Papua New Guinea - Secondary Education Project

Document of The World Bank FOR OFFICIAL USE ONLY iF LE COPY ReportNo. P-3746-PNG REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$49.3 MILLION TO THE GOVERNMENT OF PAPUA NEW GUINEA FOR A SECONDARY EDUCATION PROJECT March 1, 1984 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Kina (K) Calendar 1983 November 1983 US$1.00 K 0.833 K 0.833 K 1 US$1.20 US$1.20 K 1 million US$1,200,000 US$1,200,000 FISCAL YEAR January 1 - December 31 ACADEMIC YEAR January 1 - December 31 ABBREVIATIONS USED BCL - Bougainville Copper, Limited NMA - National Manpower Assessment NPEP - National Public Expenditure Plan PNG - Papua New Guinea  FOR OFFICIAL USE ONLY PAPUA NEW GUINEA SECONDARY EDUCATION PROJECT Loan and Project Summary Borrower: Papua New Guinea Amount: $49.3 million equivalent, including the capitalized front- end fee. Terms: Repayable in 20 years, including five years of grace, at the standard variable rate. Project Description: The project would assist Papua New Guinea in developing qualified national manpower at the middle and higher levels by increasing the output and improving the effectiveness of secondary education by: (a) implementing strengthened expansion and cost-control policies and improved evaluation practices; (b) providing appropriate textbooks and other instructional materials and upgrading national teachers; and (c) providing about 4,900 additional student places and upgrading existing school facilities. Benefits: The main benefits of the project would be an increase in the number of secondary school graduates and improved quality and efficiency in secondary education. The policy for enrollment expansion and related increases in student progression in provincial high schools would increase the overall number of secondary school graduates from 7,500 in 1982 to about 11,000 by 1988, comprising 10,000 provincial high school (grade 10) and 1,000 national high school (grade 12) graduates. The implementation of a policy to replace high cost expatriates with national teachers at provincial high schools would reduce annual recurrent costs per student by about 11% by 1988. To improve educational quality, some 450,000 curricula-related textbooks would be provided for provincial high school students and national teachers would receive increased training in their subjects of specializa- tion. To reduce inequities in the distribution of secondary school places, some 4,500 new provincial high school places would be located mainly in provinces with below average enrollment ratios. A further 400 additional school places would be provided at existing national high schools. Risks: A risk exists that provincial commitment to the provincial high school building program would be inadequate. To reduce this risk, provincial government participation would be encouraged through central government provision of tied grants to cover 50% of construction costs and all financing This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - required for incremental teachers' salaries. A related risk is that project implementation could lag as a result of delays in acquiring sites for new schools. To reduce this risk the Overseas Aid Unit of the Department of Education and the Department of Works and Supply will monitor site acquisition, with a view to completing land purchase at least four months prior to the scheduled start of construction at a site. A further risk is that individual assignments planned for in-service training of provincial high school teachers would be ineffective. This risk would be minimized through follow-up by school principals, visits by inspectorate staff and planned classroom sessions for the teachers. Estimated Costs: /a Local Foreign Total ----- ($ million) ------ Policies and evaluation 0.6 0.7 1.3 Development of materials and upgrading of teachers 5.7 4.6 10.3 Expansion and upgrading of secondary schools 30.7 17.6 48.3 Project management 0.2 0.2 0.4 Base Costs 37.2 23.1 60.3 Physical contingencies 2.9 1.9 4.8 Price contingencies 8.5 4.8 13.3 Total Project Cost 48.6 29.8 78.4 Front-end fee on Bank loan - 0.1 0.1 Total Financing Required 48.6 29.9 78.5 Financing Plan: Local Foreign Total --- ($ million) ------ Bank 20.3 29.0 49.3 Government 26.5 - 26.5 Church agencies 1.8 0.9 2.7 Total 48.6 29.9 78.5 /a Import duties or taxes on building materials have not been identified separately in project costs, since such taxes and duties are negligible.  - iii - Estimated Disbursements: Bank FY 1984 1985 1986 1987 1988 1989 1990 Annual 0.1 4.8 5.0 11.3 15.8 10.3 2.0 Cumulative 0.1 4.9 9.9 21.2 37.0 47.3 49.3 Rate of Return: Not applicable. Staff Appraisal Report: No. 4713-PNG, dated February 15, 1984. Map No. IBRD 17526.   REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA FOR A SECONDARY EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Independent State of Papua New Guinea for the equivalent of US$49.3 million, including the capitalized front-end fee, to help finance a secondary education project. The loan will have a term of 20 years, including five years of grace, at the standard variable rate. PART I - THE ECONOMY 2. The last economic report, "Papua New Guinea: Development Policies and Prospects for the 1980s" (Report No. 3544a-PNG), was distributed to the Executive Directors in December 1981. This section reflects the findings of that report and subsequent economic missions, and draws upon various country documents and recent IMF work on Papua New Guinea (PNG). Structure of the Economy 3. Papua New Guinea is a land of rugged and sometimes impenetrable mountains, rich valleys and coastal plains, and numerous widely-scattered islands. It is favored with abundant rainfall, considerable mineral re- sources, and forestry and fishery resources of good commercial potential.. The capital city, Port Moresby, with a population of about 134,000, is an enclave, with no road links to other parts of the country, and is the largest urban settlement in what remains an overwhelmingly rural society. Per capita GDP in 1982 was US$820. Despite its relatively high per capita income, however, Papua New Guinea remains a desperately poor country, where the majority of the multi-tribal society lives at a level at, or scarcely above, subsistence. The figures for monetary incomes are biased upwards by the inclusion of the incomes of expatriates and the value added of enclave enterprises. The population as of mid-1982 was about 3.0 million, spread among 19 provinces (with populations ranging from 26,000 to 310,000), each with its own parliament and separate administrative apparatus. 4. The modern sector of the economy is dominated by the enclave sector, particularly copper mining and associated investments, and by the public sector. In the late 1970s copper, through Bougainville Copper, Ltd. (BCL), accounted for about 15% of GDP; by 1982 this had fallen to 6.5% as prices declined sharply and as the more productive veins were being exhausted. (However, a strengthening of copper prices, together with some devaluation against the US dollar, brought sharp improvements in BCL finances in the first half of 1983.) The Ok Tedi mine contributed about 10% to GDP in 1982 (largely through capital investments which represented more than 40% of PNG's total investments), thus more than compensating for the decline in BCL; it is also  the increase in investments in Ok Tedi which is expected to have been the major contributor to economic growth in 1983. Beginning in 1984 as gold production comes onstream, Ok Tedi's contributions to value-added should begin to grow to a point where they reach about 12% of GDP in 1987. Non-mining industry accounts for about 9% of GDP - low for a country of PNG's per capita income - while government services, heavily dominated by expatriates in the upper ranks, account for about one-quarter of the total. Strikingly, the primary sector, which employs about 85% of the labor force, only contributes about 35% of GDP, a large portion of which is in the subsistence sector. 5. PNG's growth record has been quite mixed; for the decade of the 1970s as a whole, real per capita growth was negative at -0.2% per annum despite the strong growth in copper exports. The latter half of the decade was even worse in per capita income terms (-0.5% per annum), despite some good years, particularly 1978-79. The terms of trade effects on GDP during the seventies were roughly neutral with respect to their impact on economic activ- ity. However, since 1980, real GDP has stagnated - implying a real decline in per capita income of about 2.4%. In these years the deterioration in the terms of trade did begin to bite as the Government cut back services and capital investments and restricted the growth in the money supply to protect the balance of payments and the value of the Kina. The terms of trade effect has sharply worsened the domestic welfare picture; since 1979, gross domestic income has fallen 20% (as compared with a nearly constant GDP). On the other hand, growth of GDP is expected by the Government to average 6.3% through 1987 (4.0% per capita), largely because of investments (direct and induced) and exports associated with the Ok Tedi mine. While growth rates are likely to improve somewhat as a result of the impact of Ok Tedi, continued poor agricul- tural performance, together with a prudent demand management policy, may finally result in the sluggish growth which characterized the decade of the 1970s. Although PNG is now actively seeking to reduce real wages to stimulate investments, this policy - imposed at a time of austerity - may not succeed if the demand for labor arising from the construction of the Ok Tedi mine and related activities gives renewed impetus to wage demands. 6. As suggested above, the economy has been severely affected by the sharp drop in commodity prices that began in 1980. The price of copper dropped to its lowest level in 30 years, leading to a fall of K 42 million in budgetary resources derived from BCL between 1981 and 1982. (Preliminary data for 1983, however, suggest some improvement.) The prices of agricultural export commodities have fallen by half since the late 1970s. Lower export receipts have depressed economic activity and reduced imports. Exports are not expected to regain their 1979 level until 1984, when gold will begin to be exported from the Ok Tedi mine. After taking account of the budget support grant from Australia (para. 18), the current account deficit in 1982 was US$487 million, or about 20% of GDP. On the other hand, if Ok Tedi associated imports are deducted, the resulting current account deficit - US$305 million - was 13% of GDP (and 55% lower than in 1981). With other official and private capital flows as projected, the expected deficits will be covered without undue strain on reserves or on the debt-service ratio. The role of the Australian grant is significant in supporting higher levels of government expenditures, GDP and imports than would otherwise be possible with PNG's own resources.  - 3 - 7. In view of the fact that most of its export prices have been subject to fluctuations, often sharp, the Government has taken a number of measures to reduce the impact on the general economy and on the producers of exporl: crops. The Mineral Resources Stabilization Fund was designed to smooth the impact of fluctuating copper prices on the budget, and stabilization funds for coffee, cocoa and copra were designed to reduce the oscillations in prices received by the producers. While these funds for agricultural products have had the effect of dampening price-induced supply responses, they have contri- buted to the stability of the economy. For the most part they have shielded producers from income declines and, with the exception of the copra fund, which has had to be subsidized, their total resources are still relatively healthy as a result of substantial levies accumulating in the late 1970s, when export prices were at historical highs. 8. Following the establishment, prior to independence from Australia in 1975, of the Minimum Wage Boards between 1972 and 1976, real minimum wages more than doubled in that period, giving PNG the highest wage costs of the developing countries in the region. Since independence, two three-year wage agreements have limited the rise of both public and private sector wages to that of the consumer price index, subject to a present annual maximum of 11.75%, thus ending the sharp upward spiral of real wages that occurred during 1972-76. The wage situation was accompanied by a "hard Kina" policy causing the Kina to appreciate vis-a-vis PNG's major trading partners, which had the effect of dampening wage demands and keeping down prices of imports (40% of GDP by value). This tended to offset somewhat imported inflation, so that the increase in domestic price levels has averaged about 7.5% between 1977 and end-1982 as compared with the international inflation index of 8.7%. Price levels over 1981-82 have moderated further to about 6.2%, which is probably as much a reflection of the fall in business activity as it is of the moderation of import prices. Prices in 1983 are believed to have risen about 10% with the devaluation of the Kina along with that of the Australian dollar in March 1983. 9. Increasingly concerned about the negative impact of high real wages on the economy, the Government sought to impose a three-year freeze on urban wages. This measure involved a strategy by which the first five percentage points of domestic inflation would not be compensated; thus a 5% increase in the CPI could not be compensated at all, and an illustrative 13% increase in the CPI would be compensated by an 8% wage increase. The Minimum Wage Board rejected this approach, however, and decided in favor of full indexation of the first 5 percentage point change in the CPI, but with no further indexation. This will result in a 5% real erosion in real wages in 1983, which complements the Government's efforts to reduce domestic real wages. These had been allowed to appreciate until March 1983, as parity was maintained against the Australian dollar when the latter was revalued. The 10% devaluation of the Australian currency subsequently resulted in a 5.5% devaluation of the Kina against its basket of currencies. 10. The Government has also responded to its straitened circumstances by raising taxes in 1982 and 1983 in face of a deflationary situation, lowering government expenditure by 10% in the latter year, and laying off 3,000 employ- ees, about 6% of the total public service. The public deficit in 1983 is  - 4 - expected to reach K 121 milliloL or 6% of estimated GDP, about the same rela- tive gap as resulted in 1982.- As was the case in 1982, little of this will be financed by borrowing from the Central Bank. Borrowings from foreign commercial banks are expected to amount to about US$60 million in 1983, as compared with US$100 million in 1982. Development Strategy and Planning 11. In the post-independence period a concerted effort was made to define a set of economic and social priorities according to which government resources were to be allocated. However, as noted above, more weight has been given to developing a viable economic strategy and a decision-making process for the budgeting of government resources than to the preparation and imple- mentation of a comprehensive development plan. While a National Development Strategy has been defined and strategic objectives identified as the basis for resource allocation, these have not represented a basis for a growth-oriented development strategy as such. 12. The National Development Strategy instead places a high priority on improving the quality of life for the rural population, focusing on rural development in the less developed areas of the country. A second objective is the development of a few large natural resource projects aimed at reducing the present, very heavy, reliance on aid and leading towards economic self- reliance. The first objective recognizes not only the agricultural potential of the country, but also the fact that for quite a few generations the agri- cultural sector will be the main source of income generation and employment. The second objective, while not directly benefiting the vast majority of the population, is intended to provide a resource base for the financing of devel- opment programs. Implementation of the second objective clearly entails the importing of foreign capital and expertise, for which PNG has been very open - particularly with respect to minerals investments. 13. To carry out its development strategy, the Government established the annual National Public Expenditure Plan (NPEP), a rolling four-year plan for the public sector which focuses political decision-making on nine stra- tegic objectives and the tradeoffs among them. While the basic aims of the NPEP are to link the planning process with overall economic policy and to direct public spending to the activities that have the highest national priority, its coverage is limited to new projects and forward planning is only carried out for one year. The first NPEP accounted for only 4% of the 1978 expenditures (K 20 million), but subsequent plans have been covering increas- ing portions of the budget as government revenues have grown. In the 1984 budget, the NPEP encompasses about one quarter of total expenditures. Imple- mentation of NPEP projects has been delayed by lack of staff and experience, but the record is gradually improving. In effect, the NPEP process emphasizes the management of recurrent costs associated with capital projects, but is not, strictly speaking, geared to development. 1/ This figure takes Australian budget support into account.  -5- Development Issues 14. The major factors which will affect the Government's ability to promote economic development are the decentralization of government activi- ties, the ability to achieve self-reliance in both staffing and financial resources, and the willingness to take new initiatives in policy formulation and investment in the agricultural sector. 15. Decentralization, which gives the provinces greater control over spending, reduces the national Government's ability to pursue its priorities, while inadequate staffing interferes with the ability of the provinces to develop their own plans. PNG's topography has made it a country of scattered tribes, with no great sense of national unity, and a degree of politica:L decentralization was a necessary response to secessio--ist pressures. Provin- cial governments are gradually assuming regulatory anc. financial control in some areas and will share power with the National Government in others. Provincial governments are financed through national government conditional and unconditional grants, national government refunds of certain revenues and, to a very limited extent, their own taxation measures. Unconditional grants, which allow provinces to spend according to their own priorities, are by far the most important source of finance; but, while in the 1983 budget they com- prised over 70% of the total receipts of the provinces, they amounted to less than one quarter of total national government revenues. One of the most serious problems facing provincial governments is the shortage of trained and experienced staff, and the most urgent priority of the provinces is to develop the capability for budgeting, planning, and project identification and prepar- ation. 16. Self-reliance in PNG involves both availability of skilled manpower and financial resources. On the staffing side, the Government has made sub- stantial progress in replacing expatriates with nationals, especially consid- ering that the University of Papua New Guinea produced its first graduates as recently as 1972. However, the country still relies heavily on expatriates for many necessary services. This situation has created a relatively high- cost government and a dependence on the Australian grant (now equal to about 10% of GDP) to help meet these costs. In the public sector, localization has reached an overall level of 90%, compared to 80% in 1971, but at the higher levels of skill, requiring post-secondary education, the proportion of nationals is still only around 40%. The shortage of qualified staff is reflected in the existing vacancies in government, and in some departments the shortages of professionals are critical. The establishment of provincial governments is adding to the pressures on existing staff, and the policy of localizing positions held by expatriates adds to the demand for trained Papua New Guineans. While various training programs have been established to fill these needs, they have thus far proved inadequate. 17. The Government's efforts to attain financial self-reliance emphasize modest but steady and sustainable growth in real public expenditure, accompan- ied by a reduction of reliance on foreign aid from Australia. Domestic reven- ue accounted for only about 36% of government receipts in FY68, 60% of the total in FY76 (immediately after independence); and 69% in 1982. Over the past seven years, the Bougainville copper mine has been a major source of  -6- domestic revenue, averaging 18% of the total and reaching a peak of 27% in FY76, but falling to 6.5% in 1982. While mineral revenues will be largely restored when the Ok Tedi mine becomes fully operational in 1984, revenues from these sources may not regain their former share of overall revenues. Thus if agricultural commodity prices remain depressed, the Government may well have considerable difficulty in managing a more rapid phase-out of Australian aid after 1985/86. 18. The Australian grant, which amounted to about K 185 million in 1982, was designed to decline by 5% a year in real terms from its 1980 Australian dollar level over the 1980/81-1985/86 period. However, because of PNG's budgetary difficulties, the rate of decline was renegotiated to -1% beginning in 1983/84, -2% in 1984/85 and -3% in 1985/86. If BCL revenues should improve to their 1979 levels, the previous terms would be restored. 19. Capital expenditures (including those financed by external assist- ance) as a share of the total budget have been relatively modest. These expenditures doubled between 1978 and 1980 (to reach 20% of the total budget), and they have remained at those nominal levels - 20% of the total budget - since then. In real terms, however, government contributions to gross capital formation have remained virtually constant as a percentage of GDP. While in the past the availability of the Australian grant, together with substantial revenue from the mining sector, may have contributed to a certain laxity in financial discipline in the area of current expenditures (particularly for wages and salaries), this situation no longer prevails. Even with fairly substantial increases in taxes over the period (but excluding the Australian grant) government revenues have stagnated between 1980 and 1983. This represented an impressive effort in resource mobilization during a period of declining incomes. 20. While economic management has been largely sound and a nominal framework for planning economic development has evolved, the country's growth performance has been disappointing, averaging somewhat less than the rate of population growth over the 1970s. Of particular concern is a lack of growth in the agricultural sector, which will have to absorb the bulk of the additions to the labor force in the foreseeable future. Despite a great potential for agricultural development, even with the current world price situation, investment in the sector remains low, and its prospects for the coming decade are not bright unless steps are taken to bolster its growth. The major constraints have been inadequate extension services for small- holders, a lack of finance, land laws which prevent the consolidation of holdings too small for economic redevelopment, a shortage of managerial talent, and legislation designed to encourage the transfer of foreign-owned plantations to Papua New Guineans, which has been a serious disincentive to reinvestment. The Government recognizes the gravity of the situation and has taken some initiatives to improve it, including suspension of the plantation redistribution legislation, measures to supply management skills to Papua New Guinean-owned estates, and steps to reorganize extension services. The country faces a particularly serious problem in the area of coffee. Produc- tion of this crop has fared better than other major agricultural exports, with production now about 50% over the ICO quota. Unfortunately, sales to the non- ICO market bring a price 40% below the ICO price. The Government recognizes this problem and intensive studies on crop diversification will be undertaken.  -7- External Sector 21. PNG experienced huge trade deficits prior to the introduction of copper exports in FY73. The current account deficit was around one quart:er of GDP in the early 1970s. Imports were over 50% of GDP, whereas exports were only about one third as high. Since FY73, however, earnings from copper ex- ports have dwarfed those from other commodities, and, except for small deficits in FY75/76 when copper and copra prices fell, the balance on current account, which includes the large Australian grant, remained positive, despite large service payments, and reserves of foreign exchange reached ten months' worth of imports in mid-1979. However, falling commodity prices, a decline in the copper content of the Bougainville mine and continued inflation in the import sector have dramatically changed the situation, with the current account turning from a positive K 55 million in 1979 to a negative K 360 mil- lion (21% of GDP) in 1981. 22. The current account deficit is likely to be substantial through 1984, remaining at the same high levels as in 1982, and only gradually declining through 1986. This will be the case not only because of the adverse commodity price situation, but also because requirements for the construction of Ok Tedi are expected to cause imports to grow faster than exports. Especially with the help of Ok Tedi gold exports and continuing conservative demand management, exports are expected to begin again to exceed imports and the resource balance is expected to turn positive by the mid-1980s. PNG is likely to require an average net capital inflow of over US$200 million p.a. (in 1981 prices) through 1990, but the bulk of it is expected to come in 1981- 86, when the minerals sector is expected to finance over half of the inflow through direct foreign investment and borrowing. If the rest of the capital requirement is met by concessional loans and through official borrowing on terms similar to those recently obtained by the Government in world capital markets, the result would be a small increase in debt service requirements. Assuming a small improvement in growth rates (to 3.5% p.a.), debt service ratios would rise to about 13% by mid-decade (the 1981 level was 6.1%) to fall to around 3% in 1990. Total external public debt outstanding as of December 31, 1982 amounted to US$ 748 million, of which US$196 million (26%) was owed to the Bank Group. Debt service payments to the Bank Group are only 8% of total debt service payments. PART II - BANK GROUP OPERATIONS 23. As of September 30, 1983, Bank Group assistance to Papua New Guinea consisted of 12 loans and 13 development credits, totalling US$259.0 mil- lion. The first operation was a telecommunications loan of US$7.0 million approved in 1968; most recently, a road improvement project (US$31.0 million) and an agricultural support services project (US$14.1 million) were approved by the Board in April 1983. Project implementation has been satisfactory, though the first rural development project in the Southern Highlands exper- ienced some difficulties with recruitment of essential expatriate staff. The rapid turnover of expatriate staff and the transitional problems of recruiting and training their replacements led to delays in project monitoring and audit-  - 8 - ing but physical implementation has progressed approximately on schedule. As of September 30, 1983, eight credits and six loans were fully disbursed, and the loans and credits to Papua New Guinea held by the Bank and IDA amounted to US$241.5 million. Annex II contains a summary statement of Bank loans and IDA credits. 24. In recent years Bank Group lending has emphasized agriculture with strong support in education and transport and some lending for energy. The Bank's strategy for future lending is based on three objectives: (a) support for more growth-oriented policies and institutions; (b) development of oppor- tunities for permanent, cash-economy employment based on the substantial agri- cultural resources of the country; and (c) promotion of human resource devel- opment. A nucleus estates project and a West Sepik provincial development project are under preparation. 25. The proposed secondary education project would assist PNG in meeting some of its middle and higher level manpower requirements, while improving and expanding the country's education system at the secondary level. 26. Disbursement performance on Bank Group projects has been extremely varied. Shortly before and just after independence, disbursement rates were unusually high, reflecting the relatively small and simple pre-independence projects and the fact that they were r1ynaged by an experienced expatriate civil service. The disbursement rate- for FY83 was 24.0%, compared to an average of 28.1% for FY79-83. Disbursement rates for selected comparators for FY79-83 were as follows: Columbia - 22.7%; Philippines - 20.3%; Morocco - 17.7% and Benin - 30.0%. It does not seem possible to determine a trend since low disbursement years are followed by a high disbursement year, then another low disbursement year. PNG's disbursement figures reflect periodic disburse- ments of substantial amounts against individual large projects rather than steady disbursements for all projects. PART III - THE EDUCATION SECTOR Introduction 27. The major aims of PNG's development strategy and programs for the 1980s are: (i) to achieve financial self-sufficiency through developing the natural resource base; and (ii) to improve the quality of rural life. An important objective of the Government in meeting these aims is to raise the skill level of national manpower to replace expensive expatriate manpower, which accounts for over half of the higher level manpower in the formal sector. Weaknesses in the education system are a major constraint to achieve- ment of this objective; these include: poor average quality of primary and lower secondary education, low participation rates in secondary education and 2/ The disbursement rate is derived by dividing the actual disbursement during the fiscal year by the net cumulative undisbursed balance.  - 9 - poor cost-effectiveness at postprimary levels. The Government has begun to address thie problems through a comprehensive development program for primary education.- As the next step, emphasis needs to be given to strengthening secondary education, which supplies national manpower for higher education and formal employment. The Education System 28. Structure. Papua New Guinea's formal education system comprises four main levels: primary (grades 1-6), lower secondary (grades 7-10), upper secondary (grades 11-12) and higher education. In 1982, primary education was provided in some 2,200 schools and lower secondary education in 105 provincial high schools. About half of students enrolled at the primary level and two- thirds of students at the lower secondary level attend government schools. The remainder attend church agency schools (approved by the Government). Upper secondary education is provided in four national high schools estab- lished and operated by the Central Government, or in a preliminary year at the two government universities, the University of Papua New Guinea and the University of Technology. In addition, higher education is provided in 18 primary teacher training and technical colleges, and other post-grade 10 institutions. Most lower secondary school teachers are trained at Goroka Teachers' College in a two-year, post-grade 12, diploma program. The University of PNG also provides a bachelor's degree in education. 29. Participation. The formal education system is characterized by low participation rates at the secondary level and above. While some 319,200 children attended primary schools in 1982, only 41,300 students were enrolled in provincial high schools (39,700 students) and national high schools (1,600 students). Of the relevant age groups, about 60% are enrolled in primary school, 13% in lower secondary, and less than 1% in upper secondary. Students' performance on standard achievement tests, taken at the end of grades 6, 8 and 10, largely determines participation at higher levels of education. At present, about 35% of grade 6 graduates enter grade 7 and 73% of grade 8 graduates proceed to grade 9. The Government has, however, recently introduced a policy to increase the share of grade 8 students proceeding to grade 9 to 96% by the mid-1990s. About 12% of grade 10 leavers enter grade 11, while 8% enter the preliminary year at the universities as an alternative, and 60% enter post-secondary (non-university) institutions. 30. Quality. The average quality of primary and lower secondary education is low, with student scores on standard examinations taken in grade 10 showing a declining trend. Quality weaknesses are attributable mainly to inadequately trained national teachers and a shortage of appropriate instruc- tional materials. The Primary Education Project (para. 27) is designed to improve quality through provision of systematic upgrading of teachers and related student materials. Quality problems are less severe at the upper 3/ The Primary Education Project, assisted by Loan 1934/Credit 1087-PNG of 1981, is designed to support this effort and to strengthen educational planning in general.  - 10 - secondary and university levels as a result of competitive selection practices (para. 29) and use of expatriate teachers. 31. Administration and Finance. The Department of Education has overall responsibility for education in Papua New Guinea. In 1978, however, planning and administrative responsibilities for primary and lower secondary education were assigned to the Provincial Divisions of Education. Assistance is being provided under the Primary Education Project to build up the related provin- cial capabilities in planning and management. The Central Government finances the majority of investment and recurrent expenditures at these levels through provision of grants to provincial governments. Fees are, however, charged at the primary and lower secondary levels. Financing for upper secondary and higher education is provided directly by the Central Government. The Central Government also provides matching grants to assist church-agency schools at all levels. Expenditure on education, at about 5.4% of GNP and 19% of total public expenditure as budgeted for 1983, is relatively high and reflects high recurrent costs at post-primary levels explained by wage levels in the formal sector: salaries for national teachers are high; and the average salary of an expatriate teacher is over three times that of a national teacher. Annual recurrent costs per student are progressively higher for provincial ($550) and national high schools ($2,000) and the preliminary year at the university ($7,500) due mainly to high costs of teachers, boarding and transportation, and the relatively low student-teacher ratio at the upper secondary level. The Government is attempting to lower the cost of education by its policy of replacing expatriate with national teachers. Despite substantial progress since the mid-1970s, however, 25% of provincial high school teachers, 92% of national high school teachers and nearly all university staff were expatriates in 1982. Main Issues in Secondary Education 32. Despite its importance for development of middle and higher level manpower, the effectiveness of secondary education is impeded by weaknesses in management policies for expansion and cost-control. A limited expansion policy, together with quality problems, has contributed to the shortage in national manpower in formal employment; and an insufficiently strong policy for cost-control has contributed to the high recurrent costs as well as limited expansion. Shortcomings in subsector planning and evaluation have contributed to these policy problems and to quality weaknesses at the lower secondary level. Insufficient support is provided for the pre-service training of national teachers at Goroka Teachers' College in subject matter specialization; regular in-service training is not provided; and teaching quality is reduced by heavy administrative duties of teachers and insufficient inspectorate staff. Further, appropriate instructional materials are not systematically provided for students. Inequities in the distribution of secondary school places also detract from subsector effectiveness. The share of the relevant age group enrolled in provincial high schools varies from 8% in the Eastern Highlands and Enga to 29% and 30%, respectively, in the National Capital province and New Ireland. Moreover, girls are under- represented, accounting for 36% of the total. However, this share is expected to rise gradually as a result of ongoing government efforts to attract more girls at the primary level.  - 11 - Government Plans and Bank Participation 33. The Government gives priority to strengthening its education and training system in order to overcome the shortage of qualified national man- power. The main objectives of the Government's strategy for formal education are to reduce disparities (by location and sex) in access, inefficiencies attributable to low student progression rates, and significant variations in unit costs among levels. Priority is given to continuing development of pri- mary education and to development of secondary education. At these levels, emphasis is given to improving quality and cost-effectiveness, and to expand- ing enrollments on an equitable basis. Owing to budgetary constraints and concern for overall demand, expansion of secondary school places would, how- ever, continue at a modest pace over the next several years. At the post- secondary level, emphasis would be given to more effective use of resources. No expansion is envisaged in the near-term. Emphasis would also be given to developing nonformal education and training programs, focusing on basic education and rural skills. The Bank supports the Government's strategy for development of the education and training system. Related assistance has been provided through two earlier Bank-assisted education operations. The first of these projects, assisted by Credit 661-PNG of 1976, focussed on meeting immediate manpower needs in agriculture, health, and primary and secondary level teacher training. A project completion report has been prepared for this project. The project was satisfactorily implemented. However, enroll- ment and employment targets were not reached, owing primarily to changing manpower requirements and the insufficient supply of qualified secondary school graduates to fill places in project-supported institutions. The second project, assisted by Credit 1087/Loan 1934-PNG of 1981, supports the ongoing program for development of the primary education subsector (para. 27). The Primary Education Project is being satisfactorily implemented. It is expected that future operations would continue to support the development of basic education, both formal and nonformal, as well as efforts to improve the effec- tiveness of training for middle and higher level technical and managerial manpower. PART IV - THE PROJECT Background 34. The proposed project was prepared by the Department of Education, with UNESCO assistance. A Bank mission appraised the project in April 1983. Negotiations were held in Washington, D.C. from February 6 to 10, 1984. The Papua New Guinea delegation was led by Michael Essex, Assistant First Secretary, Finance. The Staff Appraisal Report (No. 4713-PNG, dated February 15, 1984) is being circulated separately. Supplementary project data are provided in Annex III. Objectives and Scope 35. The main objective of the proposed project is to assist PNG to develop qualified national manpower at the middle and higher levels, by  - 12 - increasing the output and improving the effectiveness of secondary educa- tion. These objectives would be achieved primarily through: study and imple- mentation of strengthened subsector policies and introduction of improved evaluation practices; provision of appropriate instructional materials and upgrading of the national teaching force; and expansion of the number of school places on an equitable basis and upgrading of existing facilities. Policies and Evaluation ($1.3 million, excluding contingencies) 36. Policies. To increase the supply of secondary school graduates for formal employment and higher education, a revised policy for expansion of stu- dent places would be introduced. Over the project period the number of lower secondary graduates are expected to increase by about 50% and upper secondary by about 25%. To support planned expansion in a cost-effective manner, imple- mentation of the policy to replace expatriates with national teachers at the provincial high schools would be strengthened to increase the share of nationals from 75% in 1982 to a targeted 87% by 1988. Over the life of the project the annual recurrent cost per student is expected to decline by about 11% in constant prices. The share of national teachers at the national high schools is expected to increase from 8% in 1982 to about 30% by 1988, although this would not result in significant reductions in costs per student. In order to identify the most cost-effective approach to further expansion, the project would provide technical assistance for a study to review alternatives at the upper secondary level (e.g., for providing grades 11-12 at provincial high schools and charging fees), including plans for eliminating the costly preliminary year at universities. The study would also review medium- and longer-term requirements for secondary education vis-a-vis manpower demand (for formal and informal sector employment) and financing considerations. The Department of Education has prepared suitable terms of reference for the study. During negotiations, an agreement was reached that the study would be carried out in accordance with a schedule agreed with the Bank, beginning in March 1985 (Section 3.01 (b) of the draft Loan Agreement). 37. Evaluation. To improve secondary education policy decisions and to support effective educational planning in general, revised evaluation prac- tices would be introduced under the project. To coordinate systematic monitoring, the Department of Education would be strengthened through the provision of four additional evaluation and testing staff. Provincial Divi- sions of Education and national high school staff would be asked to be respon- sible for the regular monitoring of subsector performance (e.g., enrollments, unit costs, student achievement). The Department would be responsible for the continuous development and administration of achievement tests, and would carry out selected studies, including evaluations of the impact on student achievement of materials and teacher training to be provided under the project. Financing would also be provided for the preparation of future education projects. During negotiations an agreement was reached on a sche- dule for appointment of new evaluation and testing staff (Section 3.01 (b) of the draft Loan Agreement).  - 13 - Development of Materials and Teachers ($10.3 million, excluding contingencies) 38. Materials. To improve the quality of secondary education and stu- dent achievement, the Department of Education would be strengthened through the addition of four subject specialists to prepare, print and distribute curriculum-related materials for provincial high school students, including some 450,000 textbooks. In addition, the project would provide for student use supplementary and reference materials and library books. To support expanded materials development activities, fellowships for key staff, a building for the Standards Division, and additional printshop staff would be provided. The project would also support improved coordination in materials preparation for national high schools through appointment of four materials coordinators for the core subjects and provision of supplementary materials and library books. The Department of Education has designated staff for new positions to be established in 1984. An agreement was reached at negotiations on a schedule for appointment of all new subject specialists and printshop staff for the Department of Education, and of the materials coordinators for the national high schools (Section 3.01 (b) of the draft Loan Agreement). 39. Teachers. To raise further the quality of lower secondary edu- cation, a revised curriculum for preservice training would be initiated, which would increase time allocated for subject matter training, and allow students to specialize in one subject area. During 1984-88, 200 Goroka Teachers' College graduates (pre-service) and 100 University of PNG graduates from fields other than teaching would participate in a diploma of education program at the University. The majority of these participants would become provincial high school and national high school teachers. In addition, to introduce systematic subject matter upgrading for practicing provincial high school teachers, six additional staff would be appointed to Goroka Teachers' College to develop and introduce a program of regular in-service courses in core subjects. In all, 325 teachers, about 30% of national teachers assigned in core subjects, would participate in this program during 1984-88. In addition, 25 senior provincial high school teachers would participate in a two-year bachelor's degree program in education, to prepare them as department heads at the provincial high schools. A further 18 teachers would participate in master's degree programs abroad or in subject courses at the University of PNG for national high school teaching positions. Fellowships would be provided to support teachers participating in each of the upgrading programs. At negotiations an agreement was reached on a schedule for appointment of Goroka Teachers' College staff (Section 3.01 (b) of the draft Loan Agreement). 40. To support improvements in the quality of teaching at provincial high schools, the project would include financing for additional inspectors as well as administrative staff at each school. Inspectors together with school principals would provide follow-up support to teachers participating in the in-service training program at Goroka Teachers' College and generally monitor the quality of provincial high school teaching. Administrative staff would also be added to each national high school. The inspector has already commenced his duties and at negotiations a schedule was agreed for subsequent appointment of remaining inspectors (Section 3.01 (b) of the draft Loan Agreement).  - 14 - Expansion and Upgrading of Secondary Schools ($48.3 million, excluding contin- gencies) 41. To support achievement of enrollment and graduation targets at provincial high schools during 1984-88, the project would include the construction of accommodations for about 112 new classes at 23 new government provincial high schools for a total of about 4,480 places. These would be located mainly in the seven provinces with below average enrollment ratios. It is planned that ten schools currently under construction would be completed and four new schools fully constructed under the project. An additional nine schools would be established and would be at various stages of construction by project completion. The project would also include financing for construction grants at church agency schools, which would be required to match these funds, for establishment of about 170 incremental staff (teaching and principals) positions required as a result of this expansion program, and for the salaries of expatriate teachers already contracted under the NPEP. The project would also support the planned enrollment expansion at the four national high schools through provision of additional boarding facilities, incremental sala- ries of an additional four teachers and staff houses. To support secondary education quality improvements, the project would also include a program for upgrading about 57 government and 30 church agency provincial high schools, as well as the four national high schools, and would provide science equipment to meet incremental and replacement needs at all provincial high schools. Project Management and Implementation ($0.4 million, excluding contingencies) 42. The project would be implemented by existing line agencies at national and provincial levels, and coordinated by staff in the Department of Education. Overall responsibility for coordinating project implementation would rest with a Project Management Committee chaired by the Secretary for Education. The project would be managed by the Department's Overseas Aid Unit responsible to the Assistant Secretary for Planning. Pre-service and in- service teacher training would be the responsibility of the Goroka Teachers' College and the University of PNG, in consultation with the Department of Education. Civil works would be implemented by the Department of Works and Supply with the following exception: upgrading at existing provincial high schools would be managed by the individual schools. To support timely execution of the building program for provincial high schools, the Departments of Education and of Works and Supply would monitor site acquisition by the provinces and the Department of Lands with a view to completing purchase four months prior to the scheduled start of construction. The Department of Education would be responsible for development of materials, monitoring project progress and evaluation studies included under the project, and coordinating studies related to the preparation of future projects. At present, the Department is effectively coordinating implementation of the Bank/IDA-assisted Primary Education Project as well as several other externally assisted projects through its Overseas Aid Unit. An experienced project manager and an accountant with specific responsibility for the proposed project would be added to the Unit. A project manager whose quali- fications and experience are satisfactory to the Bank has been appointed.  - 15 - During negotiations agreement was reached that the accountant would be appointed by January 1985. Consultant services included in the project would support the project manager. { 43. The project, which would be implemented during the five-year Period 1984-1988, is in an advanced stage of preparation. The design for the Standards Division building has been satisfactorily completed and bid documents are under preparation. Sites have been acquired for the two new provincial high schools for which construction is scheduled to begin in 1984. Bid documents for classrooms and related facilities to be contracted in 1984 are under preparation. Furniture and equipment lists and specifications are under preparation and would be completed by March 1984 for items to be purchased in 1984. Proposals for facilities upgrading would also be completed by March 1984. Terms of reference for the study on upper secondary education and descriptions of programs of study for overseas fellowships have been pre- pared. Costs 44. The total cost of the project is estimated at $78.5 million equiva- lent, including the capitalized front-end fee. Local costs are estimated at $48.6 million and foreign costs at $29.9 million. Investment costs of the project would represent about 25% of estimated development expenditures for education during the implementation period. The Government judges this level of investment to be affordable and appropriate in view of priority gi4v n to strengthening secondary education. Base costs refer to February 1984- prices. Equipment and materials imported directly under the project would be exempt from duties and taxes. Import duties or taxes on building materials have not been identified separately in project costs since such taxes are negligible. The project includes 93 man-months of consultant services (foreign) and 5,583 man-months of fellowships (252 man-months foreign and 5,331 man-months local). In addition, a sum of about US$600,000 has been included for preparation of future projects. In line with recent experience in PNG, unit costs for technical assistance were estimated to average about $6,000 per man-month for foreign consultants (inclusive of salaries, allowances, and international travel); and about $1,300 per man-month for overseas fellowships (inclusive of international travel); and $400 per man- month for local fellowships. 45. The contingency allowance of $18.1 million includes contingencies for unforeseen physical conditions of 10% for civil works, furniture, equip- ment, and materials and 5% for all other categories. Price contingencies were calculated on base costs plus physical contingencies in accordance with the implementation schedule, the Bank's experience with educational equipment and technical assistance price increases and following expected annual average increases in prices: local - 8% for 1984 and 7% for 1985-88; and foreign - 7.3% for 1984, 6.7% for 1985 and 6.2% for 1986-88.. 4/ Date of negotiations.  - 16 - 46. As a result of the project and the planned increase in the progres- sion rate for grade 8 students, the share for secondary education in total recurrent expenditure for education would increase from an estimated 17% in 1983 to 20% in 1988. At the lower secondary level, enrollments would increase by about 24% over the period 1982-88. However, costs per student are expected to decrease from about $550 at present to $490 by 1988 (1982 prices), as a result of the targeted increase in the share of national teachers. At the national high schools, enrollments would expand by about 25%. At this level, total recurrent costs, at about $3.2 million in 1982, would remain relatively c:onstant, primarily as a result of an increase in the student-teacher ratio, from 17:1 to 20:1 and savings in the average teacher's salary on the order of 1.5% expected to result from the planned increase in the share of national teachers. The Government plans to absorb the incremental recurrent costs attributed to the p5rject in its routine budgets, and should be able to do so without difficulty.- Financing 47. The proposed Bank loan of $49.3 million would finance 65% of total project costs exclusive of church agency financing, including 100% of the estimated foreign exchange cost plus the front-end fee, and 43% of estimated local costs. Local cost financing is justified as a result of current financ- ing constraints in PNG and the priority given to the project. The Government and the church agencies would finance the remaining costs of $29.2 million. Retroactive financing amounting to $4.0 million would be provided for under the loan for expenditures in all categories beginning January 1, 1984, since work on the project has already begun. Procurement 48. Civil works under the project comprise a number of relatively small iitems which would be widely dispersed geographically. Based on past experi- ence in Papua New Guinea, these civil works (totaling about $40.0 million, including contingencies) would not attract foreign bidders unless they operate Locally. Contracts for the Standards Division building, about half of the new government provincial high schools, housing and expansion at national high schools would thus be awarded on the basis of local competitive bidding to prequalified contractors under regular government procedures, which are satisfactory to the Bank. The remaining government provincial high schools which are in isolated locations (estimated value, $8.0 million) would be con- structed on the basis of competing quotations obtained locally or by 5/ Continuing priority is given by the Government to educational develop- ment. Total expenditure on education is expected to grow by 3% annually in real terms during 1984-88. As a result of general budgetary con- straints, however, expenditure on education as a share of total public expenditure would increase from about 19% in 1983 to 21% in 1988. Due to an expected upturn in export-related growth and investment, the share of expenditure on education in GNP should, however, remain constant at about 5%.  - 17 - Department of Works and Supply force account by hiring local day labor for the period necessary to complete construction. Upgrading of provincial high schools and construction at church agency schools would be arranged by the individual schools with Department of Works and Supply approval. Recommenda- tions for awards for all civil works contracts would be subject to post-review by the Bank. Equipment, and materials and printing services would be grouped to the extent practicable to form attractive bid packages. Packages estimated to cost $100,000 equivalent or more (estimated value, $3.3 million) would be awarded in accordance with the Bank's guidelines for international competitive bidding. In bid comparison, local manufacturers and printers would be given a preferential margin of 15% over the c.i.f. cost of competing imports or the customs duty, whichever is lower. Other items, which cannot be grouped to form packages of $100,000 equivalent or more (estimated value, $0.4 mil:Lion), would be procured under local competitive bidding procedures. Miscellaneous items, in packages not exceeding $25,000 in value, and subject to an aggregate limit of $0.2 million, would be purchased on the basis of at least three competitive price quotations. Furniture (estimated value, $2.0 million) would be procured under regular government procedures. Library books and other printed materials (estimated value, $1.0 million) would be procured through direct purchase after negotiations for discounts. Prior Bank review of procurement documentation and recommended contract awards would be required on equipment, materials and printing contracts of $100,000 or more. Consultancy services financed under the project would be obtained in accordance with the Bank's guidelines for the use of consultants. Disbursements 49. The proposed loan of $49.3 million equivalent would be disbursed over a period of six years. Disbursements would be made as follows: (a) 56% of expenditures on civil works; (b) 100% of foreign expenditures for directly imported equipment and materials, and for printing, 100% of the ex-factory costs of locally manufactured and printed items and 85% of the costs of other items procured locally; and (c) 100% of the costs of consultant services, fellowships and expatriate teaching and technical staff. Disbursements are expected to be completed by the end of 1989. The estimated disbursement schedule is three-and-a-half years shorter than the average for past education projects in the region due to a shorter implementation period and the advanced state of preparation. Disbursements for the expatriate teaching and technical staff, construction of provincial high schools under competing quotations or force account day labor as certified by Department of Works and Supply, upgrading of provincial high school facilities and construction at church agency schools would be based on statements of expenditure, as would disburse- ments for library books and local fellowships. Submission of numerous, small withdrawal applications for these expenditures (estimated value, $35 million) would be unduly costly for the Government and the Bank. The statements of expenditure would be submitted quarterly and normally aggregated to amounts of not less than $50,000 per withdrawal. Supporting documents would be retained by the Overseas Aid Unit and made available for review, as requested, by visiting Bank missions. Disbursements against remaining project expenditures would be made against full documentation.  - 18 - Auditing and Reporting 50. The Overseas Aid Unit would establish and maintain separate accounts for all project expenditures. The Government has given its assurance that accounts would be maintained in accordance with sound practices and audited annually in accordance with procedures satisfactory to the Bank, including separate audits of accounts related to disbursement against statements of expenditure; and that annual audit reports would be sent to the Bank within six months of the end of the Government's fiscal year (Section 4.02(c) of draft Loan Agreement). Benefits and Risks 51. The main benefits of the project would be an expanded number of secondary school graduates and improved quality and efficiency in secondary education. The policies for enrollment expansion and student progression at provincial and national high schools would increase the overall number of secondary school graduates from 7,500 in 1982 to about 11,000 by 1988, comprising 10,000 provincial high school and 1,000 national high school graduates. The implementation of a policy to replace high cost expatriates with national teachers at provincial high schools would reduce recurrent costs per student by about 11% by 1988. To improve educational quality, some 450,000 curricula-related textbooks would be provided for provincial high school students and national teachers would receive increased training in their subjects of specialization. To reduce inequities in the distribution of secondary school places, about 4,500 new provincial high school places would be located mainly in provinces with below average enrollment ratios. 52. A risk exists that provincial commitment to the provincial high school building program would be inadequate. To reduce this risk, provincial government participation would be encouraged through central government provision of tied grants to cover 50% of construction costs and financing required for incremental teachers' salaries. A related risk is that project implementation would lag as a result of delays in acquiring sites for new schools. This risk would be reduced through efforts of the Overseas Aid Unit of the Department of Education and the Department of Works and Supply to monitor timely acquisition. A further risk, that individual assignments planned for in-service training of provincial high school teachers would be ineffective, would be minimized through follow-up by school principals, visits by inspectorate staff and planned classroom sessions for the teachers. PART V - LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Loan Agreement between the Government of Papua New Guinea and the Bank and the report provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed separately to the Executive Directors. Special conditions of the project are listed in Section III of Annex III.  - 19 - PART VI - RECOMMENDATIONS 54. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. 55. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President by Ernest Stern Attachments March 1, 1984 Washington, D.C.  - 20 - ANNEX I Page 1 of 5 T A B L E 3A PAPUA NEW GUINEA - SOCIAL INDICATORS DATA SHEET PAPUA NEW GUINEA REFERENCE GROUPS (WEIGHTED AVERAGES) /a MOST (MOST RECENT ESTIMATE) /b lb 197lb RECENT lb MIDDLE INCOME MIDDLE INCOME 1960- 1970- ESTIMATE- ASIA & PACIFIC LAT. AMERICA & CARIB AREA (THOUSAND SQ. KM) TOTAL 461.7 461.7 461.7 AGRICULTURAL 3.8 4.4 4.7 GNP PER CAPITA (US$) 190.0 390.0 820.0 1028.6 2088.2 ENERGY ODNSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 36.0 166.0 332.0 792.8 1407.6 POPULATION AND VITAL STATISTICS POPULATION,MID-YEAR (THOUSANDS) 1932.0 2418.0 3061.0 URBAN POPULATION (Z OF TOTAL) 2.7 9.8 19.1 32.9 b5.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILL) 4.5 STATIONARY POPULATION (MILL) 10.0 YEAR STATIONARY POP. REACHED 2125 POPULATION DENSITY PER SQ. EN. 4.2 5.2 6.5 260.7 35.6 PER SQ. KM. AGRI. LAND 508.4 555.9 637.1 1696.5 93.2 POPULATION AGE STRUCTURE (%) 0-14 YRS 40.5 42.0 41.9 39.4 40.1 15-64 YRS 56.6 55.0 54.9 57.2 55.8 65 AND ABOVE 2.9 3.0 3.3 3.3 4.1 POPULATION GROWTH RATE (X) TOTAL 1.8 2.2 2.3/c 2.3 2.3 URBAN 15.3 15.2 8.2 3.9 3.7 CRUDE BIRTH RATE (PER THOUS) 44.0 41.5 35.9 31.3 31.5 CRUDE DEATH RATE (PER THOUS) 23.2 18.1 14.9 9.6 8.1 GROSS REPRODUCTION RATE .. 2.9 2.5 2.0 2.0 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUS) USERS (7 OF MARRIED WOMEN) .. .. .. 46.6 FOOD AND NUTRITION INDEX OF FOOD PROD. PER CAPITA (1969-71=100) 100.0 100.0 97.0 125.2 113.0 PER CAPITA SUPPLY OF CALORIES (X OF REQUIREMENTS) 79.0 83.0 90.0 114.2 111.3 PROTEINS (GRAMS PER DAY) 42.0 46.0 49.0 57.9 67.9 OF WHICH ANIMAL AND PULSE 17.0 20.0 20.0/d 14.1 34.1 CHILD (AGES 1-4) DEATH RATE 26.2 19.4 13.1 7.6 5.3 HEALTH LIFE EXPECT. AT BIRTH (YEARS) 40.6 46.4 50.7 60.2 64.6 INFANT MORT. RATE (PER THOUS) 165.0 133.0 101.9 6H.1 62.6 ACCESS TO SAFE WATER (%POP) TOTAL .. .. 20.0/e 37.1 64.8 URBAN .. .. 30.0/e 54.8 77.8 RURAL .. .. 19.07W 26.4 44.3 ACCESS TO EXCRETA DISPOSAL (X OF POPULATION) TOTAL *- 14.0 18.0e 41.4 54.6 URBAN .. .. .. 47.5 69.8 RURAL .. 5.0 5.0_/ 33.4 29.8 POPULATION PER PHYSICIAN 28840.0 11630.0 13590.0/f 7771.9 1776.0 POP. PER NURSING PERSON 2450.0/g 1800.0 960.0/f 2462.6 1012.2 POP. PER HOSPITAL BED TOTAL 170.0L/g 150.0 220.0/d 1047.2 477.0 URBAN .. 50.0 100.071 651.1 667.5 RURAL .. 260.0 270.078 2591.9 1921.6 ADMISSIONS PER HOSPITAL BED .. .. .. 27.0 27.2 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL 3.1 .. URBAN .. .. RURAL .. .. AVERAGE NO. OF PERSONS/ROOM TOTAL 0.7 .. URBAN .. .. RURAL .. .. ACCESS TO ELECT. (% OF DWELLINGS) TOTAL 80.0 .. URBAN .. .. RURAL .. ..  - 21 - ANNEX I Page 2 of 5 T A B L E 3A P PAPUA NEW GUINEA - SOCIAL INDICATORS DATA SHEET PAPUA NEW GUINEA REFERENCE GROUPS (WEIGHTED AVERAGES) /a MOST (MOST RECENT ESTIMATE) /b /b /b RECENT MIDDLE INCOME MIDDLE INCOME 1960L-:- 1970 ESTLMATE- ASIA & PACIFIC LAT. AMERICA & CARIB EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 32.0 52.0 60.0 101.2 105.0 MALE 59.0 63.0 70.0 106.0 106.3 FEMALE 7.0 39.0 54.0 97.5 103.6 SECONDARY: TOTAL 1.0 8.0 13.0 44.9 40.0 MALE 2.0 11.0 16.0 50.0 38.6 FEMALE 1.0 4.0 7.0 44.6 41.2 VOCATIONAL (Z OF SECONDARY) 16.0 19.4 16.2 18.5 34.0 PUPIL-TEACHER RATIO PRIMARY 35.0 30.0 31.0 32.7 30.7 SECONDARY 18.0 23.0 22.0 23.4 16.7 ADULT LITERACY RATE (Z) 29.4 32.1 . . 72.9 79.5 CONSUNT ION PASSENGER CARS/THOUSAND POP 2.0 7.2 6.1/d 9.7 45.6 RADIO RECEIVERS/THOUSAND POP .. .. 66.5 113.7 228.2 TV RECEIVERS/THOUSAND POP .. .. .. 50.1 108.3 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION .. .. 6.5 54.0 64.1 CINEMA ANNUAL ATTENDANCE/CAPITA .. .. .. 3.4 2.9 LABOR FORCE TOTAL LABOR FORCE (THOUS) 1058.0 1257.0 1516.0 FEMALE (PERCENT) 41.4 41.3 40.8 33.6 24.8 AGRICULTURE (PERCENT) 89.0 86.0 82.1 50.9 31.3 INDUSTRY (PERCENT) 4.3 5.8 7.7 19.2 23.9 PARTICIPATION RATE (PERCENT) TOTAL 54.8 52.0 49.5 38.6 31.3 MALE 61.2 58.5 56.4 50.7 49.8 FEMALE 47.7 44.9 42.1 26.6 14.8 ECONOMIC DEPENDENCY RATIO 0.8 0.9 0.9 1.1 1.4 INCaE DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5% OF HOUSEHOLDS .. .. . 22.2 HIGHEST 20T OF HOUSEHOLDS .. .. .. 48.0 LOWEST 20% OF HOUSEHOLDS .. .. .. 6.4 LOWEST 40% OF HOUSEHOLDS .. .. .. 15.5 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 400.0 194.5 289.8 RURAL .. .. 275.0 155.0 184.5 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 178.0 519.8 RURAL .. .. .. 164.8 372.1 ESTIMATED POP. BELOW ABSOLUTE POVERTY INCOME LEVEL (%) URBAN .. .. 10.0 24.4 RURAL .. .. 75.0 41.1 NOT AVAILABLE NOT APPLICABLE N O T E S /a The group averages for each indicator are populatior-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, "Data for 1960" refer to any year between 1959 and 1961; 'Data for 1970" between 1969 and 1971; and data for "Most Recent Estimate" between 1979 and 1981. /c Indigenous population growth rate is 2.8%; Id 1977; /e 1975; /f 1978; /g 1964. May 1983  - 22- ANNEX I DFNT ONSO SOCIAL IOSICATORI Page 3 of 5 Mates Although the dote er drawn ftra o-rce generaly jedged the most athorit-ri- and reliable, it shald als he notd that they may not hettratao comparable becnn o f the lac of atan,dar :deddeiiiosad.concepts. -d by diffeI-Irent . conries in colct the dat. The.daa ar * nenhbeea, ane.1tano otecribe order or. nagoitde , od ica_o tr_dn,ad characeizeI certain major difterenee hoteecoatre 8,orfrnc ruaat 1 h naae c--ory Eroupof the nabje- ....ctry and (2) a cu...cry group aith aeehet higher a-rage Incom then she r-ntry geoap of the tabjct oanry oncet fr nlgA,_om'. 0Iiitpreagtoup ehete tMldde tor-s Nuorth Africa end Middle Esint Is chaset beoann of stonersi-ralteeei hfiile) nthe rfetene gconl,p date ihe -aecgea are papulati-t wighted arithtaaio meaaa for each indicator and uh.- only ehet Jajeiy of the enantele in a groap h.n dat for ha i-iaa ic the caerge of ceretis aI og the indi-atar depetnis en the -eilebility of data aad Ia set anif-, weaies uta he -neei-d in relngaeagso ioeldicator to another. These averges -r only aaetli tom-pnring the -1ls of one iadiater It Itfe amoNg the ueautey end rfereore groaps. rg. o AREA (thoaneod qk.m.) Peeulaito- pe yicigae- np~Ulties dlided hy nasher of pratining Total - Totu lsuface area 1.rtg ad area and iuIuud eatera; 1960, phscasqeite rmamdina1 sehu1 t -as aieriny leel 1970 and 1980 data. P..uLotiien ear tensl Person - Pepletion dtvided by asharatpaseg WAgriultr1 - Etittnat of agri-tc-ur are used t-perarily or perm-etly maead eaegrdae" uss assistoIt . no"e pretiea nme end for crepe, pat-rea market and kiecrhe. gardeoa or to Ie. fallen;I 190,daagani ':iae. 197 and 1900 data. PaplienprtnielMd- tana1. arbea, and rural - Population (tete.1 arbor, and rura)dioldd bthir repective ohr of hespite1 bada GNP Pit CAPITA (US$) - GMP pet ca.pita -ais-t atcretmrket pricen, -nslabie In publir and prIate general and specielisd hspitol and cer bae ysm covrnio.thnod as Wacid tack Atlen (1979-81 basis); rehhliaimetew Zopitals -e estahiisheets permaatlp stffed 1960, 1970, end 1981 dor.-b as leastone physician. Estebliah.etn preiding prineipelly rastdia1 care r u I -includd. o hopial. h'wer ia"Iad hesith cad tENtRrY CONSUOIMPI PtE CAPITA -Avulappwo onuyion of cammri-a1 medica- etesI a permw-ly steffad by ephysician (hut by e milua1 pIIe neg ca end lignite, petrolen, eatrol gas and hydra-, nula essot,tm, iwf, et.) whih offer iu-petist -atsdatien and endgethema elctIciy)Iu kilograma of coaI equivalen Per -pita; pvdI ilidrnE o medica ftaillitte. Par atetistirmj purpema 1960, 1970,..ad 1980 deit. arhuthospitalt iwniuds WO. priipe1/general hospitals, and rural .optitl, l-u or rare1 hospitals and medicl- end seterity testrs. p0Pff.AlIONf AND flTAL STATISTICS pcieliwed henpitels ar ivauded aaly under total. fetal Poenlatiow. Md-Tear (th-uada) - A. of J.iy I; 1960, 1970,. ad 19ff udissot pe PI, oopital te - Total nmbet of adisostoo dtscheegea dato. from haspinela dIvided by the usher at beds. Irben opuietIco (percentr of rtal) - Iiavi of arbuo to total popltlilt; difIffeen det iuitln of urhbearanm pffect comparbility of dara HOffSING amog tautten lOi,1970, and 1981 data. ArrgSewo Iueheld -122 ( PEreIu---e hubld) ae.ub n oa vurala.iuu P,ojecc.... - A huueld iuteti of agrop of individne Ia shehar li En qsrier PapIrniocieti year 2000 - Curret poplatotplrojctict-ae don 1980 and termi mels Ahrder or ledger may ur may ne he iwudd Is toa oplto byaeno onud' theIvor ty Iad-eriIt rh. househld fo totiticel purposes. leesaeno fa uetnya it tcaao ibuncyspro esn per room tt elig -b urhon, oaf...r.rel ocrapd ooae1ensiaaa b oplcu Iur... locai, fud omal IferpctI yuthlaiga 77.5" doollinga, r-pecti-ely. .Inliiigt eaclde ne-permaet treturma sad yer.The par 'rtesfr fetlt at lohv thrt leel aec- apiod porte. nmaming decline In ferility accorlding to intone leve and peat family Accoaato iletricity (ecu ofj2deeliteg - total urban and mea - P,aunig prfrate ic coutey La the- aaaigued ate of rhenwuine ConvrtiEua welng ith ; ele iriaty in lInin qauteremprtntg to.b. atlon of surta,lty an fertilitry trends tar peojeonion purponwa. Of totl, ur .uiad rural dwell logs . remei-ely. statiooovy yPuPLatln-o s .Itationery ypalat.i-n theetsoroh t-tuce the birthrate In equal to the death r-i, adal the ago EDUCATION ntue "ermioso aa.TIs sahee nyaftor ferility ratoa fAdJoted Enr1lim.ot tatIIs decline to ehe repinc..ent level of hni e ruat rate, he- Primry scel- toa, male and fesa.Ir - Grams tota, male and fesalo oath gene.ratiou of oome rploe itel ety. ITe tottot..ry etoletatalae ttthe yrissey 1ere amIec fagsa repe-im poyleton iressesimated on the hauls of the projected fha-tara- primay nhoal-age 1 pouaions; normally iatludes ehildren Sgd h-il Inio of tho pcylatl~ou io the yto 2000, and tIe rote of danIiln of years hutadjusted fur dfl tret lengths of primary IdnToase; far f Itliyrte h rwple......t leve. -uuetries withunera edaties -erlm-n may enosed 100 peegat Tearutalonoy voalo Ian is rnhbd - OTho year ohoo tonoicoa.ry str tm "Piy" aro ho"' arehoo he officialI bhoot age.- pplto niew Will he veau.hed. Oroda... el onl maleand t Io - Competed am shov; mrendary popolatiet lenoity edui..a,reoie t best four years tf approved primary iagtrsotfas; mid - a IPopLatiotPv q..r. kll..otate (Ii0 boctare) of provides etou toativ ,,oreah,r trloinig ienssoafer ifti? %; Sti 19702, -Aa 198 dta porilsonua11y of 12 to 17 yearn of age; --repondeIc c-oI ssIor ft I .,uxyPf. . 1860'180 anri90 dae- Ewegaa enrly en prato sotay oainllsiai hA yare), od inred (y yman wadnear)em peuencoos atmOd-pst eiy r n dapsetmansr at Ifeaesddarp istuon...t- .ttt pril-ie. 160, 1970,"ad19 aa ai-.ea ratio - eiey n sa r Tonl stdi et spr ledi pearL popuato Icr0 1970,-hi 1940-1 dU anId70 tdrsoninllvIs pernetin Gowt Mae (prrec) nabaa- aIIual greoth tote of erb,sa Adl iere ae(eras -Ltet aat sIn oe n wt)a peporlanun Oarr Rlb-l 19 rO,oaf190MI perenae t oaladl pod tenagd15yer and eas. h Crade ti-b0ae Iy ieed) -- A a line hirtbm per thonIad at mid- yerpeplatin 190.190,sa 1991 Ct.CONSUMfPTION CaadZ tu-th Mane -prruad) -1anua death ro thonead at mid-year Passenger Car (per theand pproelsiot - Passenger, tars tomo motor pwpnlomlwn; (980 1970, and 1991 da.- oars msting lassthe eih-esm; incldes ashalasn, hearsas snd Gr- SpI. ti- teto- A-eWg nnb-r of daughters aIun I bea to silitoe t-hiol1a activ-perod ifaeaperewt pesm ag-arifle Badia Reeter (Pr thousan poulasIoa - Al sa a1- tl i ractn for r.indt fayi..c vane; sously fin-yas a-aeo ending in 1980. 1970, sad hbuwaa ognrl pthi pe hu d at popuLane; aneade ea 1981. Ii-mend -eaevae in. e trias sad ia years ah.. rngisarstin of radio reall Piawine -derarorm. ousol(thouands)- Annal abr of a-teapat ete ems in effect; data feer .. oa year may sat he tmparoble mica mot of bn-i-nosrelArnves nde tuPitr of uan i fmily ptmaing emmtri uheliahed lirensing. peng_a TVMacrivers (perth-nead peeloties) -;TV emneIver- fa hremdwest to yam-ily Plawebne - O..rs (eretu srloleeu -Prrt of marrid gwrol poli per thousand popelattin; .neI.d. oIIsosed TVtr-ci-er Iuto f -rhilg-evn age 1- p.-rt) -i a- hlrc--cnae1 derice toIn -nties and itoyears hcrgerro of Tc set -u to sttmnt. al mrIedecaIvtnae groat. Moaav iclto prtasn naate hawe the -t-rge POOD AND gUTRIT1Ot cicito,f~a1 eea eaetnepaper, defited a periedlal le,desa ydFoaho a P arlc (16-7.)0 e Of per capita yubtliati d-a-td primeily tc recordIng geoIa neat It Is ..n.ida...d -Ise pred-cIuno lllu t. oiia. rdntta - -la seed Pan to he 'doily" if it apper. at leas fou times aIek fas sd " n we welnka year heas. Iseedtiuia coe primary geeds (e.g. Cinem Annual itendawe per Canto Per leer- Based It the nambe at sagerren ehad at sua)bth se edibla sad a--ta. sreaeI.g. - thkets sold during the year, inclding odissian tc driv-in oin-a and coff wead na r ninde). aggregat Proudwetn nof eah weaty Is mobile auts. hamd o ntiesisnsgeprduca price nelghtn 198f1O5. 1970, asd 1991 Pead-: t,oi soaly ofa lra (nep a fralrao)- CaPs4tad tramTotal Labor Porce (thousands) - unoialymti- persons, isoodiag seem smg giaetofIwtfndsnke vilbei -a ry Per -pi- per to rte aad anaplayd but enoludIng hoom-i-ma, std.nts, Itmn, novrin fa-y A. fltlsMl Lepieasi mtcp ntn,IsPari les 'popultio of all ages. Dmfinitious in various o-arins erg net nsrns, sad tht t. i stack. Matl senIas ealde anima toad, needs, comarble; 1980, 1970 and 1981d dta. .sIoitie amin in fond prswesfq sa tese In diatribstins. f!TJ yf5)-Pmelaottsmmpostg etsalabrsnm Maqnreiwnm e etlamedby PAD hama d se pcyninlqgica seds tee nus-a agiotnrefrer t) - Labor forge In taming, tn...try, hasting and aeminap en healh ton i.eig -erene ltamp-ranar, hadp weibts., fishing as percetage of tonal 1ahor tort 1 190, 1970 set 1981 dare. . md a iribetiw of pupLanin, and allowingL PIf eoan fur Inield-try (rerveat) - blao tarts In minig tsnssruoslnn, manadnusaeis a.r =homl Imel19-0 90 a 93dt,ad oLett ricity, estee and Ia m peuesgs of stEal Ilbsr te..sef 1940, tee meit astwly f prteim(gra we day)-Pai --ten oF Per wepita 1970 oud 1981data. ami -Mnpy at fandper .y. Ma supply of fund is dftluad so abov. PatcotonMt pr f-nta.ml.ed female - Presiniptsies w gsnrmssfnr Il c toneri-n mtablished by ISIA provide tar minOa-n.i ariotystsrecw-patsd amstmti, ..I., sad tfals 1abe 1 sean as aIlenus of 40 gram of t-ta prtein vet day and 10 gram at salo and p-e.rentgma at tutal, male and fsaln pepulattan at aLL S ssemP.ntie_Ly yt.In praoat, of Witih 110 gron shoa1d hesim p-ntet. These 1980, 1970, aed 19891data. Ths r ,hsda IlCs pa-tisipalln estee mine -ase lowe ,r ob vh 5 o 0gram nf tota p-rnin and 23 gram rfLtstn age-man struntrmof thin pepeltin, aid Long time tr.nd. A sO niml psoem s sooneagefar the -nId, p-up-ne by FAD In the s f- imte re tram ntin..nI.. snreme. S.rd-r , on ore; 1981-60. 170 and 1983 daa taol rnme tat~in - lfst1o nO pnaaIa ndse If .an 65 snd aes. ts Per eeita,r=ni moewly flru mais1 and 2!Ine - Prutsin mspply of fund sstslabr fes dm-fred fra aIna1s and pn1ae in gram per day; 1961-695, 1970 sod 1977 dare. ~~~~~~~~~~~~~~~~~~~INCOME DISTIBUTlIOlN anita (ato I-h) Inath Sat (yr thousand) - annua datho per thousand In tstnam tPrvt lcm both Ints n Is)-Iaiedb ihe age tms I- yeas. o cildesa it this age grua; frma dovelaptu peen,rtet2 eoo,poet2 enu,edpenemas 60 psemes at csrisdar drte fromlif btaa; 1980,1970 ad191dst. heasnhtlds. saw ~~~~~~~~~~~~~~~~~~~~~POVERTY TAgitO GOtUPS fLIT. Tsertar- anBirth (vests) - A,rraS. sobr of P-ars at life reaIing TbrlTlf~j I0ls arm vsey '.Ypprna1mtm masee at pee.i rt vs sid at birth; 1960, 1970 Imd lgat data, should be Itnte1rpesad With ..m.sLdneb"mnais Inim- la-tait' Bate ov Ihed) dAtne1 deaths at infonin Inda ..M tstlmtsd Ahauluta Pse..rlo In.-m L.-vef ~iM1 wee,. saia te s 4C ee of ag par thmnndib hit,a 960, 1970 and 1981 data, Absolut povrty mamm Is is then .. Innsle Hi.ba MIsha inma J,-ren of bat Water (Percot of P,pltion)-ttL. oa. end rua- aritttnemly sdmqast diet plus semntiol n.a-fgad reqelramete s togac SNmber uf po-pleIntatl, atbam-an , eAe-L)it roetsatohbLm. Ill ta safo affnrdhle.. untt uply inluestreat d .st.. f etern or sotremid but Entlmonsd talstlvn Pavrt ItomIaa 01alqsa ea n torl- orctratoued ate suh a tht f-wepraactd hrbo eII, apringe, and Eoro reaiepvey antums lvs isassiS tgaigspeap sanosr welt asporen uge o their wepecttv pepolatuona. i nproe nnso tha aaerp. brhe lel is derived ftra tI coral rb-n Itro a publi fooeo sdutlntad not Ir ta 109 otera lvol sIth sd3uasant for figer coset nt livIng is atbas ieam, fro- house nay hcosdere obing ahtbi ... -ennble acesof that tmiste aeioln 61wabuli Puoste tnna ff Iaoel-ra -anerb f h hueod.A tt bane tco on dinrper.tiacte pets of pear the day Lc fething the aiy eae eoe macweto Ecesta Dtine' a v nio pploin) - total uba, e dlsPesl amP.r-Itng.t of thnir respeciv po siom.- tacreta dIspo..oI mayinlea he ol taio ad dtaosl,rth or ihatrsen,ttenmcwAHolBteivit bs enrtanssII-estarby -etor-orve systm or the useof pt totmic analysts and Peejertinne bipafiee pinion and similar inteltin. n 1893  ANNEX I - 23 - Page 4 of 5 COUNTRY DATA - PAPUA NEW GUINEA /a GROSS NATIONAL PRODUCT IN 1982 ANNUAL RATE OF GROWTH (at current prices) 1960-69 1970-76 1975-82 US$ mln % --- (constant prices) --- GNP at Market Prices 2,280.8 100.0 6.5/b 2.7/b 1.7/b Gross Domestic Investment 686.4 30.1 19.2 5.6 5.3 Gross National Saving 199.5 8.7 Current Account Balance -486.9 -21.4 Exports of Goods, NFS 863.6 37.9 9.9 18.1 1.9 Imports of Goods, NFS 1,395.3 61.2 16.5 2.7 3.0 OUTPUT, EMPLOYMENT AND PRODUCTIVITY IN 1979 Value Added /c Employment Value Added per Worker US$ mln %