Papua New Guinea - Education Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Report No. P-1917-PNG REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA FOR AN EDUCATION PROJECT October 1, 1976 s document has a resticted disribution and may be med by reciplents only In the performance of g their ofleial duties. Its contents may not oterwise be disclosed without World BDnk uthoration. |  CURRENCY US$1 = 0.787 Kina (K) K 1 = US$1.27 MEASURES (Metric system used in PNG) 1 meter (m) 2 3.28 ft. 1 square meter (m ) = 10.76 sq. ft. 1 square kilometer (km2) = 0.39 sq. mi. 1 hectare (ha) = 2.47 acres GOVERNMENT OF PAPUA NEW GUINEA FISCAL YEAR July 1 - June 30 SCHOOL YEAR January - December  FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA FOR AN EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed credit to The Independent State of Papua New Guinea for the equivalent of US$4.0 million on standard IDA terms to help finance the Bank Group's first education project in Papua New Guinea. PART I - THE ECONOMY 2. An economic mission visited Papua New Guinea in January/February 1976. Its report "Papua New Guinea: Economic Situation and Development Prospects" (Report No. 1150-PNG) was distributed to the Executive Directors in July 1976. The following discussion of recent political and economic developments and an assessment of future prospects are based on this report. Country data for Papua New Guinea are included in Annex I. 3. Papua New Guinea achieved internal self-government on December 1, 1973, and independence from Australia on September 16, 1975. The first event, accompanied by pressure for replacement of Australians in Government and business by Papua New Guineans (localization), led to an accelerated departure of expatriates. Realizing the dangers in this situation, the Government sought to hire key staff directly and began to recruit a number of expatriates from countries other than Australia. Today, localization is proceeding as rapidly as possible consistent with the maintenance of stand- ards for government services. On the political front, the most serious difficulty was a secessionist movement in Bougainville; however, the tradi- tional Melanesian reliance on negotiation and conciliation, rather than confrontation, has led to a satisfactory arrangement which will keep Bougainville and the earnings from its copper mine in PNG. 4. PNG's economy has two major elements - a large indigenous sub- sistence sector based on traditional agriculture and a rapidly expanding modern "market" sector, accounting for over 70 percent of output and income, but a minority of the population, with emphasis on mining, export-oriented plantation agriculture, government operations, and services. Real GDP grew at more than 8 percent per annum during the period 1967/68 to 1973/74. This growth was led by the market sector, growing at over 10 percent Thi documenthaistedduibeionand smybe d by.pic.nts onlyintheptfof.nnuae dof their ofca du* Its contents ay not otherwise be disclsed witbout Wowd ank authouinion.  per annum, while the nonmarket sector grew at less than 1 percent per annum. As a result, the share in GNP of the traditional subsistence sector, from which the majority of the local population still derives the main part of its living, fell from about two-thirds to less than 40 percent. The growth rate of population is at present about 3 percent per annum, a sharp increase over the 2 percent per annum rate of ten years ago, due mainly to a halving of the infant/child mortality rate. Per capita GNP in 1975 was US$450 but this average includes the high income expatriate sector; the per capita GNP of the local population, representing 98 percent of the total population, is about US$320; probably 50 percent of the local population - mainly those in the subsistence sector - have per capita incomes of about US$130 or less. 5. The Bougainville copper mine has played an important role in the country's recent economic achievements. Mining's share in GDP rose from 2 percent in 1968/69 to 32 percent in 1973/74. The impact of Bougainville on national investment was also large, and during the construction phase, it accounted for nearly 60 percent of all fixed capital formation in the country. The impact on exports was first felt in 1971/72, and in the next two years this one copper mine doubled PNG's export earnings; the growth of exports from Bougainville has accounted for the bulk of incremental GDP in the last few years. 6. Real expenditures by the Government increased at a rate of close to 7 percent per annum during the past five years. This rise was mainly caused by a substantial increase in current outlays, dominated by wages and salaries (45-50 percent of total current expenditures) and the purchase of goods and services (35-40 percent). Government employment of staff almost doubled from 1971 to 1975, and simultaneously there were substantial increases in wage and salary levels. The Government realizes the great importance of restraining both employment and salary increases, and has recently taken steps to ensure such restraint. 7. PNG benefits greatly from Australian assistance, both finan- cial and technical, although the relative importance of this assistance is declining. Australian grants provide 43 percent of the 1975/76 budget, a drop from the 70 percent provided in 1963. The commencement of copper production on Bougainville in 1972 expanded domestic revenues by about one-third and thus contributed to self-reliance. Under the terms of the most recent agreement, Australia's aid program for PNG will amount to approximately A$1 billion (US$1.27 billion) over the next five years. 8. Expatriates, largely Australians, accounted for about 14 percent of the Government staff as of July 1, 1975, compared to 20 percent in 1971. Slightly under half of the expatriates are paid directly by the Australian Government, which will continue to cover their salaries as part of its aid package for the next two years. Many other senior administrative and pro- fessional and higher technical posts are also filled by expatriates. Consequently, there is a pressing need for local people with comparable professional skills.  9. The long run goal of self-reliance has tempered the Government's approach to foreign investment, which it hopes to attract on a selective and controlled basis. The National Investment and Development Authority (NIDA) registers and licenses all foreign enterprises in PNG and coordinates Government policy. Foreign investment will be sought in those activities which are desirable for their ability to produce revenue and foreign exchange and for which the necessary capital or expertise is not available in PNG, but the investors must agree to meet terms and conditions which assure increasing local participation. 10. In the long run, no sector of the economy will have nearly as large an impact on the pace, directions, and quality of development as the Central Government. It is by far the largest employer, the largest source of investment activity, and the largest mobilizer and provider of capital. Its most crucial task is to set goals, to devise policies and programs, and to mobilize the resources needed to achieve these goals. PNG has not had a development plan since the First Five-Year Development Plan (1969/73) and the Interim Plan for 1973/74, but the philosophy of the present Government is expressed in the "Eight Aims", which, in addition to growth, stress equitable distribution of income, increased control of the economy by Papua New Guineans and decentralization of economic activity. These objec- tives reflect a shift of emphasis from the First Five-Year Plan, which concentrated on the build-up of infrastructure and the development of the modern sector of the economy. However, this new strategy has not yet been translated into quantitative terms, except in a few sectors, and no attempt has yet been made to develop a national set of sectoral priorities. The Central Planning Office is preparing a new development plan which will incorporate the Eight Aims into a coordinated national framework. 11. The PNG economy imports a large share of its capital and consumer goods, including food requirements. Until 1972, the balance of payments traditionally showed a negative trade balance, with exports dominated by a few agricultural commodities whose total value covered only about half the annual imports; the other half was covered by the Australian budget grant. In April 1972, the Bougainville copper mine came into production. The 1970/71 level of agricultural exports of about US$85 million was suddenly dwarfed by copper exports of US$206 million in 1971/72, and PNG's tradi- tionally negative trade balance became positive. However in 1974, copper prices fell sharply, and copper's contribution to the country's exports dropped from 70 percent to about 50 percent. Bougainville's impact has not been large enough to create a favorable balance on the combined goods and services account (except in 1973/74) and PNG still relies on the Australian grant to balance its external accounts. 12. Total external public debt outstanding as of December 31, 1975, amounted to US$310.8 million, of which US$81.5 million (including US$1.9 million exchange adjustment) was owed to the Bank Group. Public debt service payments in 1974-75 were about 3 percent of exports of goods and non- factor services. Debt payments to the Bank Group were only about 13 per- cent of total debt service payments. Debt service is expected to rise to  -4- about 4 percent of exports in the early 1980s. In addition, there are considerable dividend and interest payments abroad mainly as a result of the Bougainville copper mine. PNG is considered creditworthy for a limited amount of Bank loans. 13. In addition to Australia, other bilateral sources (viz. Japan and New Zealand) are also expected to make aid ftmds available. The Asian Development Bank lent to PNG from its Special Fund and is expected to continue lending to PNG in the future. PART II - BANK-GROUP OPERATIONS 14. Bank Group assistance to Papua New Guinea thus far has consisted of five loans (US$55.5 million) and five development credits (US$25.2 million), which together have helped to finance nine projects. This assistance has focused largely on infrastructure development - 86 percent of total Bank Group assistance has been for power, telecommunications, highways and ports. Agricultural projects - mainly oil palm and livestock - have absorbed the remaining 14 percent of Bank Group assistance. IFC has not been involved in PNG. 15. Project implementation has been satisfactory, although in some cases it has been affected by transition to self-government. Disbursements have sometimes been slow because of administrative procedures requiring multiple clearances for preparing withdrawal applications. Annex II contains a summary statement of Bank loans and IDA credits as of August 31, 1976, and notes on the execution of ongoing projects. 16. In view of the paucity of infrastructure in PNG in earlier years, the past emphasis of Bank Group assistance was deemed appropriate as a neces- sary foundation for future economic development. However, during the next few years the Bank staff proposes a somewhat different strategy. Infrastruc- ture projects would continue to be assisted, but to a lesser extent; such projects would represent about half of the proposed lending program. An increasing amount of Bank Group financing would be directed towards assisting agricultural and rural development. These projects would aim at increasing agricultural production, diversification, and improving indigenous cash and food cropping methods, and at raising subsistence living standards. Nlany projects would include components of social and economic infrastructure, such as education, health and roads. 17. While the manpower constraint which confronts PNG has been relieved by the Government's aggressive recruitment of expatriates, skilled PNG tech- nical and administrative personnel are scarce relative to the need. Conse- quently, the technical advice and support which Bank staff provide through project preparation and supervision of ongoing projects will be especially important. Also, the Bank stands ready to advise, when asked, on the costs and benefits of major resource exploitation projects which may compete for resources with projects aimed directly at improving the welfare of the sub- sistence sector.  18. Australia will be PNG's most important aid source for the coming years. The Bank Group will continue to cooperate closely with the Australian Government, and will be prepared to consider co-financing of projects should the Australian and PNG authorities express interest in such arrangements. PART III: THE EDUCATION AND TRAINING SECTOR 19. English is the language of instruction for most levels and types of education and training, a circumstance that will make an important con- tribution to national unity, but which simultaneously slows learning for most children, since 97 percent of them speak English only as a second or third language. A corollary difficulty arises when the student must con- front sharp cultural differences between familiar village life and a strange modern society. These differences frequently make the devising of relevant curricula a difficult task. While these conditions are most acute at the primary level in rural areas, they also exist at other levels, posing a challenge to all educators. The education sector will have heavy demands placed on it in the coming years. According.to the 1971 census, local personnel represented only 4 percent of the professional labor force and only 17 percent of the subprofessional labor force. Even in the case of skilled workers, expatriates accounted for *36.percent of this class of manpower. 20. The Department of Education bears the main responsibility for education, but several other departments provide formal and informal train- ing within their respective fields. There is considerable local participa- tion in education administration and curricula. In addition local government councils and provincial education boards have been allocated certain admin- istrative and financial responsibilities. Local councils for instance provide and maintain primary school buildings. 21. Primary schools (Grades 1-6) are run by the Government and church agencies. Enrollment reached 244,000 in 1975, representing 69 percent of males and 44 percent of females in the relevant age groups. The annual growth of enrollment has averaged less than 3 percent during the last decade, due primarily to mores which do not encourage female education. One means of achieving greater female enrollment might be to increase the number of female teachers; currently, almost 80 percent of primary school teachers are male. The proportion of students completing primary school has increased considerably - about 70 percent currently, as contrasted with about 40 percent in the mid-sixties,. Educational opportunities have in recent years become more evenly distributed throughout the country but discrepancies are still considerable. For example, almost all children attend school in East New Britain; less than 30 percent do so in the Highlands. 22. Enrollment in secondary level education has expanded very rapidly, by about 11 percent annually in recent years, and stands currently at about 41,500. The 88 high schools, comprising Grades 7-10, enroll some 30,000  - 6 - pupils. Curricula are generally well balanced, but two difficulties are evident. First, entry is based on a provincial quota system and while this is a commendable effort to distribute educational opportunities, it results in a wide variation in the educational attainment of entrants. Second, despite the recent origin of the education system, manpower planners esti- mate that the number of secondary graduates may exceed the absorptive capacity of the eco omy within a cIcade. Government plans al tr some short-term expansion in secondary education: 34 new high schools before 1980, increasing Grade 7 enrollment from 10,100 to 13,300. This is par- tially to meet the social demand for secondary education, but primarily to maintain educational opportunities for the increasing number of Grade 6 leavers. Thereafter, expansion of secondary education would be curbed to avoid more serious employment problems. The proposed moratorium is commendable, but implementation difficulties appear almost inevitable. 23. Vocational education is provided by a variety of institutions and programs. Despite these programs, however, shortages of middle-level and skilled manpower persist. A National Training Council is being established to coordinate technical tral fnig, csid-heT pflp remedy the shortage. The major training institutions are the 94 rural vocational centers, 9 tech- nical colleges (Grades 9-10) and various apprentice programs. The rural vocational centers have a combined enrollment of about 5,400 primary school leavers; they offer practical training in agriculture and a variety of technical skills such as sheetmetal work and carpentry. The curricula are dictated by local requirements, but as students are expected to estab- lish themselves, as farmers or artisans, production and management are always emphasized. Each center is also expected to cover its own operating costs, excluding instructors' salaries, from the sale of its own production. At present 56 percent of the staff are expatriates, but local staff, primarily technicians and agricultural extension staff, are being trained in a special one-year course at Goroka Teachers College. Experience with the centers has varied widely; some have been remarkably effective while others suffer from poor management and inadequate training. The Government is attempting to improve the standard of the poorer centers. 24. The country has two universities with a combined total of 2,500 students, but due to the current shortage of high-level manpower in thoff government and the private sector, a balance between supply and demand of such personnel is not expected for many years. The problem is further compounded by the fact that the early intake to the University of Papua,New Guinea was heavily geared to the production of generalists. 25. There are nine primary teacher colleges. Total enrollment is about 240 wit an annual outp-ut-of 900. 2 Only a small proportion of the trainees are women. The quality of primary teacher training is fair, but the present high turnover among the 85 percent of the staff who are expa- triates is a disturbing factor. Moreover, graduates are frequently ill- prepared to assume teaching positions in areas which are culturally and linguistically unfamiliar to them; a'revision in recruitment policy for teacher trainees to address this issue should be examined. Secondary teacher training is provided by the University of Papua New Guinea in Port  - 7 - Moresby (degree level) and at Goroka Teachers College (dipoloma level). For the foreseeable future the small number of degree graduates will be absorbed by postsecondary institutions and administrative posts. 26. There are three institutions which train agricultural extension staff - the Highland Agricultural Training Institute, the Popondetta Agri- cultural Training Institute, and the Vudal Agricultural College. The first two provide two-year courses to prepare middle-level field staff, who repre- sent about 24 percent of the country's total field staff. The latter offers a three-year course and supplies the most highly trained field staff (about 12 percent of total). The remaining 64 percent field staff are recruited from primary school leavers who generally receive no formal training in agriculture. In March 1975, a comprehensive report on agricultural exten- sion and training proposed a reorganization and simplification of the present structure introducing a two tier system, by eliminating the lowest level. Existing staff in the bottom level would either be retired, or upgraded where possible. This reorganization would require an expansion of the present middle level personnel. A second recommendation of the report would be to make field experience a prerequisite for students wishing to train for the highest level staff categories. 27. Papua New Guinea has well-developed systems of public health services and medical training. Health services are provided by a network of 1,640 aid posts offering first aid and treatment for simple common illnesses, 144 health centers which supervise the aid posts, 217 subcenters and 21 district hospitals. The quality of health training is generally good and capacities are adequate, especially for nurses. The exceptions are doctors, health extension officers, and health inspectors. Prospects for improving health care lie primarily in paramedical fields in which the two Colleges of Allied Health Sciences have a crucial role to play. The Port Moresby College is primarily responsible for registered nurse and postbasic training, while the Madang College accepts students who have completed Grade 10 to train for health extension _ff rsE_and health inspectors. The Madang College with a current enrollment ofe ly institution of its kind in the Pacific. The training is good considering the College's dilapidated facilities and the recruiting difficulties resulting from low salaries and lack of staff housing. A high wastage rate, generally 40 percent during the three years, results from inadequate facilities and also from the high standards imposed by the institution. \28. The University of Technology in Lae will be able to meet the country's need for higher level scientists and technologists for the foreseeable future. Seven technical and two secretarial colleges train skilled workers in addition to a variety of apprenticeship programs. Middle-level technicians are trained at the Lae and Port Moresby Technical Colleges, wiTi a t 7annUaf ouXtt of only f16. The-Port M 1or`e5sycolege concentrates on the construction industry; Lae offers courses in business studies, electrical, mechanical and civil engineering, and laboratory techniques. Recently, a number of programs of nonformal industrial training have been established by both Government and private employers; however, they have often been set up in a haphazard and uncoordinated  - 8 - manner resulting in duplication of expensive facilities, small enrollments per program and, consequently, excessive costs per trainee. In order to provide a mechanism for rationalization, the Government plans to set up a National Training Council that would integrate all nonformal technical training programs with the formal training conducted in the Technical Colleges. 29. Education expenditures have held reasonably constant at about 16 percent of total Government expenditures. However, within this aggregate there have been marked shifts among the components. The share of primary education fell from 46 percent in 1966 to 33 percent in 1972, /1 while expen- ditures on tertiary education grew from 8 percent to 23 percent of total education expenditures. This reflects increasing tertiary enrollment and exceptionally high unit costs of about US$5,700 per student. High unit costs are a majoru ce of concern for all levels of education in PNG. In the primary! a -hbsol, the cost to the Government for one pupil year is K 90 s - (4USj15) r 28 perc t of the per capita GNP. An important factor in these high costs arge proportion of expatriate teachers. Serious efforts should be made to reduce these costs by accelerated localization of teachers, i? \J t rationalization of the complex system of post secondary education, and R)lt4<k larger class sizes. 30. To summarize some of the main points discussed above, Papua 'U New Guinea has achieved a well-developed education system in many respects: virtually all children may have access to primary schools within two decades; local participation in school administration is strong at all levels; quality is generally high; and attention is given to relevance of content and to e'qualization of opportunities. The main issues that should be addressed\by the Government are: (a) educational opportunities are unequally distributed in three respects: by geographic location, age and sex. The Government has accorded high priority to the equali- zation of opportunities by region but has neglected f 3b-- disparities by age and sex. Efforts within rural devel- opment, adult and out-of-school education are poorly coordinated and receive low priority in financial allo- cations. A large portion of girls (56 percent) do not attend primary schools, a fact which is due more to parental attitudes than lack of schools; -> (b) the system of post secondary education is overly complex ) LC4.A/ Xwith a proliferation of small scale training programs and alternate entry routes. The Government should rationalize the system by consolidating and standard- @, izing teaching programs; ' /1 A comparison with more recent years is not possible since data before and - after 1972 are not strictly comparable.  -9- (c) another area of major concern is the high recurrent costs per student at all levels of education. Increased localization, fewer institutions and larger class sizes will eventually reduce costs. PART IV: THE PROJECT 31. The proposed project would be the Bank Group's first operation in the education sector in PNG. It comprises assistance to five separate institutions: the Highlands Agricultural Training Institute, the College of Allied Health Sciences at Madang, the Primary Teachers College at Madang, the Secondary Teachers College at Goroka and Lae Technical College. The project would also strengthen five Rural Vocational Centers. These institutions have been selected for assistance because of their potential to redress some of PNG's most pressing manpower needs - those in agricul- ture, health, teaching and industry. Moreover, the expanded output of these categories of personnel will permit a greater degree of localization in a number of fields but especially secondary teaching and middle-level technical personnel. In addition, the project would support planning and studies essential to the long-range development of education and training in PNG. The project includes a total of 21-1/2 man-years of specialist services and 9-1/2 man-years of fellowships for staff and curriculum development, experiments and studies. The project was appraised in February 1976. Credit negotiations were held in Washington in September 1976; PNG's delegation was led by Ken Woodward, Assistant Secretary for Finance. A credit and project summary is included as Annex III. The Appraisal Report dated September 22, 1976, Report No. 1210-PNG has been circulated separately. The following table summarizes the project components: Present Additional provision enrollment Student Boarding Staff Project Component Grades capacity places places houses Rural-oriented training (a) Hig,hland Agricultural Training Institute, DOPI 11-12 60 140 140 28 (b) College of Allied Health Sciences, Madang, DOPH 11-13 120 45 64 12 (c) Five Rural Vocational Centers, DOE (7) 300 - - - Teacher training (d) Madang Teachers College (Primary), DOE 11-12 300 140 140 5 (e) Goroka Teachers College (Secondary), (UPNG), DOE 11-13 430 200 180 16 Technician training (f) Lae Technical College, DOE 11+ 170 175 0 8  - 10 - 32. Highlands Agricultural Training Institute (HATI) - (Estimated Cost US$750,000). With the objective of upgrading the training of extension agents, the proposed project would expand the capacity of HATI from 60 to 200 student places. It would finance student and teacher accommodation, a community hall and minor expansions to teaching areas. With the expanded student aaccommuiodation, the College could admit female trainees for the first time. This is essential as farming is mostly done by women. Economies of O scale would reduce unit recurrent costs by about 40 percent from K 5,900 (US$7,500) to about K 3,100 (US$3,900). Staff localization will in due / course lead to further reductions. The College is adequately equipped and ,,8 the quality of the training is good. Training concentrates on smallholder >9 m and subsistance agriculture but also includes plantation agriculture. An important part of the curriculum is training in rural development work, emphasizing problem identification, planning, de5ision-making and resource mobilization. Under the proposed project a home economics course for men and women would be introduced, for which FAO is providing technical assis- tance. Because of the large amount of practical and individual instruction a student/staff ratio of about 12 would be necessary. 33. A consequence of the proposed expansion of HATI would be that practical training now being provided to Vudal College trainees at a field camp next to HATI would have to be relocated. A further consequence of the proposed project would be that the output of certificate holders would cause some reduction in the need for higher-level diploma holders. Thus, diploma training would have to be restructured into a one-year post certificate program as proposed by a recent report on Agricultural Training. The Government has already initiated action on both of these measures. 34. College of Allied Health Sciences, Madang (Estimated Cost US$970,000). The proposed project would strengthen the present train- ing program and increase the enrollment capacity of this College from 120 to 165 places. The project would finance construction and remodeling of an administrative building cum library, classrooms, audiovisual building, student accommodation and staff housing; training equipment and materials; and three man-years of advisory services, three and a half man-years of foreign and six man-years of local fellowships for curriculum improvement and staff development. At the present time, the College is understaffed partly due to low teaching salaries. The Government has undertaken to expand the number of teaching posts - an increase from the present level of 19 to about 30 is considered appropriate - (including Kainantu, Okapa and Bogia Community Health Practice Centers) and to increase teachers' salaries to levels comparable to those of teachers in other educational establishments. (See draft Development Credit Agreement, Section 4.03(a].) 35. Rural Vocational Centers (Estimated cost US$250,000). The pro- posed project would provide three man-years of technical assistance, addi- tional equipment and travelling costs for experimental programs at five of the country's 94 rural vocational centers. The purpose of this assistance would be to seek improved effectiveness of the other centers, including improved coordination of the various Government agencies concerned with  - 11 - rural development. On an experimental basis the five centers would intro- duce adult education courses and assume responsibility for supervising the other centers in their respective regions. Additional training would be provided to the best vocational trainees to create a core of particularly skilled farmers and craftsmen. The five chosen centers would supply tools and equipment to other nearby vocational centers as needed and assist in organizing an effective program of follow-up support for trainees who have returned to their communities. The project would bring in rural adults who are now excluded from skill training and who sometimes resist innovation by younger personnel trained in the centers. The project would be eval- uated for possible replication at other centers. 36. Primary Teacher Training (Estimated Cost US$630,000). The proposed project would expand the Madang Teachers College from 296 to 440 places, increasing the country's total primary teacher training capacity from 2,400 to 2,540, and would help to increase the supply of teachers in areas where enrollment ratios are particularly low. The project would finance student accommodation (two thirds of which would be for female students), staff housing, a library, and additional equipment furniture and books. Modifications to existing buildings would permit larger classrooms which, in turn, would reduce recurrent costs. The college would be able to provide good quality training at a student/ teacher ratio of about 17, higher than the present norm in PNG of about 15. Because present enroll- ment patterns favour males and applicants from the more developed areas, recruitment policies would be revised in an attempt to redress these biases. (See draft Development Credit Agreement, Section 4.03[b].) 37. Secondary Teacher Training (Estimated cost US$1.2 million). The project would finance an expansion of Goroka Teachers College by 200 places from 430 to 630 places and introduce a one-year course to train primary school teachers as secondary level instructors. It would provide boarding facilities, staff housing, a-multipurpose building, library books and some equipment. While the present quality of the training is good, certain diseconomies are evident. Courses are organized with free subject options which has led to small class sizes, and less desirable subject combinations. A reorganization of the curriculum to a fixed subjectf combination system would resolve these problems and enable an increase in the student/teacher ratio from 11 to 15, thus reducing unit costs which are high at K 2,800 (US$3,500) per annum. A major issue in secondary education is the locali- zation of the secondary teaching force as rapidly as possible without undue lowering of standards. Currently, 66 percent of secondary school teachers are expatriates. Without any new initiatives, localization would not be complete before 1990 and 6,000 man-years of expatriate services. A prin- cipal objective of this project item would be to replace expatriate teachers. This would reduce staff turnover and allow considerable foreign exchange savings. Moreover, the lower salaries which local teachers would receive would more than cover the required investment within a decade. One means of achieving some immediate localization of secondary school teachers would be to introduce a course to convert local primary school teachers into secondary level teachers. The College's intention to begin such a course by January 1977 was confirmed. (See draft Development Credit Agreement, Section 4.04.)  - 12 - 38. Once the secondary teaching force is localized, it seems likely that there will be excess capacity for training secondary teachers, since Government policy is to limit the growth of enrollment in secondary level education after about 1980. This reflects a temporary disequilibrium in the economy which is not expected to generate a sufficient number of jobs in the next decade to absorb an unchecked expansion of secondary school leavers. Although Government recognizes that a continued increase in secondary education would have a significant benefit in increasing national unity, resource constraints dictate that further expansion can be only slightly beyond the employment generating capacity of the economy. There would be no difficulty in using the available excess capacity at Goroka for other purposes, such as primary teacher training. However, it is too early to determine what will be the best use of this capacity in 10 years' time and thus any definite proposals would be premature at the present time. 39. Technical Training-Lae Technical College (Estimated Cost US$1.5 million). The project would provide a new laboratory block, staff housing, workshop, laboratory equipment and library books. Eight man-years of specialist services would be included for installing and commissioning the equipment and for introducing improved curricula and teaching methods in building, electrical, mechanical and civil engineering. This expansion would supply the increasing demand for middle-level technicians in industry, commerce and government. The total yearly output of technicians would be increased from the present level of 135 to 210 by 1980. Building certifi- cate courses would be relocated from Port Moresby Technical College to Lae, with the freed capacity used to train additional skilled workers. Total enrollment at Lae would be increased to about 900 students compared with 585 at present. 40. Integrated Rural Development Study (Estimated Cost US$160,000). The project would finance a preinvestment study of rural development and training potential. It would identify a strategy for reorganizing and integrating the existing community-based training programs and Government services. The study would be part of a wider review of the Government's emerging development strategy. The Central Planning Office is preparing a five-year plan for national development whose main emphasis is likely to be rural development, and the proposed study would therefore form an essential element. Finance would be for a total of three man-years by a rural development economist and an educator, with terms of reference accept- able to the Association. (See draft Development Credit Agreement, Section 3.02[c].) 41. Policy and Planning Division, Department of Education (Estimated Cost US$190,000). This item includes 2-1/2 man-years of technical assistance, firstly to introduce more coherent physical facility planning in PNG, focusing on the provincial level where more active and systematic approaches are needed, and secondly to undertake a mid-term review of the 1975-80 Education Plan to assess policy decisions and progress made within the education sector since 1975. This assistance should contribute to the preparation of the next education plan and help identify priority areas for future investments and would be coordinated with the Integrated Rural Development Study.  - 13 - 42. National Training Council (Estimated Cost US$110,000). The Govern- ment is planning to enact a new Industrial Training Act, with a view toward rationalizing existing training programs, and creating incentives to employers to increase their involvement in the apprenticeship scheme. This Act would replace three existing pieces of legislation and set up a National Training Council. Moreover, it would establish a system of levies and grants which would distribute the cost of training more equitably among employers. To assist the Government in achieving these objectives, the project would finance two man-years of technical assistance for an Industrial Training Adviser. The Government would collaborate with the Association on implement- ing the consultant's recommendations for establishing a National Training Council which would assume responsibility for all nonformal technical train- ing programs and integrate them with the formal training conducted by the Technical Colleges. (See draft Development Credit Agreement, Section 4.05.) 43. The efficiency of educational institutions in PNG should be mon- itored with a view toward adjusting curricula as and when required. However at present, resource constraints dictate that this work should be confined to easily available throughput statistics and essential tracer studies which have implications for other training programs. The Government would monitor the number of applicants, acceptances, and enrollment of project assisted institutions and provide the Association with annual summaries of its findings for three years beyond the completion of project implementation and would carry out tracer studies for paramedical training and the rural vocational centers. (See draft Development Credit Agreement, Section 4.02.) Project Costs 44. Total project costs, including contingencies are estimated at US$7 ( illion, with a foreign exchange component of US$4.2 million or 58 percent. Costs have been estimated on the basis of prices prevailing in early 1976. The average unit cost of buildings, deriied from recent costs of siiilar facilities in PNG, varies from US$175/m for classrooms to US$250/m for laboratories. This is somewhat higher than costs in neigh- boring countries due to the high proportion (about 60 percent) of building materials which have to be imported. 45. Utilization of classrooms, workshops and laboratories of the project institutions range from 70 percent to 90 percent based on 35-45 week teaching periods. Equipment costs appear reasonable; they have been estimated on the basis of preliminary lists as reviewed during appraisal. Technical assistance costs have been estimated on the basis of US$55,000 per man-year (all costs included) for expert services and US$12,000 for fellowships. 46. Physical contingencies have been estimated at 10 percent for site development and 5 percent for construction, furniture, equipment and tech- nical assistance. Price contingencies have been estimated as follows: for civil works, furniture and engineering, 13 percent in 1976 and 12 percent  - 14 - in 1977-79; for equipment 9 percent in 1976 and 8 percent in 1977-79; and for technical assistance 7 percent in 1976, declining to 5 percent in 1979. Price contingencies constitute 23 percent of base costs. The comparatively low figure results from the project's already advanced stage of implementa- tion - architectural designs are complete and all physical facilities should be completed within two years of credit signing. Financing Plan 47. The IDA credit of US$4.0 million would finance 95 percent of total foreign exchange costs, or 56 percent of total project costs, with the Government providing the remaining funds. 48. The project implies incremental recurrent costs for the three Government departments concerned: US$1.3 million for the Department of Education; US$0.5 million-for the Department of Primary Industries; and US$0.1 for the Department of Public Health. This represents a modest 2.4 percent, 1.6 percent and 0.3 percent respectively of these departments' 1975 recurrent budgets; moreover the figures may even be somewhat overstated since they do not include possible savings from localization of training staff. However, the increased salaries which graduates of project assisted institutions will command would be substantial. The qualified agricultural extension agent would draw a salary 30 percent higher than that of the untrained person he would replace. This, together with the projected growth of extension staff, would raise the cost for agricultural extension staff from about K 4.8 million ($6.1 million) in 1975 to about K 7.1 million ($9.0 million) in 1985 (in 1975 prices). This corresponds to an increase of expenditures for extension services of 5 percent per annum. Procurement 49. Contracts for civil works would be awarded on the basis of local procedures satisfactory to the Association. Contracts for certain civil works for the Highlands Agricultural Training Institute and for Lae Tech- nical College costing less than $65,000 each, but not more than $275,000 in aggregate would.be procured on the basis of negotiated contracts. Part of the civil works required for the Highlands Agricultural Training Institute, the College of Allied Health Sciences and Lae Technical College not exceeding an aggregate amount of $250,000 may be carried out by force account. Contracts for other civil works and furniture would be awarded using local competitive bidding procedures satisfactory to the Association. Local competitive bidding is justified in view of the small size of individual contracts and the geographic dispersion of contract sites. Prior approval by the Association would be required for all civil works contracts valued at more than US$200,000. Since some construction is expected to commence prior to credit signing, retroactive financing of expenditures after May 1, 1976 up to US$200,000 is recommended. (See draft Development Credit Agreement, Schedule 3, Part D.1, and Schedule 1, paragraph 4 respectively.)  - 15 - 50. Equipment contracts exceeding US$50,000 would be awarded on the basis of international competitive bidding. In accordance with Bank Group guidelines, domestic manufacturers would be allowed a preferential margin of 15 percent or the existing customs duty, whichever is the lower, over the c.i.f. price of competing imports. Direct Government imports are exempt from customs duties and taxes. Equipment which cannot reasonably be grouped to form contracts for at least US$50,000 equivalent could be awarded without prior Bank approval on the basis of competitive bidding advertised locally following procedures satisfactory to the Association. Books (total esti- mated cost US$150,000) would be purchased from authorized distributors. In addition, off-the-shelf items, not exceeding US$10,000 in each contract and aggregating a maximum of US$100,000 equivalent, could be purchased on the basis of a minimum of three price quotations. (See draft Development Credit Agreement, Schedule 3, Part B.) Disbursement 51. The proposed credit would be disbursed over four and one half years and would finance 100 percent of the c.i.f. costs of directly imported equip- ment, 100 percent of the ex-factory price of locally manufactured equipment, and 100 percent of technical assistance; 70 percent of the cost of locally procured imported equipment; and 40 percent of civil works, of furniture and of professional services. Implementation 52. The multiplicity of Government agencies and departments involved in implementing the project suggests the need for a central coordinating unit. A Project Management Committee will be established to oversee and guide the implementation of the project. This Committee will include the Secretaries for Education (Chairman); Finance; Transport Works and Supply; Primary Industry; and Health; and the Chancellor of the University of PNG. Already established in the Department for Finance is an Office of Project Coordination to supervise all externally financed projects. The Office of Project Coordination under the supervision of a Project Coordinator would be responsible to the Project Management Committee for administrative, finan- cial and technical supervision. An Education Project Manager specifically responsible for coordinating the implementation of the proposed project has been assigned to this Office. He would supervise the preparation of tender documents for civil works and equipment, the compilation of master lists for equipment and furniture, the execution of construction and the procurement and installation of equipment. Moreover he would have overall responsi- bility for financial coordination. He would be assisted in these functions by a senior architect and a procurement officer. Each of the line depart- ments involved in the project has appointed staff to oversee the execution of the respective components; these coordinators would report to their own departmental supervisors and liaise with the Education Project Manager. During negotiations assurances were obtained that the Association would be consulted in any future appointment to the position of Education Project Manager (see draft Development Credit Agreement, Section 4.08).  - 16 - 53. Design, tendering and supervision of all project items, except Goroka Teachers College would be undertaken by the Department of Transport, Works, and Supply. The construction unit of the University of Papua New Guinea would be responsible for the Goroka component. The necessary funds would be made available to the University as a grant. 54. The Department of Transport, Works, and Supply has prepared architectural drawings for all components, except Goroka Secondary Teachers College. However, the Department's staff constraints may lead to the Government's using consultants for detailed engineering and specifications for structural, electrical and mechanical works. An adequate number of qualified firms are available in the country. Suitable sites are available for all project items. All land required for the project has already been acquired. Evidence to this effect, with the exception of land for staff housing at the College of Allied Health Sciences (Madang), was supplied during negotiations. The remaining evidence will be supplied to the Association in accordance with Section 3.05 of the draft Development Credit Agreement. Justification and Risks 55. One of the most difficult problems facing Papua New Guinea, like many newly independent countries, is the provision of adequate manpower, crucial to economic growth and development. The proposed project would provide financing to a number of institutions chosen because of their ability to provide the country with an increase in trained manpower in key areas. The project provides for relatively modest physical facilities, as one of its major aims is to rationalize the system of education in several important fields, leading to significant savings in unit costs and increases in student/teacher ratios. The expanded manpower will be quickly absorbed into the workforce, either in filling currently unmet needs, or in replacing expatriate workers. 56. At the middle and upper levels, the economy still relies heavily on expatriate personnel. While these personnel are providing the country with excellent services in most cases, localization is desirable and has been given priority by the Government. This reflects not only national pride and the desire for self-reliance, but also an awareness of the high salaries required to maintain competent expatriates. Moreover, expatriates wages have at least two foreign exchange implications. First, expatriate consumption is more heavily weighted toward imports than is the local consumption pattern; and second, expatriates are likely to repatriate a portion of their earnings. Localization is particularly important in the case of middle-level technicians (Lae Technical College component) and in the secondary teaching force (Goroka Teachers College component). In the case of the latter, the expansion of Goroka Teachers College would enable the replacement of about 1,000 expatriates with local-ly trained indigenous teachers before 1986. Between 1977 and 1986, the expansion would save about 1,800 man-years of expatriate services and differential salary cost of about K 14 million (US$17.8 million), or twelve times the required capital investment of K 1.2 million (US$1.5 million).  - 17 - 57. Rural development and improved standards of living for the 70 percent of the population still in the subsistence sector is a crucial development objective of the Government and a major focus of the proposed project. The expansion of the Highlands Agricultural Training Institute would enable the Government to upgrade significantly the quality of its agricultural extension service, increasing the proportion of properly trained extension agents from 20 percent to 50 percent by 1985, while maintaining the level of staffing at one agent per 135 farm families. Moreover, due to economies of scale the recurrent cost per student at HATI would fall by nearly 50 percent from K 5,900 (US$7,500) to K 3,100 (US$3,900) per annum (in 1976 prices). The delivery of improved health care to rural areas is basic to improved living standards. For Papua New Guinea the least cost approach is an increase in paramedical personnel which will allow the most economical use of scarce doctors and nurses. With the expansion of the Madang College of Allied Health Sciences, the full demand for health inspectors and two-thirds of the demand for health extension officers will be generated locally by 1986. Moreover, economies of scale resulting from the expansion would reduce recurrent costs per student by about 23 percent from K 3,250 (US$4,100) to K 2,500 (US$3,200) per annum. 58. Providing rural areas with educational opportunities - both basic and vocational - is an important vehicle for bringing the rural population into the modern monetized economy. The Madang Teachers College component would increase the supply of primary school teachers to the least developed areas of the country and technical assistance to the Department of Education would help improve the distribution of school facilities. The study on Integrated Rural Development and Community-Based Training would assist the formulation of a national development policy with proposals for coordinating Government services and rural training. The Rural Vocational Center component would on a limited scale coordinate the efforts of several agencies in order to bring in adults to short courses at five experimental centers, and in the longer term suggest ways of improving and strengthening other vocational centers. 59. Female education would be promoted specifically by two project components. Two thirds of the expansion of Madang Teachers College would be for female trainees. The Highlands Agricultural Training Institute would begin to train female extension workers which is important since farming is done mostly by women. Moreover the Government would revise its selec- tion procedures to increase the representation of female trainees in other colleges. 60. Risks associated with the project are considered minimal; they are primarily financial and administrative. In late 1975, the Government's budget position forced it to freeze 1976 recurrent funds, although salary increases of about 10 percent also had to be met. Some project institutions would be unable to accommodate another reduction of this magnitude without postponing proposed expansion. The increased number of graduates under the project implies a higher salary bill. However this additional cost is offset by the savings from the localization process and the benefits of improved  - 18 - services. Finally, the secondary teacher training component is designed for a rapid localization of staff and, in consequence, training capacity would be developed in excess of needs for normal growth and wastage. There is a risk that the excess secondary teacher training capacity available after 1985 may not be diverted to other uses as planned, but used as an argument for expanding secondary education beyond present plans. However, the project addresses priority issues and the Government is well aware of the risks and constraints associated with the proposed project. PART V: LEGAL INSTRUMENTS AND AUTHORITY 61. The draft Development Credit Agreement between The Independent State of Papua New Guinea and the Association, the Recommendation of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement and the text of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. 62. Features of the Development Credit Agreement of special interest are referred to in paragraphs 34, 36, 37, 40, 42, 43, 49, 50, and 52 of this Report. 63. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI: RECOMMENDATION 64. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President by David A. Knox Attachments Washington, D.C. October 1, 1976  TABLE 3A ANNEX I PAPUA AND NEW GUIN - SOCIAL INDICATORS DATA SHEET Page 1 of L pages LAND AREA ITHOU KM42) ---------- --------------- ~~~~PAPUA AND NEW GUINEA REFERENCE COUINTRIES (19701 TO TAL 415.'. MOST RECENT AGPIC. 0.0 1960 1970 ESTIM4ATE LIBERIA IVORY COAST TRINIOAO AND ToLago"' GNP PER CAPITA (US$) 160.0 310.0 450.0 290.0 340.0 1180.0 POPULATION AND VITAL STATISTICS POPULATION (MIO-YR, MILLIONI 1.9 2.5 2.7 1.3 5.4 1.0 POPULATION DENSITY PE- SOUAP 7 KM. 4.0 5.0 6.0 12.0 16.0 200.0 PE.K SO. KM. AGRICULTURAL LAND 4.I73.0 VITAL STATISTICS AVERAGE AIRTH RATE (/THCUI i4b.1, L3. 1 1o.6 42.8 46.1 32.5 AVEPAGE nEATH RATE 4 /THOU) 25.5 20. 2 17.1 23.5 23.3 7.1 INFANT MORTALITY RATE (/THOU) . . . 137.3 .. 34.0 LIFE EXPECTANCY AT BIRTH (YRSI 38.6 45.1 47.7 41.0 41.0 67.8 GRPOSS REPRODUCTION RATE . 2.9 2.9 2.6 3.1 2.2 POPULATION GROWTH RATE (R TOTAL 2.7 2.6 2.0 3.3/a 31.4 /a 2.1 /e URBAN . . 16.7 ..8.T Z URBAN POPULATION (I OR TOTAL) .. 6.0 11.014 26.2 28.0 12.0 AGE STRUCTURE (PERCENiTi 0 TO 14 YEARS 40.5 42.8 ~a 45.2 /a 40.7 42.5 41.2 15 TO 64 YEARS 5. 56.2a 53. 37e. 56.0 54.8 54.8 65 YFARS AND OVER 2.9 1 .0 7 1.57a 3.3 2.7 4.0 AGE LEPENDENCY RATIO 0.8 0.8/ 0.q9. 0.8 0.8 0.8 ECONOMIC DEPENDENCY RATIO 'L08/ 0.8/ ...oA 0.-~ 1.3 FAMILY PLANNING ACCEPTORS (CUMULATIVE. THOU) . . . .. 25.4 USERS It OF MAPRIED WOMEN) ... . EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 1040.0 1260:0~ /a 580.0 2600.0 350.0 L LABOR FORCE IN AGRICULTURE (2) 89.0 82.0 .. 2.1 82.0 22.0 UNEMPLOYED it OF LABOR FORCE) ... .20.0/c 6.0 12.5 INCOME DISTRIBUTION X OF PRIVATE INCOME RECOD BY- HIGHEST 5X OF HOUSEHOLDS .. . .61.7/4 HIGHEST 20l OR HOUSEHOLDS .. . . 2.67 LOWEST 201 OF HOtUSEHOLDS 5.3. LOWEST 401 OR HOUSEHOLDS . . . 10.9~ DISIRIBUTIOMN Of LAND OWNERSHIP I OWNED BY TOP 102 OF OWNERS . .. I OWNFD BY SMALLEST 102 OWNERS . .. HEALTH AND NUTRITION PCPULATION PER PI{YSICIAN 14 390.0/4b 11630.0 11130.00/ 1,0450.0 12140.0 2320.0 POPULATION PER NURSING PERSO3N 2450 07Ej, 2370. 180. / 41 40.0 2480.0/4. 360.0/(b POPULATION PER HOSPITAL BED 170. ~ 1500 150. 530.0 680.0Ld 230.0 PER CAPITA SUPPLY OF - CALORIES (2 DR REQUIREMENTS) . .. . 88.0 108.0 97.0 PROTEIN IGRAMS PER DAY) .. . .36.0 60.0 64.0 -OF WHICH ANIMAL AND PULSE .. . .10.016 18.Oj 34.0/4 DEATH RATE (/THOU) AGeS 1-4 .. . .. .1.8 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL BB.0d-62/d 66:0/b-68/b . 43.0 76.0 1100.0/d SECONDARY SCHOOL ""OdIL &6 ..12.0 11.0Of 40. YEARS OF SCHOOLING PRCVIDED (FIRST AND SECOND LEVEL) 10.0 10.0 10.0 12.0 13 .0 1S.0G' VOCATIOINAL ENROLLMENT I: CF SECONDARY) 17.0 19.0 1S. 0/4 5.0 7.0 8.0/0 ADULT LITERACY RATE (21) . 3I.0O4 15.0 20.0 88.0 HOUSING PERSONS PER ROOM (AVERAGE) 0.7/. . . OCCUPIED DWELLINGS WITHOUT PIPED WATER (2) . . . . 8./ ACCESS TO ELECTRICITY (X OR ALL DWELLINGS) 80.0 . .. 66.0/f RURAL DWELLINGS CONNECTED TO ELECTRICITY (UIt). . CONSUMPTION RADIO RECEIVERS (PER THOU POP) .. . .1320 17.0 276.0 PASSENGERt CARS (PER THOU POP) 2.0 .0 7.0 11.00 10.0 75.0 ELECTRICITY (KWH/YR PEP CAP) 30.0 64.0 356.0 330.0 120.0 1173.0 NEWSPRINT (KG/YR PER CAP) .. 0.1 0.2 0.1 0.2 5.5 SEE NOTES AND OEFINITICKS CN REVERSE  Page 2 of 4. pages Unless other-sie noted, data for 1960 refer to any year between 1959 and 1961, for 1970 between 1968 and 1970, end for Most Recent E3timate between 1973 and 1975. *'Trinidad and Tobago has bee. Selected as an objective euntrv because both co.tslree are savll Island nations and alec both COUntr-feS recenItlY became Independent. The wast majority of people in each country are dependent on agriculture for their livelihwod, and both cowotries poSsess significant agricultural potential. PAPUA NEIW GUIEA 1960 A5 Ratio of population under 15 and 65 aod o'er to total labor force; /b 1964.; Lg Including aesistant nurses; 7- Papua and New Cuinea respectivelyl /a Total, urban and rural. 1970 /a 1966; A Papua and Rev Oaines respectively. MOST RECEWT PSTD4TE, la 19711 A 1972. LIBERIA 1970 /a G.e to Immigration, growth rate is higher than the rate of natural increase; /b Ratlo of population under 15 and 65 and over to total labor force; /c Unemployed and partially employed; - I Population; /e 1961.-66. VORY COAST 1970 A Due to tamigration, growth rate is higher than the rate of natural increase; / 1965-70; Ratio of popula- tio under 15 and 65 and over to total labor force; /d Govermoent only; /. 196l-66; J 12-18 years of age. TRINIDAD AND TOAO 1970 /a 15-61. years of age; /b Icluding midwives; /c 1964.66; /d 5-11 years of age; /. Government main- talned and aided schoole only; Ja 1966; IS rnside only. R6, October 5, 1976 DEFINITIONS OP SOC:AL INDICATORS Land Area (thou On'7 Population oar murs~~~ino eaoo - Population divided by fluster of pr...tia- Total T.tota surface area comprising lend ares and inland vaters. nnleademegrute uss,tand"o 'ctied nrs, \ortc.- Most recent eatima te of agricultural area used temporarily or and auxiliary personnel with training or ellperience. permanently for crops, pa3turso, market & kitthen gardens or to lie fallon,. Population Per hospital bed - Population divided by number of hospital bes vetlele in public and private general and specialized hoopital GNP par capit. (US$) - GNP par capita eoLadtimte at current mArket prices, and rehabilitation centersl excludes nursing hones and establishosents calclate bysameconvrsin mehodas Wrld ankAtla (193-7 ass);for custodial and preventive care. 1c60,cul aned 197 data.esinmto a wdSnkAl 1737 el) Per capita supply of calories (% of requirmvents) - Computed from energy 1960, 1970 and 1975 data. ~~~~~~~~equivalent of cat food supplies available in country per capita per Ppoplation -nd vita1 statistica day; available soppliea comprise dOmestic Moduction, imports lenss Posolatfon (,id-yr. millionl - As of july first, If a.ct available, exports, ankd changes in stock; net supplies exclude animal feed, seeds, average of two sod-year estimates; 1960, 1970 and'1975 dare. quantities used in food processing and losses in distribution; re- quirements wore estimated by FAO based on physiological needs for Population density - pet ansare h - Mid-year population per square kilo- normal activity and health conidering environmental tem~perature, meter (100 hectaree) of total area. bod weighta, age and sac distributions of population, and allowing PsoaI,lmto demIlty - par asuer. he of seri. land - Computed as above for 10% or waste at household level. aericultural land only. Pe aiaspl fpretain crms or da . Protein content of per capit n~t supplyp of fodpr a iiap of fond is defined as VItal stoticics. above; requirecenta for anl coutrion establ-ished by USIA Economic Crode birth rate per rhousand - Annua lire births per thosend of eid- Raeearch Services progJde for a minimum allowance of 60 groom of total year popolatton; ten-year arithmetic averages Boding in 1960 and 1970, p-a Lai per day, and 2U grass of nanial and pUbs. u-ut-s, ul Mn.2O-0O and five-year ov-rege andi.g L. 1975 for mast recant eatinate. grooms should be a-ls,l p'otmin; these standards as's lower than tames Crude death rate par thousand - Annual deaths per thousand of mid-year of 75 gramfs of total protein and 23 grams of animal protein as an aver- popuatio; te-yea arihmetc avrage endng i 196 and1970 endage for the world, proposed by FAD in the Third World Food Survey. fiv -year avrg rmItmg ti97 foer mostdu rec nt 16 esiate. 190 dPer cita rtei supsly frmaniaed cube - Protein supply of food Infant mortality rate f/thou) - Anmsal deaths of infamts under one year 5f deieTrmasiasad lesai grams per day. age per thossemd live birtba. 1Deathrth Zta_l_L5p. -Sg L.d - Annual deaths per thousand In age group Life aeaect.ncv at birth (yrsl - Average number af years of life remaiing I:Z 7 childrt n-in this age group; suggested as an indicator at birth; usually fie-year average. ending in 1960, 1970 ond 1975 f or of malnutrition. developing countries. Gress rep,roduction rate - Average number of live doeghtera a wassam will Education bear in her normal reproductive period if she experiences pre.net age- ra. -o Mn tio mar scehool - Enrollment of all ages as specific fertility raiese; "usualy five-year averaese ending is 1960, ilphL olaepwain inci,Asds children aged 1970 and 19~71 for developing asurs.6-1 years but adjusted for different lenlgths Of Primary education; Popul..ato eroth rter I- total _ Cenpoond annual growth rates of mid- for countries with universal education, enrollment naY eaceed 100% yer .opuainfredW7-5 sincea some pupils are below or above tim officia school age. F, ye.19060r96-0.Llutd nollen rtio - secondary school - Computed as above; mac- population row rate 1%; - urban - Computed like growth rate of total onayeuainrqie tleast foor years of approved primary population difrent deflnitiono of urban area may affect compare- instruction; provides general, vocational or teacher training instruc- bulity of data among countries. tions for pupils of 12 to 17 years of age; correpondence courses are UTrban opul-atlon (% of total) - Ratio of urban to total population; dif-geralexud. 7"eit efinitions of urban areas may affect compaability of data Terars o xchlune rid. d(is n eodlve .-Ttlyaso among conutrias. Yashoflng atho seon'dary rI nda'I n level,soaina nto lion talyhepartsall struture ercent) - Children (0-14. years). warking-age (15-64. years), orchomletel excludetonmyd. arial (5years and Over) as percentages of mid-year population. Vocational enrollment (8 of-secondazy) - Vocational instituctiosn include Agp2 Agednyrto- Rai fpplto neBi n 5adoe etchnical, indstriail or other programs which operate independently EcT,liilfdgenWhcuh61.or as depatments of secondary institutions. Ec mc depnecy ratio - Ratio of populecion under 15 and 65 and Over Autlerorae(I-itert adults (ebbe to read and write) as to he abo foce n age group Of 15-61. years. o n Ztlautpplto gd3 er n vr Famil planning - eccaptora uconlative. thou) .- Cunula tive number ofpecnaeototadl ouainagd1yaradov. ascptora of birth-control cdevices under auspices of national fanilyHosn Planning program since inception. -Average numfber of persoms per room in oc- FamilY Plannin - users (% of married women) - Percentages of married Pi~era on Pei ionom dwvelling - in urban aress; dwellings exclude non- women of child-bearing age (15-441 yerars who use bir-th-control de- cpierma onventistuctre dalnd ancuidprs vices to all married women in same age group. prcupied dwrellin es withouft ep ed w arter s).Ocpedcnetoa delnsiurba a .ua areas without Inside or outside piped Ml=t -t~~~~~~~~~~~~~~~~~~wae facilities as pecentage of all occupied dwellings. Totai lbOr furce (thoss~usand) - Economically eztive porsons, including Acestalectricit 1%ofal d&wellinyo) - Conventional dwellings 6id4r .I~d u xldn oseie,suet,etc.; wiLth eletricity iln livig uquarter spercent of total dwellings deorfinitins in various countries are not comparable.inubnadralres lbrfrein agriculture ()-Agricultural labor force (ini farming, in uraAn ando rural areas.tL -Coutdasaov o try _J~~~~~~~~~~~~~~~ua wlig cnetdt lctiiy()-Cmptda bv o foresty hunting end fishing) AB percentage of total labor force. radwlngeny Unamlove N f laor fce)- Unemployed are usual3y defined as persons whno are aSIO adn willing to talce B.job, sout of a job onma given day, Consumption remained cut of a job, and seeking sos-k for a specified minimum Radio ree~r. (nor thou pop) - All types of receivers for radio broad- period niot exceeding non week; may mat he compaable betwee~n coun- casts to guneral public per whousen d of population; excludes unli- tries due to different definitions of unemplO,yed end source of data, censed receiesin countries and in years kAn registration or radio e.g., employment office tattistics, samepe surveys, compulsory uneml sets was in effect; data for recant yearsnmay not be comparable since plOYmsent iwuorance. mast countries abolished licensing. income ditrrbutian - Percentage of private incme (beth in cash and kind) esnm orAPTtu.2)-asngrcscmpie oorassa- rcie by richest SI, richest 20% peroret 2UX ed pwoorst 40R of 8Zagfaatha gt persons; excludes ambulances, hearses and s,ili- houoeha1da. tory vehicles. na cnupino dtrl,om EectrIg4ty_Ckh/f ..0gc3) -Ana osmto fidsra,cm Distribution fln. wasi ofof and,M , walt- iriy 7u 'Iicipr ealectricity in kilowatt boors Per caPita; lest l~ andpoores hl p o Percentages oln vidb mt-generally bbaseed onapproldct'ion data, without allowance for losses In isat 10% and ' land cesmers. grids hbat allowing for i~mports and expsrta of electricity. Neslthtand Nuis-ition Newsporint, (k/yr per cap) - Par capita annual consamPtion In kilograms ?opAion. per plwicral.a - Population divided by number of srctcn stimated from dumestlopouto lsnt mot fnwpit  ANNEX I Page 3 of 4 COUNTRY DATA - PAPUA NEW GUINEA AREA 2 POPULATION DENSITY 475,366 km 2.65 million (mid-1974) 2 Rate of Growth: 2.6% (from 1966 to 1974) 13.6/km POPULATIONi CHARACTERISTICS (1974) IIEALTH (1.974) Crude Birth Rate (per 1,000) 44.2 lPopulation per Physician 10,860 Crude Death Rate (per 1,000) 16.3 Population per Itospital Bed 224 Infant Mortality (per 1,000 live births) 96.0 EDUCATION ACCESS TO ELECTRICITY Adult Literacy Rate (1971) 32.2% % of Population - Urban 50% Primary School Enrollment (1975) 56.8% GNP PER CAPITA IN 1975 US$450 /1 GROSS DOMESTIC PRODUCT IN FY75 ANNUAL RATE OF GROW1H (%, FY69 constant price) (at current prices) US$ Million % FY71-72 FY72-73 FY73-74 GDP at Market Prices 1,365.6 100.0 2.8 20.1 1.2 Gross Domestic Investment 220.2 16.1 -20.1 -43.7 -37.5 Gross Domestic Saving 201.4 14.7 -32.9 243.4 86.3 Current Account Balance 149.0 10.9 - 104.2 18.6 Exports of Goods, NFS 566.4 41.5 36.3 -23.3 -4.6 Imports of Goods, NFS 556.8 40.8 -5.7 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1972 /2 Value Added - Labor Force V. A. Per Worker US$ Million % 'O0O % US$ % of National Average Agriculture 258.7 40.1 158 48.8 1,637 82.2 Industry 189.7 29.4 43 13.3 4,411 221.4 Services 197.1 30.5 123 37.9 1,602 80.4 Total/Average 645.5 100.0 324 100.0 1,992 100.0 GOVERNMENT FINANCE Central Government (K Million) % of GDP FY75 FY72-73 FY74 FY75 Current Receipts 179.7 12.3 13.6 18.0 Current Expenditures/3 341.0 27.8 27.6 34.2 Current Deficit -161.3 15.5 14.0 16.2 Capital Expenditures 33.1 5.8 3.0 3.3 External Assistance (net) 137.6 16.2 15.2 13.8 1/ 1975 World Atlas. 2/ At factor cost. 3/ Includes salaries and allowance paid by the Australian Government to its overseas officers in the PNG public service. October 1, 1976  ANbl.X r Page 4 of 4 COUNTRY DATA - I'APUA Hl.NW GUINIA MONEY, CRITr ANI) PRICEIS FY73 FY74 FY75 (Million K outstanding end of period) Money and Quasi Money/I 149.3 284.0 303.5 Bank Credit to l'Liblic Sector 19.3 -12.4 8.4 Bank Crudit to Private Sector 118.3 137.9 170.1 (Percentages or Index Numbers) Money and QluZIsi Money as % of Gl)D 25.1 28.3 Consumer Plrice Index (1971=100) 111.0 143.3 154.1 Annual Percentage Changes in: Conisumer Price Index (1971=100) 4.8 29.1 7.5 Bank Credit to Plublic Sector 1.0 -164.2 167.7 Bank Credit to Plrivate Sector -12.6 L6.6 23.4 BALANCE OF PAYMENIS /2 MERCHANDISE EXPORrS (AVERAGE FY73-75) FY73 FY74 FY75 /3 US$ Million % (US$ tlilion) L.xports of Goods 304.4 676.3 562.3 Coffee 38.8 7.7 import of Goods 276.9 330.4 496.0 Cocoa 33.5 6.7 NF-Service (net) -38.1 -29.6 -56.7 Copra & Copra lProducts 43.0 8.6 Resource Gap (deficit = -)-10.6 316.3 9.6 Timber 19.9 4.0 Copper Ore & Concentrates 323.7 64.5 Factor Service Payments All Other Commodities 42.8 8.5 (net) -122.8 -306.3 -50.2 Total Net Transfers 188.2 222.6 189.6 (excJ. Reexports) 501.7 10o(1.1 Balance on Current Account 54.8 232.6 149.0 Private Capital -30.9 -95.4 -27.5 EXTERNAL DUBT, IDECEMBER 31, 1975 Puiblic Ml.T loans (net) 40.1 53.8 46.7 US$ Million Direct Investment 68.4 210.2 -45.2 Other Capital n.e.i. -94.8 -163.7 -174.4 Public lebt. incl. Guaranteed 31i Residual (surplus) 37.6 237.5 -51.4 Non-Guaranteed Private lDebt - Total Outstanding & Disbursed ill FUEL AND RELATEID ilAERIALS FY72 FY73 FY74 DEBT SERVICE RATIO FOR FY75 /4 % (US$ Mlillion) Imports 15.2 14.2 29.6 I'Liblic Debt, incl. Guaranteed 2.9 Exports - - - Non-Guaranteed Private l)ebt - Total Ouitsteinding & Disbursed 2.9 RA'IE OF EXCHANGE IBRD/IDA LENIDING (as of 8/31/76) (US$ Million): Until 12/23/72 9/9/73 - 9/30/74 IBRU IDA US$1.00 = KU.840 US$1.00 KO.675 Kl.00 = US$1.19 K1.00 = US$1.49 Outstanding & Disbursed 48.5 2u.7 Undisbursed 7.0 4.5 12/23/72 - 2/13/73 9/30/74 - 6/30/75 Outstanding incl. US$1.00 KO.784 US$1.00 K0.752 Undisbursed 55.5 25.2 K1.00 = US$1.28 K1.00 = US$1.33 2/13/73 - 9/9/73 6/30/75 - 7/25/76 Us$1.O0 = KU.704 US$1.00 K KO.794 KI.00 = US$1.42 K1.00 = US$1.26 From 7/25/76 US$1.00 - KO.763 KI.00 = US$1.31 1/ PNG has been part of the Australian monetary and banking system. Figures on money and quasi money are therefore onty estimates. 2/ PNG as part of the Australian monetary system has had no complete separate balance of payments. Figures on private capital and monetary movements are rough estimates. The country has not had foreign exchange reserves on its own until the last year. 3/ Preliminary. 4/ Ratio of debt service to exports of goods and nonfactor services. October 1, 1976  ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN PNG A. STATEMENT OF BANK LOANS AND IDA CREDITS As of August 31, 1976 Loan or Credit Amounts (US$ millions) Number Year Borrower Purpose Bank IDA Undisbursed Three credits and three loans fully disbursed 34.7 11.0 - 852-PNG 1972 PNG Telecommunications 10.0 3.0 326-PNG 1972 PNG Ports 9.2 1.9 348-PNG 1973 PNG Livestock 5.0 2.6 999-PNG 1974 PNG Power II 10.8 4.0 Total now outstanding 55.5 25.2 11.5 Amount sold 6.1 Total now held by Bank and IDA /1 49.4 25.2 Total undisbursed 7.0 4.5 11.5 B. PROJECTS IN EXECUTION /2 Loan No. 737 Upper Ramu No. 1 Hydroelectric Project; US$23.2 Million Loan of May 26, 1971; Effective Date: July 30, 1971; Closing Date: September 30, 1976 The project consists of a 75 MW underground power station, re- lated substations, and 320 miles of transmission lines linking centers previously served by small diesel units. The civil works were completed /1 Prior to exchange rate adjustments. /2 These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  ANNEX II Page 2 ahead of schedule within the 20 percent cost escalation over the original estimate, but delays occurred in equipment supplies and commissioning of the third unit which took place in July 1976, about ten months behind the original schedule. The total project cost expressed in Australian dollars is now A$34.8 million as against A$30.3 million during appraisal (15 per- cent increase). The difference in terms of US dollars is larger because of exchange rate movements. The project is still economically justified even with the changed economic situation. Loan No. 999 Second Power Project; US$10.8 Million Loan of June 12, 1974; Effective Date: December 27, 1974; Closing Date: December 31, 1979 This project consists of three distinct items: (i) training of local staff to permit an early and rapid reduction of expatriates; (ii) modest distribution expansion covering needs thru 1979; and (iii) shortfall in foreign exchange for Loan 737-PNG because of the devaluation of the US dollar. Procurement of distribution materials is underway. As for staff recruitment, ELCOM is having extreme difficulties in reaching the target figure due to movement of overseas staff back to Australia and difficulties in finding suitable replacements. Another factor is that otherwise com- petent expatriates originally selected as trainers have not always been suitable in every case. To overcome these problems partially, ELCOM has employed management consultants, in particular P.A. Management Consultants Pty. Ltd., to conduct training courses or to provide guidance. Since July 1974 six such courses/exercises, at a cost to ELCOM of A$107,000, have been conducted. The results achieved to date have been promising with about 140 Papua New Guineans having completed their training. Local staff have been gradually taking over daily operations. Loan No. 852 Second Telecommunications Project; US$10.0 Million Loan of July 21, 1972; Effective Date: January 19, 1973; Closing Date: June 30, 1977 The project provides for: (a) installation of 13,000 lines of automatic switching equipment; (b) provision of UHF/VHF radio systems; (c) installation of multiplex equipment to provide 650 additional circuits and extension of long-distance automatic exchanges; and (d) consultant services. It supports P&T's July 1973 to June 1975 development program and follows immediately on that successfully completed under the first loan 546-PNG. As a result of a reduction in demand for local subscribers' connections when the schedule for independence was first announced, the project was spread over four years instead of three years and the closing date extended to June 30,  ANNEX II Page 3 1977. Construction is proceeding satisfactorily and the project is expected to be complete in advance of the revised closing date. Growth in traffic particularly for the long distance and international services has been greater than estimated and this has offset the initial reduction in demand for local services so that financial results have been highly satisfactory and have exceeded appraisal forecasts. Loan No. 326 First Ports Project; US$9.2-million Credit of July 21, 1972; Effective Date: February 8, 1973; Closing Date: September 30, 1977 The original project consisted of extending port facilities at Lae and Kieta, land reclamation for new storage facilities at Port Moresby, a new port development at Alotau, provision of mechnical handling equipment, and consultant services. Work on all the original port improvements included in the project has been completed; the contract for improvements to the Ocean Wharf at Kieta, subsequently included in the project, has been let. There will not be any expenditures for mechanical equipment as originally foreseen. Papua New Guinea Harbors Board's financial position remains sound. It has undertaken a review of its tariff and cash flow position over the next five years in the light of the development programs' requirements and some re- vision of tariffs will be required. Total cost of the civil engineering projects is practically the same as previously reported and it is anticipated that the total amount of the credit may not be expended. Loan No. 348 Smallholder Livestock Credit Project; US$5.0 Million Credit of January 4, 1973; Effective Date: May 11, 1973; Closing Date: December 31, 1976 The Project supports the Government's program for development of livestock production by smallholders. Sub-loans are made through the Papua New Guinea Development Bank (PNGDB).to smallholders for beef, pig and poultry production. Technical assistance to smallholder livestock producers is provided by the Department of Primary Industry (DPI). The Project also provides for farmer training, in-service training of DPI extension staff and for upgrading livestock research. Physical progress of the Project has been good in that the total number of sub-loans has been in excess of the appraisal estimate. However, the average sub-loan size has been much smaller than the appraisal estimate and only about 50% of the credit was disbursed at June 30, 1976. The Government will request an extension of the closing date from December 31, 1976, probably to December 31, 1978.   ANNEX III Page 1 PAPUA NEW GUINEA FIRST EDUCATION PROJECT Credit and Project Summary Borrower: Government of Papua New Guinea Amount: US$4.0 million Terms: Standard IDA terms Project Description: The project would help to finance expansion of five educational institutions (in agricultural, health, primary and secondary teacher training, and technical fields) and, in addition, would support planning and studies essential to long- term development of the education and training sector, including an experimental program at five Rural Vocational Centers. Altogether the project includes 21-1/2 years of specialist services and 9-1/2 years of fellowships to strengthen staff and curriculum development. Estimated Costs: ----- US$ Million ----- Local Foreign Local Highlands Agricultural Training Institute 0.45 0.29 0.75 College of Allied Health Sciences, Madang 0.40 0.34 0.74 Rural Vocational Centers 0.07 0.07 0.14 Primary Teachers College 0.30 0.33 0.63 Secondary Teachers College 0.57 0.59 1.16 Lae Technical College 0.51 0.55 1.06 Technical Assistance 0.13 1.12 1.24 Subtotal 2.43 3.29 5.72 Contingencies: Physical 0.13 0.17 0.30 Price 0.62 0.75 1.37 Subtotal 0.75 0.92 1.67 Total Project Costs 3.18 4.21 7.39  ANNEX III Page 2 Financing Plan: The proposed IDA Credit of US$4.0 million would represent 95 percent of the foreign exchange component or 56 percent of total project costs, with the Government providing the remaining funds. Estimated Disbursements: IDA FY 77 78 79 80 81 Semester 1 0.1 0.6 0.6 0.6 0.1 2 0.3 0.8 0.6 0.3 - Cumulative 0.4 1.8 3.0 3.9 4.0 Procurement: Contracts for civil works and furniture would be awarded on the basis of local competitive bidding procedures, satisfactory to the Association, except certain contracts for HATI and Lae Technical College costing less than $65,000 each but less than $275,000 in aggregate which would be negotiated contracts. In addition, contracts aggregating less than $250,000 for HATI, Lae Technical College and the College of Allied Health Science may be carried out by force account. Prior approval by the Association would be required for all civil works contracts of more than US$200,000. Equipment contracts exceeding US$50,000 would be awarded following ICB. Equipment which cannot reasonably be grouped into contracts of US$50,000 would be awarded without prior IDA approval following local competitive bidding. Books (US$150,000 total) would be purchased directly from local distributors. Off-the-shelf items not exceeding US$10,000 each up to a maximum aggregate of US$100,000 could be purchased on the basis of three price quotations. Appraisal Report No. 1210-PNG Dated September 22, 1976 East Asia and Pacific Region  n ; X ~~~I R I A N J A YA ( I ND O N ES I A ) >~~~~~. .... ...... -- ---7----;---------~ ! w 0 ,,- -F ----------2~~~~~~------- i- - - -\ - - - - - - - ---- -- -- -- ------- -- i~~~~~~~~~~~~~~~~~~~ - -t\ - - - t - - - - I--------------------V ;- < x g ! ; 2 1 Cc~~~~~~1-1 O = ~rn m 2~~~~~~~~~~~~~~~~~~~~~~~ : ZS to > X e .