Recruitment of consulting services will follow ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).

4. The JFPR Project is an integral part of ADB’s package for the Lae port development. It complements ADB loans and efforts of the OPEC Fund for International Development, which will co-finance civil works, and Cooperation Fund for Fighting HIV/AIDS in Asia and Pacific which will finance HIV/AIDS interventions. To show the totality of ADB’s Loan Project, ensure internal coordination between activities funded by different sources, and strengthen financial management, financial management will be centralized in Independent Public Business Corporation’s PMU, the Executing Agency for the Loan Project. PMU will open an imprest account for the JFPR Project with a commercial bank with an initial amount equivalent to 10% of JFPR amount or 6-month expenditure, whichever is lower. It will disburse funds to MPA, maintain records and supporting documents, replenish the imprest account, and arrange auditing. The auditor’s report will include the certified copies of the audited accounts and financial statements, with separate auditor’s opinion on the use of the imprest account and a statement of expenditures authorized under the JFPR Project. They will be submitted to ADB within 6 months after the end of each fiscal year. Appendix 4 21

Figure A4.1: Provincial Political and Policy Implementation Structure

PROVINCIAL ASSEMBLY

PROVINCIAL EXECUTIVE PROVINCIAL ADMINISTRATOR COUNCIL

SECTOR COMMITTEE

JOINT PROVINCIAL PLANNING AND BUDGET PROVINCIAL PROGRAM PLANNING COMMITTEE MANAGEMENT TEAM

JOINT DISTRICT PLANNING DISTRICT PROGRAM MANAGEMENT AND BUDGET PLANNING TEAM COMMITTEE

LOCAL GOVERNMENT LOCAL GOVERNMENT MANAGER AND PROJECT MANAGER COUNCIL

WARD COMMITTEE PROJECTS

P E O P L E

Source: Morobe Provincial Administration, Papua New Guinea.

22 Appendix 4 BOARD TENDERS TENDERS PROVINCIAL HEALTH EDUCATION WORKS INFORMATION UNIT DEPUTY PROVINCIAL ADMINISTRATOR AND DISTRICT ADMINISTRATOR MANAGER, MANAGEMENTOF LANDS ASSEMBLY PROVINCIAL Figure A4.2: Project Implementation Organizational Structure ENVIRONMENT ADMINISTRATOR, DEPUTY PROVINCIAL CORPORATE AFFAIRS LAE CITY COUNCIL COUNCIL Source: Morobe Provincial Guinea. Administration, Papua New