Volume 3 Detailed Strategy

National Transport Strategy Volume 3 Detailed Strategy

May 2013

An electronic copy of this document can be obtained by visiting the following website https://www.dropbox.com/sh/8ue6rp8v1jnqj1r/ubWr1vrCrB or by scanning the QR code below

Government of Papua New Guinea Department of Transport

DETAILED STRATEGY Volume 3 – Detailed Strategy

July 2013

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Table of Contents

List of Figures ...... vi List of Tables...... vii Glossary of Acronyms ...... ix Minister’s Statement ...... xiii Introduction from the Secretary ...... xiv 1 Introduction – Preparation of the NTS ...... 1 1.1 The Purpose of the National Transport Strategy ...... 1 1.2 The Medium Term Transport Plan ...... 1 1.3 Timeframe and Activities ...... 1 1.4 Background Papers ...... 2 1.5 Review of the NTDP 2006-2010 and Earlier Sector Plans ...... 2 1.6 Analysis of Implementation Progress of the NTDP ...... 5 Part A – Sector Vision, Profile and Guiding Principles ...... 7 2 Vision and Goals ...... 7 3 Guiding National Vision and Plans ...... 9 3.1 Introduction ...... 9 3.2 The Millennium Development Goals ...... 9 3.3 Vision 2050 ...... 11 3.4 Development Strategic Plan and Medium Term Development Plan ...... 13 3.5 Economic Sector Strategies ...... 22 3.6 Social Sector Strategies ...... 26 3.7 Safeguards and Cross-Cutting Strategies ...... 27 3.8 Provincial Development and Transport Plans ...... 31 4 Profile of the Transport Sector ...... 32 4.1 Physical Geography ...... 32 4.2 Population Distribution ...... 32 4.3 Economic Activity and Transport Demand ...... 33 4.4 Social Services Delivery and Transport ...... 33 4.5 Transport Sector Institutions ...... 34 4.6 The Transport Network as a Whole ...... 40 4.7 Roads and Road Transport ...... 49 4.8 Maritime and Inland Water Transport ...... 53 4.9 Air Transport ...... 60 5 Transport Demand and the Outlook for Growth ...... 65 5.1 Population and Economic Growth ...... 65 5.2 Composition of Travel Demand ...... 67 5.3 Personal Travel Demand ...... 67 5.4 Freight Transport Demand ...... 69 5.5 Road Transport Demand Growth ...... 82

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5.6 Overseas and Coastal Shipping Demand Growth ...... 84 5.7 Air Transport Demand Growth ...... 85 Part B – Transport Sector Policy and Institutions ...... 86 6 Introduction to Part B ...... 86 7 Recent Transport Policy ...... 87 7.1 NTDP Policy and Ministerial Statement 2009 ...... 87 7.2 Existing Policy Applying across the Transport Sector ...... 87 7.3 Recent Land Transport Policy ...... 89 7.4 Recent Maritime Transport Policy ...... 90 7.5 Existing Civil Aviation Policy ...... 91 7.6 Recent Policy on Modal Integration ...... 92 8 Statement of Overall Sector Policy ...... 93 8.1 Public and Private Sector Roles ...... 93 8.2 National, Provincial and Local Level Government Roles ...... 96 8.3 Market Entry and Competition Regulation ...... 99 8.4 Cost Recovery and User Charges ...... 100 8.5 Priorities for Call on Available Funds ...... 101 8.6 Community Assistance, Subsidies and CSOs...... 103 8.7 Transport Corridor Protection and Land Acquisition ...... 107 8.8 Service Quality Standards and Monitoring ...... 108 8.9 Transport Safety ...... 109 8.10 Transport Security ...... 110 8.11 Transport Integration ...... 110 9 Statement of Policy for Cross-Cutting Issues ...... 112 9.1 Introduction ...... 112 9.2 Good Governance and Policies against Corruption ...... 112 9.3 Environmental Protection and Enhancement ...... 115 9.4 Climate Change ...... 116 9.5 Poverty Alleviation ...... 117 9.6 Gender Equity and Women’s Development ...... 118 9.7 Communicable Disease Control, HIV/AIDS ...... 118 10 Statement of Policy for Institutional Roles and Reform ...... 119 10.1 The Need for Reform ...... 119 10.2 Principles for Institutional Reform ...... 119 10.3 Delegation and Outsourcing of Functions ...... 120 10.4 Role and Functions of the Government Transport Agencies ...... 121 10.5 Role of Oversight, Audit and Regulatory Institutions ...... 131 10.6 Role of Special Purpose Infrastructure Development Authorities ...... 132 10.7 Public – Private Sector Coordination ...... 134 10.8 The National Budget Process ...... 134 11 Statement of Policy for Land Transport ...... 136 11.1 Introduction ...... 136

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11.2 Development of the Land Transport Institutions...... 136 11.3 Market Entry and Competition Regulation ...... 138 11.4 Road Network Development, Ownership and Management ...... 138 11.5 Public Private Partnerships ...... 141 11.6 Cost Recovery, Road Fund and CSOs ...... 142 11.7 Regulation of Service Standards in the Land Transport Subsector ...... 144 11.8 Road Safety ...... 144 11.9 Environmental and Social Safeguards for Road Transport ...... 145 12 Policy Statement on Maritime Transport ...... 148 12.1 Introduction ...... 148 12.2 Development of Maritime Transport Institutions ...... 148 12.3 Market Entry and Competition Regulation ...... 151 12.4 Maritime Infrastructure Ownership, Management and Regulation ...... 155 12.5 Maritime Infrastructure Protection ...... 156 12.6 Pricing, Cost Recovery and CSOs ...... 157 12.7 Regulation of Service Standards in the Maritime Subsector ...... 158 12.8 Maritime Safety ...... 158 12.9 Maritime Security ...... 161 12.10 Environmental and Social Safeguards ...... 162 12.11 Regional Relationships in the Maritime Sector...... 163 13 Policy Statement on Air Transport ...... 164 13.1 Introduction ...... 164 13.2 Development of the Air Transport Institutions ...... 164 13.3 Market Entry and Competition Regulation ...... 165 13.4 Government Ownership of Airports, Air Operators and Aircraft ...... 166 13.5 Cost Recovery and CSOs ...... 167 13.6 Private Sector Role in Air Infrastructure Services ...... 170 13.7 Service Standards in Air Transport ...... 170 13.8 Aviation Safety ...... 171 13.9 Aviation Security ...... 172 13.10 Environmental Safeguards ...... 173 14 Policy Statement on Modal Integration ...... 175 14.1 Principles ...... 175 14.2 Modal Transitions for Passenger Traffic ...... 175 14.3 Modal Transitions for Freight Traffic ...... 176 14.4 Basic Access Provision to Rural Areas ...... 176 14.5 Other Transport Modes ...... 177 14.6 Balance of Investment between Modes ...... 178 14.7 Economic Corridors ...... 178 15 Policy Statement on Sector Capacity Building ...... 179 15.1 Introduction ...... 179 15.2 The Existing Situation ...... 179

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15.3 Development of a Sector-Wide Education and Training Strategy ...... 182 16 Supporting Legislative Programme ...... 184 16.1 Introduction ...... 184 16.2 Land Transport ...... 184 16.3 Maritime Transport ...... 184 16.4 Air Transport ...... 185 Part C – Transport Funding and Investment Strategy ...... 186 17 Introduction to Part C ...... 186 18 Transport Infrastructure Investment Policy ...... 187 18.1 Investment Policy Elements ...... 187 18.2 Strategic and Tactical Planning ...... 187 18.3 Planning Investment in Transport Infrastructure ...... 188 18.4 The Framework for Prioritising Asset Investment...... 191 19 Present Structure of Transport Infrastructure Funding ...... 198 19.1 Sources of Funds ...... 198 19.2 Recent Funding and Expenditure Trends ...... 199 20 Functional Hierarchy and Standards of Provision ...... 202 20.1 Traffic and Access Functions ...... 202 20.2 Primary Transport Infrastructure ...... 202 20.3 Critical Lifelines and Network Redundancy ...... 203 20.4 The Functional Hierarchy ...... 204 20.5 Relationship to Other Classifications ...... 205 20.6 Identification of Transport Assets by Functional Hierarchy ...... 206 20.7 Standards of Provision for Infrastructure ...... 206 21 Transport Infrastructure Deficiencies ...... 213 21.1 General ...... 213 21.2 The Road Network ...... 213 21.3 Ports, Coastal and Marine Navigation ...... 214 21.4 Airports and Air Navigation ...... 216 21.5 Modal Integration and Overall Coverage ...... 217 22 Development Cost of the MTDP ...... 218 22.1 Cost Escalation ...... 218 22.2 Road Network ...... 218 22.3 Ports, Coastal and Marine Navigation ...... 228 22.4 Airports and Air Navigation ...... 232 22.5 Sector Capital Infrastructure Funding Requirement Summary ...... 238 23 Maintenance Cost of the MTDP ...... 239 23.1 Roads ...... 239 23.2 Ports and Maritime Infrastructure ...... 242 23.3 Airports and Air Transport Infrastructure ...... 244 23.4 Summary of Transport Infrastructure Maintenance Funding Requirements ...... 246

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24 Funding Projections and Funding Gap ...... 248 24.1 Introduction ...... 248 24.2 MTDP Infrastructure Funding Requirement ...... 248 24.3 Government Appropriations through the National Budget ...... 249 24.4 Development Partner Grant and Loan Assistance ...... 251 24.5 Funding from Transport User Charges ...... 252 24.6 CSO Funding ...... 255 24.7 Other Funding Sources ...... 257 24.8 The Overall Funding Envelope and Funding Gap ...... 258 25 Ongoing and Committed Projects ...... 264 25.1 Introduction ...... 264 25.2 Committed and Ongoing Road Projects ...... 264 25.3 Committed and Ongoing Maritime Projects ...... 281 25.4 Committed and Ongoing Air Transport Projects ...... 282 26 Priorities for Selecting Projects for the MTTP ...... 285 26.1 Introduction ...... 285 26.2 Priorities for Roads ...... 285 26.3 Priorities for Maritime Projects...... 288 26.4 Priorities for Air Transport Projects ...... 293 Part D – Resourcing, Monitoring and Review ...... 295 27 Resourcing and Monitoring the NTS and MTTP ...... 295 27.1 Resources Needed for Successful Implementation ...... 295 27.2 Information Needs ...... 295 27.3 Monitoring Progress and Achievement ...... 296 28 Process for Periodic Review and Updating ...... 297 28.1 Five Yearly and Annual Reviews ...... 297 28.2 Annual Review of the Maintenance Programme ...... 297 28.3 Progressive Development and Review of Projects ...... 297 28.4 TIPS Project Prioritisation Review ...... 299 28.5 Integration with SOE Forward Plans ...... 299 References Consulted in Preparation of the NTS ...... 300 NTS Background Reports and Working Papers ...... 300 Previous Transport Sector Plans ...... 300 Strategies and Corporate Plans of Transport Sector Agencies ...... 301 National Strategies and Plans ...... 301 Government Transport Policy Statements ...... 301 Strategies and Plans of Other Government Agencies ...... 301 Strategies and Plans for Cross Cutting Issues ...... 302 Oversight and Regulatory Agencies ...... 302 Development Partner Strategies and Plans ...... 303 Transport Sector, Project Planning, Feasibility and Design Studies ...... 303 PNG Transport Infrastructure Priorities Study (TIPS) 2010 ...... 303

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Mapping ...... 304 Other Reference Material ...... 304 Links to Official PNG Websites Accessed ...... 304

List of Figures Figure 1 – The Future Main Transport Infrastructure from the Development Strategic Plan ...... 16 Figure 2 – Missing Links ...... 17 Figure 3 – DSP Projected Increase in Port Container Traffic...... 19 Figure 4 – DSP Projected Improvement in Port Handling Efficiency ...... 20 Figure 5 – Development Strategic Plan Increase in Domestic Air Traffic ...... 21 Figure 6 – Projected Copper and Gold Production ...... 25 Figure 7 – Provincial Populations and Population Density, 2010 Estimates ...... 33 Figure 8 – Regional Populations and Population Density, Estimated 2010 ...... 33 Figure 9 – Institutional Structure of the Transport Sector ...... 34 Figure 10 – Existing Institutional Structure in Land Transport at National Level ...... 36 Figure 11 – Institutional Structure in Maritime Transport ...... 38 Figure 12 – Institutional Structure in Air Transport ...... 39 Figure 13 – North Coast Transport Network ...... 41 Figure 14 – Upper Highlands Transport Network ...... 42 Figure 15 – Lower Highlands Transport Network ...... 43 Figure 16 – Western and Gulf Transport Network ...... 44 Figure 17 – Southern Transport Network ...... 45 Figure 18 – New Britain Transport Network ...... 46 Figure 19 – New Ireland Transport Network ...... 47 Figure 20 – Manus Island Transport Network ...... 48 Figure 21 – Autonomous Bougainville Region Transport Network ...... 48 Figure 22 – Projected Regional Populations to 2030, millions ...... 65 Figure 23 – Employment Trends ...... 67 Figure 24 – Main Export Commodities 2001-2010, Volumes...... 69 Figure 25 - Main Export Commodities Excluding Logs and Oil 2001-2010, Volumes ...... 70 Figure 26 – Value of Main Exports, K2001 Constant Values ...... 70 Figure 27 – Commodity Price Indices, Adjusted for Inflation (2001 base) ...... 71 Figure 28 – Comparison of TIPS and MTDP Port Cargo Projections ...... 84 Figure 29 – Comparison of Air Passenger Growth Projections ...... 85 Figure 30 – The Investment Planning Cycle ...... 189 Figure 31 – Recent Trends in Road Construction and Maintenance Expenditure ...... 199 Figure 32 – Projected National Road Length and Ownership/Management...... 222 Figure 33 – National Airports Projected Funding Requirement ...... 234 Figure 34 – Estimated Maintenance Funding Needs, National Roads, 2011-2030 ...... 240 Figure 35 – Estimated Maintenance Funding Needs, Provincial & Other Roads, 2011-2030 ...... 241 Figure 36 – Estimated Maintenance Funding Needs, by Ownership, 2011-2030...... 241

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Figure 37 - Required Funding Projection for Main Port Fixed Infrastructure ...... 243 Figure 38 – National Airports Projected Maintenance Funding Requirement ...... 245 Figure 39 – Transport Infrastructure Maintenance Grants to Provinces, K’000s ...... 250 Figure 40 – Transport Infrastructure Maintenance Grants by Province, 2013, K’000s ...... 251 Figure 41 – Motor Vehicle Registration and Licensing Revenue, 2009 ...... 254 Figure 42 – Road Funding Projections ...... 260 Figure 43 – Roads Expenditure Projections, Annual Funding Gap, K millions (2010/11) ...... 260 Figure 44 – Airports & Navaids Expenditure, Annual Funding and Funding Gap, K mill (2010) .... 263

List of Tables Table 1 – Provincial Comparison for Millennium Development Goal Indicators ...... 11 Table 2 - Relating the Seven Pillars of Vision 2050 to the Transport Sector ...... 12 Table 3 – Economic Corridors and Corresponding Road Links ...... 14 Table 4 – “Missing Link” and Corridor Roads ...... 15 Table 5 – The NTDP 16 “Priority” Roads ...... 18 Table 6 – Physical Characteristics of the Declared Ports ...... 54 Table 7 - Traffic through PNG Ports Ltd Declared Ports ...... 56 Table 8 – International Shipping Services ...... 57 Table 9 – Characteristics of the ICAO recognised airports ...... 60 Table 10 – Other Airports and Rural Airstrips classed as Active ...... 61 Table 11 – Air Traffic at Main Airports and Trends ...... 62 Table 12 – Projected Population Growth Rates, per cent per annum ...... 66 Table 13 – Mineral Development and Production Outlook ...... 75 Table 14 – PNG Oil and Gas Development ...... 80 Table 15 – Functional Hierarchy for Transport Infrastructure ...... 204 Table 16 – Guideline Minimum Performance Standards for Rural Roads ...... 208 Table 17 – Guideline Standards for Ports ...... 211 Table 18 – Typical Standards for Airports by Network Functional Classification ...... 212 Table 19 – National Highways condition versus standards ...... 213 Table 20 – Initial Screening Prioritisation of New and Restored Road Links ...... 219 Table 21 – Road Sealing Targets in MTDP and proposed NTS ...... 223 Table 22 – Remaining Priority Road Sections for Upgrading to Sealed Standard...... 224 Table 23 – Targets for Rehabilitating Sealed National Roads ...... 224 Table 24 – TIPS Bridge Upgrading or Replacement ...... 226 Table 25 – Bridges for Upgrading or Replacement on the Priority Roads ...... 226 Table 26 – Summary Indicative Costs for Road Construction, Upgrading and Rehabilitation ...... 227 Table 27 – Short to Medium Term National Port Project Proposals ...... 228 Table 28 – Maritime Sector Projected Capital Funding Requirement ...... 232 Table 29 – National Airport Projected Funding Requirement...... 234 Table 30 – Estimated Funding Requirement for Other Airport Rehabilitation ...... 236 Table 31 – Airports and Air Navigation Projected Funding Requirement, K millions (2010/11) ..... 237 Table 32 – Transport Infrastructure Sector Capital Funding Projection, K millions (2010/11) ...... 238 Table 33 – Routine and Periodic Road Maintenance Funding Requirements, K millions ...... 240

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Table 34 – Projected Maritime Infrastructure Maintenance Requirement, K millions 2010 ...... 244 Table 35 – Projected Air Transport Infrastructure Maintenance Requirement, K mill. 2010/11..... 246 Table 36 – Transport Infrastructure Sector Maintenance Funding Projection, K mill. (2010/11) .... 247 Table 37 – Summary of Transport Infrastructure Investment to Support the MTDP, K mill 2010 ... 249 Table 38 – The Present Funding Envelope for Roads, K millions 2010/11 ...... 258 Table 39 - Recent, Committed and Proposed Road Upgrading, Donor Programs ...... 267 Table 40 – Committed and Ongoing Road Infrastructure Projects, K million ...... 279 Table 41 – Committed and Ongoing Air Transport Infrastructure Projects ...... 283 Table 42 – Provisional Priorities for Rehabilitation of Sealed Sections, National Rural Roads ...... 285 Table 43 – Provisional Priorities for Upgrading to Seal, National Rural Roads ...... 286 Table 44 – Priority List of Missing Links and Economic Corridor Roads ...... 287 Table 45 – Airport Development Proposals and Economic Evaluation ...... 293

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Glossary of Acronyms Acronym Description ADB Asian Development Bank AIC - Accident Investigation Commission APEC Asia Pacific Economic Cooperation ATC Air Traffic Control ATM Air Traffic Management AusAID Australian Agency for International Development ATR/ASD Air Traffic Regulation and Air Services Division (of DOT) ATS Air Traffic Services BAMS Bridge Asset Management System BCR - Benefit Cost Ratio BDA - Border Development Authority Br - Bridge CAA Civil Aviation Act CACC Central Agency Coordinating Committee CADIP - Civil Aviation Development Investment Program CAR Civil Aviation Regulations CASA Civil Aviation Safety Authority CEO Chief Executive Officer CNS Communication, Navigation and Surveillance (air) CIMC Consultative Implementation and Monitoring Council COA Certificate of Airworthiness COLREG International Regulations for Preventing Collisions at Sea (IMO) CSO Community Service Obligation CSTB Central Supply and Tenders Board CTC - Coasting Trade Committee CWTP Community Water Transport Project (within DOT) DAL Department of Agriculture and Livestock DEC Department of Environment and Conservation DFCD - Department of Family and Community Development DME Distance Measuring Equipment (air navigation) DNPM Department of National Planning and Monitoring DOE Department of Education DOF Department of Finance DOH Department of Health DOT Department of Transport DOW Department of Works and Implementation DPLLGA Department of Provincial and Local Level Government Affairs DPE Department of Petroleum and Energy DRIP District Road Improvement Programme DSIP District Services Improvement Programme DSP Development Strategic Plan DTIP - District Transport Improvement Programme DVOR Doppler VOR EC European Commission ECIA - Economic Corridor Implementation Authority

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Acronym Description ECP Enhanced Cooperation Programme (Australia) EIRR Economic Internal Rate of Return ESCAP - Economic and Social Commission for Asia and the Pacific FAS First Assistance Secretary FIR Flight Information Region FRA Forest Resources Authority GDP Gross Domestic Product GIS - Geographic Information System GLONASS Global Navigation and Surveillance System (air) GNSS Global Navigation Satellite System (air) GPS Global Positioning System (satellite) HIV/AIDS Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome IALA International Association of Marine Aids to Navigation and Lighthouse Authorities IATA International Air Transport Association ICAO International Civil Aviation Organisation ICCC Independent Consumer and Competition Commission IDA - Infrastructure Development Authority (proposed) IPEPNG Institute of Professional Engineers of Papua New Guinea IFR Instrument Flight Rules IHO - International Hydrographic Organization ILO - International Labour Organization ILS - Instrument Landing System IMO International Maritime Organization INA Institute of National Affairs IOCS International Organisation of Classification Societies IPBC Independent Public Business Corporation ISDM - Intergovernmental Service Delivery Mechanism ISPS International Shipping and Port Security JICA Japan International Cooperation Agency KPI - Key Performance Indicator LLG - Local Level Government LNG - Liquefied Natural Gas LTD Land Transport Division (of DOT) LTB Land Transport Board LTIP - Long Term Investment Plan LTMC - Long Term Maintenance Contract MARPOL International Convention for the Prevention of Pollution from Ships MDG Millennium Development Goals MFF - Multi-Tranche Financing Facility MOA Memorandum of Agreement MOU Memorandum of Understanding MPKG - Madang-Baiyer River-Karamui-Gulf Corridor MRA Mineral Resources Authority MSU Maritime Security Unit (of DOT) MTD Maritime Transport Division (of DOT) MTDP Medium Term Development Plan MTDS Medium Term Development Strategy

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Acronym Description MTTP Medium Term Transport Plan MVIL Motor Vehicle Insurance Ltd NAC - National Airports Corporation NADP - National Agriculture Development Plan NASMP - National Airport Strategic Management Plan NASP National Aviation Security Programme Navaids Navigation Aids NBPOL - New Britain Palm Oil Limited NCD - National Capital District NCDC - National Capital District Commission NDB Non Directional Beacon NDC National Disaster Centre NEC National Executive Council NEFC National Economic and Fiscal Commission NLTB - National Land Transport Board NMB National Mapping Bureau NMA - National Maritime Authority NMSA National Maritime Safety Authority NRA National Roads Authority NRI National Research Institute NRCC - National Rescue Coordination Centre NRSC National Road Safety Council NSO National Statistical Office NSP National Strategic Plan NTC National Training Council NTDP National Transport Development Plan NTI National Training Institute NTS National Transport Strategy NWS National Weather Service OCCD - Office of Climate Change and Development OPEC - Organization of the Petroleum Exporting Countries ORD Office of Rural Development PATA Policy and Advisory Technical Assistance (ADB) PBMC Performance Based Maintenance Contract PCD Planning and Coordination Division (of DOT) PIP - Public Investment Plan PLTB Provincial Land Transport Board PMAMP - Port Moresby Airport Master Plan PMIA - Port Moresby International Airport PMV - Public Motor Vehicle (Taxis and Buses) PNGDF Papua New Guinea Defence Force PNGASL Papua New Guinea Air Services Ltd PNGNLA - Papua New Guinea National Logistics Association (proposed) PNGPCL Papua New Guinea Ports Corporation Ltd

POM Port Moresby (airport code) PPP Public Private Partnership

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Acronym Description PPTA Project Preparatory Technical Assistance (ADB) PRD Policy and Research Division (of DOT) PRAEC - Petroleum Resources Area Economic Corridor RAMS Road Asset Management System (currently held in DOW) RFSS Rescue and Fire Fighting Service (airport) RIDD - Rural Infrastructure Development Division RIGFA - Review of Inter-Governmental Funding Arrangements RMRP - Road Maintenance and Rehabilitation Project (World Bank) RSO Recognised Security Organisation RTA - Road Traffic Authority SAR Search and Rescue SMEs - Small to Medium-sized Enterprises SMS Safety Management System SOE - State Owned Enterprise SWF - Sovereign Wealth Fund (proposed) TA Technical Assistance TEU Twenty Foot Equivalent Unit (shipping containers) TIMG - Transport Infrastructure Maintenance Grants TIPS Transport Infrastructure Priorities Study TPA Papua New Guinea Tourism Promotion Authority TOR Terms of Reference TSCMIC - Transport Sector Coordination, Monitoring and Implementation Committee TSSP Transport Sector Support Programme TSU - Transport Security Unit (DoT) Unitech Papua New Guinea University of Technology USOAP Universal Safety Oversight Audit Program (ICAO) VFR Visual Flight Rules VHF Very High Frequency VOR VHF Omnidirectional Range (ground based air navaid) WB World Bank

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Minister’s Statement

I am pleased to present the National Transport Strategy (NTS) and Medium Term Transport Plan (MTTP) prepared by the Department of Transport (DOT) with participation from the transport sector and central agencies of the National Government. The Strategy and Plan are in three volumes:

o Volume 1 – National Transport Strategy Summary o Volume 2 – The Medium Term Transport Plan 2014-2018 o Volume 3 – Detailed National Transport Strategy

The Department of Transport is the leading Government department with responsibility for policy and planning in the transport sector and for the compilation of the annual development budget from the submissions of the modal transport agencies.

The NTS has been developed as an entirely fresh review of the transport sector, its guiding principles, the structure and development of its institutions, transport policy in regards to economic and safety regulation, the role of Government, public funding and an investment strategy for maintaining and developing the transport network.

The NTS replaces the National Transport Development Plan 2006-2010 and is a more far reaching strategic view of the sector and its relationship to national level planning and policy as contained in Vision 2050, the Development Strategic Plan and the Medium Term Development Plan. It provides a chart for the future with a 20 to 30 year time horizon and a rolling five year investment plan for transport infrastructure and an action plan for policy and institutional development and a legislative programme.

The successful implementation of the NTS depends on active participation and commitment from everyone including other state line agencies, the private sector, provincial governments and the wider members of our communities nation-wide. To ensure that it remains a living document, a process has been established for annual monitoring and periodic review of the NTS, at no more than five year intervals through the planning period, while the MTTP will be updated annually.

I commend the Strategy and Plan as a guide for the wise application of our limited resources in order to fully meet the national development goals and to provide an affordable and equitable balance between transport services that serve our main economic sectors and those that provide reliable access to our widely distributed rural population.

Finally, I wish to thank the Secretary and all the staff of the DOT for their hard work in preparing the new National Transport Strategy.

Hon. Ano Pala MP

Minister for Transport

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Introduction from the Secretary

Papua New Guinea faces many challenges in the development of its transport infrastructure to serve the needs of economic development, wealth creation and to provide equitable access to transport services for its widely distributed population. The period of the last 10 year National Transport Development Plan was marked by some successes in arresting the deterioration of transport infrastructure assets, with sections of the national highway network reconstructed, rehabilitation of selected provincial roads, further expansion of Port Moresby International Airport and the commencement of a water transport franchise scheme and jetty programme to deliver transport access to small coastal and river communities.

The anticipated increase in national income from the development of LNG and increased funding for the transport network, offer a renewed prospect of a cohesive national effort to fully rehabilitate the national road, port and airport network, to develop the provincial road networks to serve the rural population and agricultural production and to rehabilitate or construct rural airstrips and jetties to communities where road access is not feasible.

Over the past 10 years, a number of institutional, policy and legal reforms have been completed in the transport sector, which was necessary to create a more responsive framework for planning, regulating and delivering public services in the transport sector. Safety oversight and economic regulation have been strengthened and separated from service delivery which is increasingly through more self-reliant and commercially focused state owned enterprises (SOEs), through the creation of the National Maritime Safety Authority, the Civil Aviation Safety Authority, the National Airports Corporation, PNG Air Services Ltd and the PNG Ports Corporation.

However, further structural reform is still required, and development of capacity within the new agencies, particularly for roads and land transport. The creation of the National Roads Authority was an important development but must be followed up with a modern responsive system of road user charges to ensure sustainable maintenance funding for the core national road network. This National Transport Strategy also foreshadows the creation of new Road Traffic Authority, combining the regulatory functions of the Land Transport Division of the Department of Transport and the safety functions of the National Road Safety Council.

To provide for improved consultation among the transport agencies and alignment of forward plans, the Transport Sector Coordination and Monitoring Committee (TSCMIC) comprising the heads of the transport agencies was established in 2006 and will continue to be a key focal point for Government’s role in the transport sector, chaired by the Secretary of Transport.

The National Transport Strategy and Medium Term Transport Plan are living documents and the staff of the DOT make a commitment to annually monitor their progress and to undertake milestone reviews every five years in concert with Government’s five year plans and targets.

Roy Mumu

Secretary for Department of Transport

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1 Introduction – Preparation of the NTS

1.1 The Purpose of the National Transport Strategy

The economic and social activity of the nation and its 1. Role - The role of the NTS is people determine the demand for passenger and freight to convey Government’s policy movement. The aim of the transport agencies is to for development of the transport provide and facilitate infrastructure and transport services sector over the next 20 to 30 to best meet this demand. The Department of Transport years. (DOT) as the coordinating agency for the transport sector is responsible for preparing the sector strategy for policy, 2. Responsible Agency - The institutional development and investment. Department of Transport (DOT) This National Transport Strategy (NTS) and Medium Term is the responsible agency for Transport Plan (MTTP) are the successors to the National preparing the sector strategy for Transport Development Plan (NTDP) 2001-2010 and the transport policy, institutional mid-term review of that plan, the National Transport development and infrastructure Development Plan 2006-2010. However, while investment. acknowledging the achievements and shortcomings of these past plans, the development of the NTS is based on 3. Scope - The NTS includes a fresh review of the transport sector and its performance transport policy, development of and uses recently developed tools in its preparation. the transport institutions and the strategy for transport investment Note - the summary points in the boxed text link with the corresponding numbers in the National Transport Strategy Summary Volume 1.

1.2 The Medium Term Transport Plan

The Medium Term Transport Plan 2014 to 2018 (MTTP) 4. MTTP Role - The MTTP is the second volume of the National Transport Strategy provides a short term action plan (NTS). It provides a short to medium term action plan for transport policy, institutional under the overall structure of the NTS. The MTTP development and legislative includes a timeline of actions for transport policy, programme. institutional development and the accompanying legislative programme and a five year rolling programme It also provides a five year rolling for transport infrastructure spending to ensure that programme for transport upcoming projects are consistent with the NTS infrastructure spending to investment strategy. This rolling programme will be ensure that upcoming projects updated annually as part of the forward planning process are consistent with the NTS and development of submissions under the national investment strategy. Budget round. It may be noted that the MTTP is deliberately not a five year plan to match the MTDP; prior experience with five years plans has been that by the end of the period priorities have changed and economic growth and Government financing for the sector has inevitably varied from forecast. The decision was made to develop a five year rolling programme, reliant on annual updating and closely linked to the Budget and PIP processes.

1.3 Timeframe and Activities

The NTS and MTTP were prepared largely over the period 3Q 2009 to 1Q 2012, with some later amendments to incorporate consultation feedback and updating to recognise the 2013 budget. This timeframe was dependent on the prior publication of Government’s higher level strategies and

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plans, notably Vision 2050, the DSP and MTDP which were published during 2010. During this period other government agencies in the economic and social sectors that depend on transport also prepared major reviews of their own forward strategies, which are also instrumental in informing the NTS.

Also important to the development of the NTS was the Transport Infrastructure Priorities Study (TIPS) 2010 which had the objective of developing a method for prioritising transport infrastructure investment across all transport modes, taking account of both economic and social benefits, and using available data to prepare ranked lists of priorities for maintenance, upgrading and new construction. The TIPS model and data became available in March 2011. Additional data and model revisions were made to TIPS for the analysis of projects for inclusion in the MTTP. The reports produced under TIPS consulted in the development of the NTS are included in the reference list at the end of this document.

1.4 Background Papers

The following papers and consultant reports were produced either for stakeholder consultation or as background information for the development of the NTS. Again, these are referenced at the end of this document and include:  NTS Scope and Implementation Plan;  Review of Prior National Transport Plans;  National Transport Strategy – Issues;  Port Regulation Working Paper;  NRA, DOW and the Road Fund Working Paper;  Regulation of Coastal Shipping and Cabotage Rules within Papua New Guinea;  Land Transport - Institutional Arrangements and Regulation of Vehicles, Drivers and Transport Services.

Other external reports that contributed to the development of the NTS included:  National Airports Strategic Management Plan;  Port Moresby Airport Master Plan (PMAMP);  Sea Freight Rates Study;  PMV Working Party Report;  Port Moresby Urban Public Transport Study.

A large amount of other published material has been used in developing the NTS and MTTP, including:  Government departments and statutory authority corporate and business plans;  Reports and information from the CIMC;  Economic and social sector agency strategies and plans;  SOE annual reports, corporate plans and profiles;  Information reports from the minerals, oil and gas industries.

1.5 Review of the NTDP 2006-2010 and Earlier Sector Plans

1.5.1 Strengths of the NTDP

As part of the NTS development, a review was made of the National Transport Development Plan (NTDP) 2006-2010 and prior national transport plans. Although the NTDP 2006-2010 was by no

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means fully implemented, it did have a number of strengths that made it stand out from its predecessors:  First Sector-Wide Plan - The 2001-2010 NTDP and the 2006-2010 Review was the first time that a complete sector policy and plan had been produced by the Department of Transport.  Vision for the Sector – it included a vision, objectives and a mission statement for the sector.  Recognition of Problems and Challenges – it set out existing problems and future challenges to delivering on the sector vision and objectives.  Policy Guidance – it provided statements of policy for each transport mode and covered all of the main aspects of economic and safety regulation.  Institutional Development – it gave a plan for institutional reform.  Legislative Program – it included proposals for legislative reform.  Funding – it included some short statements on funding and user charges.  Modal Integration – it recognised the need for modal integration.  Standard Setting – it provided policy direction for setting standards of transport service, particularly in matters of transport safety and security for domestic and international transport.  Asset Management – it recognised the importance of maintaining existing assets as the first call on funds and the need to recover the maintenance backlog.  Development Priorities – national investment priorities were clearly set out and there was recognition that investment would be funding-constrained and that only investment showing a high rate of economic return would be justified.  Community Service Obligations – it recognised Government’s obligation to provide transport services to remote communities where projects would not be justified purely on economic return but met social equity needs.  Implementation and Monitoring – it recognised the need for monitoring of implementation progress and provided an implementation schedule, performance indicators and agency responsibilities in Appendix F.  Production Qualities – the NTDP was professionally printed in large numbers.

1.5.2 Weaknesses of the NTDP

However, the review also showed the following weaknesses.

Institutional and Process Weaknesses:

 Ownership – the developers of the NTDP either did not make sufficient attempts to involve the sector agencies, or the agencies were not sufficiently engaged, or both – in either case there was a relatively low level of ownership and recognition of the NTDP by the sector agencies. The NTDP was regarded, particularly for the maritime and aviation sector which have a corporatised SOE institutional model, as a creature of the DOT and of only passing relevance to their operations.  DOT Profile – the lack of recognition stemmed in part from the relatively low profile of the DOT despite its position as the senior policy, planning and regulatory agency for the sector. As well as a low profile, DOT also has been constrained in human and financial resources which have limited its ability to proactively pursue its responsibilities.  Dissemination – although produced in large numbers, the NTDP was not widely known publicly and a large number of copies of the document remained undistributed. There was insufficiently marketing of the document, or work to establish it in the minds of

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Government agencies. It was not publicly available in electronic form and, unlike most Government agencies, at the time DOT did not have a public website where its work and publications were displayed.

Document Structural Weaknesses:

 Publication – the review of the NTDP 2001-2010 Volumes 1 and 2 were published alongside the (reviewed) NTDP 2006-2010 Volume 1&2 in similar format; this was confusing, particularly as the review document was almost as large as the new NTDP. Also the distinction between Volume 1 which dealt mainly with policy and strategy and Volume 2 which contained the investment programme, and the respective functions of each volume, were unclear.  Overall Document Structure – the documents, particularly Volume 1, could have been better structured. There were areas of repetition and overlap, particularly between the investment section in Volume 1 and the Investment Program in Volume 2. The Appendices in Volume 2 rightly belonged to sections in Volume 1 on the existing network status and expenditure projections/funding gap.  Degree of Detail – there was a general shortage of detail throughout and unevenness between the modes. Statements were often general and in some cases were restatements of objectives rather than actionable policies.  Linkage to Government Strategies and Plans – apart from the Minister’s Statement, there was little on the relationship between the NTDP and existing higher level strategies (MTDS, MDG) at the time, nor was there any linkage to other economic development and social sector strategies and investment.  Layout and Illustrations – for a printed publication the layout was poor and there were insufficient diagrams and illustrations. Apart from chapter numbers there was no number referencing from the contents which made the document hard to follow.

Document Technical Weaknesses:

 Vision, Aims, Goals, Objectives, Mission, Priority etc. – the hierarchy of vision, objectives, strategies and actions did not come through very well and the terminology was not very clear.  Demarcation between National and Provincial/Local Level – there was a lack of demarcation and inconsistent treatment between national and sub-national level. The infrastructure investment plan was confined to national level. While objectives and policies targeted at local level were included, there was no discussion of national and sub-national institutions, coordination, funding or legislation. Arguably the NTDP should be a sector-wide document but delineate where the boundaries and responsibilities lie between national, provincial and local level government.  Sector Status – There was a very short and general description which gave no historical view of development of the transport network or where its status was advancing or retreating. The same applied to transport policy and institutions. A detailed sector snapshot would have given a point of reference for future reviews.  Overall Policy Principles – there was no overall statement of policy principles and their rationale either derived from higher level national strategy or across transport modes. Principles for separation of regulation and service delivery were not mentioned, nor were principles for transport services competition, community services obligations, economic regulation, or public/private sector roles.  Legislative Reform – this section dwelt on policy matters on a mode-by-mode basis in the process of establishing legislative needs. The legislative program should follow on and be driven by policy decisions, not the other way around.

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 Transport Demand – there was no discussion of the determinants of transport demand (population, economic growth, export commodities) or how these were likely to change and influence policy and investment in the future and on which parts of the transport system these pressures would impact.  Modal Integration and Investment Balance – while there was recognition of the need for modal integration, there was no guidance as to what should to be achieved or how, and there was no analysis of the investment requirements and balance between modes.  Investment Priorities – there was no evidence-based approach, analysis or evaluation framework for identifying, assessing, prioritising and programming transport investment. Most of the investment program was made up of project lists obtained from the modal agencies with varying background justification. The TIPS 2006 study on which much of the investment program rested was a study of the relative importance of different infrastructure assets rather than their investment needs, and was confined in its view to the top level infrastructure serving economic activity.  Institutional Reform – the section on institutional reform was more a list of institutional responsibilities and achievements of the first five years of the NTDP, and did not chart any future direction.  Institutional Capacity – the limitations of institutional capacity and severe lack of qualified, experienced professional and technical people in the government sector was not addressed; there was a need for policies on developing human resources and on retention and career development of the transport sector labour force.  Community Service Obligations – the section on CSOs recognised the problem and listed programs that support transport to remote communities but provided no future direction, set no principles for CSOs, costs or means of funding.  Aid Harmonization – this subject was not mentioned but influences infrastructure investment decisions in the sector and the operation of the implementing agencies.  Transport Security – again this tended to be a list of actions already taken rather than policy and actions for the future.  Transport Safety – the section on transport safety did specify future action, although there was no overall framework for safety standard setting and benchmarking. There was no indication in the text of who would be responsible for the actions listed, the resources required or time scales.  Implementation – while an appendix provided an implementation schedule with responsibilities, this was not linked back to the main text and there was no consideration of resourcing requirements.  Monitoring – there was no consideration of the resources needed for monitoring the implementation schedule and although monitoring was to be reported quarterly to the TSCMIC, a framework and process for collecting, analysing and reporting on implementation is missing. Monitoring indicators were not defined.

1.6 Analysis of Implementation Progress of the NTDP

1.6.1 Policy and Institutional Components

Planning and Coordination Division (PCD) of DOT prepared a matrix for monitoring the progress in implementation of the NTDP policy and institutional components, listing all of the expected actions, timeframes and outputs and comparing these against actual performance. A qualitative summary of the implementation matrix has been prepared and is presented in the background paper “Review of Prior Transport Plans”. The matrix grades the achievement of the NTDP as expected at the end of calendar year 2010 on a scale from fully completed to no progress.

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The overall assessment of implementation progress of the policy actions against the activities in the matrix is that very few of the actions were complete at the nominal end of the NTDP in 2010. Many actions had not even been started, some had been abandoned and some were regarded as no longer appropriate. The original time frames were met in only a very few cases.

In general, the institutional reforms had been completed, although on a later timeframe, but the supporting legislative changes had not caught up, so there was a disjuncture between practice and the legal underpinning. The regulatory reviews and reforms had largely not occurred and most of the same issues outstanding are the same as they were in 2005. Where actions had occurred this was often through initiatives generated from outside the transport sector agencies – such as those by the National Economic and Fiscal Commission (NEFC) and the Independent Consumer and Competition Commission (ICCC). The activities under DOT’s responsibility had a very low level of achievement.

1.6.2 Infrastructure Investment Components

Actual total expenditure by DOW on national roads maintenance and rehabilitation for the four year period 2007 to 2010 matched the programmed expenditure at approximately K1,600 million taking account of inflation. However the route length of road projects completed was less than programmed due to project implementation costs being greater than anticipated, attributable to an increase in PNG civil infrastructure costs above the general rate of inflation and the rehabilitation needs being greater than originally planned for.

In the port sector, the 2009 ministerial policy statement identified Lae, Port Moresby, Kimbe, Wewak, Daru and Vanimo as the priority ports. In relation to ongoing investment, the rehabilitation of berths in Lae and Port Moresby were included in the Minister’s statement, as three year programmes with investment costs of K182 million and K390 million respectively. Actual expenditure considerably exceeded the NTDP plan, primarily due to the Lae port development which commenced in 2008. However, some elements, such as rehabilitation of Daru, expansion at Wewak, mobile cranes for Lae, Alotau wharf and the rural jetty programme had not progressed at all. Some aspects of the port investment plan, such as the new wharf at Kupiano, were of questionable priority.

The total investment planned for nationally important airports in the NTDP for the period 2007 to 2010 was K115 million; this compared with approximately K 65 million actual expenditure. Many of the projects listed in the NTDP 2006-2010 were not started and have now been taken up by the Civil Aviation Development Investment Program (CADIP).

1.6.3 Lesson Learned and Applied in the NTS

There were many lessons to be learned and applied in the development of the NTS. The most important of these were:  Encouraging ownership of the NTS by the transport agencies – this meant involving the agencies in the development of the NTS, and producing a document relevant to their needs that will assist them in defining and achieving their own objectives;  Producing a well laid out document that is clear, comprehensive, accurate, well-ordered, well-illustrated and accompanied by a concise summary;  Marketing the NTS and MTTP to the sector and to the wider audience through publicity at launching, and wide availability, including through a DOT website. The NTS is an opportunity for the DOT to raise its profile;  Demonstrating that the NTS is backed by serious technical and policy analysis – if the document has the weight of objective analysis behind it, it is more likely to be recognised and used by the sector agencies, by the donor community and by the Government central agencies.

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Part A – Sector Vision, Profile and Guiding Principles

2 Vision and Goals The Vision of the National Transport Strategy is for a well- 5. Vision – “a well-integrated, integrated, competitive, safe, affordable, financially and competitive, safe, affordable, environmentally sustainable transport system that serves financially and environmentally the economic and social goals of Papua New Guinea as sustainable transport system set out in Vision 2050, The Millennium Development that efficiently serves the Goals (MDGs), the Development Strategic Plan (DSP) economy and society of Papua and Medium Term Development Plan (MTDP). New Guinea”. The goals of the NTS are to: 6. Goals  restore the national transport network to a good maintainable condition and level of design Restore the national transport appropriate to the nature and volume of traffic network carried and the function of each link in the network; Fully fund maintenance as far as  maintain the restored national transport network in possible from user charges good condition, supported by reliable and Deliver a safe and secure sustainable sources of funding that reduce transport system for users and dependence on external assistance and, as far as the public practicable, are self-funded through user fees and charges; Mitigate or avoid adverse social, health and environmental effects  in developing, maintaining and operating the of transport transport network give due consideration to the safety and security of transport users and the Develop new infrastructure to general public; serve national and provincial  similarly, give due consideration to avoiding or priorities where economically mitigating adverse social, health and environmental viable and within financial and effects of transport and to fostering long term capacity constraints environmental sustainability; Provide better Government  where further funding and industry capacity institutional structures to deliver permits, develop new transport infrastructure to transport infrastructure and serve national and provincial planning priorities, services while maintaining social and regional equity in Strengthen the human resource investment and subject to meeting minimum capacity of the Government standards of economic feasibility; transport agencies  provide improved Government institutional structures to better deliver transport infrastructure Develop capacity and capability and services; of PNG national enterprises in the transport sector  develop the professional, technical and management capacity of the Government departments, state owned transport enterprises and the provincial governments to a high level of efficiency, cost-effectiveness and probity in managing and operating their transport assets;  actively facilitate the development of capable and competitive PNG-owned and staffed enterprises in the transport sector, including transport service operators, works contractors and associated support industries;

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 bring 95% or more of the population within easy reach of an all-weather transport service 6. Goals connecting to the national transport network, either by road, water or air and to work with the agencies Bring 95% of the population of Government to establish clear and sustainable within easy reach of all-weather commitment and processes for funding the transport access community services obligation inherent in meeting Provide transport access to 95% this target; or more of developable  provide transport connectivity for 95% or more of agricultural land the land planned for smallholder or large scale agricultural development, subject to economic Provide well planned, regulated feasibility and environmental and social and operated traffic networks safeguards; and urban public transport  provide well planned, regulated and operated traffic systems in the major cities networks and urban public transport systems in the

major cities.

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3 Guiding National Vision and Plans

3.1 Introduction

Transport is a sector of the economy that facilitates economic activity and community interaction. It provides 7. Guiding National Plans the physical connections that allow the other economic sectors to function by providing access to markets and PNG Vision 2050 allowing people to travel for work, personal business and social purposes. Development Strategic Plan (DSP), 2010-2030 It is important that the National Transport Strategy be supportive of the plans for economic and social Medium Term Development development at national, provincial and local level. The Plan, 2010-2030 forward plans for the nation are embodied in the National Strategic Plan or Vision 2050, and the Development Alotau Accord 2012 Strategic Plan which looks forward twenty years to 2030. Within these high level national plans, the development Millennium Development Goals plans for the economic and social sector also influence the responses required of the transport system. The Alotau Accord gives further expression to Government’s vision, including a commitment to review the MTDP, a confirmation of the Economic Corridor concept, announcing the Infrastructure Development Authority and making other proposals for the transport sector. These include the development of a policy on freight subsidies, a national shipping programme and air services to rural areas. This section shows how the National Transport Strategy fits into this framework for economic and social planning over the medium and longer term.

The cities of PNG are the major transport, business, administrative and political hubs of the country. An increasingly large population will reside in cities in future even with further rural development. A well planned urban land use and transport system is essential for the good functioning of cities and indeed the nation. Urban transport plans should include provision for road passenger and goods transport, as well as intermodal considerations for passengers and goods transferring between air or sea and land transport.

3.2 The Millennium Development Goals

Papua New Guinea is a signatory to the United Nations Millennium Declaration and has set targets for each of eight goals aimed at raising the development status of the nation and its people. The first comprehensive report on PNG’s achievement was published in 2004 (Millennium Development Goals, Progress Report for Papua New Guinea, 2004, UN and Government of PNG). A comprehensive review was made in 2010 at which time the local goals for Papua New Guinea were revised to harmonize with the MTDP. A progress review against the original international goals was made by the UN in 2009 (Second National MDG Progress Summary, UN, 2009) From these reports, the goals and targets for year 2015 and progress to date are summarised below:

 Eradicating poverty – reducing the percentage of the population below the poverty line from 30% in 1990 to 15% by 2015; a less ambitious national target of 27% for 2015 was set in 2000. The 2009 Progress Report indicated only a marginal reduction in “poverty of opportunity” compared with a 1996 baseline;  Achieve universal primary education – enrolment rates at primary school were targeted to increase from 66.3% in 1990 to 100% by 2015; the national target and projections was subsequently reduced to 85%. Core retention rates were also targeted to increase from 58% to 100% in 2015, but a lower national target is now 70% and the trend has unfortunately been a deterioration;

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 Promoting gender equality and women’s empowerment – the targeted indicator being convergence of male and female literacy rates to 100% by 2015. While there has been convergence this has been through declining literacy among the male population and a lesser rate of improved literacy among women, both now being equal;  Reduced child mortality – the MDG target is to reduce child mortality from 82% in 1990 to 27% in 2015. The national target and projection were reset in 2005 to 39% by 2016 but progress has slowed since;  Improved maternal health – maternal mortality rates were targeted in the MDG to reduce from 388 per 100,000 live births to 86 by 2015; the National Department of Health target is 242 and the projection 274. However recent updates indicate that the baseline was higher than initially reported, at 733 maternal deaths per 100,0000 live births in 1994, and that there has only been a slight improvement;  Combating HIV/AIDS, malaria and other diseases – there has been an exponential rise in the cumulative reported cases of HIV/AIDS, from 72 in 1990 to 9,000 recorded in 2003; the MDG target was that cases rise to no more than 54,000 by 2015, but the present rate of growth would give 466,000 by that date. The latest report indicates that the HIV/AIDS epidemic has not yet been stabilised and that the same applies to other associated diseases;  Ensuring environmental sustainability – there are no precise targets, but environmental degradation is observed in the 2004 report to be proceeding rapidly, often undocumented and uncontrolled. The 2009 update reports that there is insufficient systematic measurement to monitor environmental change;  Partnership for global development – although PNG is signatory to a large number of international conventions and agreements, the 2004 report revealed no coordinated approach to monitoring progress against the commitments entered into. The 2009 update recommended that a task force led by DNPM be established and some moves have been made in this direction in the past few years.

Transport is a necessary service to deliver primary level health care, education, other social programmes and opportunities for economic participation to what is still largely a rural population. It can also be a vector for diseases such as HIV/AIDS, and on its own is largely neutral in relation to gender equality. The 2004 MDG report maps the relative levels of achievement of the provinces for some of the MDGs and this gives a picture of where increased emphasis may need to be placed in ensuring that communities have basic access to a means of transport (Table 1 overleaf).

Provinces where transport accessibility is low tend to be lower on those indicators most influenced by access to transport services. The Sepik, Gulf, the outlying parts of the highlands provinces, Madang and Morobe, all of which have large groups of inland population with poor road access, are the lowest ranked against the MDG indicators. At the other end of the scale those most closely linked to central services, with NCD ranked highest, fare better. The islands provinces, with mainly coastally located communities, are relatively higher ranked than the mainland provinces.

The provincial data do not tell the full story, and a more detailed district or LLG level would give greater discrimination and most likely show that certain provinces have a mix of urban and easily accessible rural population that rank relatively better against the MDGs, and outlying districts with poor access that rank lower.

It is clear from observations on MDG achievement that a basic level of transport accessibility is a necessary, although not sufficient, condition to enable the delivery of social programmes that raise the primary health and education status of the rural population, as well as providing opportunities for economic engagement beyond localised subsistence agriculture and developing social cohesion.

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The project assessment framework adopted by the NTS, discussed in Section 18.4.2, incorporates a weighting that reflects the relative disadvantage of provinces and, potentially, districts, thereby recognising their MDG status and goals.

Table 1 – Provincial Comparison for Millennium Development Goal Indicators

Province Indicator

Poverty and Hunger Education and Literacy Health and Morbidity Mortality Fertility and Reproductive Health Labour Force Participation and Employment Gender Inequality Composite Provincial Ranking

Western MH H L ML MH L MH MH 9 Gulf L L L L ML L L L 18 Central L H M H ML H H MH 8 NCD H H H H H L M H 1 Milne Bay L MH H L H H H H 5 Oro ML M L ML M M H M 10 S Highlands H L ML M L H L L 19 Enga H L H L L H L L 17 W Highlands H L MH H L H L M 11 Simbu H L H MH L H L ML 12 E Highlands H L H M L H L L 15 Morobe L ML M L MH L ML ML 13 Madang L ML L L M ML M L 14 East Sepik L M ML L L ML ML L 16 Sandaun L L L L L ML L L 19 Manus H H MH H H L H H 2 New Ireland MH H H H H L H H 4 E New Britain M H H H H MH H H 3 W New Britain M MH L MH H MH MH H 7 Bougainville ML H L H H M H H 6 Key: H – well above national average, MH – above national average, M -around national average, ML - below national average, L – well below national average

3.3 Vision 2050 The Government in February 2010 published the National Strategic Plan (NSP), or “Vision 2050”. This provides goals for transforming the PNG economy and society over a 40 year period. The NSP Task Force identified service delivery, wealth creation and human capital development as the core areas for attention. Transport services underpin all three areas and are some way involved in all of the seven pillars, as shown in Table 2.

Transport also receives specific mention in Vision 2050 as set out below:

 The construction and maintenance of high quality transportation ... networks will create economic corridors and increase the movement of public goods and services and develop trade in general.

 Increase the national road network from the current 25,000 km to complete road networks throughout Papua New Guinea

 Develop and seal all airstrips throughout the country

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Table 2 - Relating the Seven Pillars of Vision 2050 to the Transport Sector Vision 2050 Pillar Transport Regulatory Policy Institutions Investment

Human Capital  Can influence PNG  The transport sector  Basic transport access Development, Gender, national preferences requires a supports health, Youth and People in transport sector vocationally, education service Empowerment employment and technically and delivery and access to ownership professionally employment and educated and trained market opportunities workforce

Wealth Creation  Encouragement of  Support to education  Transport investment to and preferences to and training of support economic PNG national transport workforce development based on ownership, SMEs in for greater earning sound planning and construction industry potential economic analysis and transport services

Institutional Development  Relaxation of market  Institutional reforms  improved technical and and Service Delivery entry and competition for improved service financial management regulation where delivery in road traffic of infrastructure other compatible with services and road government transport service obligations to infrastructure services delivery, outlying rural funding and communities accountability

Security and International  Regulate aviation  Establish a  Invest in port, ship, Relations and maritime sustainable transport airport and freight transport security to security security systems international administration in the through international standards sector borders

Environment Sustainability  Regulatory policy to  Incorporate  Climate change and Climate Change help lower carbon environmental and adaptation in transport intensity transport climate change investments knowledge and responsibilities in DOT and the transport agencies

Spiritual, Cultural and  Community services  Coordination  Assist church- Community Development obligation policies to between Government owned/provided rural recognise role of transport institutions transport infrastructure church-based and church-based agencies in rural organisations transport

Strategic Planning,  Compliance with the  DOT planning and  Transport investment National Transport coordination activities policy alignment with Integration and Control Strategy made a technically Vision 2050, DSP, government strengthened MTDP and MDG administrative including inter- requirement agency relationships  Improved coordination of national and provincial transport plans

 Increase the number of jetties and wharfs in all maritime provinces, and reintroduce government work boats

 Ensure that the Department of Works takes full ownership of all road networks throughout Papua New Guinea

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3.4 Development Strategic Plan and Medium Term Development Plan The emphasis of the Development Strategic Plan, 2011-2030, published in April 2010, is on coordinated action across all sectors aimed at producing transformational change in the rate of Papua New Guinea’s economic growth and social development. At the heart of the DSP are ten economic development corridors which are to open up and better link regions with new and upgraded transport connections with economic and social infrastructure developed along them.

Restoring the existing main transport infrastructure is also 8. Economic Corridor Roads a high priority, bringing all facilities up to good condition and Missing Links and upgrading existing roads, ports and airports to a higher level of capacity to serve the anticipated future The NTS has considered all transport demand. economic corridor roads The Medium Term Development Plan, 2011-2015, described or mapped in the DSP published in October 2010 gives effect to the DSP and and MTDP. also includes interim targets for the five year periods to 2030. It is a requirement that sector plans align with the They have been examined for MTDP. order of cost, likely feasibility and a priority order established. Details of the intentions for transport sector development in the MTDP and DSP are summarised below. Where While a few appear there is any difference between the DSP and MTDP, the economically feasible, a number MTDP has been assumed to govern, as it is the most of the proposed links are likely to recent expression of Government policy. prove technically difficult, high cost and at the best, only very 3.4.1 The Economic Corridors long term prospects. A map of the economic corridors is shown below in Figure 1. The corridors are identified in the Development Strategic Plan as shown in Table 3.

The economic corridors include a number of the “missing links”, mainly inter-provincial road connections linking the several isolated road networks that have long been a feature of Papua New Guinea.

The first priority economic corridor in the MTDP is Petroleum Resource Area Economic Corridor (PRAEC), for development by 2020. Transport infrastructure associated with this corridor includes the road running parallel with the pipeline route from Kutubu to Kikori, and the Gulf to Southern Highlands Road, for which the most likely route is a new section of road between Kerema and Kikori and, from Kopi along the existing pipeline road branching off at Gobe to connect, via Samberigi, with Erave in Southern Highlands. The development of a new port to serve exports from the western part of the Highlands Region at a point on the Gulf coast is also a possibility.

The second priority corridors for development by 2030 are:

 The Momase Corridor, linking Madang to East and West Sepik, primarily by connecting the two sections of the Coastal Highway via a new road link between Bogia and Angoram;

 the Central Corridor linking Morobe, Oro and Central Provinces, providing a cross-island link between Safia in Oro province and Moreguina on the Magi Highway in Central Province;

 The South Coast Corridor, New Britain, linking the disconnected sections of the road along the south coast from Rabaul via Pomio and Kandrian, and potentially to Cape Gloucester to eventually complete a ring route around the island.

 Other economic corridors are described in Table 3.

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Table 3 – Economic Corridors and Corresponding Road Links No. Name Provincial Road Linkages Priority for Development Pipeline road from Kutubu to Kikori, Gulf-S Petroleum Resource Area 1st priority, by Highlands Road from Erave to Kikori to 1 Economic Corridor (PRAEC) 2020 Wowei and then to Kerema. Sandaun to Western Provinces parallel with 5th to 10th the international border, linking Bewani, Border Corridor priority, post- 2 Amanab, Green River, Telefomin, Tabubil, 2030 Kiunga, Aiambak, Nakuku, Morehead, Daru Morobe to Oro to Central Provinces, linking 2nd to 4th priority, Central Corridor Wau, Garaina, Ioma, Popondetta, Baraji, 3 by 2030 Safia, Moreguina Madang to Western Highlands to Simbu to Gulf, linking Madang, Amele, Aiome, Simbai, 5th to 10th Madang-Baiyer-Karamui-Gulf Ruti, Baiyer River, and also a road link to priority, post- 4 Corridor Karamui from either Simbu or Eastern 2030 Highlands Coastal corridor between Madang and 5th to 10th 5 Morobe-Madang Corridor Morobe Provinces, linking Madang, Saidor, priority, post- Wasu, Finschhafen and Lae 2030 East Sepik to Enga Province, linking Pagwi, 5th to 10th 6 Enga-Sepik Corridor Ambunti, Kuvenmas, Maramuni to the priority, post- Laiagam Road 2030 South Coast from East to West New Britain, 2nd to 4th priority, South Coast Corridor linking Rabaul, Tol, Pomio, Gasmata, 7 by 2030 Kandrian, Gloucester. Madang to East Sepik to West Sepik, the 2nd to 4th priority, Momase Corridor Coastal Highway linking Madang, Bogia, 8 by 2030 Angoram, Wewak and Aitape. Completion of the Bougainville coastal road 5th to 10th 9 Solomons Corridor from Siara junction, Kunua, Koripobi, priority, post- Torokina to Boku 2030 Manus, New Ireland, East and West Sepik 5th to 10th 10 Free Zone Corridor comprise the Free Zone Corridor. No specific priority, post- road linkages are involved 2030

Not included in the ten corridor descriptions above, but shown in Figure 1 is a corridor linking the Border Corridor at Kiunga with the PRAEC Corridor. This has been included with the “missing links” described below.

3.4.2 Missing Link Roads

The MTDP includes 16 “missing link” national roads and 4 economic corridor roads in the development plan to 2030. The prioritisation of these new roads has been left to the NTS but targets are set for the numbers of roads to be constructed with most of the development taking place in the 2016 to 2030 period (one missing link constructed by 2015, and one per year thereafter, and two economic corridor roads in the 2016-2020 period and one in each subsequent five year period). The first five years is envisaged to be taken up largely with feasibility studies and other pre-construction investigations and land acquisition.

There is some overlap between the recognised missing links and the new roads needed to provide connections through the economic corridors. The following list combines the available information on the two categories of road, drawn from Table 4.2 of the DSP, the road links indicated in Figure 1 and descriptions in the MTDP.

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There are some links shown in the figure that are not in Table 4.2 of the DSP (the Trans-Island Road, Kiunga-Mendi Road) and vice versa (Kopiago - Tabubil and Bubuletta - Motau - Lavora - Raba Raba - Agaun), and in some cases there are alternative routes, in which case only the more likely feasible route is listed below (for the Gulf to Southern Highlands Road and the Sepik-Enga corridor road).

Table 4 – “Missing Link” and Corridor Roads Road Connection Missing Economic Links Corridor Kiunga - Aiambak -Obo - Morehead - Malam - Daru (Western) ML Border Kiunga - Mendi (Western P - SHP) ML Kerema - Ihu - Kopi (part of Gulf to Southern Highlands) ML PRAEC Kagua - Erave - Samberigi - Kopi Road (part of Gulf to S Highlands) ML PRAEC Malalaua - Wau (Trans-Island Road) ML Kupiano - Gadaisu (Central to Milne Bay) ML Bubuletta - Motau - Lavora - Raba Raba - Agaun (Milne Bay P) ML Bariji - Safia - Moreguina (Oro to Central P) ML Central Garaina - Ioma - Popondetta Central Wau - Garaina - Morobe Patrol Post ML Central Lae - Finschhafen Road ML Morobe-Madang Baiyer River - Aiome - Amele (WHP to Madang) ML MBKG (1) Kopiago - Oksapmin -Telefomin -Tabubil (SHP to Western P) ML Karimui Road (from Simbu or EHP) MBGK Saidor - Wasu - Sialum ML Morobe-Madang Bogia - Angoram (Madang to ESP) ML Momase Pagwi - Ambunti - Kuvenmas - Laiagam (ESP to Enga) ML Enga-Sepik Aitape - Vanimo (Coastal Highway) ML Bewani - Imonda - Amanab - Green River - Telefomin (Sandaun to WP) ML Border Bialla - Kerevat (part of New Britain Highway) ML Kimbe - Gloucester (part of New Britain Highway) ML Rabaul - Tol - Pomio - Gasmata - Kandrian - Gloucester (ENB-WNB) ML South Coast Siara Junction - Soraken - Kunua - Koripobi - Torokina - Boku ML Solomons Key: (1) MBKG Madang-Baiyer River-Karamui-Gulf Corridor

In this list order does not imply priority. The links have been grouped roughly into provinces and corridors according to the normal order of provinces. In some cases more than one new road section is required to complete a link and these sections may be assigned a different priority and could be regarded as separate links. The total number of missing links and corridor roads on this list is 23 compared with 20 in the MTDP. It shows the new links listed in the table, including alternative alignments in a few cases shown in orange (ESP-Enga, Karimui access, Kerema-Ialibu as a less likely alternative to Gulf-SHP using the Kerema-Kikori link and Kiunga-Mendi).

3.4.3 The 16 Priority National Roads

The MTDP development targets reconfirm that priority be given to bringing the 16 national roads first identified in the NTDP up to a good sealed standard, comprising about 50% of the national road network length, with second priority given to the remaining national network and selected sub- national roads (see below).

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Figure 1 – The Future Main Transport Infrastructure from the Development Strategic Plan

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Figure 2 – Missing Links

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Table 5 – The NTDP 16 “Priority” Roads Importance Road Name Linkage Length Class kms 1. Highlands Highway Mendi-Mt Hagen-Lae 604.0 I 2. Boluminski Highway Kavieng-Namatanai-Huris 336.7 II Very High 3. Koroba to Mendi Rd Koroba-Tari-Mendi 195.1 II / I 4. Porgera Rd/Enga H’way Porgera-Laiagam-Togoba 201.2 II / I 5. New Britain Highway Kimbe-Bialla-Nuau, Gaulim-Rabaul 251.2 II 6. Sepik Highway Passam-Maprik-Lumi 266.0 II 7. Coastal Highway (East) Madang-Bogia 214.1 II High 8. Baiyer Road Mt Hagen-Baiyer-Ruti Rd 60.0 II / III 9. Hiritano Highway P Moresby-Bereina-Kerema 304.3 I 10.Coastal Highway (West) Angoram-Wewak-Aitape 309.8 II 11.Kokoda Road Popondetta-Kokoda 79.6 II 12.Wau Road Highlands H’way-Bulolo-Wau 125.6 II / III Medium 13.Buka Road Arawa-Wakunai-Buka ferry 183.1 II 14.Magi Highway P Moresby-Kupiano-Babaguina 239.7 II / III 15.Ramu Highway Usino Jnc-Madang 180.9 I 16.Northern Road Popondetta-Oro Bay-Afore Rd 83.2 II / III Total 3,634.5 Sources: MTDP, NTDP, RAMS road inventory 10. The 16 NTDP Priority The 16 national priority roads in the NTDP 2006-2010 National Roads were divided into three categories in terms of their importance to supporting national economic development While these roads continue to and their relative priority for improvement to a good sealed be important road network links, standard, on the assumption that all required restoration. the investment that has been made in them and the economic This priority is a measure of the importance of the road development and population connection rather than an assessment of the restoration growth that has taken place work required and was based on population served, village since they were first identified income earned and access to main domestic and export means that the merits of further markets through the country’s main ports. improvement needs to be While the previous assessment of the relative importance considered alongside that of of the national road links remains largely valid, several of other national and provincial these roads have been subject to rehabilitation and roads. upgrading in the intervening period, so the priorities for further restorative maintenance need to be considered on The TIPS 2010 modelling, the a case-by-case basis taking account of costs and benefits. development of a functional classification and the In addition, the development of a function classification of subsequent prioritisation of the road network (see Section 20) invites a reconsideration national roads in this NTS goes of the importance rankings. The functional classification of some way to redefining future the existing roads is shown in Table 5 above. From this road investment priorities. review, the importance of the Hiritano and Ramu Highways may need to be elevated, due to their inter-provincial Consequently, while the MTDP connectivity whereas the Baiyer Road should possibly be requires that the 16 priority reduced in importance. However, if the more feasible of roads be monitored in regard to the missing links are constructed, then the relative their improvement and particular importance of the NTDP roads may change. The Hiritano targets have been set, this NTS Highway would become much more important if linked treats the 16 roads on an equal through to the Gulf to Southern Highlands Road or if the basis to all other roads. Trans-Island Highway were to be constructed. Similarly

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the New Britain Highway would increase in importance if the link between West and East New Britain was made (Nuau to Open Bay to Gaulim).

Also shown in orange in Figure 2 are a few links proposed as part of Provincial Development Plans, resource developments (Kikori-Daru, Tolukuma mine access) or being pursued as part of DOW’s on-going works programme (Kaintiba-Malalaua)

3.4.4 Road Financing

The DSP envisages the use of private financing and performance based term maintenance contracts:

“To finance the expansion and maintenance of a nation-wide network of roads, the Government will engage the private sector through the public private partnership scheme.

The Government is committed to the construction of quality roads that do not deteriorate quickly. To this end, tenders and contracts for construction or repair will specify an obligation to maintain the road for a number of years and payments will be contingent on the road being maintained in good condition. Contractors will then have the incentive to construct a good road from the outset, as they will have to maintain it later. Further, contracts for construction will be open to international road construction firms with an excellent proven record, as well as to domestic firms.”

The Government also intends to consider tolling for financing main urban road development:

“As PNG prospers, the number of passenger vehicles on the road will increase, as will the capacity of road users to pay for road use. In this context, toll roads will be cost-effective for relieving congestion on urban roads, including in Port Moresby.”

3.4.5 Ports and Shipping A fivefold increase in port container traffic is anticipated in the DSP, with a slightly higher growth rate in overseas cargo, requiring a threefold increase in port capacity (Figure 3). The domestic volumes are reported to be from economic modelling which relates cargo volume directly to increases in GDP whereas the overseas cargo volumes are based on individual commodity export projections and inward general goods.

Source: DNPM, DSP Figure 3 – DSP Projected Increase in Port Container Traffic

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Source: DNPM, DSP

Figure 4 – DSP Projected Improvement in Port Handling Efficiency The DSP also anticipates an improvement in cargo handling efficiency through the main ports due to better equipment and systems so that port capacity increases at a 2% higher rate than the fixed capital investment in the ports (Figure 4).

The port expansion includes the possible relocation of Port Moresby port, redevelopment of Madang port and Lae wharf expansion, all potentially PPP projects. Manus would become a northern hub port for the Islands Region. As previously mentioned, there is also the possibility of a new or expanded port on the Gulf coast to facilitate trade from the Gulf to Southern Highlands Road when this is constructed. There would be port rehabilitation and capacity upgrades as warranted by trade in the secondary national (declared) ports and for 200 minor coastal wharves and jetties. Restoration of 47 small navigational aids is envisaged in the first five years of the MTDP.

In respect of port investment the DSP states:

“Investment is needed throughout the nation to rehabilitate and upgrade major ports. At Lae, the country's busiest port, work is well underway to expand the port's capacity. A second port will also be constructed at Lae. Fairfax harbour in Port Moresby needs to be relocated well away from Port Moresby to make way for the city's development - beginning with a desktop feasibility study assessing the suitability of four or five potential sites away from the city of Port Moresby. Madang’'s port also needs to be relocated, because its capacity is being constrained by the shallow depth of its waters. Again this must be preceded with a comparison of potential sites to ensure the new site best caters for the region's needs over the long term.”

The DSP envisages improved coastal cargo and passenger services to the maritime provinces and a possible intention of Government to re-enter the coastal shipping trade:

“For the purposes of passenger and local freight transport in Maritime Provinces, drive-on passenger vessels will be central for interconnection as these enable the road and water transport networks to operate smoothly with one another. New transport routes will therefore need to be opened up and more frequent services provided on existing routes. Partnership with the private sector will be crucial in raising the capacity of shipping services as the private sector will be relied upon for much of the investment.

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There may be a case for introducing Government funded shipping services to facilitate the flow of people and cargo, particularly in remote regions of the 14 Maritime Provinces and islands of PNG. To minimise the impact on the budget, the Government will pursue a public private partnership arrangement. It is expected that between 15 and 20 ships will be required over the next 20 years to serve the coastal regions.”

3.4.6 Air Transport

The Development Strategic Plan is for a three- to four-fold increase in domestic air traffic by 2030. The MTDP targets are, by 2030, (i) to bring all 22 national (NAC) airports up to international safety and security certification standards (ii) to upgrade 10 domestic airports to large jet standard and (iii) and to rehabilitate 50 small rural airstrips to basic safety levels prioritised by economic viability and need. Figure 5 shows the air traffic increase anticipated in the DSP.

Source: DNPM Figure 5 – Development Strategic Plan Increase in Domestic Air Traffic The DSP states:

“Alternatives to Jacksons airport are also required in the region with the capacity to handle large jets and international flights. This is to alleviate the costs associated when one airport is closed, for example because of a lightning storm, and to otherwise reduce the pressure on Jackson's airport.

The growth of international tourism will require new international routes and appropriate airport infrastructure at key tourist destinations including Alotau, Rabaul, Madang and Manus. International airports may also be required near cities such as Lae that are an important hub for international business. Regional airlines amongst Pacific island countries should be encouraged as they promote closer regional integration.

The liberalisation of PNG's air space and the promotion of a competitive airline market are vital for reducing the cost of travel and for improving service on domestic flights.”

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3.5 Economic Sector Strategies 10. Economic Sector Strategies and Plans The NTS will be responsive to the development strategies and plans in those economic sectors that are particularly Agriculture – of the main dependant on transport links. Agriculture relies on public economic resource sectors of investment in transport infrastructure and services, agriculture, minerals, petroleum particularly smallholder production. Larger estate and and forestry, agriculture is the corporate agricultural projects may support internal road most affected by public sector systems and connections to the main network, either by investment in transport road or sea, such as the port of Bialla for palm oil. The infrastructure. Further economics of agricultural production can also be quite coordination and planning sensitive to transport costs. between DoT and DAL is Mining and forestry also rely on transport infrastructure required to fully incorporate but, because of their scale and the nature of operation, agricultural demand into national these industries are more likely to include transport and provincial transport infrastructure development as part of resource infrastructure planning. The development, including mine access roads, logging National Agricultural tracks, airfields and coastal landings and specialised Development Plan (NADP) ports, such as the new port development for Ramu provides a basis. Nickel. An outcome of a mining or forestry project may be some legacy transport infrastructure that can be Mining, Petroleum and incorporated into the national network, although design Forestry – are mainly builders standards and configuration may require upgrading of transport infrastructure for before this can happen - for example developing forestry resource extraction rather than tracks into rural access roads. depending on public sector investment; roads, ports and Economic sector strategies and plans taken into account airports built originally for in preparing the NTS include: resource extraction can become legacy infrastructure for the  Agricultural Sector - National Agricultural Government which can provide Development Plan (NADP), 2007-2016 and both benefit and an ongoing cost Implementation Plan; imposition; also some public  Minerals Sector - Mineral Resources Authority roads can be required to (MRA) Corporate Plan 2008-2013 and accommodate traffic generated industry information on mine and prospect by construction (such as oil and locations and development intentions; gas development) or extraction  Oil and Gas Sector – DSP goals and MTDP (such as logs) over limited targets and industry information; periods of time; the NTS has  Forestry Sector - PNG Forestry Authority. located these developments but  Tourism Sector - TPA Tourism Sector Review some further work will be and Master Plan, 2006-2017 required in quantifying impacts and long term incorporation of 3.5.1 Agricultural Sector the infrastructure.

A primary goal of the NADP is to stimulate the Tourism – The Tourism Master development of agricultural production as a contributor to Plan 2007-2017 identifies visitor the PNG economy through increased export income and handling at international imported produce substitution. A second main aim is to gateways, internal transport improve the standard of nutrition, enhance food security safety, quality and cost and and provide income and employment opportunities to the passenger facilities for cruise rural population. Behind this stands the role of vessels as key constraints on Government in encouraging and funding agricultural development. research and the dissemination of knowledge through

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extension services. The NADP aims for sustainable agricultural production which requires that the crops most suited to soil and climatic conditions over the long term are chosen for planting, having regard to their income earning potential and capability of rural people to afford the inputs, cultivate the crops and market the produce.

The primary development objective in the NADP is to reduce the costs of production and improve quality of agricultural produce for both domestic and international markets. Transport costs are a contributor to agricultural input costs and to marketing of the outputs. Reducing transport costs can stimulate new production and extend the area of land that is viable for development, subject to other constraints on labour, land suitability and tenure and investment capital.

Rural agricultural development is also seen in the NADP as an opportunity to improve the recognition of women’s contributions to rural industries and to increase opportunities for women’s decision making in agriculture. It also has the potential to reduce urban migration through providing rurally-based income earning opportunities.

Environmental objectives in the NADP include the reduction of “slash and burn” shifting cultivation that can be detrimental to soil fertility and land stability.

Section 2.7 of the NADP specifically identifies poor roads as a major impediment to agricultural development. Also the perceived high costs of sea transport are suggested as another constraint on production. The NADP states (Section 2.7.1.1)

“Current government and donor priorities appear to target only maintenance of major national roads or highways such as the Okuk or Highlands Highway. Most roads serving the rural sector are considered provincial roads and are the responsibility of provincial governments. Except for the few resource rich provinces, most provincial governments have very limited budget for road maintenance and almost nil for construction of new roads.

The priority for the national transportation policy should be maintenance and upgrading of existing roads instead of construction of new roads. Where necessary, the NADP should identify important agricultural roads that could be included as priority for maintenance to facilitate access for farm produce and funded under the NADP.”

The NADP has not so far identified important agricultural development roads. However, the implementation plan indicates projections of the main cash crops. The more significant crops in economic terms, their main locations and reliance on transport services are:

 palm oil – overtook coffee in 2000 as the most important export crop by value in PNG. Palm oil kernel after crushing also has by-product value as a stock food. The industry involves four companies with large estate plantings and about 20,000 smallholder producers. Oil palm is suited to relatively wet coastal and river plains. The main growing regions are West New Britain (Kimbe - NBPOL and Bialla - Hargy), Oro (Popondetta - Higaturu), Milne Bay, New Ireland (Poliamba) and Madang (Ramu) centred on palm oil refineries and direct export by sea. While road networks in the immediate areas of production around the estates and factories are relatively well developed, the condition of the public road network is a constraint on smallholder participation and expansion of the industry. Stakeholder consultation workshops organised by the Oil Palm Industry Corporation in 2008/09 indicated poor transport infrastructure to be the third most important of nine issues for industry stakeholders.  coffee - is by value PNG’s second most important agricultural export and a major source of rural income in the Highlands Region, with the 2000 Census indicating that 47% of rural households are engaged in coffee growing. The PNG Highlands is particularly

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suitable for Arabica coffee cultivation where production is concentrated, and lowland areas for lower value Robusta coffee. Coffee is extensively grown as both a smallholder and estate crop with Western and Eastern Highlands Provinces the largest producers. Coffee relies on the transport network to bring the cherry or parchment coffee to factories where it is husked to green bean and then further processed into roasted and packaged products. It is a well differentiated product with several regional brands and organic status giving premium value. The poor condition of rural roads has often been cited as a reason why coffee gardens have become neglected and a constraint on production and rural incomes.  cocoa – is a bulk rather than differentiated crop gown primarily in the coastal areas of the Island provinces and is dominated by smallholder production. Cocoa bushes are often mixed with coconut trees for shade and combined production, although copra values have been relatively low in recent years. East New Britain and Bougainville are the largest producers. Inland transport costs typically make up 10 to 15% of the on- board price at the export port. Again, the condition of rural roads in the growing regions is a constraint on production.  coconut products – the products from coconut trees are copra (dried coconut flesh), coconut oil (from copra pressing), copra cake (stock food) and coir fibre (matting and other uses). Coconut shell is used for charcoal and in the copra drying process. Other uses of the tree include sawmilling the trunks of senile palms for decorative and structural timber, making coconut trees a useful staple for coastal communities. Once the most valuable agricultural export, the value of coconut oil for use in foodstuffs and cosmetics has fallen behind other oils such as palm oil. Also there has been little replanting with modern hybrid varieties in recent years, and the original coconut plantations are now well past their prime with reduced production. Nevertheless, coconut is still an important source of income to coastal populations, particularly when underplanted with cocoa. Coconut exports have revived in the last five years, following industry changes after a period of decline. By value coconut products are the fourth highest source of agricultural export income. There are only two copra mills, in Madang and Rabaul. Copra volumes depend upon collections by sea from widely dispersed coastal communities either by villagers bringing copra to the mill by banana boat or by organised collections by traders. Road connections from the mill locations along the coast are also an important constraint on participation.  horticulture - fresh fruit and vegetables, both traditional staples and introduced varieties, are grown mainly for home consumption and for the domestic market, where there is considerable scope in the larger centres for import substitution. Export production faces demanding biosecurity requirements so is less significant. As many of the introduced species are grown at higher elevations in PNG, there is a transport requirement to bring them to market, including protection against bruising and deterioration in transit, which in turn requires reliable and relatively smooth road connections. Lack of reliable road connections to the main centres and poor rural road condition have been recognised as one of the constraints on increased production.

3.5.2 Minerals Sector

Papua New Guinea is rich in mineral resources and mine development has had a significant impact on the development of the transport network in those areas. Minerals make the largest contribution to export earnings (see Figure 26).

The DSP sector goal is to “double mineral exports, while minimising the adverse impact on the environment”. This is translated in the MTDP as targets for minerals development, including more than doubling in the number of producing mines from 9 to 20 in 2030 and doubling in the real value of mineral production from K9 billion to at least K18 billion.

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The Mineral Resources Authority (MRA)’s Corporate Plan predicts a net increase in production volumes of gold and copper over the 2010 to 2013 period of 50% and 150% respectively and production continuing at these higher levels to beyond 2020. Details of current and projected exploration and development activity together with transport implications are described in Sections 5.4.5 and 5.4.6 and this indicates many more prospects for mining that could be developed subject to market prices remaining high.

Source: Mineral Resources Authority, Corporate Plan 2008-2013

Figure 6 – Projected Copper and Gold Production

While some existing mines will close or reduce production, the buoyant market is providing a stimulus for extension plans at Ok Tedi, Tolukuma and Kainantu. Mines scheduled to be in commercial production by 2015 include Ramu nickel/cobalt mine, Simberi and Sinivit gold mines, Hidden Valley gold mine, Wafi-Golpu gold/copper mine, Woodlark gold mine, Solwara gold/copper mine and the Yandera copper/molybdenum mine.

3.5.3 Petroleum Sector

After minerals, petroleum (oil and gas) is the second largest contributor to export earnings for PNG (see Figure 26). Details of oil and gas ventures and their implications for the transport system are discussed in Section 5.4.6.

The DSP oil and gas sector goal is to “build a world leading petroleum industry that maximises benefits to PNG and landowners, minimises impacts on the environment and social welfare, and provides PNG with energy security.”

The MTDP targets for the sector are:  To maintain crude petroleum production and exports at or above 2009 levels of 13.7 million barrels/year through to 2030  To implement three large LNG projects, with gas production and export volumes rising from 3.6 to over 6.3 million tonnes/year over the period

3.5.4 Forestry Sector

The forestry sector is the third most important in export earnings after minerals and petroleum (see Figure 26). Almost all production is logs for export from natural forests, with very little onshore processing of timber other than for local market supply and a very small area of plantation forestry.

The DSP sector goal is to “build a forestry sector that is sustainable and highly profitable.”

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The MTDP tasks the forestry sector with:  increasing processed timber exports to 80% of all forestry exports by 2030 from the current rate of 20%;  have plantations produce all logs and manage forests by 2030; and  increase plantation forests from 62,000 hectares to well over 150,000 hectares by 2030.

Details of forestry production and outlook are discussed in Section 5.4.4.

3.5.5 Tourism Sector The DSP sector goal for tourism is to “increase the overall economic value of tourism to the nation by nearly doubling the number of tourists on holiday in PNG every five years and maximising the sustainable tourism growth for the social and environmental benefit of Papua New Guineans.”

This translates into MTDP targets of a rise in foreign visitor numbers from 125,000 to 1.5 million/year by 2030.

The Tourism Promotion Authority’s (TPA) Tourism Sector Review and Masterplan 2007-2017, identifies transport facilities as one of the necessary conditions for an increase in tourism numbers and revenue. Specific improvements are identified as:

 improved facilities for international visitor handling at the international airport gateway;  demand driven improvements in airport facilities at key tourism provinces, due to the long distances, difficult terrain and limited surface transport linkages;  improvements in the regulation, safety and quality of taxis and tourist sightseeing buses;  development of facilities to support cruise ships, including safe and secure navigation on the PNG coast and harbours and terminal facilities suitable for tourist passengers at key destinations;  high costs for internal transport are seen as a disincentive for tourism

The Tourism Master Plan contains detailed criticisms of the cost and quality of taxis, PMVs and domestic air services, with suggestions for price control and subsidy. Investigation by the ICCC into the air transport, coastal shipping, PMV and taxi industries were partly at the request of the TPA, but did not uphold claims of high cost and lack of competition. However, quality and safety issues in the effective regulation of licensed taxi and PMV services are recognised as part of the constraining factors limiting tourism development.

The TPA acknowledges cost recovery issues in providing facilities specifically to serve tourists, such as cruise ship reception facilities, as additional costs will deter growth in demand, whereas subsidies would ultimately be borne by other port users or the wider community.

3.6 Social Sector Strategies

The NTS will also support the Government’s strategies for social development in particular by facilitating basic social services delivery to remote rural locations and providing a means for rural populations to access social service concentrated in district and provincial centres. Health and education are the two most important of these, with transport supporting the operation of elementary and primary schools, aid posts and health centres, and providing transport access for rural people to centrally located secondary schools, tertiary colleges and vocational training centres and hospitals.

Social sector strategies taken into account include:

 Department of Health - National Health Plan 2011-2020 and Corporate Plan 2009-2013

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 Department of Education – National Education Plan 2005-2014, Universal Basic Education Plan 2009-2019 and Provincial Education Plans

3.6.1 Health

The National Health Plan contains targets for disease 11. Social Sector Strategies prevention and improvement in vital statistics of the PNG and Plans population, including several indicators for maternal and neonatal health, use of prophylactics, reduction in The National health Plan 2011- incidence of diseases such as malaria, tuberculosis 2020 and the National Education HIV/AIDS and pneumonia. Plan 2005-2014 and Universal Achievement of the targets, several of which form part of Basic Education Plan 2009-2019 the MDGs, depends upon outreach services and the have informed the NTS National Health Plan and MTDP includes the rehabilitation, restoration and expansion of aid posts, Health and education at local community health posts (replacement to aid posts), district rural level rely on the lower level health centres and hospitals. The basic level services are transport infrastructure for required to more than double in coverage per 1,000 building supplies, education and population, which implies a higher increase once health materials, delivery of population growth is also included. outreach programmes and to recruit and retain trained staff. In the risks and assumptions underpinning the health plan Connection of health and is that “access roads are built and maintained”. The NTS education facilities has been therefore takes account of how well the transport network included as a factor in performs in providing linkages for the population at a local determining the functional level to access their nearest primary health facility. The classification and desired location of existing health facilities and intended location standard of rural transport links. of new facilities are a factor in determining priorities for rural access roads, small jetties and airstrips.

3.6.2 Education

The DSP deliverables of universal education access require a sufficient number of primary secondary and vocational schools for full coverage of the population, and maintenance of the physical infrastructure including school buildings and teacher housing.

The identified risks, as for the health sector, include the building and maintenance of access roads so that the facilities can be accessed, supplied and be sufficiently attractive to retain staff and allow contacts with the higher level institutions and the Education Department.

The NTS therefore takes account of how well the transport network performs in providing linkages for the population at a local level to access their nearest primary and secondary schools. The location of existing schools and intended location of new facilities are a factor in determining priorities for rural access roads, small jetties and airstrips.

3.7 Safeguards and Cross-Cutting Strategies

Cross-cutting issues that have an influence on the construction of transport infrastructure and the delivery of transport services, the responsible agencies and existing plans include:

 Department of Environment and Conservation (DEC) - environmental protection and mitigation;

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 Office of Climate Change and Development (OCCD) – mitigation of greenhouse gas emissions attributable to the transport sector and adaptation of transport infrastructure to the effects of climate change;  The Office for Development of Women (ODW) – was established in 2007 as a stand- alone offshoot from the Ministry of Community Development (MCD). Also the PNG Economic and Public Sector Programme (EPSP), a joint initiative between Australia and 12. Cross-Cutting Strategies selected PNG government agencies to and Plans improve service delivery has a remit to promote gender equality; The NTS includes provisions for cross-cutting issues including:  Medium Term Development Plan (MTDP) – good governance and corruption has set out goals, strategies and deliverables prevention; gender equity and for good governance and reduction in women’s advancement; corruption through all Government agencies prevention of disease under the oversight of the Department of transmission such as HIV/AIDS; Finance and the Department of Personnel consideration of those with management; disabilities; environmental  The National AIDS Council has published the protection and climate change National HIV and AIDS Strategy 2011-2015. adaptation  Medium Term Development Plan (MTDP) – has also goals, strategies and deliverables for Environmental protection - improving infrastructure for those with protocols and standards for disabilities overseen by the Department of mitigating environmental impact Family and Community Development (DFCD). are required in larger donor funded projects and codes of 3.7.1 Environment environmental practice will be promoted for all transport The Department of Environment and Conservation (DEC) projects is the responsible Government agency overseeing environmental legislation and compliance. DEC has Climate change mitigation and published its Strategic Directions 2007 document which adaptation – The NTS notes the sets out how it intends to organise its future activities. climate compatible development targets for PNG established by The environmental impacts of transport include both OCCD and the sector will be construction and operational impacts, primarily run-off encouraged to progress climate and ecological impacts in rural areas, and noise and air change adaptation and include quality in populated areas. Protocols and standard the targets in monitoring the clauses for mitigating environmental impact during NTS. construction of transport infrastructure are observed by the DOW and large scale projects will generally require environmental. impact reporting, particularly if donor supported.

3.7.2 Climate Change

The OCCD has published “Climate Compatible Development for PNG”, in which it identifies a doubling of greenhouse gas (GHG) emissions from the transport sector over the 20 year plan period under a “business-as-usual” (BAU) scenario based on an increase in the vehicle fleet from 150,000 to 600,000 vehicles. However, this is acknowledged to be a relatively small contributor to the nation’s total GHG emissions and of greatest importance is the future of PNG’s forest cover and its role as a greenhouse sink. Increasing land transport connectivity through remote forested land does have some potential to accelerate deforestation unless well controlled.

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The OCCD envisages that improvements in engine technology will improve upon the BAU projection but that a shift to biofuels from cassava, coconut, sugar cane or other feedstocks has the potential to significantly reduce the GHG emissions from the sector.

“Climate Compatible Development for PNG” gives targets for the million tonnes of carbon dioxide equivalents (Mt CO2e) that could be saved through improved efficiency and the use of biofuels:

“In the transport sector, abatement will depend on the gradual adoption of more efficient gasoline 12. Cross-Cutting Strategies and diesel vehicles, but could be enhanced and Plans substantially by a shift to biofuels: Gender Equity – the MTDP

 Nearly 0.6 Mt CO2e can be saved at a includes deliverables for negative abatement cost mainly due to development of entrepreneurial continuous efficiency improvements of skills programmes for women internal combustion engines. Another 0.3 Mt and public sector workplace

CO2e could be captured at a positive policies for gender equity. abatement cost by future efficiency improvements as well as hybrid and electric Good Governance – the MTDP vehicles, but has not been included in the cost has set out goals, strategies and curve. deliverables for good governance and reduction in  Biofuels can save approximately 0.2 Mt CO2e, corruption through all based on sugarcane plus lingo-cellulose, but Government agencies under the abatement costs are difficult to estimate oversight of the DOF and DPM because no resource assessment has been done for biofuel crops in Papua New Guinea. HIV/AIDS – The National HIV There are several potential fuels, including and AIDS Strategy 2011-2015 straight vegetable oil (SVO) made from guide the NTS, in particular in coconut in coastal and island regions, delivering prevention messages jatropha (both as straight oil and methyl ester) to construction workers and and bioethanol made from sugar cane, transport drivers/operators cassava and sweet potato in highland regions, where low temperatures make the Disabled and Disadvantaged – use of straight vegetable oils infeasible. the NTS will advance the goals Feasibility studies for some of these biofuels, of the MTDP for improving including a full consideration of externalities infrastructure and utilities for (such as the potential effects on food crop disabled and disadvantaged production), are a high priority; if they are travellers included, the full abatement potential from biofuels may exceed 1 Mt CO2e.”

As well as GG emissions from transport, the effects of climate. change will require adaptation by the transport sector. Rising sea levels and coastal flooding, increased rainfall intensity, frequency and inland flooding are threats to the physical infrastructure and require consideration when designing transport infrastructure for the future.

3.7.3 Gender Equity

The DSP goal is that “all citizens irrespective of gender will have equal opportunity to participate in and benefit from development of the country.” The MTDP acknowledges the importance of addressing gender equity and improving the status of women as part of the country’s development efforts. Other significant government initiatives include the 2006 establishment of the Office for the Development of Women (ODW) and launch of a national gender equity policy (planned for 2011).

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Specific deliverables of the MTDP are the development of entrepreneurial skills programmes for women and public sector workplace policies for gender equality.

The NTS will assist in positively promoting the nation’s gender equity objectives through encouragement of women’s participation in the construction and maintenance of transport infrastructure (contracting), in transport services provision (PMVs, taxis, freight services), and women’s employment in the line transport agencies and SOEs. This will include the development of programmes and targets for skilled labour, vocational training, technical, professional and management grade positions throughout the sector.

3.7.4 Good Governance

The MTDP sets out targets for four aspects of good governance: rule of law; regulatory quality; public service effectiveness; and control of corruption. In each of these PNG ranks quite low in international comparisons.

3.7.5 HIV AIDS

The DSP goal is a “healthy population free from sexually transmissible infections and HIV/AIDS threats”. This is translated into MTDP targets to reduce the prevalence rate from almost 1% to 0.1% of the population by 2030.

The National HIV and AIDS Strategy 2011-2015 sets out ten interventions in three priority areas of prevention, counselling and systems support. The role of the NTS in advancing this cross-cutting initiative is by ensuring that HIV/AIDS and other communicable disease transmission prevention messages are delivered to the transport sector workforce, particularly those groups which are more likely to be vectors for disease transmission, such as construction workers and drivers/operators of transport equipment.

3.7.6 Disabled and Disadvantaged Travellers

The MTDP recognises the need to give special consideration to those with impairments whether by birth, or caused by disease, accident or other disadvantage. A deliverable of the MTDP, overseen by the DFCD is to “improve infrastructure and utilities to cater for the vulnerable”.

In many countries, as transport systems become more highly developed, it has become a requirement that transport agencies cater for persons who use mobility equipment such as wheelchairs and scooters in the form of ramp access, passenger lifts, and low floored or “kneeling” buses with space inside to accommodate mobility equipment. These facilities also have a dual utility for mothers with young children in strollers.

Similarly, provision is made for those who have limited vision or hearing, so that they are able to safely navigate their urban environment; for example by installing tactile paving and audible signals at traffic controlled intersections, and improved visual signals for the deaf. Other design treatments include more attention to ensuring that footpaths and crossings are smooth and sufficiently wide for wheelchairs.

In Papua New Guinea the layout and condition of urban streets and footpaths is often poor and will need to be upgraded to a higher general standard before some of these more advanced facilities can be contemplated. Similarly the construction standards for PMVs and taxis are not highly developed and are poorly enforced.

Nevertheless, it should be a longer term objective of the NTS to improve the facilities available to all those less advantaged travellers, including those with young children, the elderly, the infirm and the disabled. This will be part of the remit of the new Road Traffic Authority (RTA) and will be considered when reviewing design standards as discussed later in this NTS (Section 11.7).

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3.8 Provincial Development and Transport Plans

The detail and currency of provincial development plans varies widely. Some provinces have up-to-date 13. Provincial Transport Plans infrastructure plans at provincial level but many are either still in preparation or have not been recently updated. The detail and currency of These are embodied in the Provincial Development Plans provincial transport plans and (PDPs), in provinces’ corporate plans and in a few cases the capacity of provincial in Provincial Transport Plans (PTPs). administration to prepare and implement plans varies greatly. The NTS has used information available at the time of preparation, but at the time of five yearly reviews or more The DOT, through PCD and the frequently, there will be a need to also review the state of new RIDD will assist provincial provincial, district and local level government plans so administrations in the that there can be alignment between these and the preparation of their provincial national level NTS and current MTTP. The new transport plans with the aim of Intergovernmental Service Delivery Mechanism (ISDM) developing consistent being developed by the Vision 2050 Development Centre approaches across provinces will assist in this harmonisation between the three tiers of and good alignment between planning and service delivery. The ISDM envisages that national and provincial level the Province is the point at which the large scale top- plans. down planning from national level is integrated with local community needs generated by bottom-up . representations from local communities.

The NTS sees an important role for the national agencies, in particular the Department of Transport Planning and Coordination Division and the new Rural Infrastructure Development Division, to work closely with and assist provincial governments with the aim of developing consistent approaches and quality in the preparation of provincial transport plans (PTPs) and ensuring good alignment between the MTTP and PTPs.

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4 Profile of the Transport Sector

4.1 Physical Geography

Papua New Guinea occupies the eastern half of the island of New Guinea, bounded on the west by the Indonesian province of West Papua, with several large islands and smaller island groups to the north and east. The country is rugged, with high mountain ranges, fertile upland valleys, coastal plains, and extensive swamps. It has a coastline of over 17,000 km and 17 million ha of reef- covered coastal waters.

For administrative purposes, the country is divided into the four regions of Papua, Momase, the Highlands and Islands. There are now 211 provinces and National Capital District, of which four (4) are islands or parts of islands, nine (9) are coastal around the main island of New Guinea and five (5) in the Highlands Region are landlocked. Bougainville has separate administrative arrangements under its own autonomous government.

4.2 Population Distribution

The latest population census was in 2000 when the national population was 5.2 million. Population growth in Papua New Guinea is relatively high at an estimated 2.4% p.a. and the national population in 2010 is estimated to be 6.9 million and forecast to grow to 8.5 million by 2020 (ESCAP Statistics). The MTDP has population targets of 7.3 million in 2015 and 9.8 million in 2030, which includes a policy of reducing the growth to 2.0% over that period. There is also an intention to cap the urban population at 20% of the total.

Population distribution, growth rates and migration are principal factors in the demand for transport. Papua New Guinea has a low population density compared with most other countries, provincial population densities varying between a low of 2 persons/sq. km in Western Province to 66 persons/sq. km in Eastern Highlands, with a national average of 15 persons/sq. km.

The largest concentration of urban population is in National Capital District which accounted for 35% of the urban population and 5% of the estimated total population in 2000. The urban population officially is 12.5% of the total but is thought to be under-reported. Nevertheless, Papua New Guinea’s population remains predominantly rurally based and widely distributed with many small villages located in inaccessible mountain valleys, inland river tributaries and along the coastal margins. Figure 7 illustrates the provincial populations and densities (for NCDC the population density is 1,300 persons/sq. km) and Figure 8 gives the same information at a regional level.

The Highlands Region stands out as both a large population concentration and a relatively high population density. Southern Highlands, one of the least accessible provinces, has the largest population of any province, although the population densities in Western Highlands, Simbu and Eastern Highlands are the highest in the country, between 50 and 70 persons/sq. km, so generate more concentrated travel demand.

The Papua region, in particular the provinces of Western, Gulf and the northern parts of Central Province remote from Port Moresby, have the lowest population densities as well as being crossed by several large rivers with extensive coastal deltas. This presents a challenge for the economic provision of transport infrastructure and services.

1 In 2012, Hela Province was formed from part of Southern Highlands Province and Jiwaka Province from part of Western Highlands Province on 17 May 2012. However, data used in this Strategy relates to the old boundaries but will be changed in future reviews when equivalent information becomes available. The provincial capital of Hela is Tari and of Jiwaka is Minj.

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The Island provinces have the second highest population densities to the Highlands, with much of the population around the coastal margins, making coastal shipping of particular importance as a mode of transport both for inter-island services and for services around the island coasts.

1,000,000 100 900,000 90 800,000 80 700,000 70 600,000 60 500,000 50 400,000 40 300,000 30 200,000 20 100,000 10 0 0

Gulf Enga NCDC Simbu Morobe Central Manus Madang Western Milne Bay East Sepik New Ireland Oro / Northern East New Britain Eastern Highlands West New Britain Southern HighlandsWestern Highlands West Sepik - Sundaun

Bougainville / North Solomons

Population Population Density

Figure 7 – Provincial Populations and Population Density, 2010 Estimates

3,000,000 30.0

2,500,000 25.0

2,000,000 20.0

1,500,000 15.0

Population 1,000,000 10.0

500,000 5.0

Population Density persons/sq Populationkm persons/sq Density

0 - Highlands Momase Papua Islands

Population Population Density Figure 8 – Regional Populations and Population Density, Estimated 2010

4.3 Economic Activity and Transport Demand Efficient transport networks and services are a necessary underpinning to economic activity, for overseas trade, for supply of the main urban domestic markets from centres of rural production, and for distribution of consumer goods to large and small communities. Transport connections allow traditional subsistence-based village economies new opportunities to increase the specialisation of goods and services they provide through wider access to markets. This can take the form of the sale of surplus produce, develop into smallholder cash cropping and then larger scale ventures.

While transport connectivity is a necessary input to development, other complementary inputs are also needed in education and specialist training, and commercial services such as post and banking.

4.4 Social Services Delivery and Transport

The delivery of social services, in particular basic education and health programmes, is facilitated through good transport accessibility. Good access makes it easier and cheaper to recruit, retain

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and support teachers and health workers in remote posts. It also lowers the cost of importing building materials and supplies for the construction and operation of schools, aid posts and rural hospitals. Good transport accessibility makes it easier for pupils to attend school and for patients to access health services, and increases the effective reach of these services. Outreach programmes such as vaccination, health education and disease prevention, pre- and neo-natal support are facilitated by transport access. Other community interaction and support for youth, women, and social and religious participation are strengthened. The net result is a population that is better educated, healthier and more productive. Transport connectivity promotes social cohesion at local and national level.

4.5 Transport Sector Institutions

4.5.1 Overall Structure

Figure 9 illustrates the general structure of the institutions in the transport sector at national level.

Figure 9 – Institutional Structure of the Transport Sector

The Department of Transport (DOT) has the primary responsibility for the transport sector, headed by the Secretary for Transport under the Minister. The Secretary has a number of other roles as a member of various statutory authorities, boards and committees. Within the DOT there are divisions for policy development, planning and monitoring of sector expenditure, liaison with and assistance to the provinces, and modal divisions for land transport, maritime, air traffic regulation and air services licensing, aviation security and maritime security. The National Weather Service (NWS) also currently falls under the Department of Transport.

The Department of Works (DOW) has responsibility within the Government for managing the national road assets, in particular contract management for road construction and maintenance. It also has responsibility for engineering standards, for some engineering technical services and maintains a capacity for direct engineering works for emergency reinstatements and in remote areas.

There are four statutory authorities in the sector, the National Roads Authority, which has management responsibility for some national roads, the National Road Safety Council responsible

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for road safety promotion, The National Maritime Safety Authority responsible for maritime safety and marine pollution control, and the Civil Aviation Safety Authority, responsible for aviation safety. Whereas NMSA and CASA are regulatory agencies, the NRA is in fact closer to an SOE, being responsible for provision of road network services for which it will, in future, receive funding through a system of road user levies. CASA reports to the Minister for Civil Aviation, the NRSC and the NMSA to the Minister for Transport, and the NRA to the Minister for Works and in respect of certain financial matters, to the Minister for Treasury.

Outside of the transport agencies, the Independent Consumer and Competition Commission (ICCC) has responsibility for ensuring that there is fair competition in the markets for goods and services, and does so through powers to declare price regulated industries and services, where there is evidence of monopolistic practice. At present, the Government owned ports under PNG Ports Corporation Ltd are price controlled, and there is a degree of price control in coastal shipping and in PMV and taxi fares.

There are five SOEs in the transport sector, of which three (PNG Ports, Air Niugini and MVIL) fall under the Independent Public Business Corporation, Government’s holding company for SOEs. IPBC reports through the Minister for State Owned Enterprises. NAC and PNG Air Services Ltd report through the Minister for Civil Aviation.

The SOEs are expected to operate on commercial lines, deriving their revenue from charges made for the services that they provide. In practice there is a degree of reliance on Government financial support for capital works and operations for most of the SOEs, as full cost recovery is not currently achieved. In part this is due to the expectation by Government that the SOEs responsible for port, airport and air services will support non-commercial parts of their operations by internal cross- subsidy, as an informal community services obligation.

The private sector is responsible for supplying almost all road transport (PMV, taxi, road freight), shipping and air services (apart from Air Niugini). Government has recently become involved in the purchase of workboats and landing craft under the Border Development Authority and for use by the PNG Defence Force. Depending on their size, private companies may be owner/operator enterprises, small to medium size enterprises (SMEs) with a single owner or closely held shareholding, up to larger private and public companies with a board and executive management (such as Steamships and Airlines PNG).

4.5.2 Liaison Arrangements

Apart from direct contacts between agencies that are required as part of day-to-day operations, the period of the last NTDP saw the establishment of the Transport Sector Coordination Monitoring and Implementation Committee (TSCMIC), which brings together all of the heads of departments and chief executives of the transport sector agencies at national level, and certain of the government central agencies on a bimonthly basis to review activities in the sector. The TSCMIC has been facilitated by the Transport Sector Support Programme (TSSP) an AusAID-funded initiative for providing technical advisory support as well as funding for development programmes in the transport sector.

The composition of the TSCMIC is:  Secretary for Transport (Chair)  Secretary for Works  Secretary for National Planning  Head, Prime Minister’s Department  Chief Executive, National Roads Authority  Chief Executive, National Road Safety Council

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 Chief Executive PNG Ports Corporation Ltd  Chief Executive, National Maritime Safety Authority  Chief Executive National Airports Corporation  Chief Executive, Civil Aviation Safety Authority  Chief Executive, PNG Air Services Ltd

TSCMIC meetings are also attended by senior officials of AusAID and TSSP.

The other main channel of coordination is the Consultative Implementation and Monitoring Council (CIMC), a private/public sector body serviced by the Institute for National Affairs (INA). The role of the CIMC is to bring together civil society, the private sector and government to develop policy to influence and monitor government decision-making for the long term development of Papua New Guinea. The CIMC has a Transport and Infrastructure Sectoral Committee which deliberates on current issues in the transport sector and proposes policies and actions. CIMC also supports annual National and Regional Development Forums, which identify opportunities and constraints to improving access to adequate transport and communication infrastructure and services.

4.5.3 Institutions in Land Transport

Figure 10 illustrates the present institutional arrangements for land transport at national level. The Secretary for Transport is also the Superintendent of Motor Traffic under the Motor Traffic Act. The DOT is responsible for policy development and overall regulation of transport and traffic on the national road network, including the licensing and associated regulatory enforcement of vehicle construction and use, driver and operator licensing, and transport services licensing (freight and passenger transport services carried out for hire or reward).

Minister for Police Minister for Transport and Works Minister for SOEs

Secretary for Transport / Superintendant of Motor National Road Safety National Roads Secretary for Works IPBC Traffic Council Authority Board

Police Traffic Department of National Land Motor Vehicle NRSC Executive NRA Executive Department of Works Directorate Transport Transport Board Insurance Ltd (MVIL)

 Ministerial Advice  Network Manager for  Road Fund  Policy and Planning  PMV, taxi and hire car  Road Safety Declared Public Roads  3rd Party Insurance Management  Traffic Enforcement  Sector Monitoring licensing Coordination between except those assigned Administration  Network Manager for  Accident Reporting  Government Budget  Inter-provincial heavy Government Agencies, to NRA  Functions delegated by Assigned Public Roads  Driver Training & Coordination vehicle permits Community Groups and - Contract Management Superintendant of Motor - Works Contract Testing  Vehicle Regulatory  Freight rate and the Public - Asset Management Traffic in NCD only Management  Stopping Traffic for Enforcement passenger fare setting  Road Safety Research - Technical Services - Numberplate issue - Heavy Vehicle Transport Inspectors  Road Transport Industry in consultation with  National Road Safety - Plant & transport - Vehicle registration Weighing regulation ICCC Plans and Programmes - Own works forces - Driver license issue - Safety Auditing  Service the NLTB  TA to provinces Figure 10 – Existing Institutional Structure in Land Transport at National Level

The National Land Transport Board Act (1968) gives the NLTB the power to direct DOT to issue transport services licenses. The NLTB comprises the secretaries for transport, trade and industry, the Attorney General and six non-government appointees, and considers licence applications at national level and within NCD. The power to issue transport services licences at provincial level has been delegated to Provincial Land Transport Boards where these have been established and are operational. Provincial licenses include within-province route and service licences for freight transport, as well as provincially-based PMVs and taxis.

The DOT Land Transport Division (LTD) includes a Road Transport Industry Branch and a Road Safety Branch. The former branch services the National Land Transport Board, which licenses freight and public transport, regulates and inspects motor car dealers and motor vehicle testing

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stations, and is responsible for regional offices in Lae, Mt Hagen and Rabaul, while the latter branch has responsibility for enforcement of inspection of motor vehicles for compliance with vehicle construction and use safety regulations, and driver, public motor vehicle and freight licenses, and vehicle registration. LTD provides technical advice and administrative services to the NLTB in addition to its other functions.

Some of LTD’s functions have been assumed by the National Road Safety Council (NRSC), in particular the analysis of Police traffic accident reports and road safety matters in general. Enforcement weighing of vehicles by authorised weighing officers, either the Traffic Police or LTD Traffic Inspectors, has not been carried out for some years due to budget constraints. The Western Highlands Provincial Government has recently purchased a set of portable weighing scales and intends to commence weight enforcement in the area. The NRA has installed two weighbridges on the Highlands Highway on the outskirts of Lae but does not have the power to do weight enforcement. Arrangements are being made for Morobe Provincial Government traffic inspectors to assist NRA with this activity.

While the Provincial LTB in Lae is responsible for deciding on urban PMV routes, the responsibility for this in NCD lies with LTD and NLTB although close collaboration is clearly required with NCDC. It is more than 20 years since there has been any redesign of the PMV routes and this is now overdue.

The Policy Research Division (PRD) within DOT is responsible for the analysis and development of transport sector policy across all modes of transport and also acts as a coordinating agency for annual national budget submissions by the transport sector agencies. PRD is responsible for the preparation of the National Transport Strategy.

The Planning and Coordination Division (PCD) of DOT monitors the expenditure and delivery of programmes financed under the national budget, the activities of the transport agencies in general, and provides assistance to provincial governments in developing their provincial transport plans. Provincial liaison is conducted through the Department of Provincial and Local Government Affairs (DPLGA), specifically through the Provincial and Local Level Government Service Monitoring Authority (PLLSMA).

The National Road Safety Council was established under its own act in 1997 although only became operational in the last six years. It is self-funding from a levy on 3rd Party Motor Vehicle Insurance, collected by Motor Vehicle Insurance Ltd (MVIL). The NRSC Board legally consists of the secretaries of Transport, Works, Finance and Planning, Health, Education, Provincial and Local Government Affairs, Lands and Physical Planning, and the Commissioner for Police, the Executive Director of the NRSC and six appointees to represent NCD, the Motor Vehicle Insurance Trust (now MVIL), Chamber of Commerce, the National Broadcasting Corporation, the University of Papua New Guinea, and the University of Technology, or their nominees.

4.5.4 Institutions in Maritime Transport Figure 11 shows the present institutional arrangements for maritime transport. The Secretary for Transport is currently the departmental head responsible for maritime under the Merchant Shipping Act and the Harbours Act, the two main pieces of governing legislation for the sector.

Maritime safety matters including the PNG register of ships, safety certification of all PNG registered vessels over 10m length, port state control of the safety of visiting foreign flagged ships, adherence to the international safety conventions of the IMO, certification of ship’s crew, control of marine pollution, coordination of maritime search and rescue, maritime navigation aids and small craft safety are now the responsibility of the National Maritime Safety Authority under legislation enacted in 2003.

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Minister for Transport Minister for Finance Minister for SOEs

NMSA Board Secretary for Transport ICCC IPBC

Coasting Trade DOT Maritime DOT Maritime NMSA Executive PNG Ports Corporation Ltd Committee (CTC) Division Security Unit (ISPS)

 Under the National  Under the Merchant  Ministerial policy advice  International Shipping  Delegated powers from  Ports as a regulated  Investment in, and Maritime Safety Shipping Act on shipping matters & Port Security, the Secretary of industry manage infrastructure Authority Act - advise the minister on  Administration of compliance with IMO Transport under the - regulated port tariffs assets at declared - maritime safety coastal shipping coastal licensing and requirements for Harbours Act - implied CSO obligation national ports regulatory enforcement matters permitting - Port security - declared port - minimum service  Management of the and monitoring - report to minister on  Responsible for those - Cargo security operational control standards operation of declared - act for the state in proposed regulations waterfront matters and - Ship security and infrastructure  Essential ports services national ports international maritime affecting the coasting Government coastal  Procedures, physical provision/maintenance as regulated services  Provide a return on agreements trade infrastructure not under inspections, audits, - determing suitability & - stevedoring price Government’s - marine pollution - recommend maximum PNG Ports reporting and location of port facilities monitoring investment as required regulatory enforcement rates for coastal  Licensing of ships and monitoring outside of declared by IPBC - coordinate maritime shipping services liaison with shipping ports search & rescue industry - and others - consulting services training & management

Figure 11 – Institutional Structure in Maritime Transport

The DOT Maritime Transport Division (MTD) is responsible for administering coastal trading licences and permits required for vessels to trade on the PNG coast and to the recognised limits of navigation on inland waterways. MTD also advises the minister on shipping matters and has responsibility for coastal development of port facilities outside of the declared ports, except where these functions have been delegated elsewhere by the Secretary of Transport. Maritime security matters including PNG’s compliance with the International Ship and Port Security (ISPS) regime of the IMO, is administered by a separate Maritime Security Unit within the DOT, which acts as a coordinating agency for maritime security among the other Government agencies. The Coasting Trade Committee (CTC) is a committee of advice established under the Merchant Shipping Act and charged with advising the minister on coasting trade matters, reporting on proposed legislation and recommending maximum freight rates on coastal services. It has also customarily given advice on the issue of coasting trade licences and permits. The CTC is chaired by an officer of the DOT and otherwise comprises two representatives of shippers of goods, one representative of the coastal shipping trade and three holders of coasting trade licences. PNG Ports Corporation Ltd (PNGPCL) is a state owned enterprise (SOE) falling under the umbrella of the Independent Public Business Corporation (IPBC). IPBC acts as the keeper of the Government’s interest and a holding corporation for several SOEs and on occasion assists in raising finance. PNGPCL presently derives its powers by delegation from the Secretary of Transport under the Harbours Act. Its primary responsibility is to manage and develop the infrastructure at the Government’s declared ports. It also acts as port manager and provides certain port services, such as harbour pilots and towing. Stevedoring and ancillary activities are provided under licence to PNGPCL by the private sector. Under its present delegation, PNGPCL also has regulatory powers over development in declared ports and outside of declared ports. The Government ports are a regulated industry under the ICCC Act, and PNGPCL has a regulatory contract with ICCC which specifies maximum berthage and wharfage tariffs and rates of tariff increase tied to considerations concerning capital investment in port facilities and the implied obligation that PNG Ports subsidise loss-making ports from its more profitable operations.

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4.5.5 Institutions in Air Transport Figure 12 shows the present structure of the government agencies in civil aviation. There has been recent reform of the agencies, separating the safety regulation from delivery of air traffic and airport services. The ministers for transport and civil aviation are shown as different parties as this portfolio can be combined with that of transport but also can be separate, or combined with other responsibilities. The governing legislation is the Civil Aviation Act 2000, which is shortly to be amended to reflect all of the institutional changes, for which the minister of civil aviation is the responsible minister. The DOT provides ministerial advisory services and policy and planning input to the air transport sector. The Air Transport Division (ATD) of DOT is responsible for the negotiation and administration of international air service licensing agreements for overseas carriers to provide services into and through Papua New Guinea. ATD is also responsible for issuing air services licences to carriers.

Minister for Transport Minister for Civil Aviation

PNG Air Services Ltd National Airports Accident Investigation Secretary for Transport CASA Board - Board Corporation - Board Commission

DOT Policy & DOT Air Transport DOT Transport CASA Executive PNGASL Executive NAC Executive AIC Executive Planning Wing Division Security Unit

 Civil aviation safety  Air Transport regulatory enforcement  Ministerial Advice Regulation (ATR) - and monitoring  Maintenance,  Investigation of the  Policy and Planning international air service  Policy and regulatory - airport and aerodrome  Provision of air development and asset circumstances and  Sector Monitoring agreement negotiation enforcement for aviation operators certification navigation and airways management of national causes of air accidents/  Annual budget round security - air crew certification services government owned incident with a view to coordination for  Air Services Licensing - airlines certification airports future prevention transport agencies (ASL) - administration of - air traffic controller air services licensing training and certification

Figure 12 – Institutional Structure in Air Transport

The Transport Security Unit within DOT is responsible for developing security policy and for ensuring that PNG complies with international conventions and agreements relating to aircraft, air service, air passenger and air cargo security both externally and internally. The recently formed Civil Aviation Safety Authority is the principal regulatory agency in the sector and is responsible for safety certification of air operators, aircraft, air crew, air traffic controllers and airports. It ensures that PNG complies with international air safety conventions under ICAO. PNG Air Services Ltd is the SOE responsible for providing, maintaining and developing air navigation and airways services infrastructure, comprising ground and satellite based navigation systems and management of the upper, middle and lower airspace, including overflying. PNGASL also coordinates aviation search and rescue. National Airports Corporation (NAC) is the SOE responsible for the provision, maintenance and development of the 21 national government owned airports, including aviation security, airport fire crash and rescue services and control of ground movements of aircraft and other airport vehicles and equipment. The Accident Investigation Commission (AIC) is a recently formed body responsible for investigation of the circumstances of air accidents on a “no fault” basis with a view to future prevention.

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4.6 The Transport Network as a Whole

The principles and outline of a functional hierarchy for the road network which grades each link according to its importance in connecting between the main ports, airports, provincial and district centres and important areas of economic production is discussed in Section 20.4 and is the basis for the following regional maps of the PNG transport network, Figure 13 to Figure 21. The functional classification reflects the existing connectivity of the road network before construction of the various missing links envisaged in the Government’s DSP and MTDP.

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Figure 13 – North Coast Transport Network

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Figure 14 – Upper Highlands Transport Network

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Figure 15 – Lower Highlands Transport Network

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Figure 16 – Western and Gulf Transport Network

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Figure 17 – Southern Transport Network

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Figure 18 – New Britain Transport Network

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Figure 19 – New Ireland Transport Network

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Figure 20 – Manus Island Transport Network

Figure 21 – Autonomous Bougainville Region Transport Network

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4.7 Roads and Road Transport

4.7.1 The Road Network

The roads in Papua New Guinea have developed around the provincial centres of population, many of which are on the coast and linked nationally by coastal shipping. Local road networks have been developed from these coastal centres, along the coastal plains and up river valleys and over mountain passes to penetrate inland. The Highlands Region is landlocked, with the main centres connected by air, and this spurred the development of the Highlands Highway, connecting the five inland provinces with the coast and PNG’s main port at Lae.

This pattern of development has resulted in twelve separated road networks plus roads on the smaller islands, linked together by sea and air. There has been a long held aspiration to link the networks on the main island of New Guinea together, although making these linkages often involves long lengths of high cost road through less populated parts of the country and over difficult mountainous or swampy terrain. The travel time and cost for some of these missing links, if constructed, will not always compare favourably with coastal shipping, and the economic rationale for making the connections needs to be weighed against other priorities, so that only those links that can be shown to have good economic and social benefit in relation to cost are constructed.

The public road network in PNG comprises declared national roads, the responsibility of national government and other sub-national roads, the responsibility of provincial and local level government. National roads are currently classified into national routes (NR), the main inter- provincial connecting routes, national main roads (NM), national district roads (ND) and national institutional roads (NI - access roads serving state institutions).

The road system has developed as a series of separates networks divided by the geographic barriers of the sea, rivers and mountainous terrain, each network based on one or more main centres of population, as described below.

Highlands Highway Network The largest network is the Highlands (Okuk) Highway, NR0007, which provides the backbone connector between the main port of Lae in Morobe Province and the five Highland Provinces, the end point being Mendi in Southern Highlands, and is fully sealed.

The Highlands Highway passes through Morobe Province, the road to the old goldfields area of Bulolo and Wau, now seeing a resurgence of mining, branching off southwest just outside Lae (NR0004). The Highway crosses the braided floodplain of the Markham River and, at Waterais Junction, turns southwest over the Kassam Pass to Eastern Highlands Province, through Kainantu to Goroka in the Asaro River valley. From there the highway crosses another divide at Daulo Pass, through geologically unstable country, to reach Kundiawa in Simbu Province and the Waghi River Valley. The highway continues along the valley floor on flat to undulating terrain through to Mount Hagen. The Baiyer River Road branches north from Mount Hagen.

West of Hagen, the road divides at Togoba into the Enga Highway to the northwest to Wabag, while the Highlands Highway continues west to Mendi in Southern Highlands Province. Beyond Mendi, the highway connects to Tari and Koroba linking with the oil and gas fields; and beyond Wabag the highway connects through Laiagam to the Porgera gold mine.

In total, the Highlands Highway and its extensive network of feeder roads, serves 2.6 million people in the Highlands, or 38.5% of the country’s population (excluding Madang and Morobe). The road provides the export route to the coast for coffee from the Highlands and for produce grown in the cooler high country. It is also a key road link for supporting the development and operation of several mining ventures and the oil and gas fields.

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Madang Network The Highlands Highway connects to Madang Province via the Ramu Highway, NR0008, from Waterais Junction, following the Ramu River Valley to Usino, then turning northeast through winding hilly terrain to the Nuru River valley and meeting the coastal plain close to Madang. Parts of this road over its central section remain unsealed and difficult in wet weather, so Madang and East Sepik Provinces still do not have a fully reliable road connection through to Lae.

The Coastal Highway, NR0009, runs northwest from Madang along the coastal margin as far as Awar, short of the Ramu River which act as a natural barrier. Inland from Madang, access roads connect along the Gogol and Sogeram Rivers and at various points along the coast as far as the Ramu River mouth and the East Sepik Border. South of Madang, a coastal road links through to Saidor on the Rai coast but is in poor condition. Work is underway to bridge the first of many river crossings out of provincial government funds.

Sepik Network The Coastal Highway, NR0009, continues from Angoram on the north bank of the Sepik River, across the coastal plain to the provincial capital of Wewak. From Wewak the road continues along the coast to Aitape in Sandaun Province. Beyond Aitape access is poor and intermittent to Vanimo. From Vanimo the highway connects to the Indonesian border crossing at Wutung.

Inland from Wewak, the Sepik Highway starts at Passam Junction with the Coastal Highway and follows the northern edge of the floodplain of the Sepik River, linking to Maprik, Dreikikir and Lumi. The highway is sealed as far as Mai, just west of the East Sepik/Sandaun border where an access road leads south to Arkosame. At Hayfield junction an access road leads south to Pagwi on the Sepik River.

Central and Gulf Network The Hiritano Highway, NR0001, runs northwest from Port Moresby along the coastal plain of Central and Gulf Provinces to Kerema. The road is sealed as far as Malalaua and work is underway to complete sealing to the Gulf Province capital of Kerema. Apart from forming an important connection for Gulf Province which is relatively isolated, the end of the Hiritano Highway marks the starting point for two proposed new strategic links, one to Kopi on the LNG pipeline route with a connection to the Southern Highlands via Samberigi and Erave, and the other the Trans- Island connection from Malalaua to the Lae-Wau road either directly via Wau or through Kaintiba and the Aseki road.

The Magi Highway, NR0002, runs southeast from Port Moresby along the coastal plain of Central Province via Kwikila to Kupiano, as far as Ganai. There is at present no road linking the 129 kms between Ganai in Central Province to Gadaisu in Milne Bay Province.

Milne Bay Network The Magi Highway resumes at the provincial boundary with Milne Bay Province linking through to Alotau which is the focal point for the Milne bay road network. Access roads support the various plantation agriculture, mainly oil palm, and forestry to the west of Alotau, and access roads run to the end of the island at East Cape and across to the northern coast. There is no continuous road along the northern coast of Milne Bay, but a number of isolated lengths of track, including a track leading inland to Agaun which is intended for development as one of the “missing links”.

Oro Network This network radiates from the provincial capital, Popondetta. The Kokoda Highway, NM3601 links Popondetta to Kokoda, an important tourist destination. To the east from Popondetta the Northern Highway, NR0003, connects to Oro Bay port and along the coast, with an access road leading inland to Afore. In the north, access roads serve large oil palm plantations. Future links are proposed in the MTDP to connect the Oro network with Morobe and Lae in the north and Milne Bay and Central Provinces in the southeast and south.

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Huon Peninsular The road network is focused on Finschhafen and extends south along the coast to Busiga, north along the coast to Gitua, and inland to Pindiu. A separate road links Wasu on the north coast with Kabwum and Konge in the interior. There are prospective road links along the south coast to Lae and along the north coast to Saidor and Madang.

South Fly Network A network of local roads, in varying states of repair, link villages in the South Fly district of Western province. The main link is the Trans-Fly road running east-west between the Indonesian border west of Weam, and linking Morehead, Wipim and Oriomo, with another road leading south to the river at Bensbach. Bensbach, Morehead and Oriomo are on navigable rivers. New links are proposed running north to Aiambak and Kiunga.

Kiunga to Tabubil Network In the North Fly district of Western Province, the Tabubil Highway, NM3101, runs north from the river port of Kiunga to the Ok Tedi mine site via Ningerum and Tabubil. The road was built for the mine development and is maintained by OTML. Access roads from the highway serve local communities. A new link is proposed as a continuation east of the road between Kiunga and Nomad to connect with Southern Highlands Province.

New Britain Network The New Britain Highway, NR0010, runs along the north coast of West and East New Britain. There is a continuous link between the WNB provincial capital of Kimbe via Bialla as far as Ulamona, with a spur road to Hoskins Airport. Eastwards the route is incomplete through Open Bay and is based on lengths of logging road, with two missing sections. From Gaulim in ENB the road is constructed to sealed standard through to Rabaul and Kokopo. West of Kimbe there is a sealed road leading north to Talasea. There are further disconnected road sections radiating from coastal landing points at Silavuti/Wuhu, Lauvore, and Cape Gloucester. The missing sections of the New Britain Highway are relatively short and technically feasible to construct.

There is a dense network of roads at the eastern tip of New Britain focused on Rabaul and along the north coast to Lassul Bay and down the east coast to Merai. Along the south coast of New Britain, there are a number of isolated coastal road sections centred on Tol, Pomio and Jacquinot Bay. The MTDP proposes a south coast route linking these to Kokopo and Rabaul.

From Jacquinot Bay there is a large gap with no existing road to the boundary with WNB. A cross- island road at this point links Fullerborn and Gasmata with Kimbe. Then there are further breaks westwards along the south coast to Kandrian and Cape Gloucester, but these are relatively short.

Many of the isolated road networks on New Britain have been developed for logging and oil palm plantation development and need extensive upgrading to reach a desirable national highway standard.

New Ireland Network New Ireland is a long and narrow island province, including smaller offshore islands of Lavongai, Mussau and Emirau to the north and several island groups to the east, including Lihir. The Boluminski Highway, NM4701, runs along the coastal plain on the east side of the main island from the provincial capital of Kavieng in the north as a sealed road to the district centre of Namatanai and continuing as a gravel road almost to the southern tip of the island. There are cross links to the west coast at intervals and the West Coast Road which runs along the northern half of the island. Relatively flat terrain, few watercourses and coral gravel make road construction relatively less costly on New Ireland than most other parts of PNG

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Bougainville Network The main route on Bougainville, the Buka Road NM5001, links the centre of Arawa and neighbouring town Kieta with Buka Passage and Buka Island along the east coast. The road crosses many rivers included braided shifting watercourses and links cocoa and coconut plantations and smallholdings. Spur roads lead inland along river valleys, the longest being inland from Wakunai. Buka Island is flat and has a network of coral gravel roads.

South from Kieta and the currently disused Aropa Airport, a coast road leads around the south of Bougainville to the district centre of Buin and on to Boku and across the island via the Jaba River Valley and the closed Panguna copper mine site to join the Buka Road at Tunuru near Arawa. Down the western side of Bougainville the terrain is more difficult and a road links to Kunua and towards Koripobi, regarded as a missing link through to Torokina to join with the cross island road in the vicinity of Kono.

Manus Network Manus island has a developed road network on the east side of the island centred on Lorengau, linking in the east to Lombrum naval base and Momote Airport and inland via the East-West Road, NM4604, to Mundrau and then to the north coast at Bundralis. There are plans to extend this road to Sali’in at the west tip of the island.

4.7.2 Urban Streets

Apart from the declared national roads within urban areas, the urban street networks are the responsibility of the urban local level government (LLG) councils, otherwise known as city and town councils and, for Port Moresby, NCDC which is established under its own empowering legislation.

Port Moresby has by far the largest urban street network, followed by Lae which is considerably smaller, and then by Madang, Mount Hagen, Rabaul/Kokopo, Goroka, Wewak, Kimbe, Alotau, Kavieng and Kieta-Arawa which are smaller again, primarily residential subdivision roads and small CBD networks around the central spine of a national road.

In Port Moresby, Hubert Murray Highway, the Poroporena Freeway, Waigani Drive, Taurama Road, Hanubada Bypass, Wards Strip, Cameron Road and several others are national roads. Maintenance responsibility for some of these has been transferred from DOW to the NRA. However, in practice, it is NCDC that has assumed the maintenance and development responsibility for the national roads within NCDC’s boundaries, as well as for its own street network. It has been able to do so only by using its tax and rating revenue base, of which a substantial proportion is used to support the physical infrastructure. In contrast to other provinces, NCDC does not have access to a revenue stream from motor vehicle registration fees.

Lae has fewer national roads and a substantial street network, but does have the benefit of relatively large revenue from motor vehicle registration, as many vehicles using the Highlands network are registered in Lae. While most urban streets are flexible bituminous pavement or unsealed gravel construction, Lae also has some concrete roads. Lae streets are in a generally poor condition.

The Government has provided finance through the development budget for rehabilitation of the urban street networks in several PNG urban areas in recent years. However, the overall situation outside of Port Moresby is that urban streets are poorly maintained. Within NCDC, while the main arterial network is in fair condition, many of the secondary streets in commercial, industrial and residential areas are in poor condition.

Urban streets that carry heavy traffic such as port access routes and industrial area roads are more susceptible to pavement and kerb damage, including from overloaded vehicles and this is reflected in the generally poor condition of these routes. Damage from PMVs and other vehicles mounting kerbs and footpaths is also common.

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There are relatively few traffic signal controlled intersections in PNG cities and towns and in recent years traffic planners have preferred to install roundabouts which do not rely on electrical systems and rapid response when failures occur. The few traffic signals that are in use are commonly ignored and there is no attempt at enforcement. There are very limited footpaths and crossing facilities for pedestrians in the urban centres, particularly Port Moresby.

4.7.3 Land Transport Services

All land transport services are owned and operated by the private sector without any public subsidy. Commercial passenger transport services are provided by urban and rural PMVs (public motor vehicles, typically 15 seat minibuses) and taxis, mainly by individual owner/operators and small transport companies under a system of service licensing. For PMVs the licensing includes the routes and service frequencies to be run. Passenger transport services are also price controlled, administered by the ICCC.

The PMV services are recognised to be substandard, many vehicles being old and poorly maintained, and operators often fail to meet their timetables and to complete their routes. This situation has come about through a combination of lack of enforcement capability and fare box revenues that do not provide sufficient profit to allow operators to invest in new vehicles.

The PMV route network in Port Moresby was developed many years ago and is no longer fully functional, several routes having been abandoned due to insufficient revenue or for security reasons. While under the responsibility of LTD and the NLTB, there are no arrangements for day- to-day inspection of PMV operations to ensure they are operating to their licence conditions and no actions have been initiated to recover the abandoned routes or to redesign the route structure to account for urban development and new road links.

A study on urban public transport in Port Moresby (Mell Consultants, 2005) indicated a severe lack of capacity on bus routes and waiting times ranging up to 1¾ hours. The recommendations of the study included proposed revisions to the route structure and various other measures which have yet to be implemented.

Commercial goods transport services are provided by the private sector and are regulated by a system of permits administered by the National LTB for inter-provincial routes and by the Provincial LTBs for routes within provinces. The licences can specify the routes to be run and nature of the service and the legislation provides for price control, although this is no longer actively administered.

4.8 Maritime and Inland Water Transport

4.8.1 Declared Ports

PNG Ports Corporation is the agency delegated with the responsibility for maintenance and development of the government-owned port facilities and for the general management of activities within the defined port limits of the declared ports under the Harbours Act.

There are 22 declared ports, of which 16 are operated by PNG Ports Corporation, either directly or through agents (Aitape and Samarai). There are four ports under PNG Ports that are not currently operational - Kerema, Kinim (Karkar Island, Madang Province), Siassi (Morobe Province) and Kupiano (Central province). The ports of Lihir (New Ireland) and Misima (Milne Bay) are also declared ports under the Harbours Act but are developed and operated by the mining industry.

There are also leased and privately owned port facilities within the declared ports. The general physical characteristics of the operational declared ports under PNG Ports management are shown in Table 6. Ports are shown in rough order of cargo throughput. The table shows the general

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hinterland area of the port served by road connections. Other areas must be served by small coastal feeder services from the main ports.

The port facilities fall into three general types (a) marginal quay face backed directly by open storage area for container stacking and other open storage, that allows maximum access to shipside (b) marginal wharf structures connected to land by two or more bridging spans to allow for flow circulation (c) wharf structures in T-head formation connected to land by access trestles and/or causeway, with berthage on both sides of the wharf (d) finger wharves, with berthage on both sides (d) for tankers, short T-head structures supplemented with mooring dolphins and discharge pipeline.

Port Moresby, Lae, Kimbe, Rabaul, Oro Bay and Madang have port facilities able to accommodate vessels exceeding 150m length and drawing up to 10m.

The main wharves at Lae are a continuous marginal wharf structure with linking spans to the yard. However, the capacity of Lae is currently limited by damage to part of the wharf face, which the current Lae Port Development project will restore.

Table 6 – Physical Characteristics of the Declared Ports Name Berth Usage Dimensions Storage Hinterland Directly Province L x W x D Served from Port

Lae PNG ports: Morobe 1. overseas 123 x 12 x 11 2. overseas 123 x 12 x 11 Lae, and the 3. overseas 184 x 37 x 11 14,600 m2 covered Highlands Provinces, 4. coastal 54 x 13 x 4.9 39,000 m2 open Morobe province except 5. coastal 35 x 13 x 2.7 for the Huon peninsular tanker 100 x 10 x 13.7 and the Morobe Coast barge ramp 12m width 1:8 which are not linked by Private Wharves: Voco Point road Lutheran Shipping

Port Moresby PNG Ports: NCD 1. main wharf 106 x 18.2 x 7.6 5,300 m2 covered 2. main wharf 107 x 18.2 x 7.6 3,100 m2 open 3A. coastal 67 x 18.2 x 3.8 3B. coastal 113 x 18.2 x 4.5 barge ramp 1 6m width 1:8 NCD, Central Province barge ramp 2 6m width 1:8 and parts of Gulf 4A. container 125 x 25.3 x 10.6 5,110 m2 covered Province (as 4B. small ships 25 x 5 x 3 28,400 m2 open Kerema port is not Private Wharves: operational) Steamships APC wharf Motukea Isl Curtain 150 x 70 106 ha ind. park Napa Napa tanker 39 x 12 +80m access trestle berths, InterOil 39 x 12 +28m access trestle Kimbe 1. main wharf 117 x 12.1 x 10.7 Kimbe, Talasea area WNB 2. small ships 25 x 12.1 x 5.5 740 m2 covered of ENB, limited by 3. small ships 17 x 12.1 x 5.9 6,000 m2 open inland road barge ramp 9m width 1:8 connections Rabaul 1. Blanche St 122 x 12.1 x 7.9 10179 m2 covered Rabaul area of ENB ENB 2. Bay road 152 x 15.2 x 10.2 20300 m2 open

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Name Berth Usage Dimensions Storage Hinterland Directly Province L x W x D Served from Port

Wewak 1. overseas 73 x 12.1 x 6.2 2250 m2 covered ESP coast and inland E Sepik 2/3. coastal 30 x 12.5 x 3.0 11500 m2 open apart from the Sepik R Oro Bay 1. main 70 x 12.2 x 11.4 740 m2 covered Popondetta area, rest Oro 2. small ships 23 x 12.1 x 10.5 4650 m2 open of Oro limited by lack 3. small ships 23 x 12.1 x 10.5 of inland road barge ramp 6m width 1:12 connections Madang 1. overseas 137 x 12.8 x 10.1 2590 m2 covered Most of Madang 2. small ships 30 x 4.5 x 1.6 8830 m2 open Province Alotau 1. overseas 93 x 18 x 2.4 2430 m2 covered Alotau area only Milne Bay 2. coastal 56 x 19.8 x 2.1 7640 m2 open limited by inland barge ramp 8m width 1:12 road connections

Buka 1. main 31 x 5.2 x 3.6 165 m2 covered North Bougainville Bougainville 2. small ships 15 x 3 x 0.5 1000 m2 open Kavieng New Ireland 1. main wharf 94 x 12.2 x 7.0 750 m2 covered Kavieng and E coast 2. small ships 12 x 3.8 x 1.5 3000 m2 open of NIP Kieta 1. overseas 122 x 10.9 x 7.5 2780 m2 covered South Bougainville Bougainville 2. coastal 58 x 8.2 x 4.8 14200 m2 open limited by inland barge ramp 12m width 1:8 connections Vanimo 1. main 28.6 x 10 x 4.5 135 m2 covered Vanimo local area Sandaun 9000 m2 open only Lorengau 1. Nabu wharf 15 x 9.1 x 5.1 1000 m2 open Manus Island Manus 2. Salasia Wharf 40 x 20 x 1.4 Samarai 1. main 28 x 12.8 x 2.7 950 m2 covered Samarai Island Milne Bay 150 m2 open only Aitape 1. main 18.2 x 6.2 x 2.5 125 m2 covered Aitape and border Sandaun 2. small craft 8 x 4.4 x 2.5 1000 m2 open area to Wutung Daru 1. main 30 x 12.2 x 2.4 1000 m2 open Daru Island only Western barge ramp 6m width 1:8 (1) Note: length m x width m x water depth m below lowest astronomical tide (LAT); Source PNGPCL Port Information Handbook

The container terminal at Port Moresby (berth 4A) is a marginal quay, the wharf face integral with the container yard and joined to a later reclaimed area by a bridge. The original berths (1-3) are a concrete wharf structure parallel to the shore with long link span to the yard in a T formation, with several large cargo sheds. The smaller wharves are of the traditional finger pier type.

Kimbe has an arrangement similar, a marginal quay structure with berthing for small ships on the shorter inner side and a broad working connection to an open storage yard.

Rabaul has two separated marginal berth structures with bridging links back to yard with fronting cargo sheds and open storage to the rear.

Wewak has a relatively short overseas berth structure supplemented with mooring dolphins connected to a yard with a centrally placed cargo shed by an elongated bridge link and causeway, and a finger pier for coastal vessels.

Oro Bay is similar, although with two shorter links to shore and an open yard with cargo shed to one side.

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The berthage at Madang port is constructed at the end of promontory, with the overseas berth on one side with two linking bridges and the coastal berth opposite. A circular access road links the berths with open storage and cargo sheds located close to the old disused wharf, creating a rather irregular arrangement.

Alotau has two separated marginal berths integral with the backup land, with a relatively large open storage area and cargo sheds towards to front of the wharf.

Buka Port has been upgraded as part of the restoration process in the Autonomous Region of Bougainville, where Kieta was historically the main port. The new wharf is on Buka Island in Buka Passage and is a modern configuration of marginal quay integral with a reclaimed open storage area and adjacent barge ramp. Cargo sheds and other port buildings are to the rear. However, the depth at berth is only 3.6m. Kieta Wharf has a marginal main berth integral with the yard and two large cargo sheds and extensive open storage.

Kavieng has a marginal berth connected with two linking spans to the yard, with two cargo sheds and limited open storage area.

4.8.2 Port Traffic and Trends

Table 7 summarises the cargo handled, container numbers and ship calls at the declared ports in 2010. Lae is by far the most important port in terms of cargo volume

Table 7 - Traffic through PNG Ports Ltd Declared Ports Port Province Operator/ Total % Inter- Containers Ship Status Cargo m national TEUs Calls RT ‘000s ‘000s Lae Morobe PNG Ports 3.3 60 150 1.26 Port Moresby Central/NCD PNG Ports 1.5 62 80 1.43 Kimbe WNB PNG Ports 0.7 69 20 0.57 Rabaul ENB PNG Ports 0.4 37 18 0.46 Wewak East Sepik PNG Ports 0.2 18 6 0.86 Oro Bay Oro PNG Ports 0.19 61 5 0.25 Madang Madang PNG Port 0.17 73 4 0.48 Alotau Milne Bay PNG Ports 0.16 61 6 0.25 Buka Bougainville PNG Ports 0.09 N/A 3 0.25 Kavieng New Ireland PNG Ports 0.08 18 3 0.14 Kieta Bougainville PNG Ports 0.07 15 2 0.06 Vanimo Sandaun PNG Ports 0.05 6 0.05 0.19 Lorengau Manus PNG Ports 0.03 1 0.00 0.09 Aitape West Sepik Agent N/A N/A N/A N/A Samarai Milne Bay Agent N/A N/A N/A N/A Daru Western not in use - - - - Kerema Gulf not in use - - - - Kinim (Karkar) Madang not in use - - - - Siassi Morobe not in use - - - - Kupiano Central not in use - - - - Lihir New Ireland Mining Co. N/A N/A N/A N/A Misima Milne Bay Mining Co. N/A N/A N/A N/A Total PNG Ports 6.8 60 265 6.33 Notes: TEU = twenty foot equivalent units, includes empty container movements; cargo is million revenue tonnes; figures projected to 2010 and are approximate. Source: TIPS base data set.

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Total cargo grew at 3.8% over the 2005-2009 period, international cargo at 3.0% and coastal cargo at 5.3%. Container cargo grew at 5.7%, 2.9% for international cargo where general cargo is already mainly containerised and 11.1% for coastal cargo reflecting a movement away from break bulk towards more use of containers on coastal routes.

4.8.3 Other Ports and Landings

Other than the declared ports, there are a number of private port facilities on the PNG coast, mainly established to support specific industries, such as mining, oil palm and logging. Important privately operated ports include Kiunga (Ok Tedi Mining Limited), Bialla (Hargy Oil Palm), Basamuk (Ramu Nickel), Lihir (gold mining) and several forestry ventures.

There are a large number of minor port facilities, including small wharves, jetties, ramps and landings. Many of these are in poor condition and a number of ports of call that have been used in the past have become disused for various reasons. Historically, over 500 locations were recognised as places where cargo was collected or discharge in analysis of sea freight movements carried out by the DOT.

The Community Water Transport Project and the associated programme of rehabilitation and reconstruction of small jetties has identified about 120 minor ports of call on the PNG coast and navigable rivers and the provinces’ development plans identify a similar number. The CWTP has also put in place franchise routes for subsidised shipping services and has other routes planned. The NEFC in its fieldwork to support the review of the Transport Infrastructure Maintenance Grant has also identified boat routes in use. A number of the ports of call for the CWTP franchise routes are prospective locations and likely to be amended following investigation. Ports with a non- transport function, such as military bases (e.g. Lombrum), are excluded. There are also some small jetty facilities proposed at or adjacent to the main ports.

4.8.4 International Shipping Services

Papua New Guinea is comparatively well served by international shipping lines mainly in north- south services between Asia and Australasia. There are approximately 3,000 voyages per year and 300 voyage rotations between PNG, the Australian east coast ports and Asia. The traffic is mainly general/container cargo vessels and bulk carriers for petroleum, mineral and log exports. This equates with approximately 110,000 teu container slots available in the PNG international trade. Table 8 below shows the services and frequencies.

Table 8 – International Shipping Services

Shipping Operator Frequency Overseas Ports (days)

Swire Shipping 7 Australia, East Coast Swire Shipping 18/20 China, Taiwan, Hong Kong, Japan Swire Shipping 21 Indonesia, Thailand, Malaysia, Singapore ANL Container Line 14 Indonesia, Malaysia, Singapore ANL Container Line 16 Brisbane / tranship E Coast Australia+NZ New Pacific Line 21 Korea, China, Hong Kong Sofrana Unilines 16 Brisbane, Townsville and NZ ports Consort Express Line 9 Townsville / tranship E Coast Australia MBf Carpenters Shipping 17 Malaysia, Indonesia, Singapore HUB Line 15 Malaysia, Singapore Kyowa Shipping Co 21 Japan, Korea

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The frequencies shown are approximate as intervals and vessels deployed combine in different services over several routes. Several carriers share space share on each other’s vessels and advertise under their own bill of lading (comparable with code sharing on international aviation). Many shipping lines use Brisbane as a hub port where they centralise containers for other Australian and NZ origin ports. Similarly the larger Asian ports such as Singapore are used as hubs for linkages with services to South Asia, Europe, the Middle East and North America. Alliances between international carriers are subject to constant adjustment to suit market conditions.

Up to 2010, none of the PNG ports operated quayside container cranes, and most of the container vessels serving PNG have been self-supporting (ship-mounted cranes). The size of international container vessels is typically between 600 and 1700 teu capacity, 120 to 200 m length and 6 to 10m in draught.

4.8.5 Coastal Shipping Services

Coastal shipping in PNG ranges through a wide range and scale of services:  International shipping operators who are permitted to carry coastal cargo, trading to main ports;  Coastal scheduled (liner) service operators serving main ports;  Coastal scheduled and semi-scheduled operators serving main and secondary ports;  Specialised operators including bulk carriers, towage and salvage;  Project-related coastal shipping;  Passenger services and tourist operators;  Community-based organisations providing semi-commercial services mostly for their own constituents;  Subsidised provincial and border government services;  Vessels operating under the CWTP shipping franchise scheme;  Operators of small commercial craft providing general goods and passenger services;  Small unpowered village boats carrying seasonal agricultural and other rural products and passengers to local ports and market centres.

International cross-over operators: present an emerging trend on the PNG coast. They hold a mixture of restricted and unrestricted permits and offer coastal services between PNG ports of call on their regular international liner routes for carriage of both their own and third party cargo. They include Hub Line (PNG) Limited, MBf Carpenters Shipping (WR Carpenters (PNG) Limited), ANL Container line Limited, Swire Shipping and Sofrana Unilines Limited.

First tier coastal liner shipping companies: three companies provide scheduled (liner) coastal shipping services on primary routes between main ports and hold unrestricted trading licences, carrying containers and break-bulk cargo. They are: Consort Express Lines (now majority Swire owned), Steamships Shipping/Laurabada Shipping (part of the Swire Group) and Bismark Maritime Ltd (which also operates on secondary routes).

Second tier coastal shipping companies: Three operators, holding either unrestricted or restricted trading licences, provide scheduled and semi-scheduled services with some route flexibility to a mix of main and minor ports. They are: Hub Line PNG Ltd, Rabaul Shipping Limited and Lutheran Shipping (Kambang Holdings).

Specialised carriers: A number of mainly regionally-based companies provide shipping services either as part of their own business or to industry as specialised shipping operators on a regular or charter basis. They include petroleum distribution, logging, mining, construction, towage and salvage companies, agricultural product transport and storage, commercial and tourist passenger

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services. Businesses involved in this activity include: Agmark NGIP, Coconut Oil Production Madang Ltd, Curtain Brothers (PNG) Limited, Golden Shipping Ltd (Rimbunan Hijau - RH), Nivani (PNG) Limited and Perpetual Shipping (PNG) Ltd. There are many more of these coastal operators engaged in logging and construction in regional areas. Some also carry third-party cargoes on a commercial basis where this fits with their core activity.

Project-related coastal shipping: The rise of project-related coastal shipping has been the major contributor to a recent increase in applications for restricted and unrestricted coastal trade permits. Tugs and barges operating under permit shuttle between the anchored ocean carriage vessel(s) in Paia inlet (Gulf of Papua) to Kopi landing. The Government has granted special access to permits for such activity for foreign flag vessels engaged in the LNG project. There are similar examples of project activity that have been given special access to coastal permits in mining exploration and coastally located industrial projects

Subsidised provincial and NGO sponsored non-commercial organisations: This emerging category provides both passenger and freight services and include the vessels recently introduced by the Border Development Authority (BDA) and operated by their business entity PNG Maritime Transport Limited. In addition, there are several workboats of greater than 10 m length built and funded by provincial governments under the direction and oversight of the Department of Provincial and Local Level Government Affairs.

The Community Water Transport Programme (CWTP): is a subsidised franchise shipping scheme designed to provide waterway transport to remote and disadvantaged communities, restore water transport infrastructure, improve small-craft safety, and enable the affected communities to maximize the benefits of the transport provided. By mid-2011, there were four CWTP franchise routes in operation (Sepik, Huon/Oro, New Britain and New Ireland) and with several others in prospect. The difference between the CWTP and the BDA and provincial government services is that the ownership of the vessels lies with the private sector in the case of the CWTP, but lies with Government in the case of BDA and provinces. The CWTP is designed to induce services to small non-commercial ports of calls by offering a contestable top-up payment

Small boat services: small work boats for the carriage of passengers, agricultural production to market and transportation of essential supplies to and between villages sustains the livelihood and social network of PNG’s coastal communities.

Passenger services: the two main licensed firms engaged in the operation of coastal scheduled passenger services are Rabaul Shipping (Starships PNG) and Lutheran Shipping (Luship). Some vessels have a restricted trading range, typically to sheltered waters but engage on longer port-to- port coastal routes when the weather conditions are suitable. The coastal passenger sector is an industry that delivers essential services to remote locations and communities sustaining social and economic activity.

4.8.6 Inland River Transport

There are two major river systems that allow access to ships of up to 3 metres draft more than 500km from the mouths, the Fly River system in Western province and the Sepik River in East Sepik and Sandaun (West Sepik) Provinces. These river systems at once provide river access but also present a substantial physical barrier to development of the road network.

Other navigable waterways with river ports are Western Province - Bensbach, Mai Kussa, Morehead, Oriomo and Aramia Rivers; Gulf Province - Turama, Kikori, Era, Pie and Vailala Rivers; and Madang Province - Ramu River.

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4.9 Air Transport

4.9.1 National Airports

Port Moresby International Airport (PMIA or Jackson’s) is currently the only airport in Papua New Guinea supporting international regular scheduled passenger services, although both Daru and Wewak are denoted as international airports and, outside of PMIA, Mount Hagen receives the most international passengers associated with international direct charters for the mining ventures. PMIA currently accommodates aircraft up to B767-300 size, the second tier of airports F-100, although only designed to F-80, and the third tier supports Dash-8.

PMIA and a further 20 national airports are operated by the National Airports Corporation (NAC). A further six airports are certified in accordance with ICAO Annex 14 and PNG Civil Aviation Rules; these include three airports associated with mining (Ok Tedi – Tabubil and Lihir - Kunaye) and oil & gas (Kutubu – Moro) and three ex-national airports now operated by provincial governments (Milne Bay PG - Kiriwina and Misima, and Gulf PG - Kikori). Leading characteristics of the national and other ICAO licensed airports are shown in Table 9.

Not included in the list of national airports is Kieta (Aropa), which until 1989 was the main airport for Bougainville and more centrally located close to the provincial capital Arawa, than Buka airport which is on Buka Island at the extreme north of the province. Another airport located away from the centre of its province is Daru which, although the capital of Western Province, is located on an island off its south coast. All other airports are relatively well located with respect to both the provincial capital and the main economic activity of the province.

Table 9 – Characteristics of the ICAO recognised airports Airport Province Operator TODA(1) Runway Largest Hours of Width Aircraft(2) Operation Port Moresby IA NCD NAC 2,810 45 B767-300 24h Nadzab (Lae) Morobe NAC 2,500 30 F100 24h Mount Hagen WHP NAC 1,778 30 F100 daytime Tokua (Rabaul) ENB NAC 2,250 30 F100 24h Madang Madang NAC 1,570 30 F100 24h Hoskins (Kimbe) WNB NAC 1,645 30 Dash-8 daytime Wewak ESP NAC 1,629 30 F100 24h Goroka EHP NAC 1,900 30 Dash-8 daytime Kavieng NIP NAC 1,763 30 F100 24h Moro (Kutubu) SHP CNG(3) 1,750 30 daytime Gurney (Alotau) MBP NAC 1,559 30 Dash-8 daytime Buka ARB NAC 1,735 30 F100 daytime Girua (Popondetta) Oro NAC 1,870 30 Dash-8 daytime Kunaye (Lihir) NIP LMC(4) 1,584 30 24h Momote (Lorengau) Manus NAC 1,260 45 F100 24h Tabubil Western OTML(5) 1,340 23 daytime Kiunga Western NAC 1,460 30 Dash-8 daytime Vanimo Sandaun NAC 944 30 F100 daytime Daru Western NAC 1,057 30 Dash-8 daytime Tari SHP NAC 1,820 22 24h Mendi SHP NAC 1,540 23 Dash-8 daytime Chimbu Simbu NAC 705 23 Dash-8 daytime Misima MBP MBPG(6) 1,200 30 daytime Kerema Gulf NAC 1,320 18 F100 daytime

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Airport Province Operator TODA(1) Runway Largest Hours of Width Aircraft(2) Operation Kikori Gulf Gulf PG 1,630 18 daytime Wapenamanda Enga NAC 1,230 23 Dash-8 daytime Kiriwina MBP MBPG 1,760 30 daytime Notes: (1) take off distance available, metres for the longest runway (Mt Hagen and Goroka have second runways); (2) largest aircraft in use; (3) Chevron Niu Guinea Ltd; (4) LMC – Lihir Management Co.; (5) OTMC – Ok Tedi Mining Limited; (6) MBPG – Milne Bay Provincial Government;

4.9.2 Other Airports and Rural Airstrips

Apart from the 27 ICAO certified and licensed airports; there are a large number of smaller airports, ranging in strip length from as long as 1,700m down to small rural airstrips as short as 450m. The total number identified from various sources, including airstrips that are now listed as inactive, is 620. The number currently listed as “active” from provincial data sources is 424, as shown in Table 10 below.

Of these active airports and airstrips, 11 (3%) are still identified as belonging to the national government through the CAA. A further 92 (22%) are under provincial government ownership, including a number that have been transferred from national government responsibility in the past.

Table 10 – Other Airports and Rural Airstrips classed as Active Prov Local Comm- Not Province CAA Mission Village Total Govt Gov ercial Stated Central 0 3 0 6 13 2 0 24 Eastern Highlands 0 4 1 7 5 0 5 22 East New Britain 0 1 0 1 3 4 0 9 Enga 0 3 1 1 1 0 3 9 East Sepik 0 1 0 7 6 3 3 20 Gulf 1 3 0 2 11 6 3 26 Milne Bay 0 7 1 1 1 3 0 13 Madang 0 8 0 11 8 0 3 30 Morobe 1 8 5 2 31 4 3 54 Manus 0 2 1 0 0 0 0 3 New Ireland 1 1 1 1 0 2 0 6 Oro 0 7 0 0 12 2 0 21 Bougainville 0 4 0 0 1 1 0 6 Southern Highlands 0 10 1 3 8 1 5 28 Chimbu 0 4 0 2 2 1 3 12 Western Highlands 0 0 2 2 2 0 0 6 West New Britain 1 4 0 3 0 4 1 13 Western 2 7 4 21 17 7 3 61 Sandaun 5 15 2 20 11 1 7 61 Total 11 92 19 90 132 41 39 424 Percentage 3% 22% 4% 21% 31% 10% 9% 100% Source: airports and airstrips listed as active in provincial database (Geobooks)

The largest group, by form of ownership, is airstrips under the nominal ownership of village groups (31%), followed by missions and churches (21%). Commercial organisations including timber, mining, oil and gas and general business organisations account for 10%. By geographical distribution, Western, Sandaun and Morobe provinces contain the largest numbers.

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There are up to 200 inactive airstrips, including many that are redundant because of road connections, or other airstrips opening close by, or have been developed for specific purposes but are now obsolete and unlikely to be reinstated. However, this will still leave many inactive airstrips that potentially could be reinstated in future, if a demand for service can be substantiated.

4.9.3 Air Traffic and Trends

The historic growth rates of air passenger and freight traffic and aircraft movements through the ICAO recognised airports are shown in Table 11. Growth in the period 2001 to 2004 was subdued, corresponding to a period of depressed economic growth in PNG. There was a sharp upturn in traffic at several airports in the second half of the decade, in particular for Buka, reflecting post- conflict development and in Tari reflecting strength in the resource sector. There are no historic data for Moro, Tabubil and Kiunga which are focal points for the mining and petroleum industry.

Some airports experienced negative growth and, overall, growth in domestic passenger numbers was only 1.0% p.a. over the period and -0.5% if Port Moresby is excluded. However, the upturn in the last few years corresponded with a growth rate of 5.5% p.a. or 3.8% excluding Port Moresby.

Table 11 – Air Traffic at Main Airports and Trends Airport Aircraft Air Passengers 2008 Passenger Growth Air Movements Rate % pa (NASMP) Freight, tonnes 2008 (NASMP) (TIPS) 2001-2008 2004-2008 2008 (NASMP) (TIPS) Domestic Traffic Port Moresby IA 28,786 694,427 459,000 3.1 7.2 8,850 Nadzab (Lae) 7,714 185,969 205,781 -0.9 5.3 1,473 Mount Hagen 6,479 118,204 143,767 1.3 9.4 860 Tokua (Rabaul) 4,421 134,022 146,815 4.3 8.7 851 Madang 4,501 103,133 113,597 0.4 0.9 680 Hoskins (Kimbe) 2,365 56,164 61,323 -8.9 15.4 378 Wewak 2,246 48,122 53,267 -2.1 -2.9 285 Goroka 4,104 44,595 49,809 -5.0 -0.0 201 Kavieng 1,590 41,453 45,185 3.5 12.8 296 Moro n/a n/a 41,697 n/a n/a 773 Gurney (Alotau) 2,159 34,453 38,798 0.3 3.2 258 Buka 717 32,732 35,722 10.3 15.3 274 Girua (Popondetta) 1,697 25,307 27,634 -2.2 -2.5 164 Kunaye (Lihir) n/a n/a 26,172 n/a n/a 185 Momote 467 22,395 24,433 -1.1 4.6 101 Tabubil n/a 19,971 19,971 n/a n/a 418 Kiunga n/a 8,536 8,536 n/a n/a 264 Vanimo 1,114 13,975 15,245 4.9 8.5 113 Daru 1,856 6,350 12,092 n/a n/a 218 Tari 1,148 9,552 11,204 -7.9 15.2 72 Mendi 1,032 7,934 9,346 -4.1 -4.7 51 Chimbu 511 6,874 7,499 6.3 2.0 47 Misima n/a n/a 4,131 n/a n/a 17 Kerema 1,745 1,905 3,609 n/a n/a 182 Kikori 3,558 n/a 3,178 n/a n/a 34

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Airport Aircraft Air Passengers 2008 Passenger Growth Air Movements Rate % pa (NASMP) Freight, tonnes 2008 (NASMP) (TIPS) 2001-2008 2004-2008 2008 (NASMP) (TIPS) Wapenamanda 52 0 n/a n/a n/a n/a All except PMIA 49,476 921,646 1,108,811 -0.5 3.8 8,195 All Airports 78,262 1,616,073 1,567,811 1.0 5.5 17,045 International Traffic 341,000 Total (rounded) 1,957,000

Source: National Airports Strategic Management Plan (NASMP), Parsons Brinckerhoff et al for CAA, Dec 2009 and TIPS baseline data collection. Note: NASMP compiled data only from Air Niugini and Airlines PNG excluding 3rd level operators.

4.9.4 International Air Transport Operators and Services

The main international carrier is the government-owned airline Air Niugini (ANG) which operates the bulk of international services and routes. ANG currently operates B767-300AR, Fokker F100 and Bombardier Q400 aircraft on its international services.

International scheduled services currently operating to Port Moresby are:

 Air Niugini operates daily services to Singapore, Brisbane and Cairns, six days a week to Nadi and Honiara, alternate days to Hong Kong, and weekly to Manila, Narita and Sydney (via Brisbane); Qantas code shares with ANG on some services;  Qantas operates a link service between Port Moresby and Cairns;  Pacific Blue (Virgin Australia) operates four times a week from Brisbane to Port Moresby; Airlines PNG code shares on these services;  Airlines PNG operates four times a week to Cairns

In the past other airlines have flown into Port Moresby, including Cathay Pacific and Philippine Airlines.

4.9.5 Domestic Air Transport Operators and Services

Air Niugini and Airlines PNG operate domestic services primarily hubbed from Port Moresby.

ANG flies point-to-point services to 11 main domestic airports, two loop services to the Islands and Momase regions covering a further nine airports and some interconnecting services from the regional airports of Lae, Hoskins and Madang.

Airlines PNG operates first and second level services using mainly Dash-8, competing against ANG but also serving smaller airports from hubs at Daru and Port Moresby covering Western and Central Provinces using DHC-6 aircraft. Airlines PNG also flies on-demand and charter services to a number of smaller airports, about 50 destinations in all.

A new entrant, privately owned Travel Air, based in Madang, was certified to commence operations in November 2011 using four Fokker F50 turboprop aircraft. Initially operating daily scheduled flights between Madang and Port Moresby, Hoskins, Rabaul it has signalled its intention to operate to a number of other main centres and secondary airports. The Government, through DNPM, provided startup financial assistance to Travel Air in the 2011 budget allocation described as an air freight subsidy. The Airline fills a gap left by the closure of Airlink in 2007, also Madang-based.

The largest third level operator is Mission Aviation Fellowship (MAF), a church-sponsored airline, based in Mount Hagen, with a fleet of 16 mainly DHC-6, Cessna 206 and GA8 Airvans with which it

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serves remote rural airstrips throughout Papua New Guinea, but concentrated in the Highlands, for community support, mission, and emergency relief purposes, as well as commercial passengers and freight.

Other small fixed wing and helicopter charter operators include Central Aviation (Mt Hagen), Hevilift, Islands Nationair, Niugini Helicopters, North Coast Aviation (Lae), Pacific Helicopters and Tropicair (Port Moresby). Much of their work is in support of the resource sector but also general charter, flying into small airfields and remote worksites.

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5 Transport Demand and the Outlook for Growth

5.1 Population and Economic Growth

The two most important underlying determinants of transport demand are population and economic growth.

5.1.1 Population Growth

While there has been a trend towards increasing urbanisation, the majority of the population is still settled in rural areas. The urban population was just under 14% of the total in 2000 and, under the MTDP, is planned to be contained to 20% by 2030. About a quarter of the urban population is in NCD.

Over the period 1990 to 2000, national population growth averaged 2.8% per annum. Future population projections are for an average annual growth of 2.2% to 2020 and falling below 2.0% by 2030. The projected regional populations are shown in Figure 22 and emphasises the importance of transport connections to the landlocked Highlands Region where the population is expected to increase relative to other regions to 40% of the national total.

Figure 22 – Projected Regional Populations to 2030, millions

The variation in population growth rates for each province, based on historic data, is projected to be as shown in Table 12.

The recorded population growth of NCD between the 1990 and 2000 censuses averaged 2.6% p.a. compared with 3.2% nationally and, overall, the statistics on urbanisation show a slight reduction from 15% in 1990 to 13.2% in 2000 and an estimated 12.5% in 2010 (ESCAP Statistical Yearbook for Asia and the Pacific 2011). So, although the relatively high rate of population growth for Papua New Guinea is being reflected in a growing urban population, the amount of urban drift appears to be contained. This is unusual internationally, and in the Pacific, where all other countries have shown an increase the percentage of urbanised population. In fact PNG has the lowest degree of urbanisation in the Pacific and is very low when compared with developing countries internationally. How far reliance can be placed on the statistical data is unclear, as much of the urban drift occurs as informal settlements on the urban periphery and may not be enumerated as within a recognised urban area. So all that can be said is that the relatively high national population growth in PNG is reflected in a high urban population growth but the degree of urban drift does not appear to be particularly high.

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Table 12 – Projected Population Growth Rates, per cent per annum Province, Region 2010 - 2020 2020 - 2030

Western 2.7% 1.8% Gulf 2.2% 1.3% Central 1.9% 1.1% Milne Bay 2.1% 1.3% Oro 2.2% 1.4% Papua Region 2.2% 1.5% Southern Highlands 3.4% 2.3% Enga 2.4% 1.5% Western Highlands 2.1% 1.3% Simbu 1.5% 0.8% Eastern Highlands 1.8% 1.1% Highlands Region 2.4% 1.6% Morobe 2.3% 1.5% Madang 2.2% 1.4% East Sepik 1.8% 1.1% Sandaun 2.0% 1.2% Momase Region 2.1% 1.3% Manus 2.2% 1.3% New Ireland 2.4% 1.5% East New Britain 2.1% 1.3% West New Britain 2.9% 1.9% Bougainville 1.3% 0.6% Islands Region 2.2% 1.3%

5.1.2 National and Individual Income Growth

After population, income is the second most important determinant of transport demand. Increased cash income generates a demand for consumption of goods and services as well as travel for social purposes. In turn cash income depends upon the opportunities to grow cash crops or engage in other home-based income generating activity, and the availability of wage or salary employment outside of the home.

The projections of income and employment growth over the period of the NTS are therefore an important underpinning to the growth in personal travel demand.

Government’s macro-economic projections in the MTDP are for an increase in real GDP of 52% from 2010 to 2015, involving a 42% rise in export volumes and 62% rise in import volumes. Over the longer term, the DSP anticipates a sustained annual increase in real GDP of 8.4% over the 20 year period, compared with a projection of historic performance of 2.6%.

The MTDP medium term forecast for growth in real GDP per capita, one broad measure of income growth, is for a rise from K3,430 in 2010 to K4,681 by 2015, or an annual rate of increase of 6.4%. Over the period of the DSP and NTS, real GDP per capita is anticipated to grow by a similar annual growth rate, compared with only 0.8% per annum if the historic trend were followed.

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5.1.3 Employment Growth

Job opportunities are also expected to rise under the MTDP, the medium term projection for 2015 being for an increase in employment of 97,000 compared with 17,000 on historic trends, and a long term projection for 2030 of 2 million new jobs since 2010 compared with 360,000 on historic trends.

Figure 23 shows private sector employment trends for six areas of the country from surveys carried out by the Bank of PNG since the series was last rebased in 2002. The series is an index, so shows relative changes between regions.

The greatest increase has been for Morobe Province, followed by the other Momase Region provinces most likely with an emphasis on Madang and East Sepik, and then the Islands Provinces. The Highlands Provinces show the least change, despite a faster population growth rate and concentration of some of the nation’s main export earning industry. The southern provinces apart from NCD show similar low growth in employment.

Figure 23 – Employment Trends

5.2 Composition of Travel Demand

Travel demand can be separated into passenger and freight transport. While there is some overlap between these two main demand subsectors, for example air cargo on passenger aircraft, mixed passenger/freight domestic shipping and mixed passenger/freight carriage in rural road transport, the majority of freight and passenger demand is served by dedicated vehicles and services and is responsive to different underlying demand factors.

5.3 Personal Travel Demand

5.3.1 Domestic Passenger Travel Demand

The demand for personal travel arises from the wish to participate in activities that are not immediately available close to home. For those living a self-contained subsistence lifestyle in isolated areas, the demand to travel beyond the local area may be relatively low. Services such as basic health and education are either not available or are supplied through village primary schools and clinics, with some outreach from central and provincial government agencies.

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

The demand for transport increases as people interact with other communities, through trade and social exchange, and seek services that can only be supported at a district or provincial level, such as secondary education and hospital services. Trade also increase cash incomes and encourages the import of consumer goods. The opening up of affordable transport access also allows people to work away from home, travelling back daily, weekly or longer periods. This access to wider opportunities for work, social interaction and trading, allows increased specialisation and also a tendency towards concentration of population, industry and urbanisation to best locational advantage.

The travel purposes that arise from these spatial interactions include (i) travelling between home and the workplace (ii) travelling to access education, health and other social and government services (iii) travelling on personal or employer’s business (iv) travelling for social, religious and cultural participation.

Participation in these activities sets up the demand for travel. How that demand is satisfied depends upon what public passenger travel modes are available and their cost, what travel arrangements are made for those travelling for employers’ business purposes and, for those with sufficient disposable income, the purchase and operation of private transport – cycles, motorcycles, cars, four wheel drive vehicles, and boats. As incomes increase, private vehicle ownership and operation, either on an individual or shared basis, become more possible.

Water transport, either by small boat or by commercial passenger ferry, can be an alternative to road travel and in some cases the only mode available to coastal and river communities. However, domestic air transport is largely a separate travel market due to the generally higher fares and limited possibility for carrying goods although, due to PNG’s disconnected road networks and isolated remote inland villages, it is still sometimes the only practical available option.

The main underlying determinants of personal travel demand are then (i) the state of transport infrastructure (ii) the travel time and distance (iii) the availability of public transport services (PMV, sea and air) (iv) incomes and income distribution (v) the costs of vehicle ownership and operation where there is a choice between private and public transport and (vi) the location and extent of employment, education, health, business and social activities, with more specialised activities and opportunities in the larger provincial centres and the more common in local market centres.

There are complex inter-relationships between these factors, and the pattern of travel demand develops over time with the development of settlements and other uses of land and the transport network, one reinforcing the other.

5.3.2 Overseas Visitor Travel Demand

Travel attributable to overseas visitors is a relatively small component of total passenger demand and is most evident in international and domestic air transport. Overseas visitors divide into business and official visitors and tourists.

Tourism is still a relatively small industry in Papua New Guinea, although there is potential for it to expand, particularly if the infrastructure and security status are improved. Tourism generates transport demand in the international movement of visitors, transport to and from tourist attractions and general excursion touring. The profile of tourism visitors to PNG has been people seeking cultural, wildlife and adventure experiences, but there is a potentially large market in the rapidly developing cruise ship tourism market, which is less demanding on inland transport and local accommodation facilities, but has other requirements to be satisfied, particularly in the areas of maritime safety, navigation and passenger reception facilities at the ports visited.

Road traffic demand for tourism is quite small compared with other trip purposes, although locally important to communities that participate in the tourism industry, so does not significantly influence road traffic demand projections overall.

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5.4 Freight Transport Demand

5.4.1 Freight Growth with Economic Activity

The growth in freight volume is strongly correlated with, and generally increases at a rate equal to or slightly above, the growth in real GDP. The DSP projection of sustained 8.4% growth in GDP implies an annual growth in freight movement of around 8 to 10%. The MTDP outlook for the period 2011 to 2015 is for a 42% rise in export volumes and 62% rise in import volumes which is consistent with the linkage between GDP and freight.

The MTDP/DSP envisages a five-fold increase in sea freight volumes between 2010 and 2050, equal to equivalent to an average annual growth rate of 8.4%, again consistent with a similar size increase in GDP. Only relatively few inland routes are used for export freight movement, as most agricultural exports (palm oil, cocoa, copra, rubber) and forestry are from coastal areas. An exception is the Highlands Highway, which is the main export outlet for coffee and tea although imported freight greatly outweighs the export movement.

A more detailed analysis of freight traffic demand depends upon the location and growth of the main export industries that rely on road freight, in particular agriculture and to a lesser extent forestry, minerals and oil and gas. The freight demand from inland distribution of general consumer goods, both imported and locally processed or manufactured, is linked to population and income growth, similarly to passenger transport.

5.4.2 Growth in Main Export Commodities

The relationship between the main export commodities and transport is characterised by the relative bulk of the commodity in relation to its value and any special transport requirements such as protection against damage, spoilage and security. By volume, logs have been several times the size of any other commodity export over the last decade and have been growing strongly, apart from a dip in 2008/09. While a large proportion of logging is in lowland forest and exported from coastal landings, a small proportion is cut inland and is reliant on road transport once outside of the forest block.

Figure 24 – Main Export Commodities 2001-2010, Volumes

The growth of main export commodities, apart from logs and oil, is shown in Figure 25. Palm oil is the second largest export doubled in volume over the 10 year period. By contrast other traditional agricultural exports such as coffee, cocoa and copra oil have not grown at all. Gold, although one

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

of the most important exports by value, is very small in volume and where it is processed through to a highly purified state is able to be exported by air so has limited impact. Copper is more significant as the yield of copper from ore is higher, the commodity less valuable than gold and in some cases exported as a concentrate rather than fully refined product.

Figure 25 - Main Export Commodities Excluding Logs and Oil 2001-2010, Volumes

In terms of value, individually gold, copper and oil are several times more significant in export value than are logs and the key agricultural exports of palm oil, cocoa, coffee and copra oil (Figure 26). However, mineral development is less reliant on transport infrastructure than are agricultural exports, particularly those from land-locked provinces and coastal regions remote from main ports and roads.

Figure 26 – Value of Main Exports, K2001 Constant Values

Commodity prices have generally grown over the last decade (see Figure 27) with the exception of log exports which declined in real value between 2001 and 2005. Almost all commodities have shown a high degree of price volatility, responding to global economic and financial conditions, the drop from 2008 to 2009 being notable across the board apart from the gold price.

The viability of mining in PNG depends upon the world market prices of copper and gold. Resource proving considers the mineral concentration so lower grade deposits can become viable when the

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

market price is high and cease to be viable if the price falls. This can result in mining operations increasing or reducing in intensity over time and mines being mothballed or closed if prices fall too low. At present the price of gold is historically very high as an effect of continuing global financial uncertainty, which makes otherwise uneconomic resources viable. However, gold does not have many industrial uses and demand is from those who seek it as a store of value and for jewellery manufacture. So its price can vary over a wide range and quite rapidly. A return to growth and financial confidence could lead to a significant fall in the gold price. Copper, nickel and molybdenum on the other hand have important industrial uses and prices have been high mainly due to high rates of economic growth in the BRIC (Brazil, Russia, India, China) nations. For these industrial minerals, return to business confidence and growth should increase demand and prices.

Figure 27 – Commodity Price Indices, Adjusted for Inflation (2001 base)

5.4.3 Agricultural Products

Cash crop production is the main determinant of export freight traffic volumes. The principal commodities by value are coffee, cocoa, and palm oil. Copra, copra oil and cake, and rubber are other export crops which were historically significant but now contribute relatively small proportions of export volume and value.

With the exception of coffee, which is the primary agricultural export from the Highlands Region and relies on the Highlands Highway for export through Lae, the remaining cash crops are grown along the coastal margins, where soil conditions are suitable and other production inputs are available. Much of the resulting freight traffic travels only short distances by road to the point of primary processing before shipment through one of the country's 13 export ports.

Agricultural production is sensitive to export prices, and to production costs. Transport of agricultural inputs is a factor in production costs, and improved access to growing areas can lower transport costs and stimulate production. However, other complementary inputs such as labour, capital and extension services must also be present for these potential gains to be realised.

Coffee - coffee exports stood at 62,200 tonnes in the 2009. Export production has varied from year to year but over the last 10 years the trend has not shown either growth or decline. The peak of production was in 1999, when exports reached almost 80,000 tonnes and followed the year of peak coffee prices. The real price has varied by  25% through the last decade, although there were greater fluctuations in the 1990s. Coffee is the principal agricultural export from the Highlands region accounting for some 50,000 tonnes of freight per year. This is transported initially in small loads from estate and smallholdings to local factories, and after processing, by heavy truck to Lae

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for export. Production is sensitive to price, and some smallholders pick more or less berry depending upon the factory gate price and their individual cash needs.

Cocoa - cocoa exports were 48,000 tonnes in 2009 and have been growing in volume at 5% p.a. over the past 10 years. The bulk of production is from the Islands region where cocoa is mainly grown in smallholdings but there is also some plantation cultivation along the coastal plains. Bougainville was the largest source of production pre-conflict and volumes are recovering under the new autonomous government. Land transport of cocoa is local in nature, with longer distance movement to export ports by coastal vessels and workboats.

Palm Oil - Oil palm has shown consistent growth in export volumes over twenty years, standing at 428,000 tonnes of oil in 2009. Prices have fluctuated over a wide range and reached a ten year peak in 2008. Oil palm estates have been developed in New Britain, Oro and Milne Bay. Fresh fruit is transported to local processing plants where the oil and kernel are extracted and loaded directly to ship.

Copra, Copra Oil and Cake - Copra production has declined steadily over many years and is now only at a fifth of the export volume of the 1980s at about 20,000 tonnes. More copra is now exported as copra (coconut) oil and copra cake which is used as an animal feed. The volumes of thee commodities have remained level over the last decade at 20,000 and 40,000 tonnes respectively. Copra oil prices have been very volatile varying  50% around the annual average. Copra is exported mainly from the island provinces and all copra oil and cake are produced at a factory in Rabaul.

Rubber - rubber prices have been increasing in real terms at 9% p.a. over the past decade. However production is relatively small at 5,000 tonnes annually. Cape Rodney is the largest growing area and there are also sizeable plantings at Galley Reach north of Port Moresby and at Gavien in East Sepik.

Tea - tea is produced in small quantities of around 6,000 tonnes/year, the main growing area being in the Western Highlands with a factory in Mt Hagen.

Sugar - sugar is produced at Gusap at the Ramu mill from surrounding cane fields and is transported by road to Lae along the Highlands Highway. The mill supplies domestic consumption and volumes are relatively small.

Fruit and Vegetables - are grown throughout Papua New Guinea, the varieties dependent on the altitude and climate. Production is mainly from smallholdings as well as subsistence production from gardens. There is a trade in fresh produce from the Highlands to the main urban centres, which relies on refrigerated transport and smooth roads to avoid produce damage. There have been many attempts, not always successful, to improve the reliability of fresh produce transport to encourage growers into more production and to substitute for expensive foreign imports.

5.4.4 Logging and Forest Products

The present status of PNG’s forests, as reported in 2010, is a total forested area of 29 million hectares (Mha), or 63% of the total land area. 15 Mha are in production forests and 14 Mha in reserve forests. 12 Mha of the production forests have been acquired for logging and 10 Mha are under timber permits. The national sustainable annual cut has been estimated at 3.5 Mm3 compared with a committed cut volume of 8.9 Mm3 and a further 1.5 Mm3 of logs from agricultural land and other clearance, including for transport routes (source: presentation on the State of PNG’s Forests, PNG Forest Authority, March 2010). From these figures it is apparent that committed cut volumes are running ahead of sustainable yield and as timber concessions expire, the area of land under permit is expected to fall.

However, the PNG Forest Authority (PNGFA) lists nine forestry projects currently under

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

development with an area of 2.0 Mha and volume of 40 Mm3 primarily in Western, Sandaun and Madang Provinces, with smaller blocks in Central, Milne Bay, Morobe and Southern Highlands (source PNGFA website).

The extraction of logs, mainly indigenous hardwoods, has varied between 2.0 and 3.0 million cubic metres a year over the past twenty years of which 90% is exported. Logs are by far the dominant form of wood export, comprising 95% of the total, the remainder being mainly sawn timber and veneers. There have been forestry development projects in several parts of the country, mostly concentrated on lowland and lower montane forests, where there is direct access to coastal or river landings for log export. However, some logging also occurs inland, requiring longer transport distances by logging trucks. Roads that are important for logging include the Lae-Wau Road, the Ramu Highway from Gogol River into Madang, and locally to saw mills serving the domestic market. The export price of logs has varied widely and at K200/cu.m. is currently well below its early 1990s peak.

By contrast, plantation forests are relatively small in area and production, only 63,000 ha in total under PNGFA management, mainly of pine, acacia, eucalypts, teak and balsa.

The PNGFA’s stated policy is to progressively reduce logging from natural forests to a low level within five years, with those Provinces where the resource is already heavily depleted being the first to cease logging. The intention is that production will gradually refocus on sustainable plantation forestry and domestic forest product processing.

Up to 1991, timber companies were able to deal directly with landowners for timber rights purchases which often resulted in uncontrolled clear felling. The extensively logged-over areas are New Ireland, coastal New Britain, Western Province along the Upper Fly and basin of the Baimuru River, parts of Central Province, the south coast of Milne Bay and coastal Sandaun province towards the border with Indonesia. Through the late 1980s there was an effort to better regulate the various private dealing in timber rights and bring all substantial timber concessions under the umbrella of Government through the PNGFA negotiating Forestry Management Agreements (FMAs) with landowners and managing the tender process under the provisions of the Forestry Act 1991.

The Southern Region (South Papuan coast from Western to Oro) is the dominant area of existing timber production at 52% of the national total followed by the Islands Region and Momase at 25% and 22% and the Highlands Region only 1%. All logging under FMAs is now required to be on a selective basis under the sustainable forestry management principles being followed; however there is acknowledged to be a lack of capacity for regulatory enforcement. The logging industry is dominated by a few Asian-owned companies who control 80% of logging, processing and marketing operations, with one particular company controlling 45% of the market. Exports are as roundwood predominantly to South, East and Southeast Asia.

As the economic stands of forest accessible from the coasts and rivers are exploited, new production areas are becoming costlier to access and develop. While public roads can assist in timber exploitation, most new forest areas are remote and the forestry companies develop access roads and tracks suited to log extraction, which can be of a temporary nature.

The general outlook for forestry is for continued reliance on annual roundwood exports of around 3 million m3 from existing timber concessions and the new developments above. However, on top of this, land clearance for agriculture and for roads has doubled the annual harvest in some years.

5.4.5 Minerals

Papua New Guinea is rich in metallic mineral resources, in particular copper (Cu), gold (Au) and nickel (Ni). Silver (Ag), molybdenum (Mo), cobalt (Co) and rhenium (Re) are other metals extracted as by-products or co-products to copper, gold and nickel mining. With commodity values high, the

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

mining sector has been very active in recent years and indications are that it will continue to be an important contribution to the economy in future.

At present, there is extensive exploration and development activity in Papua New Guinea with several large mines in the development phase and expected to commence production in the next few years and others in advanced exploration. There are large open pit operations of similar scale to Ok Tedi, including: Frieda River which will involve a pipeline and slurry barging down the Sepik; Ramu Nickel and Yandera copper/molybdenum mine which both involve slurry pipeline to coastal processing plants and marine tailings disposal and Golpu/Wafi located off the Wau Road with the possibility of a slurry pipeline to the coast.

Available data on future mining production, locations and associated transport infrastructure are shown in Table 13. The data have been drawn primarily from published mining company information and, to a lesser extent, data from the Department of Minerals and Energy. In this table, mineral reserves are estimates of economically mineable material derived from a measured and/or indicated mineral resource resulting from feasibility studies of life-of-mine operations. They are lower than mineral resources, which include measured, indicated and inferred resources, and are an estimate of the quantities with reasonable and realistic prospects for eventual economic extraction. As exploration proceeds, the total size of the resource becomes more clearly defined and a greater proportion is classified as measured or indicated. As mining studies proceed an increasing proportion of the resource is recognised as reserve. Both reserves and resources involve some judgement as to the long term market price of the refined mineral. The definitions and assumptions may vary between mining companies.

Mine development in itself creates a substantial, although relatively short lived, transport demand through the delivery of construction equipment and materials to the mine site. This can require heavy-lift air support for large items if road access is impractical.

The transport demand during a mine’s operational phase includes transport of the workforce between the on-site accommodation and the main centres or overseas for foreign workers, and the delivery of mine and workforce supplies.

Transport of mine output depends on the configuration of the mining operation. This varies from self-sufficient mine sites where all processing is carried out at the mine and only the refined product leaves the mine site; for example gold is taken out by air from Porgera and Tolukuma gold mines. The mining operation can involve either open pit stripping of overburden and excavation and processing of ore, or underground mining which is less environmentally intrusive.

For the larger scale open-pit operations such as copper/gold and nickel mining, the processing involves stages of ore crushing, ore concentration and then extraction of the mineral. Process requirements, site suitability, environmental considerations, landownership issues and economics determine the location of each stage. Transport from the immediate area of the excavation is by mine vehicle and may also involve conveyor or ropeway transport over short distances of up to a few kilometres. At some point the ore will be concentrated to reduce its bulk, with the tailings stored locally, typically in a dam, and the concentrate usually transported to a river or coastal location by slurry pipeline. The concentrate may be shipped directly overseas or processed in PNG to the refined mineral, again with a tailings residue to be disposed of locally, in some cases involving discharge to sea; examples are Panguna when in operation and the developing Ramu nickel and Yandera copper projects.

Panguna copper/gold mine on Bougainville, Ok Tedi copper/gold mine in the Star Mountains in Western Province, Porgera gold mine in Enga and Lihir gold mine in New Ireland have been the four largest producing mines in Papua New Guinea. Panguna has been closed since 1989 due to conflict in Bougainville but could re-open, Ok Tedi is well through its life but is being extended and Porgera and Lihir still have another 12 years or more of reserves.

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Table 13 – Mineral Development and Production Outlook Mine Ownership Location Minerals Status and Life Reserves Resources Annual Transport Infrastructure and Production Type In Operation 670,000 t/y opened 1984-87, now now 100% concentrate mine access road to Tabubil, Tabubil Western depleted, mine life Cu – 0.7 Mt Ok Tedi, Ok PNG owned Cu, Au, containing airport, Tabubil to Kiunga Road, Kiunga Prov, 20km extension to 2022 Au – 65 t Tedi Mining Ltd (PNGSDPL/ Ag o/p Cu - 190,000 t/y, (mine) Wharf and river barging of N of Tabubil from present closure (extension) (OTML) Govt) Au – 16 t/y, concentrate. date of 2013 planned Ag – 50 t/y Enga PG, Access Road, Porgera airport (Kairik, landowners private); numerous road projects Au, Ag opened 1990, life to Au – 230 t Au – 17 t/y, Porgera Joint (5%) and Enga Prov constructed as part of tax credit, o/p & u/g approx. 2023. (2009) Ag – 2.6 t/y Venture (JV) Barrick Gold infrastructure development programmes (95%) and community facilities grants Lihir Island, Newcrest opened 1997, life to Lihir wharf and airport (private); geothermal New Ireland Au Au – 800 t Au – 22 to 28 t/y Lihir (100%) 2023 power station Prov. Chinese Metallurgical Group Co 143 Mt ore, 74km SW of Mine access road, Basamuk Bay port (MCC) 85% opened 2010, life to Ni – 1.4 Mt Ni – 31,150 t Madang at Ni, Co access road, 134 km slurry pipeline to Ramu Nickel Highlands 2030 (20y) Co – 143,000 t Co – 3,300 t Kurumbukari Basamuk port (private) Pacific 9% Landowners 2.5% (50% opened 2010, life to Au – 3.1 t/y near Wau, Au, Ag Au – 171 t Harmony, 50% 2023 with possible Ag - 20.9 t/y access road to Lae-Wau Road Hidden Valley Morobe o/p Newcrest) extension (2011) Tolukuma Gold near Mine Ltd Au, Woitape, owned by mainly opened 1995 Au – 40 t Au – 2.3 t/y processed on site, air access only Tolukuma Goilala, Petromin u/g Central prov. (GoPNG) Simberi Isl., Ore – to 3.5 Mt/y 1400m airstrip (private); Pigiput Bay wharf Allied Gold New Ireland Au, o/p opened 2008 Au – 100 t Simberi Au – to 7.5 t/y (private) Prov New Guinea East New Gold (90%), Britain, 50 opened 2007; mining Au, Cu, Goldmines of km SSW of of gold cap with no current Ore – 2.1 Mt public road access; air via Kokopo. Ag, Te not available Sinivit Niugini Rabaul, further resource estimate Au – 7.1 t processing on site. o/p Holdings Baining proving (10%) Mntns

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Mine Ownership Location Minerals Status and Life Reserves Resources Annual Transport Infrastructure and Production Type Possible Reopening Bougainville Copper Ltd Bougainville (BCL, owned opened 1972, closed AP, inland 1,000 Mt ore Cu – 170,000 t/y by: Rio Tinto Cu, Au 1989 due to conflict. concentrate by access road to coastal from Arawa- Cu - 3.5 Mt Au – 13 t/y Panguna (54%); GoPNG o/p Possible re-opening concentrate load-out Wakunai Au - 250 t (19%); public ca 2015; 20 year life Road shareholdings (27%) Kainantu, put into care and Au – 3 t/y in Barrick (100%) Au Au – 140 t possible re-opening depending on Au price Kainantu Simbu maintenance 2009 2006/07

Development Stage Cu, Au, mine feasibility study Existing 38 km project road to Lae-Wau near Ore – 870 Mt Harmony and Mo. stage; production ca Cu – 0.8 Mt 20 – 30 Mt/y ore Road at Timini. Development may involve Mumeng, Cu – 9 Mt Golpu/Wafi Newcrest probably 2015 for 30 years to Au – 39t processing slurry pipeline to Morobe coast processing Morobe Au – 601 t u/g 2045 plant. Frieda River, Ore – 2,000 Mt production 2016-2041 40 Mt/y Horse-Ival- Xstrata (74%), na Cu – 10.2 Mt (26y) Trukai Highlands Au – 603 t Sandaun/ Pacific (16%), No significant infrastructure developed so East Sepik Ore – 72 Mt 3 Mt/y Frieda River – Overseas Cu, Au production 2016 – far. Slurry concentrate pipeline to new river Border, na Cu – 1.4 Mt Nena Mineral o/p 2035 (20y) port facility on the Sepik River planned and Telefomin Au – 25 t details subject to Resources barging to coast. District feasibility study Dev. OMRD Ore – 274 Mt expected Jan Frieda River - (10%) exploration/ proving nan. Cu – 1.1 Mt 2012 Koki Au – 82 t

Cu, Mo, Access/pipeline road to Ramu Highway ; Marengo 95km SW of production 2015 – Cu eq – 4 Mt Au, Ag, Cu and Mo ore slurry pipeline to coastal Yandera (100%) Madang 2034 (20 y) Re. o/p concentrate plant on Rai Coast

Exploration drill testing and Indochine Ore – 25 Mt near resource statement not yet not yet No existing road access ; 7 km from Mining (newly Au, Ag Au – 53 t Mt Kare Porgera from previous 1997 determined determined Porgera access road. acquired) Ag – 380 t exploration Cu, Au, not yet not yet Harmony Sandaun surface exploration unknown Amanab Mo determined determined

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Mine Ownership Location Minerals Status and Life Reserves Resources Annual Transport Infrastructure and Production Type

20 km NNE surface exploration, not yet not yet Probably accessible from Western Harmony of Mt Hagen, Cu, Au unknown Kurunga initial drill testing determined determined Highlands road network W Highlands

Tari Harmony S Highlands Cu, Au 20km from Highlands Ok Tedi, not yet if developed, possibly road link to Ok Tedi Cu, Au exploration drilling unknown Olgal Pacific (100%) Star determined infrastructure Mountains, Tatu Isl. not yet Allied Gold New Ireland exploration drilling unknown Tatau determined Prov. Tatu Isl. not yet Allied Gold New Ireland Au exploration drilling unknown Tabar determined Prove New Guinea Normanby Au, Ag Ore – 1.8 Mt Gold (50%), Similar geological structure and mining Imwauna/ Isl, Milne o/p and exploration drilling unknown Au – 22t Ore – 1,200 t/d NMC Mining arrangement to Misima. 4 km from coast Weioko Bay Prov. u/g Ag – 36t (50%) JV - New Simbu/EHP Guinea Gold, border, 50 not yet 8km project track access; helicopter Gold Anomaly Au exploration drilling unknown unknown Crater Mountain km SW of determined support Ltd, Triple Goroka Plate Jnctn Vangold, New W New Ore – 1.5 Mt not yet Au, Ag exploration drilling unknown Mount Penck Guinea Gold Britain Au – 4 t determined Closed Placer Dome Milne Bay, Au, Ag opened 1990, closed wharf and airport (now public). Processing (80%), Origen nil none Misima Misima Isl. o/p 2001 was on site. Minerals (20%)

Key: Ag – silver, Au – gold, Co – cobalt, Cu – copper, NI – nickel, Mo – molybdenum; o/p – open pit, u/g – underground.

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In some cases the transport infrastructure is reserved for mine operations and in others is also available for public use. On conclusion of mining there is a potential legacy benefit of the transport infrastructure to the areas concerned, although upkeep then reverts to either the provincial or national government. Also, local transport infrastructure has been built or maintained as part of landowner and Government agreements with mining companies and through various schemes such as Tax Credit.

Both Ok Tedi and Porgera mines prompted and/or support the development and upkeep of transport infrastructure.

This infrastructure includes:  Airports at Tabubil, Porgera, Lihir and Misima (the Misima mine is now closed)  The Ok Tedi mine has also supported coastal and river transport along the Gulf and Papuan Coast and up the Fly River to Kiunga, and access road to Tabubil.  Panguna mine included the development of a main access road and a cross-island connection at Jaba River.  The Ramu Nickel project has included the development of an access road from Usino and another to a new port at Basumuk Bay.

5.4.6 Oil and Gas

The oil and gas sector has been an important contributor to PNG’s economy since independence and, with the commencement of the LNG projects, is expected to have an equal or greater impact over the period of the NTS.

The establishment of wells, processing plants and export terminals requires the development of new transport infrastructure for construction, operation and servicing of these facilities, and/or upgrading of existing infrastructure, depending on location. As with mining, this infrastructure may in some cases be developed for public use as well as for project purposes or can become a legacy of the project for the benefit of the local area. In addition, government and landowner agreements can involve development of community services in the area of the projects, including local access roads.

Oil and gas development involves the construction of pipelines to move raw and processed oil, gas and gas liquids, sometimes hundreds of kilometres. Laying and servicing the land-based pipelines requires access by road and/or air, so a pipeline access track will commonly run close to the pipeline alignment. However, this will not necessarily result in a continuous road route or one suitable for public access. Nevertheless, construction of a pipeline with connections to oil/gas fields, airstrips, river ports and processing facilities along its length can form the basis for the development of new road routes and other legacy transport infrastructure.

As with minerals, much of the freight movement associated with the oil and gas industry occurs during the development stage. Once in production, the facilities have ongoing servicing needs and movement of personnel, although much of this is supported by air.

The Department of Petroleum and Energy (DPE), issues licences for petroleum prospecting (PPL), retention (PRL) and development (PDL), as well as specific licences for production and processing facilities and pipelines. PPLs cover most of the country and permit drilling to explore for and appraise a potential resource. PRLs are issued for blocks declared to be a petroleum location, and provide for further exploration and resource proving. PDLs are the final stage and are issued for petroleum production and sale.

The producing oil and gas fields and likely prospects are located in a band running between Tabubil southeast through Western, Southern Highlands, Gulf Provinces (including offshore) and into

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Central Province. There are also identified oil and gas leads (potentially oil and gas bearing geological structures) within Petroleum Prospecting Licence areas along the western border of Western Province south of Kiunga, around Aiambak and in South Fly District. While the existing oil fields are well through their life, natural gas discoveries and development are becoming more important.

The LNG projects and existing oil production have had a large impact on Southern Highlands, Western and Gulf provinces, and have concentrated Government’s development priorities on the PRAEC corridor.

Details of producing and developing oil and gas resources are shown in Table 14.

Producing Oil Fields: the oil fields of Agogo, Moran, Hedinia/Iagifu, Mananda and Gobe are located to the west and south of Lake Kutubu in Southern Highlands, and together yield blended light sweet crude. Road access is from the Mendi to Kutubu Road and from Kikori in Gulf Province for the Gobe field. The privately operated Moro Airport provides the main air access to the Kutubu area. A crude oil pipeline runs from Kutubu southeast to Gulf province, where it is joined by a spur line from Gobe, and then via Kikori to the offshore Kumul marine loading terminal operated by Chevron New Guinea. The road between Kikori and Gobe now constitutes part of the developing Gulf to Southern Highlands Highway. The service road from the Gobe junction to Kutubu is only for access to the pipeline.

ExxonMobil LNG Project: this major project will aggregate the natural gas from several established and new wells in the Juha, Hides and Angore gas fields which lie to the northwest of the Kutubu oil fields, together with gas liquids from the Kutubu fields, and will pipe the conditioned gas to a scraper station at Kopi, then to the coast at Kikori, and then by undersea pipeline to a liquefaction plant near Port Moresby from where specialised LNG bulk carriers will export the cryogenically stored LNG to Asian markets.

Much of the freight movement associated with the LNG development is taking place during the establishment phase of the production facilities. For the LNG plant, Port Moresby is the main import gateway, with materials being imported across the privately operated Motukea port facility. For the Highlands production facilities, some materials are imported through Kopu, near Kikori in Gulf Province and other along the Highlands Highway. There is also a proposal to develop a new permanent main port facility at Wowei near Kikori to serve the new Gulf to Southern Highlands road link the development of which has been assisted by oil and gas development. A new airfield has been constructed at Komo with linking heavy haul road to Hides Gas Conditioning Plant.

The project developers are making arrangements to ensure that the Highlands Highway is able to accommodate the sizes and number of shipments necessary, through new and strengthened bridges and maintenance of the existing road surface. Once the project is in its operational phase, the demand for freight to sustain the operation will reduce and the full maintenance responsibility of the Highlands Highway will fall back on Government.

InterOil Gulf LNG Project: this second similar production scale LNG project will draw on the large Elk/Antelope gas field in the east of Gulf Province, with a pipeline southeast to a gas conditioning plant near Orioli on the Purari River and then due south to a coastal liquefaction plant to the west of Ihu, linked to a floating marine loading terminal. Both LNG projects are scheduled to come online in 2014-15.

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Table 14 – PNG Oil and Gas Development Annual Status and Remaining Field Interest Location Product Productio Transport Infrastructure Life Reserves n In Production opened 1991.

Gas supply natural gas piped to gas fired power plant and Hides including Gas to natural gas 59.6 bscf gas and 1.4 Oil Search (100% SHP 80 km contract likely power transmission to Porgera mine. Condensate Electricity (GTE) Project and Mbbl condensate for 5 to 7 bscf GTE) and others NW of Kutubu to be extend to processed to diesel and naptha and sold locally or (PDL1, PL1, PRL7, condensate GTE; remainder to match Porgera used as back up fuel for power generation PRL12) LNG project mine life served by Moro airport (private), Mendi-Kutubu light crude oil opened 1992, Oil Search (60%), SHP near 90% depleted 3 to 4 Road, shared processing facility and 256 km but mainly licensed to Kutubu (PDL2, PL2) Exxon Mobil Kutubu 32 mmbbl reserve mmbbl pipeline to marine loading terminal at Kikori, Gulf gas remaining 2035 Province Oil Search (60%), 60% depleted 2 to 3 shared processing facility and 256 km pipeline to Moran (PDL2, PDL5, Exxon Mobil (11%), SHP light crude oil opened 1998 43 mmbbl reserve mmbbl marine loading terminal at xxx, Gulf Province PDL6)) Merlin and others Oil Search (72%), Merlin (20%), SHP 10 km 77% depleted Petroleum light crude oil opened 2006 0.10 mbbl oil pipeline linking to Kutubu; no road access SE Mananda (PDL2) NW of Kutubu 0.8 mmbbl reserve Resources Kutubu (8%) SH Petroleum (40%), Oil Search 90% depleted 0.05 mmbbl Gobe (Main) (PDL4, PL3) (36%) Santos (16%) 3 mmbbl reserve airstrip at Gobe base camp on Kikori River and Gulf/SHP and others access road to fields and to Kopu landing and border NW of light crude oil opened 1998 Merlin (73%), Exxon Kikori. 8km spur connection from Gobe Processing Kikori Mobil (15%) , Oil 93% depleted Facility to the Kutubu oil export pipeline. Gobe (SE) (PDL3, PDL4, 0.25 mmbbl PL3) Search (10%) and 3 mmbbl reserve others In Development new gas fields 60km gas and liquids pipelines from Juha to Hides Angore (PRL11 ) Gas Conditioning plant; New Komo airstrip and Western LNG Project: Juha (PRL2) linking heavy haul road to serve the Hides plant ; Exxon Mobil (42%) (Juha), gas and + Hides (PDL1) exc. GTE opening 2014, 9,000 bscf of gas and 100 km condensate pipeline from Hides to Kutubu; Oil Search (34%), Gulf (Gobe) condensate + gas from existing oil for estimated 200 mmbbl of gas 6.6 Mt LNG 300 km gas pipeline alongside the existing oil Santos (18 %) and and S. aggregation fields 30 years liquids pipeline from Kutubu to Kopi ; and 415 km sub-sea others Highlands from gas and Agogo/Moran (PDL2) gas pipeline to liquefaction plant located on a (other fields) oil fields Kutubu (PDL2, PL2) greenfield site 20 km NW of Port Moresby on the Gobe (PDL3, PDL4) Vaihua River mouth; export by LNG carrier.

INDEPENDENT STATE OF PAPUA NEW GUINEA NATIONAL TRANSPORT STRATEGY – VOL 3 DEPARTMENT OF TRANSPORT DETAILED STRATEGY

Annual Status and Remaining Field Interest Location Product Productio Transport Infrastructure Life Reserves n land gas pipeline south overland to a condensate “Gulf LNG 6 to 9 Mt shipping plant and then a gas line to the coast west Project” LNG of Ihu in the vicinity of the Purari River mouth; LNG projected InterOil (50%), Gulf, inland gas and 8,000 bscf gas exports probably via an offshore floating marine opening Elk, Antelope (PPL238) Pacific LNG (50% ) NW of Ihu condensate 156 mboe condensate or terminal operated by Petromin/Hoegh JV (previous 2014/15; intention was via submarine pipeline to a approval 5 Mt LNG liquefaction plant at next to the Interoil Refinery at status unclear Napa Napa, Port Moresby). Approx 100km no transport links determined but would probably Talisman (76%), Oil gas and Offshore Gulf be linked to the ExxonMobil submarine gas pipeline Pandora (PRL1) Search (24%_ condensate Province to Port Moresby Exxon Mobil (61%), gas and Condensate barged down Fly River from SE of Tabubil P’nyang (PRL3) Oil Search (39%) condensate Drimdemasuk. Gas pipeline via Ok Menga, Horizon (50%), Western, N of gas and Drimdemasuk through Western province to the under evaluation Stanley 1 (PRL4) Talisman (50% Kiunga condensate coast in vicinity of Borabi in Bamu District gas and Gas pipeline through Western province to the Oil Search (61%) Kimu (PRL8) condensate coast in vicinity of Borabi in Bamu District

Oil Search (45%), gas and

Barikewa (PRL9) Santos ( ) condensate

offshore from gas and Oil Search (60%) Kikori, Gulf Uramu (PRL10) condensate Prov Oil Search (53%), gas and

(PRL11) Exxon Mobil (..%) condensate gas and LNG Energy Kuru (PRL13) condensate gas and Oil Search (63%) Cobra, Iehi, Bilip (PRL14) condensate Reservoir

evaluation and Access via Kiunga airport and local access roads Horizon (45%), 480 bscf gas Western, E of gas and shipping on each side of the Fly River. Gas pipeline through Elava and Ketu (PRL5, Talisman (35%), 25 mmboe Kiunga condensate planning in Western province to the coast in vicinity of Borabi PRL21) Kina (20%) condensate progress. 10 in Bamu District

year life Offshore, Gulf, no transport links determined but would probably gas and Oil Search SE of Kumul be linked to the ExxonMobil submarine gas pipeline Pasca (PPL24) condensate terminal to Port Moresby Abbreviations: PRL = Petroleum Retention Lease; mmbbl = million barrels (oil); bscf = billion standard cubic feet (gas); mmboe = million barrels of oil equivalent.; Mt = million tonnes (for LNG); oil industry abbreviations are m = 1,000, mm = 1,000,000, b = 1,000,000,000.

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Gas Fields around Kiunga: the gas fields of P’nyang near Ok Menga, Stanley north of Kiunga and Elevala/Ketu east of Kiunga are proposed to be connected by a gas pipeline with a conditioning plant at Drimdemasuk and gas liquids barged down the Fly River. The gas pipeline will run from Elevala southeast across Bamu District of Western Province, linking other smaller gas fields of Puk Puk, Douglas, Koko and Kimu and will reach the coast on the Western/Gulf border around Borabi. A road corridor along this route is also a possibility. This project is at an earlier stage of development.

Mid and South Fly Gas Fields: New Guinea Energy holds PPLs over a large number of gas leads and prospects located south of Kiunga, around Lake Murray, Aiambak and in the western half of South Fly District (Moehad area). There is potentially a gas pipeline, power and road corridor linking from Drimdemasuk south to Morehead and then east on the Trans-Fly Road to Wipim, Oriomo and Daru. This corresponds with the southern section of the Border Corridor in the MTDP and with the Western Province Transport Plan. Aiambak would likely assume increased importance as a port in such a development.

5.5 Road Transport Demand Growth

5.5.1 Road Traffic Composition

While relatively few roadside traffic counts have been made in recent years, historical data on traffic composition counts shows that heavy vehicles account on average for one third of the traffic on rural highways, although this can vary between 20% and 50%. PMVs account for about 20% of traffic, with a typical range of variation between 10% and 30%, Government vehicles for 10% to 15% and private vehicles from about 65% with a typical range between 55% and 75%.

When considering the future growth in traffic, a basic division between passenger and freight traffic is desirable, to take account of the varying demand profile on rural roads.

Population, income and employment are the main factors underlying the demand for personal travel. As incomes rise, the opportunity for higher income earners to afford private transport increases and over time this is likely to affect the composition of road traffic, with a rising proportion of private vehicles in comparison to PMVs.

5.5.2 Private Vehicle Ownership

The total number of cars, utilities and motor cycles is estimated at approximately 46,000 in 2010, or one vehicle per 147 people, although official records are poor due to the fragmentation of responsibility for vehicle licensing since devolution of responsibility to provincial governments. Growth over the past decade appears to have been low, less than 1%, which is below the growth rate in population and appears to be at variance with common observation. This total will also include cars owned by businesses, public agencies and taxis, so that vehicle ownership by private households and village groups will be even lower, possibly only 50% of the total. This is a very low level of motor vehicle ownership in comparison with other Pacific states and internationally.

5.5.3 Public Passenger Transport

The numbers of licensed urban and rural PMVs is not accurately known due to fragmentation of licensing authorities and lack of centralised collection of data. There are an estimated 9,000 minibuses, the majority of which perform public passenger services. Historic data indicate that those provinces with well-developed road networks and a relatively large population each support between 300 and 500 licensed mainly rural PMVs, and that there are approximately 600 PMVs in NCD.

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5.5.4 Passenger Traffic Demand Growth

As noted, in the absence of reliable direct traffic volume count data, there are no clear historic trends on which to base future traffic demand growth, even though this is an important input to both investment strategy and road user charges funding projections. However, past trends will not necessarily be a good guide to future growth, particularly if the projections in the MTDP are borne out.

The growth in road passenger transport demand can be expected to increase, all else being equal, with the growth in population. On the main road network, the Provincial population growth rate should be a reasonable guide to the underlying growth in road traffic. Where a road connects Provinces then the average of the growth rates of the two can be assumed. For roads with a feeder or access function, then local influences on population growth and demand may need to be taken into account. So, from Table 12, the underlying road passenger traffic growth rates due to population increase over the next 10 years can be expected to vary between a low of 1.2% (Bougainville) and 3.4% (Southern Highlands).

Overlaying this basic rate of traffic growth are the effects of real income growth and, in particular, real income growth relative to the costs of road transport, which can be expected to lead to an increase in road traffic. In part this will be traffic generated by the economic activity supporting the higher incomes but will also be due to effects such as increasing ownership of private vehicles, and increased traffic demand for social interaction, whether by PMV or private transport.

Statistical data on household incomes at a provincial or lower level as an indicator of geographic variation, together with the projected growth rate in GDP under the MTDP or alternative future growth profiles, can be used as a factor on traffic growth rate. In the absence of better information, a demand elasticity of 1.0 can be assumed, so that a 1% growth rate in real per capita income generates a 1% increase in traffic volume.

Combining a national population growth of 2.1% projected over the next 10 years, then falling to 1.9%, together with a continuation of the historic trend in GDP/capita of 0.8%, would give an average traffic growth rate of just under 3%, which is in reasonable agreement with observation and with growth assumptions in road feasibility studies and with expectations of the rate of increase in the vehicle fleet. The growth rate under the DSP projection of 6.9% annual increase in GDP/capita, implies a 9% average traffic growth rate across the road network, which would be a radical departure from past trends.

5.5.5 Road Freight Demand Growth

Export production generates a demand for coastal and overseas shipping but only limited land transport as many of the export commodities are shipped out directly from coastal locations (timber), or are grown relatively close to an export port (cocoa, copra). Bulk ore handling is largely by pipeline and barge and oil and gas are also transported by pipeline.

Imported construction and consumer freight outweighs export production on the Highlands Highway and similarly accounts for a large proportion of coastal cargoes. Principal commodities are fuel, building materials, machinery and equipment, beer and soft drinks, and general trade store supplies, including rice and tinned fish and beef. Where there is a concentration of resource development, this may generate significant volumes of road freight traffic on specific routes during the establishment phase and, for sectors such as forestry, a concentration of traffic over the period of extraction.

The volume of imported freight and road traffic demand growth can be linked to population growth in the catchments served and incomes, similarly to passenger demand. Typically, the demand elasticity for road freight with respect to incomes can be assumed to be greater than 1.00, and for

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planning purposes a figure of 1.25 is used (i.e. a 10% increase in GDP generates 12.5% increase in road freight).

5.5.6 Urban Travel Demand

The last urban transport study in Papua New Guinea was that undertaken for Port Moresby in the 1990s. Since that time there has been no survey of urban travel demand. For the majority of the population, foot travel and PMV supplemented by taxi are the main modes of personal transportation. PMVs were estimated to account of 65% of person-trips in Port Moresby when last estimated. Car and 4WD travel is dominated by company and official vehicles, with a relatively small proportion of workers owning and driving a private vehicle to work. Walking to access PMV services can involve long distances and services to certain areas and at night are almost non- existent due to security problems. Two-wheelers (motorcycles and bicycles) have not been a feature of private transport in Papua New Guinea, or in the Pacific Islands in general.

Apart from the general observation that vehicle travel demand is increasing, there is a severe absence of baseline data and analysis on which to project future urban travel demand and an urgency that such studies be undertaken to better understand trip patterns and travel choices to support the orderly future planning of the urban road networks, and Port Moresby and Lae in particular. The same applies to goods vehicle travel demand, and the pattern of goods vehicle routing between wharves, container depots and industrial sites.

While the responsibility for urban land use and transport planning rests primarily with NCDC and the city and town councils, this NTS includes comprehensive land use and transportation studies for the main cities as a near-term priority, and traffic management studies for the smaller urban centres.

5.6 Overseas and Coastal Shipping Demand Growth

The Government’s planning targets through the DSP and MTDP are for a fivefold increase in cargo through PNG main ports between 2010 and 2030, supported by a threefold increase in port infrastructure, that is berth length and storage/working areas, with the remaining port capacity supplied by improved efficiency in ship working and utilisation of wharf storage. This projection requires overall cargo growth rates of over 11% in the early years falling to 6% towards the end of the 20 year period. The DSP projections were shown in Figure 3.

TIPS 2010 anticipates a lower growth path of 7% falling to 2% for the large commercial ports and a more modest 3% falling to 1% for the smaller ports. A comparison of the DSP/MTDP projections with TIPS is shown in Figure 28.

Figure 28 – Comparison of TIPS and MTDP Port Cargo Projections

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The TIPS projections are for a doubling of cargo throughput at Lae and Port Moresby between 2010 and 2030, an increase 70% for Madang, Wewak and Rabaul and 50% for most other smaller ports. The increase in vessel calls is projected to be lower, 30% over 20 years, with an increase in ship length and container capacity. So an increase in berth length of around 50% will be needed and cargo throughout and container handling of 100% for Lae and Port Moresby.

Master planning studies to be carried out by PNGPCL are expected to review the potential for generating cargo demand for each port individually, taking account of the hinterland served, new developments planned and the potential for future trade growth. Future reviews of the NTS will incorporate the results of such studies and others that may be initiated by other Government agencies, including the DOT.

5.7 Air Transport Demand Growth

The DSP and MTDP have identified future roles for the main airports in terms of design aircraft, flight range and international/regional/domestic function, either as long haul international (Port Moresby and an alternate, B787), medium range Pacific regional (B737-800), domestic jet (F100/Q400) and domestic turboprop. The DSP anticipates a two to threefold increase in air passenger numbers as shown by PNG region in Figure 29. This equates to an average annual air passenger demand growth of 6.8% over the period.

Figure 29 – Comparison of Air Passenger Growth Projections

However, these traffic projections are not based on an airport-by-airport demand assessment for the classes of traffic proposed or by aircraft capacity/frequency. It is the position of the NTS that the proposed facility upgrades, particularly where these involve lengthening the runway to a higher capacity aircraft type or changing the role of the airport in the domestic and international network, need to be carefully assessed individually and as incremental development to the PNG aviation network, so that the facilities provided are well matched to the aircraft types, frequencies and loadings that they are likely to attract.

The NASMP developed projections for domestic air passengers to 2018 and the PMAMP for domestic and international passengers to 2030. The TIPS 2010 study assumed default values for passenger and freight traffic growth of 4.25% from 2011 to 2015 and 2% for 2016 to 2020 in lieu of demand forecasts from NAC. The response to upgrading individual airports was through demand elasticities with respect to transport cost of -0.50 for air passengers and -0.35 for air freight. The overall growth over 20 years from these assumptions is around 50% or 2.1% annually which is lower again than the NASMP/PMIA mid projection.

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Part B – Transport Sector Policy and Institutions

6 Introduction to Part B

Part B of the National Transport Strategy provides the regulatory policy statements for the transport sector as a whole and for each modal subsector of land, maritime, air, and for modal integration. This Part also sets out the further institutional reforms and supporting legislative changes required to achieve the policy goals, including the ownership, maintenance, funding and administration of the transport system between national, provincial and local government levels.

The policy on infrastructure investment is contained in Part C.

Part B contains the following sections: 7. Recent Transport Policy 8. Transport Sector Policy Statement 9. Policy for Cross-Cutting Issues 10. Institutional Reforms 11. Land Transport Policy Statement 12. Maritime Transport Policy Statement 13. Air Transport Policy Statement 14. Policy on Modal Integration 15. Transport Industry Training and Development 16. Supporting Legislative Programme

The existing transport policy is first described as it forms the starting point for the changes envisaged by the National Transport Strategy. Next, the overall policy principles for the sector is described, followed by policy on cross-cutting issues such as environment, governance, gender and social impacts. Next are the institutional reforms which will be made mainly to achieve the principles of separation of functions, as well as to ensure that delivery of public services in the transport sector are matched to the agencies with the appropriate expertise and authority. Then specific policies for each transport mode are discussed, followed by policy on achieving transport integration between modes and levels of government. General policies for building institutional capacity are noted and finally, the supporting legislative programme needed to achieve the proposed policy and institutional changes.

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7 Recent Transport Policy

7.1 NTDP Policy and Ministerial Statement 2009 The most recent statement of transport policy was presented to Parliament in March 2009. This set out the infrastructure investment requirements for the sector as embodied in the NTDP, the importance of maintenance funding and policies on deregulation, competition, institution building and reform, financing, safety and security, transport corridor management, private sector capacity building and specific policies in aviation and shipping regulation.

The following subsections summarise the existing policy, first for the sector as a whole, then for each mode, and lastly for cross-cutting issues. After each summary the way in which the policy statement has been treated in the in the following sections 8 to 9 of the NTS is briefly described.

7.2 Existing Policy Applying across the Transport Sector

7.2.1 Corridor Protection There will be protection of transport corridors from encroachment, damage and claims for compensation that cannot be legally justified; and the ability of Government to acquire land, water and air space for the development of transport infrastructure. Legislation has since been enacted to enable implementation of this policy.

7.2.2 Transport Safety Assuring a safe transport system was recognised as major national priority and an important element of policy, in both international and internal transport. Ensuring adherence to international safety conventions is important to the nation’s ability to attract international visitors and for its airlines and shipping to be welcome in overseas destinations.

While Papua New Guinea’s aviation safety record is generally good, there have been a number of recent third level air accidents and the capacity for accident investigation is limited. The safety record for domestic shipping and for road transport both leave room for substantial improvement.

The policy statements in regard to safety provide for an institutional structure and funding regime better able to deliver on safety objectives.

7.2.3 Transport Security Particularly in international aviation and maritime transport, transport security is recognised to be of increasing importance and there is a pressing need for Papua New Guinea to ensure that it fully complies with international obligations so it can continue to trade with the rest of the world and contribute as a responsible sovereign state within its local region and more widely internationally.

A Transport Security Unit has been created within DOT, responsible for developing policy in transport security matters and acting in a coordinating and monitoring role across the transport modal agencies and the sector. The institutional changes for delivery of improved transport security for each transport mode are addressed in the NTS policy statements.

7.2.4 Cost Recovery and User Charges A central policy goal is improved cost recovery for the publicly funded provision, maintenance and operation of transport infrastructure and services. The intention is that the people, companies and industries using the transport infrastructure investments should contribute to their provision and upkeep either through direct charges for access and use or, in some cases, through indirect mechanisms.

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Some progress has been made towards cost recovery through user charges in the road, maritime and aviation sectors. However, in the roads sector in particular, this has been in a very partial fashion and much remains to be done. General principles for the application of user charges and specific policies for each mode are given in the policy statements, recognising that full cost recovery may not be achievable in all cases, and that alternative funding mechanisms will also be needed.

7.2.5 Community Assistance and CSOs The existing policy recognises that rural communities are limited in their capacity to fund local infrastructure and transport services and that Government will need to continue to financially assist communities but within policy limits, since subsidising rural transport imposes a cost to PNG in the reduction of services elsewhere. The development of the NTS examined the current arrangements for Government’s financial support, which are through Community Services Obligations (CSOs) built into the service agreements with the state owned enterprises of PNG Ports and the NAC; also through the Community Water Transport Project, rural jetty programme, function grants to Provinces for maintaining provincial transport infrastructure and the District Services Improvement programme (DSIP).

In the NTDP 2006-2010, the CSO policy was to apportion approximately 5% of transport expenditure to CSOs, delivered as follows:

 Roads - through the District Road Improvement Program (DRIP), subsequently incorporated into the District Services Improvement Program (DSIP);  Water Transport Services - through the Community Water Transport Project (CWTP) subsidised shipping franchise scheme;  Minor Ports - also funded through CWTP as 100% capital funding for small wharves and jetties  Main Ports - a CSO obligation placed on PNG Ports Corporation to maintain the unprofitable main ports (all declared ports apart from Port Moresby, Lae and Kimbe)  Main Airports - 75% funding by Central Government for capital works, maintenance and operating costs of the 21 national airports, excluding Port Moresby International Airport, incurred by NAC  Aviation Regulation - 80% of the regulatory, inspection, audit etc. costs incurred by CAA  Rural airstrips - capital, maintenance and operational funding from DRIP for small airstrips in remote areas not served by road

This existing policy did not clearly define the cost of CSOs in each transport subsector or provide a rationale for the disposition of CSO funds. There was no central monitoring of what CSO funds had been allocated or for acquittal of the spending.

The following policy sections of the NTS set out principles and proposed arrangements for improving the delivery of community assistance and CSOs in each of the transport modes. Requiring SOEs to partially fund social obligations by cross-subsidy from their commercial operations is recognised to have limits and to constrain their ability to be profitable and competitive in the market. Proposals for making the cost of CSOs more transparent, delimiting the extent of commercial operations, and for deciding on where and how community assistance should be delivered, are included in the sector transport policy and modal statements.

7.2.6 Public and Private Sector Roles

Existing policy is to explore the scope for various forms of partnership between the public and private sectors including outsourcing functions of state transport agencies, new forms of procurement that transfer risk away from the public sector, introduction of private/public market

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competition, part or full privatisation through shareholdings, and various forms of private concession for investment in new large infrastructure projects.

The transport policy statement sets out policy principles for Government’s involvement in the transport sector and the conditions under which further involvement of private sector capital, ownership or management will be considered in the best overall interests of the PNG economy and people.

7.2.7 Building Contracting Industry Capacity The need for a long term approach to developing capacity in the PNG construction industry is recognised in current policy. Possible solutions include: greater investment in training more locally based engineers and construction personnel; support for the development of locally based engineering and construction companies; and the development of strategic alliances with overseas firms to assist local companies to gain the experience and capacity needed to handle the full range and size of infrastructure projects.

The NTS recognises that there is limited capacity in the domestic construction industry and that firms have faced an uncertain and variable forward workload which creates risks to investing in plant and staff capacity. Also, expertise for the development of public infrastructure of roads, ports and airports faces competition from the mining and petroleum sectors in the short to medium term. In fact the ability of the PNG economy to support increased investment in public transport infrastructure may rely on an ongoing high level of activity in these two sectors, so the challenge is to create capacity in the public infrastructure sector in parallel with buoyant private mining and oil & gas sectors. Private sector capacity building for transport infrastructure construction and maintenance also remains an area where strong policies backed by funding and effective implementation are needed.

7.3 Recent Land Transport Policy

7.3.1 Market Entry and Competition Regulation

Present policy is for controls on the number and routes of commercial vehicles performing “hire or reward” road freight services to continue with National and Provincial Governments maintaining their present control over fares, in conjunction with ICCC, although this is contrary to the NTDP 2001-2010. Similarly, route licensing was proposed to continue for buses providing hire or reward passenger transport services on both urban and rural services, although the NTDP policy was for deregulation of rural PMVs.

The need to continue route licensing for road freight and for rural PMVs have been reviewed in the new land transport policy statement in favour of regulating by quality and national ownership attributes and otherwise allowing open market competition. Route licensing for urban PMVs will be continued, but the policy details require ongoing review and monitoring to better provide safe, reliable and sustainable urban transport services.

7.3.2 Protection of Road Corridors

Targeted legislation has been enacted for the designation and classification of all roads and to create appropriate offences and penalties to protect road corridors against encroachment, obstruction and unlawful requests for compensation or other payments. The NTS policy recognises that this legislation provides a strong legal mechanism for assuring access by the transport sector agencies to land and water space required for infrastructure development. However, there are steps to be taken to operationalize the legislation, and some of the more forceful legislative provisions may prove difficult to apply in practice.

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7.3.3 Community Assistance Policy

The District Road Improvement Program (DRIP), and the subsequent District Services Improvement Program (DSIP) were initiated with the objective of improving rural road access to remote and isolated populations and to open up agricultural land for productive use. These were recognised as the CSO component of land transport in the existing policy. The Transport Infrastructure Maintenance Grant (TIMG) from national to provincial government also recognises the extent of the sub-national road network and makes a contribution to maintenance costs.

The NTS policy aims to streamline and improve the management and acquittal of government funds provided to assist communities to develop and maintain infrastructure at provincial, district and local level. The aim is for a more transparent system that is responsive to local priorities and applies an appropriate level of technical, financial and administrative management through partnerships between the national agencies of DOW and DOT, the provinces and districts, and NGOs.

7.4 Recent Maritime Transport Policy

7.4.1 Regulation of Market Entry and Competition

Existing policy is that all controls that regulate the number of coastal vessels trading on specific routes within PNG waters be reviewed with the intention of encouraging competition while maintaining strict control over the safety and security of all PNG registered vessels and monitoring the total number of vessels trading in these waters. The current practice of generally prohibiting overseas vessels from carrying domestic cargoes (cabotage) is also to be reviewed. It was intended that alternatives to the coastal licensing and permitting scheme would be considered such as direct chartering of vessels, with or without crew (bareboat and demise charters), from national and potentially foreign ship owners.

This regulatory review was not completed within the term of the NTDP. An initial review was carried out during the preparation of the NTS. However, further consideration is still needed in view of the potentially detrimental effects on the domestic shipping industry from inappropriate or premature deregulation of this market. The policy statement for Maritime sets out the conditions within which further deregulation will take place.

7.4.2 Community Assistance and CSOs

PNG Ports Corporation operates under a regulatory contract with the ICCC that requires it to maintain specified minimum service standards and to provide essential port services to all of the declared ports under its ownership, with an approval process for port closures if no longer required by users or if alternatively provided in the same location. There is a regulated schedule of maximum tariffs that divides ports into two groups, the generally larger and more profitable ports, and the less profitable ports for which a marginally greater tariff can be charged. Arrangements through to 2014 provide for a higher rate of increase on the tariffs to this second group of ports with the aim of more closely aligning revenues with costs at each port, rather than the almost level tariff (postage stamp pricing) that has prevailed to date, with its inherent cross-subsidy. The real increase in maximum port tariffs allowable under the regulatory contract, if fully implemented, will provide for 10% and 20% annual tariff growth for the two port groups, which should allow the port company to recover costs on the commercial ports.

The NTS recognises the existing contract arrangements and the aim of increasing the overall commercial viability of PNG Ports’ operations. A general policy for delivering CSOs through Government agreements with SOEs across all sectors is under development but has yet to reach firm conclusions applicable to PNG Ports’ situation. The NTS also recognises the desirability that each main commercial port be capable of independent accounting and management to facilitate possible future PPP investment.

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The Community Water Transport Project (CWTP) delivers community assistance through providing new infrastructure in minor coastal and river jetties and landings, and subsidised shipping services under a competitive franchise scheme. The NTS sets out a strategy for putting the infrastructure and operations developed under the CWTP and other jetty construction programmes on a long term sustainable basis for operation, maintenance and renewal. The ownership and upkeep responsibility for the infrastructure is clarified and the funding for the service subsidies become part of an overall community assistance policy and delivery structure.

7.5 Existing Civil Aviation Policy

In addition to the 2009 Ministerial policy statement, the Civil Aviation Policy 2000 was prepared at the time of the legislative changes in the sector that gave rise to the Civil Aviation Act 2000. Aspects of this earlier policy are also listed below where they have not been superseded by later statements.

7.5.1 Market Entry and Competition Regulation

There is an “open sky” policy of full competition on all domestic routes with airlines being permitted to use aircraft of their choice on these routes, subject to safety and airport capacity and capability requirements. This is continued in the new policy statement.

A phased approach to competition was adopted, first allowing free competition on international routes, followed by free competition on domestic routes by national owned airlines and finally entry of foreign operators into the domestic market, which has not so far been permitted. Fifth freedom rights to foreign airlines were promoted when in the economic interests of PNG. The policy committed to continuing support for the APEC and Forum policies and the Forum States’ plans for joint deregulation within their group of countries.

Bilateral air services agreement were to be negotiated incorporating features of: multiple destinations; multiple carriers; airlines to determine capacity; “double disapproval pricing” of airfares; liberal charter arrangements; and practices that support fair and equitable competition.

Non-scheduled air services for the carriage of passengers, freight and mail were to be decided on a case-by-case basis, having regard to the need to strike a balance between the commercial interests of the existing operators in the market and those of the non-scheduled operator and their clients, while taking into account the overall economic interests of PNG.

International non-scheduled services of a regular or periodic nature conducted by a majority foreign operator were not to be approved unless authorized by law or permitted under an agreement with the Government.

7.5.2 Foreign Ownership in Aviation

Under the existing policy, foreign-owned companies operating domestic scheduled services were given five years to achieve majority PNG citizen ownership, which had been met for airlines operating at the end of 2010. The foreign ownership of Air Niugini was also limited to a maximum of 49%.

The ICCC has studied market competition in domestic civil aviation and found that domestic air fares are competitive against international benchmarking and there is no evidence that the domestic market is suffering from a lack of competitive interest as a consequence of the ownership policy. Consequently, there is no pressing requirement to open up the domestic market to competition, and the policy statement for aviation retains the requirement for majority national ownership.

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7.5.3 Price Control

Price control over domestic air fares was lifted as part of the Civil Aviation Policy 2000. There is no price control over international airfares and freight rates and air fares remain undeclared under the ICCC Act although the power remains for this to be imposed should the situation change. Periodic review by the ICCC has shown air fares these to be competitive, and the future policy statement makes no change in this regard.

7.5.4 Community Assistance and CSOs

The existing policy articulated in the NTDP was that Government should fund: (i) 75% of all upkeep and improvement costs at the 21 national airports, excluding PMIA; (ii) 80% of the operating costs of inspections, audits and regulatory functions now largely performed by CASA; and (iii) an unquantified amount for rural airstrips inaccessible by road through DRIP, now DSIP. This was a more definitive policy than that adopted in year 2000 which envisaged a system of local airport authorities with CAA acting as a collection agent for landing fees to be held in trust for expenditure on the non-commercial airports.

To the extent that Government has supported national airport maintenance and upgrading through budget appropriations to the CAA and, more recently to NAC through the CADIP, the policy has been implemented in respect of national airports.

With the restructuring of the CAA into three agencies, there is a need to consider the extent to which NAC and PNGASL take on CSO responsibilities on behalf of Government for the infrastructure under their ownership, and how such responsibilities are reflected in the tariff structure for airport and air navigation services. The NTS also sets out a policy for the ongoing management, funding and maintenance of the airports and rural airstrips not under NAC ownership under the new civil aviation structure.

7.6 Recent Policy on Modal Integration

The aims of modal integration as set out in the NTDP 2006-2010 are to adopt common policy principles across the transport modes and to harmonize the provision of infrastructure, freight and passenger services so that:

 there is efficient inter-modal transfer and matching of capacity at the modal interfaces, such as between sea and road at the port interface and between air and road at the airport interface;

 there is integration of service provision to remote areas so that communities receive a service by at least one transport mode; and

 coastal and river landings are linked by access roads into the immediate hinterland; and similarly there are road linkages for rural airstrips.

The policy statement on modal integration builds on these three themes in the context of provincial transport planning and the funding of local transport infrastructure and services, including through policy on CSOs.

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8 Statement of Overall Sector Policy

8.1 Public and Private Sector Roles

8.1.1 State to Retain Ownership of Core Transport Assets The state will retain ownership of the core transport infrastructure, including all of the public road network, the 14. Ownership of Assets - The public ports and airports serving significant centres of Government will retain population, including the declared ports under PNG Ports ownership of the national roads, Corporation Ltd and the airports under National Airports ports and airports and the Corporation, and the airways and maritime navigation supporting air and maritime systems. navigation infrastructure.

Private ownership and development of new transport and Privately owned facilities may be related facilities within the main ports and airports will be established within the permitted within the prevailing regulatory framework and boundaries of the main ports in accordance with port and airport master plans. and airports in accordance with Privately developed and operated airports and ports to their master plans and the serve specific economic development, such as mining, oil prevailing regulatory framework and gas and large scale agriculture will continue to be permitted, provided they meet all regulatory standards and requirements.

8.1.2 Public Private Partnerships The mobilisation of private finance through public private partnerships (PPPs) is recognised by Government as a 15. PPPs - Private financing of potential additional source of funding for major transport infrastructure through public infrastructure developments which meet the necessary private partnerships (PPPs) will criteria, to be developed under the National Public Private be considered for new transport Partnership Policy 2008 by the proposed PPP Centre in infrastructure on a case-by-case conjunction with the responsible transport sector basis. agencies. The long-term ownership of all Papua New Guinea is a new entrant to PPPs, and any of transport assets remaining with the transport agencies contemplating such an or reverting to the Government arrangement must proceed with due care and take advice and its state owned enterprises. from the PPP Centre or other independent, knowledgeable and experienced source, to avoid the PPPs must demonstrate value many pitfalls. for money and clear advantages to PNG over conventional In general, a PPP requires technical and financial funding mechanisms of direct feasibility studies to be carried out to a much higher level Government appropriation or of certainty to give a “bankable” PPP proposition than are pay-as-you-go user charges. required for normal government budget funding. Studies are likely to be carried out separately for Government and the private consortium and are used by each side in the contract negotiation process. If the Government’s information is limited or uncertain, its ability to negotiate a fair contract will be affected.

Private capital is generally more expensive than Government’s own borrowings through the international debt markets or through concessionary loans from the multinational development banks (World Bank and ADB) and bilateral government-to-government arrangements. This is particularly the case if the capital is borrowed through individual agencies of Government on their own balance sheets and asset base, rather than being underwritten by the State. Also the Government’s borrowing capacity is limited, particularly in the present global economic climate, and

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there is a risk that higher cost borrowing may crowd out opportunities for lower cost borrowing for another agency in another sector.

Private financing is useful to bring on stream wealth-generating infrastructure at an earlier date than might otherwise have been possible. However, it expands the Government’s borrowing and debt exposure, and influences the Government’s capacity to take on borrowings from other sources, so has to be used sparingly and only for projects with high financial and/or economic return.

PPPs may be considered for the establishment of new main port and airport infrastructure, and possibly, although less likely, for selected road projects, with Government retaining development planning and regulatory controls. Where new facilities are developed using PPPs under a Build Operate Transfer (BOT) or similar arrangement, ownership will either remain with the Government throughout or will revert to Government at the end of the concession period.

Arrangements where the public agency contracts with a private company (or with a foreign state- owned company) to both finance and construct a project on a sole-provider basis introduces risk that the project may be over-priced and leaves the public agency beholden to the private company which makes it harder to ensure good quality delivery and ongoing maintenance of the asset. It is better for the financing and the delivery to be completely separate or at least that there is an effective competitive tendering process for such PPP arrangements.

Care must be taken in the currency denomination of the borrowing, and the calculation and payment of interest, particularly if over an extended term. If the denominated currency appreciates with respect to the PNG kina over time, the effective borrowing cost increases and could become unsupportable. Also, the need to hedge against such risks must be considered.

8.1.3 Outsourcing by Government Transport Agencies The transport agencies owning, managing and regulating the national transport infrastructure are encouraged to 16. Outsourcing - The competitively outsource services delivery under contracts Government transport agencies with the private sector where cost-efficient to do so and will competitively outsource without compromise to performance standards. This services delivery to the private includes: civil engineering design, construction and sector where this is cost-efficient maintenance works; network management and monitoring and does not compromise the activities; vehicle, driver, operator and transport training, core competencies of the sector testing and licensing services delivery. agencies

However, it is important that these agencies maintain core competencies in their technical fields of operation and the ability to respond to service needs in situations where the private sector is not able to deliver, such as for certain emergency reinstatement of damaged infrastructure and in remote areas where private sector capacity is absent or uncompetitive.

8.1.4 Development of the Private Sector The Government wishes to encourage the development of PNG citizen and national owned companies through 17. Development of the private providing opportunities to participate fully in the transport Sector - The Government will sector. Where existing private sector capacity is yet to be actively assist the development developed, partnership with overseas companies is of PNG national firms and recognised to be necessary to meet PNG’s development individuals to increase their goals. The Government transport agencies will be participation in the transport supportive of the development of the domestic private sector. sector in engineering design, construction and allied services, through suitably packaged contracts, assisting a predictable and even flow of construction and maintenance work, and through term contracts for asset maintenance.

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8.1.5 Government Competition with the Private Sector National and provincial government agencies will generally not engage directly in engineering construction Government Competition - and maintenance activities through use of their own The Government transport forces, in the operation of transport services or in the agencies will generally not ownership of plant, equipment and transport vehicles, so directly participate, through use as not to crowd out the private sector. of their own resources, in transport infrastructure The Government however recognises that due to construction, maintenance or in remoteness, thin markets, and lack of financial and the provision of transport technical capacity, it is not always practical to rely on the services. private sector for provision of infrastructure engineering and transport operations services. There will be a policy Exceptions will be made in of careful intervention by the public sector where these specific situations where private conditions exist for the purposes of: (i) supplying a sector capacity does not exist demonstrated need where there is no private sector and cannot reasonably be interest; (ii) providing competition on a commercially developed. costed basis where the private sector is uncompetitive through a monopoly or market dominant situation; and (iii) Government and provincial facilitating centres of technical capability and resource agencies outside of the transport sharing in remote areas. sector will similarly be discouraged from operating Examples of public sector provision in such situations are: subsidised or free transport  Establish and maintain construction plant and services that crowd out or transport depots in rural districts, allowing undermine the private sector. equipment to be hired to local contractors at commercial rates; such depots to be self- Where there is a shortage of accounting units with the possibility of eventual private sector supply of transport privatisation; services, such as on thin routes and remote areas, the  Maintain a public sector capability for undertaking community services obligation construction and maintenance work at rural district (CSO) mechanisms will be used level for the purposes of (i) providing a first to fill gaps, where this can be response capability for emergency reinstatement done at acceptable cost of damaged infrastructure (slips, washouts etc.); (ii) engaging in small scale construction and maintenance work where there is no private contractor interest or where there is evidence of uncompetitive pricing. Such capability may be established within those transport agencies with an engineering capability (DOW, PNG Ports, NAC and some provincial governments) but as arms-length self-accounting entities operating on a commercial basis;  Assist the establishment of transport enterprises through underwriting the provision of seed capital for transport equipment or by purchasing transport equipment and making it available for hire at commercial rates;

In response to the needs of remote communities, some provincial governments and ministers in their electorates have assisted in various ways the establishment and operation of transport services, most frequently coastal small boat services. This includes purchase of vessels, arrangements for gifting of vessels from overseas donors, and operation of services at reduced or zero tariff. Other Government agencies outside of the transport sector have also become involved, such as the Border Development Authority and the DNPM. Freight rate and passenger fare subsidies are other ways in which financial support has been proposed. Government and provincial agencies should avoid acquiring vessels, aircraft or road vehicles and either operating these directly or contracting their operation at less than fully commercial terms, including amortization of the equipment’s market value. Apart from potential unsuitability of the

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transport equipment, whether through safety compliance or operational suitability, such initiatives undermine the local transport market. Such government subsidised competition should not occur in areas where there is an existing competitively priced private sector service or on thin routes in opposition to an established competitive franchising scheme such as CWTP. Where Government or provincial agencies wish to assist transport services in remote areas, this can be done through supporting new private sector entrants to participate in the CWTP or to supply commercially competitive services.

The NTS policy is that all financial or in-kind support to non-commercial transport services should be coordinated for best use of scarce resources, encouragement of private sector entrepreneurship, and equitable service delivery within and between provinces.

8.2 National, Provincial and Local Level Government Roles

8.2.1 Provisions of the Organic Law and Other Legislation Over the past 15 years, Government has devolved 19. Organic Law - The National functions and powers to provincial and local level Transport Strategy supports the governments through the Organic Law on Provincial division of roles between Governments and Local Level Government. national and provincial The legislative powers and administrative responsibilities government as established by of provincial and local level governments are set out in the Organic Law. the Organic Law. In addition, the Organic Law provides for Government to delegate certain functions that it Certain institutional, legislative exercises to provincial governments, on a general or and administrative changes are selective basis. proposed to provide for the more efficient and effective discharge Provincial governments have powers: to impose fees for of responsibilities and motor vehicle registration licences; impose charges on administration of the transport users of non-national roads (defined as road user taxes); sector between national, and fees for the registration of non-traditional commercial provincial and local levels. vessels under 10m length. National roads are those declared under the Road Maintenance Act 1971, all These include matters of sector others being by implication, the responsibility of provincial funding, user charges and asset or local level governments. Provincial governments have transfers described late in the not been given law-making powers in respect of transport NTS or transport infrastructure. Under the inter-governmental financing arrangements that came into full effect in 2009, provincial governments receive a series of grants that are designed to encourage self-sufficiency, to reflect each province’s financial capability, revenue sources and level of development, and to address economic and development disparities between provinces. These specifically include disparities that may result from a lack of infrastructure or poor state of repair of infrastructure. The structure of grants also take account of development needs which may include: the wealth of the population; health indicators; education levels; remoteness; potential threats to food security; and any other factor. The structure of the legislation and framework for inter-governmental financing is therefore well-developed and is able to be used as a flexible tool of Government’s economic and social development policies for infrastructure funding at sub-national level. The Secretary of the Department of Transport, as the Superintendent of Road Traffic, has delegated various functions of motor vehicle, driver licensing and transport services licensing to provincial government administrations which now rely on revenue from these functions as part of their income.

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Under the Harbours Act, the Departmental Head with responsibility for Transport has the power through gazette notice to declare any port a “declared port”. Once declared, the responsibility for the port infrastructure lies with the Departmental head and this has been delegated to the PNG Harbours Board, now the PNG Ports Corporation Ltd. All other non-declared ports are either privately owned or in provincial or LLG ownership with management and financial responsibilities resting with the owners.

Schedule 2 of the Civil Aviation Act 2000 lists the airports originally under the control of CAA and now transferred to NAC, with the legislation allowing the Minister to establish other national airports either owned by Government or on a joint venture basis. Some airports not on the schedule that were originally national assets have been transferred to provinces. Provinces are able to establish airport authorities under the legislation, which gives them powers to manage airports and collect fees for airport services.

The policy provisions of the National Transport Strategy have been developed to be in accord with the Organic Law and with the above established arrangements for owning and managing publicly- owned transport infrastructure at national, provincial and local levels of government.

8.2.2 Giving Effect to Vision 2050 – Asset Transfers Except where declared as national assets, provincial governments have the primary responsibility for planning, 20. Asset Transfers - Over the developing and funding transport infrastructure at period of the NTS, the more provincial level. However, they have not been provided important provincial roads, ports with sufficient financial resources to undertake this task and airports will be declared as effectively and their technical and administrative capacity national assets and become the to do so is, in many cases, very limited. They have been funding and maintenance assisted in their task by central government agencies, but responsibility of the Government such assistance has at times been informal and without transport agencies. cost recovery. Declaration of transport Vision 2050 has set out Government’s intention to bring infrastructure as national assets 25,000 kms of the public road network under DOW will recognise the technical and ownership for more effective management of financial capacity of each maintenance, upgrading and new construction. As province to maintain and institutional change progresses in the road sector, the develop its transport network National Road Authority will become increasingly and will aim to better align responsible for funding (from road user charges), technical capacity and funding managing and maintaining a core road network of about availability between national and 8,000 kms once this is brought up to a good maintainable provincial level in each transport standard. mode.

This policy recognises the present imbalance between This policy will also be the limited funds and capacity available to the provinces contingent on the development compared with national government. It will require over of user charges funding at the period of the MTDP and NTS that some 17,000 kms national level and the of new links and upgraded provincial roads become progressive transfer of the core declared national assets and the responsibility of central national road network to the government in regard to funding. There will still remain NRA. approximately 12,000 kms of road under Provincial and LLG ownership, but down from the present approximately 20,000 kms.

In order to maintain a consistent approach across the transport modes, Government will also review the maritime and air transport infrastructure that are currently provincial and LLG assets, with the intention of declaring the more important of these as national assets bringing them over time under

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the ownership of PNG Ports Ltd and National Airports Corporation, to better align technical capacity and funding availability between national and sub-national level in these modal subsectors. Conversely, some national assets that have become less used, may revert to provincial or local ownership, or be closed.

Conditions for bringing specified provincial transport assets under national control will include:  assurance of sustainable funding for asset maintenance from national government budget appropriations, including funding of recognised CSO obligations where these exist;  agreement by the provincial or local level government owners of the assets to be transferred;  the development and ongoing maintenance and operation of the assets will conform to the provincial development plans and transport plans.

8.2.3 Management Agreements for Provincial Transport Assets The national level transport agencies of DOW, NRA, PNG 21. Management Agreements - Ports Ltd and NAC have the best-developed technical It is recognised that many capability for management of transport assets for roads, provinces have limited technical ports and airports. Similarly the NMSA and PNGASL have and management capacity for these capabilities for maritime and air navigation infrastructure planning, infrastructure. While some provinces are relatively development and maintenance. advanced in their asset management capability, others are not. The human resources available within the state The Government will encourage sector in professional engineering and technical trade provinces in this situation to skills is limited, susceptible to leakage to the private enter into management sector, and these resources need to be conserved, agreements with the transport developed and used to best effect in the national interest. sector agencies on a fee-for- Accordingly, a policy of the NTS is to make the technical service basis to act on behalf of knowledge and management capability within the national the provinces as asset agencies available to assist provincial governments managers for provincial roads, through establishment of regional and provincially based ports and airports. centres of expertise, combining national and provincial resources to provide for management of transport An aim of this policy is to infrastructure assets at sub-national level. coordinate and concentrate technical resources in the It is envisaged that management agreements will be made provinces to provincial or between provincial government and the relevant national regionally based centres of agencies for the management of provincial transport expertise, to make best use of assets on a fee-for-service basis, consolidating the various the combined provincial and channels of funding at provincial and local level and national resources to better making the national agencies responsible for the best manage transport assets at sub- application of the funds to maintenance and capital national level. projects for local roads, small wharves and jetties and provincial airports and rural airstrips.

8.2.4 Delegations of Motor Vehicle and Driver Licensing Where the Superintendent of Motor Traffic has delegated 22. Delegations - The existing responsibility for motor vehicle registration, licensing and delegations to the provinces of driver licensing to provincial governments and, in other motor vehicle registration and cases to MVIL, these delegations will remain and be licensing will be formalised formalised where necessary in legislation to be prepared. through legislation with obligations and responsibilities on each side.

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Provinces will retain the revenue from these activities as a fee-for-service.

Provinces and the MVIL will collect accurate records of licences issued and make returns to the Department of Transport for statistical purposes under the provisions of the Transport (Collection of Information) Amendment Act.

8.2.5 Road User Charges Collection Under the National Roads Authority Act, the NRA is 23. Road User Charges responsible for maintaining certain national roads with Collection - The provinces and revenue derived from road user charges, these being MVIL will act as collection charges on fuel and vehicles. The provinces and MVIL agents for vehicle-based annual will in future be required to act as collection agents for charges under the road user the NRA for the vehicle-linked component of these charges provisions of the annual charges, on a fee-for-service basis. National Roads Authority Act.

8.3 Market Entry and Competition Regulation Transport policy will continue to be one of market liberalisation, recognising that restrictions on market 24. Market Entry - Government entry can reduce incentives for cost efficiency through will continue with its existing lack of competition, excessive profit margins and high policy of liberalisation in the prices. Apart from situations where there is a need for domestic transport market to certainty and stability of service provision, Government encourage competition, will not regulate market entry or the routes and traffic to regulating primarily for safe be carried by domestic transport operators. Government operation, service quality and will regulate only for safe operation, service quality and fair pricing. fair pricing. 25. Foreign Competition - The PNG transport sector is already well down the track Selective protection of the of liberalisation so further relaxation will be subject to coastal shipping and domestic tests and safeguards against unintended and unwanted aviation industries will remain, consequences. as discussed under the modal policies Present transport regulation requires road freight operators and domestic shipping operators to hold transport services licences based partly on the size of the market and the services provided by incumbent operators. In future the policy will be, where economically beneficial, to remove quantitative transport licensing for hire-or-reward transport services subject to the following:  safeguards against monopolistic and market dominant behaviour;  safeguards against competition from directly or indirectly subsidised services, such as from public funding or “free” provision of transport equipment and services, except as provided for under the CSO policy;  assurance of acceptable levels of service quality, safety and security;  good character, financial competence and long term intention of new operators;  that the delivery of transport services to communities not able to sustain commercial services is not compromised by market competition;  ensuring reliable and orderly public passenger transport services in urban areas;  fostering the development of a PNG citizen-owned companies and PNG citizen skills base in the transport services and supporting industries and participation at all levels.

The Government will retain the option of prohibiting or selectively regulating overseas transport operators who wish to operate in the PNG domestic transport market by linking their international services to, from or through PNG with the carriage of domestic passengers or cargo, where the

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economic benefits of such competition are likely to be outweighed by the economic and social costs to the local industry, employment and the PNG economy in general. Specific policies are set under Section 12 Maritime and Section 13 Air Transport.

8.4 Cost Recovery and User Charges The transport sector does not recover its full costs through charges made to users. Operational costs of the main ports and airports are largely recovered, but maintenance costs of infrastructure across all modes are only partly recovered and capital expenditure on infrastructure is almost entirely unrecovered.

Almost all capital expenditure for roads, ports and airports is administered through Government with the ultimate sources of funding being from Government’s general revenue or from grant and loan funding by bilateral donors and the multinational development banks. The channels for Government funding of transport infrastructure are: (i) direct appropriation to programmes and projects of Government departments, statutory authorities and SOEs; (ii) through inter-governmental funding arrangements to provinces, districts and local level government councils; and (iii) through the tax credit scheme and other arrangements with landowners and Government where private companies fund transport infrastructure as part of overall resource development agreements.

The reliance primarily on National Government appropriations for funding, which have been limited and variable, has resulted in decades of under-investment in the transport infrastructure, well below the level that would minimise the total economic cost. This underfunding of infrastructure has caused much higher costs to fall on transport operators and users than would otherwise have been the case. The high costs to transport operators and users has increased the costs of goods and services and constrained growth in productive sectors of the economy, particularly in the agricultural sector and for business development.

Any public costs not recovered from transport users must 26. User Charges - The either be met from general revenue, limiting the Government will, over time, Government’s scope for funding other programmes, or reduce the proportion of require a higher level of general taxation, from income, transport infrastructure and corporate tax, value added tax and duties which has a services costs that it funds dampening effect on the economy. Consequently it is directly through Budget desirable that, where possible, cost recovery be from appropriation in favour of within the transport sector, subject to considerations of transport user charges user affordability, minimising evasion and avoidance, transport investment as an agent of national and regional 27. SOEs to Operate economic growth and the delivery of basic transport Commercially - The transport access to rural communities. SOEs and statutory authorities The Government will aim to increase the proportion of will be required, to the maximum publicly funded transport infrastructure and services costs extent possible, to operate on a that are recovered from transport users, either by direct fully commercial basis and with charging for use of the services provided or indirectly a minimum of price regulation through levies on vehicle, operator and services licensing, provided that the CSO compulsory insurance and purchase of vehicles, spare obligations of each SOE are parts and fuel. explicitly recognised and are separately funded. For Government owned transport organisations under the IPBC, the objective will be that these operate 28. International Obligations - commercially, with any CSO obligation recognised and Certain international obligations separately funded, and with a minimum of price limit cost recovery in regulation. For the regulatory agencies, the extent of cost international transport by the recovery from user charges will be case-specific and will regulatory agencies in aviation and maritime and exceptions will be made in such cases.

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be influenced in some cases by international agreements to which PNG is a signatory and the public good element of the services.

It is recognised that this policy objective will take some time to achieve, particularly in the roads subsector, and the NTS sets out an action plan and time frame.

8.5 Priorities for Call on Available Funds However good the forward planning, the financial circumstances of Government and its agencies change and are not fully predictable. Planning will have identified transport investments that exceed the available funds, and decisions have to be made on the priorities for spending if and when the expected funding is not available.

Investment in infrastructure can be classified into types of work: maintenance (in various categories described below); upgrading which involves improving the standard of design; and new construction - creating assets where none previously existed.

8.5.1 Maintenance Maintenance is classed into the following groups:

 Emergency reinstatement – as its name suggests, emergency maintenance and reinstatement involves either the loss or extreme degradation of service of a transport facility; as discussed elsewhere, provision will be made to accumulate funds for emergency works so that these can be called upon when needed so as not to draw funding from planned work;  Routine maintenance and operation – the day-to-day costs of operating and maintaining transport facilities, which are usually relatively low level but continuing costs that, if attended to regularly, will offset or delay more costly heavy maintenance;  Periodic or specific maintenance – needed at intervals of years to restore service levels of the infrastructure;  Rehabilitation – needed at longer intervals, involving partial renewal of parts of the facility that are subject to traffic-based and environment-based long term degradation, but short of full renewal or reconstruction; and  Renewal and reconstruction – needed when facilities reach the end of their economic service life, or are damaged beyond economic repair

An asset manager such as DOW, PNG Ports or NAC will aim for a maintenance regime that combines these various types of maintenance to give the most cost-effective outcome over the life cycle of the asset, taking account of expected traffic growth and escalation in input costs.

For facilities that handle low levels of traffic, the asset management regime will be that which preserves the minimum agreed levels of serviceability at the lowest cost to the agency. This may involve maintenance costs that cannot be recovered from either user charges or are viable when compared to the economic benefits, in which case there is a CSO component to the maintenance of the asset. For infrastructure handling levels of traffic which render the facility economically viable, the asset manager may choose to maintain the assets at a level that minimises agency costs if funds are constrained, but should aim for a level of provision that maximises the net national economic benefit by minimising the costs to users and the agency combined. In Papua New Guinea the past experience is that assets have not been maintained either at a level that maximises national economic benefit or even minimises agency costs, as large amounts of deferred maintenance have been allowed to build up, requiring more costly later intervention.

The implication of not fully funding lifecycle asset maintenance at the optimum level while at the same time still making investments in upgrading and new infrastructure is that some existing assets

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will be allowed to deteriorate or will be closed and abandoned. This is only justifiable if the new assets are greatly superior to those being discarded.

8.5.2 Upgrading Upgrading involves improving the design standard of the asset. For a road, examples are widening, realignment, surface sealing and strengthening to carry heavier loads. For airports, upgrading can involve adding or widening taxiways, increasing apron areas, lengthening and strengthening runways, either to carry larger aircraft or to provide for higher throughput. For ports, upgrading can involve 29. Order of Funding Priority - deepening and lengthening of berths, increasing and will generally be: strengthening wharf working and storage areas and new  Emergency reinstatement or additional handling equipment such as cranes.  Upgrading of essential Upgrading is required in some cases to satisfy infrastructure required to international standards and conventions to which PNG is meet mandatory standards signatory. These are mainly in aviation but also  Maintenance of existing increasingly in maritime and relate to safety, security and infrastructure assets environmental protection. These are noted as “upgrading to meet mandatory standards” in Section 8.5.4 below.  Upgrading of existing infrastructure assets Upgrading to satisfy a minimum policy standard that  cannot be justified economically involves a CSO Construction of new infrastructure component, as discussed below. Certification upgrading may involve a CSO component if the work required does 30. Maintenance - should be not produce identifiable economic benefits to justify the fully funded across the network extra costs; for this reason certification requirements before considering any should be sensitive to the scale and use of the facility, so upgrading or new construction; that onerous costs are not imposed unnecessarily on Funding of asset maintenance small facilities, such as provincial ports and airports. should be at a level that 8.5.3 New Construction minimises total transport costs (maintenance + transport user New construction involves expanding the transport costs) over the lifecycle of the network, by additional road length, new ports and asset; landings, new airports and airstrips and new associated navigation infrastructure. Failing this, the aim should be to minimise asset maintenance The functional classification of the transport network (in costs over the lifecycle of the Section 20) draws a distinction between infrastructure asset. that provides the main or sole access to an area and 31. New Construction - funding infrastructure that adds cross-connections between provinces and districts. In terms of priority, all else being should prioritise provision of equal in terms of the size and importance of the area primary access to rural areas over the provision of secondary served, the first call on funds should go to infrastructure that provides the primary means of access to an area or cross linkages over that which provides a secondary link. 32. CSO Funding - Projects that serve basic access but which do New construction projects should achieve a benefit/cost not achieve a BCR of 1.0 will be ratio greater or equal to 1.0 for economic viability. considered under CSO funding Projects that are required to satisfy policy on basic levels policy of access but which have a BCR less than 1.0 will be dependent on CSO funding support to proceed.

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8.5.4 Order of Call on Funds The order in which calls on transport expenditure from a particular pool of funding will then be generally as follows:

 Emergency reinstatement  Upgrading required to meet mandatory standards  Maintenance of existing assets  Upgrading of existing assets  New infrastructure

The policy on funding priorities recognises that there are several pools of funding in the transport sector and funds are not fungible across the entire sector (i.e. the pools are separate with limited ability to swap funds from one area to another).

However, it is desirable that there should not be large discrepancies in the sufficiency of funding across funding pools, otherwise this will give rise to a sub-optimal allocation of resources. For example it is not desirable that one agency should have funds sufficient only for maintenance activities whilst another has funds available for new infrastructure. Similarly, it is desirable that the maintenance funding of a transport facility be drawn from the same funding pool as that for upgrading and new infrastructure, so that rational decisions are made for the upkeep of projects – for example if one agency is responsible for maintenance and another for capital development, and the former has insufficient funding while the latter creates new infrastructure without regard to ongoing maintenance costs.

8.6 Community Assistance, Subsidies and CSOs

8.6.1 Definition of the CSO and Policy Rationale In the context of this National Transport Strategy, the term community services obligation (CSO) is used in a broad sense as the extent to which Government is prepared or obliged, under its policies on social welfare and income distribution, to fund a shortfall in the economic viability of transport infrastructure or a transport service. As noted in Section 8.5, expenditure on maintenance, upgrading and new construction can each involve a CSO component.

The policy rationale for Government to fund a CSO, or require an SOE to deliver one, can be either:  the service is expected to develop demand over time to a level where it becomes economic which justifies a “start-up” funding injection by Government; or  the service will continue to be uneconomic but is funded for other reasons (for example a policy decision to provide a basic level of access to population concentrations of a certain size or to local level administrative centres)

As the second of these relies on a continuing subsidy which removes investment from alternative spending, the extent to which Government is prepared to fund long term sub-economic services becomes a matter of income redistribution and welfare policy as much as transport policy.

The reason for targeting social welfare objectives through transport spending is that the alternative of directly distributing benefits through the tax system may be impractical for the rural population, many of whom are not formally employed, and provision of direct financial benefits to the potential users of transport services (such as rebates or subsidies on passenger fares and freight) does not ensure that either the infrastructure or services will be available. Also, conventional benefit cost analysis seldom makes any allowance for differences in marginal utility of income (that the value in use of an extra kina to a poor person is greater than to a rich person).

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8.6.2 Definition of Economic Benefits In a comprehensive economic analysis of a transport investment, if the net benefits are less than the net costs, when discounted over an appropriate time horizon and public sector discount rate, then such a project would normally not be recommended for funding. Economic benefits include resource cost savings of vehicle operation, the economic value of travel time savings and improved reliability and can also include the social costs of transport accidents and the economic benefits from new induced production and travel demand. The economic benefits may include those to non- users of the services in some situations. They can be further widened to include a valuation for other non-market effects such as environmental impact.

In relation to the evaluation of economic benefits, the 2010 TIPS Study included what it referred to as “social benefits” as part of the economic benefits and for ranking of individual project by BCR. In this case the social benefits are an approximation for otherwise unquantified economic benefits from delivering social services such as basic education, health and access to markets to communities that do not have the ability to afford transport services at commercial rates. The rationale is that there is a national benefit to be gained in the long run by investing in a better educated and healthier population, and that this should be recognised by raising the priority of investment in transport services for otherwise disadvantaged groups.

8.6.3 CSOs and Transport SOEs For a state owned commercial enterprise (SOE), the CSO is generally recognised as the shortfall in financial viability of community services that the Government requires the SOE to provide under some form of charter or contract, either for a financial consideration or by internal cross-subsidy.

Financial viability applying to a Government commercial enterprise is therefore more narrowly defined than the economic viability of a CSO and requires that the transport investment recover its financial costs through revenue raised, discounted at an appropriate weighted average cost of capital (WACC) and over a time horizon related to the useful asset life, or other commercial investment target. The WACC is generally higher than the public sector discount rate and the time horizon shorter. Also, from the SOE’s viewpoint, financial benefits to non-users of the service are not a consideration.

To compensate an SOE for constructing and maintaining transport assets that do not provide a financial return to the SOE so as to avoid internal cross-subsidies, requires the Government to make available funds to bridge the gap between the costs of service provision and the revenues obtained. In doing so, Government must take account of the potential for efficiency gains in service delivery by the SOE and for increasing demand for the services.

8.6.4 Community Assistance and Sweat Equity The term “community assistance” is used in this NTS to refer to Government funding support directed at a local community, to supplement the community’s own funding efforts to pay for infrastructure or a service, in money or in kind. Community assistance is therefore another term for a particular form of CSO where the community indicates its support for the facility through a cost sharing arrangement.

Communities are encouraged to reduce the cost to Government through free supply of labour or materials to a project, so-called “sweat equity”, or through a financial contribution, enabling transport projects that would otherwise miss the cut-off for a CSO contribution to receive funding by being ranked higher in the priority order (see 8.6.6 below).

8.6.5 Quantum of CSO Funding and its Distribution In the NTDP, the declared policy was that 5% of transport funding should be allocated to CSO projects, although it was not clear whether this referred to the total project cost or the CSO component of cost. However, it is reasonable that this percentage should be relatively small, as

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any funds devoted to CSOs will displace funds that could otherwise be allocated to transport projects with a positive economic rate of return, at the level defined by the available funding envelope.

Ideally, the total quantum of CSO funds for the transport sector would be determined in advance through an annual review process, and would then be allocated by Government to those agencies responsible for delivering CSO investments. The NEFC may be a suitable agency to develop the framework and carry out the annual analysis, assisted by the DOT and transport line agencies with technical information.

8.6.6 General Policy for CSO Funding The overall policy for CSO funding proposed under the NTS is: 1. Determine the total quantum of CSO funding to be made available each year – this should be decided broadly by Government, but as a starting point, an estimate of the percentage of transport funding that can be classified as CSO support in recent years can provide a benchmark. 2. Broadly apportion the funds by transport mode and by funding pool, but taking account of the desirability of equal treatment across modes. 3. For existing transport infrastructure and for Government supported transport services, estimate the cost of the CSO component – that is the excess funding provision or “top up” that cannot be justified through economic benefits – as a percentage of the total cost 4. For potential upgrading, new construction and new transport service projects, similarly estimate the excess funding provision as a percentage of total cost 5. Priority rank the CSO projects by increasing percentage “top up” requirement – this will result in those projects that are closest to achieving a BCR of 1.0 having first call on funds. However, maintenance of existing infrastructure should still have priority over upgrading and then new construction. 6. Allow the beneficiaries of the spending to supply part of the funding either in kind (sweat equity) or in cash, to raise the project’s ranking to give it more likelihood of funding under the CSO policy. This is called the beneficiary contribution.

The ranking process for economically viable projects CSO Policy Summary: (BCR > 1.0) and CSO projects can be combined and is compatible with the TIPS methodology. The descending 33. Adopt a common approach order of priority is B / (C – beneficiary contribution). It is across transport modes and reasonable for the Government to include provincial level of government based upon government cost sharing as a beneficiary contribution to an agreed total of Government nationally funded projects, on the grounds that this is an CSO funding for the sector and indication of the local priority given to a project, which may method for apportioning to differ from the national priority. modes, agencies and projects 34. Each agency to provide a The CSO component of the project is (C – beneficiary prioritised list of projects seeking contribution – B). Note that the CSO component is not CSO top-up funding from the same as the CSO financial support which for revenue Government using TIPS earning (R) transport infrastructure is (C – R) and for non- methodology revenue earning infrastructure, such as local access roads, is C. 35. Allocate a portion of Government CSO funding on a Possible sources of CSO funding, other than through provincial basis using the TIMG direct Government appropriation are discussed under the and DSIP or similar mechanisms policy for each transport mode.

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8.6.7 Delivery of CSO Funding to Provinces It is envisaged that a portion of CSO funds would be allocated on a provincial basis, and that provinces would identify the transport infrastructure and services potentially eligible for a CSO contribution. At present this allocation is done through the TIMG and development grants such as DSIP which ideally would be combined into a single channel of funding to the provinces for transport infrastructure.

The agreed CSO funds to be applied to sub-national transport infrastructure would be allocated through the inter-governmental financing arrangements as grants for transport infrastructure capital and maintenance funding on a province-by-province basis. Each province would provide the NEFC and DOT in advance with a prioritised list of projects ordered by benefit/cost ratio using the TIPS methodology, showing which were proposed for funding in the year as economically viable projects and which we being proposed as partly CSO funded projects to meet basic access criteria, again ordered by CSO Policy Summary: BCR. 36. Allocate a portion of CSO funding to low volume national 8.6.8 Delivery of CSO Funding to National roads under DOW responsibility Roads 37. Provide external funding to Some national roads may be considered for CSO compensate SOEs for delivering funding. These are most likely to be low traffic roads an agreed level of CSO funding under the responsibility of DOW, where the minimum to sub-commercial national ports design standard corresponding to their functional and airports; this external classification and traffic level requires investment that funding to be either direct does not meet a minimum economic rate of return. Government allocation or raised through a wider industry levy, to 8.6.9 Delivery of CSO Funding to SOEs and be determined Statutory Authorities In the case of SOEs and statutory authorities which are 38. The CWTP franchise required implicitly, or explicitly through legislation/service shipping and jetty scheme will agreements, to cross-subsidise between their form part of the overall CSO commercial and non-commercial operations for delivery funding envelope of CSOs, these would in future be directly funded to the 39. Government will develop a difference between user generated revenues and the similar scheme for remote rural costs of provision of the infrastructure or service. The airstrips and services agencies to which this applies are PNG Ports, NMSA, NAC and PNGASL. As NRA is to be responsible only for 40. PNGPCSL and NAC will be core roads, these are unlikely to attract CSO funding. considered for managing the construction and asset There would be independent audit and some commercial management of rural jetties and incentives applied to encourage efficiency improvements airstrips respectively under a within agencies receiving CSO funding, with the aim of fee-for service arrangement; improving the commercial and economic viability of the 41. The establishment of a service provided through productivity improvements and Community Transport raising demand for the services, to reduce the CSO cost Infrastructure and Services Fund over time. will be considered to hold the CSO funds with allocations 8.6.10 Delivery of CSO Funding to Government- approved through DOT Subsidised Transport Operations Government currently provides CSO funding to water transport services under the Community Water Transport project (CWTP). The funding is delivered through a competitive shipping franchise scheme, where operators bid for a CSO payment to supply a service, the lowest conforming bid being accepted. This allows the service to be delivered at passenger fares and freight rates that are within the communities’ ability and willingness to pay.

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The NTS confirms the CWTP shipping franchise scheme as the method for delivery the Government’s CSO to remote coastal and river communities and is preferred to the alternative of a shipping freight rate/passenger fare subsidy scheme. A second phase of the CWTP will be operated through the first five years of the NTS and the scheme fully reviewed by 2015 for a decision on continuation, amendment or termination.

Services to remote communities accessible solely or primarily by air using small fixed wing aircraft and short bush airstrips exhibit very similar needs as do water transport services to remote coastal communities. At present there is no Government financial support for third level aviation to these communities but reliance on church-supported aviation services primarily through MAF.

The Government, through DOT in conjunction with NAC and industry stakeholders, will consider alternatives to provide CSO funding support to sustain third level aviation services to remote communities at a level comparable to transport services available to remote communities connected solely by road or by water transport. Alternatives could include combinations of a franchising arrangement, similar to CWTP, freight and passenger fare subsidies and subsidy of tariffs paid by air operators for air navigation and airport services. The development of CSO policy in this area will also consider the source of funds and the desirability of establishing a trust fund, similar to the CWTP as discussed below.

8.6.11 Funding Sources and a Proposed CTISF Sources of CSO funding may include direct Government appropriation through the annual budget but, to avoid the uncertainty of funding continuity, various other funding mechanisms will be considered. Ideally the various sources of CSO funding through DSIP, TMIG, cross-subsidies within the transport SOEs, CWTP etc., would be pooled into a single fund, a suggested name being the Community Transport Infrastructure and Services Fund (CTISF), and the apportionment to each transport mode and national/provincial level administered centrally, with technical advice from the transport and central agencies, and financial management through trustees of the Fund. It is envisaged that centralised administration of CSO funds with greater monitoring and accountability will achieve better value for money than the present system. This centralised CSO funding model will, over time, replace the rather fragmented approach to CSO funding that currently applies.

Payments from the fund would be authorised by the Department of Transport against programmes and acquittals of expenditure by those agencies charged with delivering infrastructure capital works, infrastructure maintenance and CTISF assisted transport services. The CTISF would be held under prudential management in a similar way to the Community Water Transport Fund. The CWTF may in fact become part of the CTISF. Grant assistance from PNG’s development partners would also be eligible for 42. Transport Corridor payment into the Fund. Protection:

8.7 Transport Corridor Protection and Land Develop implementation Acquisition mechanisms and protocols for the Protection of Transport The Government recognises the need to protect transport Infrastructure Act including: corridors for future development, to ensure that access to land, water and air space required for transport - Carrying out an audit of infrastructure is not compromised by development, and to land compensation procures give the owners and occupiers of land certainty regarding - Developing a Community Government’s future intentions. Economic Involvement and To this end the Government has enacted the Protection of Education Programme Transport Infrastructure Act 2009 to ensure that land - Developing a policing and required for all transport infrastructure (i) is available to be enforcement strategy used for national, provincial and local-level transport; (ii) is

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secure and protected; and (iii) is free from encroachment, deliberate damage and excessive and unjustified land compensation demands.

The practical implications of the new Act, implementation mechanisms and protocols will be developed by those transport sector agencies most directly involved in securing land and water space for transport infrastructure, namely:

 Department of Lands and Physical Planning  Roads – DOW  Main Ports – PNG Ports Corporation  Main Airports – NAC  Ground-based air navigation facilities – PNGASL  Ground and water based maritime navaids – NMSA

An audit of land acquisition and compensation procedures will be undertaken to ensure the Government is not inadvertently contributing to the problem by unjustly acquiring land for transport infrastructure projects and/or paying inadequate compensation. A Community Economic Involvement and Education programme will be designed to ensure communities and their leaders who live alongside or adjacent to land used for transport infrastructure projects are:  provided with an economic stake in the protection and maintenance of transport infrastructure through the development of construction and maintenance contracts with those communities;

 made aware of their responsibilities and rights concerning roads and other land used for transport infrastructure and the need to act accordingly; and

 held legally responsible for any breaches of the law concerning the traveling public and their use of the roads and other transport infrastructure.

A policing and enforcement strategy will be developed by DOT in consultation with the Police, that effectively respond to breaches of the law and thus provides ongoing protection for all transportation and related infrastructure.

8.8 Service Quality Standards and Monitoring Service Quality Standards: Transport service quality has suffered, particularly in land 43. Freight and passenger transport but also in maritime, from shortcomings in the services will include service regulation and enforcement of transport service quality. standards in licencing conditions This has been through a combination of lack of capacity 44. ICCC will retain a monitoring in the responsible agencies, equipment limitations, role for service standards in hire- funding limitations, unclear demarcation of or-reward freight and passenger responsibilities, outdated fines and penalties and transport services outdated legislation. 45. The Government Government’s policy will be to regulate transport freight infrastructure agencies (DOW, and passenger services carried out for hire or reward on a NRA, PNGPCL, NMSA and quality rather than quantity licensing basis, subject to NAC) will formalise and maintain certain safeguards (see Section 7.3.1). guidelines of good practice over The ICCC has a mandate to oversee service quality their area of operations based standards in publicly provided transport services, and a on international best practice as system for monitoring, reporting and improvement. applicable to PNG local conditions. Developing and enforcing quality standards for the

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design, construction and maintenance of transport infrastructure has been the responsibility of the implementing agencies, in particular the DOW for roads, PNG Ports Corporation Ltd for port infrastructure, NMSA for maritime navaids and CAA (now CASA, NAC and PNGASL) for airports and air navaids. These agencies have, from time to time, developed in-house guidelines and manuals for the purpose, generally based on international or other regional practice. Outsourced consulting and contracting services engaged by the transport implementing agencies have used a mixture of these in-house guidelines and recognised overseas practices. Government will seek to review and formalise these existing practices, to ensure that clear, consistent and Service Quality Standards: appropriate guidelines and standards are applied across 46. An oversight working party the transport implementing agencies and the private will be formed from the public sector. In doing so it will seek to form an oversight and private sector under CIMC working party drawing on the resources of the public and and IPEPNG auspices to review private sector, including the CIMC, the Institute of and endorse proposed industry Engineers of PNG, and engineering consulting and standards. contracting associations. 47. All transport agencies will be All transport sector agencies, including SOEs, will be required to develop measure required to develop, measure and report on key and report on KPIs for their performance indicators for their activities and for the activities and the performance of performance of the transport infrastructure, services and transport assets under their their use under their regulation, administration, control, including public management or service delivery. As part of the KPIs, satisfaction surveys agencies will be encouraged to carry out and publicly report customer satisfaction surveys.

8.9 Transport Safety

Transport safety has been a main priority in the NTDP and will continue to be an area of high priority with the Transport Safety: objective of continuous improvement. It is recognised that 48. Develop Safety transport safety has failed to achieve these objectives in Management Systems (SMS) in the past and that a major effort will be required for the each mode situation to be improved. 49. Develop safety databases This will be done through a number of policy initiatives and Safety Action Plans including: 50. Better coordination of safety  development, maintenance and continuous functions through reorganisation improvement of Safety Management Systems of responsibilities (SMS), including safety standards where these do not already exist and more effective enforcement; 51. An improved enforcement and penalties regime will  development of safety action plans in each improve safety performance transport mode backed by improved databases of accidents and incidents with monitorable targets 52. Additional financial and reporting of achievement; resourcing  some reorganisation of safety functions among 53. Government and industry agencies and improved coordination; safety training  an improved level of enforcement of existing 54. Improved first response, transport legislation, updated legislation and SAR and disaster management penalties regime; services  improved financial resourcing for safety; and

 Government, industry and driver/operator training programmes.

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 Improved first response capability to transport accidents, improved search and rescue and disaster management services and inter-agency coordination

8.10 Transport Security The Government is committed to ensuring that PNG complies with international codes for aviation and maritime security so that it maintains and enhances its international reputation and ensures that its international transport connections to key markets are not jeopardised. This requires that a high priority be given to funding of security infrastructure and operational programmes.

Transport security at the land borders is similarly Transport Security: important and the transport agencies will work in concert with the Border Development Authority to facilitate legal 55. Compliance with cross-border trade and guard against illegal movement of international air and maritime people and goods. security codes and investment priority for security-related Within PNG’s air and water space, the Government will infrastructure enhance the security of domestic and transit traffic, through improvements to air and marine navigation 56. Safeguards against illegal infrastructure and services and response systems for cross-border movement of people and goods incidents and emergencies. 57. Improve security of domestic Security is also an issue on PNG roads and public and transit traffic in PNG’s air transport where illegal road blockages, hold-ups, theft of and maritime space goods, intimidation and danger to travellers are too frequent occurrences. Effectively implementing the 58. Increased security Protection of Transport Infrastructure Act 2009 will go surveillance and response by some way to improving road security. DOT and, once RTA and the Police formed, the RTA, will also work with the Police, Justice 59. Personal and goods security Department and other central agencies and community as well as accident and injury groups to increase the level of security surveillance and reduction to be incorporated into effectiveness of response to incidents as they occur and safety action plans act as a deterrent. NRSC and the RTA will incorporate passenger and goods security into their safety action plans. 8.11 Transport Integration

In the past, road, air and sea transport infrastructure and services have developed largely independently. This Transport Integration: separation has been encouraged by the establishment of 60. Improve road approaches, the main ports and airports as SOEs required to operate new and upgraded links and on a commercial basis, while roads remain partly under local traffic management at the Government departmental control and partly statutory main ports and airports authority, with each mode having separate reporting responsibilities to Government. 61. Consider relocation of port facilities and inland freight The NTDP 2006-2010 identified the desire to move terminals in selected cases towards a more integrated approach to transport planning 62. Coordinated provision of in PNG. The establishment of the TSCMIC was a step basic access to remote towards closer coordination between the modal transport communities by either road, agencies, under the chairmanship of the Secretary, DOT. water or air In the NTS, the process of integrated planning and funding will be taken further by the following policies for the physical infrastructure:

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 integration of transport at the main gateways – the NTS aims to better coordinate the land connections with the main ports and airports, in particular Port Moresby and Lae ports, and Jacksons and Nadzab airport; existing arrangements are confined by urban congestion and new port facilities, selective port relocation and inland freight terminals are seen as part of the Transport Integration: solutions; 63. Provide appropriate  integration of basic transport access to remote standard road links to ports and areas – the NTS aims to coordinate the provision airports of basic access to remote communities, so that 64. Construct missing links all those of significant size are connected either between provinces for overall by road, sea/coastal jetty or rural airstrip, with network integration where higher priority given to those areas with fewer economically attractive and such connections; technically feasible subject to  in addition the NTS aims to better ensure that funding availability new or existing airports and ports are linked to local and district centres by roads of appropriate 65. Provide consistency of standard; design treatment along transport routes, with heavy traffic  where economically feasible and in agreement provisions suited to road with the MTDP, the NTS promotes new road function and nature of traffic linkages between the several separated road networks that exist in PNG; in particular 66. Balanced investment connections between the Highlands road system between roads, ports and centred on Lae and Mt Hagen with the Papuan airports in relation to benefit-cost coast centred on Port Moresby, linkages along performance the Momase coast between Popondetta, Lae, Madang, Wewak and Aitape, and connecting East and West New Britain along both north and south coasts.  There is also a need to ensure that PNG roads and bridges along the main economic corridors are to a sufficient structural and alignment standard to carry the heavy traffic generated by resource development and general freight demand, recognising that improved capacity will provide benefits in lower freight costs and improved road standards will give better reliability for import and export freight connections with the main ports.  In regard to investment, the TIPS Study 2010 has confirmed expectations that investment in ports has lagged behind investment in roads. A better alignment of priorities for infrastructure project evaluation across modes will give an improved balance of funding priorities in the future.

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9 Statement of Policy for Cross-Cutting Issues

9.1 Introduction

These are issues that cut across all infrastructure and resource development sectors of the economy. A number of them correspond to the Millennium Development Goals and all relate in some way to the objectives of Vision 2050 and the Development Strategic Plan.

This statement sets out how national policy for the following issues will be implemented through the National Transport Strategy. Detail of specific treatment is also given under the policies for each transport mode.

 Good governance and policies against corruption  Environmental protection and enhancement  Climate change adaptation  Poverty alleviation  Gender equality and women’s development  Control of communicable diseases, in particular HIV/AIDS

9.2 Good Governance and Policies against Corruption

The NTS notes Government’s intention to establish an Independent Commission against Corruption and the preparation of legislation to establish this body. Good governance involves measures to both avoid inefficiency and provide good structures for decision making and management as well as safeguards against deliberate attempts to subvert or corruptly influence or benefit from the decisions that are SOE and Statutory Authority made. Strategies for raising the level of governance in the Boards transport sector are discussed below. 67. Transport SOEs and SAs are not to operate without 9.2.1 Composition of the Boards of SOEs and appointed or elected board Statutory Authorities members as required in their Good governance of the sector requires appropriate top- legal establishment level institutional structures in the government 68. Governance boards should departments, statutory authorities and state owned include an appropriate mix of enterprises. For statutory authorities and SOEs, the technical, administrative and governance boards should be composed so as to bring legal expertise rather than the right mix of technical, commercial, administrative and political or departmental legal expertise to the board table rather than political or representation departmental representation. 69. Oversight of governance of For the SOEs in the transport sector the oversight of the SOEs to be through IPBC and IPBC will be the main means of ensuring good Auditor General governance of PNG Ports Corporation and Motor Vehicle 70. Competition and market Insurance Ltd, the existing SOEs, and this will extend to entry regulation through ICCC other newly created SOEs that Government may decide to rather than through SOEs or place under the authority of the IPBC. Statutory Authorities For the statutory authorities, at present the NRA and the 71. Maintain appropriate NRSC (and in future the RTA), it is important that correct separation between ministries, relationships be maintained between the Ministers of their departmental heads and Government, the permanent secretaries responsible for the boards of SOEs/SAs transport matters, and the various boards and executives of the statutory authorities.

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For example it is not desirable that the Secretary of Transport be on the board of a statutory authority that SOE and Statutory Authority reports to the Minister, as the Secretary must maintain the Boards distance necessary from the authority to be able to give 72. Governance boards frank and impartial advice to the Minister on the affairs of responsible for regulation not to the authority. include members with commercial interests in the In general the boards of SOEs, statutory authorities or regulatory decisions special purpose committees should not include representation from individual commercial interests in the 73. CEOs not to be voting or ex- transport industry that it is their responsibility to regulate, officio board members where regulation includes matters such as market entry 74. The terms of board members and competition regulation. For this reason, most such to be limited to a maximum of regulation of the transport sector will be vested in the four years with a minimum of ICCC. four years separation before Oversight of the operation of SOEs and statutory eligibility for a further term authorities will be improved, through the Auditor General’s 75. The composition and office, to ensure that Board appointments are made in a appointments to all SOE and timely fashion so that agencies do not operate without a Authority boards to be reviewed functioning board. In general, it will not be policy that the with legislative changes if chief executives of SOEs and statutory authorities also be needed to give effect to these voting members of their boards, or be ex-officio board policies members.

Board members and chairpersons should be limited in the maximum time served in a single of consecutive appointments, proposed to be four years, with a similar stand down period before eligibility for reappointment.

The composition and appointment procedures for the boards of SOEs and statutory authorities will be reviewed, with legislative changes if necessary, to give effect to these polices.

9.2.2 Collection of Fares, Fees and Fines

The collection of fares, fees, levies and fines offers the Fares, Fees and Fines opportunity for corrupt practice. The main risk lies in road transport through practices such as: 76. DOT and when formed, the RTA, will work with Police and  PMV drivers collecting the incorrect fare, not Department of Justice to issuing tickets or not completing the route eliminate corrupt and illegal  Instant fines being collected at the roadside, practice in the handling of public without the proper issue of infringement notices, transport fares, transport licence requiring direct cash payment to the stopping service fees and transport fines officer which may be in excess of the correct fine 77. Fine and penalty regime to or be a payment to avoid a fine be reviewed and updated with  Collection of fees for vehicle registration, driver inflation-linked provisions licensing, transport services licensing and vehicle roadworthiness certificates without issue of the 78. Monies from fines to accrue correct stickers or certificates, or without carrying to the Government through the out the legally specified examinations and tests Department of Justice and not (driver testing vehicle testing) or being in as operating revenue for use by possession of the correct submitted proofs (of the administering agencies identity, age etc.)

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 Failure to pass on fees and penalties to the correct recipients, or withholding part of the monies without legal authority, or applying the received fees and penalties to the prescribed expenditures (such on road safety, road maintenance etc.)  Use of threats and intimidation to either to make collections (legal or illegal) or to avoid payment.

The unfortunate prevalence of such activities undermines the respect for public and private agencies and personnel working in the transport sector, and respect for the rule of law and fair treatment more generally in society.

Through the term of the NTS, the Department of Transport, in conjunction with the other transport agencies, the Police and the Justice Department, will work to eliminate corrupt practice in the handling of fares, fees and fines throughout the transport sector.

The strategy towards this end will include the establishment of a Road Traffic Authority as a self- funding agency operating on commercial lines, with oversight from ICCC and the Auditor General to better organise and transparently and impartially administer PMV and taxi licensing, issue of vehicle registration, driver and operator licences, oversee motor vehicle roadworthiness inspections and testing stations, and carry out on-road enforcement of traffic and transport regulations in conjunction with the Police. The RTA will report in detail on its operational activities, sources and disposition of revenue and effectiveness in improving regulatory compliance.

The regime of fines and penalties for traffic and transport infringements and offences will be comprehensively reviewed, with a view to bringing these up to date and building in provisions for inflation indexing. With a stricter penalty regime will come increased need for diligence and honesty in its administration. In general, to avoid perverse incentives and outcomes, the revenue from fines and penalties will not accrue as revenue to the administering authorities but will be directed to Government’s general fund through the Justice Department. Agencies administering the regulations will as far as possible derive their revenue from user charges, such as license fees, to cover the costs of regulatory enforcement, supplemented where appropriate from Government appropriation.

9.2.3 Countering Corrupt Practice in Administering Construction Work

Infrastructure construction and maintenance contracts and own account work by the Government transport Anti-Corrupt Practice in infrastructure agencies undertaken by offer opportunities Construction Work for corrupt practice and diversion of cash and materials 79. Transport infrastructure from their intended use. Problems that can occur include: agencies to introduce anti- awarding of contracts to related parties or in return for a corruption checking and public corrupt payment or other advantage; sale or use of reporting procedures materials intended for construction projects for illegal gain; and certification of contracted works that have not been 80. Transport agencies to carried out to specification, or at all. inculcate a culture of honesty, integrity, recognition of staff Countering corrupt and illegal practices relies on a culture effort and fair reward, leading by of honesty and integrity being inculcated throughout the example from the top staffing structure of the organisations concerned and 81. Improved tracking and cost- “leading by example”. This will be facilitated where good effectiveness monitoring of practice is recognised and rewarded and corrupt and national works undertaken under illegal practice is identified and punished. Corrupt practice contract, by own forces and is less likely to occur where staff efforts are recognised under inter-governmental and fairly remunerated and where agencies take a pride in funding to provinces to improve their efficiency and self-improvement. To this end, each value-for-money and to reduce transport agency will be encouraged to institute formal corruption internal programmes for inculcating a culture of honesty

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and integrity within their organisations.

Diversion of financial and other resources away from their intended purpose is made harder where all project Anti-Corrupt Practice in expenditure is closely recorded and reported, with Construction Work independent oversight from outside the directly 82. As part of this, introduction responsible organisation. Tracking and benchmarking of of exception reporting, diagnosis the unit costs for types of work undertaken under contract and corrective action and by own forces will be encouraged, including the works undertaken by Provinces under the TIMG, DSIP 83. Provincial governments to and similar inter-government funding streams. Exception introduce anti-corruption reporting where work executed does not match value-for- checking and public reporting money expectations, diagnosis and corrective action procedures for inter- should form part of expenditure tracking. governmental funding intended for transport infrastructure The DOT will work to improve its ability to monitor the 84. Oversight agencies for integrity and cost-effectiveness of work undertaken by the national and provincial transport transport infrastructure agencies and will require infrastructure expenditure to monitoring data under the Transport (Collection of monitor transport agency Information) Amendment Act 2009. The transport integrity performance agencies will be encouraged to institute anti-corruption internal checking and public reporting procedures on a continuing basis; the same will be expected of provincial governments in their accounting for revenues provided through inter-governmental funding and monitored through the NEFC, DNPM, ORD and DPLLGA.

9.3 Environmental Protection and Enhancement

The construction and maintenance of transport infrastructure and the operation of transport vehicles and Environment associated equipment will be subject to practice 85. Practice guidelines and guidelines and, where necessary, regulations aimed at procedures will be tailored to safeguarding the natural and built environment and each transport mode to minimising adverse environmental and social impacts on safeguard the natural and built people and communities, considering both direct and environment and to minimise indirect, consequential and cumulative effects. Transport social and environmental infrastructure will be required to observe environmental impacts to people and laws and regulations enacted by national and provincial communities Government from time to time and the legal requirements 86. Environmental impact and procedures laid down by the Department of assessments will include direct Environment and Conservation. and indirect environmental The direct adverse effects of transport include noise and effects of transport, including the polluting emissions to air, land and water from transport incremental effects of multiple operations and construction equipment. Other direct projects over time effects are severance of areas crossed by transport 87. Each transport agency will routes and traffic flows, of communities and for wildlife. be required to prepare, maintain Transport can also act as a vector for the spread of and adhere to a Code of disease and invasive species. All of these effects can Environmental Practice written cause temporary or permanent degradation of the living for the context of its operations, environment for people and the natural environment for with the aims of best practice plants and animals. and continuous improvement The opening of previously inaccessible areas can provide access for undesirable exploitive and disruptive human activity, such as hunting pressure on wildlife

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and illegal logging and mining, and adverse effects on the traditional culture of isolated communities. Development of new transport routes through pristine or thinly populated areas must therefore have regard for balancing development advantages with environmental and social costs.

The construction and maintenance of transport infrastructure and the passage and emissions from transport vehicles can adversely affect the natural environment, cause disturbance to people from noise and fumes, and damage to health. Sensitive planning of transport infrastructure and the management Environment of surrounding land and water space use can mitigate 88. Transport agencies will adverse effects. comply with the requirements of the Department of Environment Maritime transport includes environmental risks from oil and Conservation, and the spills and spills of other hazardous cargo, both from governing environmental vessels and port storage areas. These are managed by legislation NMSA and PNG Ports as noted in Section 12.10. 89. Transport agencies comply The transport agencies will be required to maintain codes with the environmental and of environmental practice to guide their day-to-day social safeguard practices and operations and those of contractors that they engage to procedures of the international construct and maintain transport infrastructure. In addition and bilateral donor agencies for to compliance with the requirements of DEC and PNG donor-funded projects Law, the transport agencies will observe the environmental assessment, reporting and mitigation safeguards required by multinational and bilateral funding agencies where they contribute to project funding.

Specific modal policies for environmental protection are included in the Sections 11.9, 12.10, and 13.10.

9.4 Climate Change

Strategies for limiting carbon emissions and adapting to the effects of climate change will be developed and CO2 Emissions Reduction implemented under the NTS in recognition of the 90. Progress the transport Government’s international commitments and domestic objectives of the PNG Climate policy in these matters. In a commitment made to the UN Compatible Development Plan Framework Convention on Climate Change Secretariat, Government has agreed to mitigation objectives of a 50% 91. Encourage the introduction reduction in greenhouse gas emissions before 2030 and of fuel-efficient transport carbon neutrality by 2050, subject to conclusion of a equipment legally binding treaty and actions by other governments. 92. Encourage sustainable The Climate Compatible Development Plan (CCDP) for substitution of fossil fuels with PNG was approved by the NEC in December 2009 with biofuels transport as one of three key mitigation areas. The 93. Monitor vehicle fleet- carbon intensity of transport is targeted to reduce by an weighted fuel and CO efficiency average of 3 per cent per year between 2011 and 2030 2 under the CCDP and strategies to achieve this target will be developed under the NTS.

NTS policies to limit greenhouse gas emissions from the transport sector are:  Encourage the introduction of fuel-efficient transport equipment and engines able to operate on biofuels from sustainable sources;  In conjunction with other agencies, assist in the development of domestic biodiesel and bioethanol for the transport sector;

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 Encourage the operation and maintenance of transport equipment in a manner that minimises consumption and CO2 emissions;  Monitor the size of the domestic vehicle road vehicle fleet, kilometres travelled and fuel consumed, so that fleet-weighted fuel and emissions efficiency can be reported annually

NTS policies to adapt to future climate change are:  The transport agencies responsible for developing and updating design codes for Climate Change Adaptation transport infrastructure will review the provisions 94. Transport infrastructure for: (i) drainage including bridge and culvert agencies will review and adjust waterway design; (ii) height of wharf and jetty design code provisions for decks and protection against storm damage; (iii) climate change adaptation identify coastal infrastructure at future risk and including for sea level rise and long term plans for coastal protection or increased rainfall intensity and managed retreat from areas at risk of inundation; duration  The National Weather Service (NWS) will include 95. National Weather Service climate change projections as part of its activities (NWS) will develop a network of to inform the transport agencies on design land and sea-based automatic parameters such as allowance for sea level rise, weather stations to advise the storm surge, rainfall intensities and durations; the transport infrastructure agencies NWS will develop a network of automatic on rainfall intensity/duration weather stations (AWS) on land and on coastal monitoring and projections buoy floats to gather data on rainfall intensities and durations for catchment management and 96. NWS will also develop a drainage design purposes. network of Lidar stations for monitoring CO and other  The DOT will work with the Department of 2 atmospheric pollutants, including Conservation Hydrology Section to reinstate a volcanic ash clouds network of river gauging stations, tide gauges and wave rider buoys so that a time series of 97. DOT will work with DEC river flood levels and coastal tidal ranges can be Hydrology Section to reinstate a collected for coastal land use planning and network of river gauging coastal protection design purposes. The coastal stations, tide gauges and wave stations will also monitor extreme events such as rider buoys for provision of storm surges and tsunami. hydrological design data for the  A monitoring network of Lidar remote sensing transport infrastructure agencies stations will be developed by NWS to monitor levels of carbon dioxide emissions, volcanic ash clouds and other atmospheric pollution

9.5 Poverty Alleviation

The lack of access to markets and social services can contribute to income poverty, food poverty and poverty of opportunity. Isolated populations without transport connections are confined to a subsistence lifestyle, dependent on the fertility and availability of cultivable land and on local hunting and gathering. Reduction in soil fertility from shifting cultivation and slash-and-burn practices, together with a growing population put pressure on resources. Difficulty in accessing education and health services limits human development.

The aim of the Integrated Provincial Development Plans (IPDPs) to be prepared under the ISDM is that each village should be connected by 2m track to service facilities at district ward level, which include an elementary school and community health post, and from the ward centre to district centres. All district and LLG administrative centres are then to have reliable transport access to the main transport network.

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Proposals for village level access are envisaged under the ISDM to be initiated by LLGs, and incorporated into Poverty Alleviation the IPDPs. The DOT Planning and Coordination Division, 98. Through the Provincial in conjunction with DOW, has a role to assist Provinces in Development Planning process preparing the transport component of the IPDPs, to a and ISDM, DOT and DOW will common project assessment framework using the TIPS work with Provincial methodology. This will enable Provinces to prioritise basic Governments to appropriately transport access projects to fit within the available funding prioritise and implement basic and make maximum impact on poverty alleviation. transport access within available funding The extent to which the NTS targets isolated and poor communities by funding maintenance, rehabilitation and 99. The overall funding directed new infrastructure will also be a function of the community to improving access for remote services obligation (CSO) component of overall funding, poor communities will be that is funding for projects on thin transport links that do determined through the CSO not provide an economic rate of return by conventional funding policy analysis, but which are desired as an instrument of income redistribution (see Section 8.6)

9.6 Gender Equity and Women’s Development

The NTS will assist in positively promoting the nation’s Gender Equity gender equity objectives through encouragement of women’s participation in the construction and 100. The NTS will actively maintenance of transport infrastructure (contracting), in encourage women’s transport services provision (PMVs, taxis, freight participation throughout the services), and in the line transport agencies and SOEs. transport sector through skills development programmes, This will include the development of programmes, time- targets and monitoring bound targets and monitoring for skilled labour, vocational training, technical, professional and management grade positions throughout the sector.

9.7 Communicable Disease Control, HIV/AIDS

The role of the NTS will be to promote the dissemination of messages on the prevention of HIV/AIDS and other Communicable Diseases communicable diseases to the transport sector workforce, 101. The transport agencies will particularly those groups which are more likely to be be expected to disseminate vectors for disease transmission, such as construction HIV/AIDs and other workers and drivers/operators of transport equipment. communicable disease prevention messages to, in When awarding construction contracts, each of the particular, the construction transport agencies will be requested to develop standard workforce and transport drivers conditions for insertion in contracts that guard against disease transmission between workers in construction 102. These will include standard site camps and the local population. inclusions within contracts and transport licencing conditions Those transport agencies responsible for licensing commercial transport services will similarly be requested to disseminate educational material on HIV/AIDS prevention to drivers and operators and to cooperate in industry surveys aimed at identifying disease status, knowledge and practices.

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10 Statement of Policy for Institutional Roles and Reform

10.1 The Need for Reform

The last decade has seen the establishment of several The Need for Reform new agencies in the transport sector, with the objectives of separating conflicting regulatory and service delivery 103. There is a need for roles, and with putting Government provision of services comprehensive reform of the on a more business-like and responsive basis. agencies responsible for road traffic and transport The civil aviation agencies have been reformed into the Civil Aviation Safety Authority and two commercialised 104. The respective roles of agencies PNG Air Services Ltd and National Airports DOW and NRA will be more Corporation. NAC has also established a fully owned clearly defined and developed, subsidiary Airport City Development Ltd for the purpose together with their funding of realising best value from NAC’s land holdings as a arrangements supplement to aviation revenues. Apart from 105. Further reforms will be establishment of the Accident Investigation Commission, made in maritime transport to no further institutional reform is envisaged in the aviation clearly separate commercial and subsector. However, it is noted that some aspects of the regulatory roles roles and interface between NAC and CASA remain to be resolved. 106. No further structural reform is proposed for the air transport In the maritime subsector, the NMSA has been agencies. established as the safety regulator. However, PNG Ports

Corporation retains some regulatory functions that are inconsistent with its role as a commercial port operator and the market regulation of coastal shipping remains unreformed, despite prior reviews and advice to do so.

In the roads subsector, the National Roads Authority has been established but not as originally envisaged and without the full benefit of a road user charges system and dedicated Road Fund. The future roles of NRA and the DOW are not fully agreed. The agencies governing economic and safety regulation for vehicles, drivers and transport services are unreformed, somewhat fragmented and structured on an out-dated model. There are also unsatisfactory arrangements for delegation of functions to provincial governments.

Outside of the transport sector agencies, there are various other state authorities which intervene in various ways in transport sector investment and operational decisions, together with multiple channels of funding. This fragmentation does not allow a sector wide approach to be taken by the Department of Transport as the senior policy and planning agency for the sector and, if not corrected, will perpetuate a lack of cohesive development planning that has marred the sector in the past.

In looking forward 20 years or more, it is important that an institutional structure based on well- accepted principles and conforming to Government policy be the model for the transport sector and that the process of institutional reform be completed expeditiously.

10.2 Principles for Institutional Reform

In setting out a new structure for the sector, the following principles for institutional reform have been followed:

 Separation of functions to avoid conflicting objectives within the governance agencies

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o agencies should not be responsible for regulating their area of operations and at the same time for delivering services in the same area, to avoid conflicts of interest o for the statutory authorities that have dedicated lines of funding from Government to support their operations, there should either be an arm’s length arrangement with a funding agency which approves, monitors and audits expenditure or, where the authority manages its line of funding internally, there should be a robust Principles external auditing process to ensure that 107. Separate regulation from funds are managed effectively and service delivery in Government efficiently; agencies  Regulatory policy in the transport sector will be implemented by statutory regulatory 108. Clear accountability and authorities with dedicated lines of funding, with auditing of Government provided the Department of Transport responsible for funds and self-generated developing, advising and monitoring that revenues regulatory policy; 109. Agencies that are best  Agencies that are best technically equipped to technically equipped to provide do so should undertake particular functions – services do so in some cases this may require delegation or 110. Government agencies not outsourcing between one state agency and to crowd out the private sector another on a fee-for-service basis, including between levels of government (national, 111. Government agencies may provincial and local); deliver services where there is  State agencies and investments should not no private sector interest either undermine the private sector by crowding out on a fully commercial basis, or to opportunities for the private sector to compete, fulfil a community services and structures and powers should reflect this. obligation under a transparent On the other hand, due to the thin transport and contestable CSO funding market in PNG, there is a need for safeguards againstpolicy market dominance by one or a few private operators in the transport subsectors and in regions of the country. In such cases, the presence of an implementation or operating arm of a Government agency operating on a fully commercial basis may be useful or necessary to achieve competitive Delegation prices. 112. Delegated functions to In some situations, where there is no private  have legal instruments sector interest or where there is an overriding national interest that may not be served by a 113. Instruments to identify: private sector operator, Government may functions delegated; period provide services on a fully commercial basis, covered; asset transfers and subject to any transparent CSO policy, but ownership; arrangements for should aim to withdraw or privatise such internally generated revenues; services if and when they become attractive to reporting requirements; and the private sector. procedures for reversing the delegation 10.3 Delegation and Outsourcing of Functions 114. Delegating agency to retain overall responsibility for the 10.3.1 Delegation functions delegated Government departments, statutory authorities and SOEs 115. Irregular and illegal with residual regulatory powers in the transport sector delegations to be withdrawn or may delegate functions only within the provisions of their regularised governing legislation. Where delegations are made, the

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legal instruments of delegation must provide for, at least, the following:

 A clear definition of the functions and activities being delegated;  The period of delegation, which must not be indefinite, but which can be subject to extension or renewal;  The fees payable by the delegator to the delegatee for the activities being delegated, and with adequate provision for funding;  The ownership of assets and intellectual property created from fees and other payments made to the delegate for services provided;  A practical process for the delegator to resume the delegated functions and activities, should the delegation prove to be unsatisfactory;  Reporting of the execution of the functions delegated, together with such statistical reports, financial acquittals and independent audits as may be deemed necessary.

The delegating department or authority will remain responsible for the functions that have been delegated.

All irregular delegations, and delegations made without legal instruments complying with the above conditions will be withdrawn and new complying arrangements made.

10.3.2 Outsourcing

All Government departments, statutory authorities and Outsourcing SOEs in the transport sector will be encouraged to competitively outsource services delivery to the private 116. Transport agencies will sector or to other government agencies (at all levels) competitively outsource service where this can be done cost-efficiently and without risk to delivery where cost-efficient and service quality and safety. without risk to performance

Outsourcing will take many forms, including output 117. Outcome (performance)- specified contracts and PPP specified contracts, outcome (performance) specified arrangements as well as contracts and forms of public private partnership. Outsourcing should be done with the objective of conventional output specified contracts will be considered obtaining best value for money in service delivery, both in terms of the Government’s finances and the costs 118. Outsourcing should aim to imposed on users of transport infrastructure and services. build the capacity of the Outsourcing should also be undertaken with a view to domestic private sector positively building the capacity of the domestic private sector, so will take into account contract packaging, and use of associations with overseas companies to build local experience.

10.4 Role and Functions of the Government Transport Agencies

The roles and function of the Government transport 119. Role of the DOT agencies are outlined in the following paragraphs. Where institutional reforms are proposed these are briefly Lead Government department in identified and are discussed in more detail elsewhere in the transport sector the NTS, with reform action plans in the MTTP. Responsible for development of national transport policy and 10.4.1 Department of Transport infrastructure planning The Department of Transport will continue to be the lead Review monitoring and updating Government department responsible for: of the NTS and MTTP  the development of high level transport policy

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and national level transport planning across the transport sector, liaising with the central agencies and with those line agencies in sectors contributing to transport demand, including agriculture, forestry, minerals, oil and gas, commerce and industry, and urban and rural development; including the preparation, review, monitoring and updating of national strategy, policy and planning 119. Role of the DOT statements such as this NTS and MTTP;  assisting and coordinating with provincial Coordinate with and assist administrations, LLGs, local communities and provincial administrations, LLGs others in the preparation and implementation and communities to prepare and of Provincial Transport Plans, encouraging implement provincial transport consistency and integration across the plans and integrate with national provinces and with national level plans and level planning strategies. Establish a Rural Infrastructure  To facilitate this planning and coordination Development Division (RIDD) to role, DOT will establish a Rural Infrastructure support the above Development Division (RIDD) within the DOT Define and lead implementation responsible for planning and coordinating the of CSO policies and forms of provision and operation of local level rural assistance in the transport transport infrastructure (local road access, sector minor wharves, jetties, landings, marine navigation aids, rural airstrips and associated Administer the Shipping air communications and navaids) in Franchise Scheme on conjunction with provincial administrations, the completion of the CWTP DPLLGA and the national level transport Chair of TSCMIC and inter- sector agencies; agency coordination  DOT will take a lead role in defining and Monitoring of the activities and implementing Community Services Obligation performance of transport sector (CSO) policies and forms of assistance in the agencies transport sector, including, on an interim basis, administration of the shipping services Coordination of national budget franchise scheme, currently undertaken by the submissions Community Water Transport Project (CWTP) Preparation and administration office, once that project closes (the Shipping of transport legislation Franchise Scheme to eventually transfer to NMA). Administrative responsibilities for  inter-agency coordination through vehicle, driver and transport chairmanship of the TSCMIC by the Secretary licencing, vehicle construction for Transport and through day-to-day and roadworthiness standard, relationships between DOT and other agency motor vehicle dealers and staff; testing station licensing  monitoring of the activities and performance of the transport sector agencies;  coordination and submission to Government of the Recurrent and Development Budget applications prepared by the transport agencies, ensuring that projects and programmes are consistent with the NTS and MTTP, are consistent from year to year and include multi-year forward budgets based on well-founded cost estimates and accompanying specifications;  preparation of transport sector legislation in conjunction with the Solicitor General’s office for consideration by the Minister, the NEC and Parliament;  administration of all transport sector legislation under the responsibility of the Minister and the permanent secretary responsible for transport matters;

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 until and unless changed through the proposed institutional and legislative reforms that will establish the RTA, DOT Land Transport Division in conjunction with the National Land Transport Board will remain responsible for motor vehicle registration, driver licensing, transport services licensing, vehicle roadworthiness certification and inspection station licensing, and licensing of motor car dealers; DOT will also continue to provide administrative support and advice to the National Land Transport Board;  until and unless changed through proposed 119 Role of the DOT institutional and legislative reforms that will establish the NMA, DOT Maritime Transport In the interim until establishment Division will remain responsible for the of the proposed NMA, regulation of coastal shipping and, through the administer coastal shipping Maritime Security Unit, for policy and its regulation and operate a administration for international shipping and maritime security unit ISPS port security; In the interim, administer air  until and unless changed through institutional transport regulation and and legislative reforms yet to be proposed, international air service DOT Air Transport Regulation Division will agreements remain responsible for international air service agreements and international and domestic air Collection, analysis and traffic regulation; publication of statistical data  collection, analysis and publication of Providing ministerial advice and transport statistical data needed for planning reporting to parliament and monitoring the performance of the Monitor and advise on transport sector, including the reinstatement of expenditure priorities across the a national road traffic survey programme; transport sector, across regions  providing advice to the minister on all of the and provinces, between national above matters and preparing reports for the and provincial level and for all NEC and parliament as required. Government agencies involved  DOT will seek to extend its monitoring and in transport infrastructure or advisory role on public expenditure on transport services provision transport infrastructure, equipment and

services to include those other Government agencies and state owned enterprises which include these expenditures in their budgets, so as to present a sector wide overview to Government. These will include the Department of National Planning and Monitoring, the Border Development Authority and other economic corridor authorities that Government may establish pursuant to the Development Strategic Plan.  DOT will seek to extend its administrative mandate to require all agencies that expend public funds on transport infrastructure, equipment and services, including the above named agencies, to ensure that their programs are consistent with the National Transport Strategy and Medium Term Transport Plan, so that it is a condition of such expenditure that it has been reviewed and accepted by the Secretary for Transport prior to inclusion in any budget or forward programme. The DOT will not exercise expenditure control over the autonomous funding of the transport statutory authorities and SOEs but may provide advice on financial matters concerning these agencies to the Minister.

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10.4.2 Department of Works and Implementation

The future role and responsibilities of the Department of Works in the transport sector will include:

 Programme and oversee the implementation of construction and maintenance works on the 120. Role of the DOW declared national road network, except for Programming and contract those national roads for which responsibility management for national road has been transferred to the National Roads and bridge construction and Authority; maintenance except where such  Implementation will be through private sector responsibilities have been engineering contracts except that DOW shall transferred to the NRA; maintain provincially-based works units for the Implement construction and purposes of emergency reinstatement of road maintenance works through and bridge closures, and for providing a last private sector contracts resort road and bridge works implementation capability where the private sector does not Maintain provincial works units provide cost-competitive and technically (PWUs) for emergency competent contracting services, and cannot be reinstatement and work in areas encouraged to do so; such work units will where no competitive private operate as independent self-accounting cost contracting capacity centres organised along commercial lines and PWUS to be self-accounting and bidding for work from DOW HQ, so as not to commercially oriented present unfair competition to the private sector; Coordinate with provinces’ works agencies to make best  Actively coordinate DOW provincial works units with the works arms of the provincial use of scarce technical skills and engineering equipment governments so as to provide an integrated engineering capability in the provinces, making Maintain HQ and regional best use of the combined capacity and skills of technical services and plant and the DOW and provincial resources; works transport capability undertaken by DOW for the provinces shall be Establish protocols and on an agreed fee-for-service basis; safeguards, in consultation with  Maintain a headquarters and, as necessary, DOT and others for the regionally-based facilities to support operation of PWUs and their engineering and related technical services engagement with provinces such as quantity and land surveying, geotechnical and materials testing, plant and Engage private sector transport; at a level that is supportive of the consultants for road and bridges industry but without restricting opportunities for design and works supervision the private sector; contracts  DOW will work with DOT and others, such as Maintain the RAMs and BAMs ICCC in matters of competition pricing and system and make annual policy, to establish protocols and safeguards constrained and unconstrained for the establishment, operation and forward maintenance plans monitoring of the PWUs and the headquarters Lead role in developing and regional facilities, so that they are technical standards for road and supportive of, rather than in competition with, bridge engineering and the private sector and in their engagement engineering training with the provinces;  Such protocols will include but not be limited to: (i) the types and scale of project that PWUs should undertake; (ii) where DOW should

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become involved in plant and equipment hire, which should be on a commercial basis, (iii) cost accounting and pricing of DOW services and plant hire to ensure that this fully reflects costs and profit so as to not provide unfair competition (iv) plans to actively assist private sector resources to develop in the provinces to reduce or remove the need for DOW involvement over time; (v) terms of 120. Role of the DOW service, including costs and funding basis, where DOW engages with provincial Maintain safety management governments and their works units; systems, safety audits of  Be responsible for contracting the preparation projects and environmental of road and bridge designs, contract codes of practice documentation, tender evaluation and Engineering technical and cost construction supervision services from private advice on project proposals and sector engineering consultants; and maintain commissioning feasibility studies sufficient in-house expertise in these areas for technical audit and oversight purposes; Provide advice on engineering costs and technical design and  Maintain the RAMs and BAMs road and bridge construction matters and asset management systems, including the participate with DOT in timely collection of road inventory and commissioning road and bridge condition data and the annual preparation of feasibility studies multi-year forward maintenance plans, advising Government on the forward funding requirements and the implications of any funding constraints; DOW will also assist the provinces in their development and maintenance of RAMs and BAMs on a fee-for- service basis;  DOW shall provide the NRA and the DOT with unrestricted access to the RAMS and BAMS databases and associated GIS mapping data and will cooperate in the maintenance, extension and utilisation of this data for transport planning purposes at both national and provincial level;  Implement safety management systems, undertake safety audits and maintain and apply environmental management codes of practice in the design, construction and maintenance of roads;  Take the lead role in the development of road engineering technical standards and practices and in road engineering technical training for nationwide application in conjunction with the NRA, IPEPNG, Provincial Governments, the private sector and others; also facilitate continuing career development for DOW staff at professional, technical and trades levels;  While final decisions on the planning and selection of national roads for major rehabilitation, upgrading and new construction shall rest with the DOT, the DOW shall advise the DOT on works costs and matters of an engineering technical nature that may influence project selection decisions and the DOW’s viewpoint on priorities including the commissioning of engineering feasibility and costing studies in conjunction with DOT.

DOW will seek to progressively restore the national road network to a good maintainable condition, following the priorities established in the NTS and MTTP. Once restored, the more important roads in terms of traffic carried and network function shall be progressively transferred to the NRA, as and when NRA has the financial and managerial capacity to absorb the transfers. Once transferred, all ongoing upkeep shall remain with the NRA.

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10.4.3 National Roads Authority

The role and responsibilities of the NRA are set out in its empowering act, the National Roads Authority Act 2003, 121. Role of the NRA and in summary are, for those nationally declared roads Undertake roles and that have been transferred to the responsibility of NRA by responsibilities as set out in the order published in the national Gazette: NRA Act 2003 and as gazetted  establish and operate a Road Fund from road Establish and operate a Road user charges, budget and other sources to Fund for the upkeep of roads fund the upkeep of its roads; under NRA control  provide the RAMs and BAMs data inputs for Maintain RAMS and BAMs data its roads and, by implication, to share the cost for NRA roads with shared of operating and maintaining these data access and support in systems with DOW on an equitable basis; conjunction with DOW  formulate, prioritise and deliver annual road Formulate and deliver annual maintenance programmes for the NRA roads, road maintenance programmes using independent private sector contractors, by private contract including contract monitoring and supervision through a transparent contract award and Implement safety and management process; environmental practices  implement safety management systems, consistent with DOW undertake safety audits and maintain and Ensure consistent technical apply environmental management codes of standards with DOW practice in the design, construction and Maintain records and report on maintenance of roads that are consistent with operations and the source and those of DOW; use of funds  coordinate with DOW on technical standards for road and bridge engineering to ensure national consistency;  keep detailed records and report publicly and transparently on collection of user charges, revenues, and in detail on the use of the revenues on the road maintenance programmes; and  provide a continuing programme of professional staff development and required skills training for non-professional staff.

The NRA role and responsibilities therefore parallel those of the DOW for the core road network that has been brought up to a good maintainable condition and transferred to the NRA. The main difference between the two organisations is that DOW has more of a development role in bringing the lower traffic parts of the national road network up to standard and in assisting the provinces in delivering basic 122. Role of the NRSC road access to outlying areas, while the NRA assumes full Coordination and promotion of ongoing responsibility for maintaining and renewing the all aspects of road safety core network of higher traffic volume national roads. Preparation of the national road 10.4.4 National Road Safety Council safety programme

The roles and responsibilities of the NRSC are those set Storage and analysis of road out in the National Road Safety Council Act 1997 and are crash data collected by the primarily to advise Government on all matters relating to Police road safety, to coordinate road safety initiatives among NRSC to be become part of the the sector agencies and the wider public, to promote road future Road Traffic Authority safety research and to prepare a long term national road

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safety programme. NRSC shall continue this role until such time as its functions are absorbed into the proposed Road Traffic Authority and legislative changes are enacted.

In recent years NRSC has taken the initiative of updating the road crash database using data collected by the Police, a function previously carried out within DOT Land Transport Division. It shall continue to carry out this function as a support to the development of a road safety action plan.

10.4.5 National Land Transport Board

The NLTB has responsibilities defined under the Land Transport Board Act 1968 which are the general 123. Role of the NLTB supervision of licensed road passenger transport, that is Supervision of transport services PMVs taxis and private hire cars, including licensing licensing for NCD urban PMVs. procedures, transport safety, supply and demand for Inter-urban PMVs and inter- services and conditions of operation. These powers are provincial goods vehicles exercised within NCD, with responsibility for transport Will be disestablished once RTA licensed in the provinces delegated by DOT to provincial is formed LTBs.

The NLTB also has responsibility under the Licensing of Heavy Vehicles Act 1977 for inter- provincial route licensing of hire-or-reward goods transport and maximum price setting, although these powers have not been exercised in recent years. For goods transport within provinces, responsibility has been delegated to the provincial LTBs.

The existing responsibilities and functions will continue in the short term but the NLTB and the provincial LTBs will be disestablished under the legislation establishing the Road Traffic Authority, and all of the transferred LTB powers and responsibilities will then be exercised by the RTA under the governance of its board.

10.4.6 Motor Vehicle Insurance Ltd

MVIL has responsibilities defined under the Motor Vehicle (Third Party Insurance) Act 1974 and Motor Vehicles 124. Role of MVIL Insurance (PNG) Trust (Administrative Arrangements) Act Administration of 3rd party 1996 to administer the compulsory 3rd Party Insurance vehicle insurance schemes for motor vehicles, a portion of which is used to fund the NRSC. It has also been delegated the Agent of Government and responsibility by DOT for motor vehicle and driver provinces for issue of vehicle licensing in NCD from which it retains the revenue to fund and driver licences on a fee-for- its operations. MVIL also provides vehicle and driver service basis licensing services to several Provincial Governments under separate arrangements.

MVIL will continue to perform services for the issue of vehicle and driver licences and collection of fees. However, to ensure nationwide consistency, compliance and timely return of accurate registration and licensing data, the existing administrative arrangements will be reformed and placed under the responsibility of the new RTA and its establishing legislation.

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10.4.7 PNG Ports Corporation Ltd

PNGPCL currently derives its powers from a comprehensive delegation made by the Secretary for 125. Role of PNGPCL Transport as provided for in the Harbours Act 1963 and Develop and maintain publicly the Harbours Amendment Act 2002. provided port infrastructure within the declared ports These functions are primarily the responsibility for provision and maintenance of the publicly provided port Operate main commercial ports infrastructure within the boundaries of the declared ports, on a fully commercial basis and and also to be the pilotage authority and responsible for non-commercial ports with the maintenance of navigation aids within the declared Government funding support to port boundaries. There are also various maritime a defined CSO policy planning and operational responsibilities and powers Pilotage authority within within and outside of the declared port boundaries which declared ports have been included with the delegation. Extent to which PNGCPL owns In the future, the primary role of PNGPCL will be to and operates cargo handling develop and maintain the publicly provided port plant versus contracting to the infrastructure within the declared ports, operating on a private sector to be determined fully commercial basis for the main commercial ports and for non-commercial ports where Government agrees to National standard setting for port operations and engineering provide CSO funding support. The extent to which practice PNGPCL will also provide plant, equipment and cargo handling services rather than contract these functions to Assistance to provinces on a the private sector is to be determined as part of ongoing fee-for-service basis as port policy development. The legislation under which requested for marine PNGPCL operates will be revised as appropriate to its engineering and asset future role and in a manner so that its commercial management operating objectives are not in conflict with any residual Port master planning studies in regulatory powers. coordination with DOT and PNGPCL will also be the primary agency for setting port consistent with NTS and MTTP operational and engineering standards and practices and will, on a fee-for-service basis provide port engineering, asset management and technical advisory services to the provinces for the upkeep of port and navigation facilities under provincial, LLG and local community ownership in accordance with Government’s CSO policy.

PNGPCL will coordinate with DOT in the preparation of master plans for each of the declared ports and the port network as a whole, consistent with the NTS and MTTP.

10.4.8 National Maritime Safety Authority

The NMSA derives its powers and functions from the National Maritime Safety Authority Act 2003, and those parts of the Merchant Shipping Act 1975 and associated regulations for which it is the stated Authority. These functions are:

 all aspects of maritime safety, ship registration, ship safety surveys, ship inspection (flag and port state control) and ships’ crew certification;  marine pollution control;  coordination of search and rescue operations;  pilotage outside of the declared port boundaries and pilot boarding areas for international passage; and

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 responsibility for maritime navigation aids outside of the declared port boundaries.

The NMSA shall continue to exercise these functions and will broaden and strengthen safety and environmental 126. Role of NMSA compliance in PNG waters, extending to the navigable Responsible for regulating all limits of inland waterways and to small craft safety. aspects of maritime safety, including, ship safety surveys NMSA will have primary responsibility for developing and and crew certification enforcing safety standards and for prosecuting breaches, with the IMO providing oversight to ensure that the Marine pollution control NMSA and the PNG Government observe the Provision and maintenance of international maritime conventions and standards to navigation aids outside of which the country is a signatory. declared port boundaries In the future the NMSA will incorporate coastal and Coordination of SAR international shipping regulatory activities currently undertaken by Marine Transport Division and the Pilotage outside declared ports Maritime Security Unit of DOT and some of the port Develop into a NMA including regulatory functions currently delegated to PNGPCL. In ISPS, shipping market regulation recognition of this broadened responsibility, NMSA will and port regulatory functions change its name to the National Maritime Authority (NMA). This will require an extension to NMSA’s legislative powers, adequate resourcing with suitably qualified and experienced staff, and ability to fund its activities from revenues and, for some non-revenue earning services, by Government grant.

Now as NMSA, and in the future as NMA, the agency will need to coordinate closely with other maritime industry participants, both public and private sector, and take opportunities to outsource some service delivery functions where efficient and economical to do so, consistent with maintaining the required standards of performance.

10.4.9 National Airports Corporation Ltd

The NAC is incorporated under the Companies Act 1997 127. Role of NAC and established under the Civil Aviation Amendment Act 2010 as a state owned commercial enterprise for the Commercially own, manage, purposes of owning, operating, managing and maintaining maintain and operate declared airports and providing all related services in Papua New national airports using own Guinea. The 21 airports under NAC ownership are revenues and provided CSO specified in a schedule to the Civil Aviation Act 2000. funding for non-commercial airports. NAC will undertake airport master planning and feasibility studies for airport development in coordination with DOT Undertake airport development and consistent with the NTS and MTTP and will be studies and implementation responsible for the implementation of the agreed works, consistent with NTS and MTTP with capital funding provided from sources agreed with Assistance to provinces on a the Government. fee-for-service basis as requested for airport engineering NAC will also be the primary agency for setting airport and asset management operational and engineering standards and practices and will, on a fee-for-service basis provide airport engineering, asset management and technical advisory services to the provinces for the upkeep of provincial airports and rural airstrips under provincial, LLG and local community ownership, in accordance with Government’s CSO policy.

No substantive change is envisaged to NAC’s institutional structure over the period of the NTS.

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10.4.10 PNG Air Services Ltd

PNGASL is incorporated under the Companies Act 1997 and established under the Civil Aviation Amendment Act 128. Role of PNGASL 2010 as a state owned commercial enterprise for the Commercially own, manage, purposes of providing air traffic, navigation, maintain and operate the air communication and related services in PNG’s airspace traffic, navigation, on a fee-for-service basis. communication and related systems No substantive change is envisaged to PNGASL’s institutional structure over the period of the NTS.

10.4.11 Civil Aviation Safety Authority

CASA is established under the Civil Aviation Amendment Act 2010 to promote safety and security in civil aviation 129. Role of CASA through: Establish, promulgate and monitor adherence to safety and  establishing, promulgating and monitoring security standards relating to the adherence to safety and security standards civil aviation system relating to the civil aviation system;  establishing and continuing the Aviation Primary responsibility for Security Service; prosecution of safety breaches  investigating and reviewing civil aviation Review air accidents and accidents and incidents and notifying these to incidents and report these to the the AIC AIC  maintaining the Register of Aircraft, and Maintain aviation documentation ensuring the provision of charts and including the register of aircraft aeronautical information,  promoting safety and security through information, advice and education programmes; and  consulting with all interested parties on aviation safety issues.

CASA will have the primary responsibility for developing and enforcing safety standards and for prosecuting breaches, with ICAO providing oversight to ensure that the CASA and the PNG Government observe the international civil aviation conventions and standards to which the country is a signatory.

No substantive change is envisaged to CASA’s institutional structure over the period of the NTS.

10.4.12 Accident Investigation Commission

The Accident Investigation Commission (AIC) is 130. Role of AIC established under the Civil Aviation Act 2000 to investigate major air accidents and incidents on a “no “No blame” investigation of air blame” basis with the purpose of raising industry accident causation standards.

10.4.13 National Weather Service

The NWS is a unit within the DOT responsible for the collection and analysis of meteorological data for the purposes of historic and current weather reporting, and near-term weather forecasting within Papua New Guinea and the surrounding region. Weather reports and forecasts are provided for general use and for specialist aviation and maritime purposes. NWS also advices on medium term climatic variation and long term climate change.

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In future, it is intended that the NWS be established as a 131. Role of NWS commercially oriented Government owned enterprise, supplying meteorological information tailored to user Collection analysis and reporting needs with the aim of being largely self-funding. of meteorological data, current weather reports and forecasts 10.4.14 Proposed National Rescue Coordination Advice on medium term climatic Centre (NRCC) variation and long term climate At present there is no Coastguard Service in Papua New change Guinea. The NMSA will work with PNGASL, provincial Establish as self-funding government and the private sector to establish local independent SOE inshore SAR services, funded from donations with a Government proportional contribution, and using volunteer personnel. NMSA will assist in training local SAR services, as an adjunct to its small boat safety 132. Role of NRCC activities. Combine maritime and air SAR The two existing rescue coordination centres established into a National Rescue within the NMSA for maritime SAR and within PNGASL Coordination Centre for air SAR, will be combined into a single National Establish local inshore SAR Rescue Coordination Centre (NRCC). The NRCC will be services responsible for coordinating first response search and rescue actions for maritime and aviation emergencies and, when appropriate, also for land transport emergencies. Consideration will be given to attaching the NRCC to the National Disaster Management Centre (NDMC).

10.5 Role of Oversight, Audit and Regulatory Institutions

10.5.1 Independent Consumer and Competition Commission

The ICCC is already the economic regulator in several parts of the transport sector, or is consulted as part of the 133. ICC process of price regulation. Although it periodically Will exercise an oversight and reviews the state of competition, ICCC does not price monitoring role for competition control air transport services and this is the preferred role and fair pricing in the maritime for ICCC in the future monitoring of the port services, and aviation sectors coastal shipping and land transport. By separating the commercial and non-commercial functions of PNGPCL Will price control passenger and moving to port-by-port pricing, the need for price transport (PMVs, taxis) in control will be removed in this sector. consultation with the RTA, NCDC and Provincial ICCC will continue to control prices for urban and rural Governments PMVs and taxi services, in consultation with the future RTA once that organisation is established and with 134. IPBC NCDC or provincial governments to ensure that there is an appropriate balance between financial return to the Will oversee the transport SOEs operators to allow them to invest in new vehicles, the under its ownership in particular service quality provided, the affordability of fares and any for finance raising and financial requirement on operators to run less profitable services. advice. Infrastructure planning and 10.5.2 Independent Public Business Corporation management will remain with the IPBC has an oversight role for state-owned commercial SOEs themselves within the enterprises currently including, in the transport sector, framework of the NTS

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PNGPCL and Motor Vehicle Insurance Ltd (MVIL).

While its Act allows that IPBC may undertake the functions of planning, coordinating and managing State assets, infrastructure and projects, this is not its intended function in the transport sector, where its role will be limited to assisting SOEs with project financing, including mobilisation of private finance and development of PPP proposals. Sector planning functions remain with DOT, exercised primarily through this National Transport Strategy, while the SOEs themselves will continue to undertake their own detailed project planning and programming within the framework of the NTS.

10.5.3 Auditor General

The Auditor General has the responsibility for inspection and audit of all Government departments, agencies and 135. Auditor General Government-owned companies at national and provincial Will annually audit the transport level. Annual audits will be required of all transport sector sector agencies and carry out in- statutory authorities and SOEs. In addition, periodic in- depth audits every 5 years depth audits under Section 3(4) of the Audit Act will be carried out at intervals of no more than five years. Audits will be carried out under the oversight of the Auditor General’s office, but may be outsourced to registered public accountants, and will be budgeted for within the finances of the respective transport sector agencies.

10.6 Role of Special Purpose Infrastructure Development Authorities

10.6.1 General provisions for All Special Purpose Authorities

There are a number of existing or proposed special purpose authorities that include transport infrastructure 136. General Provisions for All development within their remit. The creation of several Special Purpose Authorities agencies working alongside the established Government These include IDA, BDA and implementing agencies, such as DOW, PNG Ports and Economic Corridor NAC, runs the risk of conflicting technical standards and Implementation Authorities implementation priorities, a dilution of scarce technical resources and reduced coordination in the sector. Projects implemented are to be drawn from, or tested for To avoid such risks and to ensure that all agencies work consistency with and priority together harmoniously, it is proposed that all transport under, the MTTP and NTS projects and operations sponsored by the special Projects will be included in the purpose agencies be drawn from the project priorities of DoT Transport Development the MTTP and wider transport development strategies Budget coordination and review established in the NTS. Where a special purpose process and will be ratified by authority wishes to pursue a project or program that is TSCMIC not within the MTTP/NTS, then it should submit its project concept to the DoT for consideration under the transport Special purpose authorities will infrastructure prioritisation processes developed for the use existing Government NTS and subsequent referral to the TSCMIC. Where implementation agencies and necessary any differences of view in strategic planning established processes for and investment priorities would be resolved through project procurement. agreement with DNPM. Fast track procedures may be All transport infrastructure programmes, budgets and developed for large projects with funding proposals from the special purpose agencies will good technical and financial be included in the Department of Transport’s annual management backing transport budget coordination process and will pass

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through the TSCMIC for ratification, noting that TSCMIC includes the key central planning and budgeting agencies of DNPM and Treasury.

Unless there are compelling reasons otherwise, all transport infrastructure procurement and implementation will be managed by the appropriate Government implementing agency on behalf of the special purpose authority and using the existing Government systems and procedures, such as processing of contracts through the Central or Provincial Supply and Tenders Boards.

Where large projects have been brought to an advance state of readiness, have received a high level of technical and cost scrutiny in the process, and are backed by strong project management and payment certification systems, then it may be appropriate that a fast-track procedure be developed and implemented to avoid delays in approving contracts and in disbursing funds against work performed.

The intent of these provisions is to strengthen the technical quality and cost-efficiency of the transport projects initiated by the special purpose authorities and at the same time ensure that their plans are fully integrated with the NTS, MTTP and wider Government planning and strengthen rather than compete with or bypass established Government processes.

10.6.2 Infrastructure Development Authority

An Infrastructure Development Authority (IDA) is being established as a special purpose agency to manage part of the funding stream generated by Government revenues from the major resource projects through an Infrastructure Account. Another portion of this revenue stream is expected to be disbursed through the State Owned Enterprises, which in the case of the transport sector could include PNG Ports Corporation Ltd, National Airports Corporation and PNG Air Services Ltd.

The structure and mode of operation of the IDA is still under development but an establishment group has been set up within the Department of Works. It is envisaged that the IDA will concentrate on major strategic and high impact projects and will have a direct line of reporting responsibility to the upper levels of Government. It is expected to employ various methods of infrastructure procurement from conventional construction contract bids against a completed design and specification, through to performance-based long term design-build-maintain contracts. The IDA may also access project funding from multinational or bilateral agencies and private public partnerships.

Because it potentially may have funding control over a substantial portion of the transport infrastructure budget, it may be appropriate that the IDA have representation on the TSCMIC, alongside Treasury and DNPM. However this will be dependent on what is finally determined as its role, structure and governance.

Otherwise, it is expected that IDA will operate in a manner as described in 10.6.1 above.

10.6.3 Border Development Authority

The Border Development Authority (BDA) is established under its own legislation with responsibilities for infrastructure to support economic and social development, immigration and border security control within the designated border provinces. While its legislative remit is wide ranging, in practice its role has been confined to date on a pilot border trade project and associated infrastructure on the Sandaun Provincial border with Indonesia. Ways in which the transport agencies should and do interact with the BDA are set out in other sections of the NTS (4.8.5, 8.1.5, 10.4.1, 12.9 and 13.9.3). The general provisions in 10.6.1 will also apply.

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10.6.4 Proposed Economic Corridor Implementation Authorities

The DSP and MTDP envisage the establishment of a special purpose authority for each economic corridor. The first such authority is expected to be for the PRAEC corridor. These special purpose authorities are expected to be given similar functions and powers to the BDA in respect of the boundaries established for each economic corridor. The general provisions in 10.6.1 will also apply.

10.7 Public – Private Sector Coordination An important role is played by coordinating and consultative committees and associations formed with Public-Private Sector representation from the public and private sector. Dialog Coordination between the public and private sector is needed to 137. Existing public-private promote a mutual understanding of the issues, demands sector consultative bodies such and constraints in the transport sector that act on the as the CIMC play an important Government agencies on the one hand and private role and will continue to be businesses on the other. Existing bodies, such as the supported by Government. Consultative Implementation and Monitoring Council

(CIMC), supported by the Institute of National Affairs (INA), play a valuable role in this regard.

To strengthen public-private sector coordination in freight Public-Private Sector transport across all modes, and following on an APEC Coordination initiative, it is intended to establish an advisory PNG National Logistics Association (PNGNLA), facilitated in 138. A PNG National Logistics the first instance by the Department of Transport. The Association will be established, PNGNLA will provide a forum for freight interests, facilitated by DOT, with aims to transport services operators and Government to consult improve the efficiency, security and work together with the overall aim of improving the and reliability of freight transport efficiency, security and reliability of the freight transport infrastructure and operations infrastructure and freight operations.

10.8 The National Budget Process

The Budget Process has an important influence on how well any National Transport Strategy and investment plan will work in practice. At present there are several features of the process that work against good transport planning, rational selection and approval of projects and oversight of implementation:

 part of the national budget for transport is administered by non-transport agencies – DNPM, the Defence Force, the Border Development Authority and the Office of Rural Development; these expenditures are not incorporated in DOT’s budget submission for the sector and the TSCMIC does not have any opportunity to review them; there are concerns that the spending is not always good quality;  projects are added to the national budget after final submissions are made; the additions are apparently made by direct intervention of ministers or by departmental heads to Treasury and DNPM and are the result of poor forward planning or political pressure;  projects in budget submissions are cut or reduced in funding – while this is the prerogative of Treasury, cuts are made in an arbitrary way that can undermine the priorities for funding classes of work – for example by underfunding maintenance and at the same time providing budget for new construction;  projects enter the national budget with little notice or prior consideration – any substantial transport project should be signalled well ahead of the budget year in which it is first to be funded;

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 The program names often do not relate well to Changes to the Transport the projects that are included, and projects are Budget Process not always clearly identified and described in the submissions by the transport agencies. 139. All national budget transport expenditure to be The NTS proposes the following changes: channelled through the budgets  All national budget expenditure on transport of the agencies owning and infrastructure should be included in the budget managing the assets appropriation for the transport agency which Other than inter-governmental will eventually be required to manage the funding grants, all Government asset – DOW or NRA for roads depending on expenditure for provincial asset ownership, PNG Ports for ports and transport infrastructure to be jetties, NMSA for maritime navaids, NAC for channelled through the national airports, PNGASL for air navaids; transport agencies rather than  Apart from intergovernmental grants, such as other departmental budgets TIMG, Government appropriations for All transport infrastructure provincial, district or local level infrastructure expenditure to be reviewed by should be included in the budget appropriation TSCMIC before inclusion in the for DOW for roads, PNG Ports for small Budget wharves and jetties, and NAC for provincial airports and rural airstrips; these should be Budget program names and clearly demarcated as provincial transport make up should be rationalised infrastructure development programs; these Distinction between national programs should be developed from the priority roads and non-priority expenditure priorities set out in Provincial roads superseded by NTS Transport Plans that have been reviewed and endorsed at national level by DOT as No lump sum provisions consistent with the NTS, the responsible unrelated to works quantities national transport agencies and TSCMIC; and rates estimates to be included  Projects not put forward in budget submissions by the agencies or by provincial government and therefore not reviewed by TSCMIC should not be added to the national budget;  Budget program names and make up should be rationalised. A suggested re- classification of programs for the roads development budget is into (i) Rural roads and bridges – GoPNG funded, (ii) Rural roads and bridges – including loan or grant assistance, (i) Urban roads and bridges (iv) Other expenditure – for RAMS, BAMS, plant and transport, works units etc. Program and project names and identification should not vary year-to-year and be consistent between the Budget and PIP;  Once the NTS and MTTP are adopted, it will no longer be necessary to identify “national priority roads” and “non-priority roads” and these distinctions will be phased out in future amendments to the NTS and MTTP;  Lump sum budget appropriations that are not related to a scope of works, typically with an accompanying technical description, quantities and cost estimate, should not be approved – as this can lead to wasteful expenditure and lack of accountability.

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11 Statement of Policy for Land Transport

11.1 Introduction This section of the Strategy sets out the updated policy for land transport, comprising roads and bridges, road traffic, vehicles, drivers, road passenger and freight transport services, based on the general policy principles for the transport sector as a whole discussed in Section 8. It does not contain investment strategy or priorities for road infrastructure which are considered in Section C.

This policy statement replaces the existing land transport policy as conveyed to Parliament by the Minister in March 2009, contained in the National Transport Development Plan 2006-2010.

The policies for land transport are matched with key performance indicators (KPIs), targets and monitoring in an action plan for implementation of policy and institutional reforms in the MTTP.

11.2 Development of the Land Transport Institutions

11.2.1 Road Traffic Authority

All land transport regulatory functions and associated 140. Road Traffic Authority safety enforcement functions will in future be carried out by a new Road Traffic Authority (RTA), formed from the A Road Traffic Authority (RTA) NRSC and Land Transport Division of DOT, the Land will be created from the NRSC Transport Board being disestablished in the process. and DOT Land Transport Division; the National Land The RTA will be established as a statutory regulatory Transport Board (NLTB) authority under a Road Traffic Authority Act which will provincial LTBs will be abolished also incorporate and supersede the existing Motor Traffic and their function rolled into the Act. The RTA will be structured as a central headquarters new RTA; office based in Port Moresby with provincial offices as necessary. RTA will be responsible for: The RTA will be funded through administration fees charged for  administering all vehicle construction and use its services; regulations; The RTA will outsource  administering registration and annual renewal operational activities to MVIL, of registration for vehicles; Provinces and the private sector  administering driver licensing including as proves most cost-effective eyesight tests, driver competence tests, and consistent with maintaining the issue and renewal of driver licences; quality control  registering driving schools and certifying RTA will arrange for the driving instructors; collection of statistical data on  licensing, inspecting and auditing of vehicle motor vehicle, driver and testing stations, vehicle testing inspectors and transport services licensing at equipment; national provincial level, and  administering the Motor Car Dealers Act pass this data to the DOT to (although the requirement for this Act is to be support its sector policy, reviewed); planning and monitoring role  administering the licensing of public motor vehicle (PMV) services, taxis and hire cars that are used in hire-or-reward services, and for PMV driver licences for such services, based on quality standards (regulation of route structures and route and service licensing to lie with NCD and urban councils);  administering the licensing of heavy vehicles used for hire-or-reward freight transport, based on quality standards;

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 road safety functions as detailed further below; and  on-road enforcement of all the above. RTA will fund its activities from administration fees that reflect its costs of operation. The RTA will not necessarily carry out all of the above functions within its own organisation but will outsource certain of these to MVIL, to Provincial Governments and to the private sector as proves the more cost-effective while maintaining service quality standards and integrity of the system.

11.2.2 Motor Vehicle Insurance Ltd and Provincial Governments

MVIL has well-established systems for issuing motor 141. MVIL and Provincial vehicle registration, driver and transport services licences Governments together with the various testing that accompanies them, although some improvements are needed to the integrity MVIL will continues to provide of certain of the testing procedures. vehicle, driver and transport license issues and related MVIL will be invited to continue to perform these services services under contract to RTA on a contract basis alongside its primary function as a 3rd or to Provincial Governments party insurer, but will be remunerated on a fee-for-service MVIL will be compensated on a basis rather than retaining all of the revenues. Part of the fee-for-service basis and passes revenues will be used for funding the RTA. The part through the monies collected to levied as road user charges will be passed through to the the contracting authority; NRA or any other agency entitled to a portion of the road user charge revenue. In the provinces the remaining Provincial Governments will revenues will be retained by the Provincial Governments. retain motor vehicle licensing revenues as at present 11.2.3 National Road Safety Council and Safety

Functions Generally 142. NRSC and Road Safety The NRSC has been operating without a governing Functions board, that is the Council as provided for in its legislation. Prior to establishment of the RTA, a new NRSC Council Reconstitute the NRSC Council will be agreed with the Minister and be approved by the in the interim NEC. The new Chairman will then convene regular Consolidate all road safety meetings of the NRSC Council as provided for in the functions of DOT and NRSC into NRSC Act. the new RTA On its formation the RTA will consolidate road safety NRSC Council continues with functions within a single autonomous government revised membership as an inter- statutory authority, combining the publicity and agency advisory body to the promotional functions of the NRSC with the vehicle Board of the RTA. roadworthiness and on-road vehicle inspection functions RTA to actively monitor road of the LTD. The new RTA will work closely with the safety and develop and Traffic Police who will retain their current responsibility for implement action plans for on-road enforcement of traffic laws and for attending and safety improvement within an reporting on road vehicle crashes. overall National Road Safety it is envisaged that the Council of the old NRSC will Plan (NRSP). continue with a revised membership as an inter-agency Road controlling authorities will advisory and coordinating body on road safety matters. advise on road design and The committee, comprising officials from RTA, DOW, condition factors affecting road NRA, DOT, Traffic Police, Departments of Education and safety and will contribute to the Health and relevant private sector organisations will action plans and NRSP and will provide technical support and policy advice to the Board include road safety in agency of the RTA. budgets

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The RTA, using information provided by the traffic accident database and Traffic Police scene reports, will actively monitor the road safety performance of the public road network, and will develop and implement actions plans for improvement, considering vehicle, driver/operator and traffic factors. The road controlling authorities, namely DOW, NRA, NCDC, provincial governments and town councils, will be required to assist the RTA in identifying road design and condition factors contributing to crash risk and assist to develop and implement crash reduction measures and plans. Agencies will also be required to: (i) identify individuals within their organisations with the prime responsibility for road safety; (ii) to provide for roads safety in their budget requests and allocations; (iii) to apply or provide for funding against proposed work programmes; and (iv) to report on implementation.

11.3 Market Entry and Competition Regulation

11.3.1 Commercial Road Freight Transport The requirement for commercial freight vehicles (hire or reward services) to hold provincial or highway licences 143. Road Transport that specify the routes that can be run or the types of Licensing freight carried will be removed (quantity licensing). In Commercial goods transport future road freight licensing will be on a quality basis, as subject only to quality licensing, set out in Section 8.8, requiring only that the operator has quantity licensing abolished the financial capacity, good character and sufficient industry knowledge to operate a commercial freight PMVs and taxis will continue to business. Licences will be issued by the RTA and no be quantity licensed under longer issued by provincial governments. Companies and control of RTA by route or area persons operating heavy vehicles to support their own of operation businesses (own account operation) will not be required Quality licensing will be by to hold freight vehicle licenses. criteria of industry knowledge, financial capacity and good 11.3.2 Commercial Passenger Transport Services character Urban and rural PMVs and taxis are subject to route or All licenses will be issued by area licensing which will be retained for reasons of RTA in consultation with the providing a stable service based on planned routes or relevant urban council or areas of operation and to facilitate the inclusion of social provincial administration services as described in Section 11.6. All licences will be issued through the RTA in consultation with the relevant urban council (NCDC, city or town council) or provincial administration in the case of rural licenses.

11.4 Road Network Development, Ownership and Management

11.4.1 Enlargement of the National Road Network Progressively, as public roads are rehabilitated, upgraded or newly constructed, they will be selectively transferred from provincial to national ownership under the management of DOW, except where roads are transferred directly or at a later date to the NRA. The MTDP target is for 25,000 kms of public roads to be in national ownership by 2030 which will be the benchmark, along with the five year target points for monitoring achievement. This is expected to result in approximately 17,000 kms of public roads under DOW management by 2030, and a residual 12,000 kms in provincial ownership.

11.4.2 NRA Assumption of Responsibility for the Core National Road Network Progressively, the core road network, comprising the most heavily trafficked rural roads, as they are brought up to maintainable standard, will be transferred to the management of the NRA, which will fund the ongoing maintenance from road user charges. NRA will also be responsible for later

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upgrading and for rehabilitation/reconstruction of these roads at the end of their design life. The core road network corresponds approximately to the NR roads and certain of the NM and ND roads as presently numbered in the DOW inventory, although there will be a need to assess roads on a case-by-case basis for suitability for inclusion within NRA’s responsibility with regard to the need to meet upkeep costs from road user charges revenues. Some of the missing links, as and when constructed, may become part of the NRA responsibility if of sufficient functional and traffic importance. The MTDP expects this process to be completed within 20 years, and the MTDP targets will from the baseline for monitoring achievement.

11.4.3 Provincial Road Network

Provinces will be responsible for the public road network 144. Road Network not under national ownership, expected to reduce from Development approximately 20,000 kms in 2010 to 12,000 kms by 2030 and to be concentrated on lower hierarchy access roads New links and selected other and local urban roads. This reduced responsibility is more public roads to become declared in keeping with the funding provided through inter- roads as they are constructed, governmental funding arrangements and the capacity of upgraded or rehabilitated the provincial administrations. Length of the national network will increase to 25,000 kms and 11.4.4 Transfer of Private Roads into Public the provincial network will Roads decrease (~20,000 to ~12,000 There are individual roads and small road networks under km) in pursuit of MTDP targets private ownership, generally as part of development projects or providing access to private development. NRA to progressively assume Private roads will remain the maintenance responsibility ownership of core roads, of their owners. approximately 9,000 kms Transfers of private roads or In the case that (a) an owner of a private road wishes to non-transport Government transfer ownership responsibility to the Government, or agency roads to public roads will (b) a non-transport Government agency wishes to transfer require prior agreement for an agriculture, forestry or mineral development road to ongoing maintenance funding Government, with the intention that the road become a public road then this will have to be agreed in advance DOT to lead development of with the authority (DOW, NRA or provincial government) procedures for identifying, which would become responsible for the road, to ensure agreeing, surveying and legally that maintenance funds are available and that the roads transferring roads between are of a design standard that is both suitable for public provincial and national use and capable of being economically maintained. responsibility, between DOW and NRA and between private 11.4.5 Procedure for Transfers of Road and public responsibility Ownership There will need to be agreed procedures for deciding which roads are to be transferred between provincial and national responsibility (and vice versa), the responsible national agency (DOW or NRA), transfers between DOW and NRA, and between private and public ownership. As this is a long term process, taking place over 20 or more years, it can be approached incrementally and time should be taken to ensure that the process is as robust as possible taking all relevant considerations into account. Transfer procedures will be designed to operate in either direction (e.g. national to provincial as well as provincial to national).

DOT will take the lead role in developing these procedures in consultation with DOW, NRA, DPLLGA and provincial administrations, DNPM and other interested parties.

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The procedures will cover:

 selection criteria when considering transfer of ownership, including the existing and future planned role in the road hierarchy, sequencing and scheduling of transfers;  provincial and regional equity – ensuring that road maintenance responsibilities are allocated with due regard to provincial human and financial resources, and relative development status using the KPIs established in the MTTP (Volume 2, Table 10);  basis of the agreements to transfer between parties, documentation and approval processes and sequencing and timetable of actions;  accurate identification and centreline positioning, road layout and condition survey requirements, legal and customary ownership/usage of the underlying land, any existing agreements with landowners (in Memoranda of Agreement etc.);  Legal instruments for transfer and procedures to be followed, including gazetting of national roads under the Roads Maintenance Act and the NRA Act and implications under the Protection of Infrastructure Act.

11.4.6 Cooperative Working between DOW and Provinces Provinces will be encouraged to enter into management arrangements with the provincial arm of DOW to manage 145. DOW-Provincial provincial road assets on a selective or whole-of-network Cooperation basis, in which case DOW will assume responsibility for Provinces to enter into effective use of the funds available, reporting back to the management arrangements with provinces. Conversely, where the Provincial Government DOW for road asset has a strong road works capability and DOW is weak, management according to DOW will be encouraged to outsource part of its network capacity and capability. management tasks to the provincial administration. In either case, the ultimate responsibility for asset management and acquittal of funds will remain with the asset owners and such arrangements will be governed by clear written agreements between the parties including for administrative costs.

11.4.7 Establishment of Provincially-Based Works Units DOW will be encouraged to cooperate with Provincial and, where necessary, district administrations, to 145. DOW-Provincial establish commercially priced works units to act as a Cooperation focus of skills and equipment in the more remote rural Establish joint provincial works areas where there is a shortage of private sector capacity units combining DOW and or interest. (See also the role of DOW, Section 10.4.2). Provincial resources

The purposes of the works units will be: Works units to provide for emergency reinstatements, plant  to attend to emergency reinstatements where hire and for works on no suitable arrangement can be made with the competitive tender basis where private sector; little or uncompetitive private  to undertake road works on a competitive sector capacity tender basis where there is no private sector interest or where there is evidence of market dominance and uncompetitive pricing by the private sector;  to provide a plant hire service to encourage SMEs in the private sector to become involved in road works. In establishing such works units, care will be taken not to unfairly compete with the private sector and to this end the works units shall be self- and fully-accounting for their cost (that is using a project-based commercial accounting framework rather than traditional public sector accounting).

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11.5 Public Private Partnerships

In conjunction with the Government’s proposed PPP Unit, 146. PPPs the DOW and/or NRA may explore the opportunities for leveraging road construction for major projects using Envisaged to be very limited private sector capital. However, the considerations noted opportunity for true PPP road in Section 8.1.2 should govern either agency’s actions in concessions in Papua New this area. PPPs will be subject to the prevailing National Guinea. Public Private Partnership Policy and framework. Performance-based term PPPs, where the private sector participates by arranging contracts offer opportunities for private financing of all or part of a project in return for an leveraging private finance and operating concession in which the private interest collects developing national construction toll revenue, or receives revenue from Government capacity through a shadow tolling arrangement, may be viable for Finance-and-build arrangements new urban road links carrying a substantial volume of involving private sector loans are traffic. It is envisaged that such facilities would be suited likely to be more costly than to road links that provide a higher than average level of sovereign loans from service to a particular group in the community, such as a multinational donors and also limited access airport link road where such a facility create conflicts in combining would not normally attract a high priority in the investment borrowing obligation with programme. contract delivery.

Particular matters relating to PPPs for roads that should be considered are:  Most jurisdictions require that there be a free route in parallel to the tolled route, if the PPP is to generate revenue from a physical toll concession, including where tolls are collected electronically;  The infrastructure for collecting physical tolls adds to the capital cost of the project and has ongoing operational costs and security issues for the funds;  PPPs are generally only used for roads carrying relatively high volumes of traffic; few if any such conditions exist in PNG;  The private consortium in a PPP arrangement will negotiate to reduce or remove the traffic risk – that is the risk that repayments will be based on traffic volume and that the traffic volumes may be less than expected;  The responsibility for overload control needs to be considered, as this could become a reason for the private party claiming a breach of the public party’s contractual responsibility;  If the future traffic and toll revenue is not to be the means of payment, and instead the arrangement is just for the private consortium to provide the capital with a scheduled debt repayment to the public party, or Government, then this amounts to no more than a commercial loan which would be better separated from the delivery of the project – the aim of a PPP is for both parties to assume some risk, if all the risk is with the public sector, then there is no advantage;  Performance-based term contracts for road rehabilitation and ongoing maintenance are seen as a useful way of increasing private sector capacity, giving longer term assurance of work for the private sector and moving risk away from the public sector, and can be financially structured to bring projects on earlier than would be possible through the conventional budget process;  Alliance contracts between Government and private design and construction consortia also offer a method of jointly achieving cost-effective results but their introduction would require improved institutional capacity.

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11.6 Cost Recovery, Road Fund and CSOs

11.6.1 Cost Recovery and User Charges A cost recovery, user charges and funding policy for 147. Cost Recovery, Funding roads is an urgent requirement to ensure a stable, and CSOs predictable and sufficient level of funding for road maintenance. NRA will assume responsibility for the more heavily used and Roads funded from user charges - as for ports and functionally important rural airports, the road network includes main roads carrying roads, with progressive transfer relatively high levels of traffic from which user charges of roads being subject to can be raised that are sufficient to finance ongoing assurance of long term financial maintenance, once the main roads are restored to a good sustainability from the Road maintainable condition and other roads. This part of the Fund network will become the management responsibility of the NRA and its funding will be provided for from the NRA Other economically viable roads Road Fund with revenue to the fund being derived from will be funded through the DOW charges on road users. and Provincial budgets subject to funding availability Other economically viable roads - the remainder of the Non-economic roads providing national network (other declared roads) fall under the basic access to small remote responsibility of DOW while undeclared roads are the communities will be funded responsibility of NCDC, provincial and local governments. according to the CSO policy For some of these roads, the economic benefits to road from an agreed portion of the users will outweigh the costs of road upkeep (including road budget. considerations such as indirect benefit from improved health, education status and market opportunities), that is a benefit/cost ratio>1. However, it will not be possible or practical to self-fund these economic parts of the network solely from charges on road users. In these cases there will be ongoing reliance on the existing sources of funding which are variously national Government appropriations to DOW, inter-governmental development and maintenance grants, tax credit arrangements, and other financial support to roads from other sources of revenue such as provincial motor vehicle registration and licensing fees, provincial road user taxes, provincially distributed GST, sales tax, liquor licensing taxes etc.

Non-economic roads to satisfy community services obligations (CSOs) – roads to some remote areas serving small populations will in some cases be uneconomic to provide or maintain. However Government wishes to be equitable in provision of basic access, and will assign a proportion of road funding according to the policy on CSOs in Section 8.6

11.6.2 The NRA Road Fund 148. Operation of the NRA A Road Fund has been legally established under the Road Fund National Roads Authority Act. It is a special purpose off- budget fund for financing maintenance and rehabilitation Will fund all works requirements of those national roads for which full upkeep responsibility on NRA roads has been transferred to the NRA from DOW by Gazette Road user charges to be notice. Upkeep includes road and road corridor extended to a charge on both maintenance, bridge and other structural maintenance petrol and diesel, an annual and all road furniture, traffic facilities and road safety charge on registered vehicles services. Eventual reconstruction and upgrading of roads and a charge for heavy vehicle under NRA responsibility will also be funded from the axle loads NRA Road Fund.

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The Road Fund will receive revenues from nationally levied road user charges and other sources, and NRA will 148. Operation of the NRA distribute these funds against programmes for road Road Fund maintenance and rehabilitation based on road asset NRA to develop its financial and management information. The NRA will work with technical management of the Government to extend the present allocation by Treasury Road Fund and application to of part of the excise duty on diesel fuel to the Road Fund the network to a fully-fledged Road Fund obtaining revenue directly NRA to publicly report on its from a charge on diesel and petrol, from an annual affairs and to annually prepare charge on motor vehicles and heavy vehicle charge at statements of intent and service the time of relicensing, and from such other sources as performance may be considered practical and appropriate. Oversight from Auditor General NRA and DOW will manage the rate of transfer of roads and monitoring by DOT to NRA responsibility such that the Road Fund revenues are sufficient to fully fund the costs of sustaining the NRA network in the long term.

NRA will continue to develop the necessary technical and financial expertise to assess needs of their core road network, to ensure efficient and effective use of monies from the Road Fund, and to evaluate the performance of completed work. The records of meetings, processes and decisions of the NRA will be publicly disseminated. External oversight of the NRA will be maintained by the Auditor General and by the responsible Minister with monitoring assistance from the DOT.

NRA will annually provide a Statement of Intent for the works that it intends to implement and a Statement of Performance after the year end, reporting the achievement of targets and monitoring the cost effectiveness of the services purchased.

11.6.3 Funding of NCD Roads

Several of the main urban arterial roads in Port Moresby 149. Funding of NCD Roads and roads leading to national buildings and facilities are declared national roads, so should be funded by NCDC to manage all works on Government appropriation or, in cases where transferred roads within NCD boundary from to the NRA, by the NRA from the Road Fund. However, in its own forces or by contract practice NCDC has taken on the responsibility of funding NCDC to receive road user- road maintenance within the NCDC boundary and, for based funding to supplement its capital development of roads, has looked to Government financing of road works for a funding contribution which has not always been forthcoming. Unlike the provincial governments, NCDC An investigation will be made of does not receive revenue from motor vehicle and driver alternative funding sources licensing, as the service is provided by MVIL which including a proportion of RUC, retains the revenue. Consequently road funding is from vehicle registration and licensing NCDC’s general revenue sources. Nor does NCDC fees and participation in inter- routinely receive intergovernmental funding through DSIP governmental funding or TIMG as is the case for provincial governments.

As the largest urban authority in Papua New Guinea, NCDC has considerable financial resources compared with the provincial urban centres. However, it is in the position of committing about one third of its total revenue to funding the road network. While it has a works capability suited to the task, a more secure funding base related more closely to the costs imposed by road users is needed.

Accordingly, an investigation will be made of alternative funding sources for Port Moresby roads, including options, or a combination, of: (i) a proportion of the revenue raised through road user

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charges, (ii) directing the funds raised by MVIL to NCDC with NCDC paying MVIL for the services it provides on a cost plus basis or (iii) including NCDC within the inter-governmental funding arrangements as for the provinces.

11.7 Regulation of Service Standards in the Land Transport Subsector Regulation of customer service standards for licensed 150. Regulation of Service passenger transport and commercial road freight Standards transport services will be controlled through conditions of issue of the licences and enforced by the Road Traffic The RTA will regulate service Authority. The ICCC also has a responsibility for standards for commercial overseeing standards of service delivery to transport passenger and goods transport service users, such as operation to agreed schedules, services adherence to standards of passenger comfort and care Consider the introduction of a of cargo as advertised by the service providers, required system of Land Transport Rules by contracts of carriage or through the shipping service franchise contracts. DOW to be the lead agency for setting standards for road The Government will give consideration to introducing a engineering works in conjunction system of Land Transport Rules as an additional form of with industry stakeholders. legal instrument so that matters of vehicle design and use, traffic control devices, traffic management, fines and penalties, can be more readily revised to keep pace with changing requirements.

Standards for the design, construction and maintenance of road infrastructure will be periodically reviewed and monitored as set out in Section 8.8, with DOW initially being responsible for standards for road design and the NRA and DOW jointly for standards of road maintenance.

11.8 Road Safety

11.8.1 Road Safety Strategy and Action Plan The Papua New Guinea Road Safety Review (April 2011) 151. Road Safety prepared by the NRSC has shown that a major effort is The NRSC/RTA to prepare a 20 required to improve the safety of vehicles, drivers, roads year National Road Safety and transport services, including better coordination of Strategy and 5 year Action Plan the many public agencies contributing to road safety. Reduce the number of vehicle This review will be further developed into a 20 year testing stations and tighten National Road Safety Strategy, and 5 year Road Safety criteria and enforcement; Action Plan, to be prepared by the RTA (in the interim engage external auditing agency NRSC) in consultation with DOT, DOW, NRA and other stakeholders and monitored annually and reviewed every Review period between retesting five years as part of the MTTP preparation and NTS for younger vehicles review process. Centralise issue of number plates and vehicle registration to 11.8.2 Vehicle Roadworthiness the RTA; review the delegation The number of vehicle testing stations will be reduced of functions to Provincial and the criteria for licensing as an Authorised Inspection Governments and MVIL Station (AIS) will be tightened and more vigorously enforced. Responsibility for approving vehicle testing stations will transfer to the RTA on its formation. The RTA will review the options for outsourcing the licensing and compliance inspections of AIS to a quality certification agency with the necessary credentials and independence.

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Importation of motor vehicles will become subject to approval to ensure that transport equipment is fit for use on PNG roads in regards to mass and dimensions, vehicle construction rules, age and history of pre-use, and emission control equipment.

Consideration will be given to increasing the time period for retesting vehicles for roadworthiness (issue of safety certificates) to one year for vehicles of up to three years of age.

11.8.3 Vehicle First Registration and Annual Renewal The issue and surrender of vehicle registration plates and the issue and renewal of registrations will be centralised through the Road Traffic Authority. The procedures for delegating vehicle annual relicensing to provincial governments and MVIL will be reviewed to ensure integrity, consistency, and accurate data recording and central reporting. 151. Road Safety 11.8.4 Driver Licensing and Testing Driver tuition and testing The procedures and supporting legislation for driving requirements to be raised schools, driver training, testing and licensing will be RTA to increase enforcement reviewed with the aims of requiring a minimum number of effort to counter unroadworthy hours of tuition from a qualified driving instructor, a vehicles tightening of the practical test and issue of competency certificates, review of the term for renewal of licences, Safety management systems to requirements for older drivers and the introduction of be introduced for identifying and defensive driving courses. mitigating safety risks from road layout and use; new road 11.8.5 PMV and Taxi Safety projects to be safety audited The use of unroadworthy PMVs and taxis will be Road safety funding to be countered through increased enforcement effort by the increased and self-funded from new Road Traffic Authority in coordination with the Police RTA revenues Traffic Division.

11.8.6 Safety Management Systems and Design Auditing Road network managers (DOW, NRA, Provincial Government and NCDC) will be required to establish Safety Management Systems for identifying and rating safety hazards related to road design and traffic facilities, with a corresponding process for their mitigation. All road designs will be required to pass an independent safety audit by persons trained and certified to do so. An appropriation against road safety will be included in the Development Budgets for DOW and other road authorities, to encourage an increased focus on road safety improvements.

11.8.7 Road Safety Funding The basis for funding road safety will be reviewed, including the present allocation of 5% levy on third party insurance to the NRSC. Consideration will be given to self-funding all road safety activities including the activities of the NRSC and on-road safety enforcement and accident reporting under the new RTA structure.

11.9 Environmental and Social Safeguards for Road Transport

11.9.1 Emissions from Road Transport Road transport emits noise, harmful gases, unburnt hydrocarbons, particulates and carbon dioxide from engines, brake linings and tyre wear which cause localised disturbance, air pollution, waterway pollution and contribute to global warming. There is legislation against the emission of visible smoke but no other controls on vehicle emissions or on vehicle fuel efficiency.

If PNG is to meet its commitments made at Copenhagen in December 2009, the vehicle fleet will have to become cleaner and more efficient. This will benefit people living in urban areas as well as

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the climate, as cleaner vehicles will help reduce respiratory and coronary disease and create a more 152. Environment pleasant living environment. Review import controls to eliminate high emission vehicles The Government will review the import controls on used road vehicles, with the aim of eliminating vehicles with Increase on-road enforcement of outdated and unserviceable emission control systems. smoky vehicles The Government will also consider the inclusion of DOW to maintain and develop pollution related charges as part of the road user charges environmental codes of practice system. There will be an increased enforcement for road and bridge infrastructure response to remove smoky vehicles from the road. construction and maintenance including practice guidelines for 11.9.2 Environmental Safeguards for Road climate change adaptation. Construction and Maintenance The construction and maintenance of transport DOT to develop proposals for infrastructure and the operation of transport vehicles and limiting the carbon emissions associated equipment will be subject to practice from the vehicle fleet and guidelines and, where necessary, regulations aimed at introduction of biofuels in safeguarding the natural and built environment and conjunction with the OCCD minimising adverse environmental and social impacts on people and communities, considering both direct and indirect or consequential effects. DOW will take the lead in developing a strategy and practice guidelines in consultation with other stakeholders. Road network managers will be required to observe environmental laws and regulations enacted by national and provincial Government from time to time and the legal requirements and procedures laid down by the Department of Environment and Conservation.

11.9.3 Carbon Emissions Carbon emissions from the road vehicle fleet can be reduced by encouraging fuel-efficient vehicles, by good maintenance practice and by substitution of sustainable biofuels for conventional petrol and diesel. DOT will develop proposals for each of these initiatives in conjunction with the RTA and the OCCD.

11.9.4 Climate Change Adaptation Road infrastructure is potentially threatened by the effects 153. Social Safeguards of climate change, including increased rainfall intensities affecting drainage flows for culvert and bridge design and, Construction contracts to include at the coastal margins, the severity and area of effect of provisions for protecting local tropical storms and sea level rise. These threats require communities from HIV/AIDs a response both when designing new roads and bridges infection and also in retrofitting existing roads to increase their Transport operator targeted climate change resilience. The DOW, NRA, DOT and the education in HIV/AIDs proposed Committee on Engineering Design Standards prevention will take the initial responsibility for considering a response strategy to climate change that balances the Legitimate resettlement impacts risks of infrastructure damage and closures against cost. to be avoided and/or compensated in road 11.9.5 HIV/AIDS and other Communicable development Diseases Roads into inaccessible areas to The potential spread of HIV/AIDS through construction take account of cultural and camp personnel, and by freight and passenger vehicle ecological impact risks drivers and crews will be countered through safeguard

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conditions in construction contracts and through operator education programmes in cooperation with the Department of Health.

11.9.6 Resettlement Impacts of Road Construction The Government will compensate legitimate claims of those whose land, property and activities are adversely affected by new road construction and road realignment whether the resettlement is voluntary or involuntary, as required under the Protection of Infrastructure Act.

11.9.7 Impacts of Roads on Areas of Cultural and Ecological Sensitivity The opening of previously inaccessible areas can provide access for undesirable exploitive and disruptive human activity, such as hunting pressure on wildlife and illegal logging and mining, and adverse effects on the traditional culture of isolated communities. Development of new transport routes through pristine or thinly populated areas will therefore have regard for balancing development advantages with environmental and social costs.

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12 Policy Statement on Maritime Transport

12.1 Introduction This section of the Strategy sets out the policy direction for maritime transport, comprising ports and port operations, river transport and river ports and landings, coastal maritime activities, marine navigation infrastructure and operations, international and costal shipping, based on the general policy principles for the transport sector as a whole discussed in Section 8.

This policy statement replaces the existing maritime policy as conveyed to Parliament by the Minister in March 2009 and contained in the National Transport Development Plan 2006-2010. It does not contain the investment strategy or priorities for ports and other maritime infrastructure which are considered in Section C. It is recognised that in some areas maritime policy requires further analysis and development, and that this policy statement will be updated, amended and expanded as necessary in future reviews of the NTS

12.2 Development of Maritime Transport Institutions

12.2.1 Department of Transport

Establishment of a Shipping Franchise Unit: A unit will 154. DOT be established within DOT Rural Infrastructure Development Division (RIDD) as an interim measure to Establish a Shipping Franchise provide for the continued administration of the Shipping Unit within DOT RIDD to service Franchise Scheme. Until the completion of the CTWP the CWTP Stage 2, this unit will remain based in the CWTP project DOT PCD and RIDD to office. In the medium term the Shipping Franchise coordinate the planning of minor Scheme will be transferred to the broadened NMSA/NMA wharves, jetties and landings in (see below). conjunction with provinces and Rural Infrastructure Planning: the future coordinated DPLLGA planning of rural maritime infrastructure, that is minor MTD including MSU to be publicly owned/available wharves, jetties and landings absorbed into an enlarged and their local road access, for the purposes of NMSA as the National Maritime implementing and revising the NTS and MTTP, assisting Authority in the medium term provincial administrations in development of their transport plans and determining appropriate projects for CSO funding, will be carried out jointly by PCD and RIDD of DOT, in close liaison with DPLLGA through the Provincial and Local Level Services Monitoring Authority (PLLSMA).

Marine Transport Division (MTD) to be absorbed into 155. NMSA/NMA NMSA/NMA: Non-economic regulatory functions carried NMSA to broaden to a National out by the MTD, including the Maritime Security Unit and Maritime Administration (NMA) the proposed Shipping Franchise Unit, will be reassigned in the medium term to include in the medium term to a broadened NMSA/NMA (see the administration of maritime below). regulatory policy performed by DOT Marine Transport Division, 12.2.2 National Maritime Safety Authority the Maritime Security Unit, the Shipping Franchise Scheme of The role of the NMSA will be broadened over time to a the CWTP and port regulatory National Maritime Administration/Authority (NMA), to functions presently delegated to incorporate those regulatory functions currently PNGPCL from the Secretary of performed by PNG Ports Corporation under delegation Transport. from the Secretary for Transport, allowing PNGPCL to

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concentrate on its commercial functions without the potential for conflicts of interest. The non- economic regulatory functions of Marine Transport Division will also be transferred to the NMA, including the Maritime Security Unit and the operational management of the CWTP Shipping Franchise Scheme.

Functions will be transferred from DOT to NMSA/NMA only where financial provision for their delivery is made by Government, through national budget allocation and/or user charges. NMSA/NMA will retain powers to delegate or outsource the service delivery of its regulatory functions to PNGPCL and others on a fee-for-service basis, under a clearly specified instrument of delegation. In the following paragraphs, where NMSA is stated, the policies and actions will apply similarly to the future NMA.

12.2.3 PNG Ports Corporation Ltd

Endorsement of the SOE Model: The policy position of 156. PNG Ports Corp Ltd this NTS is that a SOE model of a ports corporation is an PNG Ports to remain as an SOE appropriate one for Papua New Guinea. A move back to Main port assets to remain in a statutory authority model, such as a harbour board, majority public ownership would be a retrograde step and should not be contemplated. PNG Ports Corporation to operate the three main Private/Public Ownership of Port Assets: Because of commercial ports on a fully the limited opportunities for competition in the delivery of commercial basis, as separable port infrastructure, full privatisation of the publicly-owned business enterprises with price main commercial ports carries risks of loss of sovereign monitoring but not price control control over what are key strategic assets, and would be very difficult to reverse. However, private sector PNGPCL be provided with CSO investment in port assets that retains a majority funding support to operate the shareholding by Government may be considered. non-commercial ports Further consideration be given PNG Ports Corporation to Operate on a Fully to development of PNGPCL as a Commercial Basis: PNG Ports Corporation should be landlord or tool port operator. encouraged, and given the institutional and regulatory framework, to operate on a fully commercial basis in PNGPCL regulatory functions regard to price-setting and service provision and be delegated from the Secretary of required to provide a market return to Government on Transport be transferred to an invested capital in the commercial ports (as opposed to expanded NMA. ports requiring CSO support, see below). This in turn A review will be undertaken of requires that PNGPCL not be burdened with the which ports should be declared responsibility to internally cross-subsidise unprofitable ports and their ownership and ports, allowing the present regulation of port charges be management arrangements lifted and instead replaced with a monitoring regime. PNGPCL to operate commercial PNG Ports as a Landlord or Mixed (Tool) Port and non-commercial portfolios, Operator: with the acquisition of mobile cranes and the non-commercial portfolio to rubber tyred gantry (RTG) cranes, PNGPCL has moved receive supplementary funding towards the mixed or “tool” port model of port operation, from Government or an industry where the SOE owns and maintains the port infrastructure levy, to be determined and also provides some of the ship loading and cargo handling operations, particularly for containerised cargo. PNGPCL to provide an asset An alternative “Landlord“ operator model would see these management service for other operational functions undertaken by the private sector, undeclared ports on a fee-for- with the possibility of leasing whole berths and wharf service basis on behalf of areas to one or more transport/freight logistics operators. provincial or local government This NTS does not take a fixed view on which model is

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most appropriate for Papua New Guinea, but proposes that either PNGPCL or IPBC commission a review of future strategic options, taking into account the desirability of retaining sovereign control over key assets, the availability of capital to PNGPCL versus the private sector for port development and port equipment, PPP opportunities to involve the private sector and leverage more investment, and the benefits of introducing vertical integration along the transport chain by opening port operation to logistics operators with interests in shipping and inland transport.

Regulatory Functions of PNG Ports to be Transferred to a NMA: The regulatory powers enjoyed by PNGPCL over the establishment and operation of other ports not under its ownership is in conflict with its commercial role and allows the possibility of it exerting regulatory powers for competitive commercial reasons. Over time, as PNGPCL is put on a more commercial footing (see above) and the NMSA’s role is expanded to include all administration of maritime transport regulation through transition to a National Maritime Authority (NMA), these regulatory powers that presently reside with PNGPCL will be transferred to the NMA.

Review of Declared Ports and Ownership: A few of the declared ports are so for historical reasons and now carry little traffic as their function has been superseded by land transport or change in importance of the urban centres that they serve. On the other hand, some undeclared ports are assuming more importance. Apart from those ports that will clearly remain as declared ports (Categories A and B in the ICCC regulatory contract), this NTS proposes that a review be made of which of the existing declared ports and which other significant ports under public ownership should in future be declared and within the management responsibility of PNGPCL. It should be noted that the port declaration refers to a geographical boundary over which a port authority has jurisdiction, certain ownership rights and certain development controls. Within this boundary may lay a mixture of public and privately owned and operated port facilities. The relevant legislation governing the establishment and operation of ports is in need of updating as discussed in Section 16.3.

Commercial and Non-Commercial Portfolio: The ports of Lae, Port Moresby and Kimbe can support their capital and operating costs from port revenues. The next tier of ports can largely support their operating costs but not provide a return on capital and the lower tier cannot support operating costs from revenue. It is proposed that PNG Ports split its operations for accounting purposes into a commercial and non-commercial portfolio, with the commercial portfolio required to generate a return on invested capital and operate profitably while the non-commercial portfolio is supported with CSO funding from Government or through an industry levy. There should be an inbuilt financial incentive in the CSO funding and a mission objective for PNGPCL to increase trade and profitability of marginally un-commercial ports so that they can be brought within the fully commercial portfolio with the aim of reducing the CSO requirement over time.

Asset Management of Other Ports: PNGPCL is technically the best equipped agency to undertake the asset management of other publicly owned (provincial or LLG) minor ports, should the owner of the facilities lack the technical and financial expertise to do so. Where these provincial or LLG owners request, or where national government determines that this is in the best interests of efficiency and effectiveness in the application of inter-governmental funding (through TIMG, DSIP and suchlike funds), then PNGPCL should be prepared to take on this responsibility on a fee-for- service basis. This would not preclude PNGPCL outsourcing specific tasks to the private sector or others for best cost-efficiency.

12.2.4 Reform of the Coasting Trade Committee

In parallel with amendments to the regulation of the coasting trade, it is proposed to reform or replace the Coasting Trade Committee (CTC) with a Marine Industry Advisory Group (MIAG) of wider representation, expanding its area of advice to conduct appraisal, validation and recommendations to the Minister on coastal shipping licence applications and associated maritime industry matters. The proposed composition of the MIAG is:

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 Four permanent core members: - DoT maritime representative (Chairperson role and minute distribution), - NMSA (Vice Chairperson role and to advise and coordinate on matters of safety, seafarer interest and vessel registration) - Manufacturers Council of PNG (representing the interests of PNG manufacturers), - ICCC (primarily as an observer and with the role to investigate any complaint)  Three invited members on rotation every 12 months: - one invited shipping line (as a representative of the Coastal Shipowners Association), - one invited representative of the maritime industry (towage, port, dry-dock, insurance etc.) - one invited shipper (as a representative of the PNG Shippers Association if this body is reformed)

12.2.5 Shippers Council

A PNG Shippers Council was formed at some point in the past but has become inactive. A strong PNG Shippers 157. Coasting Trade Council needs to be reformed and this may be best Committee facilitated with Government assistance to legislate its The CTC will be reformed or formation and provide an operating remit of collective replaced by a more widely discussion and negotiation. The Shippers Council would representative Marine Industry then provide an ongoing stimulus for the PNG Coastal Advisory Group (MIAG) Ship Owners Association to become more active. The 158. PNG Shippers Council Shippers Council would also interact with international associations and become active in promoting PNG Government will support the products in export markets; reactivation of a PNG Shippers Council 12.2.6 Role of the ICCC 159. ICCC Role As discussed in Section 7.2.5, the preferred model for The ICCC will monitor the state funding the community services obligations (CSO) of competition and service component of the maintenance of the non-commercial quality in the port and coastal national ports is to remove CSO funding as a cross- shipping sector, once direct subsidy obligation on PNG Ports Corporation, with this price control is removed funding instead delivered from an external source, allowing PNG Ports the freedom to set its port charges competitively, port by port. This will remove from ICCC the requirement to enter into a regulatory contract with PNG Ports that regulates the level of certain port charges. ICCC’s future role, similarly to aviation, will be to maintain a watching brief on PNG Ports Corporation’s operation to ensure that it is not engaging in monopolistic or market dominant pricing behaviour.

ICCC will exercise a similar role in monitoring the levels of prices in the coastal shipping industry, by undertaking periodic sample studies and reviews of charges versus costs, assisted by the DOT in data collection.

12.3 Market Entry and Competition Regulation

12.3.1 International Shipping Papua New Guinea international ports of entry are currently served by nine liner services and directly contracted services for particular large industries, with direct shipping links to Australia, Europe and Southeast Asia and various transhipment arrangements in overseas ports to other

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destinations. Papua New Guinea is comparatively well-served by comparison with other Pacific ports, and there is no regulation of international shipping access to its ports of entry, other than that required for safety and border security. Oversight of the state of market competition in international shipping will be maintained by the Independent Consumer & Competition Commission.

In order to promote competition in the international freight rates offered by line and charter shipping, it is proposed that a Shippers Council to represent shippers’ interests be formed, probably as an adjunct to an existing interest group such as the PNG Chamber of Commerce, to act on behalf of the consumer to provide an exchange of market data and to assist in freight rate negotiation.

12.3.2 Cabotage Cabotage is the market protection regulation against foreign entry to coastal shipping. The existing cabotage Market Entry and Competition rules apply to vessels over 10m length and require PNG 160. Cabotage - There will be registration or licensing of shipping companies, ships and stricter conditions and limits on shipping operations and for seamen and port workers to permits for international shipping be either Papua New Guinean or to have obtained a PNG to carry coastal cargo work permit. The regulations are towards the lower end (cabotage) to avoid damage to of market protection when compared against other the PNG flagged coasting trade countries and there are a number of exemptions available and its associated onshore which further reduce their effect. industries The existing permit system allows international operators A fee-based system will be to carry cargo on coastal routes. In the last few years the introduced for cabotage number of permitted services has increased, in part to on- privileges to be applied to carry specialised imported goods for the LNG and other developing the PNG domestic resource projects and partly to allow international vessels shipping industry and potentially wishing to directly compete in the domestic trade between to CSO services to small ports ports that they visit to also transfer international cargo. 161. Price Control - Price There are signs that this second category is increasing control on coastal shipping and that excessive use of permits could hollow out the freight rates will be removed but most profitable domestic routes causing damage to the operators will be required to domestic shipping industry and related maritime structure their charges to industries, constraining their growth with loss of transparently reflect actual employment and career opportunities for PNG citizens. costs. As a maritime nation, reliant on shipping connections, it is in PNG’s interest that it foster market conditions for a ICCC will periodically monitor healthy maritime industry to play the major role in freight rates through case carriage of at least domestic cargo. studies

The Government’s policy on cabotage is therefore to 162. CSO Delivery - The CWTP balance the possible short term price advantages to Shipping Franchise Scheme will shippers of allowing cabotage by international vessels of be the preferred method of purely domestic cargo with the longer term costs to delivering services on thin routes industry and the nation. In the short term, the policy will that cannot bear a commercial be to more strictly limit the granting of permits for service as part of the international operators, and in the longer term to consider Government’s CSO policy the introduction of a fee-based system for permitting cabotage such as a flag state fee, a national seafarer’s manning levy, and/or freight tonnage levy to give an appropriate balance between lowering costs to shippers and supporting the local industry. The revenue from such cabotage fees would be applied in the maritime sector, such as contributing to CSO payments through the CWTP or support to maritime industry training.

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12.3.3 Coastal Shipping Freight Rates

Although there is regulation of coastal freight rates in theory, in practice the industry has been free to set its prices since 1991. A recent Shipping Freight Rates study, carried out for the DOT, indicated that overall freight rates bear a reasonably close relationship to costs and that there was no evidence of over-pricing. The perception that freight rates are high can be attributed to thin services on some routes which makes them costly to service, and the backlog of maintenance and expansion of port infrastructure which adds costs in the form of ship and cargo delay. However, the structure of the freight rate composition is not transparent and individual elements may not bear a close relationship to actual costs.

Maintaining regulatory control over shipping freight rates is cumbersome, costly and somewhat doomed to failure as there are various ways that operators can disguise price rises in various surcharges and service fees. The policy will be to allow the ICCC to monitor competition and prices for domestic shipping on an as-required basis, probably through periodic case studies, and to require the structure of charges to transparently reflect actual costs.

Where markets are thin and there are no regular commercial services then the CWTP shipping franchise scheme is the preferred method of delivering financial support as a community service obligation (see Section 8.6). 163. Coastal Shipping 12.3.4 Coasting Trade Licensing Licensing: While there is a good level of competition on international MIAG will advise minister on routes, there are relatively few operators in the coasting coasting trade licence and trade (domestic shipping services) and the first tier permit applications coastal services are shared geographically between a Applications decided primarily few operators, each dominant in their own area. For on quality criteria but some similar reasons as for cabotage, regulation of the consideration of the effects of coasting trade offers some market protection for new entrants on the structure of operators, making them more likely to offer service on the coastal shipping market will lower traffic routes which contain an element of internal remain cross-subsidy, and to provide a mix of passenger and freight services. Use of PNG nationals for crewing and commitment to Entry to the domestic shipping market at present is industry training will be included through a system of coasting trade licences for regular as criteria in deciding services and permits for individual charters. Licence applications applications pass before the Coasting Trade Committee, a group with shipping industry representation, before PNG owned, flagged, operated being approved by the Minister on the advice of the and crewed vessels will be Department of Transport. preferred; requests for waiver will need to prove unavailability A review of the coasting trade licensing system carried Bareboat and demise charters out for the DOT has cautioned against full deregulation will be considered will require while recognising that there is a need for reform of the NMSA safety approval of licence application and approval process and vessels either before importation corresponding changes to the governing legislation, the to PNG or before going into Merchant Shipping Act. However, there is a perception in service the industry that the present system for issue of permits is not transparent, that there is inconsistency and political The Merchant Shipping Act to bias, with too many permits being awarded by direct be revised to incorporate these ministerial intervention, and that the national interest changes. grounds for such intervention are not well articulated.

The policy for issue of coasting trade licences and

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permits in future will be channelled through a reformation or replacement of the CTC, with a working name of Maritime Industry Advisory Group (MIAG), as discussed in Section 12.2.4.

The policy principles to be observed by the MIAG and the Secretary for Transport when recommending on the award of licences and permits will be:

 Regulation of domestic market entry on other than quality criteria will be kept to a minimum, subject to ensuring that the advantages of deregulation to passengers and shippers of cargo are not outweighed by loss of service on thin traffic routes, increases in the Government CSO contribution, instability in the supply and regularity of services;

 Quality criteria will be a demonstrated record of: industry experience; compliance with safety and security requirements, financial capacity, good character and long term intent; where new entrants have little prior experience or track record of operations they shall provide credible evidence of how they intend to acquire this knowledge through recruitment of experienced personnel;

 Quality criteria will apply to the owner, operator (or charterer), master and crew of the vessels and the vessels themselves; licences and permits will only be issued to PNG registered vessels that are in-survey or to overseas flagged vessels (where a waiver has been given) that have prior NMSA safety approval;

 New operators, as part of the licensing process, should demonstrate their degree of commitment to train, certify and sustain through employment opportunities and career development a PNG national maritime workforce, including sea- and shore-based positions and through all levels from master to ordinary seaman; applications from operators who demonstrate a high level of commitment reflected in actual performance, should be looked on more favourably than those who demonstrate little commitment;

 Coasting trade licences and permits should, as a starting point, require PNG owned and registered vessels and PNG crew; waivers to allow non-national vessel ownership, registration or crewing should be given only where non-availability of PNG owned, registered or crewed vessels can be demonstrated; (see also Section 12.3.2 on cabotage);

 Bareboat and demise chartering will be considered subject to quality and other criteria noted above being satisfied.

The above principles will be incorporated into the planned revisions to the Merchant Shipping Act.

12.3.5 Maritime Transport Information for Competition Regulation and Monitoring

The review of competition in the domestic shipping market is made more difficult by a lack of reliable 164. Coastal Trade Data transport statistical information. The Department of DOT to resume collection of Transport once operated a Freight Study Bureau (FSB) data on coastal freight and which recorded all domestic cargo flows from shipping passenger movements and manifests. This provided a useful source of data on the tariffs charged for planning and origins and destination of cargo movements for planning monitoring purposes purposes, although it did not capture feeder services and was very resource intensive.

While it is not proposed to re-establish the FSB, periodic and targeted sample surveys of import and export domestic freight and passenger origins and destination will be undertaken as part of the transport planning functions of the DOT in support of the provincial transport plans of those provinces with a high reliance on coastal and river transport. This information will also be useful to the ongoing operation of the Community Water Transport Programme. Such studies will assist in

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identifying where cargo flows are relatively high or low in relation to the populations and economic potential of the areas served, and where changes to domestic shipping service patterns may be warranted. Studies will be coordinated with the requirements of the MIAG for assessing coasting trade licenses and permits and ICCC for state-of-competition monitoring.

12.4 Maritime Infrastructure Ownership, Management and Regulation

12.4.1 Declared Ports PNG Ports Corporation currently owns and manages the port infrastructure assets at the declared ports on behalf 165. Port Ownership, of the Government. It provides some port-related Management and Regulation services, such as pilotage where it has been declared the DOT legal team to prepare and pilotage authority, while other cargo-handling and port submit proposed legislation for services are provided by private companies. the management and operation of declared and undeclared DOT will submit to NEC proposed legislation for the ports. management and safe operation of ports, both declared and undeclared, providing for the appointment by the PNG Ports Corporation to be the Secretary for Transport of port authorities and the port authority for all declared appointment by port authorities of port managers and port ports facility operators. The legislation will supersede the Port plans will be required for all Harbours Act from which PNG Ports presently derives its declared ports delegated authority from the Secretary of Transport. The port authority for the declared ports will, in the first Where provinces or LLGs do not instance, be PNG Ports Corporation. have the management capacity or technical capability, PNGPCL Port master plans, to be prepared by PNGPCL in will manage undeclared port consultation with the DOT will be required for all declared assets on a fee-for-service basis ports, compliant with the NTS and MTTP. DOT PCD will lead an 12.4.2 Other Ports assessment of minor port development needs and funding There are a large number of existing smaller and minor methods involving DPLLGA and ports in various states of condition and use under Provinces, with inputs from the provincial, local level government and local community CWTP/RIDD jetty programme ownership, including small jetties and landings to be and PNGPCL following the NTS rehabilitated or constructed under the CWTP (to be planning framework transferred in the interim to DOT RIDD). The same group will consider There is limited capacity in the provinces to maintain additions to and removals from these smaller facilities and many have fallen into disrepair the list of declared ports as a result. Following the policy that the best technically equipped agency should manage the upkeep of Procedures will be put in place infrastructure assets, for those provinces and for transfer of private ports to communities where managerial capacity and technical public ownerships capability is limited, PNG Ports Corporation will be PPPs for development within the engaged to asset manage the facilities on behalf of the main commercial ports will be owners on a fee-for-service basis. encouraged under the prevailing PPP framework and considering PNGPCL will be paid a fee in recognition of the funding the overall impact on the port gap between port revenues and port costs, that is the network community services obligation (CSO), in addition to retaining port charges, which will be at controlled levels under the service contract. The NMSA will similarly be engaged to asset manage local navigational infrastructure where this is not already under their control. Both agencies may outsource parts of

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the asset management to competent contractors, favouring locally based firms, where this is cost- effective.

The Planning and Coordination Division of DOT, together with inputs from the CWTP/RIDD and PNGPCL will work with the DPLLGA and provincial governments to identify and prioritise the minor ports and landings for rehabilitation and ongoing asset management, consistent with the planning framework provided in this NTS, that is by identifying each facility’s functional importance, trade prospects, condition and cost to restore or construct.

An arrangement for adequately funding the asset management from revenues of the sub-national owner will be required before the national level agency assumes the management task. It is envisaged that the function grant allocated by national government for provincial wharf and jetty maintenance would be used to fund asset maintenance, and that part of the funds currently channelled through the DSIP would be used to fund repair, upgrading and replacement. A further option is funding from the proposed cabotage levy described in 12.3.2.

12.4.3 Review and Changes to Declared Ports As with the national road network, there may be benefit in transferring the ownership of some ports at present under provincial ownership, to national ownership to better ensure continuing maintenance of the assets. The same may apply to certain privately developed ports, such as for resource exploitation where the original development purpose no longer applies. Such ports would become declared ports and part of PNGPCL’s commercial or non-commercial portfolio. Such transfers will require ongoing funding arrangements to be in place prior to PNGPCL taking on the new responsibility.

Conversely, there are declared ports that have lost their importance over time due to modal shift to road or to a reduction in administrative importance of the place served. Ports should in such cases be removed from the list of declared ports and either closed or transferred to alternative ownership.

These transfers of ownership and management responsibility for ports will require prior review by the transport agencies and Provinces as in 12.4.2.

12.4.4 Private Ports and PPPs There are a number of special purpose privately owned port and landing facilities in the main centres and along the coast such as for export of palm oil and logs. Private ownership and investment in ports will be encouraged and facilitated but will be subject to regulation in regard to their location, design and construction approval for the purposes of safe navigation, maritime security and environmental safeguards. This regulation is currently delegated from DOT to PNGPCL but will in future transfer to the NMSA/NMA.

Private public partnerships (PPPs) for the development of major new port facilities will be encouraged where in the best economic interest of the nation, taking account of the financial and operational impact on PNGPCL ports and the non-commercial ports and CSO costs. PPPs will be subject to the prevailing National Public Private Partnership Policy and framework.

12.5 Maritime Infrastructure Protection 166. Maritime Infrastructure The Government recognises the need to protect transport Protection corridors for future development, to ensure that access to land, water or underwater area required for transport The provisions of the Protection infrastructure is not compromised by development, and to of Transport Infrastructure Act give the owners and occupiers of land certainty regarding will be applied to public port Government’s future intentions infrastructure, including that developed under PPPs To this end the Government has enacted the Protection

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of Transport Infrastructure Act which will ensure that area required for transport infrastructure (i) is available to be used for national, provincial and local-level transport; (ii) is secure and protected; and (iii) is free from encroachment, deliberate damage and excessive and unjustified land compensation demands. The legislation applies to any port, harbour, haven, roadstead, channel, navigable river or creek where transport infrastructure may be located. All publicly owned maritime infrastructure and infrastructure created under a PPP arrangement that will later transfer to the Government will fall under the provisions of this act.

12.6 Pricing, Cost Recovery and CSOs

12.6.1 Main Commercial Ports

PNGPCL port tariffs will be removed from direct price control by ICCC but tariffs will remain under ICCC review 167. Pricing, Cost Recovery and benchmarking against other comparable ports in the and CSOs Pacific Region to guard against unjustifiable price The main commercial ports will increases, with the potential for price control to be reform a commercial portfolio, be imposed if necessary. priced to individually recover costs, and be subject to tariff Lae, Port Moresby, Kimbe and potentially Madang and monitoring rather than control Rabaul will form PNGPCL’s commercial portfolio. On removal of ICCC price control, PNGPCL will operate each PNGPCL will competitively port as an individual accounting enterprise, with port outsource services where cost- charges set to cover operating costs, including efficient and while maintaining maintenance, depreciation and provision for renewals quality standards and expansion, HQ overheads, and to provide a return on PNGPCL will maintain the assets acceptable to IPBC. This will then allow PNGPCL remaining declared ports under to enter into PPP arrangements at each of the main management contracts with commercial ports should the opportunity arise without Government which recognise affecting the cost and pricing structure at the other main and compensate PNGPCL for commercial ports. PNGPCL will no longer be required to the CSO component of cost cross-subsidise the non-commercial ports from main port revenues. The term management contracts will be contestable by the private PNGPCL will competitively outsource parts or the whole sector and by Provincial of the management and operation of ports under its Governments ownership where this can be done more efficiently by the SAR, security and environmental private sector, taking account of the need to maintain control activities of the NMSA service, safety and security standards. will be funded through a 12.6.2 Other Declared Ports transparent system of levies on shipping and port operators. The Government will enter into term management contracts with PNGPCL to maintain and operate the non- Where maritime navaids cannot commercial declared ports. The costs of operation for be fully supported through user each port in PNGPCL’s non-commercial portfolio will be charges, NMSA will receive examined alongside the volume of trade offering at a tariff CSO funding. level agreed between PNGPCL and ICCC to be fair and affordable. The gap between operating costs and revenue will be covered by CSO payments, but with an incentive structure to encourage PNGPCL to reduce the size of the CSO over time by developing trade through the port and by improving cost- efficiency. A benefit sharing arrangement will be considered, whereby any reduction in the CSO payment per tonne of cargo across the port is shared between PNGCPL and Government.

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These term management contracts for the non-commercial ports will be contestable by the private sector and by provincial governments and will be subject to a performance agreement which will be monitored by the Department of Transport, Treasury and the ICCC. The contracts will be issued on an individual basis or for a group of ports, and will be for a period initially of three years but for longer periods once the new arrangement is bedded down. Responsibility for issuing the contracts will lie with ICCC.

12.6.3 Maritime Safety, Security and Environmental Control The safety, search and rescue (SAR), security and environmental control activities of the NMSA will be funded through a transparent system of levies on shipping and port operators that reflect the costs of the services provided. NMSA will competitively outsource its service delivery responsibilities, such as for installation and maintenance of maritime navaids, where private sector capability and capacity exists or can be stimulated. The ICCC, as economic regulator for the sector, will maintain oversight of the tariffs and may intervene to control maximum prices if it deems appropriate.

Where maritime navaids cannot be fully supported through user charges, a CSO will exist and NMSA will apply for CSO funding under the policy principles established in Section 8.6.

12.7 Regulation of Service Standards in the Maritime Subsector Regulation of customer service standards for domestic 168. Service Standards shipping services supported with CSO funds, including the shipping franchises under the Community Water For domestic shipping will be Transport programme, will be through the conditions built regulated through coastal into the shipping franchise contracts and other licence and permit conditions, agreements relating to CSO supported services. The and through the CWTP shipping ICCC has a responsibility for overseeing standards of franchise contracts service delivery to transport service users, such as Standards for port infrastructure operation to agreed schedules, adherence to standards will be established and of passenger comfort and care of cargo as advertised by monitored by PNGPCL and the service providers, required by contracts of carriage or NMSA for maritime navaids through the shipping service franchise contracts.

Standards for the design, operation and maintenance of marine transport infrastructure will be established and monitored as set out in Section 8.8, with PNG Ports Corporation being responsible for standards for port infrastructure and the NMSA for maritime navaids infrastructure.

12.8 Maritime Safety

12.8.1 Adherence to International Conventions Papua New Guinea has been a member of the International Maritime Organization (IMO) since 1976, 169. International Conventions and is a signatory to the following international maritime Through NMSA/NMA, PNG will safety conventions: endeavour to come into full compliance with the IMO  Load Lines Convention 1966 conventions to which it is  Tonnage Convention 1969 signatory and will accede to  Collisions Prevention (COLREG) 1972 future conventions as  Safety of Life at Sea (SOLAS) 1974 appropriate  Standards of Training, Certification and Watchkeeping for Seafarers (STCWS), 1978

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 Search and Rescue (SAR) 1979

Ensuring PNG’s compliance with the above international safety conventions is primarily the responsibility of the NMSA, with oversight from the IMO. PNG will accede to future conventions as appropriate. 170. Ship Registration, Marine Through these and other safety, security and Survey and Crewing environmental control measures set out below, the Government will seek to raise PNG’s standing in the NMSA will work to ensure full Asia/Pacific region and to come into full compliance with compliance with ship registration the international conventions that it is signatory to. and survey requirements, and extend coverage to include 12.8.2 Ship Registration and Marine Survey fishing vessels All vessels of 10m length and above operating on the NMSA will ensure that safety PNG coast are required to be registered. NMSA will requirements are met by engage with port owners, provincial governments and resource exploration and others on an ongoing basis to discover unregistered support vessels and offshore vessels and require that they either be surveyed and platforms within PNG waters registered or be withdrawn from service. This includes fishing vessels which are licensed by the Fisheries Any public agency intending to Authority but are frequently neither registered or acquire, lease or charter a surveyed, which will be brought into compliance over a vessel will inform NMSA and five year period. The NMSA is also responsible under its obtain prior approval of the existing legislation for safety regulation of oil and gas fitness of the vessel for the offshore platforms and support vessels operating from intended purpose before PNG ports. importation or entry into service NMSA will maintain a secure All vessels that are required to be registered must first data system for true and undergo a survey of their seaworthiness carried out by a accurate competency marine surveyor who has been registered with NMSA as certification for ships’ crew a fit, proper and competent person to carry out such work. Vessels must undergo survey periodically and after Coasting trade vessels will be any alteration to the vessel. The NMSA is responsible for required to reserve up to two vessel inspection and issuing Safety Certificates for berths for apprentice PNG vessels that have passed survey and satisfied other national crew requirements of the Merchant Shipping Act 1975.

It will be a requirement that any public agency intending to acquire lease or charter a vessel inform NMSA of its intention prior to such action and satisfy NMSA of the suitability of the vessel for the intended service, including the supply of construction drawings, specifications and survey certification if requested. NMSA will be empowered to require any additional inspection that it deems necessary. Where public agencies fail to comply, NMSA will not include these vessels on the register and will be empowered to detain them until compliance is met.

12.8.3 Crew Registration

Crew on registered ships are required to hold certificates of competency, issued through the NMSA. The NMSA will maintain and update records of seafarers using its secure data system, to help ensure that qualified and competent persons are engaged as ships’ crew. NMSA will audit the crew certification process to ensure that qualifications and experience are true and accurate.

To encourage PNG nationals into the industry, Government will require that vessels licensed to trade on the PNG coast and all PNG flagged foreign going vessels be required to provide up to two berths for apprentice or cadet seafarers, depending on the crew size for the vessel, and to provide a career path for the advancement of capable people.

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12.8.4 Port State Control

PNG, in common with many other countries in the Asia Pacific Region, is a full member to the Tokyo MOU on 171. Port State Control Port State control (PSC). This has the objective of NMSA in conjunction with port eliminating substandard international shipping visiting owners/operators will increase PNG ports so as to promote maritime safety, to protect inspection of foreign flagged the marine environment and to safeguard working and vessels to improve compliance living conditions on board. with Tokyo MOU Port State Control provisions and will apply This requires the maritime authorities to detain foreign legislation to bring PNG flagged flagged vessels where these do not comply with the vessels up to white list status international maritime conventions covered within the Tokyo MOU. Under this convention, ships under a 172. Small Craft Safety particular country flag are inspected and rated, and the NMSA will promote small craft ranking classified into black, grey and white lists. The safety by support to Provincial compliance of PNG flagged ships visiting overseas ports Government and the production is similarly inspected and rated. of safety guidelines, education The NMSA, in conjunction with port owners/operators and and through the provisions of others, will work to increase its inspection of foreign the Small Craft Bill which will be flagged vessels entering PNG waters to improve its level passed through parliament. of compliance with Tokyo MOU standards, and will apply Provincial registers of small craft domestic legislation to bring PNG flagged vessels up to will be established, together with white list status. an inspectorate with reserve powers lying with the NMSA 12.8.5 Safety of Small Craft and Community Education 173. Navaids, Coastguard and SAR Legislation governing the safety of small craft (under 10m length), the Small Craft Act provides for the construction, NMSA will continue to restore equipping, operation, registration and safe use of small and maintain navigational aids, craft and related matters. provide hydrographic services, coastguard and marine Provincial Small Craft Registers will be established under surveillance systems to IALA, the legislation, with provisions for the NMSA to appoint IHO and IMO standards members to the Provincial Registration Boards and to direct the registrar and inspectors established under the The proposed NRCC will be boards in certain matters in the event of delay or inaction. available on a 24h basis and maintain continuous The NMSA will form partnerships with the Department of communication with the NDMC Education and provincial governments to encourage and other first responders in small craft safety through education programmes and PNG and the local region sponsorships for safety equipment, building on the NMSA designed “Small Water Craft Safety” courses which have been accredited by the Department of Education from 2011.

12.8.6 Maritime Navigation and Safety in PNG Waters PNG, through the NMSA, is a member of the International Association of Marine Aids to Navigation and Lighthouse Authorities (IALA) and will continue to restore and maintain its marine navaids, provide hydrographic services, coastguard and marine surveillance systems to meet the standards established by the IALA, the International Hydrographic Organization (IHO) and the IMO.

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This will include:  Ensuring that marine navigation charts are complete, accurate and up-to-date, together with other nautical publications;  Applying best asset management practice for maritime navaids for PNG waters including the navigable river systems, and including local community engagement programmes;  Ensuring that new navaids are provided where required for safe navigation and that missing or damage navaids are replaced or restored;  Ensuring ongoing maintenance of navaids, that repairs and replacements are effected promptly with a system for reporting and publicly notifying where marks and beacons are damaged or otherwise unserviceable and maximum times for remedial action;  Maintaining and operating the PNG Automatic Identification System (AIS) for vessel tracking and monitoring and requiring that all vessels trading in PNG waters carry the necessary equipment in operating condition;  Establishing the Global Maritime Distress Safety System (GMDSS) for maritime radio communications to support SAR activities and supplement existing radio telephone and coastal radio services.

12.8.7 Maritime Search and Rescue The Government has the objective of progressively building the capacity and extent of coverage of its maritime search and rescue (SAR) capability.

A National Rescue Coordination Centre (NRCC) will be established, combining the rescue coordination centres operated by NMSA and CASA respectively for maritime and civil aviation.

The NRCC will be available on a 24 hour basis to respond to information on emergency situations where search and rescue may be required. A Search and Rescue Operations Manual will be updated on a continuous basis as a controlled document with distribution lists and recorded amendments.

The NRCC will maintain continuous communication links with the National Disaster Management Centre (NDMC), Provincial Disaster Coordinators, and other emergency and first response agencies and with Pacific regional SAR organisations. Memoranda of Agreement will be established with relevant stakeholders and neighbouring regional organisations, such as Australian Maritime Safety Authority (AMSA).

12.9 Maritime Security The Government has increased its maritime security surveillance and response capability in recent years and 174. Maritime Security will continue to improve and extend its systems to provide The Maritime Security unit, maximum possible coverage of its marine-land interface currently within DOT, will and security for shipping and small craft travelling within coordinate maritime security PNG waters and across its international maritime boundaries. Resources will be made available to achieve full Security has several dimensions, including illegal compliance with the ISPS Code trafficking across borders, declaration and payment of Security standards will be set for import duties, immigration control and biosecurity. In PNG each port consistent with its waters, while there is no existing threat, the global international gateway function, increase in piracy cannot be ignored, and the secure volume of trade and security passage of passenger and cargo vessels must be risks assured.

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PNG is signatory to the International Ships and Port Facility Security (ISPS) Code and has introduced the Merchant Shipping (Maritime Security) Regulation 2005, which are the administrative responsibility of the Maritime Security Unit (MSU) currently located within DOT.

This requires that all ports and PNG flagged ships be inspected, where necessary their security systems be upgraded, and then verified as compliant with the ISPS Code under the IMO. This is a large task which has previously been outsourced, in respect of shipping, to the recognised international classification societies. Several new port facilities to be established in the next few years will also require verification, and all ports and vessels require periodic re-inspection.

The Government will increase the resource available for ISPS compliance, at the same time working to ensure that there is an appropriate level of security set for each port, based upon the nature and volume of trade and the assessed security risks. Cost recovery for compliance activities will be through industry levies, collected by the NMSA and/or the PNG Ports Corporation Ltd.

The MSU will act as the coordinating agency for maritime security, liaising with other Government agencies such as the Police, PNG Defence Force, the Border Development Authority, Customs, Immigration and Department of Agriculture to avoid duplication and gaps in security screening.

12.10 Environmental and Social Safeguards Papua New Guinea’s seas, coastline and rivers are subject to a number of environmental threats from transport sources including:

 pollution by shipping through oil and cargo spillages, discharge of liquid and solid wastes, and anti-fouling coatings;  spillages and discharges from wharves and port industrial sites; and  modification to shorelines and beaches through reclamation, dredging and materials extraction for construction and other purposes.

Environmental impacts of development projects are subject to environmental impact and protection regulations administered by the Department of Environment and Conservation (DEC).

12.10.1 Marine Pollution from Ports and Shipping

PNG is signatory to the MARPOL convention on marine 175. Marine Pollution pollution, so has responsibilities to ensure that ships operating in PNG waters are properly equipped and NMSA will counter marine operate to MARPOL standards. pollution threats through national and international training The NMSA is the responsible agency for the control of exercises, establishment of an pollution from ships, assisted by port owners and Environmental Protection Unit, operators in respect of pollution within port limits. The regular review and updating of NMSA will take the following actions to counter marine legislation, establishing pollution threats: protocols for engaging  With support from the DOT, ensure that marine international assistance. pollution legislation is regularly updated to best 176. Climate Change practice and is in conformity with PNG’s Adaptation international convention requirements;  Maintain a national plan for combating marine PNG Ports to coordinate pollution, including designated personnel, training standards for environmental exercises, a store of pollution fighting equipment assessment and control of and materials, and a first response capability; coastal engineering works, including for climate change  Regularly convening the National Marine Spill adaptation. Committee and conducting training exercises with

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national and international marine pollution response organisations, in particular the Australian Maritime Safety Authority (AMSA);  Establishing a protocol for engaging international assistance to respond to major pollution incidents beyond the normal capacity of PNG, such as the sinking of a vessel containing polluting cargo or an offshore oil and gas platform accident; and  Establish and maintain an Environmental Protection Unit within its organisation to address these requirements

12.10.2 Coastal Engineering Works and Climate Change Adaptation Marine infrastructure is potentially threatened by the effects of climate change, including increased severity and area of effect of tropical storms and sea level rise. These threats require a response when designing new wharves and jetties, access roads and other coastal transport infrastructure, to ensure that sufficient provision is made for future sea level rise and that the structures and seawalls can withstand all but the most exceptional storm conditions.

PNG Ports Corporation will, within its brief for coordinating engineering standard setting for maritime works, manage the preparation of guidelines for environmental impact assessment and control of modifications to the shoreline for the purposes of establishing and maintaining port facilities. These standards will ensure that climate change risks are taken into account in the relevant design and construction codes in matters such as allowances for sea level rise and storm surge.

12.11 Regional Relationships in the Maritime Sector

The PNG maritime transport agencies will engage in cooperative efforts with other countries in the region 177. Regional Relationships working through regional organisations, to achieve PNGPCL and the NMSA/NMA consistent and compatible standards and practices will actively engage with appropriate to the region across the maritime sector. neighbouring countries to promote consistent and Regional cooperation will include: compatible standards and  Development of relationships with the practices across the region neighbouring maritime countries of Indonesia, Australia, the Philippines and Pacific island states;  Regional involvement of the NMSA in the work of the IMO and ILO, in the area of marine pollution working through South Pacific Regional Environment Programme (SPREP);  Identification, designation and management of Marine Protected Areas; and  Continuing involvement of PNG Ports Corporation in a leadership role in the Pacific Countries Ports Association (PCPA) and in international port operator forums

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13 Policy Statement on Air Transport

13.1 Introduction This section of the Strategy sets out the updated policy for air transport, comprising airports and airport operations, rural airstrips, airways and air navigation, based on the general policy principles for the transport sector as a whole discussed in Section 8. It does not contain investment strategy or priorities for aviation infrastructure which are considered in Section C.

This policy statement replaces the existing aviation policy as conveyed to Parliament by the Minister in March 2009, contained in the National Transport Development Plan 2006-2010 and in the earlier Civil Aviation Policy 2000.

13.2 Development of the Air Transport Institutions

No further major structural changes are proposed for the Government institutions in the civil aviation subsector. 178. Air Transport Institutions Roles and responsibilities are set out in the Civil Aviation No further structural change is Amendment Act 2010. anticipated for the institutions in the air transport subsector The Civil Aviation Safety Authority (CASA) is the safety and security regulator for aviation within PNG airspace, CASA will be the safety and including airports, air operators and air crew, for PNG- security regulator for civil registered aircraft and for safety and suitability aviation compliance of overseas registered aircraft operating NAC and PNGASL are SOEs within PNG. responsible respectively for the National Airports Corporation (NAC) has primary provision of airports and air responsibility as the SOE owner and operator of the navigation and communication scheduled national airports, although some extension of services its role more generally for airports standards and The AIC will provide no-fault management is proposed and, over time, the scheduled investigation of air accidents and airports for which it is responsible may be extended. incidents NAC is responsible for all runway, taxiway, apron and airfield infrastructure, traffic control of aircraft on the The ATR Division of DOT will ground, terminal buildings, landside facilities, control of advise on aviation policy, leases and concessions and all airport land. administer international air service agreements and market PNG Air Services Ltd (PNGASL) is the SOE responsible entry as the sole provider of air navigation and communication DOT will retain an overall cross- infrastructure and services. modal policy and planning role The Accident Investigation Commission (AIC) is that includes aviation responsible for investigating and reporting on the causes irrespective if a Ministry of Civil of air accidents on a no-fault basis with the objective of Aviation were to be formed in improving air safety. future. ICCC will maintain a monitoring The Air Transport Regulation (ATR) Division of the DOT role over competition in civil provides policy analysis and advice and administers aviation international air service agreements and market regulation of the aviation industry. It should be noted that an overall cross-modal transport policy and planning function will continue to reside with DOT irrespective of any future separate establishment of a Ministry of Civil Aviation.

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The ICCC will maintain a general monitoring role over market competition and service standards with the reserve powers to intervene as provided for under its legislation

13.3 Market Entry and Competition Regulation

13.3.1 International Air Transport The existing policy for the regulation of market entry and competition in international aviation will generally be 179. International Air continued under the NTS. Transport Market Entry and Competition Existing policy is to gradually and selectively deregulate There will be gradual and international scheduled air services through new and selective deregulation of renegotiated bilateral air services agreements with scheduled international air emphasis on achieving fair and equitable competition and transport placing limitations in air opportunities for each country’s designated carriers. service agreements including A phased approach towards full liberalization of specifying routes, capacity international scheduled services will be continued as allocation limits and exchange of opposed to having an open skies regime allowing for free traffic rights limited to 3rd, 4th competition. This will be done by placing limitations in air and 5th freedoms. service agreements including specifying routes, capacity PNG will continue to support allocation limits and exchange of traffic rights limited to APEC and Forum policies of rd th th th 3 , 4 and 5 freedoms. Granting of 5 freedom rights regional liberalisation of air (right to carry revenue traffic between a second and third services country as part of a service connecting the airline’s own country) will be limited to the carrier’s own traffic. Non-scheduled international air services will be considered on a Entry of foreign owned airlines into the domestic market case-by-case basis with will continue to be subject to a maximum of 49% foreign approval safeguards for the equity and minimum of 51% PNG national ownership. PNG aviation industry and airport PNG participates in the Pacific Forum plan to deregulate air services within the Forum countries and will continue support for the Asia Pacific Economic Cooperation (APEC) and Forum policies for liberalising air services. All PNG carriers will be treated fairly and equitably in seeking access to international markets, with disputes being resolved by the Secretary of Transport.

When negotiating air services agreements with other countries, PNG will seek to incorporate the following conditions:  PNG airlines’ rights to fly services to more than one destination in the overseas country where economically beneficial to PNG;  PNG airlines’ rights to link to 3rd and 4th country destinations, with 5th freedom rights;  Multiple PNG airlines’ rights to fly the agreed services;  The airlines free to decide on service capacity and frequency; and  Air fares set by the airlines in response to market forces and can be disallowed if both governments agree (double disapproval pricing).

Existing policy for non-scheduled international air services is to consider applications for passenger, freight and mail carriage on a case-by-case basis, having regard to the need to strike a balance between the interests of the scheduled operators and their customers, while taking into account the overall economic interests of PNG.

Regular or periodic non-scheduled services by a foreign operator will not be approved unless required by law or permitted under an agreement between PNG and the air operator’s country of

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origin. Suitability of the foreign operator’s aircraft to the PNG airport it intends to use will also be a requirement of approval (such as aircraft weights, tyre pressures, dimensions and communications equipment). Within these safeguards, there will be a liberal policy on air charter arrangements.

13.3.2 Domestic Air Transport The National Government seeks to encourage the private sector to provide a comprehensive range of affordable 180. Domestic Air Transport aviation passenger and freight services throughout the Market Entry and Competition country. Access to the domestic aviation system will Open competition permitted on continue to be controlled through a licensing system domestic scheduled services supported by a separate system of safety regulation. subject to majority PNG ownership, aircraft suitability and Domestic air services competition will be subject to the safety compliance following conditions:  Full competition will continue to be permitted on Charter operations, such as by all domestic aviation routes; business and industrial companies allowed only in joint  Airlines may use aircraft of their choice on all venture with a PNG air operator domestic aviation routes, subject to certification through CASA in regard to safety and NAC and Temporary importation of aircraft PNGASL in regard to compatibility with PNG’s for use in PNG limited to two airport and airways infrastructure, present and three month periods in total and future (such as aircraft dimensions, tyre pressures subject to prior aircraft suitability etc.); approval by NAC and PNGASL  All air operators in the domestic market, except for those permitted on a temporary basis, must be majority (51%) PNG citizen owned;  Charter services contracted by business and industrial companies, mining companies and others operating within the country will be allowed only if such charter operators enter into a joint venture agreement with a majority PNG owned air services operator. This requirement will be written into all future mining and other major foreign investment agreements; and  The temporary importation of aircraft for operation in PNG, renewable three monthly, will be limited to a maximum of six (6) months in total and will be subject to the prior approval from NAC and PNGASL regarding compatibility with PNG’s airport and air navigation infrastructure and systems.

13.4 Government Ownership of Airports, Air Operators and Aircraft

13.4.1 Airports and Air Navigation Infrastructure 181. Government Ownership All NAC airports will remain in Government ownership, of Airports and Air Navigation including the underlying land. NAC may lease facilities or Infrastructure land to the private sector and licence private sector companies to develop facilities on airport land where this All scheduled national airports contributes to, and does not interfere with, the primary air and underlying land to remain in transport purpose and where this is in the long term public ownership commercial interest of NAC as a Government owned NAC may lease land and licence enterprise under the Companies Act. private facilities on airport land PNGASL will be the sole provider of air navigation and where not to the detriment of the aeronautical communications infrastructure. This forms air transport purpose part of the primary air transport purpose, noted above, PNGASL will own and operate where required to be located on NAC airport land. In such all air navigation and cases, NAC shall arrange to accommodate this aeronautical communications infrastructure on its land in a form and manner that is infrastructure

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practical and efficient for the operations of both NAC and PNGASL without any lease charge for the land occupied. DOT will facilitate the drafting of a form of agreement between NAC and PNGASL for ratification by the NEC detailing this arrangement.

The schedule of airports that are national assets under the ownership and management of NAC will be reviewed 181. Government Ownership periodically with a view to removing those airports that no of Airports and Air Navigation longer play an important function in the air transport Infrastructure network and for the inclusion of other airports that NAC will freely accommodate support, or could support, scheduled services, which are PNGASL air navigation and currently under the ownership of Provincial Governments. communications infrastructure The objective of bringing airports under NAC ownership on airport land and management will be to ensure their continued safe Provision will be made to add or operability and appropriate development where the remove airports from the Provincial Government lacks the financial or technical schedule of national airports capability to do so, as part of NAC’s CSO portfolio. There under NAC will also be provision for NAC to manage provincial and locally owned smaller airports and rural airstrips on a fee- The Protection of Transport for-service basis, discussed further below. Infrastructure Act shall apply to all publicly owned airports and All publicly owned airport and air navigation infrastructure air navigation infrastructure at national, provincial and local level will fall under the Protection of Transport Infrastructure Act 2010.

13.4.2 Government Ownership of Air Operators The national airline, Air Niugini will remain in Government ownership with the maximum shareholding by a single 182. Government Ownership foreign airline in the national carrier being 25% and the of Air Operators maximum overall foreign holding 49%. Air Niugini will remain in majority PNG national ownership with no The Air Niugini board and executive will be responsible foreign shareholding to exceed for decisions in regard to purchase or lease of aircraft. 25% of the company. Air Niugini will remain the only scheduled or charter The Government will not have a operation in which the Government will hold an ownership shareholding in any other airline stake. offering either scheduled or charter services. 13.5 Cost Recovery and CSOs Air Niugini will be responsible for Cost recovery from user charges in the aviation sector decisions in regard to its has been insufficient to meet the recurrent costs of purchase and lease of aircraft maintaining and operating the airports and air navigation infrastructure. Cost recovery across CASA, NAC and PNGASL is recent years has been at about 50% of operating and maintenance costs. However, this low cost recovery has been partly a result of Government’s expectation that loss-making airports would be subsidised from the few profitable main airports, without a Government contribution in recognition of the community service obligation (CSO) being provided.

13.5.1 National Airports Corporation NAC will improve its efficiency through streamlining its operations, outsourcing and application of a fair system of user charges that reflect the costs of the services provided. The Government expects NAC to move to a position of full cost recovery for all operating and maintenance costs across the 21 airports that it currently owns on behalf of the Government by 2015. To do so, NAC will exploit opportunities for non-aeronautical revenue, such as through landside parking, terminal concessions

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and leases or licences on airport land. In the interim, the Government will cover NAC’s operating cost shortfall from annual appropriations.

The capital development programme to rehabilitate and upgrade the national airports under NAC over the 20 year 183. Cost Recovery and CSOs period will be funded by Government, utilising aid - NAC funding. By the end of the NTS in 2030, NAC is expected NAC to improve its efficiency to have achieved a position where it is able to recover and increase its revenue infrastructure replacement and renewal costs from user sources to full cost recovery of charges across the airports under its ownership, due to maintenance and operating the increase in air traffic. costs over the 21 airports currently under its ownership in In the event that a detailed analysis of airport revenue the short term (2015) and and costs shows that it is impractical for NAC to fully inclusive of capital replacement recover operating costs in the short term, or all costs in and upgrading costs by 2030 the long term, then the less profitable airports will be transferred to a CSO portfolio and operated with a If studies and experience show transparent Government subsidy, the source of the CSO this to be impractical the less funds to be determined. The less profitable airports are profitable airports will be identified currently as Buka, Girua, Momote, Vanimo, transferred to a CSO portfolio Tari, Kiunga, Mendi, Chimbu, Daru, Kerema and NAC will enter into management Wapenamanda. contracts with Provincial and Airports transferred from provincial government LLGs for the operation and ownership to NAC ownership for reasons noted above, maintenance of minor airports will also form part of NAC’s CSO portfolio. on a fee for service basis

NAC may also enter into management contracts with Provincial, LLG and local community owners of small 184. Cost Recovery and CSOs airports and rural airstrips to provide asset management - PNGASL services for these facilities where the owners lack the PNGASL will aim to increase its capacity and capability. NAC will be reimbursed on a fee- recovery of operating costs for-service basis with funding provided from the provincial through user revenues and TIMG, DSIP and similar inter-governmental funding and internal efficiencies, recognising from the provinces own revenue sources. NAC will plan, limitations for cross-subsidising programme and oversee the asset management, between upper and lower outsourcing service delivery where it is cost-efficient to do airspace and the affordability of so without compromising service quality. NAC may charges on low traffic routes and employ roving airport maintenance works units for the to rural airstrips. task or source this service from the private sector, where heavy maintenance is required to restore remote rural Government will cover airstrips. PNGASL’s operating cost shortfall from through the annual 13.5.2 PNG Air Services Ltd Budget appropriation PNG Air Services Ltd will similarly be expected to CSO funding arrangements will improve its operating efficiency to achieve a higher level be put in place for air navigation of recovery of the operating and maintenance costs of air and communications services to navigation services over the upper airspace and air rural airstrips navigation services provided at and between the national Capital development of air airports. However, it is recognised that international navigation and communications aviation agreements to which PNG is signatory may limit will be met through the PNGASL’s ability to raise charges to full cost recovery Development Budget utilising level and that there are limits on the extent to which donor funding overflight revenue can be used to support operating costs

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of the lower airspace. There are similarly affordability limits to the air navigation levies and charges that can be borne by operators flying into remote airstrips for which a degree of CSO funding is likely to be required or contributions from the airport owners. In such cases, certain charges may need to be waived or fully offset with CSO payments.

Government will therefore cover PNGASL’s operating cost shortfall from annual appropriations once it is satisfied that PNGASL has made best efforts to provide a cost-efficient service and has demonstrated that it has a well-designed tariff structure set at levels that maximise cost recovery while not unduly suppressing air traffic on the thinner routes and charter destinations.

The capital development programme to rehabilitate and upgrade the air navigation systems under PNGASL to 2030 will be funded by Government, utilising donor funding.

13.5.3 Civil Aviation Safety Authority CASA will similarly be expected to move from being funded entirely through Government budget appropriation 185. Cost Recovery and CSOs to a position where part of its costs are funded from – CASA revenue such as licensing fees, levies and ticket tax. The CASA will aim to achieve 50% aim will be to achieve 50% cost recovery by year 2015. It cost recovery by 2015 is recognised that under international agreements to which PNG is signatory, the ability of CASA as a safety A CSO funding procedure will be regulator is limited in the levels of fees that it can impose. developed and implemented for NAC’s less profitable airports, There are similarly affordability limits to the CASA levies any additional airports and charges that can be borne by operators flying into transferred to NAC and airports remote airstrips for which a degree of CSO funding is remaining in provincial, LLG and likely to be required or contributed by the airport owners. local community ownership In such cases, certain CASA charges may need to be waived or fully offset with CSO payments.

13.5.4 CSOs for Minor Airports and Air Navigation Services It is recognised that a degree of CSO funding will be required to maintain and operate (i) the less profitable 186. Cost Recovery and CSOs NAC owned airports – its basic CSO portfolio (ii) – Minor Airports and Air additional airports transferred from provincial to national Navigation Services ownership as part of NAC’s CSO portfolio and (iii) CASA will aim to achieve 50% airports remaining in provincial, LLG and community cost recovery by 2015 ownership either asset managed by NAC or by the owners. Air navigation and aviation safety costs incurred A CSO funding procedure will be by PNGASL and CASA in relation to these airports and developed and implemented for the operators using them will also require CSO funding. NAC’s less profitable airports, any additional airports The general principles for prioritising capital works to transferred to NAC and airports restore or upgrade these minor airports and airstrips and remaining in provincial, LLG and to fund their ongoing maintenance have been set out in local community ownership Section 8.6.6. Priority should be given to those airports and airstrips requiring the least CSO funding to achieve an economic rate of return, with the facility owners able to top up the cost from additional local financial contributions or “sweat equity” to demonstrate local commitment.

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13.6 Private Sector Role in Air Infrastructure Services

13.6.1 Private Airports 187. Private Sector Role There are a few privately owned airports for special purposes, such as mine sites, but no privately owned Private airports for resource airports supporting regular passenger transport services. development purposes will be Further private ownership and investment in airports will facilitated, subject to approval of be facilitated but will be subject to regulation in regard to location, design, navigation and their location, design and construction approval for the other compliance requirements purposes of air safety, security and environmental PPPs will be encouraged for safeguards as well as for compliance with urban and major new airport facilities where provincial planning requirements, and land acquisition. in the overall economic interest and subject to the Government’s 13.6.2 PPPs for Major Airport Facilities PPP framework Private public partnerships (PPPs) for the development of NAC and PNGASL will major new airport facilities, such as at PMIA, will be competitively outsource parts of encouraged where in the best economic interest of the their operations where more nation, taking account of the financial and operational cost-efficient to do so, subject to impact on NAC and the non-commercial airports and service, safety and security CSO costs. PPPs will be subject to the prevailing standards being maintained National Public Private Partnership Policy and framework.

13.6.3 Outsourcing of Air Infrastructure Services NAC and PNGASL will competitively outsource parts of the development, asset management and operation of airports and air navigation systems where this can be done more efficiently by the private sector, taking account of the need to maintain service, safety and security standards. 188. Airport Service Standards

13.7 Service Standards in Air Transport NAC will be responsible for developing and administering 13.7.1 Airports and Air Navigation Infrastructure standards for airports infrastructure, and PNGASL for Standards for the design, operation and maintenance of aviation navaid and air transport infrastructure will be established and communications infrastructure. monitored as set out in Section 8.8, with NAC being NAC will develop technical and responsible for standards for airport infrastructure and economic feasibility and PNGASL for aviation navaid and communications business cases for airport infrastructure. upgrading taking account of air The design parameters for upgrading NAC airports will be transport demand forecasts. responsive to air transport demand forecasts when NAC will discuss any deciding on the design aircraft, apron and terminal sizing conclusions on upgrading etc., so that upgrading is based on economic efficiency standards and timing and and a supportable business case. differences between these and NAC will take account of the expectations in the NTS and those in the DSP/MTDP and will DSP/MTDP as amended from time to time. NAC will carry report its resolution through out feasibility and business case studies in consultation TSCMIC and if necessary with the DOT to ensure alignment with the NTS. referred to the NEC for a decision Where there is a difference between the DSP/MTDP and CSO management contracts to NAC’s conclusions on the design and timing of airport specify standards to be met improvements and the location and design of new airport

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facilities, these will be discussed with DNPM and reported back through the TSCMIC and if necessary referred to the NEC for a decision.

13.7.2 Standards for Domestic Air Services The size and frequency of aircraft used on main services 189. Aircraft Service to and between the NAC airports will be at the discretion Standards of the operators. The aircraft used must be compliant with design limits of the infrastructure and aviation safety Aircraft used at PNG airports to standards, for example in regard to maximum tyre be compliant with design limits pressures, runway length requirements, runway and of the infrastructure and aviation taxiway surface, width and apron stand size, and also safety standards. with PNGASL air navigation standards. Where air operators wish to Where air operators wish to introduce aircraft that require introduce aircraft that require upgrading of PNG airports, NAC’s feasibility studies upgrading at one of more should include the costs and benefits to air transport airports, NAC will conduct services as part of the decision on an upgrading path or feasibility studies that include policy to enable informed decision-making. costs and benefits to air transport to enable informed 13.7.3 Standards Oversight decision-making The ICCC has a responsibility for overseeing standards of 190. ICCC Role service delivery to transport service users, such as ICCC to oversee compliance operation to agreed schedules, adherence to standards of with service standards passenger comfort and care of cargo as advertised by the service providers and required by contracts of carriage.

Regulation of customer service standards for airports and air services supported with CSO funds will be through the conditions built into the management contracts and other agreements relating to CSO supported services.

13.8 Aviation Safety

13.8.1 Safety Paramount Safety is, and will continue to be regarded, as the 191. Aviation Safety paramount requirement in the Government’s regulation, provision and facilitation of air transport. Safety standards Safety to be the first and highest and safety compliance will not be traded off against other priority in civil aviation aspects of Government spending in the air transport CASA to complete the subsector. Through this policy statement, the Government implementation of compliance requires CASA, NAC and PNGASL to make passenger actions required by ICAO safety safety its first priority. audits

13.8.2 Adherence to International Conventions Papua New Guinea is a signatory to the Convention on International Civil Aviation (Chicago Convention) 1947, which established principles and arrangements for safe and secure international civil aviation. The International Civil Aviation Organisation (ICAO), which administers the Chicago Convention, undertakes safety and security audits of signatory states to measure compliance with, and application of, standards and recommended practices. A safety audit was undertaken for PNG in 2009, and as a result the Government, through CASA, is pursuing a compliance action plan accepted by ICAO to address safety and security issues.

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13.8.3 Harmonization with Neighbouring States Government will continue to harmonize its civil aviation 191. Aviation Safety laws, rules, standards and practices with international best practice and, in particular, with those states in the PNG will harmonize civil aviation Asia Pacific Region with which it shares air traffic routes. laws, rules, standards and practices with international best CASA signed a MOU with Australia in 2009 to provide a practice and with other regional further avenue for PNG to gain assistance in meeting its countries with which it shares air International aviation obligations in the form of training traffic routes and regulatory cooperation where required. NAC airports to be brought up to 13.8.4 Aviation Infrastructure Safety safety certification standard by Aviation infrastructure providers, that is providers of 2015 airport, air navigation and meteorological facilities, Other publicly owned airports to equipment and services, will be required to meet PNG’s be brought up to a certifiable international obligations and the legitimate requirements safe standard by 2020 of civil aviation users in regard to aviation safety. Air operators to set up and In 2010, there were several NAC airports that did not maintain Safety Management meet the safety certification requirements under the Civil Systems to ensure compliance Aviation Rules part 139. Government will fund the with civil aviation rules, overseen rehabilitation and upgrading of non-compliant airports to by CASA meet certification standards by 2020. Director of Civil Aviation and NAC and PNGASL will introduce, maintain and CASA to rigorously implement progressively improve Safety Management Systems with and monitor legal safety open reporting for their service delivery functions requirements including outsourced services.

Government will provide CSO funding as necessary to fund the rehabilitation and improvement of all other airports in public ownership so that these are brought up to certifiable standard and maintained at or above that standard by 2030. In cases where funding is not available for this purpose, these airports will be closed to traffic until such time as their restoration can be afforded.

13.8.5 Air Operator Safety All air operators shall be required to set up and maintain Safety Management Systems to ensure that rules and standards are complied with. Compliance will be overseen by CASA.

13.8.6 Adherence to the Civil Aviation Act, Regulation and Rules The Civil Aviation Act, and subsidiary regulations and rules provide the legal framework for ensuring that safety principles and practices are followed. These provide certification requirements for aircraft, air crew and other defined occupations in the civil aviation industry. The Director of Civil Aviation and CASA are the controlling authorities in respect of the legislation. Government will require that the legislation is rigorously implemented, monitored, and reported.

13.9 Aviation Security

13.9.1 National Aviation Security Programme Security has several dimensions, including illegal trafficking across borders, declaration and payment of import duties, immigration control and biosecurity. There have been security incidents in the PNG aviation system such as armed hold-ups at airports and carrying of firearms aboard aircraft.

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The Government has increased its aviation security surveillance and response capability in recent years and 192. Aviation Security will continue to improve and extend its systems to provide NASP to guide improvements in comprehensive coverage of its air-land interface and aviation security, including security for PNG registered aircraft and for all aircraft airport and air operator security travelling within PNG airspace commensurate with the Government to agree a security assessed level of risk. compliance action plan with The National Aviation Security Programme (NASP), ICAO developed among the industry stakeholders, will form the CASA to be the coordinating guideline document for future improvements in aviation agency for aviation security, security, together with any compliance actions required by liaising with other authorities ICAO (below). The NASP includes an air operator security programme as legally required under Civil Government will harmonize its Aviation Rule 108 as part of operator certification. aviation security practices with neighbouring states 13.9.2 International Conventions Aviation security is governed by Annex 17 to the Chicago Convention and the security related aspects of Annex 9 (Facilitation). These Annexes set out a range of standards and recommended practices designed to safeguard against an act of unlawful interference with international civil aviation.

While the requirements of the Chicago Convention relate to international operations, the Government will apply similar measures to domestic civil aviation, as far as practicable and commensurate with the assessed level of risk.

Following an ICAO security audit in 2010, Government will agree and implement a compliance action plan with ICAO to redress any identified security issues.

13.9.3 Security Coordination CASA will act as the coordinating agency for aviation security, liaising with other Government agencies such as the Police, PNG Defence Force, the Border Development Authority, Customs, Immigration and Department of Agriculture to avoid duplication and gaps in security screening. The Government will also coordinate and harmonize its security practices and systems in both its domestic and international air services with those of its neighbours in the Asia Pacific Region and with international good practice.

13.10 Environmental Safeguards

13.10.1 Airport Noise and Development Control NAC, as part of its airport master planning, will assess 193. Environment present and future airport noise footprints for its airports and, in conjunction with the responsible authorities for NAC to include airport noise land use and development planning, will agree on control in airport master plans development controls for the purposes of maintaining and to liaise with urban planning aircraft noise impacts on residents and activities to an agencies to mutually ensure that acceptable level in the surrounding areas. This will airport expansion is not limited include engine testing and like activities as well as flight by urban development operations. Noise abatement procedures are in force at

Port Moresby to limit the noise exposure from aircraft take-off and landing and will be periodically reviewed.

NAC, using the provisions of the Protection of Transport Infrastructure Act where necessary, will similarly agree with the planning authorities on the protection of land, flight paths and obstacle

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clearance surfaces required for future airport development, and for airport ground access, so that future expansion of the main airports is not compromised by urban development.

13.10.2 Aviation Carbon Emissions PNG has a target rate of improvement in its transport 193. Environment sector carbon emission intensity of 3% per annum. As air traffic increases and new larger capacity jets with more DOT will monitor air traffic and fuel efficient turbofan engines are introduced, the carbon estimate changes in carbon emission intensity of the aviation subsector will reduce in emissions and intensity from relation to seat kilometres performed. As part of its aviation. improved sector data collection and monitoring, the DOT NAC to coordinate with other will monitor domestic and international air traffic and agencies to ensure climate estimate changes in carbon emissions and intensity, change adaptation is included in obtaining data from operators using its powers under the airport upgrading Transport (Collection of Information) Act.

13.10.3 Climate Change Adaptation Airport infrastructure in low lying coastal locations, such as Madang and Vanimo, is potentially at risk from the effects of climate change, such as sea level rise and increased storm intensity and frequency. These threats require a response when designing new airports and access roads or considering retrofit measures to existing airports, to ensure that sufficient provision is made for future sea level rise and that the structures and seawalls can withstand all but the most exceptional storm conditions.

The Government, through NAC and the proposed Committee on Engineering Design Standards will ensure that climate change risks are taken into account in the relevant design and construction codes.

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14 Policy Statement on Modal Integration

14.1 Principles

The principles of integration of the three main modes of transport are:

(i) Where people or freight must complete a journey 194. Modal Integration using more than one mode of transport, the Principles transition between one mode and another should be as seamless as can be provided, taking due Efficient modal transition on account of cost, capacity and border constraints journeys requiring more than and the specific requirements of different one mode and/or cross-border travellers and forms of freight. The main points at travel which inter-modal transitions occur are at the Planning to ensure basic access country’s ports and airports. to transport by at least one most (ii) In planning the national transport infrastructure all cost-effective mode significant concentrations of population should have basic transport access, either by road, Balanced investment across water or air, and the provision of infrastructure at modes to achieve similar local level should be integrated between the economic return and compliance transport modes to ensure that this occurs. with other policy priorities (iii) Investment made in the main transport Multi-modal transport studies to infrastructure should be consistent and balanced form basis for decisions on across the three transport modes, so that in missing link construction general project investments in port, airports and Provide direct links between roads should achieve similar economic rates of main provincial centres, main return. Unbalanced development where, say, one tourism destinations, areas of mode of transport is significantly underfunded in economic production and comparison with another, is to be avoided. international port and airport (iv) The planning of new transport infrastructure gateways consistent with development in the defined economic corridors economic feasibility and will in some cases complete new linkages international transport between hitherto isolated road networks. In turn connections this will provide a different pattern of access to the country’s main international seaport and airport gateways. Infrastructure planning will be integrated through multi-modal transport studies to take account of such effects on the demand pattern for transport. (v) It is the aim of transport planning to provide as direct links as possible between the main 195. Modal Transition - provincial centres in PNG, the main destinations Passengers for tourism, main areas of economic production, and the international gateways, and so avoid NAC to work with airlines and lengthy domestic connecting services. However, border control agencies to it is recognised that the preferred points of entry smooth modal transfers for air to Papua New Guinea for international shipping passengers. and, potentially, for aviation will to a large extent PNGPCL, the domestic be dictated by the international shipping passenger ferry operators and companies and airlines. the tourism industry will work together to improve passenger 14.2 Modal Transitions for Passenger Traffic reception facilities at domestic ports for local travel and cruise The modal transitions for passenger traffic are the tourists. interfaces between international and domestic air

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transport and land transport. The requirements for efficient modal transition are adequate capacity at airport terminals and adequately staffed and equipped passenger processing stages, incorporating immigration, customs, health and security screening.

Well-designed secure and passenger-friendly ground access between the air terminal landside concourse, car parking and public transport services will be incorporated into airport master plans. NAC will work with the airlines and the border control agencies to reduce passenger terminal congestion and delays, to improve the passenger experience and streamline processing, including consideration of the allocation/sharing of airline check-in facilities and domestic/international passenger transfers.

Passenger terminal facilities at the main and secondary ports for accommodating passengers boarding and alighting from domestic shipping services are poor. PNGPCL will work with the domestic passenger ferry operators and the Tourism Promotion Authority to improve passenger reception facilities at domestic seaports and cruise ship tourism destinations.

14.3 Modal Transitions for Freight Traffic

Efficient cargo handling at the main general cargo ports and at the international air gateways is of critical 196. Modal Transition - Freight importance to Papua New Guinea’s import and export Port master planning to include trade. Inefficient handling causes delays, potentially cargo provisions for improving damage and deterioration, and reduces the efficiency of use of port land and competitiveness of the country. Papua New Guinea is in a rate of processing of cargo region where international seaports operate at relatively through the water/land interface. high levels of efficiency and for it to achieve aspirations Inland terminals, port relocations such as to be a significant transhipment port in its region and improved road links will be of the Pacific, efficient cargo handling is a pre-requisite. considered for the major ports Cargo transfer efficiency requires uncongested berthage, as part of master planning to efficient quayside cranes, efficient yard handling reduce urban congestion equipment, well arranged and uncluttered container Use of logistics companies who stacks and break bulk cargo sheds, and efficient landside can integrate sea, port and land access and load-out areas. The master plans for the main transport operations to manage gateway ports of Lae and Port Moresby will be developed the main port terminals will be with these principles in mind. Where waterfront space is considered. at a premium and where it is cost-effective to do so, opportunities for developing inland container terminals (dry ports). will be considered linked to the waterfront port by road or rail shuttle services. Opportunities will be taken for expediting the movement of cargo through the ports by electronic cargo tracking and document processing through border control. Consideration will be given to engaging logistics companies who are positioned to integrate sea, port handling and inland transportation for main port terminal operations.

Priority will be given in urban road development to improving freight vehicle access to port terminals and, where possible, creating heavy vehicle roads links that are not compromised by urban commuter traffic.

14.4 Basic Access Provision to Rural Areas

Transport planning at provincial and local level will seek to integrate the provision of local roads, small jetties including those constructed under the Community Water Transport Project, and the restoration of small rural airstrips with the objective of providing a basic level of transport access to all significant concentrations of population.

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This policy recognises that there are parts of the country where transport access can only be made available at 197. Integration – Rural Areas reasonable cost by a single mode of transport, either Priorities for providing basic small aircraft in certain upland areas, or by small boat access to remote rural around parts of the New Guinea islands and up the larger communities will take account of systems of the Sepik, Ramu, Fly and Gulf rivers. Opening modal availability as well as or reopening airstrips and providing small jetties and boat population and economic services will be the priority in those areas that are not development potential economically accessible by road. In order to prioritise which airstrips and jetties should be funded, the size of DOT, DPLLGA/PLSSMA will population and potential for agricultural production will be coordinate with provinces to taken into account, as well as providing access to primary prioritise basic rural access to health care and education services. integrate with the national network This planning will be carried out jointly between the Functional classification provinces and districts using transport planning recognises modal availability assistance from the DOT Planning and Coordination Division, DOT Rural Infrastructure Development Division and. coordination from DPLGA/PLSSMA. It is noted that the functional classification of the network (see Section 20) takes availability of modes into account.

14.5 Other Transport Modes

Transport modes other than road, sea and air transport that have been either used or proposed for use in Papua 198. Other Transport Modes New Guinea include rail, pipeline, conveyor and aerial Pipelines, conveyors and aerial ropeway. Pipelines, conveyors and ropeways are used ropeways have application to mainly in association with minerals, oil and gas either as bulk materials handling in part of the local extraction and processing plant or in minerals, oil and gas and only some cases for long distance movement of bulk impact on the publicly owned materials, through oil, gas and slurry pipeline. These transport infrastructure where forms of transport are private to the industry concerned these materials transfer to roads and tailored to the projects, although there is scope for waterways or seaports. some sharing of oil and gas pipeline infrastructure. Apart from matters such as land and environmental control, the Rail, either for long distance role of Government is limited in these modes of transport. freight or passenger or as urban However, national infrastructure planning must include light passenger rail is very places and routes where these bulk materials are unlikely to be economically transferred to river or coastal barge or to road cartage. feasible, would present technical As with forest production, these industrial movements of challenges in construction, be bulk material can be very large but transient over the life less resilient than road and of the development and operation of a project. would be difficult to sustain over the long term Rail was used in limited form in Papua New Guinea up to . early part of the 20th century, in the form of low speed narrow gauge railways for produce movement associated with island and coastal plantations. However, there has never been a rail system in Papua New Guinea used for long distance freight or for passenger transport. Rail has been suggested occasionally for long distance freight and passenger services and for urban public transport; however in no case have these been supported by convincing technical and economic feasibility studies.

Rail competes best for long haul low value bulk freight movement, particularly in large volumes over long distances on flat terrain. For long distance traffic in PNG the freight flows are relatively small, and the rail construction and operating costs would be relatively high due to the severe terrain.

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Construction of rail links would not substitute for existing roads, leaving the country with dual transport infrastructure to be maintained. In urban areas light passenger rail is found to be a very expensive transport mode to construct and maintain, particularly where it has to be retrofitted into the existing urban fabric. Rail systems depend on a high standard of control and communication system and are not as resilient as road to disruption.

A possible role for rail is as an alternative to road for very specific freight links such as connections from an inland to waterside port (Lae is possibly an example). However a business case would need to be made against the road alternative and there are fewer options for the upkeep of a rail connection and rolling stock than there are for road. In summary, while superficially attractive, rail is seen as a very unlikely alternative to road transport in the Papua New Guinea context.

14.6 Balance of Investment between Modes

There has been concern that investment in the three transport modes has been overly concentrated in roads 199 Investment across Modes while airports and seaports have been starved of Using the TIPS methodology investment. To assist balanced investment between the together with other policy three modes of transport, the prioritisation of criteria, the NTS aims to arrive infrastructure maintenance and development in the NTS at a better allocation of will consider road, port and airport investment within a investment between the three common evaluation framework, based initially upon modes of transport, recognising economic indicators such as internal rate of return, net that ports and airports have present value and benefit/cost ratio, but also incorporating been relatively underfunded in other decision factors as set out in the section on the past. investment prioritisation. . 14.7 Economic Corridors

The DSP identifies the priority economic corridors, a number of which involve the construction of new trunk 200. Integrated Development road connections between hitherto isolated road in Economic Corridors networks. The economic corridor concept involves the DOT to liaise with DNPM to integrated development of agriculture, forestry, mining, undertake feasibility studies of industry, power generation along major interprovincial missing link and corridor roads highways, linking ports, airports and the lower level feeder taking account of the benefits of road network. The combined economic impact of this associated development in other integrated development is expected to be greater than its sectors. parts.

The NTS includes the inter-provincial missing links as potential projects and these have been subject to preliminary evaluation using the TIPS methodology. More detailed feasibility studies will include the reinforcing effects of coordinated development where this can be clearly defined. DOT will liaise with DNPM to test the incremental cost benefit analysis of adding missing links and associated development sequentially to the network, making due account for induced demand and producer surplus benefits.

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15 Policy Statement on Sector Capacity Building

15.1 Introduction

The transport sector is capacity-limited on several fronts, both in the Government and private sector. The most important capacity constraint is the limited numbers of educated, trained and experienced PNG nationals available to take up posts at managerial, professional, technical and artisan levels through the transport sector. Financial constraint on secondary and higher education has been a contributing factor.

Within the Government agencies, there is the need for a stable and attractive career path for prospective employees under a well-designed management structure with knowledgeable and experienced leadership. There is a need for structured in-service training and personal development both in-house and through external courses that are appropriate to the level, background and responsibilities of staff. Conditions and remuneration that compete with those of the private sector are also needed so that good candidates are attracted and retained and to foster the integrity and morale of the agencies.

15.2 The Existing Situation

15.2.1 Public Sector Human Resource

In the Government transport agencies there are insufficient national staff with professional, technical or managerial qualifications to fill the established positions. As a result many positions are being left vacant or filled with staff with lesser qualifications and experience.

There is an aging of the workforce, particularly among higher grades and in areas that require specialist technical training and experience. Many of these started their career at or shortly after Independence in 1975. As older workers retire, gaps are opening up that may take several years to fill because of the long lead time required for training and work experience.

New graduates are attracted by higher wages in the private sector, with the mining and petroleum industry competing strongly for workers and offering incentives such as in-service training. Also, the numbers of well qualified technical graduates from the PNG high school and university system are very limited. Those with internationally marketable qualifications also have opportunities beyond Papua New Guinea.

The employment package conditions in the public sector are governed by the Public Services Commission and the general orders regarding pay and other entitlements which can limit the ability of Government Departments to offer competitive market salaries. Conditions for executive staff of public authorities and SOEs are also similarly bound by the Salaries and Conditions Monitoring Committee Act 1988. Also, matters such as housing availability and affordability in relation to allowances, particularly in Port Moresby, are a constraining factor.

The outcomes of an inability to attract or retain suitably qualified staff in the Government agencies are:  the remaining experienced staff becoming over-extended, and processing of work through the government agencies slows down;  a loss of technical knowledge and competence, leading to a reduction in the quality of decision-making and an inability to discriminate between good and poor advice;  staff are promoted to positions for which they lack training and experience, leading to weak management and loss of confidence in the agencies;  a loss in institutional memory.

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15.2.2 Private Sector Human Resource

The private sector has flexibility to offer attractive staff packages and parts of the transport sector are open to owner-operators and SMEs, such as PMV, taxi and freight operators. There is a solid and increasing demand for passenger and freight transport and for the trades that sustain it, although price control does exert a constraining influence. In domestic shipping there is an aging workforce of PNG national masters and mates, and insufficient enticements for new recruits to the industry with uncertain career path and opportunities on shore once retired from the sea. The lead time to train up replacements for those retiring is quite long, and involves years of sea-time. In aviation, which is technically the most demanding of the three modes, there is also a shortage of PNG national qualified flight crew and air traffic control and other technical occupations, leading to pressures to import foreign workers.

In the construction industry the resource projects provide strong competition for engineering and technical trades to those companies who undertake civil construction for road, airport and port development. Also, as work on public infrastructure projects is largely funded through the national budget, unless there is a continuous and predictable flow of projects from the government agencies, companies are discouraged from investing for the long term, which includes investing in staff training.

15.2.3 Role of Technical Assistance

Technical assistance has been provided to the sector through programs such as the Australian funded TSSP, “Strongim Gavman” and through grant TA for specific advisory and project preparation activities under multinational development bank, UN and bilateral funding.

Where there are extreme staff shortages and a low level of existing education or training, then technical assistance will be less effective than it should be. TA ends up being used as a way to shore up departmental resources rather than as an additional resource to help raise the standards within a well-staffed department.

Also, there is often an inherent conflict of objectives when TA is provided with a dual training/technology transfer role and a project achievement role – one objective will often get in the way of the other. Delivering and evaluating training is a skill and profession in its own right and not one that is necessarily easily combined with other TA advisory functions of a technical nature.

15.2.4 Courses and Study Tours

Another form of assistance is to offer courses and study tours to Government staff, often overseas. However, when there is already a shortage of staff in Government positions, participation in such courses can be disruptive. Also the nature of courses provided are not always well geared to the capabilities or roles of those who take them up and there is a danger that they can be treated as perks of a Government job rather than as well-designed training opportunities for a future career step.

Nevertheless, where training needs are properly identified, are well-matched to staff roles and the training resource is focused and professional, good outcomes can be achieved. Providing this training in PNG also makes it more generally accessible and less disruptive than sending staff overseas, although in some cases overseas travel is the only option.

15.2.5 Position of the SOEs and Statutory Bodies

The human resource shortage in the transport SOEs and statutory bodies is not as severe as in the Government Departments. The SOEs are more focused on service delivery and have a commercial imperative which makes for a more business-like and dynamic environment and this is inherently more attractive than the traditional Government department. However, the ability of each agency to

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support capacity building is influenced by its financial self-sufficiency and reliance on Government budget to fund activities. Where SOEs are more financially secure, then they are able to invest in their own in-house training which is often the best way to build capacity within such an organisation.

15.2.6 The Education and Training Institutions

At tertiary level, the PNG University of Technology at Lae (Unitech) is the only technological university in PNG. The ability of Unitech to attract well-prepared school leavers and train capable graduates in engineering and allied technical disciplines is critical to the replenishment of the professional and technical workforce with PNG nationals to build capacity and compensate for retirements.

Unfortunately, the strength of PNG universities has gradually weakened through financial constraints, insufficient quality control and weak governance, as reported in the PNG Universities Review (Garnaut and Namiliu, 2010), at the same time as the demand for skills is expanding with the resources boom. Graduate numbers are small and the educational standards are reported to have declined. Other factors, such as student and staff security and declining standards in the national high schools have also worked against the quality and quantity of graduates. There is also a problem of small scale compared to universities internationally. All of these factors have led to a loss of high quality staff to overseas posts, leaving a small pool of dedicated educators with a large workload.

At vocational and technical level, the PNG Maritime College offers training for crew, officers and shore-based maritime occupations. However, as with the universities, the College has very limited funding and is constrained in the courses that it can offer.

The National Training Council is the Government-Industry sponsored agency responsible for implementing national policy for vocational training, including trade skills commonly required in construction and transport operations. It provides an umbrella within which the National Qualification Framework is administered and public and private sector agencies can become accredited as training providers.

15.2.7 Training within the Government Agencies and Private Sector

Historically, Government transport infrastructure agencies, in particular DOW and PNG Ports Corporation, have played a role in in-service education and training, particularly for works overseers, plant and equipment operators and technical trades. Training is typically hands-on backed up with classroom training and geared to the specific requirements of the agency.

The larger private sector organisations, such as the resource development companies, train in- house and sponsor training courses at institutions in order to raise and expand skills among the PNG workforce to serve the demands of industry.

Bilateral assistance, international twinning arrangements and participation in international conferences also provide training and capacity building opportunities to the transport SOEs.

15.2.8 Professional and Technical Grades of Engineers

Civil, structural and mechanical engineering and allied disciplines such as quantity and land surveying, geology and materials science, are required to support the development and asset management of transport infrastructure.

The Institute of Professional Engineers PNG (IPEPNG) is a Government recognised professional body structured along similar lines to professional bodies in the larger countries in the region. Membership is attained by demonstrating professional competence and experience. Members of IPEPNG are often also members of similar bodies in Australia, New Zealand or the UK. However,

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the number of members is relatively small, aging, and this makes it difficult to maintain the critical mass for a flourishing institution.

15.2.9 Workforce Planning

The last Government assessment of workforce demand and supply dates back to 1982. DNPM and OHE are carrying out a new review to inform the implementation of Vision 2050. The MTDP similarly provides for a “National Manpower Study” and human resource training plan.

The results of this in the workforce grades and qualifications supporting transport will be important to developing a capacity building strategy for the transport sector.

15.3 Development of a Sector-Wide Education and Training Strategy

15.3.1 Introduction

The severe capacity constraints within the Government 201. Sector-Wide Education transport sector and, to a lesser extent, in the and Training Strategy construction industry and transport operations industry, demand a thoroughgoing assessment and development Establish a “Capacity Building of a training strategy and plan for the transport sector. Taskforce” under TSCMIC auspices to build capacity It will need to be recognised that this strategy will only focussing on human resource mature over the medium to long term, that there are development probably no short term fixes, except by importing staff to maintain capability in the existing organisations, which Carry out a status review of has been the pattern over the past 20 or more years. technical education, training and professional qualifications and A capacity building strategy for the transport sector will supply/demand outlook need to be coordinated with the Government’s general Coordinate with wider programmes for the education sector, those of the Government development development partners, NGOs and the private sector, so initiatives for the education and as to avoid overlap and to concentrate effort on the training sector specific needs of transport infrastructure and services development, operation, maintenance and management Develop an education and together with transport sector administration, policy training strategy and plan formulation and planning. focused on the skills, qualifications and experience It is proposed that a “Transport Sector Capacity Building required by the sector Taskforce” be formed under the auspices of the TSCMIC to oversee the development and implementation of a Propose interim ways of filling sector-wide education and training strategy. It is likely gaps in the staff establishment that external assistance will be required for the strategy of the Government transport development, combining experience from within and agencies to cover shortages of external to PNG in the education/training and transport qualified PNG nationals sectors and with development partner support for specific Propose changes and tasks. development of secondary education and tertiary 15.3.2 Status Review institutions to support the sector As a first step a comprehensive review should be undertaken to establish the demand and supply situation for the transport sector workforce, in both public and private sectors, and the present performance and outlook for the secondary, tertiary and vocational education systems to deliver the replenishment workforce. The review should also identify issues and constraints that are hindering the recruitment, retention and in-service

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development of staff capacity and their relative importance. It should include an assessment of the present staffing of the Government transport agencies, the qualifications and experience of staff and suitability to their present positions. An age profile of the staff establishment should be developed so that a cohort analysis can be made of the outlook for retirements and where critical gaps are likely to occur.

The outcome of the review will guide subsequent actions. However, this will include an assessment of the numbers of positions that need to be filled and the education and training pipeline that needs to be in place to do so. Where it is clear that positions cannot be filled by PNG nationals, recommendations should be made on the most appropriate form of interim support to the transport agencies that allows them to perform their function but without becoming indefinitely dependent on external support. This interim support could take the form of (i) twinning and support arrangements with counterpart agencies overseas (ii) programmes such as TSSP that provide either line or advisory support to specific public service positions (iii) local recruitment of overseas personnel to fill positions on a contract basis.

Gathering the data for this assessment will probably require specific industry surveys, as the information generally available is unlikely to be sufficiently detailed or focused on the issues at hand.

15.3.3 Development of Education and Training within PNG

At a tertiary level, the MTDP outlines the future direction for higher education including a major investment in the universities, technical colleges and vocational institutions. Realisation of the 2015 goals for the higher education sector would go a long way to restoring the ability of the education system to produce good quality graduates. However the MTDP is unspecific about technical disciplines and it is unclear whether the funding required for recapitalisation of the higher learning institutions will occur as targeted. Implementation within the MTDP also lies within the OHE, DOE, DPM and DNPM. A targeted strategy for transport also needs to involve the sector agencies and industry.

The proposed taskforce should take the initiative to focus on the educational skills that are required to support the technical disciplines in the transport sector, starting with secondary education through to technical trade and vocational training for each transport mode, university degree and post-graduate education, and professional society membership. Specific quality and quantity weaknesses in the existing structure should be identified and a prescription, resource plan and timetable developed for its strengthening. The existing courses, qualifications of the educators and international standing of the qualifications given at each institution should be reviewed, with a focus on those institutions supporting the transport sector, that is Unitech Lae and the Madang National Maritime College.

In conjunction with wider education sector reviews the taskforce will make recommendations on strengthening of the existing institutions and where privately financed institutions and PPP arrangements can be usefully pursued.

At professional level, the taskforce will engage with the professional institutions to determine how they can be supported and their active membership increased, including twinning arrangements with overseas counterpart institutions.

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16 Supporting Legislative Programme

16.1 Introduction

The DOT legal section will take the lead role in drafting Legislative Programme new and amended legislation to support institutional reforms, to introduce changes to economic and safety 202. Responsibility regulation of the transport sector and to consolidate and The DOT Legal Section will be update existing legislation. responsible for drafting new and Where necessary, external consulting advice on legal and amended transport legislation, technical matters will be obtained. All legislative reviews taking specialist external advice will involve consultation with interested parties. Draft where needed. legislation will be submitted to the TSCMIC, higher level 203. Land Transport committees as necessary and the State Solicitor prior to approval through the NEC and introduction to parliament. A Road Traffic Act will replace the existing Motor Traffic Act 16.2 Land Transport and related legislation to establish a Road Traffic A new Road Traffic Act will be prepared to replace the Authority, combining the NRSC Motor Traffic Act 1950, Licensing of Heavy Vehicles Act and LTD of DOT and introducing 1977, Land Transport Board Act 1968, National Road quality-based transport Safety Council Act 1977 and associated Regulations. The licensing. Act will provide for establishment of the Road Traffic Road Classification and Authority replacing the Land Transport Board, Land Standards Regulations to be Transport Division of DOT, and NRSC. drafted under the NRA’s Act. It will amend the provisions for driver licensing, and The need for the Motor Vehicle vehicle registration, and will include quality-based Dealers Act will be reviewed with licensing of goods transport, PMVs and taxis. A Road a view to repeal. Traffic Bill and accompanying Road Traffic Regulations will be completed in 2013 for NEC approval and 204. Maritime Transport introduction to Parliament. The Merchant Shipping Act will be amended to remove price Road Classification and Standards Regulations will be control on shipping freight rates drafted as provided for under the National Roads and to reform the coastal Authority Act. shipping licensing and permitting regime. The need for the Motor Vehicle Dealers Act will be reviewed and possibly repealed. The NMSA Act will be reviewed to remove ambiguity and 16.3 Maritime Transport transfer regulatory powers currently exercised by the The Merchant Shipping Act will be reviewed to provide Secretary for Transport. the legislative amendments necessary for: Legislation will be introduced in  The proposed changes to control of shipping the medium term to widen the freight rates, basically moving from a (nominally) remit of the NMSA to a National controlled systems of prescribed maximum rates Maritime Authority. to oversight of fair pricing under the supervision of

ICCC; and  To reform the licensing and permitting of coastal shipping as described in the maritime policy section of the NTS, including reformation or replacement of the CTC.

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The National Maritime Safety Authority Act will be Legislative Programme reviewed to correct areas of ambiguity, and to make changes consequential on the changes to the Merchant 204. Maritime Legislation Shipping Act. A new Ports Bill will be drafted In the medium term legislation will be drafted to widen by DOT in conjunction with the remit of the NMSA to a National Maritime Authority PNGPCL to more clearly and, as part of this, transfer some regulatory powers delineate the powers, functions currently vested in the Secretary for Transport under the and responsibilities of PNGPCL Harbours Act to the NMSA The Small Craft Act has been passed to regulate small boat A new Ports Bill will be prepared jointly by PNG Ports safety Corporation Ltd and the DOT to more clearly delineated the powers, functions and responsibilities of the PNG 205. Air Transport Legislation Ports Corporation and matters pertaining to the The following air transport declaration and identification of ports. legislation will be enacted once A new Small Craft Act has been passed which will outstanding matters of regulate small boat safety. governance responsibility and function are agreed: 16.4 Air Transport • Civil Aviation Act, Rules and The following items of aviation legislation are awaiting Regulation resolution of certain governance matters within the air • Air Services Act and transport agencies of CASA, NAC, PNGASL and the Regulation TAIC. Once resolved, these will be amended and • Airports Act, Regulation and submitted for higher approvals and enactment: Bylaws  Civil Aviation Act, Rules and Regulation • Accident Investigation  Air Services Act and Regulation Commission Act  Airports Act, Regulation and Bylaws  Accident Investigation Commission Act

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Part C – Transport Funding and Investment Strategy

17 Introduction to Part C

Part C of the National Transport Strategy focuses on investment priorities and the infrastructure investment strategy and programme. It contains the following sections:

 Section 18, Transport Infrastructure Investment Policy – outlines the matters to be taken into account in developing a policy for transport infrastructure investment including: investment policy elements, the investment planning cycle, framework for prioritisation, transport investment benefits and how they are treated, and order of funding priority for classes of expenditure under budget constraint;  Section 19, Present Structure of Transport Infrastructure Funding – sets out the sources and extent of funding of transport infrastructure maintenance and development over recent years and trends;  Section 20, Functional Hierarchy and Standards of Provision – develops a five level hierarchy of transport routes and terminals in terms of strategic importance and connecting function, and desirable standards for design and condition applying to each level in the hierarchy;  Section 21, Transport Infrastructure Deficiencies - is a general review of the deficiencies in the transport network as at the end of 2010 compared with the desirable standards for provision;  Section 22, Development Cost of the MTDP - the new construction, upgrading and rehabilitation envisaged in the MTDP is identified, preliminary cost estimates are made, and these capital works are assigned to each five year period, using the MTDP targets for 2015, 2020, 2025 and 2030. Using the TIPS 2010 model, preliminary benefit cost ratios are assigned to projects and priority rankings given;  Section 23, Maintenance Cost of the MTDP - the same process is applied to maintenance of the infrastructure. As items of infrastructure are upgraded, the ongoing costs to maintain them in good condition are estimated, with the objective by 2030 of all of the national transport infrastructure and the key provincial infrastructure being in good serviceable condition as envisaged by the MTDP;  Section 24, Funding Projections and Funding Gap – this is estimated for both a continuation of historic trends (a “business as usual” or BAU approach) and for increased national budget appropriation enabled by the strong GDP growth envisaged in the MTDP. In each case, new funding sources, such as road user charges, are included and some infrastructure is expected to be self-funding. As well as funding limitations, there are other resource constraints, such as the capacity of the construction industry to gear up for a higher level of output and the capacity of the Government administration to process and manage a much larger construction programme. A comparison between the cost estimates for each five year period of the MTDP against the resource constrained funding projections indicates a wide gap, even if the economic growth forecasts of the MTDP are achieved;  Section 25, Ongoing and Committed Projects – the work that will be funded under the first five years of the MTTP is strongly influenced by projects that are ongoing or are committed under the forward programmes of the transport sector agencies and development partner contributions; these are analysed in this section;  Section 26, Priorities for Project Selection – the final section in this part lists the priorities for projects by mode and class of expenditure using analysis from the TIPS model together with other feasibility study and transport agency data.

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18 Transport Infrastructure Investment Policy

18.1 Investment Policy Elements

In concert with the policy on private and public sector roles in transport infrastructure investment, Government will invest in the provision and maintenance of transport infrastructure where the services are provided primarily for the public benefit, and where there is no competitive market for private provision of infrastructure services and no reasonable prospect of such a market being developed.

The road system, air and sea ways and navigation systems are natural monopolies. Some privately owned access roads, airports and wharves connect with this public infrastructure and serve mainly the transport needs of their owners, which in most cases are mineral, agricultural and forestry interests. Some small airstrips and jetties are owned by small business enterprises, by church groups and village incorporations. There are also examples of the private sector supplying facilities within the publicly owned transport terminals such as private wharves, jetties and marine industry within main ports, and similar private facilities and operations at public airports. There are potential areas for private sector capital investment in PPP arrangements, where Government sees advantage in mobilising additional capital resources not available to it from general taxation or concessional donor assistance.

Given the importance of transport networks in facilitating the economic and social development of the nation, it is important that Government sets out its policy for allowing and promoting infrastructure investment and maintenance.

There are several elements to such a policy:

 Levels of planning - strategic, wide area, long term planning down to focused short term action plans;  The planning, programming, implementation and review process that is followed;  Standard of provision in relation to use and network importance;  Acceptance criteria for including new and upgraded infrastructure in forward programmes;  Prioritisation of new and upgraded infrastructure that meet the acceptance criteria;  Establishing the funding envelope and continuity for future spending, including maintenance, rehabilitation, renewals, upgrading and new infrastructure;  Prioritising the call on funds between maintenance and upgrading/new construction; and  Assigning the responsibilities for administering each stage of the policy to particular government agencies and providing procedures for the investment process.

These elements are set out in more detail below.

18.2 Strategic and Tactical Planning

The Government has set out its long term strategic planning objectives through Vision 2050, the DSP and MTDP, including the development along economic corridors, other main linking roads, and strategic development of main ports and airports. Medium term (5 year) and short term (annual and rolling programmes) will be required to be consistent with, and contribute to, the long term strategic plan.

Government has also signalled that it wishes to give increased control to the provinces, districts and local level governments to determine the planning priorities within their own jurisdictions and, consistent with their technical and administrative capabilities which will be built up over time, to take a greater role in managing transport infrastructure maintenance and development, particularly at a local level. From a planning perspective, this involves alignment of the provincial and national level

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plans for transport, ensuring that both are in turn consistent with the sector plans for resource development and social service delivery.

This National Transport Strategy recognises the priorities expressed by the provinces through their individual 206. Strategic Planning development plans, transport plans where these exist The NTS recognises the MTDP and the how the Government sees these plans being and DSP five year targets for implemented through the new Integrated Service Delivery transport system growth and Model (ISDM) and Service Delivery Mechanism (SDM) development to 2030 prepared by the Vision 2050 Development Centre. The Department of Transport has assisted, and will continue Provincial transport plans will be to assist, the provinces in developing their transport plans integrated with national level working within the framework of the Provincial transport infrastructure planning Coordination and Monitoring Committee (PCMC) under DOT will assist provinces and the DPLGA and PLSSMA. work within the ISDM and framework of DPLGA, PLSSMA When developing a long term strategic investment plan it and PCMC is important not to get caught in the trap of justifying every incremental tactical decision on funding in a short Longer term strategic planning, period time frame, particularly when there are strong where proven economically funding constraints. feasible, socially desirable and financially affordable, will set the A typical example is road relocation onto a route that will framework within which shorter be shorter, faster, more reliable and easier to maintain range tactical planning and over the long term, compared with carrying out incremental development takes incremental upgrading of an existing less well-aligned, place. less reliable and longer route (an example might be the unstable section of the Highlands Highway through Simbu). The small incremental improvement will almost always give a higher rate of return than the larger longer term solution and through incremental development may undermine the chance of the longer term strategic solution ever being taken up.

A similar case occurs when trying to develop a new port or airport – it is almost always more expedient in the short term to squeeze a little more capacity out of the existing facility, but the advantage of the more radical strategic project is never grasped and in the end as much investment might be made in the second best solution.

This tendency for short term expediency can be countered by taking the long term and large scale strategic decisions first, and then requiring that incremental development always build towards the agreed long term goal.

This does not mean that every large scale aspirational project will be a good strategic development option. All it means is that a long term strategic view should be evaluated first before looking at tactical options. This will require thorough technical and economic feasibility and evaluation that takes proper account of all policy objectives and social and environmental safeguards. This applies in particular to the proposed economic corridor developments and missing link roads, most of which are large scale potentially transformational projects, but require the investment of large capital resources and construction industry capacity and require careful analysis and prioritisation before final decisions on implementation.

18.3 Planning Investment in Transport Infrastructure

The sequence of activities that the Department of Transport will follow in its continuous cycle of planning, prioritising, facilitating implementation, monitoring and review of transport infrastructure development is illustrated in Figure 30 – The Investment Planning Cycle.

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The elements of this process are:

 Transport Demand - the existing demand for transport is established from surveys and statistical data on underlying passenger and freight demand factors such as population, economic growth and sector outputs and the relationships between these factors and the road, sea and air traffic generated. This process considers Government’s spatial development planning to accommodate population growth and for economic activities that rely on transport infrastructure and services. In part this may be organic growth based on an existing pattern of resource exploitation and human settlement but it may also involve deliberate planning by Government for urban growth, new settlements, new agricultural and forestry projects, export processing zones etc., where transport infrastructure is used as a lead investment to help stimulate activity. Forward projections of transport demand are then made based on growth trends and relationships. For personal travel this involves population projections, forecasts of personal and household incomes, and growth in private and public transport demand related to travel costs. For freight transport, growth in transport demand is closely linked to growth in GDP for general freight, and for specific export commodities to market prices and industry capacity.

Transport Demand Plans & Projections

Transport System Standards of Capacity Provision

Existing and Future Deficiencies

Periodic Review Projects to Provide MTDP/DSP, Sectors, (Annual, 5 years) Capacity Provinces, DOT

Evaluate and Rank TIPS economic / Projects social analysis, BCR

Other Policy Revised Ranking Considerations

Gov’t Expenditure Apply Funding Projections, User Constraints Revenues

Project Sequencing, Development Industry Capacity, Programme Project Readiness

Figure 30 – The Investment Planning Cycle

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 Standards of Provision – there are various design and service standards governing the 207. Transport Planning and transport system, both for infrastructure and for Investment Cycle vehicles. These can be mandatory requirements Demand assessment or desirable guideline practice, sometimes with minimum permissible standards. Standards are Transport network capacity required for consistency across the network and Present and emerging gaps to harmonize Papua New Guinea’s transport between demand and provisions system with international norms. Project identification Establishing standards in part involves identifying Socio-economic evaluation and a functional hierarchy of the transport network ranking of projects that is the tiers of main transport nodes and arterials, the secondary distributors, and the local Apply other policy objectives feeder and access routes. Functional hierarchy is and filters considered in Section 20. Revised ranking The leading dimensions, alignment and structural Apply funding and capacity capacity of transport infrastructure are closely constraints related to the costs of provision as well as the fitness for purpose to serve road vehicles, Investment programme and shipping and aircraft. Other important standards scheduling relate to safe operation, including air and marine navigation systems.

Some standards are a matter of balance between transport efficiency and cost, such as road design speeds, structural load limits, runway lengths and shipping berth length and depth.  Transport System Capacity and Deficiency Analysis – the Department of Transport and the transport sector agencies collect and analyse data on the inventory, condition and use of the transport system. Together with the standards of provision established for each road, wharf or airport according to their position in the functional hierarchy, this allows a comparison to be made against the actual provision and so shows where there are deficiencies that need to be remedied. These deficiencies can be in the maintenance condition and where the existing design falls short of the standard appropriate to the function of the road, wharf or airport and the amount and type of traffic that it supports. As well as an analysis of existing deficiencies, traffic growth projections can be used to predict where deficiencies may emerge in the future.  Project Identification – projects are investments in the transport infrastructure and include maintenance of the existing facilities and upgrading to reduce or remove present and future emerging deficiencies in the transport network. Projects can form part of a wider sector or area development plan, or may be undertaken in a lead role as a stimulator of activity. Projects must pass a number of acceptance filters before being considered for the NTS so that projects contrary to accepted strategic plans or clearly infeasible projects are not pursued. Potential projects are identified from various sources: (i) previous planning studies that have suggested projects which have not yet been implemented; (ii) projects arising from the government’s strategic planning, such as the MTDP, and from economic and social sector plans; and (iii) projects indicated from deficiency analysis and planning studies undertaken by the transport agencies.  Evaluate and Rank Projects – the initial evaluation and ranking of projects is based on the principles of economic benefit cost analysis. The TIPS model may be used as an

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evaluation tool for the initial project economic screening or a stand-alone cost benefit analysis may be undertaken. For large investments that pass the initial screening, a more thorough feasibility study may be needed to more accurately evaluate the project, prior to inclusion within the investment strategy and programme.  Apply other Policy Criteria and Revise the Ranking – the economic benefit cost analysis cannot incorporate all of the policy criteria that the Government must consider when preparing its programme. These non-economic criteria are added using a multi-criteria framework and a modified priority ranking of projects is obtained. This framework is to reflect the Government’s social and economic objectives at national and provincial level and will also take account of social and environmental safeguard policies;  Apply Funding Constraints – the NTS process includes a projection of the future funding envelope for public expenditure on transport infrastructure derived from the economic development and expenditure forecasts of government, through Treasury and DNPM, and from funding generated within the sector from user charges. The funding envelope provides a constraint on the costs of projects that can be funded in any one year or over a period of five years corresponding to the MTDP and MTTP. The funding constraints must also take account of different sources of funding, some of which will be tied to groups of projects depending on the transport mode (road, port, airport), the ownership of the facilities (SOEs, government and provincial government agencies) and in some cases aid donor constraints. Funding of emergency reinstatement, essential compliance projects and maintenance will take precedence over upgrading and network expansion where funding is a constraint.  Preparing the Transport Investment Programme – the final step to develop an investment programme for implementation in an annual or rolling three or five year programme. This involves considerations of project readiness (land acquisition, environmental mitigation plans, planning and design studies), industry capacity, and project sequencing and packaging. These practical factors may require some priorities to be shifted forward or back, but not to a loss in integrity of the overall network strategy.

18.4 The Framework for Prioritising Asset Investment

18.4.1 Economic Benefit Cost Analysis Framework

The framework for prioritising projects is economic benefit cost analysis taking a national economic viewpoint with the objective of maximising social welfare per kina of public investment. This framework is well-recognised internationally, is the principal method used by PNG’s development partners for evaluating projects in the transport sector, and is the method adopted in TIPS, so has the advantages of harmonization and general acceptability.

Resource cost basis - In the analysis all benefits and costs are expressed in resource cost terms, that is exclusive of transfer payments these being primarily import duties and indirect taxes such as VAT, but also making corrections for market rigidities, such as shadow pricing labour and foreign exchange if necessary. Costs are expressed in constant kina values as of the base date for the analysis, normally the year in which the project is put forward for consideration.

Benefit/cost ratio indicator - as the Government’s financial resources are constrained, the primary economic indicator is the benefit/cost ratio, which is the ratio of the economic benefits of the project option compared with a base option divided by the economic costs similarly compared to a base, all discounted over a specified time horizon and rate of public sector discount.

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Discount rate and time horizon - for comparability across projects, a standard discount rate of 12% and time 208. Evaluation Framework - horizon of 20 years is used, although the effects of a Social Cost Benefit Analysis lower discount rate (suggested 8%) can be included as a For comparing between sensitivity test. Where project investments are long lived, independent projects and then a terminal value can be included at the end of the 20 between mutually exclusive year time horizon to represent the ongoing present value project options of discounted benefits net of discounted costs for a further future period. Use resource costs, net of transfer payment, at constant Ranking of projects - projects are accepted in present day values descending order of BCR until the available funding is Costs are investment costs to exhausted. The BCR for the last accepted project is the the public agency acceptance value. Benefits accrue to existing Selection of project options using the incremental transport system users and new BCR - where projects are mutually exclusive (doing one users project stops the other from being done) then they should Decide time horizon to suit be treated as project options and evaluated using the incremental BCR method. project lifetime and an appropriate rate of discount for Project options are ordered by increasing cost and the future benefits and costs BCR calculated for the lowest cost option, called the base Selection criteria – Benefit/Cost option. The incremental cost and incremental benefit of Ratio (BCR) preferred where the next higher cost option is next calculated. If the ratio there are funding constraints – of incremental benefit/incremental cost (the incremental as applied in TIPS BCR) is greater than the acceptance value then this option is selected and the process repeated with the next Use incremental BCR to higher cost option until no higher cost option with an distinguish between mutually incremental BCR above the acceptance value is found. If exclusive investments the incremental BCR is less than the acceptance value Other effects on non-users and then the next higher cost option is compared with the the environment can be base option and so on. incorporated into SCBA

18.4.2 Modifications to Recognise Unquantified For links into inaccessible areas, Benefits and Other Policy Objectives benefits in stimulated production through reduced input and Modifications to the quantified economic benefits have marketing costs should be been included to recognise benefits and policy criteria included (producer surplus) that cannot be readily incorporated into a quantified benefit cost analysis: Some less easily assessed benefits, such as education and  connecting isolated population – recognising health access to remote or poor that a new transport connection (normally but not communities can be necessarily a road) into an area with either no incorporated by benefit existing access or only seasonal four wheel drive weightings – as in TIPS access has the potential to induce producer Project options that do not surplus benefits that are not included within the conform to minimum standards basic evaluation framework which relies on of safety and environmental transport user surplus. protection should not be  social benefits – recognising the desire of included Government to provide a basic level of transport access to remote and isolated groups of the rural population and that this access provides a necessary condition for the delivery of primary health and education services as well as

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market access which will ultimately lead to a higher health and educational status and economic engagement. These hard to quantify benefits are incorporated in TIPS as “social uplift factors” on quantified benefits and can be adapted to vary by provinces or district based upon MDG or similar indicators.

 safety and security benefits – where these are not included as quantified economic costs using recognised methodology. This combined benefit recognises the potential of a project to reduce transport accidents and the role of projects in assisting in border and internal security.

 environmental effects – that are not already mitigated with mitigation costs included in the analysis and where such effects are not sufficient to breach environmental protection standards and invalidate project selection.

 consistency and support to national planning – to recognise the role of a project in providing support to the development of an economic corridor or missing link as identified in the DSP and MTDP and proven through feasibility assessment to be a transport infrastructure development priority, and/or to recognise the supporting role of the project to a national agricultural development plan.

 consistency and support to provincial planning – for transport infrastructure supporting intra-provincial transport movements, to recognise the role in supporting a Provincial Government’s provincial development plan and/or provincial transport plan or other recognised transport infrastructure priority process.

The modifying effects are incorporated as factors that amplify or depress the project benefits to a level that is a best estimate of the benefit increase or decrease that would be obtained if complete data were available that would allow a more comprehensive economic appraisal including inter- sector benefit multiplier and accelerator effects. These are discussed further in the following sections.

18.4.3 Transport User Benefits

Beneficiaries - the direct benefits of maintenance and upgrading existing transport infrastructure that already has an established level of traffic accrues first to the transport users. These are the owners and operators of transport vehicles using the system and the people and goods carried.

So for roads, the direct benefits lie with lower operating costs for private vehicle owners, taxi operators, PMV operators and freight transport operators and travel time savings for travellers and for those consigning and receiving cargo.

For water transport, the costs typically lie with the port or wharf owner and the benefits are experienced by the ship operators through more efficient port operations such as reduced waiting time for berths and faster turnaround time, by ships’ passengers and by those sending and receiving air cargo.

For air transport, the costs typically lie with the airport owner and the benefits are experienced by air service operators through more efficient airport operations, less time waiting to land or take-off and faster turnaround time, by air passengers through time savings and by those sending and receiving air cargo.

Transfers through fares and charges - in each case, the extent to which the direct benefits are retained by the transport operator, passenger or cargo interest or are passed on to the passenger or purchaser of the goods depends on whether there are any changes in the charges made between the various parties. So, for example, the port or airport operator may raise charges to help recover costs of the investments made which reduces the amount of benefit to the air operator and,

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in turn, increases may be passed on to the end customer, the air passenger or freight consignee. These transfers do not affect the economic evaluation directly, although the benefit flowing through to the end user of the transport service will influence whether transport demand increases as a result of the project – in the worst case if a project “gold plates” a transport infrastructure investment and fares rise more than passenger benefit, the effect might be to reduce demand. Estimating the extent of the demand response is the responsibility of the project analyst.

Reliability benefits - as well as savings in operating costs and time to transport users, there may also be improvements in the reliability of the transport service, experienced as lower risk of weather closures and more predictable travel times in normal operation. Improved reliability has been found in some situations to be as important as savings in travel time. For goods transport, benefits to cargo owners come from more reliable delivery times and smoothness of goods handling to avoid damage and loss in value, as well as from lower freight charges.

Factors influencing reliability benefits are the risk of weather delay or closure on the project route, the availability of a practical alternative route and the importance of the route in the transport network. International research has shown that the value of reducing the variability in journey time by one standard deviation is roughly equal to the value of travel time. This allows a set of modifying factors to be applied to the travel time benefits to recognise the influence of a project in improving the reliability of a transport link.

Connecting isolated populations, producer surplus benefits - the benefits to transport users are pass through into increases in the value of land and property and reduction in the prices of goods and services imported and exported from the area served. So land becomes more valuable for development when there is transport access, the price of store goods in remote areas may fall, and the costs to supply inputs to agriculture and to transport produce to market both reduce.

Where new transport infrastructure or services are being provided, and where the most basic and unreliable access is being improved to all-weather condition, then these flow-on effects can increase the overall benefits of the project, the lower costs stimulating new production and allowing people to purchase more goods with the added income. These benefits to producers in the places given better access should be added to the transport user benefits to give a fuller estimate of transport benefits of the project. Also the added production and consumption generates new induced traffic, which also benefits from the lower travel costs and which are included in the base analysis.

Again, a set of modifying factors can be developed to recognise the value of producer surplus benefits relative to transport user surplus benefits.

Social benefits – as well as stimulating economic activity and providing market access opportunities, particularly to those communities remote from the main urban centres and main ports, transport access provides a necessary means for delivering social programmes such as primary health care and education, supplying schools and aid posts and facilitating outreach programmes such as vaccination, maternity services and neo-natal health and health education to prevent the spread of infectious diseases including AIDS.

Apart from these social programmes, providing transport access to all populated areas of the country, including isolated remote populations, is a specific objective of Government policy and, in evaluating transport investment, Government may choose to give special weight to serving particular areas based on their remoteness and income, as a means of alleviating relative disadvantage.

In the TIPS model, this has been included as a “social uplift factor” on quantified transport user benefits. Giving a special weighting for social benefits recognises that improved health and education status and improved social cohesion by removal of isolation all feed back into economic

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prosperity and wellbeing, but are hard to measure in monetary terms. It also needs to be recognised that not all effects of transport accessibility are positive, and that some positive aspects of village life and cultural values may be weakened and accessibility to outsiders may be regarded as undesirable in some cases. It is important therefore that local community views through Local Government Councils and District Councils are taken into account when providing new or upgraded transport links as not all projects will necessarily be welcomed at local level.

Safety and security benefits - an important factor in personal transport is safety, and project investment may be directed specifically towards improving the safety of the transport system or may have safety benefits as part of the overall value of the project. It is now well accepted in international practice that safety benefits can be quantified and included with other transport user benefits in economic evaluation. Safety benefits include avoidance of damage to vehicles and other property, reduced costs of medical treatment and emergency services, avoidance of lost output from injured workers and their families and the social value placed on reducing the risk of fatal, serious and minor injuries. Valuing safety benefits does not limit the role of safety in setting minimum standards, particularly for safety-sensitive modes such as aviation.

Environmental effects – in most cases, transport projects are undertaken with environmental effects treated as negative externalities that have to be either accepted, mitigated or avoided. In the worst case a project may have to be abandoned or substantially revised if the environmental consequences are regarded as unacceptable. For example, Government may at some time choose to create reserved conservation land or marine reserves where new infrastructure development is prohibited.

The environmental impacts of transport include local pollution from construction, ongoing infrastructure maintenance and traffic such as air emissions, pollution and sedimentation of natural water, noise and vibration, impacts on wildlife and ecosystems and global climate change impacts. There are also environmental effects on people and activities close by transport routes, including noise disturbance, dust, severance of communities, loss of privacy and security and safety concerns.

Where land is to be occupied or acquired for the project then there are voluntary or involuntary resettlement issues as well as compensation, now legislated under the Protection of Transport Infrastructure Act, and processes to be followed. Apart from compliance with minimum standards and planning controls, and inclusion of mitigation and resettlement costs as part of the economic evaluation of a project, environmental effects are treated as consequences of a project.

While some environmental effects can be ascribed with a monetary cost using non-market valuation techniques, this is difficult, contentious and probably impractical for the time being in Papua New Guinea. So the approach recommended is to identify and quantify the adverse (or in some cases positive) impacts according to the numbers affected and the degree of effect or qualitative description so that environmental factors can be viewed alongside the main quantitative economic analysis.

Conformity with Vision 2050, DSP and MTDP – the selection of projects should not be contrary to, or inconsistent with, the long range development plans in these national planning documents. Assuming that detailed feasibility has shown an economic development corridor or missing link to be economically viable, then it can be assumed that proceeding with development of the transport component will be backed up with the required complementary investments in other infrastructure required to support the population and economic growth projected in the area of influence.

In this respect the economic development corridors will have a greater benefit increment than the missing links where no specific complementary investment is planned and the benefits derive solely from shorter transport connections. Until such time as stand-alone feasibility study and economic analysis is carried out for each corridor and missing link, a modifying factor is applied to the

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transport user benefits calculation to recognise the economic surplus attributable to the transport infrastructure share of the total corridor investment that has not been quantified in transport user savings, in a similar way to the producer surplus benefits from connecting isolated areas.

Conformity with provincial development plans – a similar process can be applied for conformity with national level planning, but in this case to recognise where transport projects form part of an integrated provincial development plan. If the project is a transport connection with no other evident development support, then the modifying factor is sufficient to recognise some latent traffic demand and provincial commitment to maintaining the project in the future. If the project is part of a more considered integrated development, such as to support agricultural production, then a factor to reflect producer surplus benefit is included.

18.4.4 Priority for Classes of Transport Expenditure

The priority order for call on funds should be:

 urgent and emergency maintenance to reinstate 209. Priority order for infrastructure that has been closed or seriously expenditure degraded, usually by weather events; urgent and emergency  investment required to meet legal operating maintenance to reinstate requirements to avoid facilities being closed for infrastructure that has been safety reasons (such as for airports); closed or seriously degraded,  routine and periodic maintenance applied to usually by weather events; standards and frequencies that minimise road investment required to meet maintenance plus road user costs; legal operating requirements to avoid facilities being closed for  rehabilitation or reconstruction of degraded safety reasons (such as for infrastructure to its original standard; airports);  upgrading of existing infrastructure to a higher routine and periodic standard by expanding capacity or improving the maintenance applied to user performance of the facilities; standards and frequencies that minimise road maintenance plus new infrastructure – new road links, new ports,  road user costs airports. rehabilitation or reconstruction of There is an understandable tendency to underfund degraded infrastructure to its routine and periodic maintenance in favour of adding original standard; higher profile new infrastructure. This leads to the damaging cycle of infrastructure deterioration, high costs upgrading of existing to users, followed by premature failure and expensive infrastructure to a higher rehabilitation or reconstruction. A higher economic return standard by expanding capacity is almost always obtained from timely and sufficient or improving the user maintenance than from building new projects. performance of the facilities; new infrastructure – new road So a primary goal of the NTS and MTTP is that links, new ports, airports. infrastructure maintenance be fully funded at national, provincial and local level. If the transport network cannot be properly maintained through lack of funding, then there is a case for abandoning lower use sections and concentrating funding on a smaller core network. This is undesirable and should not be necessary as PNG has the economic base to properly maintain its existing infrastructure. However, it does argue for caution in constructing new transport links over long and thin traffic routes, particularly where there is already existing access and new links are providing additional cross-connections.

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At all times, forward planning of road investment should take account of the funding envelope. New projects should go through a systematic process of desktop feasibility, field investigation and detailed feasibility, then design and tendering, with the opportunity at each stage for the project to be moved up or down the priority list, or rejected if not good value or if it goes against the investment strategy. Under this systematic process, new projects should not be introduced directly into a national budget request without being signalled at least one or more years ahead, so they can be properly assessed.

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19 Present Structure of Transport Infrastructure Funding

19.1 Sources of Funds

Transport infrastructure is funded from a mix of sources:

 parliamentary appropriations through the national budget process to the Government transport agencies, primarily the Department of Works, but also the NRA, PNG Ports Corporation and National Airports Corporation; mainly through the development budget although from 2010 some road maintenance funding is through the recurrent budget;  multinational (ADB, World Bank) and bilateral (Australia, Japan, China etc.) donor funds either grant-in-aid or loans, made to Government or passed through to transport SOEs, with loans being repaid to terms and conditions specified in the loan instruments; loans and grants are normally shown in the Government appropriations and monies held in Government trust accounts;  parliamentary appropriations to non-transport sector agencies for expenditure on transport infrastructure, such as the Department of National Planning and Monitoring (DNPM) which in the recent past has directly administered a number of national, provincial and district level development programmes and projects which include or are exclusively for transport infrastructure development, mainly roads;  national government funds transferred directly to provincial and district administrations under the reformed intergovernmental financing arrangements; these include funding for transport infrastructure maintenance under the Service Delivery Function (SDF) Grants;  members of parliament (district open seats) are also provided with funds for discretionary expenditures in their districts, some of which are used to fund local transport infrastructure;  charges made by PNG Ports Corporation Ltd, National Airports Corporation, PNG Air Services Ltd and the National Maritime Safety Authority which go towards the maintenance and upkeep of ports, airport, marine and air navigation infrastructure;  a portion of the excise duty on diesel fuel is transferred from Treasury to the National Roads Authority for road maintenance purposes and NRA administration;  provincial governments, exercising their powers under the Organic Law, are legally authorised to levy a provincial road users tax, although there is no provision that revenues be expended on road upkeep;  the tax credit scheme, whereby companies involved in development activities, such as mining, directly fund and administer infrastructure provision, mainly roads, in return for a corresponding tax credit; the use of these funds is administered by DNPM;  as part of memoranda of agreement with landowners and/or for public good motives, some developers fund public infrastructure provision in development areas, for example the activities of the PNG Sustainable Development Program in Western Province;  charitable and church-based institutions which support the maintenance of local level transport infrastructure, such as rural airstrips, small wharves and local roads, often as support to their social services (health, education) activities;  private financing is used to fund private transport infrastructure which may at some point be transferred to public ownership, examples being logging and agriculture development roads, mine access roads, airstrips and port facilities, and commercial transport operators who develop infrastructure to support their operations. In some cases common user access is provided, either free or for a charge, alongside the private owner’s operations, and in some cases the infrastructure is restricted to private use; and  village self-help in-kind inputs to transport infrastructure, so-called “sweat equity”, is now less prevalent than was once the case; however it still has a place in future consideration of the overall funding envelope, even if not rewarded through cash payment.

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19.2 Recent Funding and Expenditure Trends

Actual expenditure on transport infrastructure has generally been lower than the original budget appropriation. This has been for a variety of reasons, including the need for Government to limit expenditure part way through the year, projects not going forward as quickly as programmed, and approvals being received close to the year end leaving insufficient time for funds to be applied. Also, some funds that are not expended immediately are credited to trust accounts, a recent example being the accumulation of funds in trust for the National Road Authority while that agency was acquiring its legal mandate and building its organisation. Another area of under-expenditure has been the tax credit scheme where forecast credits have not been taken up to extent expected.

Expenditure trends for the period 2004 to 2010 are illustrated below. These show expenditure that is traceable to transport infrastructure maintenance and development although there are some programmes where the application of funds is not readily identifiable or the proportion applied to transport compared with other infrastructure. For the statutory authorities and SOEs, the expenditures are partly from the national budget and partly from internally generated revenue.

19.2.1 Roads Funding and Expenditure

Total spending traceable to road maintenance and construction over the last five years has averaged a little over K300 million annually, 80% of which has been channelled through DOW, 14% through DNPM (including DSIP), and 6% via the Transport Infrastructure Maintenance Grant (TIMG) directly to provinces. About 76% of expenditure has been on national roads and 24% on sub-national (provincial, district and local) roads. However, the expenditure on sub-national roads assumes that all of TIMFG, DRIP and DTIP and an assumed 30% of the DSIP funds were spent on road works. As there is no central reporting of the uses of the funds the actual delivery in completed works is not known.

K500,000

K450,000

K400,000

K350,000

K300,000 Provinces

K250,000 DNPM

K200,000 NRA DOW K150,000

K100,000

K50,000

K0 2004 2005 2006 2007 2008 2009 2010

Figure 31 – Recent Trends in Road Construction and Maintenance Expenditure

Up to 2009, the NRA accumulated its revenues from diesel excise and only in 2009 commenced active expenditure on road maintenance. However, this is expected to increase rapidly as NRA takes over maintenance responsibility for an increasing length of national road and by 2015 NRA is

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expected to fund between K150 and K200 millions of 201. Levels of Funding, last 5 road maintenance, assuming that its revenue stream years from road user charges is secured. Roads: The great majority of road expenditure has been on remedial and deferred maintenance and reconstruction K200 rising to K400 M pa, rather than on upgrading. Where upgrading has occurred average K 300 M from all it has generally taken the form of pavement sealing of sources; ¾ on national roads gravel roads with drainage and minor alignment Mainly through from improvements rather than construction of new road links. Development Budget including The annual allocation to national road maintenance loans and grants, NRA diesel outside of remedial, mainly donor supported, projects excise, DSIP and TIMG averaged about K40 million or under 20% of total road expenditure. This was transferred from the development Substantial proportion through to the recurrent budget in 2009. DNPM actual expenditure only 68% of Actual expenditure has been only about 68% of budget budget appropriation appropriations over the five year period, although this substantially improved in 2008 and 2009 to around 85%. Maritime: Also the total appropriation and expenditure on roads has Main Ports – K45 M pa average, been increasing, expenditure approximately doubling 85% development and 15% from K200 to K400 million between 2005 and 2010. maintenance Part of the higher spending has come from a substantial Ports development expenditure increase in Transport Infrastructure Function Grants to mainly through the Development the provincial governments, together with the start up in Budget to PNGPCL or IPBC maintenance expenditure by NRA. Maritime Navaids restoration 19.2.2 Ports and Maritime Infrastructure Funding K16 M pa average and Expenditure Small jetties programme expenditure programmed but not Historically, the larger capital projects at declared ports executed; little to no expenditure have been funded from the development budget either below national level directly to PNG Ports Corporation or through IPBC as the holding company for SOEs. The larger projects have had Air: donor loan support. Maintenance support has not been Main airports – K10 M pa made available by Government and has been funded development through CAA with from port revenues, although at a lower level than that maintenance from airport required to maintain the assets in good condition due to revenue the limited revenues obtained from many of the smaller non-commercial ports which has required maintenance to Donor supported CADIP to be cross-subsidised from the operating surpluses from improve expenditure on national Port Moresby, Lae and Kimbe. airports in future

Over the five year period annual capital expenditure has Little to no provision for averaged about K38 million and maintenance K7 million, provincial airports and rural a total of K45 million. Projects have included Lae and airstrips Wewak port extensions, reconstruction at Kupiano and development at Kimbe. There are some very large expenditures over the 2011-2014 for Lae Tidal Basin and port expansion and for purchase of mobile harbour cranes, with a number of other port rehabilitation and expansion projects in prospect.

Maritime navigation aids have been replaced under the donor funded program that established the NMSA which involved an average of K16 million expenditure over the 2005-09 period. NMSA has now taken over the ongoing funding of navaids for which about K12 million was budgeted in 2009

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on an annual basis to fund preventive maintenance, replacements, land leases and community- based security arrangements. All costs are met from NMSA revenues.

Restoration and replacement of small jetties under the Community Water Transport Project are being funded through the DOT development budget with donor loan support. However, none had been completed to the end of 2010, although 40 jetties are planned for construction with a further 160 in the longer term.

While a small part of the TIMFG has been assessed for jetty maintenance at provincial and local level, the extent to which these funds are actually applied for this purpose is uncertain.

19.2.3 Airports and Air Navigation Services Funding and Expenditure

The Civil Aviation Authority was funded by an average of K10 million per annum over the five year period to 2009 from the Development Budget to undertake airport and airstrip upgrading. From 2011 responsibility for national airport maintenance and development transferred to the National Airports Corporation (NAC) with an annual appropriation of K30 million increasing to over K70 million annually on average in future years against the loan funded Civil Aviation Development Investment Programme (CADIP).

National airport maintenance is funded from NAC revenue. Ongoing maintenance requirements for the 21 national airports certified to existing usage (F100/Q400 and Dash-8) are estimated at around K20 million annually to cover periodic resealing, airfield, terminal and fencing maintenance. However, maintenance costs will rise substantially in future in real terms as some airports are upgraded to larger jet aircraft (B737-800) or if an alternate B747 capable airport for Port Moresby is developed at Lae or elsewhere. Even at present standards, the NAC’s ability to adequately fund maintenance of all 21 national airports is in some doubt.

Below national level, 23 previously national airports have been transferred out of NAC responsibility mainly to provincial government, but without an accompanying means of funding (Amanab, Ambunti, Balimo, Bewani, Cape Rodney, Finschhafen, Green River, Hayfields, Imonda, Kandrian, Karkar, Kikori, Kiriwina, Marawaka, Misima, Morehead, Namatanai, Ningerum, Ruti, Safia, Tadji, Tapini, Telefomin). The annual maintenance requirement for these airports is estimated to be a further K6.5 million in 2011 values. These airports currently support scheduled services by Airlines PNG and charter operations but are already restricted or at risk of closure. There are approximately 72 other active provincial government owned rural airstrips and a further 26 inactive, with an annual maintenance requirement of K14 million.

At local level there are some 300 rural airstrips classed as active by NEFC out of a recorded total of about 600. These are under a variety of ownership and management arrangements, with an estimated maintenance requirement of K75,000, or K22 million in total if all were to be maintained to a safe and sustainable standard. In practice relatively few of these airstrips remain open and those that are by the efforts of the users and at the own risk of those using them. While a small part of the TIMFG has been assessed for airstrip maintenance at provincial and local level, the extent to which these funds are actually applied for this purpose is uncertain.

Responsibility for the upkeep and upgrading of the air navigation infrastructure transferred to PNG Air Services Ltd from 2008 which is required to be self-funding commercial entity. Capital investment requirements also have to be met out of revenue and borrowings, with the upgrading of Port Moresby’s instrument landing system included within the first CADIP project.

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20 Functional Hierarchy and Standards of Provision

20.1 Traffic and Access Functions

Transport networks are composed of nodes (road junctions, ports and airports) and links (roads, air and sea routes). The start and end points for passenger trips are centres of population, from large urban areas to small remote villages accessed by walking. For freight trips, the start and end points are areas of production, manufacturing and sale and include plantations, smallholdings, production forestry, mines, and industrial areas.

The traffic and access functions of transport links and nodes are their function in carrying traffic through an area and collecting or delivering trips to or from that local area. The hierarchy of functions classifies transport links and nodes from those that serve primarily a traffic function, with little or no local access at the top of the hierarchy, and those links and nodes that serve only local access with no traffic function at the bottom of the hierarchy.

 Highest level – mainly a through traffic function, little to no access function  Intermediate levels – a mix of through traffic and access functions  Lowest level – mainly access function, little or no through traffic function

There can be any number of levels in a hierarchy and five levels have been defined for the purposes of the NTS.

20.2 Primary Transport Infrastructure

Overseas trade and travel are critical to the Papua New Guinea economy, so the main international traffic gateways and their connecting routes are of primary importance in the transport network. As the port carrying the bulk of PNG’s exports, the port of Lae, in conjunction with the Highlands Highway are probably the two most important pieces of transport infrastructure in the country.

When grading the transport infrastructure, the first importance is to provide the population with at least one connection to the main urban centres and the international sea and air gateways.

Many of Papua New Guinea’s provincial capitals are on the coast or on islands and have limited land connections. For these provinces the sea ports are particularly important for inter-provincial as well as international travel. For provincial centres that lie inland, the land connection from a main port are the most important transport links. This applies to the Highlands provinces and to the large inland catchments of the Sepik and Fly rivers.

Where provincial centres lying on the coast have a good road connection to Port Moresby or Lae, then the role of the provincial port becomes less critical, particularly if it is used primarily for coastal cargo and passenger travel. This is why the port of Kerema is less important now than formerly, since it has been connected to NCD via the Hiritano Highway. In future, the importance of some other coastal ports may be reduced as main road connections are developed, such as along the northern coast.

The general trend internationally is towards fewer but larger capacity ports in each country, with inland freight distribution as the land transport connections are improved. However, the balance between providing main port facilities and providing better road connections is an economic decision and depends on the relative size of the provincial populations, the export production from the port hinterland and the road distances, standards and costs.

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For the Highland provinces, the Highlands Highway provides the backbone transport link to Lae and, provided there is at least one reliable and good standard road link from the Highway to each province, any other inter-provincial connections become a second order priority. Having additional inter-provincial connections is justified where these provide new access to populated areas and areas of production, where they genuinely provide an alternative route and better network security if the main connection to Lae should be closed and where they can be justified from an economic benefit cost analysis. However, some additional inter-provincial links, because they pass through low population areas and are costly to construct, have a lower importance in the network than new or improved provincial roads that help open up isolated pockets of population.

Similarly, within provinces, the first priority is to ensure a reliable transport connection to all significant areas of population, either by road, sea or river, or air. This will generally mean ensuring one reliable connection from the provincial centre to each district centres and into all significant populated areas, particularly where these have untapped agricultural production potential. Providing additional cross-connections between districts may help with network security, but will generally be of secondary importance and should be justified by economic benefit cost analysis.

These priorities result in a tree structured road network emanating from the main ports, with some areas isolated from road access served by secondary ports or airports, which is the form of the network in Papua New Guinea today. The highest priority will be to develop new branches from the tree to serve significant areas of population, rather than to create additional cross connections.

Once the road, sea and air networks have each been extended to serve the population and centres of production as far as it is economically feasible to do so, then the construction of other cross- connecting links between provinces and districts can be considered as a second stage of network development.

20.3 Critical Lifelines and Network Redundancy

Another way of looking at the importance of transport links in a network is the impact of removing a link on the operation of the network. Removing a local access road to a small village has serious consequences for that village, but very little for the remainder of the network. However if a link were to be removed from the Highlands Highway, say at Kassam Pass, then the whole of road communications between the Highlands Provinces and the Port of Lae would be affected, as there is no alternative route. So importance of links in the network should also include their importance as critical lifelines.

The lifeline role of a transport link will determine the extent to which the link is engineered to be proof against closure from natural hazards such as seismic or flood induced damage and route closure. In some cases, where the natural hazard risks are high, there will be value in providing an alternative route. A particular case is an alternative to the Highlands Highway route through Simbu Province which is on unstable geology. There are other locations where roads are at risk from shifting flood prone watercourses and alternative routes may be economically viable on a risk-based analysis.

Providing network redundancy through route alternatives helps reduce the impacts of closure of the main route, but there will often be a choice between reducing the risks on the existing route versus the cost of a route alternative. In some cases, all that may be needed is a local diversion that is capable of carrying traffic while the main route is repaired. In other situations there may be a case for a wide diversion. However, if the alternative delivers traffic to a different destination (for example, to Madang or Port Moresby instead of Lae), this is not a full substitute and may be of less value. The reason for the trip may require it to end at Lae or, for export shipping, there may not be the facilities or overseas shipping service at another port.

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20.4 The Functional Hierarchy

The functional hierarchy that has been developed for the NTS is shown in the table below. The levels are shown from I to V and include the size and importance of the areas served together with whether the connection is the primary link for an area or provides a secondary connection. Where connections are secondary, in that they provide an additional transport link conferring some network redundancy but with no other primary function, they are rated one level lower.

Areas of economic production include agriculture, forest resources, minerals, oil and gas, concentrations of manufacturing industry and any special export processing zones that may be established in future. Forestry, minerals and oil and gas will generally support the development of transport infrastructure as part of projects, as will some large scale agriculture, so tend to lead development of the transport infrastructure where none already exists. In some cases, Government is then able to “piggy-back” on this resource development to improve the transport access to areas that might otherwise have been uneconomic to provide.

In the case of airports, there is currently only one international gateway of any size, which is Port Moresby International Airport (PMIA). However, Nadzab and Mount Hagen are important hub airports and Tokua a gateway for the Island provinces. For ports, Lae, Port Moresby and Kimbe are the most important in terms of cargo throughput and all are international gateways.

Table 15 – Functional Hierarchy for Transport Infrastructure Level in Ports and Airports Roads Hierarchy  Main international gateway and PNG  Primary connections from Level I ports regional ports and the main and airports to national and provincial I international gateway and hub centres and to major areas of economic airports. production;  Primary connections between provinces.  Other ports handling significant  Primary connections from Level II ports volumes of overseas cargo, serving and airports to their provincial capitals other provincial centres and/or other  Primary connections from provincial significant areas of economic centres to district centres and to other production significant areas of economic production II  Other airports handling significant  Secondary connections between volumes of overseas traffic, serving provinces other provincial centres and/or other  Connections to international land border significant areas of economic crossings production  Other ports and airports generally  Primary connections from Level III ports serving district centres or and airports to the district centre or other catchments of over 10,000 areas generally of over 10,000 population population, or over 5,000 population in the hinterland served without a road or (for airports) a  Primary connections from provincial III water connection to the provincial centres to other areas generally of over capital 10,000 population  These ports and airports generally  Primary connections to high schools, support, or could potentially support, hospitals and health centres regular services on a scheduled or  Secondary connections between district inducement basis centres  River and coastal landings and rural  Road connections from Level IV ports and airstrips serving other areas airports IV  Occasional charter, private and local  Road connections to other areas use  Subsidised services via CWTP  coastal and river landings suitable  Minor roads and tracks providing only dry only for small craft weather access for four wheel drive V  minor landing areas suitable only for vehicles rotary wing operations

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20.5 Relationship to Other Classifications

This functional hierarchy applies principally to the rural transport network rather than to urban roads, although 211. Functional Hierarchy the road connections in this hierarchy penetrate the Need for a classification of urban areas (they do not stop at the urban boundary). transport routes and terminals Within the larger urban areas, there is similar hierarchy of based on function in connecting arterial roads, collector/distributor roads and local access provinces, districts, towns, ports roads. However urban road networks are better treated and airports that is separate separately. from national/provincial ownership or funding Roads managed centrally by DOW are denoted in the arrangement RAMS system as: A five level classification has  NR - national routes, reserved for the recognised been developed main rural highways; Each link is rated according to  NM - national main roads, which are a second its function in connecting level to NR roads and also include some urban provinces, districts, other sections; concentrations of population,  ND - national district roads, a level further down ports, airports and social again; and infrastructure (schools and  NI - national institutional roads. The NI roads are health facilities) generally relatively short access roads linking This classification is government facilities to the main network (police independent of the ownership or stations, barracks, training colleges, institutes administrative responsibility etc.) but also include oil palm estate and access (DOW, NRA, PNGPCL, NAC, roads in New Britain. Province etc.) and funding The numbering system is four digit, the first two digits a arrangements; provincial identifier (except for NR roads which are Standards of provision are denoted 00) and the third and fourth digit a road identifier. related to volume of traffic The roads are further broken down into RAM segments. carried and functional Provincial roads are given a P number in RAMS, again classification with a provincial two digit identifier and a four digit road identifier. The provinces have in some cases adopted the Standards of route security RAMS numbering but others use their own systems. should also take account of critical lifelines and network The classification of a road under RAMS provides a redundancy general indication as to its importance and place in the Routes that are critical lifelines functional hierarchy, but there is not an exact one-to-one and have no alternatives should correlation. be constructed and maintained For ports, the declared and other (undeclared) ports to a standard that gives them again give a general picture of relative importance but added security against there are declared ports that are now not operational and unplanned closure have become less important while there are also ports The Highlands Highway retains not under PNG Ports Corporation ownership that have its importance as “backbone been developed as part of resource projects and have an infrastructure” connecting the importance in the network. inland highland provinces with the main coastal ports, in For airports, the functional hierarchy will to some extent particular Lae be associated with the design aircraft for sizing runways and the required approach surface controls and navigation standards. The levels of design aircraft are (a) wide bodied jets (B7370-800 and larger

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in the case of PMIA) (b) large turboprop aircraft (F100, Q400) (c) small turbo-prop (DHC-6) and (d) light aircraft (Cessna 206).

20.6 Identification of Transport Assets by Functional Hierarchy

The maps in Figure 13 to Figure 20 show the functional hierarchy for each transport mode as the network presently exists. As missing links and other new road links are constructed, some outlying road sections that presently serve only rural access will be reclassified to a higher level appropriate to their new functional status. The DOT will develop a full database of the functional classification and mapping of all national and provincial transport infrastructure as it now exists and in its ultimate future development.

20.7 Standards of Provision for Infrastructure

20.7.1 General Considerations and Responsibilities

The standards of provision for transport infrastructure will 212. Standards of Provision be based on the following considerations:  position in the functional hierarchy; General Considerations  the level of use; position in hierarchy  the economics of provision; and level of use – traffic carried  harmonization with recognised international and economics of provision national codes and practice harmonization with recognised Standards may include minimum required levels of international and national codes provision (mandated standards), and desirable levels of and practice provision (guideline standards) in relation to the above Parameters considerations. availability – limits on outages Parameters that will be taken into account in setting standards of provision include: user performance – technical criteria  network availability – acceptable limits on the frequency and duration of closures; safe design and operation  user operability – technical characteristics of the security facilities provided; environmental compliance  safe design and operation;  security – in particular for cross-border transport Responsibility operations; and DOT, responsible transport  environmental compliance agencies, external agencies with cross-cutting responsibilities In general, a higher position in the functional hierarchy will be accompanied by higher standards of provision.

The responsibility for setting standards will involve the Department of Transport in respect of overall policy and planning considerations, the transport agencies responsible for management and safe operation of the infrastructure assets (DOW, NRA, PNG Ports, NMSA, NAC, PNGASL, CASA) , and external agencies with cross-cutting responsibilities such as the Department of Environment and Conservation.

20.7.2 Standards for Rural Roads

The guideline standards for rural roads will be based on a combination of: (i) network function; (ii) total traffic volume (iii) use by heavy traffic (iv) costs of construction versus terrain; (v) natural

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hazard risk management; and (vi) user operability. The following standards are proposed but will be subject to ratification and amendment by the proposed Standards Working Group (see Section 8.8)

Network Function: Irrespective of traffic volume, roads with a high network classification justify a good standard of surface, alignment and reliability (low risk of closure). For example, the traffic level along the Highlands Highway is greatest near the larger towns and populated valleys and is least over mountain passes. However, the Highlands Highway has the same important network function over all of its length and this requires that some of the design standards be to a consistent high level along the length of the highway.

Traffic Volume: Roads carrying higher volumes of traffic can justify higher standards of design than low volume roads. In particular this affects carriageway width, horizontal alignment and gradients. Also, where rural roads carry volumes of traffic in excess of 2,000 vehicles/day and are limited in sight distance, auxiliary passing lanes may be justified. Where traffic volumes and network function are both low, then it will be sufficient for the road to be single lane per direction.

Heavy Traffic: Roads carrying high volumes of heavy traffic warrant some particular design standards, such as lower maximum road gradient, wider road shoulders for heavy vehicles to pull over, and extra widening on curves. Some roads may be required to carry extra-heavy or extra- large loads, and this may justify increased loading capability for bridges and other road structures, and greater horizontal and vertical clearances. At present most bridges are rated as T33 or T44 standard. T33 was a pre-1976 Australian standard approximately equivalent a 33 tonne semi-trailer, and T44 from 1976 to 2004 approximately equivalent to a 47 tonne semi-trailer. Post-2004, Australia has adopted the SM1600 standard, which caters for heavier loads again and may be appropriate for heavy traffic routes, such as the Highlands Highway from Lae to the Southern Highlands.

Unit Costs and Terrain: While it is desirable to maintain consistent design standards along a road route, the costs of construction are heavily influenced by topography and geology. Roads can be classified by the nature of the terrain, with more difficult mountainous terrain requiring some compromises in road alignment compared with flat terrain. Mountainous terrain is more likely to involve more hard rock cut, whereas at the other extreme swampy terrain may require the use of geotextiles, deep removal of organic material and raising and preloading of road embankments. So guideline standards also vary with terrain.

Natural Hazard Risk Management: natural hazards, particularly earthquakes and storms can give rise to slips and flood damage that can close roads for protracted periods. The network classification allows for important roads to have a lower risk of closure which can be provided by higher standards of engineering or by providing route alternatives. Standards for the acceptable length of route closure are included in the guideline standards.

User Costs: the costs of using the road as experienced by the road user are a combination of the vehicle operating cost (or fare or freight charge), the time taken (or average travel speed), the ride comfort and the perceived safety of the route. Vehicle operating costs are largely a function of road geometry and road surface roughness, rougher surfaces being more damaging to vehicles and cargo and also less comfortable for passengers. The RAMS data base includes road roughness and a composite road condition index that rate road surfaces a good, fair or poor. Roughness and condition index can serve as proxies for user costs.

Guideline technical standards for road design and management features that vary with functional classification are proposed in Table 16 below. The standards are for the network function or the annual average daily traffic (AADT) in vehicles per day, whichever is greater. These guideline standards will be considered by DOW in conjunction with NRA, DOT and the IPEPNG, amended and extended as necessary and then adopted for general use.

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Table 16 – Guideline Minimum Performance Standards for Rural Roads Item I II III IV V Traffic, more than vehicles/day 1,000 500 200 50 0

Road Passability (other than during closures) % of time passable in dry not not 100% 100% 75% weather by two wheel drive required required vehicles % of time passable in wet not not 100% 95% 50% weather by two wheel drive required required vehicles % of time passable in wet not weather by four wheel drive 100% 100% 95% 90% required vehicles Road Closures not maximum number of minor 5 10 15 25 closures (< 4 hours) per year required maximum percent of time closed not for more than 4 hours with 1% 5% 10% 20% required diversion alternative maximum percent time closed for not more than 4 hours without nil 1% 5% 10% required diversion alternative Vehicle leading dimension limits maximum overall length, trailer 20.0 combinations, m maximum width, m 2.5 maximum height, m 4.3 Vehicle mass limits (bridges) designated heavy vehicle routes ≥ T44 (SM1600) *n/a n/a n/a other routes T44 T44 ≥T33 ≥T33 n/a Bridge lanes, minimum short bridges (≤ 20m length) 2 2 1 1 1 long bridges (> 20m) 2 1 1 1 1 Road standards number of traffic lanes, min 2 2 2 1 1 gravel/ sealed sealed gravel earth surface type earth surface, short steep grades sealed gravel earth surface condition rating (RAMS) % good 95% 90% 80% 70% n/a % fair 5% 10% 20% 30% % poor 0% 0% 0% 0% no more than 5% of surface roughness measurements 5.5 7.5 10.0 n/a n/a exceed IRI (International Roughness Index) maximum short gradient % 10% 12% 14% 16% 25% max sustained gradient % 8% 9% 10% 12% 20% design speed, km/h: flat to rolling terrain 100 80 60 50 20 hilly terrain 80 60 40 30 10 mountainous terrain 60 40 20 15 5

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Item I II III IV V sealed pavement width, m flat to rolling terrain 7.5 7.0 hilly terrain 7.0 6.5 n/a n/a n/a mountainous terrain 6.5 6.0 pavement + shoulder width, m flat to rolling terrain 9.5 8.5 7.5 5.0 4.0 hilly terrain 8.5 7.5 7.0 4.5 3.5 mountainous terrain 7.5 6.5 6.0 4.0 3.5

Notes: * n/a – not applicable

For road safety, the crash exposure increases with increasing traffic volume and measures to mitigate traffic hazards are more economically viable as traffic levels increase. At present there is no road safety or roadside hazard rating system in place for Papua New Guinea roads and this is one of the future objectives of transport policy. When such a rating system becomes available, then then higher standards will be required for roads carrying higher volumes of traffic and for higher levels in the functional hierarchy.

General environmental protection and mitigation standards apply to road construction and maintenance techniques and these are not directly related to road function. Similarly, for new construction, the desirable or required degree of environmental mitigation is related more to the surrounding natural and built environment than to road characteristics. The Department of Works “Environmental Impact Guidelines for Roads and Bridges” provides information for the preparation of Environmental Management Plans, including environmental treatments for issues commonly arising during road and bridge construction. However, these Guidelines need to be reviewed and formalised to ensure that they comply with international best practice, are well attuned to the environmental issues encountered in Papua New Guinea, that there is clarity in how and when they are to be applied and how they inter-relate to the wider environmental legislation and procedures of the Department of Environment and Conservation.

20.7.3 Standards of Provision for Ports

Type and Size of Vessel The leading dimensions and layout of port facilities are largely guided by the size and types of vessel using the port. The main design characteristics are the vessel length, draft at the berth, form of cargo loading and quantity of cargo transferred. Liquid and dry bulk carriers may require dedicated berths or ports, particularly if associated with a single industry and cargo interest (oil and gas, palm oil, bulk cement, grain, ore slurries). The extent to which these bulk facilities can be shared with general cargo may be limited. Rough cargo, such as logs, also use dedicated berths and around the PNG coast export logs are mainly loaded from small coastal landings associated with logging projects where the landing and forest roads are temporary in nature.

For general cargo, a large proportion is unitised in some form, mainly in ISO 20ft and 40ft containers, including refrigerated (reefer) units. Container cargo is currently handled by geared vessels, that is self-supporting vessels equipped with deck mounted cranes for ship-shore transfer alongside. PNG Ports has recently acquired mobile shore-based cranes for Lae and Port Moresby which will provide additional cargo transfer capacity. Break bulk (non-unitised) cargo is transferred by ships’ derricks or port mobile cranes.

Another form of cargo transfer is roll-on roll-off vessels (RoRo) equipped with stern or quarter ramp access for cargo handling equipment and vehicles to the ship’s loading decks. Car carriers are another form of RoRo. Motorised landing barges are also used around the PNG coast, flat bottomed

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open deck vessels equipped with bow ramps that can be lowered onto shelving barge landings which are provided at several ports.

The size of vessels that can be accommodated at each port can also be length and draft constrained by navigation at the port approaches, and the depth of channel available. The ability of ships to dock can be affected by the state of tide, wind and sea conditions depending on the configuration of the harbour.

The international shipping lines serving Papua New Guinea trade on routes to Australasian, Pacific and Southeast and East Asian Ports. They are regional in nature and for shipping to onward destinations such as the Americas, Europe and other parts of Asia. Cargo is transferred onto larger vessels at regional hubs in Australia, Indonesia, Singapore, China, Korea and Japan.

Typically these vessels are medium size geared cellular container and mixed container/break bulk carriers of capacity from 500 to 1700 TEU capacity, up to 180m in length and 11m draft.

The main coastal shipping services are provided by a combination of second tier operators using general cargo vessels and landing craft of 50 to 100m length and 750 to 5000 tonnes load capacity and operators who cross over from international services using their larger vessels and serve the larger ports.

Below this is a third tier of smaller cargo/passenger landing craft typically 30 to 50m equipped with bow ramps to allow the versatility of alongside or RoRo operation where there is a landing pad or suitable shoreline conditions. The Border Development Authority has a number of such vessels in service or in prospect to serve the designated border province coastal communities. However, these vessels are rather large for the volumes of cargo moving on feeder routes. Two companies also provide passenger ferry services in vessels of 30 to 50m length.

Smaller again are workboats, mainly of wooden construction from local yards, of 10 to 25m length with both passenger and cargo capability providing unscheduled feeder services to small jetties and landings. At the lowest level are small “banana” boats, outboard equipped open fibreglass workboats of about 10m length. Although relatively expensive to operate, banana boats are popular for being able to provide a fast responsive service for small amounts of cargo and passengers; however they are also frequently overloaded posing safety risks.

Berth Occupancy and Cargo handling The standards of provision for ports should attempt to minimise the overall costs of providing port facilities and the costs to the users in ship and cargo delays. Service criteria that can be used as indicators of the standard of provision are the probability of not finding an unoccupied berth (that is the probability of having to queue), the average time spent queuing and the rate of cargo transfer.

Investment in upgrading and maintenance that increase the berthage length and number of berths available or increases the cargo handling rate will bring down the probability of queuing, and such investments should be analysed individually to determine their financial and economic feasibility.

However, as a general guideline, the standards can be applied as shown in Table 17. The more berths of a type that are available, the higher the overall occupancy rate can be for a similar degree of ship queuing.

Standards for Minor Jetties and River Landings Standards designs for minor jetties have been developed by the Community Water Transport Project. The typical layout for jetties is a small T-head with trestle and/or causeway to land, sufficiently large for mooring and loading vessels of up to 10 to 15m length alongside and also to cater for banana boats and traditional craft. All goods are loaded and discharged by hand.

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For some sheltered river landings where jetties are unsuitable, a floating pontoon landing design has been developed.

Table 17 – Guideline Standards for Ports

Guideline maximum monthly berth occupancy International container berths 1 berth 50% 2 berths 60% 3 berths 65% Coastal general cargo berths 1 berth 50% 2 berths 60% Cargo handling rate, containers shore based crane, TEU/h 15 ships crane, TEU/h 10 RoRo, TEU/h 8 barge 6 Cargo handling rate, break bulk ships crane, t/h 150 RoRo, t/h 75 barge, t/h 75

Port Security All international ports of entry will be required to comply with International Shipping and Port Security (ISPS) standards for land access to the port facilities, to ensure that risks of illegal and unsafe movements of people and goods across the border are minimised.

ISPS provisions will also apply to situations where there may be direct ship to shore transfers of passengers and goods from overseas shipping outside of the ISPS certified ports.

20.7.4 Standards of Provision for Airports Airport and air navigation standards are more rigorous and more highly codified than either port or road, mainly because of the much more stringent safety regime that surrounds air transport.

For the aerodrome, the leading characteristics determining physical standards are the categories of aircraft using the airport, whether international or only domestic air traffic is handled, whether the airport supports both day and night operations with the consequent airfield lighting requirements, and the air navigation systems in use. For the smaller airports, there is a distinction between visual and instrument flight operations.

The categories of aircraft using the airport and the sector lengths flown determine the runway take- off length requirement. The aircraft types and take-off weight also determine the loads applied to the aircraft pavement and the design strength requirements. The aircraft wingspan and length determine taxiway and stand separation distances and positioning of terminal services.

The leading physical features are the approach and take off lengths of the main runway, in each direction, the facilities required for taxiing and aircraft stands so that ground movements are facilitated, the passenger boarding method and gate numbers, the air cargo and baggage handling systems and the sizing of the passenger holding areas within the terminal. Finally, the landside road access and parking arrangements affect the efficiency of the airport.

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Airport design is codified in publications by the International Air Transport Association (IATA), the International Civil Aviation Organisation (ICAO) and the Federal Aviation Administration (FAA). In addition Papua New Guinea must also harmonise its air transport standards and practices with its Pacific neighbours, particularly in regard to international operations, aviation security, upper airspace control and overflying arrangements.

Table 18 – Typical Standards for Airports by Network Functional Classification Functional Classification I II III IV V

B747-400ER B737-800 F100/Q400 Dash-8 DHC-6 Design aircraft range A330-300 F100/Q400 Dash-8 DHC-6 C206 3,500 2,300 1,700 1,100 700 Runway length range, m 2,500 1,700 1,100 700 300 45 30 23 18 - Runway width range, m 30 23 18 - - 300 150 80 60 45 Strip width range, m 150 80 60 45 30

Note: actual lengths and widths to comply with IATA, ICAO and NAC/CASA standards; runway length requirement will depend on elevation, temperature and take-off weight.

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21 Transport Infrastructure Deficiencies

21.1 General

Over the last 25 years there has been persistent under-investment in the transport infrastructure at national, provincial and local level. Under-investment in maintenance of existing infrastructure has led to unnecessarily high rates of deterioration which have then required substantial rehabilitation or reconstruction, often funded through development assistance. Also, financial resources have not always been well directed and best practice construction and maintenance methods have not always been applied.

Expansion of the capacity and extent of the network over the last quarter century has been limited to essential investment to address traffic congestion in the main urban centres, particularly Port Moresby, and some new links mainly for access to mining and oil & gas development. Investment in rehabilitation of the main rural roads, main ports and airports has been sufficient to keep facilities operational, although often at a sub-optimal standard and not without some periods of disruption. However the second tier of district roads and provincial ports and airports have overall deteriorated while the lower level rural infrastructure has in places suffered badly, many rural airstrips having closed, many coastal jetties and landings now unserviceable and rural access roads impassable.

Overall, there is a large deficit between the existing state of the physical transport infrastructure and the desirable levels of service indicated by the functional hierarchy and in national and provincial development planning.

21.2 The Road Network

Table 19 shows the shortfall in surface type and condition for the main national highways compared with the standards proposed for the corresponding functional class as of 2010. Most NR roads are Class I in function once they are fully developed, apart from the Wabag to Mendi Road and the Sepik Highway which are Class II. However, until some of the missing links and economic corridor connections are made, the outlying parts of some highways have a lower functional classification in practice and an unsealed surface standard is appropriate until that time.

Table 19 – National Highways condition versus standards Per cent of length Per cent of length not to Road below (good) surface (sealed) surface standard condition standard Existing Future Existing Future

Function Function Function Function NR001 - Hiritano 29% 29% 43% 43% NR002 - Magi 39% 73% 39% 44% NR003 – Northern 15% 44% 44% 49% NR004 – Wau (Trans-Island) 20% 20% 64% 68% NR005 – Wabag to Mendi 91% 91% 81% 81% NR006 – Enga 0% 0% 67% 67% NR007 – Highlands 6% 6% 19% 19% NR008 – Ramu 42% 42% 51% 51% NR009 - Coastal 56% 67% 16% 63% NR010 – New Britain 44% 54% 56% 57% NR011 – Bundi 0% 100% 57% 95% NR012 – Sepik 28% 28% 57% 78% All NR Roads 33% 44% 50% 52%

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This table will be extended to national main roads, national district roads and other roads progressively in future development of the NTS and updated to maintain currency.

The percentage of road length that was not to sealed standard at the end of 2010, and should desirably be so for the existing road function was one third of the length of the NR network, a little over 1,000 kms. When the NR roads perform their future Existing and Emerging Gaps function this rises to 44% or about 1,400 km. Note that between Transport Demand this does not include the missing sections of these main and Infrastructure Provision national routes. 213. Roads Similarly the percentage of length that was below the proposed standards for good condition (95% for Class 1, National routes (NR) – 33% that 90% for Class II, 80% for Class III and 70% for Class IV), should be sealed to serve their was about 50% for the present function of the NR present function remained network and 52% for the future condition once all unsealed as at 2010 and this connections are made. rises to 44% when the future function of these routes is Highways that stood out as being below the desirable considered standards for their functional class were the Wabag to 50% of the national routes were Mendi Road, which was almost entirely unsealed at the below a good surface condition time and largely in poor surface condition, the Bundi Highway if it is to be re-established to perform an inter- Notable deficiencies were: provincial linking role and alternative to the Highlands - Wabag-Mendi Road Highway, the western part of the Sepik Highway and the - Bundi Highway Highlands Highway to Wau Road, particularly if it is - Sepik Highway extended in future as part of a Trans-Island link or to - Lae-Wau Road connect through to Popondetta as one of the economic corridor roads.

This deficiency analysis will be extended to all of the performance indicators in future development of the NTS, once baseline data are collected and analysed.

21.3 Ports, Coastal and Marine Navigation

PNG Ports Corporation has had limited revenues and development budget with which to maintain the declared ports, many of which are loss making in terms of port revenues versus operating and maintenance costs. Consequently there are unmet deferred maintenance and repair needs at all of the ports to varying degree, with the ports carrying lower levels of traffic attracting relatively less expenditure. In particular, maintenance dredging at the berths and approaches of the smaller ports has been carried out to the minimum necessary to allow the ports to remain open. There has also been deterioration of wharf structures, pavements and buildings.

Lae is the largest port in Papua New Guinea and gateway to the Highlands Region. The port suffered earthquake damage in year 2000 and there has been general deterioration through low levels of maintenance. Existing deficiencies stem from the inability to make use of all the berthage length, insufficient depth alongside and limited well-configured cargo storage area in the face of increasing size of vessels, cargo volume growth and a predominance of container cargo for a port that was originally designed to handle smaller ships and break-bulk cargo. Delays of up to 3 to 5 days are regularly experienced, with berth occupancy well above that for an efficient operation. Additionally there is insufficient berthage for passenger vessels. However, the port is now at the start of a donor assisted programme of port rehabilitation, upgrading and expansion.

Port Moresby is also experiencing congestion, particularly berthing and storage. Also the port is constrained in its development by its location on the foreshore of Port Moresby town, with road traffic having to negotiate congested urban roads for access. As well as expansion of the existing

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container berth and storage area, this has given rise to a call for consideration of a new location for publicly owned port facilities at Port Moresby. However, the development of privately owned port infrastructure at Motukea Island to support the LNG project has with potential capacity for more general use.

Kimbe, while not experiencing the same degree of congestion as Port Moresby and Lae, has general rehabilitation needs for the main overseas and small ships wharf and improved mooring and pipeline connections for larger liquid bulk vessels for palm oil exports.

Madang overseas wharf is in need of rehabilitation and pavement resurfacing. The role of Madang port in relation Existing and Emerging Gaps to the expansion of Lae and whether the new port between Transport Demand development at Basamuk Bay to support the Ramu nickel and Infrastructure Provision project could have potential as an alternative main port 214. Maritime development, or a new port at another location, is a Lae – the main Highlands strategic decision to be considered in future planning. gateway for freight; repairs and Rabaul port has suffered from accelerated siltation of the expansion needed to increase harbour and berthage from volcanic ash run-off following capacity and efficiency the eruption of 1994, which poses an ongoing Port Moresby – existing port maintenance cost. The existing natural harbour has many expansion and master planning advantages and is well located in relation to sea routes to determine role in relation to but East New Britain Provincial Government has plans to privately owned Motukea and explore alternative port sites for future strategic need or otherwise for port development. relocation Wewak overseas and small ships wharves require Madang – rehabilitation needs rehabilitation and the overseas berth requires extension and longer term decision on to better cater for the size and number of vessels. possible relocation

On Bougainville, there has been development of Buka Rabaul – frequent dredging port in recent years although Kieta has historically been requirement due to volcanic ash the main port for the island. With the relocation of the and future development centre of administration back to Kieta/Arawa, there is a planning required demand to rehabilitate Kieta overseas wharf. Kieta/Buka – reopening of Kieta Other PNG Ports Corporation ports generally require wharf and development with dredging and general maintenance but without expansion respect to Buka as needs. administration shifts back to Arawa/Kieta At a provincial level, as with airstrips, there are a large Extensive rehabilitation/ number of small ports of call around the PNG coast and replacement needs at several inland waterways. Many have become derelict, while hundred minor ports, jetties, many others remain open with minimal maintenance river landings intervention or are maintained by users. There are 500 to 600 hundred recorded as historical or existing ports of Some outstanding restoration of call, although not all will have had wharf or jetty small navigation aids along the structures. The Community Water Transport Project has coast and main river systems so far identified over 100 to be included in franchise (Fly, Sepik, Ramu etc.) routes and a similar number feature in Provincial development and transport plans.

Coastal maritime navaids have been substantially restored and rehabilitated over the period of the NTDP. Further development is required to rehabilitate day markers and beacons for some coastal routes and inland water ways. While this will largely result in a maintainable coastal and inland

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waterway navigation system, there remain improvements to be made for vessels transiting through PNG waters, in particular pilot and improved navigational aids and vessel tracking services in Torres Strait, Jomard Passage, China Strait and other environmentally sensitive areas.

21.4 Airports and Air Navigation

In a recent review by the ADB, the state of the nation’s national airports was characterised as having: low compliance with safety and security standards, creating risks of accidents and illegal movements of people and goods; air-side pavements, terminal buildings, equipment, and utilities in poor condition; swiftly deteriorating pavements; and inadequate maintenance. The air navigation systems were described as unreliable and deteriorating because of old and obsolete equipment, lack of spare Existing and Emerging Gaps parts, theft and vandalism, unreliable power and between Transport Demand communications, and logistics problems. This was and Infrastructure Provision leading to operational problems, including unplanned 215. Air airport closures, diversions and constraints on air operators in their investment in new more efficient aircraft Port Moresby International types. (Jacksons) Airport – experiencing apron and terminal Port Moresby International Airport (PMIA) was last congestion; increased runway expanded in 1995-2000, when the new international length, expanded/ renewed passenger terminal was opened. Also, the second terminal facilities and larger parallel runway has been decommissioned opening up apron as set out in recently some options for rearrangement of taxiways and apron. completed master plan. A recent master planning study for PMIA has identified Lae – development as alternate that the airfield and runway capacity is sufficient to cater international airport to PMIA for the forecast growth in aircraft movements but that plans to operate longer range international services Other NAC airports – upgrading would require an extension to the main runway. to comply with ICAO certification standards for security and The passenger terminal apron is congested, with runway length and strength for insufficient aircraft stands and the taxiway system needs F100 operation. rearranging for efficient ground movement of aircraft. The cargo and other aircraft maintenance and general Provincial airports – ongoing aviation aprons need rationalisation. The international recurrent and remedial passenger terminal is lacking in passenger processing maintenance needs to avoid capacity through check-in, immigration and security closure. giving rise to departure delays. Also the passenger Rural airstrips – heavy concourse and departure areas are lacking space and maintenance and rehabilitation associated commercial franchise facilities are limited. On of approximately 400 remote the landside, the airport access roads and parking airstrips to maintain operability. facilities are inefficient and routes into Port Moresby are affected by traffic congestion.

PMIA is the only airport with capability for large wide bodied jets, and there is no diversion alternate airport with similar capacity within PNG, which is recognised as desirable by Government to reduce reliance on neighbouring Australian airports. The second airport at Nadzab, serving Lae, has been identified as a possible alternate to PMIA, or a new or smaller airport could be expanded to provide this facility.

The most pressing deficiencies at the other NAC airports is the non-compliance of several under ICAO certification standards for Fokker F-100 operations even though these aircraft are already in service in replacement of the F80. The airports requiring upgrading are Madang, Goroka, Gurney, Buka, Momote, Vanimo and Hoskins, with the deficiencies being variously runway length, pavement strength and surface condition, runway shoulder width, standby power supply and airport boundary

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security fencing. The upgrading of these airports to certification standard is therefore an important priority.

At provincial level, 23 airports previously maintained by CAA have been devolved to provincial governments in addition to those already under provincial government management. These airports typically support DHC-6 Twin Otter scheduled services by Airlines PNG and third level scheduled and charter services. The ability of the provinces to adequately provide for the upkeep of these smaller provincial airports is extremely limited and the number that remain operable is gradually reducing.

Below this level are small rural airstrips of which there around 400 in number although many are unserviceable, maintained by Local Government Councils, village groups, missions and private persons and companies. Many of these airstrips have heavy maintenance needs beyond the capacity of local resources which is forcing closure to fixed wing operations and reliance on more expensive servicing by helicopter for access. Government policy is to rehabilitate and re-open selected airstrips based upon need.

PNG Air Services Ltd faces a significant challenge in the rehabilitation and upgrading requirements for the air navigation infrastructure in both the lower and upper airspace. In the lower airspace, air airport-related ground-based navigation systems are in poor condition and face problems with vandalism and are being replaced with satellite-based navigation. In the upper airspace, PNGASL must continually upgrade the services it provides for overflying aircraft which are an important revenue source, to maintain competitiveness and compatibility with adjacent air navigation regions.

21.5 Modal Integration and Overall Coverage

Historically there has been a lack of overall integration in the development of the transport modes and between Existing and Emerging Gaps national and provincial level. Port, airport and road between Transport Demand system development have been pursued independently. and Infrastructure Provision For example the port of Lae and Highlands Highway are 216. Modal Integration both essential to the movement of PNG’s main exports Development of the main and unbalanced development of one and not the other highway network, main ports will not give the best outcome for investment. It has been and airports has proceeded generally recognised that transport sector investment has independently and with little been concentrated on roads and the results of the recent coordination. TIPS 2010/11 study has supported the view that more investment in the main commercial ports will yield good Insufficient attention has been economic returns. This also involves an efficient land/sea paid to land/sea and land/air interface, including attention to road links from the interfaces. strategic network to the ports of Lae and Port Moresby There has been an imbalance of with relocation of port facilities and creation of inland investment concentrating on terminals where justified. roads with relatively less At the local rural level, there are coastal and river investment in main ports and communities that rely on access by water where road is airports. not an option in the foreseeable future and other There has been insufficient communities in inland valleys who rely on air. Attention is coordinated planning of land, air required from the level of national planning in conjunction and water transport connections with the provincial governments to better integrate the to remote communities with development of the rural network so that all significant provincial disparities. concentrations of population have at least one reliable transport link to their district centre and that all district centres are reliably connected to their provincial capital and to the primary transport network.

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22 Development Cost of the MTDP

22.1 Cost Escalation

In developing cost estimates for new construction, upgrading, rehabilitation and maintenance of infrastructure, all future costs are shown in 2010/11 kina values. When preparing budget submissions for future years, allowance must be made for general currency inflation and differential inflation for civil engineering works.

The cost estimates presented make the assumption that there is no differential inflation between the costs of civil construction and general costs in the economy. Over the past decade the global prices of inputs to construction such as cement, steel and fuel have increased at a higher rate than general inflation. High costs can also arise where there is limited market competition in the construction sector, and when there is high demand for construction resources, both of which have been the case in parts of Papua New Guinea. However, past experience is not necessarily a predictor of future trends, so a neutral position has been taken in preparing the NTS. Nevertheless, future updating of the NTS should include monitoring of cost trends and where differential inflation is apparent, adjustment of unit costs and project cost estimates.

22.2 Road Network

22.2.1 National Roads – New Links

The economic corridor roads and missing links identified in the DSP and MTDP, together with some existing roads Development Cost of the where connections need to be re-established and MTDP potential national roads identified in provincial plans, form 217. New National Road Links the long list of new road links for consideration. Other new links include potential re-routing of the Highlands Highway The total cost of constructing the and urban arterial roads in NCD, such as the proposed missing links and economic airport link. corridor roads in the MTDP is estimated at K 27 billion An economic analysis for several of the economic corridor New links with an indicative BCR roads and missing links has been carried out as part of greater than 1.0 (that is the TIPS 2010/11 study although the results should be economically feasible) are: regarded only as an initial screening stage to establish possible priorities for further detailed feasibility due to the - New Britain Highway (Bialla- approximate nature of the costs and technical feasibility of Kerevat) the routes and uncertainty regarding traffic demand. The - Gulf to S Highlands MTDP envisages that full feasibility studies for these new (Samberigi – Erave) links will be carried out over the first five year period 2011- - Bundi Highway restoration 2015 and this is endorsed by the NTS. Such feasibility - Lae-Wau road extension to studies should be broadly based and consider the Popondetta via Garaina development potential and benefits in the new corridors - Southern Corridor, New and development of the links on an incremental staged Britain basis. - Trans-Fly (Morehead- Oriomo) The prioritised new link projects are shown in Table 20. Few, if any, of the missing links are found to achieve the minimum BCR of 1.0 (EIRR of 12%) in this analysis. The most promising projects are described below:

Highlands – Lae/Madang alternative route: to improve network reliability an alternative route linking the Highlands Region with the Morobe/Madang coast that avoids the unstable area of geology in Simbu Province is desirable.

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Table 20 – Initial Screening Prioritisation of New and Restored Road Links Road Connection Indicative Road Missing Economic New Estim- Capital BCR Overall Construct- No. Link Corridor Length ated Cost K from Ranking ion Period kms Traffic million TIPS veh/day Model

Bialla – Kerevat (part of New Britain Highway – log track upgrade) 2016-2020 NR-10 ML - 50 (of ) 500 500 3.41 14 Towei - Kopi – Samberigi – Erave Road (part of Gulf to S Highlands) 2016-2020 NR-01 EC PRAEC 160 (of 265) 400 420 1.60 41 Kundiawa – Ramu (Bundi Highway – restore/upgrade link) 2016-2020 NR-11 existing - 12 (of 98) 250 290 1.81 47 Garaina – Ioma – Popondetta (Northern Highway extn) 2016-2020 NR-03 CR Central 120 200 990 1.38 54 Cross-Island Road - Gasmata – Kandrian – Gloucester (ENB-WNB) 2021-2025 ML South Coast 56 (of 432) 150 980 1.08 57 Rabaul – Tol – Pomio – Cross island Road 2021-2025 ML South Coast 147 (of 436) 150 1,700 1.09 70 Morehead – Malam – Daru (Western) 2021-2025 CR Border(Trans-Fly) 25 (of 79) 150 1,000 1.11 77 Kimbe – Gloucester (part of New Britain Highway) 2021-2025 NR-10 - 150 0.94 91 (1) Baiyer River - Aiome - Amele (WHP to Madang, alternate to Bundi H/way) 2026-2030 ML MBKG 160 200 1,200 0.79 93 Kerema - Towei (part of Gulf to Southern Highlands, Hiritano extn) 2026-2030 NR-01 ML / PR PRAEC 75 250 2,600 0.57 101 Wau – Garaina – Morobe Patrol Post (Northern Highway extn) 2026-2030 NR-03 ML Central 136 100 1,300 0.53 101 Aitape – Vanimo (Coastal Highway) 2026-2030 NR-09 CR - 80 40 290 0.30 105 Bariji – Safia – Moreguina (Oro to Central P, Northern Highway extn) 2026-2030 NR-03 EC Central 96 100 860 0.32 116 Bogia – Angoram (Madang to ESP) 2026-2030 NR-09 EC / ML Momase 76 70 250 0.29 116 Malalaua – Wau (Trans-Island Road, Eloa Valley route 2026-2030 NR-04 CR - 176 250 1,300 0.68 119 Kiunga - Mendi (Western P - SHP) 2026-2030 EC - 180 150 1,600 0.58 119 Kiunga – Aiambak –Obo – Morehead (Western) post-2030 CR Border 200 40 3,300 0.31 124 Saidor – Wasu – Sialum (N Coast Huon) post-2030 ML Morobe-Madang 97 40 500 0.30 124 Bewani – Imonda – Amanab – Green River – Telefomin (Sandaun to WP) post-2030 ML Border 305 30 2,900 0.09 131 Siara Junction – Soraken – Kunua – Koripobi – Torokina – Boku (W Bvlle) post-2030 ML Solomons 167 30 1,500 0.15 141 Pagwi – Ambunti – Kuvenmas – Laiagam (ESP to Enga) post-2030 ML Enga-Sepik 193 90 980 0.24 142 Kopiago – Oksapmin –Telefomin –Tabubil (SHP to Western P) post-2030 ML - 153 80 1,600 0.22 142 Bubuletta-Motau-Lavora-Raba Raba-Agaun Road post-2030 ML - 159 30 1,330 0.07 142 Notes: ML and EC – missing links and economic corridor roads as in Table 4.2 of DSP; CR and PR – corridor road, proposed road as in DSP map.

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Options are (i) to restore the Bundi Highway link from Kundiawa to the Ramu Highway, which would provide a slightly less direct route to Lae or would connect with Madang, requiring reconstruction of about 12 kms and upgrading of the adjacent sections; (ii) the longer (160 km) new proposed Baiyer River to Madang road, from Western Highlands, which would draw on a smaller catchment of population and would require the port of Madang to be viable in the role of an alternative port to Lae; (iii) an intermediate route from Banz through the Jimi Gap to connect to Usino and (iv) a more localised re-routing of the Highlands Highway in Simbu Province across more stable terrain.

Gulf – Southern Highlands link: This is the PRAEC corridor, a top priority for Government. The link from Kopi via Gobe to Samberigi and Erave requires only a relatively short (40 km) connection to complete, for which construction is expected in 2013/14, and could be served by sea to Kikori or a new Gulf port nearby. To make the road connection to Port Moresby requires either (i) an almost 300 km connection from Kopi to Kerema skirting the base of higher ground north of the several river deltas in Gulf province; this route has advantages of providing access to isolated Gulf population and is more likely to be technically feasible than the alternative of (ii) a shorter but extremely mountainous route to Ialibu through a less populated area. A feasibility study is required that considers options of the Southern Highlands being served by sea and road or via one of the two road alternative.

Trans-Island Road: this route has long been considered for a road link between Port Moresby and Lae and various feasibility studies have been carried out. The link is from Malalaua in Gulf Province near the end of the existing section of the Hiritano Highway to the Lae-Wau road. It is shown on the DSP map of missing links (reproduced in Figure 1). An alternative is via a link from Malalaua via Kaintiba to link with the Aseki Road. There are route alignment and technical feasibility issues but no more so than many of the other missing links and the latent traffic demand should at least match that on other long distance missing links.

Northern Highway, Lae to Popondetta: this lies in the Central Corridor which is a priority under the MTDP. The missing section is from Wau to Garaina and then to Popondetta via Ioma. There are options of a direct inland route or a connection along the coast via Morobe patrol post. The inland route appears the most likely but a feasibility study is required for this together with any possible extension across the island to Moreguina on the Magi Highway in Central Province, which appears less likely to be feasible.

Magi Highway link to Milne Bay – this involves connecting the missing section from east of Kupiano at Babaguina to the Sagarai River near Gadaisu on the Milne Bay border. The terrain is relatively easy and the corridor is moderately populated with plantations, forestry and economic potential. An exploratory feasibility study was carried out some years ago but no work is currently programmed.

New Britain Highway – the MTDP priority is for a route along the south coast connecting Rabaul, Pomio, Kandrian and Cape Gloucester. However, the New Britain Highway along the north coast already mainly exists between Rabaul and Kimbe apart from around 50 km of linking sections, on which work is proceeding under GoPNG funding. This area also has economic importance for oil palm and has a moderate population density. The south coast route appears technically more difficult and is longer and higher cost so may be a longer term project. In the meantime, most of the towns along the south coast are linked by sea and the area is one of the proposed routes for the Community Water Transport Project.

Lae – Finschhafen – is a relatively short link of about 50 kms which would connect the south and east Huon coastal settlements to Lae. It can be seen as a much more ambitious and long term project to complete a route around the Huon peninsular and through to Madang. Some construction work has been commenced under MP’s funding.

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Bogia – Angoram - this is part of the Coastal Highway connection along the north east coast, linking Madang, East Sepik and West Sepik if the Aitape-Vanimo link is also completed. Resources have already been committed to commencing work on the Bogia to Angoram section but there are costly engineering challenges in crossing both the Sepik and Ramu Rivers close to their estuaries which most likely would be by ferry, and the surrounding swampy terrain.

Other proposed missing links and corridors are considered to be technically very challenging and high cost, while their traffic function is relatively low and the areas that they pass through of low population density. These less obviously feasible proposals include:

 East Sepik to Enga – from Pagwi on the Sepik River west to Ambunti, a ferry crossing of the Sepik, then across the flood plain to the south and over the dividing range through the remote mountain settlement of Maramuni to join the Wabag to Laiagam road in Enga Province.  Kopiago to Tabubil – an east-west connecting link between Southern Highlands and Western Province, via Oksapmin and linking Telefomin. This connects a number of small mountain settlements but across mountainous terrain and with low traffic demand. There is no clear economic purpose for the link.  West Border route – this ambitious route from Bewani to Telefomin and then from Kiunga to Daru is proposed as a border economic corridor connecting from Sandaun to Western province. Parts of the route, in particular the Trans-Fly section, may be individually feasible and useful as intra-provincial roads but connecting the full route involves new roads over long lengths of difficult and relatively uninhabited terrain. Due to its remoteness there would probably be important natural environment issues connected with this route. Its role in assisting (or otherwise) border security is unclear and there are no obvious economic benefits.  West Coast Bougainville – from Siara junction at the north of the island down the west coast to Koripobi where there is an old road, then connecting Torokina and to the cross- island road near Boku. The west side of Bougainville is relatively low population compared with the east, south and north and traffic demand is expected to be similarly low.

22.2.2 Construction of Additional National and Provincial Roads

The MTDP has established targets for additional roads to the missing links and economic corridor roads. In some cases these additional roads will be feeders to the missing link and corridor roads and in other cases will be priorities established by provinces. The aim is for the full length of the national road network in PNG to attain 25,000 kms by 2030.

The total length of public roads in Papua New Guinea, based upon the national RAMS database and data from the extension of RAMS to the provinces comprises the approximately 8,400 km of national roads and 20,000 kms of other provincial, district and local roads. If all of the missing links and economic corridor roads are constructed, this would add approximately a further 3,400 kms. The MTDP also envisages that 4,000 kms of provincial roads would be either upgraded or be new construction, also by 2030. The length of secondary and feeder roads required to provide access within the economic corridors from the main connectors has yet to be determined. However, as many of the missing links pass through sparsely populated areas, for the purposes of the NTS, 1,000 kms are assumed to be new roads associated with the corridors, a further 1,000 other new provincial roads, and the remaining 2,000 kms upgrading of existing roads.

The MTDP anticipates that all national roads will be managed and/or owned by the Department of Works as they are progressively upgraded under the targets set out in the MTDP. The higher traffic sections comprising the core road network for which maintenance can be financially supported from road user charges will be brought under the management of the National Roads Authority. The residual local roads will remain the responsibility of provincial and local government councils. On

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this basis, the projected development of the road network and its ownership is shown in Figure 32 below.

40,000

35,000

30,000

25,000 Under NRA ownership

kms 20,000 Under DOW ownership

15,000 Under Provincial/Local ownership 10,000

5,000

0 2010 2015 2020 2025 2030

Figure 32 – Projected National Road Length and Ownership/Management

22.2.3 National Roads – Upgrading

Upgrading of national roads will generally involve replacing gravel surfaces with bitumen seal where roads Development Cost of the are not already to sealed standard and where the function MTDP and traffic volumes warrant, with associated alignment 218. Upgrading of National and side and cross-drainage improvements. In most Roads cases, bituminous sealed surfaces will be double surface treatments of stone chip and bitumen over a crushed Targets have been established aggregate or stabilised road base but, for high traffic at 5 year intervals for sealing all volume roads carrying substantial numbers of heavy national roads by 2020, with trucks, asphaltic concrete construction may provide a 1,800kms of the 16 Priority more economical solution. Roads at K 2.1 billion having precedence, followed by4,800 The functional classification has indicated that Class I and kms of other national roads. II national roads will normally be sealed and the MTDP There is no need for multi-lane has also provided targets for sealing the national road roads outside of the main urban network, which requires that some lower classification centres; however passing and roads, including all of the institutional access roads, also climbing lanes may be be sealed within the 20 year period. The MTDP interim considered on some higher targets for sealed length have been converted to traffic sections of rural highway percentages of each road class and sub-targets developed for each level of priority for the 16 priority roads . and for each of the NR/NM/ND/NI classifications for the remainder of the national network (Table 21).

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The remaining unsealed sections of the 16 priority roads, with costs and BCR from TIPS 2011 are shown in Table 218. Upgrading of National 21. Where the roads are not continuous, the BCRs for Roads upgrading the adjacent unsealed sections do not allow for National roads need to be the connection of missing links and the consequent assessed for reliability against increase in traffic. closure, a monitoring system for closures established, and road The total unsealed length of existing priority road sections drainage upgraded to cope with is around 1,800 kms, with an estimated cost of upgrading increasing rainfall intensities and to seal exclusive of bridge costs of about K2.1 billion in duration in the future. 2011 values. Relatively few of these sections justify upgrading on economic criteria alone at existing levels of The total cost of new road links, traffic. upgrading to seal and rehabilitation of national and In general, the traffic volumes on rural sections of Papua provincial roads to satisfy the New Guinea’s road network do not yet require more than MTDP is estimated at K46 two traffic lanes. However, on some higher traffic volume billion, of which K11 billion is for sections (typically exceeding 2,000 vehicles/day) provincial roads and K35 billion overtaking lanes may be desirable, particularly where for national roads. sight distances are limited and on uphill sections to provide opportunities to pass slow vehicles.

Table 21 – Road Sealing Targets in MTDP and proposed NTS National Roads Actual 2011 Target % sealed kms sealed % 2015 2020 2025 2030 16 Priority Roads Very High Priority 1,588 63% 75% 90% 100% 100% High Priority 1,113 60% 65% 80% 95% 100% Medium Priority 895 43% 50% 65% 85% 100% Total 3,597 57% 65% 80% 95% 100% Other National Roads Routes (NR) 482 2% 50% 100% 100% 100% Main (NM) 1,239 26% 30% 50% 80% 100% District (ND) 2,161 14% 20% 35% 60% 100% Institutional (NI) 937 10% 20% 35% 60% 100% Total 4,819 15% 25% 45% 70% 100% Notes: MTDP targets in bold italics, NTS detailed targets remainder

Upgrading works may also be undertaken to improve the reliability of a route against unplanned closures such as areas of flooding and those prone to slips. Works may require local realignment, widening and cutting back of embankments, raising the road level and raising the road at bridge crossings. In future, climate change is likely to increase rainfall intensities and duration and worsen these problems. All national roads should be assessed for closure risk and a system established to monitor and record periods of closure so that performance against the norms set out in Table 16 can be measured.

Bridges may be upgraded as part of the upgrading of road sections or may be undertaken as separate works and are discussed below.

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Table 22 – Remaining Priority Road Sections for Upgrading to Sealed Standard Unsealed Cost K TIPS Road Section kms mill. model BCR Very High Priority Boluminski Highway (NIP) Matakam Br to near Manga 79 118 0.1 Koroba-Mendi Road (SHP) Mendi to Nipa 58 71 0.3 Koroba-Mendi Road (SHP) Nipa to Tari 97 119 0.6 Koroba-Mendi Road (SHP) Tari to Koroba 41 50 0.3 New Britain Highway (WNB) Nuau Br to Obatubu Br 105 129 0.05 New Britain Highway (WNB) Galoku Br to Buvussi Jnc 30 37 0.04 Sub-total 410 524 High Priority Sepik Highway (Sandaun) Mai to Lumi 61 74 0.2 Coastal Highway (Sandaun) Aitape to Sandaun Border 92 113 0.6 Coastal Highway (Sandaun) Sandaun Bdr to Vanimo 109 71 0.2 Coastal Highway (Sandaun) Vanimo to Bewani Jnc 70 75 0.1 Coastal Highway (Sandaun) Bewani Jnc to Wutung 44 32 0.2 Hiritano Highway (Gulf) Malalaua to Kerema 52 38 0.7 Coastal Highway (Madang) Korak Br to Deigum Br 43 47 0.2 Coastal Highway (ESP) Angoram to km 31 31 35 0.2 Sub-total 502 485 Medium Priority Kokoda Road Euru Br to Mamba Br 47 58 0.5 Wau Road Bulolo to Wau 26 32 0.3 Magi Highway Kupiano to Gadaisu 61 74 0.1 Magi Highway CP Border to Sagarai R 78 96 0.1 Magi Highway Sagarai R to Gumine Br 12 15 1.7 Ramu Highway Saussi Br to Wasigo Br 57 71 0.2 Ramu Highway Tapo Crossing to Umin Br 19 23 0.2 Northern Highway Oro Bay to Bareji Jnc 35 18 0.1 Sub-total 335 387 Total 1,247 1,396 Note: costs are 2010/11 base and derived from TIPS estimated; some part sections have been estimated pro rata.

22.2.4 National Roads – Rehabilitation

For national roads that are already constructed to sealed standard, the MTDP target is that these all be rehabilitated to good condition by 2030. Priority for rehabilitation will be given according to road functional classification, traffic volume, existing condition and cost. However, indicative targets for the four classes of national road are shown in Table 23 below.

Table 23 – Targets for Rehabilitating Sealed National Roads

National Roads Actual 2011 Target % good condition kms % fair or 2015 2020 2025 2030 poor Routes (NR) 1,730 38% 70% 80% 90% 100% Main (NM) 604 34% 70% 80% 90% 100% District (ND) 306 66% 50% 65% 85% 100% Institutional (NI) 97 85% 30% 55% 80% 100% Total 2,738 42% 66% 77% 89% 100% Estimated Cost, K mill 1,284 252 340 357 335

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These require about 60 km of road to be rehabilitated to good condition annually from 2012. The total cost over the period of the NTS is estimated at K1.3 billion in 2011 values, based on TIPS 2011.

22.2.5 National Roads – Bridges Bridges are an integral part of road links and all bridges along a route should be built and maintained to a Development Cost of the standard consistent with that of the road, including MTDP reliability against closures from flooding and other 219. Rehabilitation of National incidents. The standards in Table 16 propose a minimum Roads of two lanes for bridges on Class I links and also for Targets are set at 5 year Class II links for shorter bridges. Bridge loading intervals for rehabilitating sealed standards are generally T44 loading in Papua New national roads to good condition Guinea, although increased capacity to accept by 2020 at a cost of K 1.2 billion. overweight and over-dimension loads on strategic routes At present 42% are in fair or carrying heavy traffic such as the Highlands Highway poor condition. should be considered where economically justifiable. 220. Bridge Upgrading or The structural form for bridges will be a technical decision Replacement based upon site conditions, accessibility, industry capability and construction costs. However, the practice Bridges on national road of using rapid deployment steel component “Bailey” type sections that are upgraded or bridges for permanent construction, while expedient in rehabilitated should also be some circumstances, does not normally give the most repaired, upgraded or replaced economic design solution and does not assist the as necessary to T44 or higher development of the local civil engineering design and standard construction industry. Upgrading or replacement of over 50 bridges on national road A systematic bridge replacement programme on national sections at a cost of K63 million roads will form part of the NTS. ADB assistance has been have been identified as being secured for one component of such a programme which economically feasible in their seeks to replace single lane Bailey bridges on national own right roads where upgrading to two lane permanent construction is justified on grounds of traffic delay, road 534 bridges require upgrading or safety and route security, with usable components of the replacement on the 16 Priority replaced structures being re-used at priority locations on Roads at a cost of K735 million non-national rural roads. although few of these are economically justifiable The TIPS study has developed an initial prioritisation for bridge replacement which can form a starting point for development of the on-going bridge programme. The following road sections are listed by priority of BCR for bridge upgrading or replacement to T44 standard, for projects achieving a 12% EIRR. Further projects achieving under 12% EIRR or that are not quantifiable on available data are set out in the TIPS reports.

The bridge prioritisation has made a number of broad assumptions regarding loading capacity, residual life and the economic impact of closure. Also road safety and congestion are excluded. Consequently a more detailed appraisal is required prior to including TIPS bridge priorities into the programme of works.

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Table 24 – TIPS Bridge Upgrading or Replacement Section No. of Cost Road Section length BCR bridges K mill kms NR0007 Highlands Highway Waterais to Goroka 124 8 17 5.0 NM3701 Koroba Road Mendi to Nipa 58 9 7 2.8 NR0006 Enga Highway part 1 90 18 18 2.8 NR0005 Wabag to Mendi Road Wabag to Sirunki 28 1 2 2.6 NR0008 Ramu Highway whole length 11 1 1 2.6 NM3101 Tabubil Road Tapko to Tabubil 51 1 5 2.0 NM4801 Warongoi Road whole length 56 1 2 1.8 NM3701 Koroba Road Nipa to Tari 97 14 11 1.2 Total 515 53 63

In addition to the bridges prioritised by BCR, bridges on the 16 priority roads identified by TIPS 2010 for upgrading or replacement to T44 standard are shown in Table 25 below. There are 534 bridges in all at an estimated order of cost of K 0.74 bn.

Table 25 – Bridges for Upgrading or Replacement on the Priority Roads No. of Cost BCR Road Section Bridges K mill Very High Priority Highlands Highway Lae to Nadzab 25 43.7 0.2 Nadzab to Waterais 64 123.7 0.1 Waterais to Goroka 8 16.7 5.0 Goroka to Kundiawa 0 0.0 - Kundiawa to Mt Hagen 0 0.0 - Mt Hagen to Mendi 0 0.0 - Boluminski Highway Kavieng to Fangalawa 0 0.0 - Fangalawa to Karu 7 3.7 0.9 Karu to near Manga 17 10.4 0.8 Koroba-Mendi Road Tari to Koroba 16 10.2 0.8 Nipa to Tari 5 19.0 <0.1 Mendi to Nipa 14 10.9 1.2 Porgera-Togoba Road whole length 9 7.4 2.8 Wabag-Mendi Road Wabag to Sirunki 0 0.0 - Sirunki to Mendi 1 1.9 2.6 New Britain Highway Rabaul to Gaulim 0 0.0 Mt Uluwan to Hoskins 8 7.9 0.2 Hoskins to Kimbe 6 14.2 <0.1 Sub-total 180 269.7 0.6 High Priority Sepik Highway Passam to nr Hayfield 18 29.0 0.1 nr Hayfield to Karaitem 0 0.0 - Coastal Highway (west) Angoram to Wewak 22 13.1 0.2 Coastal Highway (west) Wewak to ESP border 38 27.5 0.5 ESP bdr to Wutung 36 22.8 0.1 Baiyer Road Baiyer - Part 1 0 0.0 -

Hiritano Highway P Moresby to Veimauri 11 35.1 0.1 Veimauri to Bereina 9 15.6 0.1

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No. of Cost BCR Road Section Bridges K mill Bereina to Kerema 4 8.5 0.2 Coastal Highway (east) Madang to Surumarang Br 22 29.3 0.1 Surumarang Br to Awar 63 68.1 0.1 Sub-total 223 249.0 0.1 Medium Priority Kokoda Road first section 17 19.5 0.2 Wau Road H/Hwy to Mumeng 13 40.0 0.1 Mumeng to Wau 12 23.9 0.1 Buka Road Tunuru Jnc to Wakunai 0 0.0 - Wakunai to Kokopau 0 0.0 - Magi Highway P Moresby to Launakalana 8 12.8 0.4 Launakalana to Kupiano 4 8.6 0.2 Kupiano to Ganai 5 8.8 0.1 Magi Highway CP Border to Sagarai 16 22.6 0.2 Sagarai to Alotau 0 0.0 - Ramu Highway H/Hwy turnoff to Bundi 28 34.4 0.1 Bundi to nr Madang 16 27.7 0.1 Madang 1 0.7 2.1 Northern Highway Popondetta to Kokoda 10 16.7 0.1 Sub-total 130 215.7 0.1 Total 534 735 0.3 Note: as indicated by TIPS 2010

In total, the estimated cost to upgrade the 16 priority national roads to sealed standard, together with bridge upgrading and replacement is K2.9 bn.

22.2.6 Summary of Road and Bridge Construction, Upgrading and Rehabilitation The costs of upgrading the remaining unsealed national roads to good sealed standard are estimated in Table 26 below, which summarises the overall costs by five year period of the NTS required to achieve the targets in the MTDP for new construction and upgrading.

Table 26 – Summary Indicative Costs for Road Construction, Upgrading and Rehabilitation National Roads Estimated Cost in K millions (2011 values) Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 New Construction Economic corridor & missing links 26,850 3,000 5,400 6,700 11,750 New provincial & district roads (2) 5,000 0 2,500 1,250 1,250 Sub-total, new construction 31,850 3,000 7,900 7,950 13,000 16 Priority Roads – upgrade to seal Very High Priority 750 250 300 200 - High Priority 500 50 200 200 50 Medium Priority 750 100 200 250 200 Sub-total, 16 priority roads 2,000 400 700 650 250 Other National Roads – U/G to seal Routes (NR) 650 300 350 - - Main (NM) 1,100 50 300 450 300 District (ND) 2,350 150 400 700 1,100

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National Roads Estimated Cost in K millions (2011 values) Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 Institutional (NI) 1,050 100 200 300 450 Sub-total, other national roads 5,150 600 1,250 1,450 1,850 Sealed National Roads – rehab. Routes (NR) 675 150 175 175 175 Main (NM) 175 25 50 50 50 District (ND) 200 50 50 50 50 Institutional (NI) 100 25 25 25 25 Sub-total, sealed roads rehab. 1,150 250 300 300 300 Provincial and Other Roads Provincial – upgrade to seal (2) 2,500 0 1,250 625 625 Gravel and earth rehabilitation 3,000 750 750 750 750 Sub-total, provincial & other roads 5,500 750 2,000 1,375 1,375 Total new, upgrading & rehabilitation 45,650 5,000 12,150 11,725 16,775 Notes: (1) Costs include new, upgrading and replacement of bridges (2) these are new and upgraded provincial and district roads as anticipated in the MTDP some of which support the economic corridors; they will become part of the national network under DOW/NRA ownership/management

22.3 Ports, Coastal and Marine Navigation

22.3.1 National Ports under PNGPCL

A number of port development and rehabilitation projects currently in prospect by PNG Ports Corporation Ltd have been evaluated by economic benefit cost ratio in TIPS 2010/11 as shown in Table 27 below. All projects were evaluated against an appropriate level of maintenance of the existing infrastructure. In many cases this is a higher level of maintenance than can be afforded under existing budgetary arrangements. A number of other projects not included within TIPS, such as the Lae tidal basin and associated container terminal and berth 1 reconstruction, and those other projects included in the 2011 development budget submission, are also shown.

Not included in the table are funding requirements for the port master planning exercises, for which a total of K30 million were requested, but not funded, in the 2011 development budget submission.

Table 27 – Short to Medium Term National Port Project Proposals Port and Project Cost K mill BCR Commitment / Timing Lae Berth 1 and tidal basin project 770 not inc (2) in progress, ADB loan Wharf extension and hardstand 300 1.5 Liquid bulk (tanker) berth extension 275 0.9 Berth No. 3 extension 78 3.9 Wharf mobile cranes 36 10.0 funded 2011-2012 Pavement repairs 4.5 49.7 Port Moresby Berth 4a extension 190 2.7 Wharf mobile cranes 36 13.2 funded 2011-2012 Barge crane 10 0.0 Dumb barge 3.5 38.2 Incinerator 5 not inc (2) Kimbe Pipeline and offshore mooring 80 0.01 2011 budget submission(1)

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Port and Project Cost K mill BCR Commitment / Timing Main wharf rehabilitation 35 0.04 Small ship wharf rehabilitation 13 0.04 Mooring dolphins 10 0.3 2011 budget submission(1) Dredging 2 4.3 Madang Overseas wharf rehabilitation 41 0.02 Pavement resurfacing 1.5 0.9 Rabaul Dredging 4 7.0 Wewak Overseas wharf extension 104 0.02 2011 budget submission(1) Overseas wharf rehabilitation 22 0.03 Coastal berth extension 52 0.03 Small ships wharf rehabilitation 3 0.05 Buka Kokopau wharf 200 0.004 Pavement rehabilitation 3 0.1 Oro Bay Dangerous goods facility 15 not inc (2) 2011 budget submission (1) Dredging 2 4.4 Kieta Overseas wharf rehabilitation 37 0.004 Kavieng Dredging 2 0.1 Lorengau Port rehabilitation 40 0.01 Alotau 40 not inc (2) part funding PIP 2012- Overseas wharf extension 2015 Coastal wharf rehabilitation 17.5 0.1 Daru Approach trestle 18 0.001 2011 budget submission(1) Dredging 2 0.2 Aitape Wharf rehabilitation 10 not inc (2) 2011 budget submission(1) Vanimo Dredging 2 3.7 PNG Ports passenger terminals project 15 not inc (2) 2011 budget submission(1) Total cost for works with BCR > 1 1,513 Total cost of all works 2,479 Notes: (1) included in development budget submission for 2011 but not funded or included in the PIP for outyears to 2014; (2) projects not included in TIPS 2010 evaluation

In general, capital projects at the two largest commercial ports of Lae and Port Moresby show the greatest economic benefits for invested capital. For the smaller ports which support less cargo volume, the first priority is to maintain the facilities in operable condition, which generally show a positive net economic return, but upgrading is harder to justify.

For a few of the national ports, Daru being one example, even the cost of maintaining port facilities at their present level falls short of producing a positive economic return, and much less a financial return. This is particularly the case if the port has been allowed to fall into disuse; for example Aitape is not recorded as carrying any traffic, a considerable capital expenditure is required to

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rehabilitate the wharf and any future road extensions along the north coast may undermine its future viability.

The MTDP target for the 16 national ports is that all be progressively rehabilitated and upgraded over the 20 year period, four ports every four years. Rehabilitating ports where there is ongoing expectation that investment costs will be matched by port revenues is an appropriate objective, although upgrading should take place as cargo demand increases and not necessarily be concentrated into one time period. So it is likely that there will be justification and cargo demand for ongoing investment in the upgrading of Lae, Port Moresby and possibly Kimbe throughout the period of the NTS.

Strategic development at the ports of Port Moresby, Lae, Madang and Rabaul will require further study. In the case Development Cost of the of Port Moresby this should take account of the roles of MTDP the public and private sector, including possible PPP 221. Ports arrangements, possible relocation of the port facilities in The total cost of development downtown Port Moresby and the future role of the port projects for the national ports in facilities that have been developed at Motukea Island. the short to medium term is In the case of Lae, there will be ongoing demand for port estimated at K2.5 billion, of expansion and there will be a need to investigate how this which K1.5 billion is for can be accommodated at the present location, through economically justifiable projects. port expansion and the possible development of an inland This does not include longer port terminal with connecting transport link. Again, the term development at Port potential for private sector involvement in port financing Moresby, Lae, Madang, and and operation should be considered. Rabaul for which master plans An increased role for Madang in relation to Lae for must first be prepared. international and domestic trade lies behind the MTDP A further K0.5 billion is required suggestion of port relocation, together with consideration for the 200 minor jetties and of the Basamuk Bay port developed for Ramu Nickel as a landings envisaged under the potential site. Such an investigation should be carried out CWTP and small jetties projects jointly with the feasibility studies for either the Bundi Relatively small additional Highway or the proposed Baiyer to Madang link as an capital investment is required in alternative access to the Highlands. For international small maritime navaids trade, fewer rather than more international ports is the most likely scenario and an expansion at Lae and the upgrading and restoration of the Bundi Highway or development of an alternative route to Lae port from the Highlands, seems a more attractive option.

The port of Rabaul is a well-located and a good natural harbour apart from the problem of volcanic ash siltation. Retention of the present site, accepting an ongoing need for dredging seems the most likely option, but a feasibility study of development options is warranted.

For the other national ports, individual feasibility studies of each port, the connecting road network and cargo demand from developments in the port hinterland will be carried out to determine an appropriate development path. In some cases ports may be either closed or devolved to provincial or private ownership where they no longer have a sustainable role in the transport system, for example where land connections have diverted trade away from coastal shipping or where the location served has less importance (such as Samarai). In other cases, the ongoing maintenance of the ports, where these are not commercially viable, will be dependent on suitable arrangements for funding the community services obligation in maintaining them. There may also be cases where ports that are not currently declared ports should be raised in status.

For the purposes of forward projections of capital funding requirement, shown in Table 28, it has been assumed that all economically feasible projects as assessed by TIPS, will be undertaken

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within the first 10 years of the NTS, together with those expenditures already in progress or recently approved. These will be funded from a combination of concessionary loans, Government development budget allocation and from PNGPCL revenue. Other capital works that have not been shown to be economically viable at present are included in the second 10 year period 2021-2030. Some of these may become economically viable as port traffic increases, or may be funded as a community service obligation. The total capital funding over the period of the NTS on PNGPCL facilities at main ports is estimated at K3.9 billion in 2010/11 values, of which an estimated K1.4 billion has been shown or expected to provide a net economic return.

It is recognised that not all main port development requirements for the period of the NTS will have been anticipated, and a clearer picture will emerge once PNGPCL has completed its detailed master planning studies. Future reviews of the NTS will take such studies and their recommendations into account.

22.3.2 Privately Owned/Operated Ports

The NTS does not include estimates of investment in privately owned and operated ports. As well as Motukea in Port Moresby and other private wharf facilities in the main ports, there are declared ports that have been transferred to private ownership and/or operation such as Kiunga, Misima and Bialla, and a number of undeclared privately operated ports either developed to serve specific industries, such as the Basamuk Bay for Ramu Nickel, or partly maintained by shipping operators.

Investment in privately owned ports is not directly included in the NTS but where private interests are willing to invest in port facilities that are available for common use, this has the potential to reduce the need for public sector investment.

22.3.3 Minor Wharves and Jetties

The MTDP anticipates the restoration or new construction of 200 minor wharves and jetties, with 10 by 2015, 50 over 2016 to 2020, 60 over 2021 to 2025 and 80 over 2026 to 2030. The Community Water Transport Programme is seen as the agent for delivering this commitment. At present the CWTP has identified about 100 ports that could be included in the franchise routes and there are a similar number of other ports under provincial and local government ownership in need of rehabilitation that feature in Provincial development plans.

In determining the priorities and need for jetties in remote rural locations, a similar general approach will be taken as for rural airstrips. Preference will be given to jetties or other types of small craft landing that serve isolated catchments of rural population that do not have land or air access and on the basis of size of the population served. Where the districts have relatively low social indicators (as measured by the MDG), these will be given relative priority over similar size areas of population where the level of development is higher.

In all cases, creation of new jetty and similar facilities will be contingent on certainty regarding ownership, access rights, continuity of maintenance funding and maintenance responsibility with a competent agency. Some assurance that there will be use of the facilities will also be a prior condition of development. All development under this programme will need to be consistent with provincial development and transport plans, which in turn will be integrated with national level planning.

The development costs for restoring, reconstructing and building new jetties and river landings, using the experience from the Community Water Transport Project have been estimated based on the available tender information, as no jetties have so far been constructed. An average capital cost of K 2.5 million per facility has been allowed for, or K 500 million for 200 jetties and landings, assumed to be evenly distributed over the 20 year period.

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22.3.4 Maritime Navaids Infrastructure

Progress under the NTDP 2006-10 has seen the rehabilitation and reconstruction of maritime navigation aids around the Papua New Guinea coast under donor-supported programmes. The NMSA has also been established to oversee the operation and ongoing development and maintenance of this infrastructure. The capital replacement requirements are included in maintenance funding projections discussed in Section 23.2.4.

22.3.5 Summary Maritime Infrastructure Capital Funding Requirement

A summary of the maritime sector capital funding requirements over the period of the NTS in 2010/11 values, for new, upgraded and rehabilitated infrastructure is shown in Table 28.

Table 28 – Maritime Sector Projected Capital Funding Requirement Port and Maritime Infrastructure Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 Main ports - PNGPCL facilities Commercial/economic development 1,428 842 586 - - Other development 1,051 146 146 380 380 Sub-total, PNGPCL 2,479 988 732 380 380 Minor Wharves and jetties 500 125 125 125 125 Maritime Navaids (inc under maintenance) Total 2,979 1,113 957 505 505

22.4 Airports and Air Navigation

22.4.1 National Airports

The CAA Infrastructure Investment Plan, Long Term (2010-2030) (LTIP), (CAA, 2009), endorsed by the NEC, Development Cost of the is the most recent definition of a long term strategy for MTDP upgrading the national airports, now under the 222. Airports management of NAC. The plan gives effect to NEC Decision 215/2005 to upgrade regional airports to wide- The CADIP project covers the bodied jet for Air Niugini’s likely re-fleeting programme for development costs of the future domestic and international operations. national airports and air Subsequent to the LTIP, the Civil Aviation Development navigation system, apart from Investment Program (CADIP) has slightly modified the PMIA at a total investment cost selection and likely timing of improvements. The of K 1.4 billion upgrading and new development work envisaged under Development of PMIA to the this strategic plan involves: master plan is estimated at K 1.0 billion Long Range International (2 airports):  Upgrading of Port Moresby International Airport Further development of the (PMIA) to a larger wide-bodied jet standard, such national airports to complete the as B787 Dreamliner, together with enlargement national airport development as of the apron and terminal facilities, possibly with envisaged in the MTDP is private sector financing as a PPP project estimated at K 0.3 billion  Develop an alternate diversion airport for PMIA in Papua New Guinea, currently anticipated to be Nadzab in the LTIP/CADIP, but other candidates have been suggested

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Medium Range Regional (5+4 airports):  Upgrading of five national airports to B737-800 or similar standard (Mt Hagen, Wewak, Madang, Development Cost of the Gurney and Hoskins are proposed in CADIP as a MTDP two stage process, the first stage being to bring 222. Airports the airports up to F100 standard; The Long Term Investment Plan (LTIP) proposed Mt Hagen, While security and certification Wewak, Tokua and Kavieng) upgrading are economically feasible, further upgrading of  The MTDP proposes that 10 airports including airports to B737-800 standard Nadzab be upgraded to medium range regional should be subject to further standard by 2030; assuming that those proposed studies of demand and in CADIP are upgraded by 2020, then in the 2021 economic and financial feasibility to 2030 period other domestic jet airports that could be considered for upgrading subject to A further K 100 million is feasibility study are Tokua, Kavieng, Goroka and required for rehabilitation of Aropa (assuming that the administrative capital of provincial airports and rural Bougainville returns to Arawa/Kieta). Aropa is airstrips currently not a national airport and is the An estimated K76 million is responsibility of the Autonomous Bougainville required for upgrading Government. CNS/ATM systems Domestic Jet Services (3 airports):  Upgrading of a further four airports to F-100 or similar standard (Vanimo, Buka and

Momote). Goroka and Aropa might be added to this list if not included as part of the second stage medium range regional upgrade. Domestic Turbo-prop Services (8 + 1 airports):  Repair and maintenance works at the remaining 8 national airports supporting turboprop aircraft (Chimbu, Daru, Girua, Kerema, Kiunga, Mendi and Wapenamanda). Tari is also included in the LTIP future works programme but is now the responsibility of Southern Highlands Provincial Government.

The investment programme for the national airports will be 85% funded from ADB loan assistance under CADIP. Project 1 will finance the emergency upgrades to bring Hoskins, Wewak, Gurney, Goroka and Kavieng airports up to F-100 certification standard, involving pavement strengthening, security fencing and airport fire and rescue services, together with an extension of the domestic apron at Port Moresby and installation of an instrument landing system (ILS). The design of upgrades for the other national airport to form subsequent projects under CADIP will also be undertaken as part of this initial work.

This NTS endorses the NAC’s investment plan for the airports under its control, subject to the upgrading of each domestic airport to B737-800 standard being justified by a feasibility study that considers the traffic demand potential at each airport in relation to air service capacity and frequency and the combined economic costs and benefits to air operators, NAC and users to ensure that upgrading in each case is the best use of available funding, is appropriately timed and achieves an acceptable rate of return on investment. Such studies should take account of the planned developments and feasible timing for the main road network, in particular where new road links may alter the regional catchments for air passenger and freight demand.

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Figure 33 – National Airports Projected Funding Requirement

Assuming that projects anticipated in the LTIP, CADIP and MTDP are found to be economically and technically feasible then, subject to availability of funding, a forward programme of development and funding requirement is shown in Figure 33 and Table 29 below (2010/11 kina values).

Table 29 – National Airport Projected Funding Requirement TIPS Cost K 2011- 2016- 2021- 2026- TIPS Airport and upgrade Priority million 2015 2020 2025 2030 BCR 2010 CADIP – PPP and other funding Upgrade to PMIA (Master Plan) 3.9 975 165 621 210 16 CADIP Project 1 – 85% ADB, 15% Government Funding Security fencing (5 airports) high high 28 28 - - - PMIA domestic apron, ILS, Fire high high 36 36 - - - Upgrade to F-100 operations Wewak 2 2.9 35 35 - - - Mt Hagen 3 1.9 101 101 - - - Hoskins (Kimbe) 4 1.7 52 52 - - - Gurney - - 21 21 - - - CADIP Project 2 – 85% ADB, 15% Government Funding Security fencing (2 airports) high high 13 13 - - - Upgrade to alternate for PMIA Lae 1.1 139 - 139 - - Upgrade to F-100 operations Madang 5 1.3 79 79 - - - Kavieng 1 3.7 57 57 - - - Goroka - - 46 46 - - - Tokua - - 70 35 35 - - CADIP Project 3 – 85% ADB, 15% Government Funding Non-Jet Airport Rehabilitation Simbu - high 25 25 - - - Kiunga - high 25 25 - - - Vanimo - high 25 25 - - - Upgrade to B737-800 operations

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TIPS Cost K 2011- 2016- 2021- 2026- TIPS Airport and upgrade Priority million 2015 2020 2025 2030 BCR 2010 Mt Hagen - - 104 - 104 - - Wewak 2 2.0 93 - 93 - - Hoskins (Kimbe) - - 97 - 97 - - CADIP Project 4 – 85% ADB, 15% Government Funding Non-Jet Airport Rehabilitation Girua (Popondetta) - high 25 25 - - - Mendi - high 25 25 - - - Wapenamanda - high 25 25 - - - Kerema - high 25 25 - - - Daru - - 25 25 - - - Upgrade to F-100 operations Buka - - 62 - 62 - - Upgrade to B737-800 operations Madang 4 1.0 93 - 93 - - Gurney (Alotau) 3 1.0 60 - 60 - - CADIP Ongoing – no funding identified Upgrade to F-100 operations Momote (Manus) - - 38 - 38 - Upgrade to B737-800 operations Tokua (Kokopo/Rabaul) 1 8.4 75 - 75 - - Kavieng - - 63 - - 63 - Goroka - - 80 - - 80 - Buka or Aropa - - 63 - - 63 - Note: TIPS benefit cost ratios adjusted for changes in CADIP cost estimates; priority numbers are order of BCRs within groups of upgrading (to F100, to B737-800 etc.); BCRs for certification work and for non-jet airport pavement rehabilitation are generally greater than 10.

The table includes the priorities and benefit/cost ratios from the TIPS 2010-11 study with some modification to reflect updated CADIP cost estimates. This showed Tokua, Wewak and possibly Gurney to be economically feasible for upgrading to B737-800 but Kavieng slightly sub-economic if the upgrading were to take place in the immediate future. All of the upgrades to F-100 operations were shown to be economically viable apart from Goroka and Gurney. The order of development is that currently shown in the CADIP programme, but ongoing reviews of priorities and timing should take account of the TIPS cost benefit analysis and more detailed feasibility studies.

22.4.2 Privately Owned/Operated Airports

The NTS does not include estimates of capital investment in privately owned and operated airports. These include the airports of Kunaye (Lihir Island), Tabubil and Moro (Kutubu), as well as many smaller rural airstrips under company or individual private ownership. Where private interests are willing to invest in airport facilities that are available for common use, this has the potential to reduce the need for public sector investment. Each of these larger airports could be considered for upgrading to F100 operations. However, there is also the potential in the future for companies to close airports no longer needed to support their business operations, in which case any ongoing upkeep would revert to either NAC or provincial government.

22.4.3 Provincial Secondary Airports and Rural Airstrips

Proposals for maintaining, upgrading and opening non-national airports derive from the available plans and priorities expressed by provincial governments and districts together with the DSP objective of re-opening 50 unserviceable rural airstrips.

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In the process of forming the NAC, twenty four (24) formerly national airports operated and maintained by CAA were divested without any clear future ownership and maintenance responsibility and, by default, they have become the responsibility of provincial governments. These include licensed airports of Kikori, Kiriwina, Misima and Tari that might be considered for upgrading in future.

The general conditions for considering secondary and smaller airports/airstrips in developing a priority list for public funding are:

 airports or airstrips that currently support regular scheduled or charter services, or have done so in the recent past (where closed for maintenance reasons rather than where they have been made obsolete by other transport connections)  classification in the functional hierarchy (I to V as in Table 15), the higher classified having precedence  airports or airstrips should not duplicate services to an area, apart from privately operated facilities that do not allow common use

These should be used as general screening criteria. However, the costs of rehabilitation or new construction, the expected usage of each facility, the discounted cost per expected revenue passenger and provision for sustainable maintenance funding should be taken into account when prioritising investment in rehabilitation and/or upgrading.

The cost of opening currently unserviceable airstrips will vary with size of facility and the extent of deterioration. The CAA LTIP estimates for rehabilitation vary from K50,000 to K250,000 for small rural airstrips to secondary provincial airports, which are probably lower end estimates. For larger airports, an example being the closed Kieta (Aropa) airport, the cost of restoration has been estimated to be around K25 million, once security fencing, new terminal building and runway resurfacing are included. The LTIP estimate for rehabilitation of the 23 secondary provincial airports, 128 other provincial airports and 307 rural airstrips was K 40 million.

The total number of secondary and other airport and rural airstrips that are currently active or could be returned to useful activity with restoration work, excluding those that are privately or company owned, is somewhere in the range of 360 to 520, with the LTIP provision a reasonable mid- estimate. It is unlikely that restoring all of these will be economically feasible or financially affordable. However, the overall provision that needs to be made is still probably an under-estimate. The NTS has included a working allowance of K80 million (2010/11 values), to allow for price increases and expected greater works requirements, spread over the 20 year period at K20 million per 5 year period. The notional distribution of these funds is shown in Table 30.

Table 30 – Estimated Funding Requirement for Other Airport Rehabilitation Airports for Rehabilitation Notional Unit Cost K Total Cost Number (2010/11) K mill (2010/11)

Secondary provincial airports 25 2,000,000 50 Other provincial airports 40 500,000 20 Selected rural airstrips 50 200,000 10 Total 100 80

22.4.4 Air Navigation Infrastructure

Proposed development projects for the air navigation infrastructure under PNGASL are targeted for completion in the first five year period of the NTS:

 Communication, Navigation and Surveillance (CNS) services improvement

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o installation of Global Satellite Navigation Systems (GNSS) at all national airports apart from PMIA; o installation of Automatic Dependent Surveillance (ADS) & Controller-Pilot Data Link Communications (CPDLC) at Wewak, Tokua, Momote, Alotau and Nadzab o upgrade radio navigation aids in Port Moresby, Madang, Gurney, Buka, Momote, Girua and Finschhafen  Air Traffic Management (ATM) Services centralisation and modernisation – centre the delivery of ATM services in Port Moresby including progressive modernisation of equipment, communications and surveillance systems;

The Instrument Landing System (ILS) for Port Moresby International Airport is part of the airport infrastructure and responsibility of NAC, and so is included in Table 27. The CADIP programme estimates of investment cost for CNS/ATM service improvements are K61.5 million, to which an ongoing addition of K10 million has been made, the period estimates shown in Table 31.

22.4.5 Airport and Air Navigation Infrastructure Summary

A summary of the capital funding requirement for airports and air navigation infrastructure over the period of the NTS is shown in Table 31 below. The total capital development requirement in 2010 kina values over the period of the NTS is approaching K 3 billion.

Table 31 – Airports and Air Navigation Projected Funding Requirement, K millions (2010/11) Airports and Air Navigation Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 National Airports CADIP program Project 1 273 273.4 0 0 0 Project 2 410 197.0 212.9 0 0 Project 3 377 83.1 293.7 0 0 Project 4 361 0 360.6 0 0 Ongoing 318 0 75.0 242.5 0 PMIA master plan developments 975 128.5 620.6 210.0 16.3 Secondary provincial airport restoration 50 12.5 12.5 12.5 12.5 Other provincial airport restoration 40 10 10 10 10 Rural airstrip restoration 10 2.5 2.5 2.5 2.5 Air navigation infrastructure (CNS/ATM) 72 49.3 12.2 10.0 0 Total, Airports and Air Navigation 2,886 756 1600 488 41

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22.5 Sector Capital Infrastructure Funding Requirement Summary

A summary of the funding requirements for new, upgraded and restored infrastructure across the three subsectors is shown in Table 32. The total capital requirement is estimated at over K50 billion over a 20 year period.

Table 32 – Transport Infrastructure Sector Capital Funding Projection, K millions (2010/11) Subsector Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 Roads sub-sector New road links 31,850 3,000 7,900 7,950 13,000 16 Priority roads - upgrade to seal 2,000 400 700 650 250 Other national roads - upgrade to seal 5,150 600 1,250 1,450 1,850 Sealed national road rehabilitation 1,150 250 300 300 300 Provincial and other roads 5,500 750 2,000 1,375 1,375 Roads sub-total 45,650 5,000 12,150 11,725 16,775 Ports and maritime navigation sub-sector Main ports - PNGPCL, commercial 1,508 842 666 - - Main ports - PNGPCL, CSO 1,022 170 284 284 284 Secondary and minor ports 500 125 125 125 125 Maritime sub-total 3,030 1,137 1075 409 409 Airports and air navigation sub-sector National airports (NAC) 2,714 682 1,563 453 16 Provincial airports 90 23 23 23 23 Rural airstrips 10 3 3 3 3 Air navigation (PNGASL) 72 49 12 10 - Air sub-total 2,886 756 1,600 488 41 Total 51,566 6,893 14,825 12,622 17,225 Road % 89% 73% 83% 92% 97% Maritime % 6% 16% 6% 4% 3% Air % 6% 11% 11% 4% 0%

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23 Maintenance Cost of the MTDP

23.1 Roads

23.1.1 Maintenance Needs

Maintenance is required both to repair the wear caused 224. Maintenance Costs of the by road traffic and deterioration from age and weather Road Infrastructure to meet influences. The ongoing maintenance requirements of MTDP Targets roads that have been brought up to a good maintainable condition involve: The ongoing maintenance costs (i) routine pavement, drainage, traffic facility and of roads in their present state corridor maintenance activities required at and after development intervals ranging from a few weeks to annually; expenditure to restore roads to good condition to meet the (ii) less frequent periodic resealing and regravelling targets of the MTDP are: at intervals of several years; and - K390 M rising to K860 M p.a. (iii) more extensive strengthening, reshaping and by 2020 for national roads as restoration treatment at longer intervals involving roads are upgraded and variously reconstruction of base layers, overlays transferred into national and resurfacing. ownership Bridges also require routine maintenance of the - K230 M reducing to K70 M waterway, foundations, superstructure, decking and p.a. by 2020 for provincial fittings. and local roads

The main influences of the level of road maintenance on - The NRA share of costs as it costs to users are from surface roughness, caused by takes over responsibility for potholes, rutting and other surface unevenness, and the core national network unplanned closures. Surface roughness affects vehicle rises from K30 M to K 280 M repair and maintenance costs as well as running speeds p.a. while closures cause lost time to road users and make A further K25 M rising to K 40 M the road connection less reliable. For best overall annually should be set aside in a economy, roads carrying higher volumes of traffic should sinking fund for urgent and achieve a higher standard of surface smoothness than emergency maintenance needs lower volume roads, and so will require greater maintenance input.

23.1.2 Routine and Periodic Maintenance Estimated Future Funding Requirement

Assuming that the length of the national road network is expanded and upgraded as envisaged in the MTDP and illustrated in Figure 32, with some roads transferring from provincial to national ownership to achieve the MTDP target of 25,000 kms under national ownership by 2030, then the estimated forward estimates for road maintenance are shown in Table 33 and Figure 34 to Figure 36. The total maintenance funding requirement to maintain roads brought up to good condition under the MTDP targets is K15 billion over the 20 year period and rising from K600 million to K1 billion per annum over the period.

These estimates are in real 2010/11 values and have been made based on RAMS unit rates, with some extensions and assumptions for provincial roads. Where roads are to be upgraded within five years, then the estimates assume that only routine maintenance is applied in the interim. Once roads are upgraded to good condition, then annual maintenance needs include an annualised provision for periodic resurfacing and other specific maintenance activities. These estimates are not resource constrained, that is they assume that funding and construction capacity are available, and are well above historic levels of maintenance spending on both national and provincial/local

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roads, where both funding and construction limitations have been constraining factors on achieving a well-maintained road network.

Table 33 – Routine and Periodic Road Maintenance Funding Requirements, K millions Road Type and Owner/Manager Total 2011- 2016- 2021- 2026- 20 years 2015 2020 2025 2030 National Roads Sealed 7,515 741 1,234 2,143 3,397 Unsealed 4,365 1,183 1,140 1,143 900 Total 11,880 1,923 2,374 3,286 4,297 Provincial and Other Roads Sealed 82 82 - - - Gravel 2,173 908 689 391 186 Earth 683 171 171 171 171 Total 2,938 1,160 859 561 357 Total Roads Sealed 7,597 823 1,234 2,143 3,397 Gravel 4,447 1,265 1,140 1,143 900 Earth 683 171 171 171 171 Total 12,727 2,258 2,544 3,457 4,467 By Owner/Manager Department of Works 8,484 1,755 1,691 2,154 2,884 National Roads Authority 3,396 169 682 1,133 1,413 Provincial & Other 2,938 1,160 859 561 357 Total 14,818 3,083 3,233 3,848 4,654 Annual average 617 646 769 931

Figure 34 – Estimated Maintenance Funding Needs, National Roads, 2011-2030

The transfer of roads from provincial to national ownership, in some cases accompanied by upgrading from gravel to seal, has the effect of placing almost all of the sealed network under national management and reducing the size of the feeder and access road network, comprised of mainly gravel and earth roads, that remain to be supported by services delivery function grants and

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other local funding sources. Under NRA’s business plan, NRA will assume responsibility over time for around 40% of the national road length, with the period through to 2020 seeing the bulk of the transfer. Beyond 2020, the national network would continue to expand to meet the targets of the MTDP with the ownership responsibility of new added length being taken primarily by DOW. Annual routine maintenance accounts for about one third of the total maintenance requirement for gravel roads and about half of the requirement for sealed roads.

Figure 35 – Estimated Maintenance Funding Needs, Provincial & Other Roads, 2011-2030

Figure 36 – Estimated Maintenance Funding Needs, by Ownership, 2011-2030

23.1.3 Urgent and Emergency Maintenance Provision is also required for urgent and emergency maintenance to repair rain and flood damage involving minor clearance of slips through to reinstatement of washed out bridges and culverts and major land instability. Wilful damage and other events that close roads to traffic are also included. DOW distinguishes between urgent works which are smaller natural events, with damage limited to the roadway, where the costs are absorbed into the allocated budget (although at the expense of other planned maintenance activity), and emergency maintenance such as cyclone where external funding is provided through other government agencies.

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Urgent and emergency maintenance is more likely to be needed where roads have not received sufficient routine maintenance attention, for example blocked drainage increase the risk of larger scale washouts. So, as maintenance funds are constrained below levels that address routine maintenance needs, the expenditure on extraordinary events increases. This is destabilising to the proper planning of preventive maintenance and encourages a reactive, rather than proactive, mode of operation within the road maintenance authority.

In future, it would be desirable for one or more sinking funds to be established, one within NRA and another accessible by DOW to spread the funding risk for genuine urgent and emergency maintenance needs. As a starting point, this fund should aim to collect the equivalent of about 10% of the routine maintenance requirement. On this basis the overall provision for urgent and emergency maintenance should be about K25 million annually in 2011 rising to over K40 million annually by 2030 (in real 2010/11 kina values).

23.2 Ports and Maritime Infrastructure

23.2.1 Maintenance Needs

Port infrastructure maintenance includes repairs and 225. Maintenance Costs of the periodic resurfacing of concrete, bitumen and unsealed Maritime Infrastructure to working surfaces, repairs to wharf structures, meet MTDP Targets replacements of fittings such as fendering and bollards, maintenance of wharf buildings and port utility services. The annual maintenance Where the port owns handling equipment such as cranes requirement, excluding major or forklifts, these also form part of the maintenance task. rehabilitation and replacement Another significant maintenance requirement is the for main ports managed by dredging of approach channels, basins and berths to PNGPCL is estimated at K37 M counter siltation, the extent of which varies with location. p.a. rising to K60 M p.a. by 2020 Rabaul, for example, has particular siltation problems Of this, about 60% is attributable from eruption ash. to the commercially profitable The tropical marine environment is particularly ports and 40% to the remainder aggressive and any incursion of seawater into fine cracks A further K1.2 M p.a. rising to K in concrete structures can rapidly lead to corrosion of 10.8 M p.a. is required to reinforcement, spalling of concrete cover and structural maintain minor wharves and deterioration. Similarly, steel piled wharves depend on jetties as these are rehabilitated, cathodic protection against corrosion that must be replaced and new facilities periodically renewed. Buildings and equipment subject to opened under the small jetties sea spray drift will similarly be at risk of accelerated programme deterioration. Maritime navaids require an As with all transport infrastructure, timely attention to annual maintenance expenditure preventive routine maintenance can help avoid more of about K13 M p.a. expensive heavy maintenance, rehabilitation or - p.a. replacement and increase operating life. However, compared with roads, maintenance of port infrastructure is somewhat less use-dependent and is more time-dependent, port handling equipment excepted. A whole of life cycle approach to optimising maintenance costs to the port company is desirable but is easily compromised where there is a shortage of funding.

23.2.2 Main Port Maintenance

PNGPCL revenues are recognised to be insufficient to sustainably maintain all the main ports. A detailed assessment of the work and costs to rehabilitate the main ports to their original working condition is required. As these assessments are made, rational decisions can be taken on the future of some of the smaller main ports.

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The history of expenditure on maintenance by PNGPCL is therefore not a good guide to the underlying funding need once ports are restored to a good condition. An approximate projection of maintenance funding requirement has been made for the purposes of this NTS based on a percentage of the estimated capital replacement cost of port fixed infrastructure assets. Assuming the infrastructure has been rehabilitated then ongoing routine maintenance costs are estimated at 0.5% annually of this replacement cost. Taking account of future rehabilitation and replacement needs, the annualised maintenance cost is expected to be about 1.5% of the capital replacement cost. The capital replacement cost of the PNGPCL fixed port infrastructure is estimated to be about K2 billion, based upon a rough order of cost for construction of berth length, open and covered storage and with an allowance for other items such as services, security fencing and access roads. This is in marked contrast to the book asset valuation at transfer of the port assets in 2007 at the establishment of PNGPCL of K8 million.

As the invested capital in port infrastructure increases with planned extensions to the main ports, particularly in Lae, then the maintenance requirement will also increase. The maintenance funding projections show (i) maintenance of the commercial ports (Lae, Port Moresby and Kimbe) including short to medium term upgrading, all of which have been shown by TIPS to be economic in terms of benefit/cost ratio (except Lae Tidal Basin which has not been evaluated in TIPS) (ii) maintenance of the non-commercial ports, for which the majority of rehabilitation and upgrading work has been shown not too be economic by TIPS (the exceptions being dredging to restore berth and channel depth at the more active ports). Under the MTDP, all of the main ports are to be rehabilitated, so the upper maintenance cost estimate applies. It has been assumed that the short to medium term upgrading work will be undertaken over the first 10 years of the NTS. Beyond 2020 there may be additional port expansion to cater for growth, and the maintenance funding requirement to support this potential future expansion is shown as a trend continuation through to 2030. Future reviews of the NTS will reassess these requirements.

The future maintenance funding demand profile for fixed port infrastructure is as shown in Figure 37, separated into maintenance of port infrastructure that provides a commercial or economic return.

Figure 37 - Required Funding Projection for Main Port Fixed Infrastructure

23.2.3 Small Wharves and Jetty Maintenance

An asset management plan has been prepared for the Community Water Transport Project which estimates the operational costs of inspection and costs of routine maintenance, repairs and renewals of the infrastructure. The assumptions in this plan have been applied to the average capital cost per facility and the construction programme to give a forward maintenance funding

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requirement shown in Table 34. This assumes that the 200 jetties and river pontoons cover all of the smaller port capital requirements and that at present the minor ports are essentially receiving no maintenance input.

23.2.4 Maritime Navaids Maintenance

Progress under the NTDP 2006-10 has seen the rehabilitation and reconstruction of maritime navigation aids around the Papua New Guinea coast under donor-supported programmes. The NMSA has also been established to oversee the operation and ongoing development and maintenance of this infrastructure. An ongoing cost of K12.5 million (2010) values is included in the NTS for navaids maintenance, replacements, lease and security payments for the navaids infrastructure, based on NMSA information. The cost of maintenance is expected to be fully recovered from NMSA levies.

23.2.5 Summary of Maritime Infrastructure Maintenance Funding Requirement

The estimated maintenance funding requirement for port and maritime navaid infrastructure over the period of the NTS is shown in Table 34. A total of K1.4 billion (2010 values) is estimated to be required over the 20 year period

Table 34 – Projected Maritime Infrastructure Maintenance Requirement, K millions 2010 Port and Maritime Infrastructure Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 PNGPCL ports Commercial ports 624 107 158 177 181 Non-commercial ports 365 76 76 93 120 Sub-total, PNGPCL 989 184 235 270 300 Minor Wharves and jetties 121 6 22 38 54 Maritime Navaids 250 63 63 63 63 Total 1,360 253 319 371 417

23.3 Airports and Air Transport Infrastructure

23.3.1 National Airports Maintenance

The CADIP investment programme includes airfield upgrades and restorative maintenance to the national airports. Where this occurs in staged upgrading to F100 and later to B737-800, the upgrading costs include airfield pavement resealing and overlays. So this has the effect of reducing the pavement periodic maintenance requirements in the years immediately following the upgrades. In some cases, where the restoration or upgrading is later in the CADIP programme, some interim pavement maintenance will be required to hold the condition at an acceptable level in the meantime. Other building, airfield and landside facilities maintenance such as access roads, car parks and security fencing will not be affected, and an annual provision is required. After comparison with other sources, The NTS has adopted the TIPS maintenance model projections, adjusted to agree with the CADIP investment programme, as a reasonable representation of ongoing maintenance funding needs, which shows a forward funding requirement as shown in Figure 38 and Table 35.

The maintenance requirements have been categorised by class of airport, so changes in classification can be seen where Lae is upgraded to a Long Range International diversion airport and where a number of domestic jet airports are upgraded to medium range regional capability. It should be noted that if the CADIP programme were not to carry out the upgrades envisaged, the ongoing maintenance funding requirement would probably remain the same or even rise, as additional periodic resurfacing would be required in place of runway upgrading.

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Figure 38 – National Airports Projected Maintenance Funding Requirement

23.3.2 Provincial Airports and Rural Airstrip Maintenance

At present, it is believed that minimal maintenance 226. Maintenance Costs of the expenditure is being applied on a regular basis to airports Air Transport Infrastructure to below national level, although there is a small notional meet MTDP Targets allocation via the facilities maintenance grants under the intergovernmental funding arrangements (new RIGFA). Annual maintenance expenditure needs for the Section 22.4.3 identified an investment programme for national airports operated by selective restoration of provincial airports and rural NAC is estimated at K15 M p.a. airstrips aimed at the most heavily dependent isolated populations and avoiding overlapping provision. Once A further K10 M p.a. is required restored and/or upgraded, these facilities will require an to maintain provincial secondary ongoing routine maintenance provision and, after a and other airports in good period of time, funding for periodic maintenance works operable condition once such as resealing, regravelling, and building and services rehabilitated; there is minimal repairs. For the rural airstrips, some of the routine work maintenance at present such as grass cutting, other vegetation removal and A further K8 M p.a. is required to minor airstrip drainage and field maintenance may be maintain rural airstrips in good provided by local villagers under mutual agreement. operable condition once Where local people are willing to input resources to rehabilitated; there is minimal maintain facilities, this should be recognised by maintenance at present Government when deciding on which rural airstrips to re- K10 M p.a. is required to open, as part of a community services obligation policy, maintain the air communications discussed elsewhere. and navigation infrastructure 23.3.3 Air Navigation Infrastructure Maintenance

There is an existing investment in the air navigation infrastructure under the responsibility of PNGASL incorporating the main ATM centre in Port Moresby, seven control towers at regional airports, ground-based air navigation systems, and communications links both ground and satellite

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based. Under the CADIP investment programme, much of the ground based infrastructure will be gradually replaced with satellite based systems. An approximate annual maintenance estimate has been made based upon the estimated replacement cost of existing systems and the replacement investment, allowing for an annual maintenance cost of 10% of the current replacement value. This indicates an infrastructure maintenance provision between K50 and K60 million annually.

23.3.4 Summary of Air Transport Infrastructure Maintenance Requirements

Table 35 shows the estimated maintenance funding requirements over the period of the NTS. In total K0.9 billion is estimated to be required to maintain the upgraded and expanded air transport infrastructure.

Table 35 – Projected Air Transport Infrastructure Maintenance Requirement, K mill. 2010/11 Airports and Air Navigation Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 National Airports Long Range International 47 8 9 15 15 Medium Range Regional 90 - 6 38 46 Domestic Jet 146 56 53 21 16 Domestic Turboprop 45 10 11 12 12 Total NAC Airports 327 74 80 86 87 Provincial Government Airports Secondary Airports 63 18 17 15 14 Other Airports 121 33 31 29 27 Total Provincial 184 51 48 44 41 Rural airstrips 162 40 41 41 41 Total Airports and Airstrips 674 165 169 171 169 Air Navigation Infrastructure (CNS/ATM) 229 50 60 61 58 Total, Airports and Air Navigation 903 215 229 231 228

23.4 Summary of Transport Infrastructure Maintenance Funding Requirements

A summary of the funding requirements for fixed public infrastructure maintenance in the transport sector is shown in Table 36. The total maintenance requirement is estimated at K20 billion over the 20 year period, or an average of K800 million per year in the first five years rising to K1.1 billion/year, all in 2010 kina values. The majority is for funding road maintenance, which is consistent with the extent of investment in the road subsector.

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Table 36 – Transport Infrastructure Sector Maintenance Funding Projection, K mill. (2010/11) Subsector Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 Roads sub-sector National Roads – Dept of Works 8,484 1,755 1,691 2,154 2,884 National Roads - NRA 3,396 169 682 1,133 1,413 National Roads, total 11,880 1,923 2,374 3,286 4,297 Provincial and other roads 2,938 1,160 859 561 357 Routine and Periodic Maintenance 14,818 3,083 3,233 3,848 4,654 Emergency and Urgent Maintenance 1,482 308 323 385 465 Roads sub-total 16,300 3,392 3,557 4,232 5,119 Ports and maritime navigation sub-sector Main ports - PNGPCL, commercial 1,508 842 666 - - Main ports - PNGPCL, CSO 1,022 170 284 284 284 Secondary and minor ports 100 25 25 25 25 Maritime Navaids 250 63 63 63 63 Maritime sub-total 2,880 1,100 1,038 372 372 Airports and air navigation sub-sector National airports (NAC) 2,714 682 1,563 453 16 Provincial airports 90 23 23 23 23 Rural airstrips 10 3 3 3 3 Air navigation (PNGASL) 72 49 12 10 - Air sub-total 2,886 756 1,600 488 41 Total 22,066 5,248 6,195 5,092 5,552 Road % 88% 88% 87% 88% 89% Maritime % 7% 7% 8% 8% 7% Air % 5% 6% 6% 5% 4%

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24 Funding Projections and Funding Gap

24.1 Introduction

The National Transport Strategy must have regard for the likely future availability of funds for transport infrastructure maintenance and capital works. Funding for policy and operational programmes must similarly be considered.

Inevitably, the call on funds for supporting desired transport infrastructure investment will be greater than the financial resources available and prioritisation of expenditure will be required to keep within funding constraints.

Sources of funding can be separated into funding from operational revenues, from Government’s budget allocation and from grant assistance, which are “pay as you go” (PAYGO) methods of funding, and various forms of debt financing such as concessionary loans from development partners (ADB, World Bank etc.), commercial loans and public private partnerships (PPPs) in which the private partner provides capital funding in return for a revenue stream from the project. While debt financing is a way of enabling capital projects to be implemented at an earlier date that with PAYGO financing, there are limits to the debt servicing capability of the Government and transport sector agencies. Also debt commitments in other sectors may influence Government’s ability to take on new borrowing in the transport sector. The project sponsors, whether Government or the private sector must be confident that projects that are debt financed will achieve a net beneficial economic return or a sufficient financial return if commercially funded. In turn this generally requires that the projects will receive adequate maintenance funding so that their value is not reduced by premature deterioration.

In this section of the NTS, the history of funding for the transport sector is examined so that projections can be made of the likely future funding envelope. This is not to assume that past trends will necessarily be continued in future. For example, the DSP and MTDP envisage transformational change in PNG’s economic growth path and, if realised, this will increase Government revenues and enable real increases for public spending on transport. There will also be some scope for the introduction of new forms of charging for services provided within the transport sector, although there will be limits on levels of user fees that can be borne by the market and levels that are politically acceptable and will not be self-defeating through avoidance and evasion.

24.2 MTDP Infrastructure Funding Requirement

The total estimated transport infrastructure investment requirement to implement the Medium Term Development Plan, including new infrastructure, reconstruction and rehabilitation, upgrading and maintenance of assets, is summarised in Table 37. An estimated K70 billion (2010/11 values) is required to bring the transport network up to a generally good state of condition, construct the missing links and economic corridor roads and some supporting lower level transport infrastructure, and provide better transport access to rural communities.

This provides an appreciation of the scale of funding required, against which the adequacy of present and anticipated future sources of funding can be compared. The estimated K70 billion compares with the DSP estimate of slightly over K100 billion for the transport sector, although it is not clear whether the DSP estimate is in nominal or real kina values or whether it includes the operating and administration costs of transport sector agencies.

The DSP anticipates that the Plan will be self-funding, through additional taxation revenue generated by the expected increase in economic activity, although it also anticipates some additional debt funding in the early years while new revenues build.

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Table 37 – Summary of Transport Infrastructure Investment to Support the MTDP, K mill 2010 Subsector Total 2011- 2016- 2021- 2026- 2015 2020 2025 2030 Capital investment - new infrastructure, upgrading, reconstruction/replacement and rehabilitation Roads 45,650 5,000 12,150 11,725 16,775 Ports and Maritime 2,579 1,013 757 405 405 Airports and Air Navigation 2,885 756 1,600 488 41 Sub-total - capital investment 51,114 6,769 14,507 12,617 17,221 Maintenance - routine annual, periodic, urgent and emergency Roads 16,300 3,392 3,557 4,232 5,119 Ports and Maritime 1,360 253 319 371 417 Airports and Air Navigation 903 215 229 231 228 Sub-total - maintenance 18,562 3,859 4,105 4,835 5,764 Total - Capital and Maintenance Roads 61,950 8,392 15,707 15,957 21,894 Ports and Maritime 3,939 1,266 1,076 775 822 Airports and Air Navigation 3,788 971 1,829 719 269 Total 69,676 10,629 18,612 17,452 22,984

24.3 Government Appropriations through the National Budget

24.3.1 Department of Works

By far the largest appropriation of Government funding to transport infrastructure is to the Department of Works. The average annual expenditure on roads and bridges for both development and maintenance through DOW has been about K230 million, of which K112 million has been from government appropriation and the remainder from development assistance grants and loans. A small proportion of this expenditure has been for provincial road and bridge projects, both under GoPNG and development partner programmes, such as the World Bank Road Maintenance Project and the ADB Highlands Road Upgrading and Maintenance both of which have spanned national and provincial roads. The provincial roads concerned will most likely be brought under national ownership under the management of DOW in the future.

24.3.2 Department of Transport

The DOT is primarily a policy and planning department, with some operational responsibilities, but does not control a large capital works budget. It administers the Community Water Transport Project which has expended about K3 millions of Government funding annually over the last five years, but primarily on shipping services development. Prior to the establishment of the NMSA, DOT also had responsibility for maritime navigation aid rehabilitation which drew Government funding of about K5 million/year over five years.

24.3.3 Department of National Planning and Monitoring/ORD

In recent years, the DNPM has administered an increasing value of transport infrastructure development expenditure through the national budget, at an average of about K40 million/year over 2004-2009. This has primarily been on provincial and district roads, including funding through DRIP/DSIP. From 2010 the development budget appropriation for roads increased to over K 200 million, including one-off planned expenditure on two of the missing link roads (Bogia-Angoram and Baiyer-Madang) with construction being executed by PNGDF. However DNPM’s forward provision under the PIP is around K50 million/year, mainly for provincial road programmes. DNPM has also funded transport equipment, such as coastal vessels, which are not included here. The Office Of Rural Development (ORD) has been responsible for DSIP since 2007.

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24.3.4 Support to Statutory Authorities and SOEs

Government provides financial support to PNG Ports Corporation on a project by project basis through the Development Budget varying from nil in some years up to K30 million for 2011. Development assistance funding for ports has also been directed through the budget appropriation for IPBC, for the Lae Port tidal basin project. Government has also provided funding support for the establishment of the NRA and NMSA.

Up to 2010 when the CAA was split into NAC and CASA, Government funded selected airport projects through the development budget, varying from nil in some years up to a maximum of K20 million in 2008. Government will channel funding for CADIP through the development budget process in the future, utilising the proceeds of an ADB MFF Loan (85%) and Government counterpart funding (15%).

24.3.5 Inter-Governmental Support to Provinces

Under the RIGFA, Government provides support to provincial governments for transport infrastructure maintenance under the Transport Infrastructure Maintenance Grant (TIMG), the majority of which is allocated to roads but which is also intended for maintenance of rural airstrips and wharves under Provincial and Local Level Government ownership. This appropriation has increased from K15 million/year up to 2007 to K62 million/year for 2011. The TIMG grants made from 2006 to 2009 and appropriations for 2010 and 2011 are shown in Figure 39.

There is no breakdown of this expenditure on roads, airstrips and jetties although it is thought that almost all the applied expenditure is on roads which has been assigned half each to routine maintenance and rehabilitation.

The distribution of these grants in 2013 is shown in Figure 40. The grant allocations take account of other sources of revenue available to provinces through other sources such as resource development grants (Fly River/Western and New Ireland are examples) and have also been purposely increased over recent years to better recognise the infrastructure maintenance needs, as identified by the NEFC.

Figure 39 – Transport Infrastructure Maintenance Grants to Provinces, K’000s

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Figure 40 – Transport Infrastructure Maintenance Grants by Province, 2013, K’000s

24.4 Development Partner Grant and Loan Assistance

24.4.1 Overall Sector Support

AusAID, ADB and the World Bank have been the main development partners contributing grant and loan finance for transport infrastructure projects, together with mainly grant technical assistance for project preparation and sector policy and implementation advisory services. Others active in the sector are Japan (JICA) through bridge programmes and more recently China, through a specific road project supporting road access to the Ramu Nickel Project and new port at Basamuk Bay.

All three of the main development partners and JICA have indicated their intention to continue to support the development of the PNG transport sector. AusAID is currently reviewing the structure of its future support under the TSSP, which includes both project grant financing and advisory assistance. The form of technical assistance may change, but this review of the future funding envelope anticipates that AusAID will continue to give project investment support at similar levels as over the past five years and primarily in the roads subsector. AusAID’s financial assistance to road construction, rehabilitation and maintenance has averaged between K50 and K60 million annually, or 46% of the donor total support.

The ADB has been the second largest funder over the past decade but has increased its commitment to PNG through long term financing under its Multi-tranche Financing Framework (MFF) for main airport development (CADIP) and Highlands Region Road Improvement Programme (HRRIP). ADB is also supporting the port sector through Lae Port development and community shipping franchise services and small jetty construction through the CWTP. The Highlands Region Road Maintenance and Upgrading Project is also continuing under supplementary funding for the next few years covering second tier national roods and important provincial roads in the five Highlands Provinces. ADB’s support to the roads sector has been between K30 and K40 million/year, or about 27% of the total donor assistance.

The World Bank’s recent activity has been through the Road Maintenance and Rehabilitation Project (RMRP) in six provinces outside of the Highlands, where its contribution has been around K23 million/year or about 18% of the donor assistance.

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24.4.2 Roads and Bridges

Over the period 2005-2009, approximately half of project-related expenditure through DOW on roads and bridges was from donors, at an average annual rate of K57 million in loans and K65 million in grants. AusAID provides exclusively grant assistance, with ADB and WB providing concessionary loans.

A similar pattern of future commitment is anticipated over the NTS plan period, particularly over the first five year MTTP.

24.4.3 Ports and Sea Transport

ADB has been the main development partner for the port sector, through a series of mainly project loans directed at the main commercial ports. While PNG Ports Corporation is an SOE, it is not financially independent and has relied on government backing for loans to fund capital projects. ADB is currently providing K425 million equivalent loan financing for Lae Port Development over the period 2010 to 2013. ADB has also financed the restoration of maritime navaids, and has provided about K40 million equivalent funding for the Community Water Transport Project, part of which is to finance small jetty infrastructure.

24.4.4 Airports and Air Transport

Over the past decade, development assistance for airports was primarily through the AusAID Balus programme which ended in 2005. Since then there has been a gap in development partner support for infrastructure works which has been filled by the ADB through CADIP which will support the rehabilitation and upgrading of the main national airports to 2020. NAC has indicated in its longer term planning a second phase of CADIP which is also reflected in the MTDP, and could be funded by a second MFF loan, taking the main airport development programme support out to the end of the NTS period. ADB funding commitment under CADIP is up to about K1.1 billion equivalent, as a multi-tranche loan.

There has so far been no development partner support for restoration and maintenance of the second tier airports now outside of NAC responsibility or for rural airstrips.

24.5 Funding from Transport User Charges

24.5.1 General

One of the policies of the NTS is to increase the recovery of infrastructure maintenance and development costs from transport user charges, particularly for the main infrastructure carrying substantial levels of passenger and freight traffic. This will improve the self-reliance of the sector and lessen the dependence on government appropriation which can vary unpredictably from year to year. The first target is for transport charges to recover the recurrent costs of maintenance and operation of the transport infrastructure. Once this is achieved a longer term target is to recover the costs of renewal and upgrading of the infrastructure, although it is recognised that this may not be practical in all cases because of thin traffic routes and nation’s stage of development.

24.5.2 Road User Charges (RUC)

A reliable and sustainable source of funding for road maintenance is a longstanding goal of transport policy. Reliance on annual budget allocations has led to severe under-funding of road maintenance and progressive deterioration of the road network. Options for internalising maintenance funding within the road sector include direct charging for road use through tolls, which has many practical challenges and implementation costs, or indirect funding from road user charges.

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The National Roads Authority receives a small portion of the excise duty on diesel fuel to fund its road maintenance activities. There are plans to extend the RUC to a three part levy covering diesel and petrol, at higher rates than currently, an annual levy per vehicle scaled by vehicle size and a levy based on the road damaging effect of heavy axles. The revenue from RUC will accrue to the dedicated Road Fund, to which other financial contributions can also be made, including development partner support.

The NTS funding envelope assumes that this development of RUC will take place, thus enabling the NRA to extend its role as the asset manager of the core main road network, defined as those roads carrying higher volumes of traffic and at the higher levels of the functional hierarchy. The lower traffic sections of the network will remain under the management of DOW with some delegation to provincial administrations where capability and capacity exists.

It is desirable that once roads are taken over by NRA, all road maintenance and rehabilitation activities come under NRA’s financial and management responsibility. If this is not the case, there will need to be on-going reliance on the uncertainty of Government appropriations for road rehabilitation and/or reconstruction as pavements reach the end of their useful life. It also opens up an opportunity for demarcation disputes between classes of maintenance and undermines the incentive for NRA to effectively manage the road asset on a whole-of-life basis.

The revenue stream that could be raised from RUC has been estimated through various technical assistance to GoPNG. The latest such estimate is for annual revenue from this source to be increased progressively as charges are phased in reaching around K400 million p.a. in real terms by 2020 and allows for a 3% annual increase in road traffic. This annual revenue has been estimated to be sufficient for routine and periodic maintenance of the whole national network apart from institutional roads (that is NR, NM and ND roads together with some important non-national roads in the Highlands that are currently included within the ADB HRRIP). This amounts to an estimated 8,780 kms of roads of which some 57% would be sealed (by 2020).

The Organic Law provides for Provincial Governments to levy provincial road user taxes. While this provision is not widely exercised, and the need for these taxes has been superseded by the Transport Infrastructure Maintenance Grants (TIMG), the intention of such taxes is that they be applied to the upkeep of provincial and local roads. They are separate from road users charges levied for maintaining roads under NRA control, notwithstanding that provincial administrations may be engaged as collection agents for part of these national road user charges.

24.5.3 Vehicle Registration and Licensing Revenue

Vehicle registration and driver licensing revenue is retained by provincial government for administering those services and with the residue intended to be used for road maintenance and other transport related activities, although in most cases this revenue is used more generally as a source of provincial government funding. In NCD, vehicle registration and driver licensing revenue is collected by MVIL, which retains a fee for administration and pays the remainder to the central Government. These arrangements are the subject of proposed policy reforms but meanwhile this revenue forms part of the funding envelope for provincial roads.

The amounts declared by provinces for recent years, allowing for under-reporting by provinces in some years, indicate annual revenue of around K20 million distributed as indicated in Figure 41. Morobe receives by far the largest share (excluding NCD), due to its location at the end of the Highlands Highway network and the preferred registration place for many of the vehicles using this road. Central Province also receives a relatively large share as vehicles have the option of registering at the provincial office or through the NCD office, both of which are in Port Moresby. There has been a rising trend in revenues from 2006 to 2009 of about 5% per annum, which is indicative of a slightly higher rate of increase in vehicle fleet growth than indicated from other sources.

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Figure 41 – Motor Vehicle Registration and Licensing Revenue, 2009

24.5.4 Main Port Revenues and Infrastructure Expenditure

Actual expenditure on maintenance of port infrastructure over the last available five year period 2004-2008 averaged K5.8 million, which include one exceptional year when expenditure on maintenance rose to K16.6 million. The exceptional year is a better reflection of the maintenance expenditure needed to retain the ports in good condition (see 23.2.2).

The future projections for PNGPCL ship and cargo based revenues derive from the allowances for increased charges made in the existing regulatory contract with ICCC together with shipping and cargo growth. Beyond the end of the contract period, which expires in December 2014 it has been assumed that port charges will increase at the rate of general inflation (that is no increase in real terms).

The future capacity of PNGPCL to fund capital development and maintenance will depend largely upon port traffic throughput and the tariffs for berthage, wharfage and cargo storage. At present the existing revenue from these sources is approximately K70 million/year together with other revenue of K25 million.

However, only a proportion of ship and cargo related revenue is available to fund port maintenance. As a proportion of operating expenditure, maintenance currently accounts for only about 5 to 10%, although the maintenance requirement is much greater. On a pro-rata basis only about K6 million is currently available for maintenance work, although this will increase with higher tariffs and increased cargo demand. PNGPCL’s contract with ICCC allows increases in port tariffs, subject to PNGCPL completing certain capital development works to a prescribed schedule.

It is assumed that PNG Ports will be required to repay loans, taken out by itself directly or through IPBC as the state owner of the asset, to fund port infrastructure development at the main commercial ports, in particular Lae, but also Port Moresby and Kimbe and any ports which, in future, develop trade to a level that enables port maintenance, operation and capital charges to be recovered through port dues on an individual port basis. The same would apply to port infrastructure funded through PPPs - revenues would be expected to recover all investment and recurrent costs including interest on capital.

Those ports that require external financial support to remain financially viable but are to be retained as a matter of public policy, include a CSO funding element.

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24.5.5 Maritime Navigation Revenues

The NMSA receives revenues of about K28 million p.a. from a system of levies for maritime navigation services and for its other responsibilities in maritime safety and countering marine pollution. NMSA’s revenues are expected to fully recover costs, including future capital replacement and rehabilitation of navaids as discussed in Section 23.2.4 of K12.5 million/year (2010 values).

24.5.6 Main Airport Revenues

NAC has been established under the Companies Act as a commercial Government owned enterprise with responsibility for national airports as set out in Schedule I to the Civil Aviation Act 2000. NAC derives revenues from landing, terminal navigation and services charges, subject to payment of part of the terminal fees to CASA. The levels of charges are set out in the Civil Aviation (Aircraft Charges) Regulation.

In 2009, a National Airports Strategic Management Plan (NASMP) was prepared on behalf of the then CAA. One of the findings from the NASMP was a shortfall in funding for airport maintenance and critical upgrading requirements. While the split into NAC, CASA and PNGASL had the effect of removing some previously second level national airports from NAC’s responsibility, and the CADIP programme has effectively shifted the critical rehabilitation and development expenditure to Government, there is still ongoing uncertainty as to whether NAC’s revenue stream will be sufficient to fund airport operations and ongoing maintenance commitments. NAC’s aeronautical revenue is approximately K25 million which, together with other revenues of approximately K10 million, are required to cover all staff, operating and administration costs of which facilities maintenance is only a minor part. On a pro-rata basis, only about 15% of recurrent costs are attributable to maintenance, and an equivalent share of revenue is K5 million.

The NASMP has recommended that a detailed review of airport services charges, and air services charges generally, be made against forward operating and maintenance costs, so that either any shortfall can be identified and recognised as an ongoing subsidy obligation on Government, or that charges are raised to cover costs. It was also recommended that NAC explore other non- aeronautical revenue streams, such as airport concessions, airport land leases, airport terminal car parking fees and commercial development on NAC land to lessen the reliance on aircraft landing fees and terminal charges. The NTS endorses this course of action and it is assumed that this combination of measures will enable NAC to significantly increase its revenue stream and operate profitably, assuming that capital development costs are born by Government.

24.5.7 Air Navigation Revenues

PNGASL is a SOE incorporated under the Companies Act, with an objective to operate profitably. PNGASL is able, under the Civil Aviation Act, to charge for aeronautical services based on aircraft type and sectors flown, including international overflights which accounts for a large proportion of revenue, and other en route services provided.

However, as for the main airports, it is recognised that PNGASL will not be able to recover the costs of capital reinvestment in modernising PNG’s air navigation infrastructure, including the transition from ground to satellite based services. It is also uncertain whether PNGASL will be able to fund ongoing maintenance of the new assets out of revenue.

24.6 CSO Funding

National policy for community services obligation (CSO) funding for non-commercial public services is still in the process of formation and is discussed in more detail in the policy section of the NTS. However, the de facto CSO policy has been for certain SOEs such as PNGPCL and NAC to use revenues from commercial operations to fund, even if at a minimal level, the maintenance and

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operation of non-commercial assets. This has allowed the unprofitable national airports and ports to receive some limited funding.

24.6.1 Roads

This profitability definition of a CSO is inappropriate for roads which are not provided within a SOE framework with direct charging. In this case the CSO is the difference between economically viable provision and that required for other policy reasons such as a basic l level of access provision for social and redistributive purposes. Even where roads are economically viable, the ability to support a road user charge at a level that will recover costs and not be so high as to encourage evasion is limited to the more heavily used sections of the network. Also, any practical road user charges system is likely to be a second-best option, as direct charging for road use is not yet a technically or financially feasible proposition.

The road network can therefore be divided into three levels:

 the core network for which a feasible road user charges system based on fuel and vehicle charges can financially support the life-cycle maintenance costs – corresponding generally to roads under the management of the NRA, which is the recipient of user charges via the Road Fund;  less functionally important and/or lower traffic roads which are nevertheless economically viable based on social benefit cost analysis, but which cannot be supported from the road user charges system so require Government budget funding;  the CSO roads that are not economically viable but which the Government wishes to provide as basic access as a part of its social policy and redistribution of income.

24.6.2 Ports and Maritime

In the case of PNGPCL, the ICCC has estimated the full cost of the CSO under the port tariff structure prevailing in 2010 as K28 million per annum. This reflects the actual expenditures on the non-profit making ports and will not cover the remedial maintenance needs to bring all ports up to their original operating condition, so is most likely a low side estimate.

For lower level infrastructure, there are no revenue streams supporting small wharves and jetties owned by provincial and local level government and these facilities would almost certainly be heavily loss making even if landing charges were to be levied. The original design of the CWTP envisaged that maintenance costs of jetties constructed under this programme would be absorbed into the government agency charged with management of the scheme, then expected to be the NMSA, but currently lying with the DOT.

24.6.3 Airports and Air Navigation

For NAC, the National Airports Strategic Management Plan has examined the cost recovery across the national airports for high and low economic growth projections over a 10 year period. This showed Port Moresby and the first tier of regional airports (Nadzab, Tokua, Mt Hagen and Madang) to have sufficient revenue to meet ongoing operating and maintenance requirements. Other national airports were projected to have an average annual shortfall of between K36 and K43 million. The scope for operating surplus from Port Moresby International and other first tier airports to cover the operating losses at the remaining airports depended on a high economic growth path being achieved. Once capital development costs were included, only Port Moresby International was found to be capable of recovering its capital development plan costs from revenue. If PMIA capital development is funded as a PPP, this will remove all or part of the opportunity for it to continue to be used to cross-subsidise the low profitability national airports.

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For provincial secondary and other airports, airport charges are the responsibility of the managing authority, normally the provincial government. It is not known to what extent landing fees are currently levied at provincial airports but it can be assumed that ratio of revenue to operating costs will be well below that of the least profitable NAC operational airports which is Kerema at 15%. For rural airstrips under District, LLG, village or mission ownership again it is not known to what extent landing fees are charged, if at all and the costs of maintenance are likely to be well below any supportable user charge revenue. To the extent these facilities are maintained at all, all of the funding can be regarded as CSO in nature.

24.6.4 Provincial Transport Infrastructure Maintenance Grants

At provincial level, the TIMG to provinces can be regarded as an existing CSO funding channel from National Government recognising that Provinces, Districts and Local Level Governments have limited resources to maintain public transport infrastructure, much of which has no accompanying revenue stream.

24.7 Other Funding Sources

24.7.1 Sovereign Wealth Fund

The Government has recently proposed a Sovereign Wealth Fund (SWF) for the purposes of (a) providing a financial buffer to level fluctuations in public expenditure (b) funding long term high impact programs and projects aimed at economic and social improvement and (c) investment of the surpluses from resource development in foreign currency for the long term benefit of the nation. The revenue of the SWF will come from deposited taxes and dividends from mineral and oil and gas resources development.

It is envisaged that funding of large infrastructure projects will be made from the SWF, with approximately 30% being channelled through SOEs and 70% through the Government’s Infrastructure Development Authority. The IDA will manage the disposition of this funding to projects that are consistent with the national strategies and plans, that is the DSP, MTDP and, in the case of the transport sector, the NTS and the MTTP (also refer to Section 10.6.2 on the IDA).

The funding stream to the Infrastructure Account generated by the SWF is so far unknown but estimates made from information on the mineral resources revenues indicate a possible K1,200 million annually in the medium term. Part of this revenue will flow to non-transport projects, so a rough order of magnitude for this funding stream of K1,000 million is estimated. However, this will not be all “new money”, rather a different way of channelling some of the financing for large strategic projects.

24.7.2 Tax Credit Scheme (TCS)

The Tax Credit Scheme provides for certain types of private sector industry to offset up to 0.75% per annum of their assessable tax by making a direct financial contribution to development projects, normally in the vicinity of the industry. It originated in the mining sector but is now spread over several industries. Development projects can include transport infrastructure, both capital and maintenance expenditure, but has also been used for school buildings, clinics and other infrastructure. In some cases the TCS has enabled private companies to reduce the risk of disruption to road access to their project sites either from lack of maintenance by the responsible public agency or road blocks by local landowners.

The budget expenditure on the TCS over the five years 2005-09 has averaged K25 million per annum, although the original budget appropriations have been at three times this level. It is not clear what proportion of this tax credit has been expended on roads or other transport infrastructure, but probably the major part.

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24.7.3 Resource Development Contributions

Certain districts and provinces benefit from financial contributions provided as part of resource development agreements, either with Government or landowners or both. This mainly applies to areas where there is mineral, oil and gas or forestry development. In some cases the developer constructs and maintains the infrastructure as well as providing funding.

Western, Southern Highlands, Enga and New Ireland Provinces, in particular, benefit from mining and petroleum royalties and dividends where these sources contribute between 50% and 90% of provincial revenues (Western province is the highest). Overall these sources contribute about 40% of total provincial revenue.

24.7.4 Self-Help and Voluntary Contributions At a local level, the routine maintenance of access roads, airstrips and jetties can be largely undertaken by unskilled labour with hand tools provided there is some incentive to do so and enough local people with disposable time. This can be expanded to the next level of maintenance work by community purchase or donation of basic mechanical equipment, provided there is provision for housing and maintaining it. This “self-help” or “sweat equity” contribution was once more common than it is today, as people have become more accustomed to wage payment for work undertaken, and expectations have been raised that public agencies are responsible for providing basic access and that people will always be compensated for use of land. The idea of a social contract whereby villagers contribute land and labour in return for assistance in materials and specialist construction skills to enable local transport infrastructure, has been in decline. The policy framework for the NTS includes provision for incentivising and rebuilding a self-help culture to improve basic transport access.

24.8 The Overall Funding Envelope and Funding Gap

24.8.1 Roads The present overall funding envelope for capital works and maintenance, based on recent experience and the future outlook are summarised below, disaggregated by funding source and type of works. These are based on averages over 2005 to 2009 converted to real 2010/11 values or, in some cases where new funding is expected in future, the expected value. In round numbers about K580 million/year is currently available for roads, with approximately 70% being applied to national roads and 30% to provincial and local roads, although it is difficult to track actual expenditure at provincial and local level and some of the national road programmes include provincial components.

Table 38 – The Present Funding Envelope for Roads, K millions 2010/11 GoPNG GoPNG Grants & User Other Total Description DOW DNPM Loans Charges - NRA

National Roads Recurrent Maintenance 42 - 9 91 - 141 36% Rehabilitation 102 - 140 - - 242 61% Upgrading & Construction 5 - 2 - - 7 2% Bridges 7 - 1 - - 8 2% Total, National Roads 156 - 151 91 - 398 69% 39% 0% 38% 23% 0% 100%

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Description GoPNG GoPNG Grants & TIMG Other Total DOW DNPM Loans Provincial & Other Roads Recurrent Maintenance - - - 30 - 30 17% Rehabilitation - 71 - 30 12 113 63% Upgrading & Construction 17 8 11 - - 35 20% Bridges (no separate data) ------Total, Provincial & Other 17 79 11 60 12 179 31% 9% 44% 6% 34% 7% 100%

All Roads 173 79 162 151 12 577

A relatively small amount had been applied to recurrent maintenance until 2010 when NRA commenced funding Projected Funding Envelope roads that have been transferred to its responsibility. The and the Funding Gap majority of spending has been on rehabilitating roads that 228. Roads have deteriorated due to a lack of preventive maintenance. Annual funding for national roads and bridges has averaged For provincial and local roads, funding through the K400M in recent years, and DNPM’s development budget is the largest component of K180M for provincial and local funding and has been directed at specific projects. The roads Transport Infrastructure Maintenance Grant is the second main channel of funding and has risen rapidly over the This expenditure has not always last five years as a result of the reviewed inter- been well targeted, particularly governmental funding arrangements (RIGFA); although at provincial level where there is exactly how much of this grant is effectively spent on doubt concerning the correct roads and other transport infrastructure is unclear. Further application and effectiveness of smaller contributions are channelled through the DOW the expenditure development budget, from loans and grants from Maintenance has been development partners, and the remainder from a variety underfunded and several of the of sources such as the tax credit scheme and resource development projects have not development grants, although these are also hard to track conformed to priorities and are targeted on specific provinces and districts. developed under the last NTDP In 2010 there was a relatively large allocation to two To meet the MTDP requires the missing link roads, channelled through the DNPM Budget allocation to roads to development budget, but this is no longer in the forward double as a percentage of GDP, PIP, so has been disregarded in the current funding even assuming the high rate of envelope. GDP growth expected in the In comparison to the national budget, from which almost MTDP all road expenditure is currently derived with the exception The rate of increase in of diesel excise revenues hypothecated to the NRA, total expenditure required will also be expenditure on roads and bridges has averaged 5.6% of constrained by construction total national budget expenditure over the five years capacity 2005-2009. As a percentage of GDP, expenditure on roads and bridges has varied between 0.8% and 1.6% , with an average of 1.1%, over the same period. There are no particular time trends in either case. In future, the Government’s forward projections of expenditure in the PIP do not show any significant change in the intended pattern of spending on roads and bridges. Indeed, expenditure tends to drop away in outyears but this is probably due to projects yet to be identified. The main increase in funding for the roads subsector is expected to be from road user charges revenue channelled through the NRA for road maintenance, which is expected to rise to K400 million by 2030, giving a total funding envelope of approximately K1 billion. This rests on the assumption that

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Government will not offset any loss in hypothecated revenue to the NRA by reducing allocations to DOW, DNPM or provinces. As DOW will be extending its road network responsibilities with several MTDP upgrading targets to be met together with the funding required for the missing links and economic corridor roads, the DOW budget should be grown rather than reduced. The forward projections of the funding envelope for roads make the assumption that, apart from NRA road user charges, other GoPNG and Donor expenditure on roads will maintain a constant percentage of 5.6% of the Government budget which in turn will maintain a constant ratio against GDP (the budget has consistently been 33% to 35% of GDP). In the case of road user charges, the projections already incorporate some real growth in revenue due to an increasing population, vehicle fleet and GDP increasing at a similar rate to historic trends. The MTDP projection of GDP is for much higher growth and NRA road user charges revenues have been factored up to allow for this higher rate of growth. This gives the two funding projections in Figure 42. The actual funding to roads and bridges from GoPNG and donors in 2010 was 6.6% of the national budget, which is why the funding dips in the early years. Although the appropriation for 2011 is very high once carried over funds held in trust are incorporated, it is unclear how these funds will affect future budget appropriations, so a conservative approach is taken. In the outyears to 2014, real GDP and budget projections show only modest growth

Figure 42 – Road Funding Projections

Comparing the funding requirement from Table 32 with the above funding profile gives a large funding gap as shown in Figure 43.

Figure 43 – Roads Expenditure Projections, Annual Funding Gap, K millions (2010/11)

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The figure illustrates that a funding gap of K1 billion annually opens up almost immediately under the expenditure profile required to fund the MTDP. To bridge the funding gap would require the budget allocation for roads, including GoPNG and donor contributions, to approximately double from 5.6% to 11% of the national budget and be sustained over the period of the NTS.

The rapid increases in funding required in the early years are in order to meet 2015 targets set in the MTDP. Assuming that funds are available, the required increased in capacity of both the Government and private sector to meet this expenditure profile are unrealistic.

24.8.2 Ports and Maritime

Funding for ports and maritime navigation comes from the national budget for some development spending and otherwise from PNGPCL and NMSA revenues and retained earnings. The Government contribution over the five years 2005-2009 has averaged K6.5 million, only 0.1% of the national budget.

Under the tariff structure prevailing at in 2010 prior to the new regulatory contract, the capacity of PNGPCL to fund capital development and maintenance from its own resources was limited by its revenue stream. Almost all capital development in recent years has been financed through development budget appropriation. Expenditure on maintenance has averaged K5 million/year which is estimated to be only 15 to 20% of that needed to maintain all PNGPCL ports in good condition.

Lae Port expansion is the largest capital development Projected Funding Envelope currently in progress, although only one of several and the Funding Gap planned over the medium term. Assuming that the tariff increments in the regulatory contract with ICCC are fully 229. Maritime implemented or, alternatively, the cross-subsidy Government capital expenditure arrangement for CSOs is replaced by direct funding on the declared ports has support allowing PNGPCL to be freed from price control, averaged K6.5 M or 0.1% of the then the capacity of PNGPCL to service the planned Development budget project loans and at the same time carry out maintenance of national ports for which it is financially responsible will Maintenance expenditure has be greatly enhanced. averaged K5 M p.a. only 15% to 20% of what is required to From the available information, the outlook for the main maintain the assets in good ports is that PNGPCL should be able to fund the capital condition. costs of all port new construction and rehabilitation works that show a positive economic rate of return as identified PNGPCL should have the by TIPS together with the ongoing maintenance costs of capacity to fund capital costs of the national ports, with the exception of those port construction and maintenance of rehabilitation and maintenance costs that fall within the Lae, Port Moresby and Kimbe community services obligation (CSO), as identified by from revenue and development ICCC and subject to ongoing review. PNGPCL’s funding loans, but will require CSO arrangements may include a variety of sources, including funding support for all other concessional loans, grants, commercial borrowings and ports. PPP arrangements. Maritime navaids are expected to be fully funded from NMSA Maritime navaids are expected to be fully funded from revenue in future, once all are NMSA revenues. The CSO component of national ports restored to good operable rehabilitation and maintenance, secondary and minor condition. ports and certain other maritime services costs are discussed under CSO funding in Section 12.6.

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24.8.3 Airports and Air Navigation

Funding for airports and air navigation comes from Government budget allocation and from revenues of NAC and PNGASL. The Government’s annual budget contribution averaged for the five years 2005 to 2009 has been about K8.4 million or 0.13% of the national budget. This will grow substantially to around 3% of the national budget under CADIP, including Government’s direct contribution and loan funds.

The National Airports Strategic Management Plan (NASMP) has modelled future scenarios for air traffic growth, revenue streams and costs for NAC airports, based upon CAA’s LTIP capital works programme with some suggested reductions in the proposed development of airport terminal buildings. The NASMP has postulated low and high growth air traffic projections, based upon lower (trend) or higher economic growth rates (corresponding to MTDP anticipated growth) over the period to 2018.

The higher growth (MTDP) scenario leads to a small Projected Funding Envelope overall operating surplus over the first 10 years for the and the Funding Gap NCA domestic airports subject to a number of management recommendations being followed; however 230. Air the low growth (trend) scenario still leads to an operating Capital funding of the national deficit. Recurrent airport maintenance is included in the airports with the exception of operating costs, so a deficit implies inability to cover all PMIA is met through CADIP maintenance funding needs. None of the capital Projects 1-4 development loan development costs are covered. to approximately 2017 The funding envelope for development of the main PMIA capital funding to carry out airports under CADIP is committed only for Project 1, but the Master Plan is expected to is covered by the Multi-tranche Financing Framework for be through a PPP arrangement CADIP Projects 1 through 4, subject to overall limit of financed from the ongoing ADB financing and Government providing its contribution. revenue stream; failing this This funds the main airports development works through Government Development the first half of the NTS, leaving the second half (2019- Budget funding would be 2030) with no firm commitment. However, it is expected required, probably with donor that a second CADIP multi-tranche financing facility would lending support. follow on, assuming successful completion of the first programme. As less economically attractive projects are Beyond 2017, capital likely to fall into this notional second programme, it should development envisaged under be regarded as subject to confirmation at each main the MTDP will rely on a further review period for the NTS. development loan of similar size to CADIP The NASMP proposes that the operating shortfall of the Provincial airports and rural less profitable airports which is all those except Port airstrips are largely unfunded Moresby and the regional airports of Nadzab, Tokua, Mt and require a CSO arrangement Hagen and Madang should be recognised as CSOs and be subject to a contract between the Government and CNS/ATM upgrading is funded NAC. To enable alternative funding arrangements, such from CADIP but ongoing as the proposed PPP for Port Moresby International maintenance is unlikely to be Airport, it is desirable that each airport be accounted as supportable from PNGASL an individual cost centre or separable business revenue enterprise, allowing flexibility to tailor landing and terminal charges to each airport, which would also facilitate a CSO arrangement.

The secondary, other provincial airports and rural airstrips are essentially unfunded in regard to their ongoing maintenance and capital expenditure needs. Figure 44 shows the projected funding gap for airport development under the MTDP.

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Figure 44 – Airports & Navaids Expenditure, Annual Funding and Funding Gap, K mill (2010)

The CADIP programme for the NAC airports and air navigation systems, together with PPP funding for Port Moresby is assumed to provide the bulk of capital funding, leaving rehabilitation of provincial airports, rural airstrips and maintenance of all facilities except for PMIA, Nadzab, Tokua and Mt Hagen all unfunded. The overall financing agreement for CADIP will allow about 45% of the national airports and navaids development programme as identified in the MTDP to be funded, lasting through until mid-2017/18.

The funding gap for other provincial airport and rural airstrips construction and for all maintenance not covered by airport charges is approximately K50 to K55 million/year in 2010 values over the whole 20 year period.

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25 Ongoing and Committed Projects

25.1 Introduction

In developing the Medium Term Transport Plan which has a one to five year focus, recognition must be given to ongoing and committed projects. In general those projects that have been developed with donor support and those which have been through the DOT coordination process of prioritisation prior to budget submission are consistent with the NTS priorities in their categories of expenditure. However, this does not necessarily mean that the best projects are being selected and there is an imbalance between maintenance which is seriously underfunded and upgrading and new construction.

25.2 Committed and Ongoing Road Projects

Road infrastructure maintenance and development is being delivered through the following programs:

 DOT – feasibility studies for roads are included in DOT’s budget;  DOW – mainly national roads, although some provincial and urban roads are also included, and primarily through the Development Budget;  Defence – two new roads being constructed by the Defence Force are now included in that department’s budget, previously through DNPM;  DNPM/ORD – funding of the District Services Improvement Program (DSIP), predominantly roads, was delivered through DNPM’s budget to 2011 and through ORD budget from 2012;  National Road Safety Council (NRSC) – is provided with development budget for safety related programs;  National Roads Authority – support to maintenance on NRA roads for capital works and in lieu of an early start up of the full road user charges scheme ;  Provincial Governments – through TIMG and individual project grants.

25.2.1 Department of Transport

The DOT from time to time conducts feasibility studies for road projects, including engagement of consultants. Apart from a budget allocation in 2011 for a study of the Gulf-S Highlands and Trans- Island links, there are no committed projects in 2012 and beyond.

25.2.2 Department of Works

Most road works are delivered through the Development Budget, although there has been a move to maintenance under the Recurrent Budget, to emphasise that it should be looked on as an ongoing commitment. However, many of the donor assisted programs, which are in the Development Budget, are mixes of routine, periodic and restorative maintenance. Also, some of the donor funded projects include mixes of national and provincial roads and mixtures of roads and bridges, despite the title of the program they have been classified under.

There is a lot of inconsistency in how projects are classified into programs (for example provincial roads appearing under national road programs, asset management under “Construction and Upgrading”, urban roads under “Rural Transport” etc.) and new project numbers are often opened under a different program for what is a continuation of funding to a subsequent year. The PIP then confuses matters further with a different set of Program names.

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There is a trend towards life-cycle based funding through performance-based contracts that include capital works and maintenance over a period of time. So projects that are a mixture of types of road work are likely to be more common in future.

Rather than follow the somewhat confusing program names given to them in the Budget and PIP, projects are described below under headings of:

 Road and bridge maintenance (GoPNG - Recurrent Budget)  Donor supported road and bridge programs and projects GoPNG funded:  National road maintenance, rehabilitation and construction  Provincial road maintenance, rehabilitation and construction  Urban roads  Bridge projects  Other expenditure,.

Road and Bridge Maintenance (Recurrent Budget)

 Maintenance of National Priority Roads (Activity 11632): this is a budget to cover the entire national road network, although maintenance is also included in the Development Budget. The RAMS-generated road maintenance plan was transferred to the recurrent budget in 2009. In part this was to emphasise that road maintenance in an ongoing and largely predictable annual activity that needs to be funded at an optimum level that will provide the lowest combined cost to the road provider and road user (noting that costs to road users from reductions in road maintenance are considerably greater than any savings to the road provider).

Historically, road maintenance has been severely under-funded for many years, if not decades, and the latest 2013 Budget is no exception. The DOW was so inured to receiving only a fraction of the funding requirement that for several years the budget submissions covered only routine light maintenance to roads that were in good or fair condition, the remainder being left to deteriorate further and then become objects of largely donor funded reconstruction and rehabilitation programmes. The budget submissions were probably not helped by separately listing priority and non-priority roads, which could give the impression that the non-priority items could be passed over for funding without too much concern. The priority roads in this case were the 16 national priority highways and the non-priority was the remaining national road network. Typically the budget submissions were for K100 - 200 million while the appropriation was between zero and K30 million.

Since 2010, DOW has submitted a budget based upon the maintenance actually required to restore the existing network to good condition over time, which now requires an expenditure of some K2 billion per year for a number of years. Meanwhile actual funding has continued at a level of K60 to K70 million annually which, although an improvement over the K20 to K30 million through the 2000 – 2010 period is still well short of what is required. The K2 billion is perhaps something of an exaggeration as some parts of the network are covered under the Development Budget as part of the large donor funded projects, and a small but increasing length of the network is being covered by the NRA funded from road user charges. Nevertheless, this NTS has estimated that once restored to good condition, an average annual expenditure of approximately K400 annually is required for annual road maintenance, so the shortfall would still be some 85%, even if all rehabilitation and reconstruction is catered for separately in the Development Budget.

 National Bridge Maintenance (Activity 11806) - a request for over K200 million/year for 2013 rising to K310 million in 2017 was made for maintenance and repair of cross drainage

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structures (large culverts and bridges) nationwide with needs assessed using the BAMS. The Budget appropriation in 2012 and 2013 was for about 15% of the assessed requirement.

Donor Supported Road and Bridge Programs and Projects:

 Transport Sector Support Program (TSSP) (AusAID Grant, GoPNG) – routine, periodic, specific and bridge maintenance of selected sections of the 16 identified national priority roads in the NTDP in 12 provinces. The priority roads identified in NTDP remain important and the nature of the work, being maintenance of the assets, is also of high priority. TSSP-1 concluded in mid-2012. The TSSP-2 work programme currently projects forward to 2014 so there is no firm commitment beyond that time, although a provision on some projects for expenditure in 2015+ In the Partnership Agreement document, the road assistance is indicated to be K179.4 per year over the 2013 to 2015 period, although this is expected to be exceeded based on the 2013 plan. TSSP as a whole is conceived as a 15 to 20 year commitment from 2007, so has many more years to run and TSSP-2 has an approximate finishing date in 2018. The K179/year funding has therefore been assumed to continue as an indicative spend at least through to 2018. Road sections included in the TSSP programme include: Central Province sections of the Hiritano Highway; the Magi Highway in Central and Milne Bay Provinces; Milne Bay East Coast Road; lower sections of the Lae-Wau Road; sections of the Highlands Highway in Morobe and Eastern Highlands; sections of the New Britain Highway in both East and West New Britain; New Ireland - sections of the Boluminski Highway and West Coast Road; The Ramu and Coastal Highways through Morobe, Madang, East Sepik and Sandaun Provinces.  Highlands Road Maintenance and Upgrading Project (ADB, GoPNG Counterpart Funding) – this project provided mainly for the upgrading to seal of sections of national road and selected provincial roads in the five Highlands provinces from 2003 to 2007. The project was extended with supplementary donor financing which was exhausted in 2012 but continued using GoPNG funding and is now expected to complete by 2014. Roads remaining to be completed are Raipinka to Okapa Stage 1 (gravel rehabilitation), Kamaliki to Bekuvia (upgrade to seal), Ialibu to Seven Corners (rehabilitation), Kiapau to Pangu (rehabilitation) and Chuave to Move Road (resealing).  Highlands Region Road Improvement Investment Program (HRRIIP) (ADB, GoPNG Counterpart Funding) – this is being implemented under the first tranche of a multi-tranche financing facility (MFF); the facility itself runs through to 2018 and has an overall financing provision of up to US$750 million (approx. K1,600 million) including $400 million ADB, $150 million possible co-financing and $200 million GoPNG. The MFF is expected to be disbursed in four tranches. The first tranche/project is for upgrading to seal of Mendi to Kandep (NR005, 50 km), Laiagam to Pogera (NR0005, 65km) from mid-2012 to mid-2014. The project was originally also to include three sections of the Koroba Road (NM3701) Nipa to Margarima (26 km), Margarima to Nipa (41 km) and Hiwinda Junction to Koroba (29km) and upgrading of selected feeder roads to improved gravel standard: Kandep to Margarima (34km), Nipa to Munihu (23km), Kuare to Tindua (14.8km) and Mendi to Tambul (40 km). The two national roads NR0005 and NM3701 are among the priority ranked road sections for upgrading from NTS analysis (Table 43). Progress is nearly two years behind the original schedule and risks exceeding the closing date of the Tranche 1 loan in 2014 Tranche 2 projects have been identified as upgrading to seal of Mendi to Tambul (ND3704, SHP/Enga), Ialibu to Kagua (NM3703, SHP) and Kotna to Lampramp (or Lyaporambo) on

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the Baiyer Road (P390303, WHP). Ialibu to Kagua is an important link, functional class II, and will become more important when the Gulf-S Highlands connection is made. The case for Mendi to Tambul is less clear. While Tambul is a district centre it is in Enga Province and has a relatively short link to the Enga Highway. The Tambul to Mendi road traverses relatively lowly populated terrain around the northern slopes of Mt Giluwe and has been nominated as functional Class IV. TIPS analysis indicates “Maintenance Only”. The Kotna to Lampramp Road similarly provides an additional cross-link rather than being a primary connection and has also been nominated a Class IV. However, in this case the population concentration and agricultural potential are probably higher. The forward commitment by Government to Tranche 2 and subsequent tranches of this program are not clear from the PIP. Table 40 shows the level of funding anticipated from the MFF disbursement profile which is somewhat higher, particularly beyond 2014.  Bridge Replacement for Rural Access (ADB loan, GoPNG Counterpart Funding) – this project replaces temporary or damaged/aged single lane steel truss bridges on main highways with permanent materials and deploys any usable system bridging components for use on rural feeder and access roads. The project is programmed for 2012 to 2016 at a value of US $82 million (K175 million). The bridges are to be selected based on BCR and are expected to be on the Magi, Hiritano, Ramu, Sepik and New Britain Highways.

 Road Maintenance and Rehabilitation Project-2 (World Bank loan, GoPNG Counterpart Funding) – this project provides $40 million (K82.4 million) for road rehabilitation and some road upgrading from gravel to seal on both national and provincial roads. The project will concentrate on the Hiritano Highway, including sealing of two unsealed sections between Port Moresby and Kerema, rehabilitation of other sections and routine maintenance of all sections prior to the rehabilitation/upgrading works. The Hiritano sections are consistent with the NTS and with the Government’s priority to develop the PRAEC corridor. In future, new sections should be selected based on NTS and MTTP priorities. The project runs through to 2016. While the loan allows for expenditure in other provinces, present indications are that the identified projects will absorb all of the loan funding.  Usino Junction to Yamagi Road (Grant Funding China, Madang) – a new access road to the Ramu nickel mine, about 95% funded by China and the remaining K2 million by GoPNG, 2011-2012.

Table 39 - Recent, Committed and Proposed Road Upgrading, Donor Programs

Rd No, Prov- Donor, Road, Section kms Treatment Sect ince 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

AusAID – Transport Sector Support Program (TSSP) Hiritano Highway NR0001 Repair, Reseal 060-070 Cen Veimauri – Doa Plantation 26 U/G to Seal 090 Cen Agevairu - Akerama 16.4 U/G to Seal 100-110 Cen Akerama - Aropokina 18.3 Magi Highway NR0002 Repair, Reseal 110 Cen Kemp Welch – Matairuka 15.8 Reseal 130-140 Cen Lebugoro – Alepa Jnc 14.4 Repair, Reseal 170 Cen Upulima Br – Imila Br 7.4 U/G to Seal Cen unspecified Regravelling Cen unspecified Repair, Reseal 610 MBP Goilani - Kainako 9 Repair, Reseal 600 MBP Kainako - Hagita

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Rd No, Prov- Donor, Road, Section kms Treatment Sect ince 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Repair, Reseal 590 MBP Naura - Gumini 10 U/G to Seal MBP unspecified 10 Wau-Bulolo NR0004 Repair, Reseal 010 Mor HH to Markham River 4.0 U/G to Seal 140 Mor Bulolo – Pinetops Br 5.5 U/G to Seal 160 Mor Kuranga Br – Wau Ck Br 9.5 Enga Highway NR0006 PBMC 080-100 Enga Wapenamanda - Wabag 31.6 Highlands Highway NR0007 LTMC 010-200 Mor Lae Wharf – Yung Creek 168.8 LTMC 210-400 EHP Yung Ck – Magiro Creek 182.1 Ramu Highway NR0008 Repair, Reseal 010-040 Mor Waterais - Pompoquato 30.3 Repair, Reseal 040-110 Mad Pompoquato - Usino 75.2 Repair, Reseal 190 Mad Gogol Br – Baidal Modilon 12.8 Regravelling 140 Mad Mupu Br – Biribiri Mountain 7 U/G to Seal 140 Mad Mupu Br - Yabour 7 U/G to Seal 190-200 Mad Gogol Br – Tapo Ford 13 U/G to Seal Mad Remaining gravel sections Coastal Highway NR0009 Repair, Reseal 010-060 Mad Ramu Hway – Sumerang Br 42 Repair, Reseal 130-170 Mad Kumul Br – Ulingan Jnc 34 U/G to Seal 190-210 Mad Nimuru Br – Deigum Br 20 Repair, Reseal 220-240 Mad Deigum Br – (Bogia) 32 Repair, Reseal 530 ESP Kreer Jnc – Nagam Br 18 U/G to Seal 540 ESP Minga Ck – Hawaian Riv 9.6 U/G to Seal 550 ESP Hawaian Riv - Parom 12.4 U/G to Seal 560 ESP Parom - Malamba 12.7 U/G to Seal 570 ESP Malamba - Hogi U/G to Seal 570-580 ESP Hogi – U/G to Seal 800-810 San Sawmill Jnc – Pasir Jnc 3.5 Regravelling 830-850 San Yalinge Riv - Romei 18 U/G Gravel 860- San Romei - Regravelling 950 San Davi - Musu 6 New Britain H’way NR0010 Reseal 010 ENB Tunnel Hill Jnc _ Burma Hill 12.4 Rehab, Reseal 020 ENB Burma Hill – Vunadidir Jnc 6.8 Reseal 030 ENB Vunadidir J – Malabunga HS 8.4 U/G to Seal 040 ENB Malabunga HS - Gaulim 8.4 Rehab, Reseal 235 WNB Gigipuna Jnc – Koloi Br 5.0 Repair, Reseal 250-260 WNB Ruma Bx – Tiauru Riv 9.6 Reseal WNB unspecified U/G to Seal WNB unspecified Sepik Highway NR0012 Repairs 010 ESP Passam - Nagam 2.5 Rehab ESP Toanumbu - Warabung 31

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Rd No, Prov- Donor, Road, Section kms Treatment Sect ince 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Rehab ESP Drekikir – Warasikau Br ESP unspecified Regravelling WSP Asini Fd – Sipik Digicel 6.5 LTMC gravel WSP unspecified WSP unspecified Boluminski H’way NM4701 Reseal 060-080 NIP Paruai - Pananma 28 Reseal 090-130 NIP Pananma - Tandis 38 Reseal 250-260 NIP Pire - Namatanai 10 U/G to Seal NIP unspecified U/G to Seal NIP unspecified East Coast Road ND3501 U/G to Seal 030-040 MBP Daduwe - Lelehudi 15.7 Regravelling 050 MBP Gadudu – East Cape 14.7 West Coast Road ND4703 Sealed Repairs 020-060 NIP Marakalang - Kalili 54 Sealed Repairs 070-100 NIP Kalili - Labur 43 Sealed Repairs NIP unspecified Sealed Repairs NIP unspecified Mai - Nuku Road P450301 U/G gravel all WSP Mai - Nuku 28 Oro Bridges Oro Cyclone restoration 4 no. ADB – Highlands Region Road Maintenance and Upgrading Project (HRRMUP) U/G to Seal NM3901 WHP Mt Hagen - Baiyer R Stage 2 13.5 U/G to Seal NR0011 Simbu Kundiawa - Gewa 10.6 Rehab Gravel P410503 EHP Rypinka - Okapa 51.3 Sealing P410304 EHP Kamaliki - Bekuvia 17.3 U/G to Seal NM3703 SHP Ialibu - 7 Corners 19.7 U/G to Seal ND4003 EHP Chuave - Move 18 Wabag – Mendi Rd NR0005 U/G to Seal 100-110 Enga Kandep - Kaikau 21.5 Rehab 070-090 Enga Kaikau - Pangu 18.8 ADB – Highlands Region Road Investment Improvement Program (HRRIIP) – Project 1 Wabag – Mendi Rd NR0005 U/G to Seal 260-280 SHP Mendi - Peane 21 U/G to Seal 180-250 Enga Peane - Kandep 29 Porgera Rd NM3901 U/G to Seal 010-090 Enga Laiagam - Porgera 65 LTMC above NM3901, NR0005 115 LTMC SHP Tari – Koroba, NM3701 96 ADB – Highlands Region Road Investment Improvement Program (HRRIIP) – Project 2 U/G to Seal ND3704 SHP Mendi – Tambul 40 U/G to Seal NM3703 SHP Ialibu – Kagua 34 U/G to Seal P390303 WHP Kotna - Lampramp 23 ADB – Highlands Region Road Investment Improvement Program (HRRIIP) – Projects 3/4 unspecified

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Rd No, Prov- Donor, Road, Section kms Treatment Sect ince 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ADB – Bridge Replacement for Improved Rural Access Project (BRIRAP) Replacement NR0001 3 bridges Replacement NR0002 3 bridges Replacement NR0008 6 bridges Replacement NR0010 12 bridges Replacement NR0012 3 bridges World Bank – Road Maintenance and Rehabilitation Project (RMRP1 and 2) Hiritano Highway NR0001 U/G to Seal 130 Cen Aropokina - Buioto 8.5 U/G to Seal 140 Cen Buioto - Inawabui 4.7 U/G to Seal 140 Cen 126.5-134 7.5 U/G to Seal 140-150 Cen Inawabui – Bereina Jnc 17.5 Recons Gravel 230 Gulf Malalaua – Kepemai Br 18.0 U/G to Seal 220-250 Gulf Malalaua - Epo 57 Reconstruct 230-250 Gulf Kepamai Br – Uamai Br 26.0 Reconstruct 250-280 Gulf Uamai Br - Kerema Construction 280 Gulf Wara Kerema Bridge Magi Highway NR0002 U/G to Seal Cen 9.5 U/G to Seal 150 Cen Matariuka-Bukuku (3 sects) 10.2 Northern Highway NR0003 Reseal 020-040 Oro Girua - Oro Bay 35.5 New Britain H’way NR0010 Reconstruct 300 WNB Bilomi - Koriri 13.8 Reconstruct WNB Koriri - Pisi 10.2 U/G to Seal WNB Koloi - Balaha 10.4 Torna Highway U/G to Seal ENB Baliora - Tokorongan Kokoda Highway NM3601 Reseal 010-020 Oro Popondetta – Inhambo 19.75 U/G to Seal 050 Oro Embara - Kumusi 9.5 E-W Highway NM4604 Man Regravelling 030-050 Man Tingou - Mundrau 22.0 Reconstruct Worei Rd Man Tingau - Worei 9.0 Reconstruct Baliora ENB Baliora - Tokorongan 10.0 JICA Strengthening NR0004 Mor Markham Bridge Restoration NM5001 BVE Buka Road Bridges 15 no. China Rehabilitate Ramu Ni Mad Usino Jnc to Yamagi 16.0 Highlands Highway NR0007 (possible EXIM Bank Loan) Repairs, Reseal 010 Mor Wharf – 2 mi Jnc 5.9 4 Laning 020 Mor 2mi Jnc – Wau Rd Jnc 6.9 Repairs, Reseal 030-060 Mor Wau Jnc - Nadzab 26.9 Reconstruction 620-630 SHP Kisenapoi - Ialibu 24.1

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National Road Maintenance, Rehabilitation and Construction (GoPNG)

The following projects were funded in 2013:  Alotau to Gurney (Magi Highway, NR0002) – sealing from Alotau to Gurney Airport turn-off, a project with a very high BCR. A lump sum of K5 million was provided in 2012; this was without any feasibility, design or cost estimate.

 Kumalu By-Pass (NR004 Morobe) – K14 million allocated 2012 to construct a local deviation of the Wau Highway (NR004) to overcome a river erosion problem; originally the submission was for a feasibility study but subsequently increased to fund the full project  Wapenamanda to Wabag (NR006, Enga) – repair and reseal 28.9km of the Enga Highway over two years at a cost of K24 million spread equally over 2012 and 2013; Rehabilitation of this section has a preliminary BCR of 2.8 from TIPS using a cost estimate of K35 million for a longer length of 32.5 km and is a high priority. The Togoba to Wabag section is part of TSSP grant assistance but is contingent upon GoPNG part funding which this would provide.  Highlands Highway Maintenance (NR0007) – specific maintenance to parts of the Highlands Highway, near term focus being on Simbu province and through Southern Highlands Kisenapoi to Angura Bridge. K80 million was appropriated in each of 2012 and 2013, with K100 million in the PIP for each of 2014 and 2015.  Vanimo Highway (future part of NR0009) – upgrading of the existing gravel road and regravelling between Aitape and Vanimo. K10 million was appropriated in 2013.  New Britain Highway, Ulamona to Open Bay (NR0010) – a lump sum of K10 million was provided in 2011 to commence work on this missing link and completion of a pilot track between Malasaet and Alakasam (14 km) is expected in early 2013. The completion of missing sections between Rabaul and Kimbe has the highest BCR of all the missing link and new economic corridor roads.  Maintenance of Specific National Highways – one-off individual lump sum budget allocations have been made for amounts of K5 or K10 million for maintaining: NR001 Hiritano, NR002 Magi, NR0003 Northern, NR0010 New Britain, NR0012 Sepik, NM3601 Kokoda, NM4701 Boluminski, and ND3701 Koroba-Kopiago (Oksapmin Road) Highways overall K100 million in 2012 and K130 million in 2013 but with no continuity of funding in outyears. None of these were in the budget submission.  Malalaua to Kaintiba Road (NM3201) – a lump sum of K10 million was appropriated in 2012 towards the rehabilitation/construction of this link between the Hiritano Highway at Malalaua and Kaintiba; only the section from Yandati to the mine is recorded in the inventory. The project appears in the 2013 Budget under Malalaua to Kotidanga (see below)  Tapini Road reconstruction (NM3304, Central) – K98 million over five years to reconstruct 98km of the Goilala road. The preliminary BCR from TIPS is 0.3 but did not consider the benefits to the Tolukuma gold mine, which is a spur road off the Goilalai Road at Abele River. This would restore an all-weather road connection to a significant area of population and with high potential for supplying Port Moresby with market produce. The TIPS cost estimate for this road is K98 million.  Goilala access road (NM3304) - from the Hiritano Highway to Tapini District HQ and a spur road to Tolukuma, both populated areas with poor access. No feasibility study has been carried out. The 2012 Budget submission was for K68 million spread over five years of which K10 million was allocated in 2012. The 2013 Budget submission was changed to K60 million spread evenly over six years, but no further funding was forthcoming.  Wau Junction to Menyamya Junction (Aseki Road, NM4201, Morobe) – reinstatement of 85 km of road and bridges, at estimated cost of K10.5 million over three years. The project was submitted in 2012 but not funded It was resubmitted in 2013 at K7 million over two years.

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The TIPS preliminary evaluation is a BCR of 0.8 for upgrading to seal based on a cost of K75 million excluding bridges. The first section will certainly justify sealing but the more remote sections might justify only an upgraded gravel surface and a full feasibility study is required. The road links a large population catchment area and has a functional classification of III. If it became part of an alternative route for the Trans-Island missing link via Kaintiba, this road would assume a higher functional status, potentially of Class I.  Bundralis to Ndrehet (NM4604 Manus) – this is a 32 km extension westwards along the north coast of the East-West road on Manus Island, an ongoing project from 2007. This was a continuation of a 2012 project where K3.5 million has been appropriated as the total budget requirement but a further K3.5 million was subsequently requested in 2013. Again, this is a project ranked highly in the Provincial Development Plan although not nationally. There is no supporting economic feasibility study. The route of the road does not appear to agree with that in the Manus Sectoral Implementation Strategy which identifies the routes of potential future national roads on the island It is not one of the missing links identified in the DSP although Manus as a province is shown as an Economic Corridor  Boregaina to Wiga Road (ND3308, Central) – rehabilitate and upgrade to seal a neglected 43km national road from the Magi Highway to inland Rigo District to provide access for health, education and produce marketing. K43 million was requested over 5 years to 2016 in the 2012 and 2013 budget rounds, but was passed over for funding on both occasions. TIPS evaluated this upgrade with a BCR of 0.3 based on the same capital cost.  Hula Road (ND3314, Central) - rehabilitate and upgrade to seal a neglected 48km national road from the Magi Highway to inland Hula District to provide access for health, education and produce marketing. K48 million was requested over 5 years to 2016 in 2012 and again in 2013 but was passed over on both occasions. Reconstructing this road had an estimated BCR of 1.6 in TIPS based on a cost of K54 million, a relatively good ranking.  Tomba to Piambi Road (Tambul Road, ND3704, WHP) – rehabilitation and maintenance of 32km was funded to K5.5 million in 2012 with no forward projection. A further K5.5 million was requested in 2013 which was not funded. As far as Tambul which is a district centre the road is functional Class II and beyond Tambul, Class III.  Gumine to Karamui Road (ND4002, EHP) – this project was a late addition to the 2012 Budget and provided K10 million for the extension of this access road towards the isolated inland district of the Karamui plateau, one of the Economic Corridor roads, but not a high priority and without any supporting feasibility study. No submission was made in 2013. A large expenditure is needed to reach Karamui and the best access is not clear and could be through Eastern Highlands via an extension of the Lufa – Gono Road.  Chuave to Move Road Sealing (ND4003, Siani Road, EHP) – this project was a late addition to the 2012 Budget and was not part of the sector submission. K6 million was allocated in 2012. A further K6 million was requested for 2013 but was not funded. The TIPS preliminary assessment for sealing this road is a BCR of 0.8 based on a rough order of cost estimate of K22 million.  Bougainville, Kokopau to Arawa (Buka Road NM5001) - a lump sum of K20 million was provided in 2011 to commence work on upgrading this main route down the east coast connecting the present administrative centre of Buka with the pre-conflict capital of Arawa/Kieta. This project has a high preliminary BCR.

Provincial Road Maintenance, Rehabilitation and Construction (GoPNG)

The District Services Improvement Program (DSIP) and the Transport Infrastructure Maintenance Grants (TIMG) are the inter-governmental channels for providing the provinces for capital and maintenance funding for provincial and local roads. However, a number of provincial roads are nevertheless funded through the DOW Development Budget. It was notable in 2013 that the Budget submissions for provincial roads (under Provincial Roads Transport Support and Rural

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Transport Development) were almost all rejected for funding, and those that were partially funded were described as new rather than continuing projects. Funded projects in 2013 were:  Wapenamanda to Baiyer Road (Enga) – pavement repair and reseal of 28km at a cost of K 30 million, over one year, was submitted in 2012 but not funded. The project was resubmitted in 2013 as the Wapenamanda to Yalis Road covering the first section from Wapenamanda towards Kompiam for K18 million over 2013-2014, of which K10 million was appropriated in 2013 listed under a new project Kulupuga Road. The Wapenamanda to Kompiam Road has been assigned a Functional Class II and the connection between this road and the Baiyer River Road is assigned as a future Class III road. It is likely that the Wapenamanda to Kompiam Road would be considered for national road status in future as part of the Government’s policy to extend the national network.  North Coast Highway (Milne Bay) Rehabilitation, Topura to Kwabunaki – this is an incremental extension or possibly reinstatement of an old road from the existing end point at Topura, west to Kwabunaki, currently a provincial road (P113547) but part of a long term plan to create a continuous road along the north coast to Rabaraba so might eventually become a national road. It is part of the Bubuletta - Motau - Lavora - Raba Raba - Agaun Missing Link. A one-off K10 million lump sum allocation was requested in 2012 of which K7 million was appropriated K6 million expended. In 2013 a budget request for a further K6 million was made and K5 million was funded under a new project number and name (Bubuleta to Agaun). Although part of Milne Bay Province’s plan, the economic feasibility of this route has not been established and it is not one of the higher national priorities, so the investment is questionable, particularly if nationally funded.  Kulupuga Road (WHP, Enga) – this project was not part of the 2013 Budget submission but was funded to K10 million and is apparently for the restoration of minor provincial road link between Western Highlands (Lumusa area) and Enga Province (Pawari Area) although not clearly defined Projects submitted by DOW which were not funded in 2013 were:  Tolukuma Mine Access Road (Central) – 12km new access road to the Petromin-owned Tolukuma gold mine in the Goilala District of Central Province from Abele River on the Goilala access road (NM3304) from the Hiritano Highway to Tapini District HQ and a spur road to Tolukuma, both populated areas with poor access and with good market produce potential for supplying Port Moresby. The 2012 Budget submission was for K68 million spread over five years of which K10 million was allocated in 2012 and applied to the entire road length from the Hiritano Highway (overlapping with the Tapini Road Reconstruction Road project). The 2013 Budget submission was changed to K60 million spread evenly over six years and applied to the access road construction only, but no further funding was forthcoming.  Obura to Wonenara Road (EHP) - this project was added to the 2012 Budget and was not part of the sector submission, but appears in 2013. It provides a lump sum of K10 million over two years for the repair of an outlying provincial road connecting between Lamari and Yelia LLG areas. This is expenditure that should in theory be covered from the TIMG.  Nuku to Arkusame Road (Sandaun) – this provides for maintenance to prevent closure of a provincial road from Nuku Station to Arkusame Station in Mawase LLG which would deprive the area of health, school and other Government services. K15 million was budgeted for a two year project 2012-13, of which K8.4 million was been approved for 2012 and K5 million for 2013. This is expenditure that should in theory be covered from the TIMG.  Kusaun to Timbunke Road (Sandaun) - regravelling and drainage on this 45 km section of provincial road from the Sepik Highway at Timbunke Station on the Sepik River, estimated at K13.5 million/year over four years 2012-2015, a total of K54 million. An appropriation of

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K10 million was made in 2012 but a reduced request for K10 million in the 2013 budget was not funded, and no further costs in 2014 forward resulted in the submission not being funded.  Veifa’a Road (Aipeana Road) – rehabilitation of a 18km provincial feeder road from Hiritano Highway to inland Mekeo in Kairuku District, Central Province; estimated K18 million over 2012-2013 of which K7 million was funded in 2012; a submission in 2013 for a further K7 million was not funded. This road appears on the District’s 5 year development plan as a provincial project for the full 28 km but at only K0.5 million. The DOW estimate is more realistic.  Kikori to Komaiyo Road (Gulf) – the 2012 Budget submission was for K3 million for each of 2012 and 2013 for restorative maintenance; however only 2012 was funded. This local road runs west from Kikori to Komaio, a ward administrative centre in West Kikori Rural LLG area. There is an existing provincial road along part of the route. This is expenditure that should in theory be covered from the DSIP.  Boni to Tadji Road Upgrading (Sandaun) – this is a 52 km provincial road (P450204) link across the Torricelli Mountains to (re)connect the inland Sepik Highway (Boni) with the Coastal Highway (at Tadji). K10 million was requested in 2012 but not funded, although but the project would appear to be larger than this, and no further submission was made in 2013. This would normally be expected to be funded through DSIP.  Keibam to Fatima to Lumi Loop Road (Sandaun) – rehabilitate a 30km provincial feeder road originally constructed in the 1980s, from the Sepik Highway to Fatima Station with loop back to Lumi. K36 million over four years 2012-2015 was requested in the 2012 Budget round but not repeated in 2013. This would normally be expected to be funded through DSIP.  Nubia to Giri Road Upgrade (Madang) – upgrading of 32 km of gravel road to seal, costed at K50 million over three years 2012-2015 and submitted for the 2012 Budget but not funded. This is a provincial feeder road (P43203/204) inland from Nubia on the Coastal Highway. There is no supporting feasibility study. This would normally be expected to be funded through DSIP.  Yambi to Avatip Road (East Sepik) – regravelling and drainage to 40km of this provincial road with funding requested at K30 million for 2012 in that Budget submission. The project was resubmitted in 2013 split over two years at K15 million each but was not funded. This is currently a pilot track running along the north bank of the Sepik River west of Pagwi to Avatip. The economic basis for the road is unclear and there is no feasibility study. This would normally be expected to be funded through DSIP.  Replacement of Surumarang Bridge, Coastal Highway (NR009, Madang) – K15 million over two years to replace existing damaged structure to prevent loss of the road connection.  Bogia to Josephstaal Road (Madang) – in 2012 this was described as rehabilitate and seal 72km of provincial access road from the Coastal Highway at K15 million over 2012-2014. The existing gravel road is currently impassable cutting off a substantial inland population. In 2013 the project was resubmitted on a reduced scale as emergency restorative maintenance and ongoing work on the gravel road for K11 million over a five year period. In neither case was the project funded. While this would normally be expected to be funded through DSIP, the route has a functional classification of III due to the population and facilities connected and could be considered for change to national status following upgrading. The cost estimate does not appear sufficient for the project and sealed construction seems unlikely to be justified.

Again, the question must be asked why these maintenance and rehabilitation works have not been funded using the TIMG and DSIP, for those roads that are not national roads. It implies that either the DSIP/TIMG funds are insufficient or are not being properly applied.

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Urban Roads

 National Capital District (Port Moresby) Roads – an urban project so is poorly classified, it provided K65 million in 2012 for maintaining, rehabilitating and upgrading roads in NCD; in 2013 a separate project for Port Moresby City Roads was approved to K100 million under  Metropolitan Roads – this is also ongoing to 2014, and split from “Provincial Roads Transport Support” funded at K68.7 million in 2012 rising to K81,7 million in outyears. It includes urban roads in: Lae K28.7 million; and lump sums for Mt Hagen K20 million; Madang K 10 million; Kerema K10 million, Goroka K10 million. These roads will include some national sections but will largely be provincial level responsibility and imply that the Transport Infrastructure Maintenance Grant is either insufficient or not being used for urban road maintenance. Bridge Projects

 Replacement of Specific Bridges (GoPNG) – in addition to the ADB program, some individual bridge replacements are funded directly by GoPNG, with three bridges (Yowar, Minjung and Wasa) in the 2013 appropriation for K17 million

Comments on the Programme Some general points can be made on the projects in the above program:  The projects are not clearly described and information is often contradictory. In future, each project should be accompanied by a clear identification of the road and section number from the national or provincial inventory, a description of start and end places that corresponds with the inventory, the present condition of the road and bridges and the degree of passability in wet/dry conditions, an outline feasibility report (cost/benefit analysis) generated from TIPS or other source, an estimate of the traffic using the road now and once improved, and the population numbers and institutions (schools, health centres) dependent on the road for access. Each project should be accompanied by a map and desirably, by photographs along the road to illustrate the condition. This should be a reasonable expectation for projects requiring millions of kina from the national budget.  The nature of works is not always accurately described – in some cases the roads are in fact new construction on an existing walking track and not rehabilitation of an existing road; maintenance, rehabilitation or reconstruction are not clearly separated.  Where sealing of a gravel road is proposed, particularly for provincial roads, it is not clear why an improved gravel road has not been considered. Also, where provincial roads are upgraded, their future status as continuing provincial road or change to a national asset should be identified.  The projects that have been submitted are a wide mixture from projects that appear to be high priority (Aseki Road, Hula Road) to expenditures that appear to be attempting to extend the network into remote areas with little clear justification and in a funding climate where ongoing maintenance is not guaranteed.  National and provincial road projects should be separated and clearly identified and some explanation given why provincial roads are included in this program and not within, say, the DSIP. Where provincial roads are to be improved using national funds and under DOW management, these should then become part of the national road network as part of the expansion to 25,000 kms (as discussed in the NTS).  The rejection of some projects submitted by DOW/DOT while other projects that were not part of the submission have been added is not conducive to good long term planning. Some of the new projects added do not have obvious merit, while a number of those rejected do have merit.  The separation of bridges from road links for funding purposes carries risk that one will be funded and not the other. Bridge and culvert maintenance should become part of an

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integrated forward programme of road and bridge maintenance that uses multi-period budgeting over at least a five year look ahead

25.2.3 Department of Defence

The Defence Force has been allocated budget from 2010 onwards for the construction of two missing links, in 2010 through the DNPM budget and from 2011 through the Defence budget:

 Baiyer-Aiome-Madang – Annual appropriations of K20 million in years 2009-2011 (20101 through DNPM and not disbursed) and a further K10 million for each of 2012 and 2013 and indicated K45 million in outyears 2014-2016. These costs appear to exclude an estimated K125 million for new bridges at Jimi and Ramu rivers and delivery of the project seems likely to be after 2107 at the earliest. This missing link has an indicated BCR from TIPS of 0.8 and a Ongoing and Committed rough order of cost of K830 million to construct to Projects national highway standard. On paper it compares 231. Road less favourably than a rehabilitation of the Bundi Highway at a BCR of 1.8 and cost estimate of Approximately K1,100 M K300 million, which would appear to be a better annually is expected to be way of delivering the network reliability and available for roads and bridges connectivity benefits between the Highlands and expenditure over the next five Madang/Morobe. years

 Bogia-Angoram – The Defence Force was funded This assumes funding at near K20 million in 2010 through the DNPM budget. 2012 level and is a significant This was continued in 2011 as a K20 million increase on the average for the conditional grant to East Sepik Provincial last 5 years Government but no further funding is indicated. On this basis, ongoing and This missing link has an indicated BCR from TIPS programmed projects will utilise of 0.3, making it one of the lower priorities, and all available funding through an estimated rough order of cost of K550 million. 2013 and 2014.

These two projects, although major expenditure items There will be limited opportunity and challenging in engineering terms, completely for expenditure on new projects bypassed the transport sector agencies and have no from 2015 feasibility study or engineering and cost details. The approach taken does not appear likely to complete these projects efficiently or in a reasonable time frame. Described as “Civic Action Program”, the Defence Force might be better employed on smaller and better defined community-based projects more suited to its capabilities.

25.2.4 Office of Rural Development

The DSIP was included in the ORD budget allocation to 2012; previously this was administered through DNPM. The DSIP was budgeted at K178 million/year in 2011 and 2012. Up to that date DSIP funds were spent almost entirely on sub-national roads and ORD had a monitoring role for this expenditure. However the details of projects were held at District level and there is no national statement of acquittal of the funds or of the works carried out.

In 2013 a greatly increased DSIP budget of K890 million was disbursed directly to Provincial Governments (see below).

25.2.5 Department of National Planning and Monitoring

DNPM administered a number of road projects directly up to 2010 but these have now been assigned to other agencies as described above. Remaining under DNPM are:

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 Tax credit program – provisions under the tax credit programme have been: 2011 - K60 million, 2012 and 2013 - K130 million each year. The forward provision in the PIP for 2014- 2015 is - K80 million/year. Part of this spending is on roads constructed as tax offsets by, or on behalf of, the private sector resource developers. However, the amount in each year that can be allocated to roads and the division between national and sub-national roads is also unclear;

 Economic Corridor Development – provision has been made in the budget and PIP for, 2012 – K10 million, 2013 no provision; 2014 and 2015 – K5 million/year. So far work has proceeded on legislation to establish the PRAEC corridor implementation authority and the future provisions are for feasibility studies.

25.2.6 National Road Safety Council

NRSC submitted a K4.1 million program for 2012 for support of its various awareness and education functions, none of which were funded but K1.0 million/year was allocated to the National Road Safety Program for 2012 and included in the PIP to 2015. In 2013 NRSC submitted a program of five projects seeking funding comprising: (i) the road traffic accident database maintenance; (ii) a national road safety programme; (ii) development of a road safety school curriculum; (iii) the social costing of road accidents; and (v) a driver education programme and driving school, in total a request for K4.2 million in 2013, K1.82 million in 2014, K1.65 million in 2015 and K0.3 million in 2017. No funding was forthcoming or any future funding signalled in the PIP.

The failure to fund the modest requests of NRSC from the development budget will be partly reflective of Government’s view that NRSC has a dedicated funding source from the 3rd Part Insurance Levy, even though this is at an insufficient level and increases have been suggested.

25.2.7 National Roads Authority

The NRA has requested budget support in lieu of the establishment of the full system for road user charges, so that it can fulfil maintenance commitments on those roads that have been transferred to its care.

A budget request of K67.7 million for 2012 was only partially funded to the amount of K15 million and K20 million in 2013. The request for outyears to 2016 was K25.3 million/year and the indicated provisions in the PIP are K30 million/year for 2014 and K20 million/year for 2015-2016. Internally sourced funds from user charges, together with donor financing brings the total funds available to NRA to K133.7 million/year over the period 2012-2016.

The NRA has also been pursuing possible private sector, described as PPP, debt-financing of “high impact” road projects. The model for delivery of these projects is still being formulated but appears to be invite tenders for construction and ongoing maintenance under a performance-based contract arrangement, with the contractor arranging finance and the NRA (or GoPNG) repaying the loan over a period possibly as a repayment related to traffic use of the road or as a conventional loan. There is discussion on PPPs in the NTS main Volume 2.

In addition, NRA has been given responsibility for the funding of Lae to Nadzab 4-laning project, with budgets of K150 million in 2013, K100 million for 2014 and 2015 and K50 million for 2016. This is the first road project to be given assistance from the SWF and the funding will be passed through the Infrastructure Account and managed initially by the proposed new IDA. The project is for improvements from Lae Wharf to the 2 mile roundabout, where the four lane section will commence and finish at the Wau Road junction. From that point to Nadzab, the road will be improved two-lane construction.

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25.2.8 Provincial Governments

The forward allocation of Transport Infrastructure Maintenance Grants (TIMG), Special Support Grants (SSG), District Services Improvement Program (DSIP), Provincial Services Improvement Program (PSIP) and Project Grants to the provinces in the 2012 and 2103 budgets were:

 TIMG – the amounts for 2012 - K79.4 million and 2013 - K100.7 million continue the planned increase in these grants according to the RIGFA. Amounts are allocated to each province according to its circumstances. NCD and ABG are not included in this grant.

 DSIP – from 2013 these funds are channelled directly through the provinces rather than administered by ORD on a district basis and there has been a large increase to K890 million. In the past the majority of this expenditure has been on roads, and it is assumed that 75% of the 2013 and forward DSIP is available for roads expenditure. No indication of forward funding intentions.

 PSIP – from 2013 these funds are channelled directly to the provinces at a value in 2013 of K445 million; the PSIP is exactly half the DSIP in each province. Again, a large proportion of this expenditure is expected to go on roads, 75% assumed No indication of forward funding intentions.

 SSG – funded at K91 million in 2012 and K101 million in 2013 with no indication of forward funding, applied to a variety of projects in the resource development areas with Western Southern Highlands and Enga the main beneficiaries; part of this expenditure will be on local roads.

 Provincial and District Support Grant (Members non-Discretionary Funding) – K27.3 million/year to 2016 is signalled in the PIP; part of this funding will go to road projects (25% assumed)

 Grants for Provincial Road Projects – these vary from year to year with no indication of funding continuity. In the 2013 budget K 41 million was allocated to town roads and a further K20 million to specific road projects (see Table 40)

 Autonomous Bougainville Government (ABG) – the support to Bougainville includes DSIP and PSIP funding plus K100 million to high impact projects, some of which will be roads.

25.2.9 Summary of Ongoing and Committed Road Projects

Table 40 overleaf summarises the on-going and committed projects and funding. For years 2012 and 2013 the amounts are either actual or budgeted while the years 2014 to 2017 are based on the PIP, donor intentions and Government statements. Where there is capacity within donor programs to accept additional projects, this has been shown.

The projects/programs have been grouped into: (i) routine maintenance; (ii) repairs, resurfacing and rehabilitation; (iii) upgrading (which is mainly gravel to seal; and (iv) new construction. Because some programs combine elements of more than one class of work it is not possible to be exact with these classifications. Urban and rural, national and provincial, have been separated as far as possible in a similar way. In this table, the funding for routine maintenance under DOW is assumed to rise annually, although the amount shown falls well short of the requirement as discussed in 25.2.2 above.

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Table 40 – Committed and Ongoing Road Infrastructure Projects, K million Agency Source 2013 2014 - Medium Term Transport Plan Program/Project 2018 2014 2015 2016 2017 2018 Routine Maintenance (mainly) Maintenance of national roads and bridges (recurrent budget) DOW Recurrent Budget 64 450 70 80 90 100 110 NRA Dev Budget 20 70 30 20 20 0 0 (Assumes RUC now becomes operational 2014-15) NRA From Revenue 20 635 30 75 130 200 200 Maintenance of Provincial Roads Provinces TIMG 101 650 110 120 130 140 150 Routine maintenance, national and provincial 192 1805 240 295 370 440 460 Repair, Resurfacing, Rehabilitation (mainly) Rural National & Provincial Roads – Donor Supported RMRP-2 (World Bank/GoPNG) DOW Loan/D Budget 30 78 26 26 26 0 0 HRRMUP (GoPNG funded completion) DOW Loan/D Budget 75 75 75 0 0 0 0 HRRIIP MFF Loan(ADB/GoPNG) Projects 1, 2 DOW Loan/D Budget 100 380 100 100 100 80 0 Projects 3, 4 (to be identified from list) DOW Loan/D Budget 0 120 0 0 0 20 100 TSSP – Roads in 9 Provinces Committed/Identified Projects DOW Aus Grant 227 329 200 129 0 0 0 Future Projects (exact sections to be identified) DOW Aus Grant 3 656 69 50 179 179 179 Total DOW Aus Grant 230 985 269 179 179 179 179 Rural national & provincial roads – donor supported 435 1638 470 305 305 279 279 Rural National Roads - GoPNG Highlands Highway Maintenance DOW D Budget 80 200 100 100 0 0 0 Individual National Roads Maintenance DOW D Budget 50 300 100 100 100 0 0 Koroba to Kopiago Road Rehabilitation DOW D Budget 10 91 25 40 26 0 0 Tax credit scheme (assume 50% to roads) DNPM TCS 40 200 40 40 40 40 40 Rural national roads - total 180 280 265 240 166 40 40 Rural Provincial Roads - GoPNG Nuku to Arkusame rehabilitation (Sandaun) DOW D Budget 5 0 0 0 0 0 0 Kulupuga Road DOW D Budget 10 0 0 0 0 0 0 DSIP – assume 75% on roads PGs D Budget 670 3350 670 670 670 670 670 PSIP – assume 75% on roads PGs D Budget 335 1675 335 335 335 335 335 Special Support Grants (SSG, assume 25% to roads) PGs D Budget 25 125 25 25 25 25 25 Wabag – Kompiam Road (Enga) PG D Budget 3 0 0 0 0 0 0

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Agency Source 2013 2014 - Medium Term Transport Plan Program/Project 2018 2014 2015 2016 2017 2018 Yampu – Londol Road (Enga) PG D Budget 2 0 0 0 0 0 0 Kerowagi – Bogo Road (Simbu) PG D Budget 3 0 0 0 0 0 0 Nagum – Urimo Road (East Sepik) PG D Budget 5 0 0 0 0 0 0 Tari – Ambua Road (SHP) PG D Budget 5 0 0 0 0 0 0 Members’ PSG/DSG (assume 25% to roads) PG D Budget 7 35 7 7 7 7 7 Rural provincial roads - total 1055 5185 1037 1037 1037 1037 1037

Urban Roads Port Moresby/NCD Roads DOW D Budget 100 Goroka Town Roads DOW D Budget 10 Kerema, Wabag, Hagen, Kundiawa, Madang, Telefomin PG D Budget 41 Urban Roads - total 110 0 0 0 0 0 0 New Construction – new links and extensions (mainly) Malalaua - Kotidanga - Kaintiba DOW D Budget 10 0 0 0 0 0 0 Future stages of Highlands Highway Design DOW D Budget 30 0 0 0 0 0 0 Gulf to S Highlands Highway Design DOW D Budget 10 0 0 0 0 0 0 Kikori to Kerema Design DOW D Budget 10 0 0 0 0 0 0 Vanimo Highway upgrading (NR0009) DOW D Budget 10 0 0 0 0 0 0 Bubuleta - Agaun (M Bay N Coast Rd extension/upgrade) DOW D Budget 5 0 0 0 0 0 0 Baiyer-Aiome-Madang (Missing link) Defence D Budget 20.1 20.1 0 0 0 0 0 New construction - total 20.1 20.1 0 0 0 0 0 Bridges ADB Bridge Replacement & Rural Access DOW Loan 72.5 208 72.5 67.5 67.5 0 0 Yowar, Minjung and Wasa Bridges DOW D Budget 17 0 0 0 0 0 0 Bridges - total 72.5 208 72.5 67.5 67.5 0 0

Total – Roads and Bridges 2,064.6 9,136 2,085 1,945 1,946 1,796 1,816 Through national budget (inc loans and grants) 908.6 3,116 978 793 739 519 539 Through internally-generated revenue 20 635 30 75 130 200 200 Through tax credit 40 200 40 40 40 40 40 Through inter-governmental funding to provinces 1096 5,185 1037 1037 1037 1037 1037

Note: items in italics are assumed continuation of funding for certain programs such as DSIP, PSIP and for future continuation of donor programs.

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25.3 Committed and Ongoing Maritime Projects

25.3.1 Department of Transport

There are two investment items in the DOT budget for Ongoing and Committed maritime: Projects  Coastal Vessels Program – K37 million was 232. Maritime appropriated in 2011 under this program assigned to DOT although not requested in the The largest committed project is sector budget submission. Previously under Lae port at a projected cost of DNPM budget this program was for the purchase K770 M between 2010 and 2014 of coastal work boats. A further K13 million was or later. appropriated in 2013 under the ORD budget. Alotau Wharf rehabilitation has The NTS does not support Government been funded to K15 M although involvement in transport services except under not identified as a priority project arrangements for CSO delivery discussed in the by TIPS NTS. There is no ongoing commitment to funding. The Community Water Transport Project Stages 1 and 2 will  Community Water Transport – this ADB- construct up to 250 small jetties supported programme includes the shipping NMSA will complete its franchise scheme and the rural jetties program, restoration of small navaids which funds 40 jetties under CWTP, with a further 210 jetties planned under GoPNG funding with planning provided by the new Rural Infrastructure Division of DOT. Budget funding under CWTP was 2011- K5.3 million; 2012 - K23.6 million appropriation of which GoPNG contributed K10 million. A second programme CWTP -2 with ADB loan funded has been approved but not initiated and there is no further GoPNG funding scheduled under the PIP.

25.3.2 Department of Works

DOW has not historically been involved in maritime infrastructure. However, in the 2012 Budget, DOW was funded for K7 million for wharves and jetties repair, although not requested and this has not been continued in the 2013 budget or PIP.

25.3.3 IPBC

IPBC, as the financial holding company for various SOEs, is the borrower for the ADB Lae Port project, although engineering and operational matters and ongoing ownership lies with PNG Ports.

The Lae Port Project is funded through loans and grants: (i) the original loan for $100 million ADB, $6 million OPEC and GoPNG counterpart of $45.75 million equivalent; (ii) additional financing in 2011 for ADB $189.1 million, OPEC $6 million and GoPNG counterpart $94.0 million equivalent. The overall project cost of works is approximately K770 million with construction spread over the period 2010 to 2016 or later.

25.3.4 NMSA

NMSA has been funded for K5 million/year for 2011 for small navaids and K1.0 million for tide gauges. For 2012 K6.9 was requested for navaids, and K5.0 million approved. No budget funding was appropriated for NMSA in 2013 and there is currently no provision in the PIP for future years. However a Maritime and Waterways Safety Project Loan has recently been agreed between GoPNG and ADB for replacement and new navigation aids over the period 2013 to 2018 at an overall cost of K100 million including a GoPNG counterpart contribution of K14 million. NMSA revenue is discussed in Section 24.5.5.

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25.3.5 PNG Ports Corporation Ltd

PNGPCL was been funded from the Development Budget for two projects in 2012 only one of which involved ongoing funding. Eleven (11) projects were turned down for Budget funding for 2012.

 Alotau Wharf Rehabilitation – a budget request for K40 million was made and K15 million/year appropriated for 2012 with further K15 million shown in the PIP for each year 2013 to 2015. However, no further funding was made available in 2013. The TIPS preliminary analysis did not give a high BCR for capital intensive rehabilitation and a more detailed feasibility study of options for ongoing management of the wharf is indicated

 Rubber Tyred Gantry (RTG) Cranes for Lae – a request for K34 million was funded to K23 million in 2012. Lae port is the most commercially viable of all PNG ports and this puts in question the requirement for national budget support rather than financing equipment from revenue or borrowings through IPBC. There is also a strategic development issue of whether PNGPCL should own and/or operate heavy port handling equipment rather than outsource this to the private sector.

No appropriation was made for PNGPCL in the 2013 Development Budget although seven of the previously submitted projects were again put up for funding. Projects that were not funded in 2012/2013 are shown in Table 27 above. Comments on individual ports and projects are discussed in Section 26.3.

PNGPCL also has provision for funding maintenance of national ports from its own revenue as discussed in Section 24.5.4.

25.4 Committed and Ongoing Air Transport Projects

25.4.1 Department of National Planning and Monitoring

An amount of K10 million was provided as air freight subsidy in the 2012 budget, to help establish a new Ongoing and Committed operator Travel Air. While provision was made in the PIP Projects for ongoing expenditure this was not continued in 2013. 233. Air Also refer to the discussion on subsidies in Section 8.6.10 The CADIP program provides and 13.5.1. committed funding through to 25.4.2 PNG Air Services Ltd 2017 for security works, upgrading of airport runways to PNGASL has applied for Budget support for the following F100 standard, and other priority infrastructure projects: works at the national airports

 Replacement of ATM systems, new ATM building CADIP also provides committed and services, Aeronautical Communications and funding for air communications, Aeronautical Surveillance: these infrastructure navigation and air traffic replacements are funded from CADIP Loan (ADB) management systems grading with a GoPNG counterpart contribution; however, There is limited and there is a funding shortfall for which PNGASL uncoordinated support for applied to Government for budget support as provincial airports and rural shown in Table 41 below. This support comprises airstrips that needs to be 80% of the project cost. K5 million was brought into a well-planned appropriated in 2012 and K14.3 million in 2013. prioritised multi-year programme led by DOT with implementation Radio Navaids Replacement at Port Moresby – a  carried out by agencies with an one-off budget request for K 5 million in 2012 was airports engineering capability approved

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25.4.3 National Airports Corporation

NAC’s forward infrastructure commitments are all within the CADIP program, of which Project 1 is active. Project 1 includes:

 airport security fencing at Hoskins, Goroka, Gurney, Kavieng and Wewak;  upgrades of the airport runways at Hoskins, Mt Hagen, Gurney and Wewak;  apron extension at Port Moresby;  terminal upgrade for Mt Hagen;  fire tenders

The cost estimates and schedule are shown in . As with the air navigation under CADIP, the costs are much higher than originally estimated, leaving a funding shortfall of just under 30%. The Government has contributed K8 in the 2011 Development Budget and made appropriations for K15 million in 2012 and K16 million in 2013.

This provides the opportunity to reassess the projects using the TIPS 2010 model to decide the priority ranking for the Project-1 components for inclusion in the MTDP. All of the security fencing projects rank highest, while the upgrade to Gurney ranks lowest, with a negative BCR.

Table 41 – Committed and Ongoing Air Transport Infrastructure Projects Agency Source 5 year 2011 2012 2013 2014 2015 Program/Project Total National Airports CADIP Project 1 ADB Loan NAC Loan 224.9 1.8 34.8 153.4 34.9 - GoPNG counterpart NAC GoPNG 59.4 8.0 15.0 16.0 20.4 - Total NAC Total 284.3 9.8 49.8 169.4 52.3 - Port Moresby Apron NAC Provincial Airports Telefomin Sandaun D. Budget 8.5 - 2.0 3.0 2.5 1.0 Kundiawa Simbu D. Budget 5.0 - - 5.0 - - Wapenamanda Enga D. Budget 5.0 - - 5.0 - - Rural Airstrips Maintenance DOT D. Budget 6.0 - - 6.0 - - Air Navigation ATM/CNS Replacement ADB Loan PNGASL Loan 40.5 - 12.3 20.1 8.1 - GoPNG counterpart PNGASL GoPNG 7.1 - 2.1 3.7 1.3 - Unfunded PNGASL none 201.2 - 75.6 77.0 48.6 - Total PNGASL 248.8 - 90.0 100.8 58.0 - Radio Navaids PNGASL D. Budget 5.0 - 5.0 - - - Replacement

25.4.4 Provincial Airports

There are currently three projects within the national budget and PIP, included in the grants to provincial government:

 Sandaun – Telefomin Airport Development: to develop and extend the airstrip to airport status; K10 million over four years to 2015

 Kundiawa – K5 million in 2013 for pavement upgrading and drainage works

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 Wapenamanda – K5 million in 2013 for security fencing of airport

25.4.5 Rural Airstrips

In theory the TIMG include an allowance for rural airstrip maintenance but use of the funds is not reported nationally and it is believed that little of the grant is applied to rural airstrip maintenance. The budget requirement to meet MTDP targets for rural airstrip restoration is shown in Table 31.

In the 2013 Development Budget K6.0 million was appropriated to the Department of Transport budget for rural airstrip maintenance and the Department is currently developing processes for assigning this funding to priority rural airstrip projects and engagement of implementation resources. It is likely that DNPM will be requested to spread this budget commitment over a period of several years to allow a well-planned approach, commencing with a status and condition review of the airstrips, consultation with operators/users, identification of the airstrips’ current and future role and the contributions required from local village/community groups to ongoing upkeep.

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26 Priorities for Selecting Projects for the MTTP

26.1 Introduction

This section of the NTS assesses the priorities for adding additional projects to those already committed for funding. The capacity for including additional projects will be constrained by the amount of funding allocated to the sector and the capacity of the sector to internally generate revenue sufficient to fund maintenance and capital works.

A preliminary assessment of priorities using the TIPS 2010 model (with data and modelling enhancements) has been used to generate the priority lists that follow.

26.2 Priorities for Roads

26.2.1 Priorities for Rehabilitation of National Sealed Roads

The following existing national roads are provisionally identified from TIPS analysis as priorities for light rehabilitation (fair condition roads) or heavy rehabilitation/reconstruction (poor condition roads). DOW will commission field surveys to first visually inspect the road condition to confirm the extent of deterioration and make a preliminary estimate of cost. Classified traffic counts will be carried out to DOT specification.

If this confirms the general need to rehabilitate or reconstruct, then follow-up road pavement investigations will be made to establish pavement layers, residual strength and any subgrade weaknesses, carry out pavement deterioration and road user cost modelling using HDM-4 and develop a treatment plan with cost estimates. At each stage the project list will be reviewed and re- ranked according to the latest data.

Table 42 – Provisional Priorities for Rehabilitation of Sealed Sections, National Rural Roads RAMS Vicinity Indicated Length Cost BCR Road Sections Treatment kms K M 2010 National Routes NR07 – Highlands Highway 510 Kundiawa - Hagen Rehab 10.1 11 8.4 NR07 – Highlands Highway 590 Hagen-Mendi Reconstruct 9.8 13 8.3 NR08 – Ramu Highway 200 Madang Rehab 11.3 12 7.7 NR07 – Highlands Highway 020-060 Lae - Nadzab Rehab 33.8 37 6.4 NR07 – Highlands Highway 400 Goroka - Kundiawa Rehab 5.5 6 5.8 NR07 – Highlands Highway 270,330 Waterais - Goroka Rehab 21.9 24 4.6 NR09 – Coastal Highway 010 - 030 Madang to Plant. Rehab 20.7 20 3.7 NR06 – Enga Highway 030-100 Part 1 Rehab 64.4 71 2.8 NR01 – Hiritano Highway 020-030 POM - Veimauri Rehab 22.4 25 1.9 NR07 – Highlands Highway 150, 160 Nadzab - Waterais Rehab 20.2 22 1.4 NR04 – Wau Road 100-130 Mumeng- Wau Rehab 33.3 32 1.3 NR08 – Ramu Highway 020-040,090 NR07 - Bundi t.o. Rehab 36.2 40 1.0 NR04 – Wau Road 050-060, 080-090 NR07 - Mumeng Rehab 35.4 34 0.9 NR10 – N Britain Highway 290 Hoskins Reconstruct 14.1 19 - NR12 – Sepik Highway 160 - 170 Hayfield-Karaitem Reconstruct 20.3 28 0.7 NR12 – Sepik Highway 110 - 150 Hayfield-Karaitem Rehab 46.6 44 0.7 NR12 – Sepik Highway 020 - 100 Passam - Hayfield Rehab 93.3 89 0.7 NR01 – Hiritano Highway 160-170 Bereina - Kerema Rehab 33.8 34 0.6 NR07 – Highlands Highway 600-610 Hagen - Mendi Rehab 20.8 23 0.6 NR08 – Ramu Highway 160 Bundi - Madang Rehab 5.2 6 -

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RAMS Vicinity Indicated Length Cost BCR Road Sections Treatment kms K M 2010 National Main Roads NM3901 – Baiyer Road 020 - 070 Part 1 Rehab 49 46 3.9 NM4601 – Momote Road 010 - 030 Part 1 Rehab 28.2 27 3.2 NM3903 – Ogelbeng - Dona 010 - 040 Part 1 Rehab 28.2 27 2.0 NM3903 – Ogelbeng - Dona 050 Part 1 Reconstruct 5.2 7 1.6 NM5002 – Aropa Rd 010 - 040 Arawa to Aropa Reconstruct 30.5 41 1.3 NM3901 – Baiyer Rd 080 Part 1 Reconstruct 5.2 8 1.0 National District Roads ND4001 – Kerowagi Access 010 Part 1 Rehab 6.8 6 0.9

26.2.2 National Rural Road Sealing The following existing national roads are provisionally identified as priorities for upgrading from gravel to sealed standard. As part of policy under the MTDP all national roads are eventually to be sealed. These selected roads show a BCR generally greater than 1 using the TIPS 2010 model.

However, these will require a staged process of field inspection and preliminary design to better estimate engineering costs cost, classified traffic volume counts conducted to DOT specification, followed by economic analysis using the HDM-4 economic evaluation model or similar to re- estimate the BCR. This will allow the candidate roads to be more confidently ranked for programming purposes.

Table 43 – Provisional Priorities for Upgrading to Seal, National Rural Roads RAMS Vicinity Length Cost BCR Road Sections kms K million 2010 National Routes NR0002 – Magi Highway 580 to 590 Sagarai to Gumine 46.8 25 12.1 NR0009 – Coastal Highway 530 to 600 Wewak to Sandaun bdr 84.4 95 4.8 NR0005 – Wabag to Mendi 050 to 280 Kandep to nr Mendi 50.0 56 1.4 NR0001 – Hiritano Highway 220 to 250 Malalaua to Epo 57.0 58 1.3 NR0009 – Coastal Highway 410 to 470 Angoram to near Wewak 56.4 68 1.1 NR0003 – Northern Highway 050 to 090 Oro Bay to Bareji Jnc 36.9 42 1.1 NR0008 – Ramu Highway 130 to 180 remaining unsealed sections 44.0 54 0.9 NR0012 – Sepik Highway 200 to 260 Mai to Karaitem 73.5 83 0.8 National Main Roads NM3903 – Ogelbeng- Dona 060 to 080 Numga CS to Wara Mombl Br 27.1 33 3.6 NM3601 – Kokoda 060 to 090 remaining unsealed sections 30 53 3.5 NM4201 – Aseki Road 010 to 120 Wau Jnc to Aseki 85.9 130 3.3 NM3701 – Koroba Road 080 to 190 Nipa to Tari 96.9 109 3.0 NM3801 – Porgera Road 010 to 090 Kandep Jnc to Porgera 70.4 79 2.8 NM3701 – Koroba Road 010 to 070 Mendi to Nipa 57.6 65 2.6 NM3703 – Erave 030 to 090 Ialibu to Erave 73.2 82 2.0 NM3103 – Tabubil Road 110 to 140 Tapko to Tabubil 47.7 53 2.0 NM3103 – Tabubil Road 010 to 100 Kiunga to Tapko 76.3 86 1.8 NM4501 – Ainbai 010 to 060 Bewani Jnc to Ainbai Jnc 56.3 69 1.7 NM3305 – Kupiano 010 full length 8.9 11 1.6 NM3701 – Koroba Road 200 to 240 Tari to Koroba 40.6 47 1.0 NM3705 – Kagua 010 Kagua Jnc to Kagua 10.0 11 1.0 NM4604 – Manus East-West 010 to 050 Momote Jnc to Bundralis 52.8 59 1.0

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RAMS Vicinity Length Cost BCR Road Sections kms K million 2010 NM4701 – Boluminski H’way 270 to 320 Matakam Br to Manga 70.5 88 0.8 National District Roads ND3705 – Pangia Road 010 to 030 full length 23.1 26 3.9 ND4801 – Korere 040 Bai to Rapindik 5.0 6 2.8 ND3703 – Poro to Moro 010 to 100 Koroba Rd to Moro 112.6 126 2.6 ND4701 – Kaut 010 to 030 Boluminski Hway to Kaut CS 25.2 28 2.0 ND3314 – Hula Road 010 Gabagaba Jnc to E. Gabona 12.6 15 1.6 ND3313 – Kelewakra Road 010 to 050 full length 48.0 54 1.5 ND3307 – Launa Road 010 to 030 full length 30.0 34 1.4 ND4704 – Lihir Ring Road 020 to 030 Pali to Londolovit 43.2 52 1.4 ND3315 – Moreguina Rd 010 Magi H’way to Moreguina Stn 10.1 11 1.4 ND4102 – Dunantina Dumpu 010 to 040 HH’way to Hagulagabi 47.9 22 1.4 ND4103 – Okapa Road 020 to 030 Part 1 23.0 26 1.4 ND4305 – Mis to Kamba 020 Part 1 2.9 4 1.3 ND4703 – West Coast Rd 090 to 180 Kolube to Fagalawa t.o. 105.1 118 1.1 Note: Bougainville roads not included in this table

26.2.3 Construction of New and Restored Road Links

The MTDP identifies a number of proposed economic development corridors, several of which are located around new inter-regional connecting roads. Outside of the defined economic corridors there are several other “missing link” roads, most of which have appeared on earlier national development plans. There are also a few cases where existing inter-regional or inter-district linking roads have fallen into disuse through lack of maintenance and natural events, such as landslips. The missing links and economic corridor roads are listed below in order of BCR from the preliminary TIPS 2010 analysis. The priorities are sensitive to the estimated traffic volume using each route, together with the cost estimates, and will need to be confirmed by more detailed feasibility studies that take better account of induced demand effects.

Table 44 – Priority List of Missing Links and Economic Corridor Roads ML, Route length for new Capital BCR Section (Route/Highway) EC or construction or upgrading, Cost RC (1) kms K mill. U/grade New Total 2010 Links with BCR >1.0 Bialla-Kerevat (part of New Britain Highway) ML 176 74 250 717 3.4 Kundiawa-Ramu (Bundi Highway) RC 98 12 110 300 1.8 Towei-Erave (part of Gulf to S Highlands) EC 105 70 175 897 1.6 Morobe-Ioma- Popondetta (N Highway Extn) EC 33 118 152 456 1.4 Morehead-Daru (part of Kiunga to Daru) EC 91 125 216 616 1.1 Rabaul-Cross Island Rd (NB S Corridor) EC 289 147 436 1304 1.1 Cross Island Rd-Gloucester (NB S Corridor) EC 376 56 432 1304 1.1 Links with BCR 0.5 < BCR <1.0 Kimbe-Gloucester (part of N Britain Highway) ML 122 148 270 949 0.9 Lae-Finschhafen (Huon South Coast) ML 83 39 121 409 0.9 Kupiano-Gadaisu (Magi Highway CP-MBP) ML 88 129 217 1030 0.9 Baiyer River-Madang (WHP to Madang) ML 94 66 160 832 0.8 Popo-Wau (Trans-Island Road) ML 22 154 176 1370 0.7 Kiunga-Mendi (Western – SHP) EC 168 136 304 1707 0.6 Kerema-Towei (part of Gulf-S Highlands) EC - 165 165 1538 0.6

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ML, Route length for new Capital BCR Section (Route/Highway) EC or construction or upgrading, Cost RC (1) kms K mill. U/grade New Total 2010 Wau-Garaina-Morobe EC 74 83 157 1258 0.5 Links with BCR < 0.5 Bariji-Safia-Moreguina (Oro to Central) EC 25 122 147 995 0.3 Aitape-Vanimo (part of Coastal Highway) ML 133 31 164 433 0.3 Saidor-Wasu-Sialum (Huon N Coast) ML - 100 100 400 0.3 Bogia-Angoram (Momase Corridor) EC 40 70 110 551 0.3 Pagwi-Ambunti-Laiagam Rd (ESP to Enga) ML 12 245 257 1906 0.2 Kopiago-Telefomin-Tabubil (SHP to Western) ML - 184 184 1627 0.2 Kiunga-Morehead (Kiunga to Daru) EC 42 330 372 1127 0.2 Siara Jnc-Soraken-Kunua (Bvlle W Coast) ML 117 86 203 793 0.1 Bewani-Amanab-Telefomin (Border Corridor) EC 122 294 416 2674 0.1 Bubuletta – Rabaraba-Agaun (MB Prov) ML 41 174 215 1330 0.1 Notes: (1) ML - Missing Link, EC – Economic Corridor Road, RC – Restored Connection (2) capital costs and BCR calculation exclude land acquisition, pre-construction (feasibility studies and design) and construction supervision costs

For comparative purposes, all roads were evaluated assuming on the same basis using a nominal three year construction period 2011-2013. If a project is constructed later in the 20 year period of the NTS, intervening population, economic and traffic growth should lead to a higher BCR, provided that construction costs have not risen in real terms.

The links have been grouped into:

 those with preliminary BCR greater than 1.0, which have good potential to be economically viable, so should be given priority for feasibility study;  those with BCR under 1.0 but above 0.5. This group may become economically viable over time, and are worth more detailed feasibility in conjunction with complementary development in the economic corridor which may raise their ranking;  those with BCR less than 0.5 - this last group are much less likely to be economically viable, mainly due to long distances, high cost due to terrain obstacles such as major river crossings, mountain ranges and swamp, and relatively low catchment population.

As noted earlier, the future funding envelope and capacity constraints provide very little scope for constructing new road links.

26.3 Priorities for Maritime Projects

26.3.1 Introduction

The content of the maritime sector infrastructure investment component of the MTTP for the 2011- 2015 period is heavily influenced by the Lae Port Development. Although assessed to be self- financing, in that revenues can support the project loan, it forms a large capital commitment and will limit the extent to which other port infrastructure can also be developed, other than committed and ongoing projects.

In the port sector, there are a number of market and feasibility studies intended by PNG Ports, and the pattern of port development later in the first five year period and beyond between 2016 and 2030 will be influenced by their findings.

As with other sectors, maintenance of the existing port infrastructure should take first priority for funding, followed by upgrading and new development only where funds permit and where these can be shown to be sustainable both financially and economically. The extent to which a CSO

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obligation is recognised by Government and is funded, will influence the extent of rehabilitation at the non-commercial ports and for lower level port infrastructure.

26.3.2 Maintenance and Rehabilitation for Main Ports

The TIPS 2010 evaluation indicated high BCRs (greater than 10) for continuation of basic maintenance of all the operational main ports with the exception of Daru (BCR of 0.2) and Aitape for which no assessment was made.

Wharf rehabilitation projects evaluated by TIPS 2010 were ranked as shown in Table 27.

Dredging of the berths at several wharves is needed to remove accumulated siltation. Dredging at Kimbe, Rabaul, Oro Bay and Vanimo improve wharf operability and showed good BCRs (range 4 to 7). Dredging at Daru and Kavieng gave low BCRs

In each case the BCRs are a comparison of rehabilitation compared with ongoing basic maintenance. With the exception of Lae pavement repairs, the rehabilitation projects, all of which involve substantial capital outlays, give BCRs well below 1.0. The assessments were made from the viewpoint of increased efficiency of port and ship operation before and after the rehabilitation work. They do not reflect the cost of the wharves becoming unserviceable over time if rehabilitation work is not carried out. The analysis indicates that for most wharves a policy of continued basic maintenance and spot repairs is preferred to major rehabilitation. For the non-commercial ports, rehabilitation should be accompanied by CSO funding from Government, rather than require internal cross subsidy from PNGPCL.

26.3.3 Main Port Upgrading and Extensions

Upgrading and expansion works will generally be justified on a financial basis at the three profitable main ports of Lae, Port Moresby and Kimbe. At the next level of main ports, upgrading and expansion may be justifiable on a national economic basis as traffic demand increases in the second half of the planning period, even though the ports do not return a profit at the present time (Rabaul, Wewak, Madang, Oro Bay and Alotau) provided that there is a clear expectation of increased cargo and vessel throughput and little risk of trade being diverted to other port facilities, including privately established ports. For all other PNGPCL ports there is unlikely to be any justification for upgrading or expansion and for some closure or divestment are more likely futures for certain PNGPCL ports (Kerema, Kupiano, Kinim, Lihir, Misima, Siassi, Samarai). Some of these have been evaluated by TIPS 2010. However for port projects, the TIPS methodology should be regarded as giving only an approximate indication of BCR and for investment of any size a more detailed economic and financial feasibility assessment will be required. This is because the TIPS 2010 method is a “one size fits all” process while the characteristics of demand/supply relationships and costs are sufficiently particular to each port to require specific analysis.

Committed and ongoing projects, such as the development of Berth 1 and tidal basin at Lae, were not included. A brief description of the port upgrading and extension projects is given below.

Lae Port Lae is the main export port for Papua New Guinea and experiencing the greatest capacity constraints in both berthage and storage. With its large hinterland and as the internal road network expands, Lae is likely to be become even more dominant as PNG’s primary port in the future. One of only three ports that are currently profitable and with limited opportunities for the development of private port facilities, Lae will be a main focus of port expansion in PNG over the time frame of the NTS. Projects aim to contain occupancy for both international and coastal berths below the 65% level needed for efficient operation through increased container transfer rates, and to increase container terminal storage capacity. Upgrading is also required for larger size bulk tankers. A

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master plan for Lae port covering the next 20 years is due for completion at the end of 2011 and will influence future revisions of the NTS.

 Berth 1 and Tidal Basin: dredging of a tidal basin 700m by 400m with entrance channel, 250m wharf, 200,000 teu container yard together with associated revetments, navigational aids, port link road, buildings and utilities. Committed funding from ADB.  Tanker Berth and Cement Wharf extension/reconfiguration: partial demolition and reconstruction as general purpose berths primarily for tankers and bulk cement vessels but otherwise available for container vessels. This project was proposed as an interim capacity enhancement while the tidal basin project was under development. Continuing need for this extension should therefore be reviewed as part of Lae Port Master Plan.  Berth No. 3 extension: this is an extension of the coastal berth from 130m to 240m length to accommodate up to three vessels. This project was proposed as an interim capacity enhancement while the tidal basin project was under development. The project was commenced in 2009. Continuing need for this extension as opposed to rehabilitation should therefore be reviewed as part of Lae Port Master Plan.  Mobile Harbour Cranes (MHCs): two mobile cranes for supplementing ship-mounted cranes to increase the rate of cargo transfer and reduce ship berthing time.  RTG cranes: seven rubber tyre mounted gantry cranes for container handling between quayside, container stack and road transfer area; funded in 2012 budget appropriation.  Inland port and transport link: to accommodate cargo growth and free portside space, an inland port terminal is under construction at 2 mile; a dedicated transport link has been proposed as a future development.  Portion 508 project: development of an area owned by PNG Ports requiring reclamation and development for storage and ancillary facilities, details to be determined by the Lae Port Master Plan study. Port Moresby The future development of the downtown port in Fairfax Harbour is influenced by the future role of private port facilities developed at Motukea to support the LNG development. The existing port is also constrained by its physical location close to downtown Port Moresby, with difficult land transport access that cannot be easily improved. While there will always be a need for main port facilities to service NCD and Central Province, the port’s hinterland has relatively little scope for expansion by new land transport connections. Future relocation of Port Moresby port to Tatana Island is a possibility but development rests upon master planning yet to be undertaken. In the meantime, projects are aimed at removing existing port constraints and improving productivity.

 Berth 4a Extension: 232m long x 25m wide overseas wharf, 57m long x 12m wide coastal wharf, dredging, revetment works, earthworks and pavements, drainage, electrical and water services. Existing pavement at Terminal 5 to be upgraded to a heavy duty concrete block finish to cater for container loads and serve as container storage area for the Berth 4A extension. The continuing need for this expansion project which was originally proposed as a stopgap while the main wharf was undergoing repair needs to be considered as part of Port Moresby ongoing master planning.  Mobile Harbour Cranes: two 40t capacity mobile container cranes to supplement ship- mounted cranes for improving container handling rates are proposed.  RTG cranes: three rubber tyre mounted gantry cranes for container handling between quayside, container stack and road transfer area were acquired in 2011.  Incinerator: quarantine incinerator and waste treatment facility to meet national/international biosecurity and safety requirements. This may be considered as a certification project required for the continued operation of the port, so has priority in that respect and has not been subject to economic analysis.

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Kimbe Kimbe is the third profit making port and a major export port for palm oil. The port also handles international and coastal general and container cargo experiences port congestion when schedules coincide.

 Tanker berth: a separate tanker berth for palm oil is proposed to reduce ship queuing and provide for long term expansion of the palm oil industry including developing Kimbe as a hub port for palm oil from other parts of PNG and the Solomon islands. The berth will be sized for new larger 200m tankers and is proposed in place of an earlier proposal to extend the existing common user berth. The TIPS 2010 analysis did not show the former extension project to be economically viable and this larger and higher cost project is expected similarly to have a low BCR. Wewak Wewak port does not generate revenue sufficient to cover its operating and maintenance costs. However, a major expansion of the wharf has been proposed.

 Wharf expansion: the design has been completed for this proposal to handle an increased in ship calls and longer vessels resulting from anticipated traffic for fish processing and for support of mining projects in the Sepik region. The project involves 100,000m³ of dredging, creation of 2,400 m² storage area, a new 180m x 9m wide earth filled causeway, 2 no. 32m x 5m wide approach trestles, two breasting and mooring dolphins and a 86m x 19m wide reinforced concrete wharf head. The TIPS 2010 economic evaluation gave a very low BCR for the project (0.02). Oro Bay There is no dedicated facility for handling dangerous goods at PNG ports. Oro Bay has been proposed by PNG Ports as a suitable port due to its distance from any main urban area. The facility would meet international code requirements and for this reason can be considered a certification project, with high priority. No economic assessment has been made.

 Dangerous goods facility: To ensure all classes of dangerous goods imports are well secured, safe and hazard free from the public, community and to protect the environment and marine life from spills. Small consignments would be transhipped on demand to other ports for immediate delivery. Daru Although it is the provincial capital, Daru port has historically carried very little traffic and serves only Daru town. The approach trestle reconstruction is required to enable the port to remain open.

 Daru Approach Trestle: the project involves demolition, removal and replacement of existing concrete deck and piles, and wharf service lines. The TIPS BCR for this project was very low, and the work would need to be viewed in the context of CSO expenditure.

26.3.4 Port Master Planning and Feasibility Studies

PNGPCL has commenced a series of port masterplan studies to better assess the port development needs over the next 20 years. The first of these for Lae is expected in early 2012 and further studies are planned for Kimbe, Madang and Rabaul. In addition there is a stakeholder working group for Port Moresby port possible relocation.

The NTS supports this initiative of PNG Ports and it is suggested that all master planning and associated feasibility studies should include demand/supply analysis including port operational modelling for the larger ports, preliminary site investigation and engineering order of cost analysis, financial and economic valuation, funding source analysis, including potential private sector

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involvement, risk identification and mitigation, environmental and social impact, land ownership and acquisition.

The NTS suggests that individual master plan and subsequent feasibility studies for main ports should address the following:  Lae: a master planning study currently in progress will be reviewed and extended as necessary to a detailed development plan for the port of Lae over the next 20 years.  Port Moresby: in conjunction with the port relocation stakeholder working group, a broad ranging study of port development options is required, including scenarios for the development of private port facilities and ownership/operational options, and covering all of the port facilities within Fairfax Harbour.  Rabaul: a master planning study of the future of the existing port of Rabaul, taking account of its volcanic ash risk and susceptibility to siltation, alternative port locations and future port hinterland and demand taking account of future road links along the north and south coasts of New Britain.  Kimbe: a master planning study of the future development of Kimbe port prior to commitment to the proposed Kimbe tanker berth project. The study will review demand for general cargo, palm oil and other specific cargoes; it should also consider the potential for joint venture or PPP involvement of the palm oil company which stands to benefit most from the project.

 Individual or collective engineering and demand studies for the smaller declared ports and ports which might be considered to become declared national ports in future to better estimate the rehabilitation needs, costs, utilisation and whether best operated by PNG Ports, provinces or by private interests. This study would also supply improved information to better determine the CSO component of funding needed at each port to supplement port revenues and match ongoing upkeep costs.

The future of main ports on the Papua and Momase coasts and inland road connections to the Highlands region deserves a major planning study before committing to projects such as a relocation of Madang port or a new main port development at Towei in Gulf Province. The new road link and new port proposals would involve very large capital investments and it is not clear that the economic gains will warrant the construction costs in comparison over increased investment in Lae port and the Highlands Highway to improve the capacity and reliability of this existing corridor.

Such a study should include consideration of future shipping patterns and the general industry trend towards larger higher capacity vessels, freight consolidation and hobbling out of fewer international ports. Ports that should be included in such a study are: Port Moresby, Towei, Lae and Madang. Existing main highways links that should be included are: Highlands and Enga Highways, Ramu Highway (upgraded), Bundi Highway (upgraded/restored), Hiritano Highway (upgraded) and Gulf to Southern Highlands link (now a committed project but would need to be further upgraded). Missing links that should be included are: Kerema-Towei; Trans-Island Road (Malalaua-Wau); and the proposed Baiyer-Madang link. Different combinations and sequencing of development should be explored in conjunction with development potential in the economic corridors to map out a long term strategy for combined investment in main port and main road infrastructure that will deliver the greatest economic and social benefit for investment cost and is deliverable within likely financial and capacity constraints. Economic benefits that should be considered include transport user and transport operator cost savings for shipping operators, port operators and road users. The study should include considerations of risk, particularly for large investment components with uncertain outcomes in terms of demand and development impact.

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26.4 Priorities for Air Transport Projects

26.4.1 Introduction

The MTTP for airports and air transport will be strongly influenced by the CADIP program, which largely sets out the investment programme for the national airports in the near to mid-term and the arrangements made to upgrade Port Moresby International Airport under possible PPP funding.

Beyond the initial CADIP Project 1, the feasibility of upgrading regional airports to jet status to be able to support direct connections from Australia, Pacific and SE Asian destinations needs to be addressed on an airport by airport basis as incremental network improvements. Initial indications are that only a few airport upgrades to B737-800 standard will be viable.

For the provincial airports and rural airstrips, the rehabilitation and upgrading will require CSO funding and airports and airstrips should be selected as set out in the NTS, taking account of their functional status, provincial and community contributions, and the funding gap to economic viability

26.4.2 National Airport Maintenance Section 24.8.3 noted a shortfall between operating revenue and funding requirement for NAC and that the 16 airports other than Port Moresby, Nadzab, Tokua, Mt Hagen and Madang should be regarded as having a CSO funding component, that should be supplied by Government through a contractual agreement with NAC. The funding deficit varies year to year and should be subject to detailed financial evaluation but is in the region of K50 to 60 million annually.

26.4.3 National Airport Capital Development Airport capital development requirements are funded from CADIP. As indicated in Section 24.8.3, the CADIP MTFF envelope should cater for development expenditure through to 2020, and this expenditure is for work that can be justified on economic grounds.

TIPS 2010 economic evaluations for the planned upgrades to the main airports are summarised in Table 45, together with their expected timing and tranche of funding from CADIP. Ongoing maintenance at all of the airports evaluated showed high BCRs. Works required to certify the airports to the standard required for the operations they currently support, mainly security fencing, also show high BCRs.

With the exception of Goroka, all of the proposed upgrades to F100 standard were evaluated as having BCRs greater than 1.0. Of the B737-800 further upgrades, Tokua (Rabaul) and possibly Wewak give BCRs over 1.0, but upgrading of Goroka and Gurney (Alotau) are probably not justified while Mt Hagen, Hoskins and Bougainville (Buka or more likely Aropa) have not been evaluated.

Table 45 – Airport Development Proposals and Economic Evaluation Airport and Project Cost K mill BCR Commitment / Timing Port Moresby International Development to Master Plan 1,011 3.9 2014 to 2026 (1) Nadzab (Lae) Security works for certification 6 40 CADIP-Proj 1, 2011-15 Upgrade as alternate to PMIA 119 (139) 1.1 CADIP-Proj 2, 2016-20 Mount Hagen Upgrade to F100 60 (101) 3.2 CADIP-Proj 1, 2011-15 further Upgrade to B737-800 (104) n/a CADIP-Proj 3, 2016-20 Tokua (Rabaul) Upgrade to F100 (70) n/a CADIP-Proj 2, 2016-20 Upgrade to B737-800 58 8.7 CADIP-II, 2016-2020 Madang Upgrade to F100 119 (79) 1.3 CADIP-Proj 2, 2011-15 further Upgrade to B737-800 104 (93) 0.0 CADIP-Proj 4, 2016-20

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Airport and Project Cost K mill BCR Commitment / Timing Hoskins (Kimbe) Security works for certification 31 4.6 CADIP-Proj 1, 2011-15 Upgrade to F100 44 (52) 2.0 CADIP-Proj 1, 2011-15 further Upgrade to B737-800 (97) n/a CADIP-Proj 3, 2016-20 Goroka Security works for certification 19 4.3 CADIP-Proj 1, 2011-15 Upgrade to F100 38 (46) negative CADIP-Proj 2, 2011-15 further upgrade to B737-800 (80) n/a CADIP-II, 2021-2025 Wewak Security works for certification 5 36 CADIP-Proj 1, 2011-15 Upgrade to F100 27 (35) 3.7 CADIP-Proj 1, 2011-15 further Upgrade to B737-800 80 (93) 1.0 CADIP-Proj 3, 2016-20 Gurney (Alotau) Security works for certification 13 4.6 CADIP-Proj 1, 2011-15 Upgrade to F100 15 (21) negative CADIP-Proj 1, 2011-15 further Upgrade to B737-800 (60) n/a CADIP-Proj 4, 2016-20 Kavieng Security works for certification 5 35 CADIP-Proj 1, 2011-15 Upgrade to F100 47 3.7 CADIP-Proj 2, 2011-15 further Upgrade to B737-800 (63) n/a CADIP-II, 2021-2025 Momote Security works for certification 5 18 CADIP-Proj 2 , 2016-20 Upgrade to F100 (38) n/a CADIP-II, 2021-2025 Buka Upgrade to F100 (62) n/a CADIP-Proj 4, 2016-20 Buka or Aropa Upgrade to B737-800 (63) n/a CADIP-II, 2021-2025 Notes: (1) PMIA Master Plan development expected to be self-funded, possibly including PPP; (2) parenthesis indicates project costs from CADIP, other figures and BCR from TIPS

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Part D – Resourcing, Monitoring and Review

27 Resourcing and Monitoring the NTS and MTTP

27.1 Resources Needed for Successful Implementation

The successful implementation of the National Transport Strategy and Medium Term Transport Plan relies on the Resourcing and Monitoring timely availability and efficient application of human, the NTS and MTTP financial, material and information resources. 234. Responsibility - The DOT Planning and Coordination The financial resources required have been detailed in Division will provide the preceding sections, and will be supplied through a resources for monitoring the combination of direct and indirect user charges, progress the policy, institutional Government budget appropriation, Grant and Loan and legislative reforms and the financing from multinational and bilateral sources, infrastructure development and provincial revenues and contributions from communities maintenance strategy and and NGOs. programme contained in the Capacity constraints in the transport sector and the NTS and the MTTP. general need to build staff numbers and capabilities in PCD will monitor the progress of the public sector have also been noted in Section 15 on the MTTP against input, output sector capacity building. and outcome indicators for policy, institutional and This section considers the particular resources needed to legislative actions and for carry out the administration, monitoring and updating of infrastructure development. the NTS and MTTP within the responsible government agencies, with the Department of Transport taking the DOT Policy and Research lead coordinating role. Division will annually report on the extent and condition of the 27.2 Information Needs transport infrastructure, on traffic and licensed transport users. An up-to-date, accurate, comprehensive and readily accessible database of information on the transport 235. Re-Establishing a system, its development and utilisation is important for Transport Database - DOT will monitoring the effects of policy initiatives and investments establish a project to rebuild its made in the transport sector. database of the transport system at national and provincial level, The TIPS 2010 study experienced difficulty in collecting using a GIS mapping platform, the minimum basic data required to carry out a rational so as to better equip itself to analysis and prioritisation of transport investment. In carry out its transport planning some cases this was due to an absence of data recording and policy analysis and collection, in other cases to lack of data organisation responsibilities making it difficult to efficiently collect and verify DOT will request, collect and information, and in other cases to a reluctance to share analyse data from the transport data among agencies. Some data collection and agencies to further the re- reporting that used to be done by government agencies establishment of its transport has stopped, again for various reasons, such as through data system, where necessary loss of key staff, budgetary restrictions or a loss of making use of its powers under recognition of the reasons for, and value of, regular data the Transport (Collection of series. Examples are the very limited data on the motor Information) Act vehicle fleet, road traffic surveys, and the lack of recent inventory and condition data on the sub-national road

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network.

The DOT is taking steps to rebuild its statistical database which covered most of the planning and policy monitoring information required, but progress is slow and the management and staff resources being applied are very limited. Physical transport planning is also very much reliant on the geographic mapping of information, and most such data systems utilise one of the proprietary geographic information system (GIS) software platforms so that information can be called up for analysis and reporting. The DOW has a GIS database as part of its road and bridge asset management system and the NEFC was instrumental in producing the Geobooks system of provincial GIS mapping.

Accordingly, building a GIS enabled database that can interchange data sets with other Government users for infrastructure planning, regulatory oversight of the transport industry and policy analysis, is a recommended action for the Policy & Planning wing of the DOT. This will require the establishment of a dedicated unit, recruitment of suitably qualified staff, and most likely the recruitment of an external consultant to establish an operational system.

27.3 Monitoring Progress and Achievement

The NTS and MTTP will be monitored by Planning Coordination and Monitoring Division (PCD) of the Department of Transport against the achievement milestones for specific policy, institutional and legislative actions and on a project-by-project basis for transport infrastructure investment.

Monitoring will be at national level, but PCD, through its engagement with the provinces, will also carry out a parallel monitoring process for each province, so that the linkage between national agencies and provinces are strengthened and a better base of information on the provincial and local level infrastructure is built up over time.

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28 Process for Periodic Review and Updating

28.1 Five Yearly and Annual Reviews

The National Transport Strategy will be subject to a main review at five year intervals, corresponding with the 236. Periodic Review and Government’s five year MTDPs, at the end of 2015, Updating 2020, 2025 and 2030. At each major review the outlook The NTS will be subject to a for the strategy will be advanced a further five years, to main review in 2015 and at five maintain a 20 year look ahead. year intervals thereafter.

At each five yearly review, DOT will consult with the At each five yearly review, DOT transport and central agencies on changes to the policy, will consult with the transport institutional and legislative content and direction of the and central agencies on NTS and next MTTP. Any major change will be referred changes to the policy, to the TSCMIC before incorporation. institutional and legislative content and direction of the NTS 28.2 Annual Review of the Maintenance and next MTTP. Any major Programme change will be referred to the TSCMIC before incorporation. Sufficient funding and effective implementation of infrastructure maintenance has been the main failing of The annual review will report on past development plans. The annual review will report maintenance expenditure, works specifically on what maintenance effort has been applied and resulting changes in to infrastructure in each mode and at each level, down to network condition, initially at individual ports, airports and road links. national level but extending down to provincial level over the This comparison will compare (i) the maintenance first three year period to 2015 treatment for best economic efficiency (ii) the Transport investment projects maintenance actually programmed for that year (iii) the will be developed progressively maintenance delivered (iv) the costs and quantum of from planning through to work so that cost-effectiveness can be measured. implementation and post- Each of the line transport agencies and provinces will be evaluation, with particular effort requested to supply information to the DOT to an agreed being applied to the larger more template, where necessary using the provisions of the capital intensive projects. Transport (Collection of Information) Amendment Act 2009.

28.3 Progressive Development and Review of Projects

Transport investment projects will be developed progressively from planning through to implementation and post-evaluation, with particular effort being applied to the larger more capital intensive projects.

Unlike previous five and ten year development plans, it is not anticipated that a fixed menu of projects will be determined for each five year period and the success of the plan based on project delivery. It is inevitable that some projects will rise in priority while others fall, according to the rate of development in various parts of the country, the costs of projects as they are more clearly defined, and the effects of funding and capacity constraints.

The processing of projects will follow stages of:

 Initial identification and listing for consideration; new projects may be suggested by the transport agencies, other government departments, provinces or local communities

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 Profiling, stakeholder consultation and determining the consistency of each project with 237. Project Development the NTS, the MTTP and MTDP; projects that are Cycle clearly inconsistent or infeasible will be screened The processing of projects will out; follow stages of:  Preparation of an initial short Project Feasibility • Initial identification and listing Report (PFR) from desktop analysis; as a result of for consideration; the initial PFR, projects will be given an initial ranking in the list of potential projects; • Profiling, stakeholder consultation and determining  Rapid field inspection, development of preliminary the consistency of each cost estimates and pre-feasibility evaluation of project with the NTS, MTTP BCR and project priority; initial identification of and MTDP; funding sources  Detailed site investigation, environmental and • Preparation of an initial short social analysis including land acquisition costs Project Feasibility Report and development of an implementation timeline; from desktop analysis; as a detailed feasibility report, economic and financial result of the initial PFR, analysis, BCR, rate of return, risk analysis and projects will be given an initial management plan, potential funding sources and ranking in implementation mode; initial programming into the • Rapid field inspection, forward budget (PIP) or investment plan (for development of preliminary SOEs) cost estimates and pre-  Detailed design and engineering cost estimates; feasibility evaluation of BCR review of economic and financial analysis; review and project priority; initial position in the PIP or investment plan identification of funding  Programming into the forward budget process (or sources investment plan for SOEs); tendering and • Detailed site investigation, contract award; economic, environmental and  Implementation; social analysis; initial  Completion review of project outputs versus programming into the forward design, including cost out-turn versus estimate budget (PIP) or investment and reasons for variance, as-built design plan (for SOEs) compared with engineer’s design; capturing this • Detailed design and information for future planning and budgeting engineering cost estimates; purposes; review of economic and  Post-evaluation review of selected key or financial analysis; review representative projects for impact and position in the PIP or achievement of project outcomes and impacts at investment plan three to five years following completion; including • Programming into the forward traffic demand versus forecast and review of budget process (or attributable benefits investment plan for SOEs); Projects may drop out of contention, be amended or put tendering and contract award; on hold for later consideration at any of the first six of the • Implementation; above stages. For large projects, a period of about two years is expected to be required between initial • Completion review of project identification and approval to proceed, so that projects outputs versus design and can be given due consideration and those of a purely estimate; political nature are not rushed through. A comparison will be made between the expected project progress at the start of each financial year and the achievement at year end, integrated with the Budget process. Except under specific

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ministerial direction, projects that have not previously been signalled through the MTTP development process 238. Project Development will not normally be included in the succeeding year’s Cycle budget request. • Post-evaluation review of selected key or Line agencies and provinces will be requested to supply representative projects for information to the DOT similarly as for capital projects. impact and achievement of It is important that the achievement of milestones in project outcomes. project development, approvals and post-implementation • A framework and process assessment be structured with detail being provided at a that formally incorporates level appropriate to the size of the project. It is also these stages and includes important that some degree of independent external external audit will be checking or audit be involved, again depending on the developed, it is suggested by size and nature of the project, so that there can be an appropriate subcommittee confidence that projects are being developed and of TSCMIC. implemented efficiently, with integrity and to the required standards. It is suggested that an appropriate subcommittee of the TSCMIC be responsible for developing this approvals framework.

28.4 TIPS Project Prioritisation Review

The TIPS 2010 economic evaluation model, once the structure of the model has been suitably verified and 238. TIPS Model Enhancement amended and the data inputs verified, will be used for The TIPS model will be further early stages of project evaluation and prioritisation. For developed and improved for more advanced stages of project prioritisation, standalone ongoing use by the DOT, and economic and financial analysis will be substituted, using other more detailed methods methods such as HDM-4 for road projects, as used by (such as HDM-4 for roads) will DOW and NRA. HDM-4 will also be used for determining be used for detailed project the most cost-beneficial forward road maintenance evaluation and prioritisation programme, including routines, specific, periodic maintenance and rehabilitation. The TIPS 2010 model will 239. Requirement for be improved and updated, benchmarking against more Consistency with this NTS detailed analysis. The transport agency SOEs and statutory authorities (PNGPCL, The transport agencies, provinces and DOT will liaise to NMSA, NAC, PNGASL, NRA, ensure that consistent and accurate project information is NRSC/RTA), will ensure that gathered and shared for projects, the level of information their forward development and used being consistent with the stage of project expenditure plans are consistent development. with the NTS and MTTP 28.5 Integration with SOE Forward Plans

The transport agency SOEs and statutory authorities (PNGPCL, NMSA, NAC, PNGASL, NRA, NRSC/RTA), will ensure that their forward development and expenditure plans are consistent with the NTS and MTTP.

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References Consulted in Preparation of the NTS

The following is list of the main published reference material, background working papers and data produced and consulted during the course of preparation of the NTS and MTTP. The list is not exhaustive and does not reference information such as PNG Budget submissions and papers, National Department of Statistics data and unpublished information provided in response to working group meetings and direct requests from agencies, and media reports.

NTS Background Reports and Working Papers

Allan Kennaird Consulting Ltd (2010), Land Transport Institutional arrangements and Regulation of Vehicles, Drivers and Transport Services, 6 Sep 2010.

Bone, I, Beca International Consultants Ltd (2009), Preparation of the National Transport Strategy (NTS) and Medium Term Transport Plan (MTTP), ADB TA 7214-PNG, Contract S18494, ADB Project Manager’s Inception Report, Revision 1.2, 30 Nov 2009.

Bone, I, Beca International Consultants Ltd (2010), National Transport Strategy - Issues, Revision 1.3, 11 May 2010.

Bone, I, Beca International Consultants Ltd (2010), National Transport Strategy - DOW, NRA and Road Fund, Working Paper, Revision 0.1, 21 May 2010.

Bone, I, Beca International Consultants Ltd (2010), National Transport Strategy - Review of Strategies and Corporate Plans, Revision 0.3, 31 Jul 2010.

Bone, I, Beca International Consultants Ltd (2010), National Transport Strategy - Port Regulation Working Paper, Revision 0.2, 22 Nov 2010.

Bone, I, Beca International Consultants Ltd (2011), National Transport Strategy - Review of Prior Transport Plans, Revision 0.96, 20 Dec 2011.

Department of Transport (2008), National Transport Strategy, Scope and Implementation Plan, Version: 1.2, 18 Nov 2008.

Sammons, A (2011), Regulation of Coastal Shipping and Cabotage Rules within Papua New Guinea, Technical Assistance Consultant’s Report, Jan 2011.

Wirasinghe Consulting Inc (2012) Peer Review of the Inputs on Urban Transport for the National Transportation Strategy, Feb/Mar 201.

Previous Transport Sector Plans

Department of Transport (1993), Transport Infrastructure Development Plan, 1993 to 2003, Road Sector, Apr 1993

Department of Transport and Civil Aviation (2000), National Transport Development Plan, 2001 to 2010, Volume 1 Infrastructure, Institutional and Legislative Reform, Oct 2000

Department of Transport (undated ca 2005), Review of the National Transport Development Plan, 2001 to 2010, Volumes 1&2

Department of Transport (undated ca 2005), National Transport Development Plan, 2006 to 2010, Volume 1 Infrastructure Improvement, Institutional and Legislative Reforms; Volume 2 Infrastructure Investment Program.

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Strategies and Corporate Plans of Transport Sector Agencies

Civil Aviation Authority of Papua New Guinea (2006), Corporate Plan 2006 to 2008 and Beyond

Civil Aviation Authority of Papua New Guinea (2009), Infrastructure Investment Plan, Long Term (2010-2030).

Civil Aviation Authority of Papua New Guinea (2010), Project 2010 Definition Document

Department of Transport (undated ca 2006), Corporate Plan 2006-2010

Department of Works, Papua New Guinea (undated ca 2008), Corporate Plan 2009-2012

National Maritime Safety Authority (2008), Corporate Plan 2008-2012

National Maritime Safety Authority (2008) Ministerial Cabinet Briefing Paper, August 2008

National Maritime Safety Authority (2009) Business Plan and Budget

National Road Safety Council (2011), 2007 Road Safety Data Report

National Road Safety Council (2011), Papua New Guinea Road Safety Review, Discussion Paper

PNG Air Services Ltd (2011), 2010 Annual Report

PNG Air Services Ltd (2011), Corporate Plan 2011

PNG Ports Corporation Ltd (2011), Annual Report 2008

National Strategies and Plans

Department of National Planning and Monitoring (2010), Development Strategic Plan, 2010-2030

Department of Provincial Planning and Local Government Affairs (2010), National Government Position on Power Sharing and the Proposed National Framework, Discussion Paper

National Strategic Plan Taskforce (2010) PNG Vision 2050

Department of National Planning and Monitoring (2010), Medium Term Development Plan 2011- 2015

Government of PNG (2012), The Alotau Accord

Public Private Partnership Taskforce (2008), National Public Private Partnership Policy

Government Transport Policy Statements

Minister of Transport, Policy Statement to the House of Representatives, 2009

Ministry of Transport and Civil Aviation (2000), Civil Aviation Policy 2000 for Papua New Guinea

Strategies and Plans of Other Government Agencies

Border Development Authority (ca 2010), 10 Year Development Master Plan 2010-2020

Department of Lands and Physical Planning (ca 2006), National Framework for Physical Planning 2007-2037

Department of Lands and Physical Planning (2010), National Urbanisation Policy. 2010-2030

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ICCC and Tourism Promotion Authority (2006), Tourism Sector Review and Master Plan 2007- 2017, Sep 2006

Ministry of Agriculture and Livestock, National Agricultural Development Plan 2007-2016, Volume 1 Policies and Strategies

Ministry of Agriculture and Livestock, National Agricultural Development Plan 2007-2016, Volume 2 Implementation Plan

Office of Rural Development, Corporate and Strategic Plan 2008-2012

PNG Department of Education (2004), A National Plan for Education 2005-2014, ISBN 9980-85- 448-0

PNG Department of Education (2009), Achieving Universal Education for a Better Future, Universal Basic Education Plan 2010-2019.

Strategies and Plans for Cross Cutting Issues

Department of Environment and Conservation (2007), New Strategic Directions

Department of Environment and Conservation (2010), Papua New Guinea’s Fourth National Report to the Convention on Biological Diversity, United Nations Environment Programme - Global Environment Facility

PNG National AIDS Council, Papua New Guinea National Strategic Plan on HIV/AIDS 2006-2010

National Department of Health (2010), PNG National Health Plan 2011-2020

Office of Climate Change and Development (2010) Climate-Compatible Development for Papua New Guinea, March, 2010

Oversight and Regulatory Agencies

Independent Consumer and Competition Commission (2006) Review of the PNG Air Transport Industry

Independent Consumer and Competition Commission (2007) PMV and Taxi Fare Review

Independent Consumer and Competition Commission (2007) Review of the PNG Coastal Shipping Industry

Independent Consumer and Competition Commission (2008) Stevedoring and Handling Services Pricing Review

Independent Consumer and Competition Commission (2010) Review of PNG Harbours Regulatory Contract

Independent Consumer and Competition Commission (2010) PNG Ports Regulatory Contract, 2010-2014

National Economic and Fiscal Commission (2009) Review of Inter-Governmental Financing Arrangements (RIGFA)

National Economic and Fiscal Commission (2009) Closing the Gap - Review of All Expenditure in 2007 by Provincial Governments

National Economic and Fiscal Commission (2009) Walking the Talk - Review of All Expenditure in 2008 by Provincial Governments

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National Economic and Fiscal Commission (2010) Green Shoots of Change – The 2009 Provincial Expenditure Review

National Economic and Fiscal Commission (2010) Step Two The Ripple Effect – The 2010 Provincial Expenditure Review

Development Partner Strategies and Plans

Asian Development Bank, PNG Country Operations Business Plans 2011-2012, 2012-2014, 2013- 2015, Country Partnership Strategy 2011-2015 and ADB project documents

AusAID, Transport Sector Support Program – various documents, annual plans and reports

World Bank, PNG Country Partnership Strategy 2013-2016 and project documents

Transport Sector, Project Planning, Feasibility and Design Studies

CPCS Transcom, Deloitte Touche Tohmatsu (2007), Strategic Plan 2007-2011, for PNG Ports Corporation Ltd

Jacobs Consultancy (2010), Port Moresby International Airport Master Plan, for National Airports Corporation, Jacobs Consultancy, Ottawa and Canberra, May 2010

Parsons Brinkerhoff, Reihbein AOS, KPMG (2009), Strategic Airports Management Plan, December 2009

PNG Transport Infrastructure Priorities Study (TIPS) 2010

The TIPS study was carried out by a consultant group headed by KPMG and supported by GHD and Rehbein AOS.

Report B - summary of initial data collection, 25 Feb 2010

Report C - on data availability and review, 25 Mar 2010

Report D - on detailed methodology for project benefits assessment, Apr 2010

Report E - preliminary ranked list of national transport infrastructure priorities, Jul 2010

Report F - report on national transport infrastructure priorities incorporating feedback from the stakeholder Working Group, 18 Apr 2011 revision

Report G - report on recommended approach and work required to undertake a comparable study of sub-national transport infrastructure to provide for prioritisation at the provincial level, 12 Nov 2010

Report H - Draft Final Report, 20 Apr 2011 revision

Report P1 - report on the approach to provincial consultation, 4 Mar 2010

Report P2 - progress report on first round of provincial consultation, 25 Feb 2010

Report P3 - final report on first round of provincial consultation, 31 May 2010

TIPS Model User Guide, Mar 2011

Excel TIPS model, version 17 Mar 2011

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Mapping

Geobooks Mapping of PNG Provinces – Population, Physical, Settlements and Infrastructure Assets and Transport Routes, Sanborn, University of PNG, 2010

PNG Reference Atlas, Geographics Mapping of PNG, 2004

Other Reference Material

Civil Aviation Infrastructure Development Investment Project (CADIP), Investment Program and Project 1 Investment Plan, 2011 (pers com.)

Garmut R. and Ganilau R. (2010), PNG Universities Review, Report to Prime Ministers Somare and Rudd, May 2010.

National Airports Corporation, Papua New Guinea (2011), Location and Category of Secondary National Airports, (pers com.)

National Airports Corporation, Papua New Guinea (2010), Aerodrome Directory, 1st Edition, Feb 2010

PNG Ports Corporation Ltd, Port Data, Website Accessed Sep 2009

PNG Forestry Authority (2009), Papua New Guinea Forestry Outlook Study, Asia Pacific Forestry Sector Outlook Study II, Working Paper ADFSOS II/WP/2009/19, FAO, Bangkok 2009

Links to Official PNG Websites Accessed

Asian Development Bank, PNG http://www.adb.org/countries/papua-new-guinea/main

AusAID Economic and Public Sector Program, Gender http://pngepsp.org/gender

AusAID Transport Sector Support program http://www.pngtssp.com/

Consultative, Implementation and Monitoring Council, http://www.inapng.com/cimc/index.html

Department of Agriculture and Livestock http://www.agriculture.org.pg/

Department of Finance http://www.finance.gov.pg/

Department of Lands and Physical Planning http://www.lands.gov.pg/

Department of National Planning and Monitoring http://www.planning.gov.pg/

Department of Treasury, including National Budget Papers http://www.treasury.gov.pg/

Department of Works and Implementation http://www.works.gov.pg/

Independent Public Business Corporation http://www.ipbc.com.pg/

Mineral Resources Authority http://www.mra.gov.pg/

Ministry of Inter-Government Relations, Department of Provincial and Local Level Government Affairs http://www.igr.gov.pg/

Motor Vehicle Insurance Ltd http://www.mvil.com.pg/

National Airports Corporation http://www.nacpng.com/

National Economic and Fiscal Commission http://www.nefc.gov.pg/

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National Maritime Safety Authority http://www.nmsa.gov.pg/

National Research Institute http://www.nri.org.pg/

National Roads Authority http://www.nra.gov.pg/

National Statistics Office http://www.nso.gov.pg/

PNG Air Services Ltd http://www.pngairservices.com.pg/

PNG Forestry Authority http://www.forestry.gov.pg/

PNG Liquefied Natural Gas Project http://www.pnglng.com/

PNG Ports Corporation Ltd. http://www.pngports.com.pg/

PNG Sustainable Development Programme http://www.pngsdp.com/

World Bank http://www.worldbank.org/en/country/png

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