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Document of The World Bank FILECOPY FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 4184-PNG STAFF APPRAISAL REPORT PAPUA NEWGUINEA Public Disclosure Authorized ROAD IMPROVEMENTPROJECT Public Disclosure Authorized March 8, 1983 TransportationDivision 2 Projects Department East Asia and Pacific Regional Office Public Disclosure Authorized Thisdocument has a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwisebe disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit - Papua New Guinea Kina (K) US$ 1.00 = K 0.7435 K 1.00 = US$1.3449 K 1 million = US$1,344,900 ABBREVIATIONS ,AADT - Annual Average Daily Traffic ADB - Asian Development Bank AWMO - Area Works Manager Office BPC - Budget Priority Committee BRRP - Bridge Rehabilitation and Replacement Program DTCA - Department of Transport and Civil Aviation DWS - Department of Works and Supply ERR - Economic Rate of Return FA - Force Account (Day Labor) ICB - International Competitive Bidding LCB - Local Competitive Bidding NEC - National Executive Council NPC - National Planning Committee NPEP - National Public Expenditures Plan NPO - National Planning Office PMFA - Project Managed Force Account PRTS - Provincial Rural Transport Study PWMO - Provincial Works Manager Office RTWP - Rural Transport Works Program UNDP - United Nations Development Program VOC - Vehicle Operating Costs VPD - Vehicles Per Day WEIGHTS AND MEASURES Metric British/US Equivalent 1 meter (m) - 3.28 feet (ft) 1 kilometer (km) - 0.62 mile (mi) 1 square kilometer (sq km) - 0.386 square mile (sq mi) 1 kilogram (kg) - 2.205 pounds (lbs) 1 metric ton - 2,204 lbs or 1.102 US short ton (sh ton) FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY PAPUA NEW GUINEA STAFF APPRAISAL REPORT ROAD IMPROVEMENT PROJECT Table of Contents Page No. I. TRANSPORT SECTOR .............................................. 1 A. Background ............................. 1................. B. The Transport System .. 2 C. Transport Administration .. 3 D. Transport Planning and Coordination .. 4 E. Previous Bank-Financed Projects .. 5 F. Transport Sector Issues .. 6 II. HIGHWAYS .. 6 A. The Network .. 6 B. Traffic .. 7 C. Administration, Staff and Training .. 8 D. Planning .. 9 E. Engineering ............... ............................ 9 F. Construction ........................................... 9 G. Maintenance ............... ............................. 11 H. Financing .. 12 III. THE PROJECT .13 A. Objectives .. 13 B. Main Features ........................ 13 C. Detailed Description .. 14 D. Status of Preparation .. 17 E. Cost Estimates .. 17 F. Financing .. 20 G. Implementation .. 20 H. Procurement .. 21 I. Disbursements .. 23 J. Environmental Aspects ............................., 24 The report is based on the findings of the Appraisal Mission consisting of Messrs. L. Schiffman (Engineer), B. Coukis (Economist) and S. C. Hardy (Procurement Adviser) who visited Papua New Guinea in May 1982. Mr. G. Trnka (Engineer) assisted in preparing the report. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - Page No. IV. ECONOMIC EVALUATION....................................... 24 A. General .................................................. 24 B. Rehabilitation and Improvement of Provincial Roads .24 C. Bridge Rehabilitation and Replacement Program .25 D. Improvement of Highlands and Enga Highways .26 E. Economic Rate of Return .27 F. Risks .27 V. AGREEMENTSTO BE REACHED AND RECOMMENDATIONS.28 TABLES IN THE TEXT 3.1 Summary of Project Costs .18 4.1 Sensitivity Analysis of ERR .27 ANNEXES 1. Action Program for Project Implementation .30 2. Project Related Doc-uments and Data Available in the Project File .34 TABLES TO THE MAIN REPORT 1. Expenditures on Transport by National Government, 1972/73-1984/85 .37 2. Road Infrastructure: Estimated Revenue from Road User Charges and Composition of Expenditures, 1977-81 .38 3. Roads in Papua New Guinea, 1981 .39 4. Vehicle Fleet by Type, 1975-79 .40 5. Road Transport Statistics by Province, 1980 .41 6. Road Transport Output, 1975-79 .42 7. Road Design Standards (DWS) .43 8. Rehabilitation and Improvement of Provincial Roads .44 9. Bridge Rehabilitation and Replacement Program .45 10. Improvement of Highlands and Enga Highways .46 11. Consulting Services - Engineering .47 12. Consulting Services - Studies .48 13. Technical Assistance and Training .49 14. Summary of Project Costs .50 15. Schedule of Estimated Disbursements .51 16. Distribution of Benefits from Rehabilitation and Improvement of Provincial Roads (Category I) .52 17. Operating Costs on Unpaved Roads .53 18. Operating Costs on Paved Roads .54 - iii - Page No. CHARTS 1. Department of Transport and Civil Aviation - Organization Chart ... 55 2. Department of Works and Supply - Organization Chart ........ 56 3. Implementation Schedule .................................... 57 MAPS 1. IBRD 16664R - Transport System ............................ 58 2. IBRD 16665R1 - Project Components .59 1. TRANSPORT SECTOR A. Background 1.01 Papua New Guinea (PNG) has an area of 461,700 sq km and a popula- tion of about 3.0 million (in 1980); during the last decade the population has grown at a rate of 2.3% per annum. PNG comprises the eastern half of the island of New Guinea and of about 600 other islands, most of them small and uninhabited. 1.02 PNG is extremely mountainous. The central mountain range of the mainland forms a complete divide between north and south, and consists of numerous ranges separated by broad upland valleys. These valleys, with altitudes of 5,000-10,000 ft. form the Central Highlands where about 40% of PNG's total population is concentrated. In addition to limitations imposed by the mountains, extensive swamps cover large areas. Topographic conditions have created small pockets of widely dispersed population. 1.03 Steep slopeb, lhigh altitudes and extensive swamps allow only 10% of the land surface to be used for agricultural purposes. Agriculture, forestry and fishing employ about 85% of the labor force but account for only 25% of GNP. Half of the agricultural output comes from subsistence farming. Coffee, cocoa and copra were introduced fairly recently and almost the entire output is exported. The modern sector is dominated by mining activities: a large copper mine in Bougainville has been operating since 1972 and an even larger mine in Ok Tedi is scheduled to open in the mid-1980s. As trained and experienced PNG nationals are in short supply, expatriates dominate the middle management and professional grades in the public sector and manage almost all manufacturing and service establishments. 1.04 Since independence in 1975, the Government, rather than emphasize growth and an expanding modern sector, has chosen to attempt a more equi- table distribution of the national product among the PNG population. "Localization" and "decentralization" are two major policy aims. Locali- zation is to accelerate the transfer of administrative and management functions from expatriates to locals, and decentralization aims at the reallocation of political and administrative powers from the national to 19 provincial governments. Both aims are politically motivated, they are, however, administratively demanding and financially expensive. 1.05 Throughout the 1970s, the economy grew at an annual rate of 2%, or about 0.1% less rapidly than the population. Commodity exports were strong, Government revenues remained sizeable and prudently managed, and annual grants from Australia continued to provide needed budgetary support. Depressed commodity prices since 1979 and the resulting financial difficul- ties of the Government, however, demonstrated that a higher growth rate is required to support basic needs and the welfare of the rural population. The 1981 estimate of per capita GNP is US$820 p.a. but it includes -2- expatriates. Of the estimated 1.1 million economically active persons in PNG only about 15% are formally employed. This extremely low employment rate is caused partly by high minimum wages and partly by a deliberate Government policy to limit foreign investments in the country. As the majority of the population is expected to continue to be in subsistence agriculture during the 1980s, the Government will derive most of its income from mining royalties and from the annual grant from Australia (US$263 million in 1980). Despite the country's dependence on the modern sector and on the foreign grant, provision of improved services to the rural areas, where most of the people live, is a political necessity for the Government, and better land transport has the highest priority. B. The Transport System 1.06 The transport system reflects the country s geography, topography and early stage of development. Air and water transport play a compara- tively large role because land transport is difficult and expensive, and major roads do not reach the majority of the population (Map IBRD 16664R). There is no railway. Copper and timber are the bulkier exports and they move through special harbor facilities. The remaining exports (coffee, copra, cocoa) and imports plus domestically produced beer and soft drinks, generate almost all the freight traffic both for road haulers and for coastal and inter-island shippers. In terms of gross tonnage, imports are almost three times the volume of exports
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