Papua New Guinea - West Sepik Provincial Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 13088 PROJECT COMPLETION REPORT PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) MAY 27, 1994 Agricultural Operations Department Country Department III East Asia & Pacific Regional Office 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.  PROJECT COMPLETION REPORT PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) CURRENCY EQUIVALENTS At Appraisal (October 1984): K 1 = US$1.18 (IMF exchange rates used for costs throughout implementation, see Appendix 1) FISCAL YEAR OF BORROWER January 1 to December 31 ABBREVIATIONS DWS Department of West Sepik DPI Department of Primary Industries ERR Economic Rate of Return GDP Gross Domestic Product GOPNG Government of Papua New Guinea IFAD International Food and Agriculture Development Organization LDP Less Developed Provinces M&E Monitoring and Evaluation PCR Project Completion Report PFMSD Provincial Finance and Management Service Division PPCD Provincial Planning and Coordination Division PNG Papua New Guinea PSDU Provincial Staff Development Unit RDO Rural Development Officer RDT Rural Development Technician SAR Staff Appraisal Report WSPDP West Sepik Provincial Development Project  FOR OFFICIAL USE ONLY THE WORLD BANK Washington, D.C. 20433 U.S.A. OffM of Diroctor-G.nral Operations Evaluation May 27, 1994 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT Subject: Project Completion Report on PAPUA NEW GUINEA West Sepik Provincial Development Project (Ln. 2475-PNG) Attached is the Project Completion Report on Papua New Guinea-West Sepik Provincial Development Project (Ln. 2475-PNG) prepared by the East Asia and Pacific Regional Office. No Part II has been received from the Borrower. The quality of the report, while candid, is not fully satisfactory because too many project outputs and effects cannot be accounted for. The project aimed to strengthen human, institutional and physical resources in West Sepik Province to enable productive and market-oriented development to grow sustainably. The project contained development components for agriculture, transport and communications infrastructure, health and nutrition, education and training, and institution building. While many infrastructure targets were met, institutional and agricultural development were unsatisfactory. Weak performance resulted from a flawed project design that badly underestimated the difficulty of working in a remote and inaccessible location that lacked basic social and physical infrastructure. Production of food and export crops hardly changed for lack of appropriate technology and effective contact with farmers. Nor were the aspirations of the hunter/gatherer communities in the project area taken into account. The appraised project was neither well grounded nor well focused, and was too complex, attempting too much in too short a time. Success would have required a longer time frame, more prior consultation with stakeholders, stricter prioritization of project components and their sequencing, more intensive project management, and a higher level of Bank supervision. The project made a mark by strengthening local government institutions, providing feeder roads and airstrips, establishing community health posts, and improving teacher training. But the overall outcome is rated as unsatisfactory because rural production systems have not been improved, and sustainability is uncertain because commitment to the maintenance of improvements put in place by the project is lacking. No audit is planned. Attachment 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.   FOR OFFICIAL USE ONLY PROJECT COMPLETION REPORT PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) Table of Contents PART I: PROJECT RESULTS FROM BANK'S PERSPECTIVE PREFACE .................................................. EVALUATION SUMMARY ...................................... ii 1. Project Identity ............................................ 1 2. Background .............................................. 1 3. Project Objectives and Description ................................ 2 4. Project Design and Organization .................................. 3 5. Project Implementation ....................................... 5 6. Project Results ............................................. 8 7. Project Sustainability ......................................... 10 8. Bank Performance .......................................... 10 9. Borrower Performance ........................................ 10 10. Lessons of Experience ........................................ 11 11. Project Relationships ......................................... 11 12. Consulting Services ...... .............. ..................... 12 13. Project Documentation and Data .............. ................... 12 PART II: PROJECTS RESULTS FROM BORROWER'S PERSPECTIVE (Not received from Borrower within three month's of written requst) PART III: STATISTICAL INFORMATION Table 1: Related Bank Loans and Credits .............................. 13 Table 2: Project Timetable ....................................... 14 Table 3: Disbursements ......................................... 14 Table 4: Project Implementation .................................... 15 Table 5: Project Costs and Financing ................................ 16 A. Project Costs ........................................ 16 B. Project Financing ..................................... 17 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.  PART III: STATISTICAL INFORMATION (Cont.) Table 6: Project Results ......................................... 17 A. Direct Benefits ...... ........... .. .................... 17 B. Economic Impact ..................................... 18 C. Financing Impact ..................................... 18 D. Studies ....... .............. ...................... 19 Table 7: Status of Loan Covenants ............... ................... 19 Table 8: Use of Bank Resources ..20 A. Staff inputs..20 B. Missions.20 APPENDICES 1. Project Annual Cost Summary - By Category .......................... 21 2. Summary of DPI Statistics ..................................... 22 3. Permanent Provincial Staff Positions Created through WSPDP ............... 24 4. Note on Re-evaluation of Economic Impact ........................... 25 PROJECT DATA SHEET .................................................. 29  PROJECT COMPLETION REPORT PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) PREFACE This is the Project Completion Report (PCR) for the West Sepik Provincial Development Project in Papua New Guinea, for which Loan No. 2475-PNG in the amount of US$9.7 million was approved on October 30, 1984. The Loan closed on December 31, 1992, two years behind schedule. Total disbursements were US$9.33 million and an amount of US$0.37 million was canceled effective May 3, 1993. The PCR was prepared by an FAO/World Bank Cooperative mission,' which visited Papua New Guinea in December 1992. It is based on a review of all relevant project documentation, field visits to the project area and discussions with the Borrower's project staff and associated Bank staff. The draft PCR was sent to GOPNG on April 8, 1993, for their comments and Part II of the report. To date these have not been received and hence the report has been finalized without Part II. 1/ Messrs. J.P. Wright {Agriculturalist, Mission Leader) and S. Coleville-Stewart (Economist, Consultant).   PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) EVALUATION SUMMARY Objectives The objective of the Project was to strengthen the human, agricultural, institutional and physical resource base in the West Sepik Province to enable directly-productive and market-orientated activities to be carried out and sustained. The Project covered all of the districts in the Province and was intended to be the first five-year phase of a long-term development program. The main components of the Project were: (a) Agricultural Development; (b) Infrastructure Development; (c) Health and Nutrition Services Development; (d) Education and Training; (e) Lumi District Special Program; and (f) Institution Building. The total number of discrete sub-components was twenty three. Implementation Experience Implementation took seven years instead of five because of initial staffing problems and delays in the completion of the investment study (for second phase development). The most critical variances between planned and actual project implementation are: significant shortfalls under subsistence food crops, commercial vegetables and cocoa production; cost-overruns and delays in the civil works program; and the discontinuance of four sub-components, namely, subsistence food crops, nutrition, community schools and farm supplies. However, given the complexity of the project, remoteness of project areas, poor communication facilities, and a general shortage of trained and experienced managerial and technical staff, the overall performance of the provincial administrative staff should be considered to have been commendable and the implementation delay as well as the shortfalls in the targets not unusual or out of line with Bank-wide experiences. Critical management weaknesses were in the field of financial management and project monitoring and evaluation. It appears that many of these implementation constraints could have been minimized if detailed working papers for the various components had been prepared at appraisal, Bank supervisions were more frequent, intensive and wide-ranging in scope, and more concerted efforts had been made for staff training. Consultants retained under the project were useful in supporting implementation, but their contributions to transferring skills to the local counterparts were poor. The expected support from the central government for financial management, staff development, and project M&E also did not materialize. Results As the first phase of a long-term development program for the province, the success of the project has to be viewed, as it was envisaged at project appraisal, in a 'long-term context and has to accommodate the fact that a sizeable portion of the benefits will be unquantifiable.'  iii The most significant contribution of the project has been the strengthening of local level institutions and physical infrastructure, the essential first steps towards the project's long-term goal for promoting sedentary agriculture and 'modern' way of life in isolated communities depending on hunting-gathering and shifting cultivation for livelihood. The range, capabilities and availability of public services throughout West Sepik have been much improved through the establishment, upgrading and strengthening of Government institutions. Community health care has been greatly improved in all six districts and the Project has improved the quality of education through in-service training of teachers and facilitated school attendance through increased boarding facilities and wider vocational training opportunities. Road and airstrip improvements have been of benefit to the Province. The project's success in improving the productivity and production in agriculture has, however, been mixed and less encouraging. Incremental production of food crops has been far below appraisal targets, primarily because of inadequacies in the support services, lack of technological recommendations (food crops) and marketing constraints (vegetables). However, the livestock development activities, particularly poultry, and tree crop development have been reasonably satisfactory. It is possible that some of the incremental production of vegetables and livestock products are consumed on farm and thereby contribute to improved nutrition. Sustainability The Project's sustainability will depend on access to adequate funds by the provincial government for operation and maintenance of the physical facilities and services created under the project, and the government's commitment to address the development constraints identified during the implementation of the project. The Central Government is currently providing funds for the salaries of incremental staff appointed under the project and for the maintenance of roads and buildings. The provincial government has also been pursuing with the Central Government and donor agencies for initiating a follow-up project for consolidating the first phase initiatives. Should the current initiatives continue and are effective, the project has a reasonable chance to be sustainable. Findings and Lessons Learned Rural development in Papua New Guinea has to take place under extremely complex and difficult institutional, infrastructural and socio-political constraints. Considered against this backdrop, the overall outcome and achievements of the project should be considered as positive and significant, and largely consistent with those of other similar projects implemented in PNG (e.g., Enga, Southern Highlands, South Simbu). Admittedly, the performance of the agricultural development initiatives have fallen short of expectations. However, the agriculture sector as a whole stagnated in PNG during the last decade due to, among other reasons, adverse incentives structure  iv environment and macro-economic policy framework. It would be unreasonable to expect the agricultural development initiatives under the project to have been an exception to the overall sectoral trends. The major lessons learnt from the implementation of the project are as follows: (i) rural development projects should be conceived and sequenced as an integral part of a long-term strategy and development program; (ii) in determining the scope of multisectoral rural development projects, interventions should be rigorously prioritized so that projects would be less complex and yet have the synergistic effects; (iii) detailed working documents and implementation guidelines should be prepared at appraisal and updated, as appropriate, during implementation; particular care should be taken to ensure clear understanding among the key national and provincial staff about their respective roles in project implementation; (iv) supervision of rural development projects require more donor and government resources than is usual for sectoral interventions; (v) institutional arrangements and staffing for project monitoring and evaluation should be in place early in the implementation of the project, and mid-term reviews should be geared to making appropriate changes/restructuring of project; (vi) roads improvement should be planned in the context of developing an overall network for produce evacuation and not simply for making certain areas accessible; and (vii) an appropriate macro-policy framework and incentives structure is fundamental to the success of agricultural development components of a rural development project.   PROJECT COMPLETION REPORT PAPUA NEW GUINEA WEST SEPIK PROVINCIAL DEVELOPMENT PROJECT (Loan 2475-PNG) PART I 1. Project Identity Project Name : West Sepik Provincial Development Project Loan No. : 2475-PNG RVP Unit : East Asia and Pacific Country : Papua New Guinea Sector . Agriculture 2. Background 2.1 Although the agriculture sector, including forestry, provides the livelihood for about 80% of the total population of Papua New Guinea (PNG), it currently only contributes about 26% of GDP and 19% of export earnings. Sector growth during the 1980s has been poor (1.7% p.a.), with population growing around 2.5% p.a. Output per capita has declined appreciably over the past decade; except for oil palm, production of all other major export crops has been on the decline because of drastically reduced world prices. On the positive side, production of traditional staples, some "introduced" foodcrops (potato, temperate climate vegetables, maize) and poultry has steadily increased which, augmented by imported food, has helped PNG maintain a satisfactory level of food security and nutrition. However, in some of the densely populated and remote areas, particularly in the Highlands, nutritional stress and environmental degradation are emerging, and the population continue to live in abject poverty. 2.2 All the policy statements of the Government of Papua New Guinea (GOPNG) in the latter half of the 1970s placed emphasis on the need to inject funds and technology into the least developed provinces through provincial-based, multi-sectoral integrated rural development projects, with the major aim of agricultural interventions to diversity food production and consumption, to improve nutrition and to increase incomes from cash crops. Five such projects have been financed since 1977, four by the World Bank (Bank) and one by the International Food and Agricultural Development Organization (IFAD). All the projects had mixed results: physical targets were generally achieved, infrastructure and social services components had an encouraging impact, perceptible improvements in local level institutions were achieved, and although some agricultural production objectives were met, these could not be sustained due to marketing problems. Financial sustainability is a major issue. 2.3 West Sepik is one of the poorest provinces in PNG. The West Sepik Provincial Development Project (WSPDP) was appraised and approved in response to a request from GOPNG for  - 2 - Bank assistance to initiate a development program in the Province. The specific development goals of West Sepik Province at the time of project appraisal were to: (a) enable the people to make an orderly transition from an isolated way of life involving hunting and shifting cultivation to a more modern way of life and settled form of agriculture; (b) increase productivity and production in subsistence agriculture and cash cropping in order to increase incomes and improve nutrition; (c) improve the availability and effectiveness of Government services; and (d) increase the provincial revenue base. The population's most frequently articulated needs were better roads, health services, schools and opportunities to increase cash income. 3. Project Objectives and Description 3.1 The Project represented the first five-year phase of a long-term program (3040 years) to meet the provincial development objectives. The Project covered all of West Sepik, and was a pioneering effort at accelerating the building of a technological, manpower, entrepreneurial, infrastructural and institutional base which would effectively hasten economic and social development. By improving the physical and human resource base, the Project sought to begin to address the minimum conditions necessary to promote development. 3.2 The Project consisted of the following components: (a) Agricultural development comprising assistance to: (i) about 2,000 families in increasing and diversifying subsistence food production from gardens, and bringing under garden-type cultivation some additional 100 ha of land; (ii) increase area under commercial vegetables by 300 ha; (iii) increase area under cocoa by 160 ha by providing seeds, extension and marketing advice to about 800 new families; (iv) about 1,000 existing coffee/cocoa growers in improving present production operations; (v) about 300 farmers to plant 100 ha of rubber and 500 existing producers to market their rubber; (vi) strengthen support services including for cash crop marketing, provision of young livestock, field staff supervision and training and farm supplies; and (vii) investigate and prepare future agricultural projects through investment studies. (b) Infrastructure development comprising road upgrading and rehabilitation, house construction, airstrip upgrading and construction of a wharf. (c) Health and nutrition services development comprising improvement of diets of high and community school students and training of 15 primary health care workers annually. (d) Training and education improvement comprising support for eleven community schools and two vocational training centers; and establishment of an education resource or in-service training center and boarding facilities at Lumi High School. (e) Support for a special program in Lumi District, a particularly disadvantaged area, comprising the establishment of a village development center, district administration strengthening and malnutrition and socio-economic studies.  - 3 - (f) Institution building comprising the upgrading of the Provincial Planning and Coordination Division, the Provincial Finance and Management Services Division (PFMSD); and the establishment of a Provincial Staff Development Unit (PSDU). (g) Establishment of a Less Developed Provinces' (LDP) Studies Fund to assist the Central Government to prepare development plans for other less developed provinces in PNG. 3.3 The total project cost, over a period of five years, was estimated at appraisal to be about US$16.6 million, of which nearly 60% was to be financed by a Bank Loan of US$9.7 million. The project cost included a provision of US$1.3 million for what was termed in the Staff Appraisal Report (SAR) as an "unappraised component". Retroactive financing of up to US$400,000 was approved for eligible expenditures (salaries, vehicles, operating costs and civil works) to help assure the prompt start- up of the Project. 3.4 The Department of West Sepik (DWS) was the implementing agency for the entire Project except the LDP and investment studies component. These studies were to be implemented by concerned divisions of the National Government. 4. Project Design and Organization 4.1 As already noted (para 3.1), the Project constituted the first five-year phase of a long-term effort to accelerate development of the human, agricultural, institutional and physical resource base of the Province and, as such, its activities were spread throughout all districts. The Project was prepared by the West Sepik Provincial Government, with the assistance of consultants and the National Government, and was appraised by the Bank in November 1983 ". 4.2 While the Project had a fairly clear conceptual foundation, based broadly on meeting the provincial development objectives, some of the basic assumptions were flawed, particularly those regarding the marketability of agricultural products. The specific objectives of each sub-component were not sufficiently detailed nor adequately conveyed to those responsible for implementation. Further, the absence of clearly defined implementation roles and responsibilities and a detailed implementation plan reduced the chances of a successful Project. These aspects were important because the project-funded programs required implementation and coordination by more than one Government Division. For example, the Nutrition Sub-components failed because they were not suitably detailed nor were the combined roles and responsibilities of the Health, Education and Primary Industries ' Divisions clearly specified, or subsequently resolved. Most of these problems could have been overcome by a project- launch workshop which would have meant that all parties had a clear idea of their role and responsibilities. 4.3 The Project introduced several potentially valuable innovations, notably the establishment of the PSDU within the office of the Deputy Secretary of the DWS, the Marketing and Economics Section under the Division of Primary Industries (DPI), two-man aid posts of the Health Division in remote " SAR, dated October 11, 1984. 2/ Agriculture represents the main primary industry.  - 4 - locations and the Monitoring & Evaluation (M&E) Unit within the Project Planning and Coordination Division, and employed 59 additional staff in essential line positions within the Provincial Government. The timing of the Project was appropriate, especially in light of the objective of the National Government to increase assistance to less developed provinces and the weak infrastructural and institutional base of the West Sepik Province. 4.4 The project design was relatively complex and overly ambitious given that it involved implementation by eight Provincial Government Divisions ", and 23 sub-components, although it constituted the first phase of a long-term development program in the Province. Both the manpower resources and public infrastructure required to implement the Project and achieve its targets were expected to be developed during the course of the Project and consequently both were not available at the early stages of implementation. This resulted in weak initial implementation of some sub-components, particularly of the Agricultural Development Component (ADC). 4.5 Further, the Project covered remote locations throughout the six districts in the Province2". This meant that good communications were fundamental to its successful implementation. This problem was not adequately addressed at the design stage. For instance, the Project should have provided for radio units and operating budgets for telephones, where available, to facilitate communications between the project-supported outstations and the Provincial headquarters. 4.6 Another problem requiring specific attention was the paucity of statistical information and the absence of quantitative baseline data on health characteristics and the agricultural systems in the Province. To tackle this problem, the requirements and activities of the M&E Unit should have been specified at the design stage in more detail and geared particularly to monitoring the productive sub- components of the Project. Little information on these aspects was collected during implementation, rendering the subsequent evaluation of results almost impossible. 4.7 Also, closer attention should have been paid during project preparation to ascertaining the needs and development priorities of farmers and other potential beneficiaries. Largely, as a result of a lack of detailed information on these aspects, the Project promoted several agricultural interventions which failed because of low adoption and acceptance by farmers, particularly of lowland vegetables, hybrid cocoa and subsistence food crops. The problem of low adoption rates was exacerbated by a weak extension support program and an apparently limited demand among farmers for improved cash incomes. 4.8 Finally, while project design placed emphasis on developing feeder roads to improve access to areas with potential for expanding cash crop production, the fact that the Province has had an inadequate trunk road infrastructure linking major inland centers with port facilities at the coast was not given due consideration. By developing only feeder roads, the Project enabled local marketing, but did not facilitate marketing and transportation of goods to points of export. On the other hand, the Project has exacerbated marketing problems through increasing the volumes of commodities requiring exports. The absence of trunk roads has also inhibited the development of private enterprise marketing and required the Provincial Government to provide as a remedial measure subsidized marketing assistance " The Divisions of Primary Industries, Works and Supply, Health, Education, Provincial Planning and Coordination, Finance and Management Services, and Information, and the Office of the Deputy Secretary. 2/ Vanimo, Aitape, Lumi, Nuku, Telefomin (including Oksapmin), and Amanab (including Green River).  (price support and transport subsidy). Moreover, marketing constraints have contributed to reduced farmer acceptance of the development options promoted by the Project. 5. Project Implementation 5.1 The Bank Loan was approved on October 30, 1984 and signed on January 7, 1985. Due to delays in project staffing, the Loan did not become effective until September 17, 1985. The Loan was originally scheduled to close on December 31, 1990 but, due mainly to project implementation proceeding slower than anticipated and protracted delays in initiating the last two phases of the investment study, the Closing Date was extended; first to December 31, 1991 and again to December 31, 1993. Total disbursements were US$9.33 million, or 96% of the original Loan amount of US$9.70 million (see Part III, Table 3). The balance of the Loan was cancelled. 5.2 The most critical variances between planned and actual project implementation are the significant shortfalls, both in terms of the number of farmers reached and the areas planted under subsistence food crops, commercial vegetables and cocoa sub-components of the ADC (see Part III, Table 4); the cost overruns and delays under the civil works sub-component; the discontinuance of four sub-components, namely subsistence food crops, nutrition, central community schools and farm supplies; and the addition of a sub-component consisting of construction and staffing of seven two-man aid posts under the Division of Health. 5.3 The achievement of SAR agricultural targets has been mixed. With the exception of rubber, for which the potential area planted exceeds the SAR target by 50%," the targets for areas planted and farmers reached have not been achieved. Cocoa farmer numbers and area planted achieved approximately 63 % of target. Subsistence food crops and commercial vegetables have been least successful and have generally realized only 5% of targets. Whereas food crop production suffered due to a lack of technical packages, the main constraint to increasing commercial vegetable production was the lack of new markets coupled with a substantially reduced demand from the OK Tedi mine. On the other hand, due to the high demand from the farming community for young animals, the Project's livestock activities have been reasonably successful, and, due to the installation of a large capacity incubator at Pasi, the annual distribution of young chickens has exceeded estimates by 700%. 5.4 The comparatively poor performance of the crop production activities of the ADC could probably have been improved if a coordinated agricultural strategy had been developed together with a workable methodology. As it was, extension was ineffective, with Rural Development Officers and Technicians (RDOs & RDTs) making little direct contact with farmers except at training courses for farmers. No on-farm demonstrations were carried out except at a few schools. Very little in-province training of RDOs and RDTs was carried out and then only in crop management by the Food Crop Officer in extension and communication skills. Field staff lacked technical skills, had few messages to pass to farmers and were poorly supervised. Extension could have been considerably improved if adequate training had been given to the field staff. This was not done for two main reasons. Firstly, the staff development unit delegated technical training in extension to DPI, but did not provide DPI with the funds Due to lack of monitoring information on areas planted, this has been estimated from the number of seedlings distributed by the nurseries and assuming 600 trees per hectare as a standard planting density. However, the figures reported are somewhat theoretical and in practice the effective area planted, based on survival of seedlings, may be considerably less.  -6 - for this activity. Secondly, although a specific budget was allocated for supervision and training by visiting staff from the Department of Agriculture and Livestock, only 18% of the budget was spent on conferences in Vanimo and no field visits were made. Funding for this activity was stopped at the end of 1989, but the unutilized funds were not made available to DPI for the Division to initiate a substitute training program. The success of the proposed tree crop development was dependent on seed and seedlings being readily available and transportable throughout the year. A strategy to fulfil this requirement was not developed and, although a large number of nurseries were established, seedling production tended to be in large batches produced erratically without regard to anticipated farmer demand. 5.5 More than 100 buildings of various types have been constructed by the Project, a large number of which are used as offices and utility buildings at health and education centers. The buildings appear to be structurally sound and physically adequate. However, the costs of construction, especially those of transporting materials to site by air, were generally underestimated at appraisal. In addition to buildings, the physical resource base of the Province has been improved by the upgrading and rehabilitation of 139 km of roads and 7 airstrips, the cost of which was also under-budgeted and, as a result, roads were either partly completed or the standard of construction was reduced. Maintenance appears to be inadequate and the provincial authorities expressed concern about the allocation of adequate maintenance funds in the future. 5.6 The main variance in expenditure was in the Infrastructure Component. As presented in the SAR, the costs of this component represented only road construction and related items. However, project accounting confused the nomenclature of this component with the Civil Works category, as specified in the disbursements schedule. As a result, some construction costs of buildings in other sub- components have been allocated to infrastructure in the project cost summary. It is not possible to reallocate these costs. However, it is estimated that the actual costs of the Infrastructure Component (i.e. roads construction) exceeded the SAR estimate by 23%. 5.7 While project management reports that construction costs were generally under-budgeted at appraisal, project audit reports show that total Civil Works costs were less than SAR estimate, including contingencies. This discrepancy is believed to be due to misallocation of expenses in the project accounts. It is also possible that the budgets used throughout implementation were those developed in 1984 and that they were implemented up until the end of the Project in 1991 without allowing for the cost escalation provided for under physical and price contingencies. This is further reflected in that total actual project costs are less than the SAR estimates including contingencies, but more than the SAR estimates of base costs. Other cost variances mostly reflect reallocation of funds between discontinued and expanded activities, as in the case for the Education, Health and Agriculture Components. These are detailed in Part III, Table 5.A. 5.8 The Project has facilitated the establishment of the Raihu Health Worker Training Center at Aitape for training primary health care workers. Although the sub-component aimed at improving nutrition at community schools was dropped, the Project did assist five high schools to establish vegetable gardens. The scope of the Health Component was increased by the construction and staffing of seven two-man aid posts, located in remote areas. 5.9 Under the Education and Training Component, an Education Resource Center was established at Lumi to provide in-service training for teachers. The Vocational Training Center at Aitape was upgraded and a similar center established at Telefomin. However, the proposed support to Central  - 7 - Community Schools was dropped, primarily due to lack of building plans. A Village Development Center was established at Lumi. 5.10 Under the Institutional Building Component, the Project has supported and upgraded the PPCD, and the PFMSD. It has been instrumental in establishing a PSDU, a Provincial M&E Unit; and a Media Unit under the "unappraised component". 5.11 The problems experienced with staffing were probably the most important factor contributing to the adverse variances, notwithstanding that delayed staffing was identified at appraisal as a project risk. Although the Project Coordinator was in post prior to project effectiveness, the full complement of contract staff was not in place until June 1987, virtually two years into the Project. Further, three key counterpart staff, namely the Project Coordinator, Staff Development Officer and the Finance Officer, were not appointed until mid-1988. As a result, when the contract Project Coordinator left in April 1989, his counterpart had to take over the Project after only a very short period of understudy. The problems stemming from delayed staffing of key positions were compounded by high staff turnover at the lower levels. A review of the dates of appointment of all levels of project staff, who were in position at the end of 1991, showed that a vast majority of them had been appointed between 1988 and 1990 (see Appendix 3). The net result of all the delays was that most counterparts received inadequate training. Staff recruitment continues to be a problem for the Provincial Government, with a particular case being the PSDU which is currently unmanaged and inactive. 5.12 This lack of training was most evident in terms of weaknesses in financial management and in monitoring and evaluation. Although, on the whole, accountancy was fairly competent, financial management was relatively weak and inconsistent. The anticipated Central Government assistance to financial management and accountancy was not forthcoming. The contract Project Coordinator had a disciplined and somewhat inflexible approach to financial management, and project sub-component supervisors were either excluded from or showed little interest in the financial management of their relevant activities. 5.13 The baseline survey was not completed until mid-1987 and produced little useful information. Due to the recruitment of an unsuitable contract M&E officer, subsequent data collection, except by DPI, was uncoordinated. Interpretation of the data was particularly weak. The inadequate performance of M&E was aggravated by the assignment of the counterpart officer to other duties for long periods of time. 5.14 The four sub-components that were dropped could probably have been moderately successful if there had been a better understanding of the objectives, better design, and the will of management to overcome the problems faced. For example, the tools supplied under the farm supplies sub-component had an initial positive impact on rubber production, but supplies were discontinued due to poor cost recovery. With a better understanding of the revolving fund concept and better management, the sub- component could probably have been continued. The dropping of the community schools sub-component was a direct result of poor communications and ill-defined responsibilities between Divisions. 5.15 The three main risks associated with the Project were correctly identified in the SAR. The recruitment of staff has already been discussed (para 5.11). The coordination and management risk was largely overcome by the provincial administrative staff, who on the whole performed well, considering the scope and complexity of the Project. This performance would have been better if the anticipated support in training and financial management had been forthcoming from the Central Government. The  - 8 - third risk, that of acceptance of new farming or dietary practices, was not overcome mainly because of lack of involvement of the farmer in the Project and the failure of M&E to provide feedback on implementation, including the socio-cultural implications of change. 6. Project Results 6.1 Overall, the Project has been successful in achieving its objectives of strengthening the human, institutional and physical resource base of West Sepik; however, most of its agricultural sub- components have failed to meet their specific objectives of increasing productivity and production. However, it should be noted that the SAR specifically pointed out that "project justification has to be viewed in a long-term context and has to accommodate the fact that a sizeable portion of the benefits will be unquantifiable" (SAR para 6.01, page 32). 6.2 Non-quantifiable Benefits. The range, capabilities and availability of public services throughout West Sepik have been greatly improved by establishing, upgrading and strengthening of Government institutions through developing both physical infrastructure and staffing. In particular, 59 permanent line positions have been created and staffed within the eight Provincial Government Divisions involved in the Project. This represents an increase of 90% over the 31 positions estimated at appraisal, of which the variance mostly comprises additional aid post staff of the Health Division (14), vocational center instructors in the Division of Education (6), Media Unit Staff in the Information Division (3) and support staff in the Division of Program Planning and Coordination (4). 6.3 Community health care has been greatly improved in all six districts. The outreach of essential health services has been extended and improved through the training of community health workers and construction and staffing of additional aid posts. The impact of these activities is seen in fewer outpatient visits to central health centers as people are now able to obtain assistance for all but the most serious conditions locally. Cost savings from reduced outpatient transport has enabled more resources at the central health center level to be put into urgent medical evacuations and essential surgery and, in general, the health facilities appear to be adequately supplied and staffed. The expansion of provincial health services and, inter alia, provision of anti-malarial drugs is also expected to have a significant impact on reducing mortality in West Sepik. This is of particular relevance as malaria is reported to be the largest single cause of adult deaths in PNG. 6.4 Discussions with officials in the province indicate that the Project has improved the quality of education through teacher in-service training at the Education Resource Center at Lumi. However, this improvement cannot be substantiated as no evaluation of this sub-component was carried out. There is a distinct possibility that teacher training will cease in the near future, either due to lack of funds or the resignation of the Principal of the Center. Also, the Project has facilitated higher school attendance through increased school boarding facilities and wider vocational training opportunities. The extent of demand for the courses offered by the vocational training institutions is highlighted in that the Aitape Center received in excess of 500 enrolment applications in 1991. 6.5 The Project's physical development of roads and airstrips are of particular benefit to the Province in view of the heavy reliance on expensive air transport services. Any improvement in provincial transport networks will assist in meeting the Government's development objectives.  -9 - 6.6 Impact on Agricultural Production. Overall, the Project's impact on agricultural development has fallen short of appraisal expectation. Technological improvemernts in agriculture were limited in scope and quality. Incremental crop production was less than 5% of SAR estimates primarily because of inadequacies in support services, lack of technological recommendations (food crops), and marketing constraints for vegetables. However, progress in tree crop development was reasonably satisfactory, with area planted with rubber standing at nearly 150% of SAR targets and cocoa at over 60%. Livestock activities have been successful overall and, in particular, annual distribution of young poultry has exceeded SAR estimates by 700%. 6.7 It is difficult to assess the impact of the agricultural development component on farm income, employment and nutrition because of a lack of relevant data. However, given the reduced prices of cocoa and rubber since mid-1980s, it appears that the project's tree crop interventions resulted in only minimal impact on farmer income. But it is also possible that part of the incremental production of vegetables and poultry were consumed on-farm and by the local population, which contributed to improved nutrition. Lastly, it should also be noted that PNG's agriculture sector as a whole stagnated during the 1980s because of adverse incentives structure and macro-economic policy framework. It would be unreasonable to expect that the agricultural development components of the project to have been successful and sustainable under such conditions. 6.8 Economic Impact. A conventional economic analysis of the overall Project was not undertaken at appraisal because the specific impacts of the Project were difficult to assess for several reasons. These included: that some underlying technical coefficients and parameters of the subsistence system needed to estimate incremental benefits were not known with sufficient accuracy; that achievement of objectives depended on many factors, such as the accuracy and efficiency of extension recommendations and the degree and speed of uptake of the recommendations by farmers, all of which were difficult to anticipate; that there was a lack of sufficient experience, in terms of farmer response under similar projects dealing with isolated and subsistence societies; and, moreover, because the Project constituted the start of a long-term program and, as such, its impact, particularly on development of subsistence systems, was difficult to separate from the impact of the long-term program. 6.9 In view of these factors, the SAR presented two indicative analyses to supplement the qualitative evaluation made of the Project. In the first analysis, the minimum increase in family incomes (or agricultural output) needed to yield a 10% ERR for a 30-year program of complementary investments in agriculture and roads was estimated and judged for feasibility. The second analysis presented a conventional rate of return analysis for one agricultural sub-component (Highlands Vegetables), for which the necessary data were available. 6.10 However, as a result of a number of factors, presented in detail in Appendix 4, it has not been possible to re-estimate the ERRs based on the two analyses contained in the SAR. Further, given the paucity of data on agriculture in the Province, an alternative analysis was neither feasible nor worthwhile. The assumptions necessary for such an analysis by the PCR mission would not have any justifiable foundation and thus would not provide even an indicative measure of the economic impact of the Project. In lieu of this, the PCR presents a qualitative assessment of the performance of WSPDP in accordance with the indicators defined in the SAR.  - 10 - 7. Project Sustainability 7.1 The Project's sustainability would largely depend on the allocation of adequate funding for the recurrent expenditure needs and satisfactory follow-up of the project interventions. Following project completion, the Central Government has provided funds for the salaries of incremental staff and for the maintenance of roads and buildings, although the funds allocated for maintenance are considered to be inadequate. On the other hand, the level of funding provided for project-initiated activities has been drastically reduced, resulting in curtailment or cessation of some activities. For example, DPI's core activities of extension, marketing assistance and seedling production have been reduced and health patrols, production of media material, training involving travel and M&E field activities have ceased due to inadequate funds. Unless sufficient funding is made available to maintain project-funded activities and services, the sustainability of the Project would be in jeopardy. Further, there is a need for a follow-up project to consolidate the benefits obtained in the WSPDP. It should focus on improving communications, marketing and agricultural production, the latter through the development of technical packages acceptable to the farmers and improved training of lower level extension workers. 8. Bank Performance 8.1 Through the Project, the Bank has made a positive contribution to the physical and institutional development of West Sepik Province. It has also provided an opportunity for the Provincial Authorities to gain implementation experience of a large scale development program which will greatly assist all future investment programs undertaken in the Province. 8.2 On the other hand, the Bank's supervision of the Project was relatively weak. Missions were infrequent (10 in 8 years) and mostly of short duration, so that very little time was spent in the field away from project headquarters. Most missions were one-man missions comprised of an agriculturalist and the only visits by other specialists were one each by an engineer and a health specialist. This resulted in delayed identification and resolution of implementation problems. A clear policy of prioritization of sub-components was lacking and mid-project corrections were largely inappropriate: there was a tendency to decide to drop a sub-component rather than make every effort to overcome inherent problems. 9. Borrower Performance 9.1 Both the Central and Provincial Governments performed satisfactorily in implementation of this complex project. On its part, the Central Government assisted implementation through appointment of a project steering committee and satisfactory administration of the project Loan. However, the lengthy Central Government procedures for processing of contracts and staff recruitment caused considerable delays in project implementation. Also, the steering committee was ineffective in providing supervision and support to the Provincial Government in project financial management and monitoring and evaluation. 9.2 The Provincial Government was successful in complying with the loan covenants (see Part III, Table 7) and, after initial delays, was able to successfully incorporate most sub-components into its recurrent operations.  - 11 - 10. Lessons of Experience 10.1 The lessons that can be learned from the Project are: (a) The Project was over-ambitious and complex given the extreme institutional and infrastructural constraints in the province and in PNG. For such projects, the SAR should provide clearly defined operational responsibilities, full details of the activities of each sub-component and detailed terms-of-reference for all key personnel. A project-launch workshop would have made a positive contribution towards overcoming these problems. (b) Because of the integrated nature and complexity of the Project and the Provincial Government's inexperience with management of large-scale investment programs, the Bank should have supervised implementation more effectively. Supervision missions should have included a wider range of technical personnel to identify and resolve implementation difficulties experienced by project management. (c) Rural development projects should be conceived and sequenced as an integral part of a long-term development program and strategy. A follow-up project is needed to consolidate and build upon the achievements of this Project. (d) It is necessary to ensure that support services to the farmers are comprehensive and fully effective; and that marketing constraints are adequately addressed. A much greater impact on produce marketing would have been achieved through support for trunk roads linking inland centers with the coast. (e) Given the remoteness and isolation of villages and project locations throughout the Province, project design should have made provision for an effective telecommunications system. (f) The timely recruitment, and subsequent retention, of project staff should have been more effectively addressed, especially as this risk was identified at appraisal. (g) Given the lack of a relevant base data, more attention should have been given to developing the effectiveness of the Provincial M&E Unit. 11. Project Relationships 11.1 Throughout the project period, a good working relationship existed between the Borrower and the Bank. This was enhanced through the continuity of Bank staff associated with the Project. 11.2 At the local level, the success of implementation of some of the project sub-components, particularly Community School Nutrition, was reduced by poor relationships and weak communication between project management and some implementing agencies.  - 12 - 12. Consulting Services 12.1 Consulting services had a substantial role in all aspects of the Project. Consultants generally performed satisfactorily in achieving physical implementation targets, but a common weakness was their generally poor training and preparation of counterparts. This was mostly due to the consultants placing emphasis on meeting implementation targets rather than on training key personnel. 12.2 The M&E consultancy was particularly weak. The consultant lacked an understanding of the requirements of M&E in relation to an investment program such as this and no effective data management or evaluation systems were developed. Little emphasis was placed on gathering agricultural and socio-economic statistics which could be used by project management for planning or evaluating project activities and impacts. 13. Project Documentation and Data 13.1 The SAR and the Loan Agreement were generally perceived as sufficient to provide a useful framework to guide implementation and were closely adhered to by the project management. Overall, it would have been of more use if the SAR had specified objectives and activities for each sub-component in greater detail and clearly defined implementation roles and responsibilities. 13.2 The Departmental Brief and Handover report of November 1991, prepared by the Assistant Secretary, PPCD, was a useful document and relevant to the PCR mission, whereas the Mid-Term Evaluation Report appears to have had little impact due to its very limited circulation. 13.3 Although, as previously stated, very poor project data were generated by the M&E Unit, DPI field staff collected reasonable data throughout implementation (see Appendix 2 for summary of data collected), but there has been no collation or evaluation of these data.  - 13 - PART III: STATISTICAL INFORMATION 1. Related Bank Loans and Credits Loan/Credit Purpose Year of Status Comments Approval 1/ Popondetta Smallholder Oil Oil Palm Development 1977 Closed PCR: Objectives achieved. Palm Development Project II Dec. 1984 (Loan 1333) Southem Highlands Rural Development aimed at rural 1979 Closed PCR: Design too complex Development (Credit 841- poor. 7 Nov. 1985 and unrealistic. Sustainability PNG) problems. Cash crop components failed. Second Agricultural Credit Lending Program to 1981 Closed PCR: Sustainability doubtful. (Credit 1149) Smallholders 31 Dec. 1984 Enga Provincial Provincial Development 1982 Closed PCR: Planned infrastructure Development 30 Sept. 1988 provided; agricultural targets (Credit 1227/Loan 2125) not attained. Design must be flexible and phasing skillful. Agricultural Support Institutional Support 1983 Closed PCR: Project too ambitious Services 30 June 1989 in scope and implementation (Loan 2276-PNG) scheduling; better Bank supervision required. Third Agricultural Credit Lending Program for 1986 Closed PCR: Poor prospects for (Loan 2624-PNG) Agricultural Development. 16 Jan. 1990 sustainability of lending for Strengthening ABPNG similar projects by ABPNG. S. Simbu Rural Improved incomes of rural 1987 Ongoing to Effectiveness of field services Development population. Dec. 1993 is a major challenge. (IFAD Loan 192-PA) Vegetable marketing not sustainable. 1/ World Bank fiscal year.  - 14 - 2. Project Timetable Activity Planned Revised Actual Identification/Preparation GOPNG Feasibility Study, dated mid-1983 Appraisal Mision 3-26 November 1983 Loan Negotiations 27-29 August 1984 Board Approval 30 October 1984 Loan Signing 7 January 1985 Loan Effectiveness 9 April 1985 17 September 1985 2/ Loan Closing 31 December 1990 31 December 1991 31 December 1992 Loan Completion 30 April 1993 I/ Upgraded from pre-appraiul mission. 2/ Delays in project saffing. 3. Credit Disbursements Cumulative Estimated and Actual Disbursements (US$ million) Financial Year 1985 1986 1987 1988 1989 1990 1991 1992 1993 Appraisal Estimate 0.4 1.2 3.6 5.4 6.9 8.6 9.7 Actual - 0.49 2.36 3.71 4.73 5.69 6.84 7.61 9.33 Actual as % of 41 66 69 69 66 71 78 93 Appraisal Estimate  - 15 - 4. Project Implementation Indicator Appraisal Actual or Estimate PCR Estimate A. Infrastructure Houses 20 73 Roads (km) 124 139 District km (No.) 86(6) Provincial km (No.) 53(4) Schools dormitories 12 2 Airstrips 3 7 Wharf 1 -I Education training centers 3 3 Classrooms - 5 Dormitories - 6 Health training centers 1 1 Village development center 1 1 Aid posts - 7 Renovations - 3 Miscellaneous - 10 B. Staff Recruitment Overseas 7 7 Volunteer 3 4 National 23 59 C. Agricultural Development Nurseries and stations Food crop nurseries 8 7 Tree crop nurseries 13 27 DPI outstations 17 17 Market stations/cool rooms 3 2 Subsistence food crops Farmers reached 2,000 100 Area planted (ha) 100 n.a. Commercial vegetables Farmers reached 2,000 356 Area planted (ha) 300 17 Rubber Farmers reached 300 230 Area planted (ha) 100 149 Cocoa Farmers reached 800 500 Area planted (ha) 160 101 School Gardens Community Schools 38 31 High Schools 6 7 Young Livestock Distribution Poultry 5,000 34,700 Pigs )300 120 Goats ) 45  - 16 - 5. Project Costs and Financing A. Project Costs SAR Estimated SAR 1/ Actual 2/ Actual as Base Costs Estimates with or PCR % of SAR Contingencies Estimate with (US$ '000) (USS '000) (USS '000) Contingencies Agricultural Development Subsistence Crops 488.3 659.7 451.5 68% Cash Crops - Vegetables 743.4 1,004.4 744.2 74% - Coffee & Cocoa 731.1 987.8 527.2 53% - Rubber 277.8 375.3 508.8 136% Farmers Supplies 114.3 154.4 33.7 22 % Supervision & Training 131.9 178.2 20.5 11% Marketing 276.0 372.9 448.4 120% Provincial Agricultural Studies 897.3 1,212.3 1,079.0 89% Small Livestock (PASI Support) 140.4 189.7 332.0 175% 3,800.5 5,134.7 4,145.3 81% Infrastructure 3/ Civil Works - - 3,510.8 - Maintenance - - 1,961.6 - 2,793.3 3,773.9 5,472,4 145% Health and Nutrition Primary Health Care 339.3 458.4 637.1 139% Commrunity School Nutrition 79.1 106.9 40.0 37% High School Food Production 93.3 126.1 88.3 70% 511.7 691.3 765.4 111% Education Central Community Schools 193.0 260.8 9.5 4% Luni Education Resource Center 320.6 433.2 305.3 70% Luumi High School Boarding 207.3 280.1 237.7 85% Telefomin Vocational Center 158.3 213.9 327.5 153% Aitape Vocatonal Institute 65.4 88.4 100.9 114% 944.6 1,276.2 981.0 77% Lumi District Special Program 198.3 267.9 208.8 78% Institution Building Planning, Coord., Accounting 795.7 1,075.0 1,527.1 142% Staff Development Urut 490.4 662.6 609.5 92% 1,286.1 1,737.6 2,136.6 123% Unappraised Projects Media Unit - - 95.2 - Commerce 9.3 - 1,298.7 1,754.6 104.5 6% Less Developed AreasStudies 1,450.4 1,959.6 351.2 18% Total Project Baseline Costs 12,283.6 16,595.9 14,165.2 85% 1/ Physical and price contingencies incorporated into SAR base cost estimates. 2/ Source of actuals:- project accounts. Kina values converted to US$ at weighted IMF average exchange rate for project period of K 1 =US$1.0947. 3/ SAR infrastructure component included only road construction costs. However, many variances with SAR result from project accounting confusing the Civil Works disbursement category with this sub- component due to nomenclature used. Some building costs have been indiscriminately allocated to this infrastructure sub-component, whereas SAR estimates include building costs against the relevant sub- components. Reallocation of building costs to sub-components proved impossible. However, Division of Works and Supply and project records show that total sub-component road construction and maintenance costs were US$2.74 and US$1.96 million respectively which indicates that the infrastructure component (i.e. roads construction) exceeded SAR estimate, including contingencies, by 23%.  - 17 - B. Project Financing Planned Actual 1/ Bank Govt Total Bank Govt Total Civil Works 4.52 1.13 5.65 3.83 0.96 4.79 Vehicles, Equipment and Furniture 0.22 0.06 0.28 0.46 0.12 0.58 Technical Assistance and Consultant 2.24 0.56 2.80 2.93 0.09 3.02 Services Incremental Operating 2.72 5.14 7.86 1.82 3.96 5.78 Total 9.70 6.89 16.59 9.04 5.12 14.16 Source of Data: Project annual audit reports, project accounts and mission estimates - Kina values converted to US$ using IMF annual average mid-point exchange rates (see Appendix 1). 1/ Civil Works and Equipment categories were disbursed at 80% of actual, as stipulated in the Loan Agreement. Technical Assistance and Incremental Operating Costs categories disbursed at variable rates and the table shows mission estimates of final actual Bank disbursements against these two categories. Government contribution may exceed value shown since expenditure records were incomplete. 6. Project Results A. Direct Benefits Appraisal Estimate at PCR Estimate at Full Development Project Completion I/ Commodity .... AnnuaDlncremental Production (tons).... Home Gardens Produce 9,000 negligible Commercial Vegetables 5,700 -300 Cocoa (wet bean) 3,600 850 Rubber (cup lump) 2,200 35 Coffee (dry parchment) 150 -134 Poultry (young birds distributed) 5,000 34,700 Pigs (young) )300 120 Goats (young) 45 I/ A re-estimate of incremental production at full development was not possible - see Appendix 4.  - 18 - B. Economic Impact Appraisal PCR Estimate Estimate ERR: Agricultural and Roads Components 10% Not re-estimated due to lack of data. Highland Vegetables Sub-component 16% Not re-estimated due to lack of data and negative incremental production. Comments: At appraisal, an illustrative rate of return was estimated for the agricultural and roads components for a 30-year investment program. This analysis was prepared on the basis of hypothetical production parameters and using an iterative process to determine the minimum increase in family incomes for 90% of households required to give an economic rate of return of 10%. Although the ERR has not been recalculated because of the lack of data and the impossibility of predicting incremental production at full development, the low levels of incremental production strongly indicate that the ERR would be negative if calculated following standard methodology. For a full explanation see Appendix 4. A second analysis was representative of highlands vegetable production and was also based on hypothetical assumptions of production parameters due to insufficient data. Recalculation of this ERR was not possible since the incremental benefits from this sub-components were negative. C. Financial Impact Appraisal PCR Estimate Estimate Percentage increase in beneficiary 11% Not re-estimated due household incomes. to lack of data. Comments: To achieve an ERR of 10% for the combined agricultural and roads investment components of the project, the SAR estimated that the beneficiary annual farm incomes for 90% of the provincial population would need to increase from an average of K 1,200 without the project to K 1,330 with the project at full development. Overall, this increase has not occurred so far, nor is expected to occur at full development. The extent and adoption of project agricultural activities has fallen far short of SAR targets (see Appendix 4). ---------- ~ ~ ~  - 19 - D. Studies Study Purpose as Defmed at Appraisal Status Impact Land Use Studies Aimed at establishing medium to Feasibility Study completed Report under review by large-scale tree crop development. on 31 December 1992. GOPNG. Less-Developed Assistance to less developed Two consultants funded for Unknown. Provinces Studies provinces to prepare development one year in Department of plans. Agriculture and Livestock. Status of consultancies and reports; if any, unknown. 7. Status of Covenants Agreement Section Type of Covenant Description of Covenant Status Loan Art. 3.06 I Employ not later than 30/6/85 (or such other agreed In compliance. date) or continue to employ personnel listed in schedule 5. Art. 3.07 Ml 1) By 30/6/1987 design and implement data Partial compliance. gathering & evaluation system for project M&E. 2) Complete baseline survey for West Sepik In compliance. Province Agriculture Sector. Art. 3.08 Ml A) Carry out studies in Part B (Development In compliance. Studies). B) Fumish Bank copies of report. Art. 3.09 M2 1) Prepare and submit (by 31/12/85) a preliminary In compliance. report setting out training needs and Ist year traimng program. 2) Final report by 31/12/88 evaluating program and providing recommendations for future programs. Art. 3.10 M3 Before undertaking any work on additional activities to In compliance. cost more than an aggregate equivalent of US$75,000 for any such subpart, approval by Bank required. Art. 5.01 I A) Offered employment to personnel listed in In compliance. schedule 5, para. A. B) Advertised employment for personnel position in schedule Part B. Institutional: I = Create/Revise/Update Organizations; Improve MGMT & MIS; agreements between or with agencies. Managerial: Ml = Supervision of implementation (plan/action/reporting incl. procurement action, develop accounting system). M2 = Adequate training program. M3 = Work program/budget prepared.  - 20 - 8. Use of Bank Resources A. Staff Inputs (staff weeks) Fiscal Year Preparation Appraisal Negotiations Supervision Other Total 1984 24.8 28.8 1.0 54.6 1985 4.1 2.2 6.3 1986 9.5 9.5 1987 11.5 11.5 1988 7.2 7.2 1989 6.3 6.3 1990 4.8 4.8 1991 7.8 7.8 1992 6.3 6.3 1993 0.5 9.0 9.5 Total 24.8 28.8 5.1 56.1 9.0 123.8 B. Missions Stage of Project Cycle Month/ No. of Days in Specializations Performance Rating Types of Year Persons Field Represented 1/ Status 2/ Problems 3/ (Pre) Appraisal 11/83 5 24 A, B. D, E, F Loan Negotiations 8/84 n.a. Board Approval 10/84 na. Effectiveness 9/85 n.a. Supervision 5/85 2 4 A - Supervision 4/86 1 7 A 2 Supervision 3/87 1 12 B Supervision 7/87 1 7 A 2 Supervision 4/88 1 7 A 2 Supervision 2/89 1 5 A 2 Supervision 11/89 2 16 A, C 2 (I on Covenants) Supervision 6/90 1 3 A 2 (I on Covenants) T, TA, S Supervision 5/91 1 12 A 2 (I on Covenants) T, TA, S Supervision 3/92 1 6 A 2 (I on Covenants) TA, 0 1/ A = Agriculturalist; B = Civil Engineer; C = Public Health Specialist; D Operations; E = Economist; F = Financial Analyst. 2/ 1 = No problems; 2 = Moderate problems. 3/ T = Training; TA = Technical Assistance; S = Studies; 0 = Others.  PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 1. Project Annual Cost Su ary - By Category (Kina) Pre-1986 1986 1987 1988 1989 1990 1991 1992 1993 ITEM Civil Works 380,166 1,355,647 981,531 382,730 743,510 385,412 143,824 Vehicles & Equipment 99,214 76,498 49,795 103,622 28,381 163,548 13,086 Technical Assistance 704,266 119,032 164,429 185,827 148,887 93,091 280,715 865,086 301,031 Incremental Operating Costs 329,087 481,158 567,192 743,021 729,716 741,038 223,758 Total Eligible 1,512,733 2,032,335 1,762,947 1,415,200 1,650,494 1,383,089 661,383 865,086 301,031 Ineligible 69,500 335,068 330,318 412,157 208,500 Total Project Costs 1,512,733 2,101,835 2,098,015 1,745,518 2,062,651 1,591,589 661,383 865,086 301,031 Cumulative 1,512,733 3,614,568 5,712,583 7,458,101 9,520,752 11,112,341 11,773,724 12,638,810 12,939,841 Exchange Rates 0.9877 1.0404 1.1384 1.2100 1.1633 1.0493 1.0498 1.0457 1.0457 Total Project Costs USS 1,494,126 2,186,749 2,388,380 2,112,077 2,399,482 1,670,054 694,320 904,620 314,788 Cumulative USS 1,494,126 3,680,876 6,069,256 8,181,333 10,580,814 12,250,869 12,945,189 13,849,809 14,164,598 Source:- Project Annual Audit Reports (for the period 1984-1991) and unaudited project accounts (1992 and 1993). Exchange rates used are taken from IMF International Financial Statistics, Dec. 1992. Average weighted exchange rate over project period: Kl : USS1.0947. Motes:- Pre-1986 data (1984 & 1985) calcuLated from the audit submission (unaudited) for 1991. This showed the expenditure by category for the period 1/4/84 to the end of the 1990 financial year. Subtraction of annual amounts for 1986-1990 was used to determine pre-1986 costs. 1992 and 1993 expenditure based on continuing expenditure on the investment study. 1991 technical assistance incLudes USS336,789, which was paid directly to consultants based in DAL and thus did not go through project accounts. 1992 amount claimed for disbursement from Bank includes K865,086 for the investment study and K277,096 (K346,370 x 80%) which is for eligible civil works, for which expenditure was incurred in previous years but not yet claimed.  PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appedix 2. Sua ry of DPI Statistics (Page 1) (1965-1991) 1965 1966 1967 1988 1989 1990 1991 l ~~~~~~~~~~Unit 93BSISTENCE FOW CROPS - Seed Distributed Kg - 504 -l - Seedlings from Pasi No. - - 5,447 - -l CONUERCIAL VEGETABLES (A) HIGHLNW - Nurseries No. - - - 10 - Seedlings Distributed No. - - - - 62,000 155,000 132,000 - Project Area Planted (30,000/ha) Ha - - - - 2.1 5.2 4.4 - Production Sold T - 374 397 240 260 315 367 - Value K/kg - 0.45 0.22 - - - 0.36 - Farmers No. - - - - 68 99 93 (B) LOWLAND - Nurseries No. - - - - - - 23 - Seedlings Distributed No. - - - - 6,000 - 141,950 - Project Area Planted (30,000/ha) Ha - 48 86 - 0.2 . 4.7 - Production Sold T - 52 29 - 15 4 15 - Value K/kg - 0.21 0.32 - - - 0.35 - Farmers No. - 196 84 - 12 - 84 - Nurseries No. 4 4 6 6 6 - 15 - Seedlings Distributed No. 19,963 27,815 11,193 13,188 7,425 3,868 5,884 - Project Area Planted (600/ha) Ha 33.3 46.4 18.7 22.0 12.4 6.4 9.8 - Area Total Ha 256 262 290 323 340 383 482 - Area Producing Ha 45 46 86 98 111 144 194 - Area Immature Ha 196 216 204 225 229 239 288 - Production T 4 6 6 37 44 41 39 - Value (price paid to farmers) K/kg - 0.25 0.25 0.25 0.23 0.23 0.20 - Farmers No. - 622 42 - - 125 147 - Nurseries No. - 5 8 4 5 - 12 - Seedlings Distributed No. 794 11,665 18,869 25,465 14,472 35,935 18,885 - Project Area Planted (1,250/ha) Ha 0.6 9.3 15.1 20.4 11.6 28.7 15.1 - Production (wet bean) T 64 110 87 271 768 807 882 - Value (dry bean) K/kg - - 1.20 1.20 0.97 1.00 0.61 - Farmers No. - - 411 - - - 192 - Fermentries No. - - 4 8 - 63 16 COFFEE - Production T 278 75 112 80 102 5 16 - Value (dry parchment) K/kg - 1.25 0.88 1.52 0.30 - 0.70 - Farmers No. 3,373 - 70 - - 63 42 COPRA - Production T 11 666 524 481 289 282 685 - Value K/kg - - 0.15 0.20 0.20 0.20 0.17 - Farmers No. - - 600 - - 42 -  PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 2. Sumary of DPI Statistics (Page 2) (1985-1991) 1985 1986 1987 1988 1989 1990 1991 Unit RICE - Area Ha - Production T 31 - - - 8 14 - Farmers No. - - - - 58 30 126 FRUIT TREES - Nurseries No. - 1 12 - Seedlings Distributed No. - 6,975 15,753 - - 2,052 7,659 - Project Area Planted (180/ha) Ha - 38.8 87.5 - - 11.4 42.6 Production T - - - - - 3 11 Farmers No. - - 431 - - - 51 LIVESTOCK SOLD OR DISTRIBUTED FROM PASI Poultry No. - 1,947 5,291 7,950 9,407 16,435 34,737 Eggs in Province Doz. - - 16,068 26,572 29,120 35,204 34,632 Egg vaLue K/doz - - 2.40 2.40 2.36 2.40 2.40 Pigs No. - - 9 70 82 135 114 Goats No. - - - 19 20 16 42 Sheep No. - - - - - - 5 TRAINING - Course Attendance Farmers No. 161 170 280 509 150 92 - - Staff No. 39 44 47 43 49 16 15 NISCELLANEOUS - Agroforestry seedlings No. - - - - 9,000 8,632 8,250 SciiCE: DPI Annual Reports. I  - 24 - PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 3. Permanent Provincial StafT Positions Created Through WSPDP COMPONENT/Position SAR Actual Date Estimate Appointed INSTITUTIONAL BUILD1NG Project Coordinator 1 1 1/ 05/89 Finance Officer I 11/ 11/89 Monitoring and Evaluation Officer I 11/ 11/89 Monitoring and Evaluation Assistant I - vacant Project Officer - 1 07/90 Staff Development Unit Manager 1 1 1/ vacant Staff Development Officers - 2 10/91 Social Planner (ex M&E assistant) - 1 07/90 Secretary/Keyboard Operator - 1 07/90 AGRICULTURE Food Crops Officers I 1 1/ 11/89 Food Crops Extension Officer 1 1 04/89 Rural Development Technicians 4 4 03/86 Rural Development Officers 2 3 2/ 06/89 Forestry Extension Agent I 1 11/89 Cash Crop Extension Officer 1 1 04/89 Nursery Manager 1 12/ 08/86 Rubber Extension Officer 1 1 1/ 04/90 Economics/Marketing Officer 1 1 11/88 Assistant Economics/Marketing Officer 1 1 10/91 HEALTH Health Extension Officers 7 7 03/88 Nurse/Tutor 1 1 03/88 Community Health Care Workers - 14 currently being filled EDUCATION Education Resource Centre Supervisor I 1 04/88 Clerk/Typist I 1 10/89 Telefomin Vocational Centre Manager 1 1 2/ 03/91 Instructors - 3 03/91 LUNII DISTRICT SPECIAL PROGRAMMUlE VDC Manager 1 1 02/88 Instructors - 3 02/88 UNAPPRAISED Media Director - 1 07/90 Illustrator - 1 07/90 Computer Operator - Desktop Publishing - 1 2/ 07/90 TOTAL 31 59 1/ Position initially filled by expatriate contract staff. 2/ Position also filled by volunteer during part of the project period.  - 25 - PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 4: Note on Re-evaluation of Economic Impact Appendix 4: Note on Re-evaluation of Economic Impact 1. A conventional economic analysis of the overall project was not undertaken at appraisal because the specific impacts of the project were difficult to assess for several reasons. These included: that some underlying technical coefficients and parameters of the subsistence system needed to estimate incremental benefits were not known with sufficient accuracy; that achievement of objectives depended on many factors, such as the accuracy and efficiency of extension recommendations and the degree and speed of uptake of the recommendations by farmers, all of which were difficult to anticipate; that there was a lack of sufficient experience, in terms of farmer response under similar projects dealing with isolated and subsistence societies; and, moreover, because the project constituted the start of a long-term program and, as such, its impact, particularly on development of subsistence systems, was difficult to separate from the impact of the long-term program. 2. In view of these factors, the SAR presented two indicative analyses to supplement the qualitative evaluation made of the project. In the first analysis, the minimum increase in family incomes (or agricultural output) needed to yield a 1 0% ERR for a 30-year program of complementary investments in agriculture and roads was estimated and judged for feasibility. Through an iterative process, in which numerous income levels were assessed, this analysis concluded that, assuming 90% farmer adoption by full development, average household incomes would need to increase by 1 1% to achieve an ERR of 10% for the Agricultural and Roads sub-components. 3. The second SAR analysis presented a conventional rate of return analysis for one agricultural sub-component (Highlands Vegetables), for which the necessary data were available. The analysis assumed that 70% of households in the district would produce and successfully market vegetables to the Ok Tedi mine by project year 1 0 and, more importantly, that demand for vegetables by the mine would remain at 1 984 levels (1,600 tons). Based on these assumptions, the analysis indicated an ERR of 1 6% for the sub-component. 4. A number of important factors have a bearing on the re-evaluation of the economic impact of the project at completion. These include: (a) Because of a lack of reliable data on farming in the project area at appraisal, the SAR proposed that a baseline survey be undertaken which would provide details of the Province's agricultural sector including, inter alia, data on crop yields, cropped areas, cultivation practices, marketed and non-marketed production. It was anticipated that the data collected through this survey would enable quantification and adjustment of the analyses made at appraisal. However, neither the baseline survey nor any monitoring exercises undertaken during project implementation, have collected the required information and there remains a considerable lack of provincial agricultural data, particularly relating to crop budgets, farm models and the prevailing farming systems. The weak project M&E has also produced little data on project physical achievements and incremental  - 26 - PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 4: Note on Re-evaluation of Economic Impact production. In this situation, it is almost impossible for the PCR mission to undertake any meaningful revised economic analyses. (b) In the course of field visits, the PCR mission observed that the farming systems in the province at appraisal had changed due to a number of factors, not least of which was the fact that farmers were neglecting agriculture due to improved off- farm income generating opportunities and reduced commodity prices. As a result, the assumptions of production and household income used in the first SAR analysis no longer represent actual farming systems in the Province and, as such, they should not be used to assess the prevailing and future conditions. (c) It was noted at appraisal that there was a lack of alternative earning opportunities in the Province - mainly as rural works or mine labor. This was expected to encourage participation and adoption of the agricultural activities promoted by the project. However, considerable development of small-scale gold prospecting has occurred within the Province and this is believed to have contributed to the poor performance of the agricultural sub-components. In some inland areas, particularly those in which the project promoted rubber cultivation, it is estimated that as many as 95% of smaliholder farmers are now regularly engaged in panning for alluvial gold. Farmers are reported to be finding on average 2 grams of gold per day which, at K 6.00 per gram, yields considerably better than farm labor which is presently valued at K 2.00 per day. (d) Exogenous to the project, commodity prices have declined significantly since project appraisal. In real terms, international cocoa and coffee prices in 1991 were respectively about 36% and 39% of their 1985 levels and this was also reflected in the local prices paid to farmers (see Appendix 2). Rubber prices have also declined over the project period and they are currently about 60% of their levels at appraisal. The extent to which these price reductions have an adverse impact on average farm incomes in the Province is unquantified, but it is expected to be a reduction of the order of 30%-40%. The following table illustrates commodity price changes over the project period: Commodity Price Indexes (Constant 199O Prices) 1985 1988 1989 1990 1991 Iutanatlona Prices (1985 base) Cocoa 100 51 40 39 36 Rubber 100 100 87 76 73 Coffee 100 68 54 42 39 Copra 100 74 65 41 50 Local Prices (1988 base) Cocoa 100 74 65 37 Rubber 100 84 71 58 Coffee 100 18 - 33 Copta 100 91 78 61  - 27 - PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 4: Note on Re-evaluation of Economic Impact (e) Weak extension support for the main agricultural cropping activities originally promoted by the project resulted in generally low adoption and, as a result, the emphasis of the agricultural development sub-components was reassessed during implementation to focus particularly on livestock production. This change in emphasis and, as a consequence, the modified targets of the production activities and incremental benefits, makes the basis on which the project was originally assessed obsolete. As such, re-estimation of the original analysis of the investments in agriculture and roads would not provide a practical assessment of the true impacts of the project. Adequate costs and returns data required to undertake a quantitative analysis of either the original or supplemental enterprises promoted under the project were not available. (f) Notwithstanding the above, the low levels of adoption and limited incremental production benefits from the Agricultural and Roads sub-components provide a strong indication that, if calculation was possible following standard methodology and using quantified data rather than the assumptions presented in the SAR, these sub-components would yield a negative ERR. (g) Commercial vegetable production in Telefomin and Oksapmin has declined over the project period. The fall in production is a result of reduced demand from the Ok Tedi mine, partly due to increased competitive vegetable production at the mine site, and increased incidence of pests and diseases. Market prospects are not expected to return to the levels assessed at appraisal in 1 984 and it is unlikely that 70% of farmers in the district will produce commercial vegetables by project year 10, as assumed in the SAR economic analysis. Current production of vegetables is about half of 1 984 levels, but it is not possible to assess whether the fall in production would have been greater if the project had not been implemented -although this is unlikely. As the incremental production is assessed to be negative, it is not worthwhile to re-estimate the ERR for the Highland Vegetables Component as was done in the SAR. (h) The economic analyses in the SAR assumed subsequent projects would continue the activities initiated through this project. However, within the context of low farmer adoption, modified farming systems in the Province, revised emphasis of project activities and reduced commodity prices, it is impossible to predict the level or forms that future agricultural support might take if provided by the Government or promulgated through subsequent projects in the Province. (i) Lastly, a significant proportion of the project sub-components relates to institutional strengthening and social services strengthening, for which benefits are unquantifiable. 5. As a result of the factors outlined above, it has not been possible to re-estimate the ERRs based on the two analyses contained in the SAR. Further, given the paucity of data on agriculture in the Province, an alternative analysis was neither feasible nor worthwhile. The assumptions necessary for such an analysis by the PCR mission would not have any justifiable  - 28 - PAPUA NEW GUINEA: West Sepik Provincial Development Project Project Completion Report Appendix 4: Note on Re-evaluation of Economic Impact foundation and, as such, would not provide even an indicative measure of the economic impact of this project. In lieu of this, the PCR presents a qualitative assessment of the performance of WSPDP in accordance with the indicators defined in the SAR.  - 29 - PROJECT DATA SHEET Input: - Date: 23/3/1993 - Name: J.P. Wright Report No: I Country: Financing institutionis: Cost: 16.6 MS 45/93 CP-PNG 14 PCR Papua New Guinea World Bank (IBRD) (at appraisal) I ~~~~~~~ ~ ~~~~~~~~~~~FE: 8.4 MS TriLE: PAPUA NEW GUINEA: West Sepik Provincial DevelopmentProject Date: 23 March 1993 T Sub-Sector: Agriculture Type: PCR Syst.Code: Language: English MISSION MEMBERS: J.P. Wright (Mission Leader), S. Colville-Stewart (Economist) Date of Field Vlsit: 30 November to 20 December 1992 Main Features/CaractOristioues: Objectives/Objectifs: The objective of the project was to strengthen the human, agricultural, institutional and physical resource base in the West Sepik Province of Papua New Guinea to enable directly-productive and market-orientated activities to be carried out and sustained. Components/Composantes: The main components of the project were: agricultural development, infrastructure development, health and nutrition services development, education and training, Lumi District Special Programme and institution building. - Duratlon/Dur&e: 1985-1992 - Cost/Cobt: (total miliion S) 14.2 FE: - - No. Benefclarles/NSombre de b4nflclairea: No data. - Cost per beneficiary/Coat par benefklalre: No data. - Area/Supersicle: Not applicable. - Cost per ha./Coat par hectare: Not applicable. - Main crops/Principales cultures: Vegetables, cocoa, rubber. - Main benefits/Principaux benet)ces: Improved human, institutional and resource base. - Ec. Rate of Return/Taux de rentabillte: n.a. l Lai Subjects of general interest/Stlets d'interet e6neral: Ref. Page No.: 1. Project design considerations. Para 4.2 4 2. Effectiveness of supervision missions. Para 8.2 11 3. Project sustainability. Para 7.1 11l 4. Monitoring and evaluation. Para 5.13 8 KEY-WORDSJMOTS-CLES: pending/en attente Marketing, remote locations, communications.