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 (excluding copper and timber).

1.07 The Government is aware of the inadequacies in the transport sys- tem. Tariffs are high, the safety record poor, maintenance expensive, and management of larger operations mainly in the hands of expatriates. Since domestic construction capacity is in its infancy stage, major works require foreign contractors. Demands to extend and upgrade the road network exist, but at the same time, there are pressures to reduce the recurrent budget, to limit expatriate recruitment, and to press forward with localization and provincialization (paras. 2.09 and 2.20).

Highway Transport

1.08 The highway subsector and its administration are discussed in detail in Chapter II.

Air Transport

1.09 Air transport plays an important role in providing access to the hinterland. PNG has 425 operational airports and airstrips and the national airline Air Niugini flies scheduled services to 18 of those airports; an additional 133 airports are serviced by small commercial operators. Air Niugini has a virtual monopoly in domestic civil aviation. Other operators are obliged by the National Airline Commission, the country-s regulatory body for air transport, to use small aircraft and not to compete directly - 3 -

either with Air Niugini or among themselves. Operating costs are high because of flying conditions, infrastructure costs, seasonal demand variations, high labor costs, and lack of effective competition. For Air Niugini, average annual load factors are 60%; for other operators they are below 50%. Both passenger and freight rates are comparatively high. Total volume of air freight has been slowly decreasing; passenger flows between 1975 and 1980 show a shift from urban-rural to urban-urban patterns.

Maritime Transport

1.10 PNG relies heavily on water transport for inter-island and coastal traffic. There are 13 relatively well equipped major sea and river ports. Sixteen are managed by the Papua New Guinea Harbours Board and two by mining companies. In addition, there are some 400 minor ports with limited facili- ties serving the coastal trade. The Project includes studies of several proposed boat service projects expected to improve access to isolated communities (para. 3.08). In 1980, overseas cargo throughput in the main ports amounted to 3.7 million tons and coastal cargo to 824,000 tons. The main ports have overseas shipping services provided by 15 companies. Secondary ports are serviced by 176 smaller boats. Private operations are supplemented by a government fleet consisting of 61 vessels. The high costs generated by this fleet have recently caused the Government to review the fleet-s viability. The performance of coastal shipping resembles that of road transport: a few large firms with expatriate management dominate while small, local operators work at the margin. Tiere too, inefficiency contributes to high tariffs. Tariff control is based on a system of distance zones and shorter journeys are frequently penalized.

C. Transport Administration

1.11 The Department of Transport and Civil Aviation (DTCA) is responsible for transport planning, policy and administration, including regulating the different transport modes (Chart 1). DTCA consists of:

(a) the Policy and Planning Division, responsible for planning the transport sector, and for the preparation of projects to be funded through the National Public Expenditures Plan (NPEP);

(b) the Civil Aviation Division, responsible for the licensing of internal air service operations, for approving airline timetables, and for setting fares and freight rates;

(c) the Maritime Division, responsible for the provision and main- tenance of navigation aids and the administration of shipping regulations;

(d) the Division of Land Transport, responsible for the regulation and licensing of road traffic; and -4-

(e) the Civil Aviation Agency, an autonomous agency whose operating expenses are paid for by a grant from the Australian Government, responsible for aircraft control, electronics, airworthiness, and other safety-related operations.

1.12 The Department of Works and Supply (DWS) is responsible for all civil works and their maintenance. Construction and maintenance of roads outside the national network come under the authority of provincial governments and municipalities which, however, generally engage DWS to carry out the work on an agency basis.

D. Transport Planning and Coordination

1.13 DTCA originates plans for the improvement of transport infra- structure. Coordination of all economic and social planning work is the responsibility of the National Planning Office (NPO) which compiles annual investment programs for each sector and presents them to the Budget Priority Committee (BPC); both NPO and BPC are under the jurisdiction of the Ministry of Finance. BPC reviews each sectoral program and submits a consolidated investment program to the National Planning Committee (NPC). NPC submits the program, together with appropriate recommendations, to the National Executive Council (NEC) consisting of Cabinet Ministers. NPC and NEC jointly review the annual investment programs in the light of the Government s development policy and available funds. The results of this review are incorporated into NPEP: this is an annually updated public investment program, drawn up on a four-year rolling basis.

1.14 Investments in the transport sector are part of the NPEP. Apart from the NPEP, the Government does not have an explicit transport develop- ment program. A Transport Development Plan, drafted in 1981 by DTCA, was not accepted by Government which, instead, directed DTCA to prepare a medium term transport strategy. This was to be published in early 1982 as a White Paper but the necessary work has not yet been completed. In the absence of an accepted long-term master plan, DTCA carries out reconnaissance studies of existing facilities, identifies shortcomings, and assesses improvements required to meet transport demand. In addition, it incorporates into its annual submissions to the NPO justifiable projects identified by other agencies of the national government and evaluates projects put forward by provincial governments who seek financial assistance. As a matter of policy, DTCA emphasizes projects which are continuations or extensions of previous development programs and closely scrutinizes proposals for new schemes to ensure they respond to genuine needs. The absence of a transport investment plan does not allow infrastructure improvements to be schedluled in a coordinated manner. During negotiations, the Government agreed to adhere to a timetable for addressing the transport planning issue.

1.15 The 1981-85 NPEP allocated about 15% of public investment to transport: four-fifths of that amount was earmarked for roads and bridges on -5-

the national network, the remainder for the improvement of provincial and local roads. The 1982-86 NPEP allocates similar proportions: in 1982, expenditure for roads and bridges were about K 32.0 million (US$41.4 million) of which somewhat less than half was for maintenance. Table 1 shows expendi- tures for transport works over the 1972-85 period. Table 2, however, shows that revenues from the use and ownership of vehicles are low and amount to about 30% of the total expenditure on roads. The size of the implied subsidy emphasizes the need for an increase in road user charges (para. 1.18).

E. Previous Bank-Financed Projects

1.16 The Bank Group has assisted the transport sector through three highways and two ports projects. Two of the highways projects and both ports projects have been satisfactorilycompleted. At this juncture, only the Performance Audit Report (June 16, 1977) for the First Highway Project (Credit 204/Loan 693-PNG) is available; it found that the Bank Group's refusal to provide supplementary finance for the 90% project cost overrun was unnecessarily harsh and that international competitive bidding (ICB) under the conditions prevailing in PNG during 1970 may have contributed to cost escalation. During preparation of the Second Highlands Road Improvement Project (Credit 677-PNG), approved in 1977, it was found that the bids received under ICB for improvement of the Highlands Highway exceeded cost estimates by 75%; and the project was subsequently reduced.

1.17 The Third Highway Project (Loan 1856/Credit 1030-PNG) approved in 1980, is currently underway and provides US$30 million for the improvement of some 138 km of the Highlands Highway (Map IBRD 16665R1), for consulting services, technical assistance for road maintenance, and training. The bids received under ICB for the improvement of the Highlands Highway were within the appraisal cost estimate; and a sound basis for ICB cost estimating has thus been established. After a slow start, the rate of progress in implementing this project had improved and civil works are now about 50% complete. Recently, civil unrest in the area has again slowed progress. In addition, substantial increases in required earthwork due to unstable slopes is expected to appreciably increase project costs and delay completion. Disbursements continue to lag substantially behind appraisal estimates due to initial implementationproblems and slow processing of withdrawal applications by the Government. Seminars concerning withdrawal procedures have been held with the executing agency and procedures regarding certification of expenditures have been streamlined to speed up processing. Project completion is now expected during 1984, about 12 months behind the appraisal schedule. Implementationof the technical assistance for road maintenance has also been substantially delayed. The Government has now appointed the technical assistance consultants to carry out a study of maintenance needs, including training, and work will begin during March 1983. The proposed project provides for a continuation of this effort, and for implementationof study recommendations,including training. -6-

F. Transport Sector Issues

1.18 The Bank Transport Sector Review of 1979 identified a series of issues which need to be addressed. These were: sector planning, efficiency of transport operations, participation of PNG nationals in transport related activities, and balance between public expenditures for, and public revenues from, transport operations. During negotiations of the Third Highway Project in 1980, the Government and the Bank agreed that: (a) proposals would be submitted to the NEC by June 1981 to increase user charges in all three modes to cover at least current expenditures; (b) a proposal for the deregula- tion of the trucking industry would be submitted to the NEC by June 1981; (c) the Governmentwould explore measures to liberalize operations in civil aviation and coastal shipping and would inform the Bank of its proposed actions by end-1981; and (d) the Government would report to the Bank annually on progress in the development of the domestic constructionindustry.

1.19 Difficulties in implementingpolitical objectives such as localization and decentralization,scarcity of experienced national staff, the absence of a transport strategy framework, and the technical intricacy of issues such as pricing policy and deregulation suggest that much more time than originally envisaged would be needed to appreciably improve transport sector management and operations. It is encouraging,however, that the Government has become, over the past two years, increasinglyaware of significant operational benefits that would materialize by the formulation of sound transport policy. Thus, transport policy issues are a subject of continuing dialogue between the Government and the Bank. The proposed project will focus on infrastructureimprovements as well as on planning, institution-buildingand training issues (paras. 3.08 to 3.11). During negotiations, agreement was reached with the Government that it would adhere to a timetable for addressing the policy and manpower issues and that it would, by July 1, 1985, prepare and furnish to the Bank for review a transport sector development strategy, and, after taking the Bank-s comments into account, submit it to the NEC for consideration (para. 5.01).

2. HIGHWAYS

A. The Network

2.01 PNG has a road network of about 19,000 km of which about 940 km are sealed (Table 3). About 5,000 km are maintained by the National Government, and the remainder are the responsibilityof the provincial and local govern- ments. Roads are primarily located in and near the main coastal towns, and in the Central Highlands. Because of the high construction costs associated with the extremely mountainous terrain, difficult soil and harsh climatic conditions, the road system is not linked and consists of a number of regional networks. The condition of many roads is poor because of inadequate maintenance and damage from overloaded vehicles. Moreover, missing or weak bridges diminish the usefulness of existing roads; in some areas, access roads simply do not exist. -7-

2.02 For planning purposes, DTCA separates roads into three functional categories: (a) arterials which are highway and trunk roads, mainly servicing interregional transport; (b) collectors connecting main population or commercial centers to arterials; and (c) locals, which serve a rural area, sometimes connecting with the collector roads. The arterials number about 5,000 km and collectors and locals about 13,000 km. In addition, there are about 1,000 km of urban roads. For purposes of administering construction,improvement and maintenance, roads are also classified as national or provincial including "district" roads.

B. Traffic

2.03 There are an estimated 55,000 vehicles in PNG, with new registra- tions averaging about 11,000 vehicles annually over the past five years. About 38% of all vehicles are cars and station wagons; 32% light trucks; 15% heavier trucks; 5% buses; 6% motorcycles, and 4% tractors (Table 4). Trucks have been steadily increasing their share of new registrations,particularly in the Highlands Region. Lack of vehicle maintenance, overloading of both passenger and freight vehicles, and poor road conditions result in high annual scrapping rates. Relationships among population, motorized vehicles and kilometers of road on a province by province basis are shown in Table 5.

2.04 Road traffic volumes are generally low, both for passengers and freight. Travel demand is seasonal and peaks just after the annual coffee, copra and cocoa sales. Most road traffic is short distance; long distance passenger traffic is chiefly by air, and by sea for freight. An important exception is the Highlands Highway which runs for a distance of about 600 km from the main port at Lae through Mt. Hagen to Mendi providing an essential facility for the Central Highlands. The Highlands Highway carries an average traffic volume in excess of 600 vpd, of which over 40% are trucks and buses. Because of the improvements to the road there has been a gradual shift from trucks of 5 to 7-ton capacity to 12-ton trucks with 10-ton trailers, used particularly on the long distance runs. Estimates of vehicle kilometers by vehicle type are shown in Table 6.

2.05 For-hire road transport operations are limited to the area of the Highlands Highway and are dominated by several large, expatriate-managed companies which provide an efficient, reliable and well-supported service. Small, local operators work mostly as subcontractors. According to a recent study, truck freight rates on the Highlands Highway are 40% above the "cost- plus-overhead" total and this is partly due to overregulationof routes, tariffs and licensing. Another constraint is the scarcity of local entre- preneurs and managerial staff. Unless changes are made to the prevailing rate-fixing structure and the regulation of licenses, road improvementswill provide profits to operators rather than savings to consumers. The proposed project would provide for a review of the road freight industry in order to increase participation of PNG nationals (para. 3.08). Outside the Highlands Highway, passengers and freight are mostly carried by "Public Motor -8-

Vehicles". These are privately owned minibuses, often the property of community groups. Rates are set by negotiation between operators and clients, sometimes mediated by local government councils or by provincial authorities.

2.06 Lack of enforcement of existing safety regulations and poor vehicle maintenance result in a relatively high incidence of traffic accidents, espe- cially on the Highlands and Enga Highways. The project will enhance traffic safety on the Highlands and Enga Highways sections proposed for improvement by providing wider, paved roads; improved visibility for drivers; and adequate shoulders for pedestrians.

C. Administration,Staffing and Training

2.07 Responsibility for planning, construction and maintenance of the road network is divided between the National Government and the 19 provincial governments. The national roads are administered by DTCA and DWS. Provincial and local roads are the responsibilityof the provinces and the municipalities,respectively.

2.08 While DTCA handles policy and planning matters, DWS directly handles all works on national roads, both capital and recurrent, through its field organization. There are five Area Works Manager Offices (AWMO): Boroko, Lae, Madang, Mount Hagen, and Rabaul; and 20 Provincial Works Manager Offices (PWMO), one in each Province plus one for the National Capital District. An organization scheme of the DWS operational sections, related to transport, is shown in Chart 2.

2.09 Most senior and middle management posts in Government agencies are held by expatriates engaged on short-term (2-3 years) contracts. Qualified PNG nationals are in extremely short supply in most technical agencies. In DWS, about 80% of the professional staff are expatriates. The Government is continuing active recruitment overseas but the introductionin 1979 of reduced salary scales and revised terms of contract has made recruitment difficult and many positions remain vacant. The deficit in skilled personnel has been made up by short-term engagement of consultant staff for key positions. Although the Staff Development and Training Section of DWS continues to carry out training courses to accelerate staffing with qualified nationals, these activities have been hampered by: (i) shortage of national instructors; (ii) limited training equipment; (iii) insufficient training curricula; and (iv) inadequate training methodology. Training efforts have so far been centered on fellowship programs and on courses for semi-professionals,technicians and foremen. It is acknowledged that it will take many years to train local staff for all professionalpositions. The proposed project will provide technical assistance to help with the training effort at the DWS headquarters and in the provinces (paras. 3.09 and 3.11). - 9-

D. Planning

2.10 The DTCA Policy and Planning Division carries out reconnaissance of existing road networks and assesses improvements required to meet trans- port demand. Specifically, it focusses on gradually improving road access into rural areas, and connecting, with all weather roads, the major population and production centers among themselves and with major ports.

2.11 The Provincial Rural Transport Study (PRTS), financed through the Third Highway Project (Loan 1856/Credit 1030-PNG) was carried out by a consortium of British and West German Consultants (T.P.O'Sullivan/GITEC). The study reviewed rural transport needs in the thirteen least developed provinces of PNG; five provinces were studied in 1981 and eight more in 1982. On the basis of the study findings, DTCA conceived a Rural Transport Works Program (RTWP). RTWP is a rolling program from which high priority items are selected for upgrading each year, depending on the volume of available funds; for the next few years RTWP will emphasize rehabilitation and improvement of provincial roads. DWS completed a detailed National Roads and Bridges Inventory in 1979 and identified structures with serious problems. Following the site inspection of more than 100 bridges, DWS and DTCA formulated a rolling Bridge Rehabilitation and Replacement Program (BRRP) to improve or replace bridges on national roads which will be insti- tuted on a permanent basis.

E. Engineering

2.12 DWS is responsible for the engineering of road works, and has formulated design standards, which are presently being revised and updated, for various types of roads and terrain conditions (Table 7). Although the Roads and Bridges Section of DWS undertook the design of some major projects in the past years, a large proportion of its design work is carried out by consultants, most of whom are subsidiaries of foreign, mainly Australian, firms. In general, the quality of engineering is satisfactory, and the proposed project will provide technical assistance to aid DWS in making further improvements (para. 3.11) to its in-house capability.

F. Construction

2.13 As domestic construction capacity remains limited, most major construction works on national roads have been carried out by foreign contractors, especially for externally financed projects. Some construction works on national roads have also been carried out by force account (day labor) or by its variant, Project Managed Force Account (PMFA), which involves the use of subcontractors, labor and plant hired under a construction management team of consultants engaged by DWS. An 8.5 km section of the Highlands Highway near Kundiawa was built through PMFA under the Second Highlands Road Improvement Project (Credit 677-PNG) and PMFA will again be used for some selected roadworks under the proposed project (para. 3.23). The use of PMFA would provide increased work for domestic road contractors and thus assist their further development; and it would also provide training opportunities for PNG nationals in construction operations (para. 3.23). - 10 -

2.14 Provincial governments often employ DWS on an agency basis either to execute, or call contracts for, the construction of small projects on provincial and village roads. Roadworks on village roads are carried out largely by manual labor but sometimes with equipment, usually supplied by DWS, which also provides technical assistance to the local government councils.

2.15 Construction costs in PNG are high and may reach, in mountainous terrain, up to K 500,000 (US$650,000) per km of two-lane national road and K 100,000 (US$130,000) per km of provincial road. Despite high costs, civil engineering contracts in PNG are not of a magnitude, either in scale or frequency, to support a comprehensive domestic contracting industry. Local contracting firms can be divided into three categories: (a) domestically owned and managed; (b) domestically owned and managed by expatriates; and (c) subsidiaries of overseas contracting companies. The firms in category (a) tender only for plant-hire contracts, while the firms in category (b) are able to bid for smaller civil works contracts. Only firms in category (c) would have the capacity to execute major construction works, such as the sections of the Highlands and Enga Highways included in the project. At present, sufficient road construction equipment is available in the country to cater for its likely needs.

2.16 As the Government wishes to promote the domestic road construc- tion industry, the Second Highlands Road Improvement Project (Credit 677-PNG) included a component providing technical assistance to domestic road con- struction contractors. Under this component, a. consultant drafted a con- tractor-s manual in 1978 and concentrated later on field training for six or seven domestically owned and managed firms which owned a basic equipment fleet and had the entrepreneurial spirit necessary for their further devel- opment. However, the relative shortage of suitable small road construction or maintenance contracts hampered the success of these training efforts. Under the Third Highway Project (Loan 1856/Credit 1030-PNG), the Government undertook to investigate further ways of promoting the domestic road con- struction industry and report to the Bank Group each year until 1984 on any measures taken. As the results have been disappointing so far, the proposed project contains provisions to revive and continue the previous efforts to develop the industry. During the project period, DWS would supply work to genuine domestic contractors by careful apportionment of small roadworks (para. 3.23).

2.17 Major construction projects which are externally financed are usually supervised during construction by the consultants who carried out the detailed engineering. Smaller or locally financed contracts are supervised from DWS Headquarters or by PWMOs, sometimes with consultant assistance. The quality of supervision is generally satisfactory and the proposed project will provide technical assistance to aid DWS in further improving its in-house capability (para. 3.11). - 11 -

G. Maintenance

2.18 Maintenance of national roads and bridges is carried out by DWS through its AWMOs and PWMOs. While the technical standard of maintenance on national roads is satisfactory, the level of maintenance services provided is often inadequate. Nevertheless, emergency situations such as landslides, culvert washouts, and bridge abutment erosion receive prompt attention. The cost of road maintenance in PNG is high, due on the one hand to extremely adverse topographic and climatic conditions, and on the other to inefficien- cies in DWS maintenance operations. Maintenance requirements are also expected to increase in future as a result of road network extension and traffic growth. In the past, adequate funds have been provided by the National Government for maintenance of national roads, but some maintenance funds have been diverted to road improvement works.

2.19 DWS has considered for some time establishing a central Maintenance Branch at its headquarters to plan, direct and monitor road maintenance and its cost. At present, maintenance expenditures are not properly monitored and verified against budgets or physical accomplishments; they are often inflated by the cost of minor construction and improvement projects and are not determined by road standards and conditions, or traffic levels and composition. Lack of such data limits the scope for well conceived policies for maintenance operations, for efficiency and spending levels, for road standards and necessary road improvements. The Third Highway Project (Loan 1856/Credit 1030-PNG) included technical assistance services for improving maintenance operations. For over two years, the Government had delayed the appointment of the consultants; the consultants have now been appointed and work will begin shortly. The proposed project would continue to provide technical assistance to DWS for building a maintenance information, monitor- ing and cost accounting system, including training (para. 3.11). During negotiations, the Government agreed to prepare and submit a detailed action program for the improvement of maintenance operations for Bank review by March 31, 1984, and to subsequently implement the agreed program, including setting up a Maintenance Branch within DWS and appointing suitable national staff for training by December 31, 1983 (para. 5.01). In addition, and in order to improve its training efforts, the Government agreed, during nego- tiations, to prepare and submit for Bank review, a detailed action program for the implementation of a road maintenance training program by September 30, 1983, and to subsequently implement it under the proposed project (para. 5.01).

2.20 Maintenance of provincial and local roads, which is the responsi- bility of the provincial governments, is inadequate. Certain provinces allocate a reasonable amount of money for maintenance while others allocate very little and concentrate on building new roads. Except for two provinces (Chimbu and Bougainville), maintenance of provincial and local roads is being carried out by DWS as an agent of the provincial governments. However, the extent of maintenance works and the provision of funds depend entirely on the provincial governments. The proposed project will assist the provincial - 12 -

governments to develop a rational strategy for maintenance on provincial and local roads (paras. 3.09 and 3.11).

H. Financing

2.21 Financing for construction, improvement and maintenance of national roads is provided from the National Government's annual budget. In addition, provincial governments fund works on provincial roads through their untied grants and other internal funds or by using tied grants appropriated through the NPEP. Some provincial governments make bulk allocations to district councils or communities for maintenance or minor road improvement. Provincial governments also have some revenue generating authority and may obtain additional funds for roadworks through the levy of local taxes.

2.22 The Government's allocation for roadworks for 1982 is about K 32.0 million (US$41.4 million), which is exclusive of provincial untied grant funds intended for such activities. Of this total, about K 19.0 million (US$24.6 million) is for construction and about K 13.0 million (US$16.8 mil- lion) for maintenance. No figures are available for provincial expenditures.

2.23 The Government-s annual expenditures on roads increased, with some fluctuations during periods of peak construction activities, from some K 20.0 million (US$25.9 million) to about K 32.0 million (US$41.4 million) during the period 1972/73-1979/80. As a percent of total expenditures these amounts have averaged about 7% p.a. Annual maintenance costs for the national system have varied between K 10.0 and K 19.0 million (US$12.9 and US$24.6 million) for this period, depending on funds available rather than requirements. While the highway system had not increased substantially over this period, DWS reports that maintenance budget requirements are rising appreciably due to increasing costs. Fund allocations, however, are expected to remain at about K 15.0 million (US$19.4 million) p.a., indicating that road maintenance may not receive adequate funds in future. It is therefore necessary that increased efficiency be introduced through better programming and monitoring of maintenance operations.

2.24 At this juncture, the Government is preparing a Second Road Improve- ment Project considered for financing by the Asian Development Bank (ADB). The proposed ADB project would provide for improvement of about 40 km of national roads, consulting services, and technical assistance for preparation of a future project. The ADB project is estimated to cost about US$15.6 mil- lion and is scheduled for appraisal in early 1983. - 13 -

3. THE PROJECT

A. Objectives

3.01 The main project objectives are to improve rural mobility through rehabilitation and improvement of roads and bridges, highway maintenance through the establishment of an efficient management system, and to assist in developing the road transport and construction industries. The project also aims to assist in establishing a strategy for transport sector development leading to policy action plans and associated investment programs.

B. Main Features

3.02 The project comprises:

(a) rehabilitation or improvement of about 15 provincial road segments totaling approximately 277 km, comprised of: (i) Categories I and II - 10 roads (227 km); and (ii) Category III - about 5 roads (50 km);/l

(b) rehabilitation or replacement of about 32 bridges on national roads having an estimated total length of 1,520 lineal meters, comprised of: (i) Categories I and II - 17 bridges (1,017 lineal meters); and (ii) Category III - about 15 bridges (500 lineal meters);/l

(c) improvement of two sections of the llighlandsHighway (29 km) and of the first section of the Enga Highway (about 25 km);

(d) consulting services for feasibility studies, detailed engineering and construction supervision, for transport policy studies, and for the preparation of a transport sector development plan and associated investment programs;

(e) technical assistance to establish efficient procedures for transport sector development functions in general and highway management and administration in particular, and to assist in the development of the domestic road construction industry; and

(f) training of highway maintenance personnel.

/1 Category I items are those for which detailed engineering has been completed. Category II items are those for which detailed engineering is underway but not yet completed; and Category III items are those that are to be identified during the course of project implementation. Construction of Category I items is scheduled to begin during the first year of the Project. Construction of items in Categories II and III will begin in later years. - 14

Funds will be also be provided to carry out a Hydropower study for the Department of Minerals and Energy in order to review potential hydropower resources.

C. Detailed Description

Rehabilitation and Improvement of Provincial Roads

3.03 The 10 road segments included in Categories I and II (Table 8) which are to be rehabilitated and improved under the project were selected from RTWP. They are mostly rough and narrow gravel and earth roads, impassable for a good part of the year due to inadequate drainage and lack of maintenance. These roads, totaling 227 km in seven provinces (Map 2) fall into two categories according to their status of preparation. The first category includes four road segments totaling 81.5 km whose implementation is scheduled during 1983. The second category, comprised of six road segments totaling 145.5 km (Table 8) is scheduled for implementation in later years (Annex 1 and Chart 3). The roads will be rehabilitated or improved largely on existing alignments, to DWS Rural Road Standard (Class 3) or Access Road Standard (Classes 1 or 2) (Tables 7 and 8) depending on the volume of anticipated traffic. All roads will be provided with gravel surfacing; bridges will be strengthened or replaced and drainage improved. Pavements will be designed for an axle load of 18,000 lbs. In addition to these 10 road segments, the project provides for about five additional road links, totaling approximately 50 km (Category III - Table 8) which are to be identified from the continuation of the PRTS, now ongoing. Funding for the roads included in Categories II and III under the project would be limited to those with an Economic Rate of Return (ERR) of 10% or higher. If one of the segments fails to meet this criterion, it would be replaced with another segment selected from RTWP that would be acceptable to the Bank.

Bridge Rehabilitation and Replacement Program

3.04 Under BRRP, the project would include the replacement and rehabilitation of 17 bridges (Categories I and II - Table 9) on national roads in six provinces, for a total length of 1,017 lineal meters. These bridges fall into two categories according to their status of preparation; the first includes eight bridges (Map IBRD 16665R1) totaling 425 lineal meters and the second, nine bridges totaling 592 lineal meters (Table 9). The bridges are either in imminent danger of collapse, have an extremely low load restriction placed upon them, or require abnormally high maintenance expenditures; they would be built to DWS Design Standard, Loading Class T44 (Table 7). In addition to these 17 bridges, the project provides for approximately 15 more bridges (Category III - Table 9), totaling about 500 lineal meters, which are to be identified as part of the ongoing BRRP. Funding for the bridges included in Categories II and III under the project - 15 -

would be limited to those with ERR of 10% or higher. If one of the bridges fails to meet this criterion, it would be replaced with another bridge selected from BRRP that would be acceptable to the Bank.

Improvementsof the Highlands and Enga Highways

3.05 The project will improve three sections of the Highlandsand Enga Highways, totaling about 54 km (Map IBRD 16665R1). Two of these sections, namely Kudjip to Minj (13 km) and Watabung to Chuave (16 km), are the remaining unimproved sections on the Highlands Highway between the port of Lae and Mount Hagen and their conditionaccounts for high vehicle operating and road maintenance costs. The third section, Togoba to Tanbul Turnoff, covers the first 25 km of the Enga Highway which is the continuationof the Highlands Highway towardsWabag. The Government intends to continue improving the highway up to Wabag (an additional 68 km) over the next decade.

3.06 All three sections have rough and narrow gravel surfaceswhich have deterioratedbecause of inadequate design, lack of maintenanceand significant traffic. They will be improved to DWS Rural Road Design Standard,Class 1 (Tables 7 and 10), mainly on existing alignments,provided with improved drainage and paved using double bituminous surface treatment. At some locations, embankmentswill be raised to control flood damage and slopes stabilized. Bridges will be rehabilitatedor replaced, as and where necessary.

Consulting Services

3.-07 The project would provide about 700 man-months of consulting services in total (Tables 11 and 12). Consulting services for feasibility studies, preliminaryand detailed engineeringand constructionsupervision of the road and bridge componentswould total about 440 man-months;and another 75 man-months of serviceswould be provided for constructionmanagement and monitoring of the civil works for the Watabung-Chuavesection and of some provincial roads which will be built using PMFA (para. 3.23). In addition, the project would provide 70 man-months of consulting services to undertake feasibility studies and detailed engineeringneeded for the preparationof future projects (Table 11).

3.08 The project would also include a total of 82 man-months of consulting services for DTCA to cater for shortages in experiencedstaff in order to assist with a series of transportpolicy studies to be undertaken during 1983/85 which will cover operationaltopics such as the preparationof a transport developmentplan leading to an investmentprogram for 1985-90; establishmentof data informationsystems to support transportplanning; review of the road freight industry to develop measures for the increased participationof PNG nationals; review of airport user charges to rationalize tariffs; and a review of bus operations in Port Moresby and Lae (Table 12). In addition, the project includes 40 man-months of consulting services to undertake feasibilitystudies and preliminary engineeringfor several boat services projects identified by the PRTS. Outline terms of reference for each of the consulting services included in the Project have been agreed upon - 16 -

between the Government and the Bank (see Project File) and detailed terms of reference will be approved by the Bank prior to the appointment of consultants.

Technical Assistance and Training

3.09 As continuing shortages of qualified national staff impede the Government s localization policy, assistance is needed in the transport sector to strengthen planning, and supervisory and monitoring capacity both at the national and at the provincial government levels. The project will assist in the strengthening of DTCA and DWS by financing technical assist- ance and training by consulting firms totaling 156 man-months (Table 13).

3.10 For DTCA, the project will provide one senior adviser (12 man- months) to assist in provincial liaison, planning and training programs and in promoting the upgrading and localization of DTCA's planning and programming capabilities at the national level. Outline terms of reference for these services have been agreed upon between the Government and the Bank (see Project File) and detailed terms of reference will be approved by the Bank prior to the appointment of the adviser.

3.11 For DWS, the project will provide five experts (132 man-months). Three senior advisers, for a two-year period, will assist in improving DWS organization, management and operations (24 man-months), in improving highway design, management and supervision of construction (24 man-months), in helping to set up and initially operate a permanent, rolling program for bridge inspection, rehabilitation and replacement on a nationwide basis (24 man-months) and in preparing and carrying out a program of incentives and assistance designed to promote the growth and capabilities of indigenous road construction contractors (12 man-months). Two maintenance experts (48 man-months) and one maintenance training adviser (12 man-months) will assist DWS and the provincial governments in improving road maintenance planning, programming, execution, monitoring and cost accounting, and in practical training. They will assist in establishing and operating a Maintenance Branch and a Training Unit for maintenance within DWS (which DWS will set up by December 31, 1983 - para. 5.01). The training adviser will work within the Training Unit of the Maintenance Branch, and would particularly assist in: (i) determining detailed training needs in the road maintenance area using, as a basis, the results of the Road Maintenance Study now being carried out under the Third Highway Project; (ii) preparing and beginning the implementation of a three-year maintenance training program at the national and provincial levels; and (iii) organizing and supervising training of national instructors. Outline terms of reference for all these technical assistance consulting assignments have been agreed between the Government and the Bank (see Project File). During negotiations, arrangements to prepare Action Programs for improvement of maintenance operations, for establishing training needs and for implementing a training program was agreed between the Government and the Bank (para. 5.01). DWS will submit the detailed action program for maintenance training for Bank review by September 30, 1983, and - 17 -

the detailed action program for the improvement of maintenance operations for Bank review by March 31, 1984 (para. 5.01). The technical assistance advisers will aid DWS in this effort. Detailed terms of reference for all technical assistance assignments will be approved by the Bank prior to the engagement of consultants.

D. Status of Preparation

3.12 As the project consists of many small components scattered all over the country, preparation has been difficult, time consuming and costly. For rehabilitation and improvement of provincial roads and for bridges on national roads, feasibility studies and preliminary and detailed engineering have been completed for the four roads and the eight bridges included in Category I, the first year's construction program. Feasibility studies and preliminary engineering for the six roads and nine bridges included in the second category are presently ongoing and will be completed during 1983. For the remaining five roads and 15 bridges in the third category, feasibility studies and preliminary engineering will be undertaken during 1983/84. This work is being carried out by DWS, DTCA, and consultants according to a methodology and timetable agreed with the Bank. Detailed engineering for the second category bridges having an acceptable economic rate of return will be undertaken during 1983/84. For the second and third category roads and the third category bridges, detailed engineering will be carried out, for those roads and bridges having an acceptable economic rate of return, during the course of project implementation.

3.13 For the Kudjip-Minj section of the Highlands Highway, feasibility studies and preliminary engineering have been completed by DTCA and DWS with the help of consultants (Beca, Carter and Hlollings, PNG). A consultant will be selected and appointed shortly for the Watabung-Chuave section and feasibility study and preliminary engineering will be completed during 1983. Detailed engineering for the Kudjip-Minj section will be completed during 1983; for the Watabung-Chuave section, it will be carried out under the proposed project, subject to an acceptable economic rate of return being shown (para. 3.27). The feasibility study for the Togoba-Wapenamanda section of the Enga Highway, which includes the Togoba-Tanbul Turnoff section, was prepared by consultants (Rendel, Palmer and Tritton, UK) with financing under the Second Highway Project (Credit 677-PNG). Detailed engineering and tender documents for the Togoba-Tanbul Turnoff section have been prepared by DWS with the help of consultants (Cardno and Davies, PNG), and have been completed.

E. Cost Estimates

3.14 The total cost of the Project, including contingency allowances, is estimated at about K 40.2 million or US$54.0 million equivalent. Total project cost includes: (a) physical contingencies of 10% to 25% of base costs on all civil works items depending on the status of engineering and anticipated project complexity in each case; and (b) price contingencies - 18 -

amounting to about 21% of base costs on all items, including physical contingencies, (estimated for both foreign and local costs at 8.0% for 1983; 7.5% for 1984; 7.0% for 1985; and 6.0% for 1986 and later years). Overall, physical and price contingencies combined represent about 26% of the total project cost. The cost estimates exclude all taxes and duties since the Government would exempt the project from such charges. Detailed cost estimates are given in Table 14 and are summarized below in Table 3.1.

Table 3.1: SUMMARY OF PROJECT COSTS

Foreign Local Foreign Total Local Foreign Total exchange --- (K million) ------(US$ million)--- (% of total)

Provincial Roads Rehab- ilitation & Improvement 2.18 3.28 5.46 2.94 4.40 7.34 60

Bridge Rehabilitation and Replacement program 1.47 2.73 4.20 1.98 3.67 5.65 65

Improvement of Highlands and Enga Highways 4.67 8.66 13.33 6.28 11.65 17.93 65

Consulting Services 0.80 4.03 4.83 1.08 5.42 6.50 83

Technical Assistance and Training 0.22 1.32 1.54 0.30 1.77 2.07 85

Right-of-Way 0.45 - 0.45 0.60 - 0.60 0

Base Costs (Feb. 1983 9.79 20.02 29.81 13.17 26.92 40.09 67 prices)

Contingencies Physical 1.15 2.26 3.41 1.55 3.03 4.58 66 Price 2.36 4.60 6.96 3.18 6.19 9.36 66

Total Project Cost 13.30 26.88 40.18 17.90 36.14 54.04 67

Front End Fee on Bank loan 0.17 0.17 - 0.23 0.23 100

Hydro power study 0.15 0.74 0.89 0.20 1.00 1.20 83

Total Financing Required 13.45 27.79 41.24 18.10 37.37 55.47 67 - 19 -

3.15 For the Highlands and Enga Highways sections, the average improve- ment cost per km (excluding contingency allowances and right-of-way) is estimated at about US$350,000 equivalent. Including contingencies and right-of-way, the cost would be about US$475,000. For the two sections on the Highlands Highway (representing about 25% of the total project cost), the cost estimates are tentative because detailed engineering is still to be done. For provincial roads, rehabilitation or improvement costs would average about US$30,000 per km; including contingencies and right-of-way, the cost per km is estimated to be about US$40,000 equivalent. Unit prices for all construction items are based on an analysis of the cost of labor, materials, depreciation, operation of equipment, and contractors- overhead and profit, taking into account recent bids received for similar works. A 10% physical contingency allowance for quantity and time overruns is considered adequate for those project components for which detailed engineering is complete and no special problems are anticipated. For other project components, a physical contingency of 15% to 25% was used. Cost estimates are considered to be reasonable.

3.16 Consulting services for detailed engineering, and supervision of construction for project roads and bridges will require about 375 man-months (Table 11) at a total estimated cost of US$3.7 million equivalent. These costs are based on experience on the Second and Third Highway Projects and amount to about 12% of the estimated construction cost for the project roads and bridges. Consulting services for construction management of PMFA works will require about 75 man-months (Table 11) at an estimated cost of US$800,000. This cost is included in the estimate of construction cost for the works involved. Consulting services for feasibility studies and preliminary engineering for the sections of the Highlands Highway included in the project will require about 65 man-months at an estimated cost of US$670,000 equivalent. Consulting services for the feasibility studies and detailed engineering of future projects will require about 70 man-months at a total estimated cost also of US$670,000 equivalent (Table 11); consulting services for the transport policy studies will require a total of 82 man-months at an estimated cost of US$1.12 million equivalent (Table 12). Consulting services for feasibility studies and preliminary engineering for the boat services projects (Table 12) will require about 40 man-months at a total estimated cost of US$360,000 equivalent. These costs are considered to be reasonable, are based on the cost of similar consultant's services under previous projects in PNG and other countries, do not include contingency allowances, and reflect the varying complexity of each consulting assignment.

3.17 Consulting services for technical assistance and training will require a total of 156 man-months (Table 13) at a cost of about US$2.1 million equivalent, without contingencies. These costs are based on the cost of similar consultant's services provided under previous projects in PNG and in other countries. For all consulting services, technical assistance and training under the project, the man-month rate for expatriate experts is estimated to be about US$11,000 (or US$9,500 excluding local costs for equipment, vehicles, housing and administrative costs). The costs include salaries, social costs, firm's overhead and profit, subsistence and other allowances, and reimbursable items such as local and international air travel. These costs are considered reasonable. - 20 -

F. Financing

3.18 Financing for the Project, including its foreign exchange cost (US$36.14 million, representing about 67% of the total cost) and about US$580,000 equivalent of local costs incurred in connection with consulting services and technical assistance, would require an amount of approximately US$36.7 million equivalent; including the capitalized front-end fee on the Bank loan (US$230,769), the amount required would be about US$36.9 million equivalent. The Kuwait Fund has indicated its interest in providing on a parallel financing basis, the amount of US$7.0 million equivalent. The amount required, therefore, would be approximately US$30.0 million. However, during negotiations the Government requested that funds to enable the Department of Minerals and Energy to carry out a Hydropower Resources Survey be included in the loan. Including the foreign exchange cost of this survey (US$1.0 million equivalent), the proposed Bank loan would be in the amount of US$31 million (para. 5.03). The Loan would include US$900,000 equivalent of retroactive financing for project preparation work undertaken after July 30, 1982 by DTCA and DWS, through consultants (Beca, Carter and Hollings - PNG, Cardno and Davies - PNG, and Ove Arup & Partners UK), including the cost of traffic surveys, soils explorations and analyses. The Government would finance the balance of the local costs of about US$17.5 million equivalent through annual budgetary allocations.

G. Implementation

3.19 The project extends the assistance of previous transport projects from the national to the provincial government level by financing rehab- ilitation and improvement of provincial roads. Tables 8 and 9 show the provincial roads and bridges on national roads for which implementation is scheduled to begin during the first year of the project period (Category I) and these identified for later implementation. For Categories II and III roads and bridges included in the Project, the Government will submit by October 31 of each year beginning in 1983, a proposed list of roads and bridges to be implemented beginning in the following year for Bank review and approval (para. 5.01). Chart 3 shows the implementation schedule for Category I roads and bridges and a tentative schedule for Categories II and III. Because of the lack of management capabilities and technical expertise in the provinces, the provincial road component will be implemented by DWS; after their completion, the provincial roads will be maintained initially by DWS using its own financial resources. During negotiations, arrangements for maintenance of the provincial roads under the project were agreed with the Government (para. 5.01). When provincial capabilities reach a satisfactory level, the responsibility for maintaining these roads will be transfered to provincial governments. To expedite this process, the project will include technical assistance and training in maintenance, through DWS, to provincial staff. In addition, it will provide technical assistance for transport planning, through DTCA, to provincial planners. DWS will be responsible for project implementation, with the exception of the transport policy studies, the boat services feasibility studies and the technical assistance for rural transport planning which the DTCA Policy and Planning Division (Chart 1) will handle. Within DWS, the Works Division (Chart 2) will manage rehabilitation - 21 - and improvementworks for roads and bridges as well as related consulting services and technicalassistance. Training will be handled by the Staff Development and Training Section of the DWS AdministrationDivision (Chart 2) in cooperationwith the DWS Maintenance Branch which would be established. The previous two Bank-financedroad projects have been carried out through DTCA and DWS; except for shortage of staff, no special administrative diffi- culties are anticipated, particularly since substantial technical assistance to these agencies has been included in the Project.

3.20 Civil works would be carried out by contract,force account and PMFAo PMFA is a modified version of force account whereby DWS forms a project management and monitoring team to carry out force account works whose supervisory members are engaged through consultants. Except for the lack of bidding, the work is then performed as if a contractor had been hired, including provision of a priced bill of quantities and monthly bills certified by a supervising consulting engineer. DWS will engage qualified consultants to carry out feasibility studies, preliminary engineering and detailed engineering where required (Table 11); to supervise civil works contracts and PMFA works on the Highlands and Enga Highways, as well as on provincial roads and bridges (Table 11); and to provide technical assistance and training (Table 13). DTCA will retain qualified consultants to carry out studies (Table 12) and to provide technical assistance to provincial governments for rural transport planning (Table 13).

3.21 The project will be executed over a five-year period and should be completed by mid-1988.-Contractors will be responsiblefor maintaining their respective works for a 12-month period after completion. All project roads, including provincial roads, will be maintained after completion by DWS from its normal maintenance budget which would be increased to provide for the additional roads (para. 5.01). A schedule showing implementation phases for each project component is attached as Chart 3. An implementation action pro- gram for DWS and DTCA is shown in Annex 1. During negotiations, the imple- mentation schedule was agreed with the Government, attached to the Loan Agreement as a Side Letter, and assurances obtained that the Government would: (a) adhere to the agreed action programs (para. 5.01); (b) submit semi-annual progress reports to the Bank; (c) monitor overall implementationof the Pro- ject; and (d) prepare a completion report within six months of the Closing Date. H. Procurement

3.22 Prior to the appraisal of this Project, the Governmenthad strongly requested that the Bank permit the use of PMFA for the Togoba-TanbulTurnoff section of the Enga Highway instead of ICB, due to the poor security situa- tion in the area, the training benefits that could be realized, the opportu- nity to promote the domestic construction industry, and its perception that ICB would result in increased costs of construction. Therefore, the appraisal mission made a thorough examination of the factors affecting the choice of an optimal procurement method for this road section. The appraisal mission concluded that, in the case of the Togoba-Tanbul Turnoff section, ICB was indeed the preferred method of procurement rather than PMFA for the following reasons: (a) while security problems exist, contractor's prices and schedules would allow for this. The costs involved were not considered to be greater than those expected for PMFA; (b) in contrast to the situation existing during - 22 -

the implementationof the previous highway projects, there now is sufficient interest among the internationalcontracting community that responsive bidding under ICB can be expected;and (c) the Government'sobjectives of promoting the domestic constructionindustry and of extending its training efforts will be furtheredunder the Project by using PMFA to carry out part of the works for the Watabung-Chuavesection of the Highlands Highway (earth- works and drainage)and some of the provincial road works. These procurement arrangements(para. 3.23 and Tables 8, 9 and 10) were agreed by DWS and DTCA during appraisal, were confirmed by the Government during negotiationsand were incorporatedinto the Loan Agreement.

3.23 Civil works for the improvementand paving of the Togoba-Tanbul Turnoff and Kudjip-MinjRoads on the Enga and Highlands Highways, totaling about US$15 million equivalent,including contingencies,will be procured under two separate contracts through ICB in accordancewith the Bank-s Guidelines for Procurement (July 1980). Contractorswill be pre-qualified. Payments under constructioncontracts in PNG are made exclusivelyin local currency, whether the project is externally financed or not. Since the currency is freely convertible,this regulationdoes not impede international contractors. Civil works for paving and bridges on the Watabung-Chuavesec- tion of the Highlands Highway (totaling US$3.5 million), for selected provin- cial road works and for bridges on national roads (totaling US$13.5 million), including contingencies,will be procured under contracts (value of each package not exceeding US$1.0 million equivalent)through Local Competitive Bidding (LCB) procedures which are satisfactory. The balance of the improve- ment works for the Watabung-Chuavesection of the Highlands Highway (US$5.6 million equivalent),the provincial road works and the works for the bridge program (US$4.1million equivalent)will be carried out by DWS, partly through force account (day labor) and partly through PMFA in packages not exceeding US$750,000 equivalent. During negotiations,agreement was reached between the Government and the Bank concerning the specific form of procurementto be used for each identified project component (Tables 8, 9 and 10), and reflected in the Loan Agreement. During the review of each year's program, agreementwill be reached concerning the specific form of procurementto be used for Category III provincial roads and bridges on national roads (Tables 8 and 9). Civil works contractorswill be eligible to bid for one or several packages. The bidding will be arranged in stages so that unsuccessfulbidders could bid on subsequent rounds. Opportunitieswil also be provided to domestic contrac- tors, primarily through subcontractingportions of larger contracts or PMFA works. The contract tender documents tinderLCB will provide for the use of nominated subcontractorsselected by DWS. For PMFA, a monitoring system utilizing a separate consulting firm engaged for the purpose will be set up to measure the cost effectivenessbetween those road sections carried out using PMFA and those executed by contracts under ICB. PMFA will also provide for on-the-job training of PNG engineers who will be attached to the construction management and supervisionteams.

3.24 All bidding packages for civil works estimated to cost US$500,000 equivalent or more will be subject to the Bank's prior review of procurement - 23 -

documentation. Consultant services for engineering,construction supervi- sion, studies, technical assistance and training would be obtained in accordance with the relevant Bank Guidelines (August 1981).

3.25 Contractorswill be free to choose their own constructionmethods, including the most economicaluse of mechanical equipmentand labor, subject to their work complyingwith the technical specifications. While use of labor-intensivemethods will be encouraged,it would be impracticableto stipulate that contractorsshould carry out the work largely by labor because of the relative shortage of constructionlabor in the area, the high wage rates and because it would be technicallydifficult to achieve satisfactory quality. Nevertheless,it is expected that the works will give direct employment, on average, to about 800 workers over a period of four years.

3.26 The Governmentwill acquire the right-of-way,will take the necessary steps to complete this acquisitionprior to awarding contracts and will furnish the Bank satisfactoryevidence that required land and rights to land are available for project purposes (para. 5.01). Difficulties over right-of-wayacquistion have been common in the past but the DWS Survey Division is quite capable of handling the acquisitionfor the project and the necessary arrangementsto acquire the needed right-of-wayare well underway. For the first year's program, all necessary right-of-wayhas been obtained.

I. Disbursements

3.27 Disbursementswould be made for: (a) 65% of total expenditures for civil works; and (b) 100% of total actual expendituresfor consulting services, technicalassistance and training. All expenditureswould be fully documented except those for civil works carried out by DWS through force account (day labor) which would be reimbursedon the basis of statements of expenditure certifiedby DWS. These reimbursementsunder the Statement of Expenditure procedurewill be made on the basis of a previously agreed total estimated cost for each road or bridge in accordancewith the periodic certificationby DhS as to the percentage of the work completed. Supporting documentationwould be retained by DWS and made available for review by Bank staff. Disbursementsagainst the constructioncost of the Kudjip-Minj; section of the HighlandsHighway would be made conditionalon satisfactory completion of detailed engineeringdemonstrating the cost-effectivenessand technical feasibilityof the proposed improvement. For the Watabung-Chuave section of the HighlandsHighway, inclusion as part of the Project would be made conditionalon satisfactorycompletion of feasibilitystudies and pre- liminary engineeringdemonstrating, the feasibilityand economic justifica- tion of the proposed improvement. Disbursementsagainst the construction cost of the Watabung-ChuaveRoad would be made conditionalon satisfactory completion of detailed engineeringdemonstrating the cost-effectivenessand technical feasibilityof the proposed improvement (para. 5.02). Table 15 shows a schedule of estimated disbursementswhich follows, with some minor - 24 -

modifications,the regional profile in order to provide for unexpected delays in implementation. Payments will be subject to internal audit by the DWS and by the GovernmentAuditor-General's Office; and the Government's auditing arrangementsare satisfactory.

J. EnvironmentalAspects

3.28 The project is not expected to cause any environmentalor ecologi- cal problems. No major changes in the alignment of project roads will be made. Wider and better constructedshoulders will contribute to road safety. Suitable design of drainage and slope stabilizationwill ensure that the works will not cause or aggravate flooding,erosion or land slides. Paving the road sections on the Highlands and Enga Highways will eliminate the present danger and nuisance caused by dusty, slippery and muddy surfaces.

4. ECONOMIC EVALUATION

A. General

4.01 The project comprises infrastructureimprovements and technical assistance/consultancyservices aimed primarily at staff training and the development of sound planning and operationalprocedures. Benefits from such services cannot be satisfactorilyquantified and have been excluded from the economic evaluation.

B. Rehabilitationand Improvementof Provincial Roads

4.02 This componentwould finance the improvementof four provincial roads whose economic and technical feasibilityhas been establishedand whose implementationis scheduled to begin in 1983 (CategoryI), plus items which would emerge from feasibilitystudies now underway (CategoriesII and III) and whose implementationwill begin in later years of the project. Selection and evaluationprocedures have been developed as part of the PRTS and consist of three successive screens: the first excludes items not meeting specified thresholds for population served but passes items with strong local support. The second screen broadly compares costs and benefits derived from engineeringestimates and provincial parameters describing production, travel and consumptionresponses to improved transport. The third screen evaluates items showing positive net present values (at 10% rate of discount): preliminaryengineering is then carried out and a definitive comparison of economic costs and benefits is undertaken. Working papers on the identification/screeningprocedure and on the detailed evaluation of the four roads are in the Project File. - 25 -

4.03 Costs considered in the evaluation are investment expenditures, and maintenance costs over the assumed 20-year life of a road. Benefits arise mostly out of vehicle operating cost savings and include those accru- ing to producers of marketed agricultural output, to travellers, and to consumers of goods imported into the area served by the road. Agriculture benefits represent reduction in transport costs for the current production plus the net value of agricultural output induced by the road improvement (after taking into account production response lags and the costs of necessary inputs). The comparative extent of each type of benefit is determined by field investigation to postulate yield increases and other response rates. Benefits to travellers are reductions in trip costs to current travellers only. The net value of new trips generated by the improved road (particularly where the road allows access to wage-employment activities) was initially considered as an additional benefit. Field investigations suggested that reliable estimates could not be made of travel demand induced by increased income. Hence, improved accessibility benefits" are exclusively based on current trip-making patterns and, as a further conservative step, values of time savings resulting from the improved road have been ignored in the evaluation. Benefits to consumers of imported goods are also measured conservatively: they reflect reduction of transport costs and no account is taken of additional volumes of imported freight resulting from rising incomes. Table 16 shows net benefit flows for the provincial roads in Category I.

4.C4 Category I roads show 1982 traffic volumes of 50-300 AADT and ERRs from 13.9-25.9% (Table 16). Category II and III roads are expected to show a minimum ERR of 10%.

C. Bridge Rehabilitation and Replacement Program

4.05 This component would finance an initial replacement of eight bridges on national roads whose economic and technical feasibility has been established and whose implementation is scheduled to begin in 1983 (Category I), plus items which would emerge from feasibility studies now underway (Categories II and III) and whose implementation will begin in later years of the project. Identification and initial screening of the items to be included in the BRRP was done by DWS. Subsequently, DWS and DTCA carried out comparisons of costs and benefits of different remedial solutions. Traffic flows before and after improvements and the corresponding cost and benefit streams for the eight Category I bridges are in a working paper in the Project File. The evaluation approach is summarized below.

4.06 Increasing the load-bearing capacity of a deficient bridge on a main road promises significant benefits: low bridge load limits at any point of the road influence adversely traffic composition (and hence costs) over the entire road. DWS and DTCA collected data for typical loads carried by each class of vehicle and, after assuming the removal of bridge load limitations, estimated the traffic composition (and the corresponding vehicle operating cost savings) likely to result from shifting part of the - 26 -

traffic to larger, more efficient vehicles. Benefits would emerge slowly while all bridges on a link connecting two traffic centers are being strengthened. The nature and rate of traffic response to bridge improvement would vary, depending on the level of economic activity and the status of the transport industry in the area. The evaluation method takes into account this variable response by allowing 5-10 years for the full manifestation of benefits.

4.07 Category I bridges show 1982 traffic volumes of 50-200 ADT and ERRs from 10.5-174.5%. Category II and III bridges are expected to show a minimum ERR of 10%.

D. Improvement of the Highlands and Enga Highways

4.08 Three road segments, with a combined total of about 54 km, would be improved under this component, reducing vehicle operating costs for a heavy commercial vehicle from US$1,117 to US$828 per one thousand kilometers, and for a passenger car from US$184 to US$122 per one thousand kilometers (Tables 17 and 18).

4.09 The Kudjip-Minj (13 km) section of the Highlands Highway showed a November 1982 total traffic volume of 705 vehicles per day, resulting in an ERR of 21.2%. A working paper, prepared by DTCA, on the economic evaluation of this section and showing details on estimated vehicle operating cost and maintenance savings is in the Project File. The Kudjip-Minj and the Watabung-Chuave (16 km) sections are the two unimproved sections remaining on the Highlands Highway. As preliminary engineering studies and recent traffic count data for the Watabung-Chuave section were not available at the time of negotiations, the Government and the Bank agreed that DWS and DTCA would complete preliminary engineering and economic justification studies for this segment in order to demonstrate the feasibility of the proposed improvements. If the feasibility results prove unacceptable, the financing provision would be reallocated to other project components, such as provincial road or bridge rehabilitation components. If the results are acceptable, detailed engineering and road improvement costs would be financed under the project.

4.10 The Togoba-Tambul Turnoff road section (25 km) is the first part of the Enga Highway linking the Mount Hagen area with Wabag. A feasibility study for the Togoba-Wapenamanda portion of the Enga Highway was completed in 1980 and included, as its first part, the Togoba-Tanbul Turnoff section. Traffic estimates for this section were updated in May 1982 and show an ADT of 305 resulting in ERR of 12.2%. Tables 17 and 18 show vehicle operating costs on unpaved and paved roads similar to this section. A working paper on the economic evaluation of the Togoba-Tanbul Turnoff section, containing detailed analyses of traffic and vehicle operating cost projections with and without the proposed improvements, is in the Project File. - 27 -

E. Economic Rate of Return

4.11 Items whose implementation is scheduled to begin in 1983 include four provincial roads, eight bridges on national roads, the Kudjip-Minj section of the Highlands Highway and the Togoba-Tanbul Turnoff section of the Enga Highway (representing about 49% of the total project cost for civil works). Taken together (Table 16) these 14 items show an overall ERR of 33.2%. Under the agreed criteria, items under preparation and proposed for inclusion in the project ought to show a minimum ERR of 10%. DTCA has developed an evaluation methodology acceptable to the Bank and demonstrated capacity to apply it on proposed project items. At completion, the project as a whole ought to show ERR of 20% or better. Table 4.1 below summarizes ERR calculations for the 14 items for which preparatory work has been completed under alternative assumptions concerning increases or decreases of the cost and benefit streams.

Table 4.1: SENSITIVITY ANALYSIS OF ERR

Economic rate Costs Benefits of return (%)

As estimated ...... As estimated ...... 33.2 As estimated ...... Plus 10% ...... 35.8 As estimated ...... Minus 10% ...... 30.5 Plus 10% ...... As estimated ...... 30.8 Minus 10% ...... As estimated ...... 36.1 Plus 10% ...... Minus 10% ...... 28.3

F. Risks

4.12 Four types of risk affect the project. First, the possibility that costs may be higher and benefits lower than anticipated; this has been dealt with through the conservative assumptions in the evaluation methodology and the sensitivity analysis summarized in the preceding table suggests that even a simultaneous increase of costs and decrease of benefits by 10% still preserves the overall ERR above 28%. A second risk is connected with potential difficulties over right-of-way acquisition. To reduce this risk, construction schedules have been extended to allow for necessary protracted negotiations. A third risk is that improvements to be financed through the project may not be adequately maintained after completion; this is to be dealt with through arrangements with DWS to undertake maintenance of all project roads. The fourth risk is that the project's policy and institutional objectives (strengthening transport planning, highway management and maintenance, and staff training) would not be met because the necessary expatriate staff would not be recruited according to schedule, or because the Government would not assign sufficient numbers of national - 28 -

officers to work with the foreign experts. To reduce this risk, the project implementation schedule has been extended, and programs for improving maintenance and staff training have been agreed with the Government.

5. AGREEMENTSREACHED AND RECOMMENDATIONS

5.01 During negotiations, agreement was reached with the Government on the following:

(a) the Government to adhere to an agreed timetable for addressing the transport sector issues, namely transport planning (paras. 1.14 and 3.08), modal deregulation (paras. 1.19 and 3.08) user charges (paras. 1.19 and 3.08), and development of domestic contractors (paras. 1.19, 2.16 and 3.11);

(b) the Government to prepare and furnish to the Bank for review by July 1, 1985, a Transport Sector Development strategy and, after taking the Bank-s comments into account, submit it to the NEC for consideration (para. 1.19);

(c) DWS to furnish to the Bank for comments by March 31, 1984 and subsequently implement a detailed action program for the improvement of maintenance operations satisfactory to the Bank, including the establishment of a Maintenance Branch and the appointment of appro- priate national staff for training not later than December 31, 1983 (paras. 2.19 and 3.11);

(d) DWS to prepare and furnish to the Bank for comments by September 30, 1983, an action program for the implementation of a road maintenance training program and subsequently implement a detailed training program for its maintenance staff under the project (paras. 2.19 and 3.11);

(e) DWS to submit prior to October 31 of each year beginning in 1983, for Bank review and approval, its proposed list of provincial roads and bridges on national roads for which implementation is to begin during the following year (para. 3.19);

(f) the Government to acquire all land and rights to land for purposes of the Project prior to the award of construction contracts for the project component(s) affected and will furnish the Bank satisfac- tory evidence that such land and rights to land will be available for purposes of the Project (para. 3.26);

(g) DWS to properly maintain its national road system and the provincial roads included in the project, using its own financial resources with adequate funds being provided for the purpose (para. 3.19); and - 29 -

(h) the Government to adhere to the action program for project implementation(para. 3.21) and the action program for the improvementof the transport sector which were attached to the Loan Agreement in the form of a Side Letter (para. 3.21).

5.02 During negotiations,it was agreed between the Government and the Bank that disbursementsfor the constructionof the two road sections on the Highlands Highway will be made only after satisfactorycompletion of: (i) feasibilitystudies and preliminaryengineering for the Watabung-ChuaveRoad demonstratingthe feasibilityand economic justificationof the proposed improvementand thereby confirming its inclusion in the Project; (ii) detailed engineeringfor the Watabung-ChuaveRoad, to be undertaken only if its economic justificationhas been satisfactorilyestablished, demonstrating the cost-effectivenessand technical feasibilityof the proposed improvement;and (iii) detailed engineering for the Kudjip-MinjRoad demonstratingthe cost-effectivenessand technical feasibilityof the proposed improvements (para. 3.27).

5.03 Subject to the above, a suitable basis exists for a Bank loan of US$31 million equivalent, for a period of 17 years, including a grace period of four years. ANNEX 1 -30- Page 1

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Action Program for Project Implementation

Date Action Start Complete

A. Rehabilitation and Improvment of Provincial Roads

1. Category I

a. Acquire necessary right-of-way March 1983 Aug. 1983 b. Appoint consultants for construction supervision Feb. 1983 Aug. 1983 c. Construction and improvement works Aug. 1983 Sept. 1984

2. Categories II and III

a. Appoint consultants for detailed engineering and construction supervision Dec. 1982 March 1985 b. Acquire necessary right-of-way Mar. 1983 Dec. 1986 c. Detailed engineering and letting of construction contracts Mar. 1983 Dec. 1986 d. Construction and improvement works Jan. 1984 Feb. 1988

B. Bridge Rehabilitation and Replacement Program

1. Category I

a. Let construction contracts Mar./July 1983 Aug./Oct 1983 b. Acquire necessary right-of-way March 1983 Aug. 1983 c. Appoint consultants for construction supervision March 1983 Aug. 1983 d. Construction and improvement works Aug. 1983 Apr. 1985

2. Categories II and III

a. Appoint consultants for detailed engineering and construction supervision June 1983 Sept. 1983 ANNEX 1 - 31- Page 2

Action Program (Continued)

Date Action Start Complete

b. Detailed engineering and letting of construction contracts Sept. 1983 June 1984 c. Acquire necessary right-of-way June 1983 June 1984 d. Construction and improvement works July 1984 Dec. 1987

C. Improvement of Highlands and Enga Highways

1. Kudjip-Minj Section

a. Appoint consultants for detailed engineering March 1983 April 1983 b. Detailed engineering April 1983 Sept. 1983 c. Letting of construction contract Oct. 1983 Feb. 1984 d. Appoint consultants for construction supervision Oct. 1983 Dec. 1983 e. Acquire necessary right-of-way Jan. 1983 Feb. 1984 f. Construction and improvement works March 1984 Jan. 1986

2. Watabung - Chuave Section

a. Appoint consultants for feasibility studies and preliminary engineering March 1983 July 1983 b. Carry out feasibility studies and preliminary engineering Aug. 1983 Dec. 1983 c. Appoint consultants for detailed engineering, if justified Dec. 1983 Feb. 1984 d. Detailed engineering March 1984 Sept. 1984 e. Letting of construction contract(s) Oct. 1984 March 1985 f. Appoint consultants for technical assistance in construction management Jan. 1985 May 1985 g. Appoint consultants for construction supervision and monitoring Jan. 1985 May 1985 h. Acquire necessary right-of-way Jan. 1984 May 1985 i. Construction and improvement works May 1985 June 1988

3. Togoba-Tanbul Turnoff Section

a. Acquire necessary right-of-way June 1982 Dec. 1983 b. Letting of construction contract Oct. 1983 Jan. 1984 c. Appoint consultants for construction supervision May 1983 Nov. 1983 d. Construction and improvement works Jan. 1984 Jan. 1987 ANNEX 1 - 32 - Page 3

Action Program (Continued)

Date Action Start Complete

D. Consulting Services and Technical Assistance for Transport Policy Review, Studies, Plan- ning, Institutional Strengthening, and Training

1. For DTCA

a. Agree TOR, appoint consultants and carry out policy review and other studies and transport investment program Jan. 1983 Dec. 1986

b. Agree TOR, appoint consultants and carry out program to provide technical assistance to provinces for transport planning Jan. 1983 July 1984

c. Agree TOR, appoint consultants and carry out feasibility studies and pre- liminary engineering for boat service projects identified through the PRTS Jan. 1985 Dec. 1986

d. Agree TOR, appoint consultants and carry out feasibility studies, pre- liminary engineering and detailed engineering to prepare future project June 1984 Dec. 1986

2. For DWS

a. Agree TOR, appoint consultants and carry out program to provide technical assistance to DWS for institutional strengthening and technical training June 1983 Dec. 1986

b. Prepare and submit for Bank review an action program for the implementation of the road maintenance training program March 1983 Sept. 1983

c. Agree TOR and appoint consultants to provide technical assistance in road maintenance to DWS and provinces June 1983 Oct. 1983 ANNEX 1 - 33 - Page 4

Action Program (Continued)

Date Action Start Complete

d. Prepare and submit for Bank review an action program for the improvement of road maintenance operations Oct. 1983 Jan. 1984

e. Institute Maintenance Branch in DWS and appoint appropriate national staff for training June 1983 Jan. 1984

f. Carry out road maintenance training program for DWS and provinces with assistance from consultants March 1984 Dec. 1985

g. Agree TOR and appoint consultants to assist DWS in preparing and carrying out a program of incentives and assistance designed to promote the growth and capabilities of indigenous road construction contractors June 1983 Dec. 1984 - 34 - ANNEX2 Page I

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Project-RelatedDocuments and Data Available in the Project File

A. General Reports and Studies on the Transport Sector

A-i The National Public Expenditure Plan, 1982-1985, Government of PNG.

A-2 Road Freight Transport Study, August 1980, Rendels Economics (Australia).

A-3 Transport Policy and Programmed Expenditure 1979-1982, DTCA.

A-4 An Assessment of Transport User Charge Policy and Rates in PNG, 1981, DTCA.

B. General Reports and Studies Relating to the Project

I. Studies and Reports

B-1 Feasibility Study of the Togoba - Wapenamanda Road, January 1980, by Rendels and Partners (Australia).

B-2 Technical Assistance to Local Civil Engineering Contractors,Final Report 1979, Rendels and Partners (Australia).

B-3 Transport Data Base Study, November 1981, by RPT Economic Studies Group (UK).

B-4 Provincial Rural Transport Study, 1982, by T.P. O'Sullivan & Partners and GITEC Consult GMBH(UK/Germany), Volumes I, II, Planning Manual, Appendices and five Provincial Reports (nine volumes).

B-5 Highlands Highway Project Kundiawa, Intensive ConstructionGroup, Final Report, 1979, Snowy Mountains Engineering Corporation (Australia).

B-6 Proposed Rural Transport Works: Engineering and Economic Studies and Analyses, 1982 by DTCA and DWS.

B-7 Vehicle Operating Cost Savings: Working Paper by DTCA, 1982. - 35 - ANNEX 2 Page 2

B-8 Proposed Bridge Rehabilitation and Replacement Program: Engineer- ing and Economic Studies and Analyses, Phases I and II, 1982 by DTCA and DWS.

B-9 National Road and Bridge Inventory, DWS, 1979.

B-10 Coastal Shipping Survey, January 1982, by Shiptraco (Germany).

II. Detailed Engineering Reports

B-il Detailed Engineering for the Highlands Highway Between Waterais and Togoba, 1974, Valentine, Laurie and Davies (Australia).

B-12 Detailed Engineering for the Enga Highway Between Togoba and the Tanbul Turnoff, 1982, DWS.

B-13 Rural Road Links: Preliminary Engineering Studies, DWS and Consultants, 1982.

B-14 Bridge Rehabilitation and Replacement Program: Preliminary Engineering Studies, DWS, 1982.

B-15 Bridge Replacement Program: Phases I and II, Engineering Assessment, and Bridge Layout Plans, 1982, DWS.

B-16 Preliminary Engineering Studies and Reports: The Togoba-Wabag Road - Enga Highway, May 1982 by Cameron McNamara Kramer (Australia), 12 volumes.

B-17 Preliminary Engineering Study: Chuave to Minj Road - Highlands Highway, December 1975 by DWS.

B-18 Project Managed Force Account (PMFA) for Highlands Highway Project (Kundiawa):

a. Costing Manual, 1977, DWS.

b. Management Controls and Reporting Manual, 1977, DWS.

III. Government Reports

B-19 Provincial Financial Control Manual, DWS, 1982.

B-20 Capital Works, Maintenance Programming and Administration Manual, 1981, DWS. - 36 ANNEX 2 Page 3

B-21 Planning, Engineering and Constructionof PenetrationRoads, 1979, DWS.

B-22 ProvincialWorks Manager's Guidance Manual, 1979, alS.

B-23 InformationBooklet - Staff Developmentand Training Division, 1981, DWS.

B-24 Local GovernmentTechnical InformationHandbook, 1975, DWS.

B-25 Standard Specificationsfor Road and Bridge Works, 1978, DWS.

B-26 ProvincialAccounting Practice Manual, March 1980, DWS.

B-27 Rural Roads Manual, 1977, DUS.

C. Selected Working Papers

C-1 Parametersfor Price Contingency Calculations.

C-2 Cash Flow Analysis and Contingency Calculationsfor Project Components.

C-3 Economic Rate of Return and SensitivityAnalysis Calculations.

C-4 Detailed Cost Estimates.

C-S Terms of Reference for ConsultancyServices and Technical Assistance.

C-6 ProvincialRoads and Bridges on National Highways: Economic Methodology and Analysis.

C-7 Togoba-TanbulTurnoff Section (Enga Highway): Economic Methodology and Analysis.

C-8 Kudjip-Minj Section (HighlandsHighway): Economic Methodology and Analysis. PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Expenditures on Transport by National Government (K million)

1972/73 1973/74 1974/75 1975/76 1976/77 1978 1979 1980 1981 1982 1983 1984 1985 (Est.) (Forecast) -----

Roads Capital works 11.6 7.0 10.5 11.7 16.4 15.0 13.8 17.1 15.7 19.0 20.0 21.0 21.0 Maintenance 9.9 13.2 18.9 16.6 17.9 10.5 12.7 14.9 14.8 13.0 14.0 15.0 16.0

Total 20.5 20.2 29.4 28.3 34.3 25.5 26.5 32.0 30.5 32.0 34.0 36.0 37.0

Wharves Capital works 0.2 0.1 0.2 0.2 0.2 0.3 - 0.1 0.1 0.1 0.1 0.2 0.2 Maintenance 0.1 0.1 0.1 0.1 0.1 0.1 - 0.2 0.1 0.1 0.1 0.2 0.2

Total 0.3 0.2 0.3 0.3 0.3 0.4 - 0.3 0.2 0.2 0.2 0.4 0.4

Aerodromes Capital works 0;3 0.7 0.7 0.7 0.8 0.7 0.8 0.1 0.3 1.5 1.0 1.0 1.0 Maintenance 0.7 1.0 1.6 1.3 1.4 1.8 2.0 2.2 2.6 2.5 2.7 2.9 3.0

Total 1.0 1.7 2.3 2.0 2.2 2.5 2.8 2.3 2.9 4.0 3.7 3.9 4.0

Source: DWS/DTCA.

October 1982 - 38 - Table 2

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Road Infrastructure - Estimated Revenue from Rboad User Charges and Composition of Expenditure, 1977-81 (K million)

1977 1978 1979 1980 1981

Revenue

Automotive gasoline tax 3.2 3.3 3.4 3.4 5.6

Diesel tax 0.4 0.5 0.5 0.5 2.6

Vehicle registration & other fees 1.8 2.0 2.2 2.8 2.2

Import duties 5.7 5.8 8.3 9.1 9.9

Total 11.1 11.6 14.4 15.8 20.3

Expenditure

Capital 16.4 17.0 22.3 25.6 24.2

Maintenance 17.9 18.5 22.5 25.4 25.8

Administration 1.0 2.1 3.3 2.4 2.6

Police 1.8 2.0 2.1 2.4 2.8

Total 37.1 39.6 50.2 55.8 55.4

Notes: (1) Figures do not include revenue from the general import levy of 2.5%.

(2) Estimated policing costs are equivalent to 10% of total police expenditure.

(3) Provincial components within expenditure totals are approximate estimates based on partial data.

Source: DTCA.

October 1982 - 39 - Table 3

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Roads in Papua New Guinea, 1981 (Length in km)

National Provincial Province Sealed Unsealed Sealed Unsealed Total

Western - 81 4 409 494 Gulf - 18 3 270 291 Central (incl. NCD) 244 564 - 1,149 1,957 Milne Bay 2 31 - 299 332 Northern 16 416 4 367 803 Southern Highlands 31 217 - 1,238 1,486 Enga - 91 3 750 844 Western Highlands 54 110 10 1,016 1,190 Chimbu - 100 4 660 764 Eastern Highlands 25 161 15 1,265 1,466 Morobe 167 172 22 949 1%310 Madang 31 340 25 584 980 East Sepik 6 189 22 873 1,090 West Sepik - 142 3 486 631 Manus - - 2 149 151 New Ireland - - 9 1,400 1,409 East New Britain 26 58 116 1,000 1,200 West New Britain 24 361 9 538 932 North Solomons - - 60 1,155 1,215

Total 626 3,051 311 14,557 18,545

Note: National roads include oil palm roads in Northern and West New Britain Provinces, Port Moresby urban roads and some "temporary" national roads in addition to the national highways.

Sources: 1979 National Roads Inventory, selected reports and Provincial Inven- tories and Department of Works and Supply estimates. Collated by Department of Transport and Civil Aviation. The overall level of accuracy for provincial road totals is low.

October 1982 - 40 - Table 4

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Vehicle Fleet by Type, 1975 to 1979

1975 1976 1977 1978 1979 1980

Cars and station wagons 17,923 17,726 17,228 17,150 17,730 18,481

Light commercial vehicles (utilities, vans and 4-wheel drive) 11,192 11,681 13,311 14,047 15,617 16,291

Trucks 5,829 6,424 6,479 6,514 7,121 7,981

Buses 885 1,125 1,497 1,987 2,397 2,870

Motorcycles 3,815 3,866 3,436 2,892 2,860 2,351

Tractors 1,786 1,753 1,812 1,728 1,711 1,796

Total 41,430 42,575 43,763 44,318 47,436 49,770

Source: National Statistical Office.

February 1983 - 41 - Table 5

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Transport Statistics by Province, 1980

Motor vehicles Km of road Motorized Km of per 1,000 per 1,000 Province Population vehicles roads inhabitants inhabitants

Western 78,881 60 494 0.8 6.3 Gulf 64,167 176 291 2.7 4.5 Central /a 240,003 16,194 1,957 67.5 8.2 Milne Bay 127,841 304 332 2.4 2.6 Northern 77,273 753 803 9.7 10.4 Southern Highlands 235,647 884 1,486 3.7 6.3 Enga 164,476 579 844 3.5 5.1 Western Highlands 262,886 3,340 1,190 12.7 4.5 Chimbu 178,490 590 764 3.3 4.3 Eastern Highlands 277,180 2,521 1,466 9.1 5.3 Morobe 310,526 7,583 1,310 24.4 4.2 Madang 211,209 2,429 980 11.5 4.6 East Sepik 220,903 1,722 1,090 7.8 4.9 West Sepik 114,119 327 631 2.9 5.5 Manus 25,844 70 151 2.7 5.9 New Ireland 65,705 941 1,409 14.3 21.4 East New Britain 133,530 4,908 1,200 36.8 9.0 West New Britain 89,229 1,167 932 13.1 10.4 North Solomons 128,890 5,222 1,215 40.5 9.4

Total 3,006,799 49,770 18,545 16.5 6.2

/a National Capital District is included in figures for Central Province.

Sources: DTCA, National Statistical Office, National Census Office.

February 1983 - 42- Table 6

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Road Transport Output, 1975 to 1979

Estimated Vehicle-Kilometers by Vehicle Type (Millions)

1975 1976 1977 1978 1979 1980

Cars and station wagons 300 300 290 290 300 310

Light commercial vehicles (utilities, vans and 4-wheel drive) 440 460 520 550 610 640

Trucks 440 490 490 500 540 610

Buses 60 80 100 140 170 200

Other vehicles 60 60 50 50 50 40

Total 1,300 1,390 1,450 1,530 1,670 1,800

Note: These estimates derive from Vehicle Registration, tatistics, together with assumptions on average vehicle-kilometers per vehicle type taken from a report on Vehicle Operating Costs by Rendels Economics (August 1979).

Source: DTCA

February 1983 PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Design Standards (DWS)

Maximum Max. speed Absolute Desirable length at Maximum Overall for sight minimum minimum General Absolute absolute length width Design distance radius radius maximum maximum maximum desirable between Pavement Class of road Terrain speed benching curve curve gradient gradient grade grade shoulders width (km/hr) (km/hr) (m) (m) (/im) (W/m) (m) (m) (m) (m)

Primary Flat/Rolling 80 100 200 paved 350 .04 .07 No limit 12/a 6.5 250 gravel 10.5 Hilly 60 80 125 paved 250 .06 .08 600 1,200 11/a 6.5 130 gravel 10 Mountainous 40 60 50 paved 90 .08 .10 250 500 8.5 6.0 60 gravel

Rural Flat/Rolling 60 80 125 paved 250 .06 .08 600 1,200 10.5/b 6.0 class 1 130 gravel 8.5 Hilly 50 60 95 paved 150 .08 .10 300 600 8.0 6.0 95 gravel Mountainous 30 50 30 paved 50 .10 .12 250 500 7.5 5.5 30 gravel

Rural Flat/Rolling 60 80 130 gravel 250 .06 .08 600 1,200 8.5 3.6 class 2 Hilly 40 50 60 gravel 75 .10 .12 250 500 7.0 3.6 Mountainous 25 40 20 gravel 30 .12 .14 150 300 7.0 3.6

Rural Flat/Rolling 50 60 95 gravel 150 .08 .10 500 1,000 7.0 3.6 class 3 Hilly 30 40 30 gravel 50 .10 .12 250 500 6.0 3.6 Mountafinous 25 30 20 gravel 30 .12 .14 150 300 6.0 3.6

Access class 1 As for rural class 3 5.0 3.6

Access As for rural class 3 3.6 Full width class 2 as required

Bridge Loading: National Association of Australian State road Authorities (NAASRA), Bridge Design Specification (1976); Standard Vehicle Loading Class T 44.

Pavement: Axle load 18,000 lbs (design based on projected number of repetitions of "equivalent 18,000 lbs axle loads").

/a The higher is to be adopted where traffic volume is between 2,500 and 5,000 v.p.d. /b The higher is to adopted in rolling terrain where sight distances are limited.

Note: DWS classifies traffic for rural roads in terms of three categories: Light - 0 to 160 vpd (Access Class 1 & 2, and Rural Class 3) Medium - 120 to 500 vpd (Rural Class 2 and 3) Heavy - over 500 vpd (Rural Class 1 and 2) a

Source: Department of Works and Supply. m

October 1982 PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Rehabilitation and Improvement of Provincial Roads

Fstinated Estimated Met',od ^f Proposed Improvement cost /a ERR procure- Item Province Description Class /e Surfacing (Kina million) {x) ment

Category I /b 1. Sila-Itokama Road Oro Rehabilitation of 36 km Access Class 2 Gravel r.125 l1q. PMFA 2. Henagaru-Tunakau Road Eastern lilghlands Rehabilitation of 13.5 km Access Class 2 Gravel 0.150 25.9 PMFA 3. Doliba-Kilau Road Simbu Rehabilitation of 11 km Access Class 2 Gravel 0.185 20.8 PMFA 4. Mai-Nuku Road West Sepik Improvement of 21 km Access Class 2 Gravel 0.116 13.9 PMFA

Subtotal 81.5 km 0.576

Category II _c 1. Aseki-Menyamya Road Morobe Improvement of 36 km including replacement of the Kortle Bridge Rural Class 3 Gravel 1.135 - LCB 2. Ua River-Bundi Road Madang Improvement of 12.5 km Access Class 2 Gravel 0.400 - LCB J 3. Kilau-Nomane Road Simbu Rehabilitation of 20 km Access Class 1 Gravel 0.264 - PMIFA 4. Manemp-Mants River-Kol Road Western Highlands Rehabilitation of 35 km Access Class 2 Gravel 0.540 - LCB X 5. Tsingoropa-Koinambe Road Western Highlands Rehabilitation of 25 km Access Class 2 Gravel 0.504 - LCB 6. Wamu River-Ubaigubi Road Eastern Highlands Rehabilitation of 17 km Access Class 2 Gravel 0.437 - LCB

Subtotal 145.5 km 3.280

Category III /d Other provincial road links to be later identified (approx- imately 5 road sections) 50 km 1.600 - /f

Total 277 km 5.456 -

/a In February 1983 prices, without contingencies. Tb Category I items identified by the Provincial Rural Transport Study (PRTS). Feasibility studies, preliminary engineering and detailed englneering for Category I items have been completed. Category I represents the first year½s construction program. /c Category II items constitute components identified by the PRTS, for which feasibility studies and preliminary engineer 4 ng are underway. Detailed engineering will follow for those roads found to be economically justified. /d Category III items are yet to be identified and will be included in the Project only if their economic justification can be satisfactorily established. /e See Table 7 for classification details. If To be determined. H

Source: DTCA/DWS and Mission.

February 1983 - 45- Table 9

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Bridge Rehabilitation and Replacement Program

Total Method of Length estimated Estimated procure- Item Province/Location (Lin. m.) cost /a ERR ment (Kina) (%) (million)

Category I 1. Kaugel River Bridge West Highlands/Mt. Hagen- Mendi Road 55 0.300 211.3 LCB 2. Kemp Welch River Bridge Central/Magi Highway 78 0.380 57.3 LCB 3. Tuoima River Bridge Morobe/Lae-Wau Road 50 0.100 174.5 FA 4. Wasego River Bridge Madang/Ramu Highway 45 0.150 128.2 LCB 5. Hapmet Creek Bridge West Sepik/Sepik Highway 30 0.165 11.5 FA 6. Gilagil River Bridge Madang/Coastal Highway 117 0.300 10.5 LCB 7. Sikor Creek Bridge Madang/Coastal Highway 20 0.070 25.6 LCB 8. Ulingan River Bridge Madang/Coastal Highway 30 0.115 } LCB

Subtotal 425 1.580

Category II 1. Niumen River Bridge West Sepik/Coastal Highway 60 0.165 - FA 2. Akanai East Bridge West Sepik/Coastal Highway 30 0.085 - LCB 3. Wainingi River Bridge West Sepik/Coastal Highway 60 0.110 - LCB 4. Drinumor River Bridge West Sepik/Coastal Highway 72 0.350 LCB 5. Aitape River Bridge West Sepik/Coastal Highway 78 0.075 - LCB 6. Nenema River Bridge Enga/Enga Highway 40 0.175 - LCB 7. Ormond River Bridge Central/Magi Highway 92 0.130 - FA 8. Raihu River Bridge West Sepik/Coastal Highway 60 0.115 - FA 9. Waghi River Bridge West Highlands/Highlands Highway 100 0.015 - FA

Subtotal 592 1.220 -

Category III Other bridges to be identified (approximately 15 bridges) 500 1.400 - /c

Total 1,517 4.200 -

/a In February 1983 prices, without contingencies.

/b Detailed engineering for Category I bridges has been completed, and is underway for Category II bridges. Category I represents the first year's construction program.

/c To be determined.

Source: DTCA/DWS and Mission.

February 1983 - 46 - Table 10

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Improvement of Highlands and Enga Highways

Estimated Estimated Length Approx. Improvement cost /b ERR Method of Item (km) AADT class /a (Kina mln) (%) procurement (1982)

Highlands Highway Watabung-Chuave Road 16 500 Rural Class 1 5.000 - PMFA/LCB Kudjip-Minj Road 13 600 Rural Class 1 2.300 21.2 ICB

Enga Highway Togoba-Tanbul Turnoff 25 300 Rural Class 1 6.032 12.2 ICB Road

Total 54 13.332 -

/a See Table 7 for classification details.

/b In February 1983 prices, without contingencies.

Source: DTCA/DWS and Mission.

February 1983 -47 Table 11

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Consulting Services - Engineering

Cost Item Estimated (Kina /a man-months million)

1. Construction Supervision for Rehabilita- tion and Improvement of Provincial Roads 45 0.350

2. Construction Supervision Bridge Rehabilitation and Replacement Program 40 0.300

3. Construction Supervision of Highlands and Enga Highway sections 130 1.000

4. Detailed Engineering of Kudjip-Minj and Watabung-Chuave Roads 90 0.650

5. Detailed Engineering of Provincial Roads (Categories II and III) 50 0.300

6. Detailed Engineering of Bridges (Categories II and III) 20 0.130

7. Feasibility Studies and Preliminary Engineering for Kudjip-Minj and Watabung- Chuave Roads (Highlands Highway) 65 0.500

8. Feasibility Studies, Preliminary Engineering and Detailed Engineering to prepare future project 70 0.500

Subtotal 510 3.730

9. Construction management and monitoring for PMFA works /b 75 0.600

Total 585 4.330

/a Without contingencies. Prices as of February 1983. /b Cost for these services included in construction cost estimates.

Source: DTCA/DWS and Mission.

February 1983 - 48 - Table 12

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

Consulting Services - Studies

Cost Estimated (Kina /a Item man-months million)

1. Transport Investment Program 35 0.374

2. Transport Data Base 9 0.094

3. Financial Data Reporting System 2 0.021

4. Port Moresby/Lae Public Transport Systems Study 8 0.083

5. Road Freight Industry Study 10 0.099

6. Aviation User Charges Study 3 0.031

7. Boat Services Feasibility Studies and Preliminary Engineering 40 0.270

8. Other Studies 15 0.128

Total 122 1.100

/a Without contingencies. Prices as of February 1983.

Source: DTCA/DWS and Mission.

February 1983 - 49- Table 13

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Technical Assistance and Training

Cost Estimated (Kina /a Item man-months million)

Technical Assistance to DTCA

Provincial liaison planning and training 12 0.112

Technical Assistance to DWS

Organizational studies, management and operational improvements 24 0.208

Improvements to road and bridge design and construction supervision systems and capabilities, including training /b 48 0.498

Road and bridge maintenance improvement program, including training 60 0.624

Program to promote the development of the domestic road construction industry, by providing incen- tives and assistance to indigenous contractors 12 0.100

Total 156 1.542

/a Without contingencies. Prices as of February 1983.

/b Includes assistance in setting up a permanent, rolling program for bridge rehabilitation and replacement.

Source: DTCA/DWS and Mission

February 1983 - 50 - Table 14 PAPFUANEW GUINEA ROADIMPR0OEMERBT PR0OECT

S-rnary of Project Costs Ia

Local Foreign total Local Foreign total l Proj-ct co-poceoto Loogth cost .ocheogo toot coot ... ha.se/d east foreigo It.o doscriptioo (k.) ---- (K illito) ------(US$ illion) --- aohasgs

A. lohabilitotico & Irprov.ecnt of Provi-ctol Roads Category I Silo-ltotaca Road 36.0 0.050 0.075 0.125 0.067 0.101 0.168 60 H-oagaco-To..kac Rood 13.5 0.060 0.090 0.150 0.081 0.121 0.202 60 Doliba-Kilau Rood 11.0 0.074 0.111 0.185 0.100 0.149 0.249 60 hai-fokp Road 21.0 0.046 0.070 0.116 0.062 0.094 0.156 60 Sobtotal 81.5 0.230 0.346 0.576 0.310 0.465 0.775 60 Coto0ory II Aaeki-Mcoyasya Road 36.0 0.454 0.681 1.135 0.611 0.916 1.527 60 UR Rivor-RBodi Road 12.5 0.160 0.240 0.400 0.215 0.323 0.538 60 Kilau-No-ane Rood 20.0 0.105 0.159 0.264 0.141 0.214 0.355 60 Maccop-Roots River-Kol Rood 35.0 0.216 0.324 0.540 0.290 0.436 0.726 60 Tsingoropa-Koi-a=be Road 25.0 0.202 0.302 0.504 0.272 0.406 0.678 60 WOco River-Ubaigubi Road 17.0 0.175 0.262 0.437 0.236 0.352 0.588 60 Subtotal 143.5 1.312 1.968 3.280 1.765 2.647 4.412 60 Catego-y III Other lick. to bh ideotified 50.0 0.640 0.960 1.600 0.861 1.291 2.152 60 Sobtotal (A) 277.0 2.182 3.274 5.456 2.935 4.403 7.338 60 B. Bridge Rohabilitatioe 4 Roplaceoent Froerac Category I Ktegel Ricer Bridge 0.105 0.195 0.300 0.141 0.262 0.403 65 Ke-p Welch Rover Bridge 0.133 0.247 0.380 0.179 0.332 0.511 65 Totina Rover Bridge 0.035 0.065 0.100 0.048 0.087 0.135 65 Wa-reo River Bridgo 0.052 0.098 0.150 0.070 0.132 0.202 65 Hapret Crook Bridge 0.058 0.107 0.165 0.078 0.144 0.222 65 Gilagil River Bridge 0.105 0.195 0.300 0.141 0.262 0.405 65 Sikor Crook Bridge 0.025 0.045 0.070 0.033 0.061 0.094 65 Ulingan 0I1er Bridge 0.040 0.075 0.115 0.054 0.101 0.155 65 Sobttol 0.553 1.027 1.580 0.744 1.381 2.125 65 Category II Niie River Bridge 0.038 0.107 0.165 0.078 0.144 0.222 65 Akhaci Boot Bridge 0.030 0.055 0.085 0.040 0.074 0.114 65 Ociciegi River Bridge 0.038 0.072 0.110 0.051 0.097 0.148 65 Drinp=or River Bridge 0.123 0.227 0.350 0.166 0.305 0.471 65 Ajitpe Rover Bridge 0.026 0.049 0.075 0.035 0.066 0.101 65 Ne-e-a REvor Bridge 0.061 0.114 0.175 0.082 0.153 0.235 65 Oreo_d River Bridge 0.046 0.084 0.130 0.062 0.113 0.175 65 Raiho Rover Bridge 0.040 0.075 0.115 0.054 0.101 0.155 65 Waghi River Bridge 0.005 0.010 0.015 0.006 0.014 0.020 65 S6brotal 0.427 0.793 1.220 0.574 1.067 1.641 65 Category III Other bridges to bh identified 0.490 0.910 1.400 0.659 1.224 1.883 65 Shbtotal (B) 1.470 2.730 4.200 1.977 3.672 5.649 65 C. Laprove-e-t of Higblaods and etg Righ-ays Tegohb-Tatbel T.rnoff Road 25.0 2.111 3.921 6.032 2.840 5.273 8.113 65 Kcdjip-MOiojRood 13.0 0.805 1.495 2.300 1.082 2.011 3.093 65 Watahbog-Ch-avo Road 16.0 1.750 3.250 5.000 2.354 4.371 6.725 65 Subtotal (C) 54.0 4.666 8.666 13.332 6.276 11.655 17.931 65 D. C.o.slting Services 1. eglnoie..g Rerric.s (DRo) Co_otroctio_ s.pervtst. for r-ehbilitstion and iepr-veoeet of p-ovi.elel coeds 0.070 0.280 0.350 0.094 0.377 0.471 80 Cctsirtcti. supervsibin of bridge rehebilitatiop a roplacenevi program 0.060 0.240 0.300 0.080 0.323 0.403 80 Co..trtctice superviioo of BHghcl-d a-d EBgs highvry sections 0.200 0.800 1.000 0.269 1.076 1.345 so Detailed cogie.eriog of provincial roads (Categories II cod ILI) 0.075 0.225 0.300 0.101 0.303 0.404 75 Derailed e-gineeriSg of bridges (Categories II and III) 0.032 0.098 0.130 0.043 0.132 0.175 75 Feasibility otedics cod preliti-ary engineering f-r Kedjip-Mi.o and Wbataheg-Ches-e Roads (retracti-ve ...anciog) 0.050 0.450 0.500 0.067 0.605 0.672 90 Detailed e-gi..crieg of Kedjip-M4ij aod Oatabeeg-Cheeve Reads 0.098 0.552 0.650 0.133 0.742 0.875 85 Feasibillry stodies & detoiled egi..oriog to prepare futrer project 0.050 0.450 0.500 0.067 0.605 0.672 90 Subtotal (1) 0.635 3.095 3.730 0.854 4.163 5.017 83 2. Stodies (DTCA) 0.165 0.935 1.100 0.222 1.258 1.480 85 Subtotal (D) 0.80 4.030 4.830 1.076 5.420 6.496 83 E. Techeical Asei.tt-ce and Trali=i 1. For DTCA: DTCA provicciol liainon, ple..iog & traiciog 0.011 0.101 0.112 0.015 0.136 0.151 90 2. For DWS: Orgaoieaticoel etedies, oa coddageoeet eper-ticoal optoeve_ents 0.031 0.177 0.208 0.042 0.238 0.280 85 IyPvoec-ts to -rd and bridge dosigo a=d co.st..cttco oopervision systee aed capebilitier, i.cledIeg traicieg 0.075 0.423 0.498 0.101 0.569 0.670 83 Road a-d bridge eaitteceece Inpre--eet program. Itclodiog training 0.094 0.530 0.624 0.126 0.713 0.839 85 Progras to pro=ote the d-velepeest of the domestic reod reostreottio itodetry 0.015 0.085 0.100 0.020 0.114 0.134 85 subtotol (2) 0.213 1.215 1.430 0.289 1.634 1.923 81 Subtotal (E) 0.226 1.316 1.542 0.304 1.770 2.074 85 F. Right-sf-Way 0.450 - 0.450 0.605 - 0.605 0 Total (A to F) 9.794 20.016 29.810 13.173 26.921 40.094 67 G. CVia.p4encies Physi7Il7/b 1.154 2.256 3.410 1.552 3.034 4.586 66 Price /c 2.360 4.600 6.960 3.174 6.187 9.361 66 Subtotal (G) 3.514 6.856 10.370 4.726 9.221 13.947 66 TOTAL PROJCT COST 13.308 26.872 48.180 17.899 36.142 54.041 67

Is Fri coo ae of Fobroery 1983. 7T PhysIeal cootiogoePy for civil cooke varies bt.-ec 101 sod 250, depesdi.s sn state of prep-rstien of detailed eegloeeriag serb, sod aaticipated complesities. /c Price iec'eses OD all items, itclodiogphysial ceotieg.ncies, at estiated rae- of 8.00 fte 1983, 7.50 for 1984, 7.00 for 1985, and 6.00 for 1986 cod later years. /d K 1.00 - US$1.3449 (Febreary 1983). Source: DTCA. DWS, C-aceltoeco aed Mission. Fobr-ary 1983 - 51 - Table 15

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Schedule of Estimated Disbursements

Cumulative disbursements at end of semester Fiscal Year and Semester (US$ million)

1984

First 1.50 /a Second 3.50

1985

First 5.50 Second 8.50

1986

First 11.5 Second 16.0

1987

First 19.0 Second 21.7

1988

First 25.2 Second 27.2

1989

First 30.0 Second /b 31.0

/a Includes $900,000 of retroactive financing.

/b Closing Date - June 30, 1989.

February 1983 PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

DISTRIBUTION OF BENEFITS FROM REHABILITATION -AND IMPROVEMENTOF PROVINCIAL ROADS

Category I Items: Benefit Streams (K 000)

Provincial roads Bridges Togoba- S ila- Henagaru- Doliba- Kaugel Kemp Kudjip- Tanbul Con- Itokama Tunakau Kilau Mai-Nuku River Welch Tuoima Wasego Hapmet Gilagil Madang-Bogia Minj Turnoff- bined Combined Net Year Road Road Road Road Bridge Bridge Bridge Bridge Bridge Bridge Road Bridges Road Road cost benefits flow

1 -142.3 -143.8 -173.5 -126.6 -325.0 -395. 0 -125.0 -160.0 -122.0 -373.0 -360.0 -1,512.0 -2,000.0 5,9 58.2 - -5,9 58.2 -28.3 3.4 1.5 -10.4 673.9 73.1 130.5 198.8 3.7 10.0 16.0 -1 ,008.0 -2,452.0 3, 498.7 1,110.9 -2,387.8 -26.7 7.4 3.7 -9.4 700.1 155.0 276.6 206.8 3.8 10.0 33.9 520.7 473.0 36.1 2,391.0 2,354.9 -25.1 10.3 5.6 -8.4 728.9 246.4 439.8 215.0 3.9 92.5 53.8 546.8 487.0 33.5 2,830.0 2,796.5 5 -18.3 22.3 20.8 -2.0 758.0 348.2 621.6 223.6 4.0 10.0 76.1 574.1 516.0 20.3 3,174.7 3,154.4 -22.5 4.6 -36.0 -76.5 788.4 461.4 823.6 232.6 73.1 10.0 100.8 602.8 547.0 135.0 3,644.3 3,509.3 ,, -1.4 51.3 52.8 16.2 819.9 586.9 873.0 241.9 4.1 113.7 128.2 632.9 580.0 1.4 4,100.9 4,099.5 5 12.9 71.2 72.4 31.9 852.7 622.1 925.4 251.6 4.4 10.0 158.6 664.6 615.0 - 4,292.8 4,292.8 39.8 102.5 99.5 52.5 886.8 659.4 980.9 261.6 4.5 10.0 192.1 697.8 652.0 - 4,639.4 4,639.4 10 59.5 120.0 111.2 66.1 922.3 699.0 1,039.7 272.1 4.6 135.0 203.6 732.7 691.0 - 5,056.8 5,056.8 66.9 104.8 50.9 -4.5 959.2 740.9 1,102.1 283.0 74.4 10.0 215.9 769.3 732.0 4.5 5,109.4 5,104.9 99.2 141.4 131.4 88.4 997.5 785.4 1,168.2 294.3 4.6 10.0 228.8 -74.2 776.0 74.2 4,725.2 4,651.0 119.3 146.8 136.2 99.7 1,037.4 832.5 1,238.3 306.1 5.0 156.4 242.5 842.2 823.0 - 5,985.4 5,985.4 124.0 152.4 141.1 103.3 1,078.9 882.5 1,312.6 318.3 5.1 10.0 257.1 890.6 872.0 - 6,147.9 6,147.9 15 128.9 158.1 146.2 107.0 1,122.1 935.4 1,391.4 331.0 5.3 10.0 272.5 935.1 907.0 - 6,450.0 6,450.0 121.6 132.6 79.3 29.1 1,167.0 991.5 1,474.9 344.3 75.1 177.9 288.9 981.9 943.0 - 6,845.1 6,845.1 139.1 169.9 156.8 114.7 1,213.6 1,051.0 1,563.4 358.1 5.6 10.0 306.2 1,031.0 981.0 - 7,139.4 7,139.4 144.5 176.4 162.3 118.7 1,262.2 1,114.1 1,657.2 372.4 5.8 10.0 324.6 1,082.5 1,020.0 - 7,491.7 7,491.7 150.0 182.9 168.0 122.9 1,312.7 1,180.9 1,756.0 387.3 5.9 199.5 344.1 1,136.7 1,061.0 - 8,051.6 8,051.6 20 155.6 277.5 280.1 127.2 1,365.2 1,251.8 1,862.0 402.8 101.8 90.0 364.7 1,193.5 1,104.0 - 8,576.2 8,576.2

ERR 13.9 25.9 20.8 13.9 211.3 57.3 174.5 128.2 11.5 10.5 25.6 21.2 12.2 33.2 H

Source: DTCA February 1983 - 53 - Table 17

PAPUA NEW GUINEA

ROAD IMPROVEMENTPROJECT

VEHICLE OPERATING COSTS (1,000 KMS) ON UNPAVED ROAD (1982 PRICES)

(KINA)

COST COMPONENT CAR SMALL MEDIUM. HEAVY COM. COM. COM.

Fuel (Litres consumed) 128 210 238 367 Cost/litre 0.28 0.28 0.27 0.27 Fuel cost 36 59 64 99

Maintenance Cost of parts 13 39 49 123 Labor Quantity 1.22 2.85 11.76 11.76 Cost/hour 11 11 11 11 Labor cost 13 31 129 129

Tyres Number 0.309 0.309 0.122 0.344 Cost/type 44 40 67 205 Tyre Cost 12 12 8 71

Crew Number 0 44 100 67 Cost/hour 0 0.9 1.9 2.2 Crew cost 0 40 190 147

Lubricating Oil Quantity 2.4 3.6 8.0 8.0 Cost/litre 2.0 2.0 2.0 2.0 Oil cost 5 7 10 16

Depreciation Cost 50 27 25 64

Total Running Cost 129 215 481 649 Overhead Cost factor 0.10 0.33 0.33 0.33 Overhead Cost 13 71 159 214

Total Operating Cost/1000 Kms 142 286 640 863

Source: DTCA October 1982 - 54 - Table 18

PAPUA NEW GUINEA

RAOD IMPROVEMENTPROJECT

VEHICLE OPERATING COSTS (1,000 KMS) ON PAVED ROAD (1982 PRICES)

(KINA)

COST COMPONENT CAR SMALL MEDIUM HEAVY COM. COM. COM. COM.

Fuel (litres consumed) 119 214 226 387 Cost/litre .28 .28 .27 .27 Fuel cost 33 60 61 104

Maintenance Cost of parts 3 9 22 55

Labor Quantity 0.52 1.16 5.87 5.87 cost/hour 11 11 11 11 labor cost 6 13 65 65

Tyres Number 0.045 0.045 0.066 0.185 Cost/tyre 40 40 67 205 Tyre cost 2 2 4 38

Crew Number 0 44 100 67 Cost/hour 0 0.9 1.9 2.2 Crew/cost 0 40 190 147

Lubricating Oil Quantity 1.2 1.8 4.0 4.0 Cost/litre 2.0 2.0 2.0 2.0 Oil cost 2 4 8 8

Depreciation Cost 39 22 25 63 Total Running Cost 85 150 374 480 Overhead Cost Factor 0.10 0.33 0.33 0.33 Overhead Cost 9 50 123 160

Total Operating Cost/1000 KMS 94 200 497 640

Source: DTCA October 1982 CEARTSI

PAPUA NEW GUINEA: ROAD IMPROVEMENT PROJECT Department of Transport and Civil Aviation Organzation chErt

STATUTORY-BODIES CVIAIATIQ.11

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A| | OPECRTARTIN |ASST SECRETARY A| SECRTARY ASST SECRETARY TRANSPORT PRINTER RERRCEIi SERVICES RAHETINS ASHTRAINING

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CHART 3 PAPUANEW GUINEA ROADIMPROVEMENT PROJECT Implementaflon Schedule

CY 1983 1984 1985 1986 1987 1988 1989 EVEWT- EVE.'9T2 31 4 1 2 3 4 2 3 4 1 2 3 4 1 2 34 1 2 3 4 1 2 3 4

I. IMPORTANTEARLY ACTMTIES

A BOARDPRESENTATION - 3/29/83

B. LOANEFFEC'TIY - 6/30/83 1 C. SELECTIONOF CONSULTANTS

II.IMPILEMENTATION // / 7 7 7 7 7 / , // / A REHABILITATION& TMPRCNF'EMENT OF . . . . . PROVINCLALROADS 1.Category I a. Mai-Nuku RoadC b. Dollba-KElauRoad c. S9a-Itokamc Road d. Henagaru-Tunakau Road 2.Category II

a. Tsingoropa-Koinambe Road T II Y - m U - U - U . - =IIU b. Manemp-Mants Rlver-Kol Road _ _ i _ I _ - U - - - U - c, Aseki-MenyomYa Road r _ _ - - - - _ - - I ME d, LlaRiver-Bundl Road mom it - U U - - - _- - * e, Kailu-Nomane Road as ii - U -

f. Wamu River-Ubaigubi Road i r - - m _- - m m T 3,CATEGORY U | s T " - - - U U - - -. B. BRIDGEREHABILITATION AND REPLACEMENT PROGRAM ICategory I a, TuOiomra

b.Wasego i i c. KempWelch U - m U m - M mo _

d. Sikor I e.UlinganII

f.HapmnetI g.GlIagullii-m - -m- m i h.Kaugel i - - U U U El Im 2. CaTegoryIf

3. Category ]iIiim - -U - m U U -U UI C. IMPROvEMENTSTOHIGHLANDS AND ENGAHIGHWrAYS

1.Togoba-Tanbul TumoffRoad | - m - - -m- a

2.KudJip-MInj Road a _U - - - U - U *

3.Watabung-Chuove Roaadii i Iii - - m- -- U - DOONSULTiNGSERMCES AND TECHNICAL ASSISTANCEFOR POLICY REvEW AND INSTrtTLONALSTRENGTHENINSG 1.PollcyReviewStudles U U - - 2, InstltutionalStrengthening

a. DTCAProvincial Liaison - - - - U b. DWSInst. Strengthening - 11-_- --

c. DWSRds. and Bridge Maintenance. Program,Including Training - U - U U I I I - r I - r _ r 3. Developmentof Local Construction Industry amB

E. RIGHT-OF-WAYACQUISMTON - - - - U - -

Legend (CMI Works)

- m * - 'Continuation of Program(later phases)Not Included In ThisProject IIIIIIUEUEIg Tenderingand Award Period Constructlon RainySeason - -- - . Guarantee Perold February1983 Worid Bank-24746

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'- -w'~-----'NEW BRITAIN PROPOSEDPROJECT Highlandand Enga HighwaysSections (Categories:I& U 2 . F~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A S T Provincial Roads I) K.' /GHIANP 0 K ~~~~~~~~~~~~~:OA4ORQBF NEW: 8 RI TA IN: 8('ricgfs(Category 1 PEIOU)SPROJECTS antdlmnprovemoenf* K,IoH B Ia ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~R6oclConstruction :e$iiystvdies* / a a fFIRSTPROJECT LoAN 693 CREDIT204 RNO WESTERN \ 0 0 i~~~~~~~ * ~~~SECONDPROJECTCREDIT 677 PNO PROJECTLOAN 1856 CREDIT1030 PNG _ . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~THIRD Agencies Ke~ea~o '..-~.-.,--,------*--,--y------'----~----7' -* 0 Projectsby Other '0 NORTHERN I ~~~~~~~~~~~~~~~~~~----f~utureMajor Roads (National) "~~~~~~~~" ~~~~~~~~~~~~Nctios/ l Rads or 'N I Maj~~~~~ZorProvincial Roads zcCRive rs ~~c~~~~ 5e~~~~a~~~~ P'opoadett. "/K / .. ~~~~~~~~~MountainousAreas (2O00O-3O0QOMeters)

I - - ~~~~~~~~DistrictBoundaries 9~~~~ I ~~~~~~ v,,~~~~~~~~~~~--.--~~~~~~~~;~~~~

I - -- ~~~~~~~~~~jriternationaiBoundaries ---- '~~~~~~. GUlf ~~~ 2 roBoY.; ~~~~~~~. 7 j'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.o PHUPPINj~~~~~~~~~~~~~~~~~~~Sc,_~'PHL, IF / N I PORTMOR BY © K -. 6 t~ 4~;-~AA0 LNATIONL HIGHWASI (7 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ PAPuANEW OIJINEA~PAUANEWGUNE Q NIRITANOHIGHWAY G CFNTRA( KNP- I ' KI'RITANO, HiG 0 ~ENA:HIGHWAYI) ..... HIGH-WAY, MA~Gf (I2)WAHIGHLANDS r~o rKILOussssS 0 R 120 ES K I RJHGHWAY ®0 RAMu HIGHWAY L NINAPE Mhwu*0r NATIOA H:HWY) COASTAL: HIGHWAY MILES -

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