Documentof The World Bank Report No: 19278-PNG Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ON THE FIRST PHASE Public Disclosure Authorized OF A PROPOSED LOAN IN THE AMOUNT OF US$25.26 MILLION EQUIVALENT TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA FOR A Public Disclosure Authorized SECOND GAZELLE RESTORATION PROJECT October 1, 1999 Urban Development Sector Unit Public Disclosure Authorized Papua New Guinea and Pacific Island Country Management Unit East Asia and Pacific Regional Office CURRENCY EQUIVALENTS (Exchange Rate Effective March, 1999) Currency Unit = Kina Kina 1.0 = US$ 0.37 US$ 1 = Kina 2.70 FISCAL YEAR January 1st to December 3 1 st ABBREVIATIONS AND ACRONYMS ADB Asian DevelopmentBank APL AdaptableProgram Loan AusAID AustralianBilateral Assistance CAS CountryAssistance Strategy CCRI Cocoa and Copra ResearchInstitute DoPM Departmentof PersonnelManagement DOW Departmentof Works EATA Executing AgencyTlust Account ELCOM PNG ElectricityCommission EMPs EnvironmentalManagement Plans ENBPA East New Britain ProvincialAdministration ERR EconomicRate of Return FRR FinancialRate of Return FY Fiscal Year GAAP GenerallyAccepted Accounting Principles GoPNG Governmentof Papua New Guinea GRA GazelleRestoration Authority HDM III HighwaysDesign and MaintenanceModel ITRP IrmnediateTerm RestorationProgram of GRA LACI Loan AdministrationChange Initiative MoF Ministryof Finance MTRP MediumTerm RestorationProgram of GRA NARI National AgriculturalResearch Institute NBC National BroadcastingCorporation NGO Non-GovernmentalOrganization NPV Net Present Value OCA Office of Civil Aviation OD/OP OperationalDirective/Operational Policy OECF Oversees EconomicCooperation Fund O&M Operationsand Maintenance GRA/PIU GRA Project ImplementationUnit PNG Papua New Guinea UNDP United Nations DevelopmentProgram VAT Value-AddedTax Vice President: Jean-Michel Severino Country Director: Klaus Rohland Sector Director: Keshav Vanna Task Manager: Stuart Whitehead Papua New Guinea Second Gazelle Restoration Project CONTENTS A. Program Purpose and Project Development Objective 1. Program purpose and program phasing 2. Project development objective 3. Key performance indicators B. Strategic Context 1. Sector-related CAS goal supported by the project 2. Main sector issues and Government strategy 3. Sector issues to be addressed by the project and strategic choices 4. Program Description and performance triggers for subsequent loans C. Project Description Summary 1. Project components 2. Key policy and institutional reforms supported by the project 3. Benefits and target population 4. Institutional and implementation arrangements D. Project Rationale 1. Project alternatives considered and reasons for rejection 2. Major related projects financed by the Bank and/or other development agencies 3. Lessons learned and reflected in proposed project design 4. Indications of borrower commitment and ownership 5. Value added of Bank support in this project E. Summary Project Analyses 1. Economic 2. Financial 3. Technical 4. Institutional 5. Social 6. Resettlement 7. Environmental assessment 8. Participatory approach F. Sustainability and Risks 1. Sustainability 2. Critical risks 3. Possible controversialaspects G. MainLoan Conditions 1. Effectivenessconditions 2. Other H. Readinessfor Implementation I. Compliancewith Bank Policies Annexes Annex 1. ProjectDesign Summary Amnex2. DetailedProject Description Annex3. EstimatedProject Costs Annex 4. Cost-BenefitAnalysis Summary,or Cost-EffectivenessAnalysis Summnary Annex 5. Financial Summary for Revenue-EarningProject Entities, or Financial Summary Anniex6. Procurementand DisbursementArrangements Table A. Project Costs by ProcurementArrangements Table Al. Consultant SelectionArrangements TableB. Thresholds for ProcurementMethods and Prior Review TableC. Allocationof Loan Proceeds Annex 7. ProjectProcessing Budget and Schedule Annex 8. Documentsin Project File Annex 9. Statement of Loans and Credits Annex 10. Countryat a Glance Annex 11. Letter of DevelopmentPolicy Annex 12. Relocation Strategyfor Populationfrom High-Risk Villages around Rabaul Annex 13. Generic ImplementationPlan for RelocationActivities Annex 14. Consultationin Project Preparation Annex 15 EnvironmentalSummary Photographs Map: IBRD 30006 1 Papua New Guinea Second Gazelle Restoration Project Project Appraisal Document East Asia and Pacific Regional Office Papua New Guinea and Pacific Island Country Management Unit Date: August 23, 1999 Team Leader: Stuart Whitehead Country Manager/Director: Klaus Rohland Sector Manager/Director: Keshav Vanna Project ID: PG-PO-54238 Sector: Urban Lending Instrument: APL Theme(s): Rehabilitation Poverty Targeted Intervention: [X] Yes [ No IBRD Others Total Commitment Closing US$ m % US $m US$ m Date Date APL 1 25.3 64% 14.2 39.5 11/30/99 6/30/03 Independent State of Loan/ Papua New Guinea Credit APL 2 15.0 51% 14.3 29.3 11/30/01 6/30/06 Independent State of Loan/ Papua New Guinea Credit Project Financing Data [X] Loan [ ] Credit [ Grant E Guarantee [ Other[Specify] For Loans/Credits/Others: Amount (US$m): 25.3 Proposed terms: [3 To be defined [] Multicurrency [XI Single currency [ Standard Variable [X] Fixed [] LIBOR- based Grace period (years): 3 Years to maturity: 15 Commitment fee: 0.75% Service charge: Front-end fee on Bank loan: 1% Government IBRD 25.3 25.3 Other(specify) 3.1 3.1 Total: 14.2 25.3 39.5 Borrower: Independent State of Papua New Guinea Guarantor: Resonsible agency(ies): Gazelle Restoration Authority 2 Estimateddisbursements (Bank FY/US$M):l Annual 3.6 8.6 11.4 1.6 Cumulative 3.6 12.3 23.6 25.3 Projectimplementation period: 3.5 years Expected effectivenessdate: November30, 1999 Expected closing date: June 30, 2003 Implementing agency: Gazelle RestorationAuthority Contact person: John Painap,OBE, ProjectManager Address: P.O. Box 2177, Rabaul,ENB, Papua New Guinea Tel: (675) 982 8768 Fax: (675)982 8767 E-mail: [email protected] 3 A: Programand ProjectDevelopment Objective 1. Programpurpose andprogramphasing (see Annex 1) The overall developmentobjective of the SecondGazelle Restoration Project, which is also the project's global objective,is to support the Medium-Tern RestorationProgram (MTRP)of the East New Britain ProvincialAdministration (ENBPA). This programseeks to restore the social and economicwell-being of the East New Britain people that prevailed prior to the 1994volcanic eruption, which devastatedmuch of the then provincialcapital (RabaulTown) and surroundingvillages. Furthermore,the project aims to ensure sustainabilityof outcomesand minirnizeadverse impacts of future volcaniceruptions on lives, propertyand livelihood. 2. Project developmentobjectives (see Annex 1): To achieve this goal, the MTRP is designedto: * upgrade existing facilitiesand transportationinfrastructure to support a shift in the location of settlement and economic activity towards lowerrisk areas centered on the new provincial capital at Kokopo; e consolidaterelocation sites in safe zones for evacuationof displacedcommunities from devastatedand high risk areas; and * restore such infrastructureand servicesin Rabaulas are neededprimarily to ensure the effective operationof the port as a major economicfacility for the Gazelle Peninsulaand the Eastem Region of Papua New Guinea. 3. Key performanceindicators: End of project indicatorsare shown as the benchmarksin the table below: Medium Term Phase I Phase II Restoration Program (stabilization) (consolidation) Years 1999-2002 2002-2005 Development Objective completion of Phase I and institutional transition normalization to longer-term development process Key Program Outputs: Benchmarks for subsequent * completion of infrastructureand services and at * restoration of health and education services, Adaptable Loan and Grant least an 80 percent occupancy at all relocation sites water supply and sanitation service to affected Financing * 100% completion of port-related protection works population in Rabaul and approval of revised zoning plan that * provision of non-project services (including prohibits redevelopment in the devastated areas of passenger transport, etc.) to resettled Rabaul communities * 75 % completion of other infrastructure, utilities & * reduction in erosion of caldera and social services under Phase I, including sedimentation in Rabaul Port Rabaul/Kokopo Road (except for Vulcan section) * full occupation at relocation sites that provide * formulation of spatial and economic strategy sustainable livelihood for displaced families framework and institutional plan for longer-term * Consolidation of private sector economic development as well as plans for coastal zone activities in new development areas management and mitigation of coastal hazards in * Establishment of Kokopo as regional East New Britain Province govemment center with major increase in * approval by ENBPA of detailed arrangements to population integrate GRA into the Provincial Govemment. * Implementation of longer-term development planning reflecting economic, natural and human resources in province * Full ENBPA funding of warranted O&M costs on assets restored under ITRP and MTRP. 4 B: StrategicContext 1. Sector-relatedCountry Assistance Strategy (CAS) goal supportedby the project (see Annex 1): CAS documentnumber: 14906Date of latest CAS discussion: August 29, 1995. The last CAS, which was endorsedby the Bank's Board in August 1995, focused on restoringmacro- economicstability and growth, followingthe unprecedentedfinancial crisis in 1994. This agendaremai:ns a cornerstoneof the new CAS. The project