Papua and New Guinea - Current economic position and prospects (Vol. 2 of 2)

ILE COPY AS129 Vol. 2 .This -report was prepared for use within the -Bank -and its affilia-ted organizations. They -do.not accept responsibility for its -accuracy or completeness. The report may -not be -published nor may it -be quoted -as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF THE TERRITORY OF PAPUA AND NEW GUINEA (in two volumes-) VOLUME II Agriculture and Livestock Transportation Power August 25, 1.967 Asia Department  CURRENCY EQUIVALENTS US$1. 00 = 0. 8929 Australian dollar $A 1.00 = US$1. 12 $A 1, 000, 000 = US$1, 120, 000  This report is based on the findings of a Mission which visited the Territory of Papua and New Guinea in March of 1967. The Mission was composed of the following members: Raymond J. Goodman Chief Ernest Lamers General Economist Campbell P. McMeekan (Consultant) ARriculture Edward A. Minnig Power Guenter H. Reif General Economist Hendrik van Helden Transportation  Appendix I Agriculture and Livestock  TABLE OF CONTENTS Volume II Appendix I - Agriculture and Livestock Page No. Introduction .............. . . ........................... 1 Response to Bank Survey Mission Report . Land Resources and Use! . . . . 3 Copra .*... Cocoa..... 5 Coffee.... 6 Rubber ....6 Tea ............. 7 Pyrethrum .... 8 Oil Palmi ............ . ....................................... 9 Other Crops ................................................... 10 Cattle . . . . ......... O10 Other Livestock . . . .......... 11 Project Identification ........ . .11 Statistical Annex (Tab'Les I - 10) ............................  APPENDIX I AGRICULTURE AND IJVIMTOCK Introduction 1. The main objectives of this report are to update the agricultural sections of the Bank Survey Mission Report "The Economic Development of the Territory of Papua and New Guinea," and to assist the Administration in id(entifying agricultural projects potentially suitable for Bank financing. 2. Barely four years have passed since the Bank Survey Mission. Accordingly, insofar as updating is concerned, this report concentrates on major changes since that time. The Bank Survey Mission Report should be referred to for background and general issues in respect of whi-h it is still valid. On the identification side the projects considered are those to which the Administration gave highest priority and for which external finance was considered by it to be necessary. 3. The time available to the mission did not permit complete field coverage of the agricultural zones. Areas wthere some progress was reported to have occurred and areas likely to be involved in immediate development plans were given priority. Thus, three main zones were visited: the MYt Ha en area of the Highlands (tea and cattle), Lae and the Warkham Valley, pasture improvement, cocoa and cattle), and New Britain (palm oil, copra cocoa). Throughout the field surveys, the mission was accompanied by the Director of Agriculture and his senior staff in the respective zones. At all points, discussions with both expatriate and indigenous producers were held. 4. On returning to Sydney, the Commonwealth Department of Territories was informed of the tentative views of the mission. Its preliminary reactions to possible recommendations were obtained and discussed. Response to Bank Survey Mission Report 5. Of both importance and interest are the reactions of the Common- wealth Department of Territories and of the Administration of the Territory to the views and recommendations of the Bank Survey Mission Report. 6. From official reactions at high level both in Canberra and Port Moresby and action policies currently being implemented, it is clear that the Report was not only well received but is being used as a blueprint for development. Both administrative and technical staff at all levels obviously regard it not only as soundly based but also as a stimulus to renewed efforts on their part to strengthen and develop the overall agricultural economy. 7. The main area of disagreement is in the emphasis on the role of land settlement in meeting the agricultural targets proposed by the Bank  - 2 - Survey Mission, The Survey Mission's adverse ooinion has changed thinking only to the extent that land settlement is now given equal, and not as - formerly prior, importance to the alternative approaches of "village con- centration" and "nucleus estates". 8. Behind this policy lies continuing preoccupation with the problems of population pressure in the relatively small areas of Chimbu, Wabag, Maprick and Gazelle Peninsula. However, the Minister of Territories has approved plans for land settlement around nucleus estates of tea, oil palm and, possibly, rubber. Such schemes may be worthy of consideration but the present mission concurs with the finding of tlhe Bank Survey Mission and believes firmly that the Bank should avoid involvement in other types of large-scale land settlement. 9. Despite these and other reasons advanced, the present mission concurs with the findings of the Bank Survey Mission and believes firmly that the Bank should avoid involvement in large-scale land settlement for major investment, save in special circumstances. 10. Significant progress has been made in the past four years in zones where it has been possible to apply the "village concentration" technique. Future progress should accelerate with the recent establishment of "Adjudication Areas" within which "Demarkation Committees" are being appointed to help settle land disputes and to advance procedures to the tenure conversion stage whereby boundaries are re-aligned to form smallholder blocks for assignment to individual onmers. However, the "village concentra- tion" approach has not been given the high priority recommended by the Bank Survey Mission because of the inherent land tenure problems and the Administration's belief that there is insufficient good agricultural land near villages to achieve the Survey Mission's targets. 11. ine development of a beef cattle industry of dimensions sufficient at least to satisy local demand for meat was given very high priority by the Survey Mission. This proposal has been given very low ranking by the Administration, within which, however, strong contrary views exist. None of the specific recommendations for accelerated progress in cattle develop- ment have been followed, with the foreseeable consequence that the gap between local production and imports of meat has widened with continuing adverse effects on the balance of payments position; in addition, the scarcity of locally bred cattle, with which to stock indigenous farms, has reached such embarrassing dimensions that further progress with. "Native Cattle Projects" to which the Administration is committed have had to be suspended. 12. On the administrative side, while "concentration rather than dispersal of effort" has been accepted in principle, the Administration has yielded to local political representations leading to even wider dispersion of technical and advisory staff in some instances. While the need to reorganize the Department of Agriculture, Livestock and Fisheries as recommended is recognized, such reorganization is still in the planning stage. On the staffing side, little recruitment of technical agricultural staff has occurred despite the need for an agressive development policy and a serieu. loss in the rnedium age group of experienced men has rezulted. F-ecomeinded overseas sources of staff have not been intensively eb-Iored.  - 3 - 13. Again, in the field of agricultural credi r, the dearth of credit facilities to agricultural producers highl.ghted by the Bank Survey Mission has continued over the past four years. While positive action to correct this by setting up a Papua and New Guinea Development Bank as proposed by the Survey Mission has occurred, action proposals both in respect to organization and finance are still rather nebulous. 1.4. On the positive side, noteworthy advances have been made in the production of tea and pyrethrum. Acceptance of the recommendation of the Survey Mission for the "nucleus estate" approach to these crops has lead to promising developments, and in particular the achievements in establishing a potential tea export incdustry are impressive. Also the development of a palm oil industry is in an advanced planning stage. Likewise, rubber produc- tion, based on village concentration as well as land settlement,is ready to go. Steady progress has been made in promoting replantings, and new plantings of cocoa, coffee and coconut palms, both in the indigenous and in the expat- riate sectors. Facilities for cattle processing and marketing have been provided by the completion of a slaughter house at Lae and the acquisition c,f an idle plant at Port M4oresby. Similar facilities are planned at Mt. Hagen and Goroka in the Highlands. The pace of educating indigenes for technical services in agriculture has stepped up by the completion of the Vudal Agricultural College. This college promises to become the most out- standing of its kind in tropical agriculture. Agricultural research has improved, especially in the field of pasture research and crop chemistry. Direct liaison between plant and animal scientist, formerly absent, is now a reality. 15. Comparing the situation in 1963 and 1967, however, one is left with the impression that the call of the Survey Mission for a vigorous development policy in the field of agriculture has not been followed by planned action. Those changes and progress that have occurred have either been constrained by the exigencies of tight budgetary controls or have been the result of the beneficial effect or expatriate capital in "nucleus estate" development. 16. The following sections describe the present status of the main agriculturai sectors with special emphasis on the changes over the past four-year period. Land Resources and Use 17. Estimates of resources remained unchanged as compared to the Bank Survey Mission Report..l IndiLg-nous production, though still dominantly subsistence in dharacter, has 2^.1tinued to move into cash cropping wherever possible. This has brought about a small increase in the indigenous 1/ See Table 8, Statistical Appendix, Main Report.  - 4 - share in copra production and a relatively large increase in its share in coffee production. Indigenous coffee output grew parti.cularly fast as large immature plantings came into bearing; in addition, non-indigenous producers restricted their production programs in view of the limitations imposed by the International Coffee Agreement. On the other hand, the indigenous share in cocoa production has declined slightly with large expatriate estate plantings coming into profit. 18. In 196h/65, non-indigenous producers accounted for nearly all the rubber, 72% of the copra, 79% of the cocoa and 40% of the coffee. T'his production continues to come from relatively few holdings and less than 5% of the usable land. Expatriate holdings have decreased in numbers in the Islands and in the Lowlands of the New Guinea mainland, but in- creased in the Highlands over the period. The net increase is only 38 holdings, duie mainly to leases to new tea producers 1/. Indigenes are now contributing about 30% of the value of total crop production from about 50% of the total land used for export type crops. LCopra 19. The major change since 1963 has been an increase by nearly 78,000 acres in indligenous planting (up 31%) with most of it occurring in Bougainville, New Ireland and New Britain. Indigenous harvesting has increased only 16% over the period. Since a much larger proportion of indigenous plantations are immature (44.3% as against 16.7% on non- indigenous plantations) and indigenous areas in coconuts now exceed non- indigenous by about 60,000 acres, the share of the indigenes in the copra industry is likely to increase substantially in the years ahead. Without ;special effort this trend might accelerate even more since a large propor- tion of the plantations of established expatriate estates are approaching the senility stage. 20. On the planning side, the ~dministration has accepted the target recommendations of the Bank Survey Mission for the indigenous sector and envisages plantings totalling 238,000 acres (mission target 250,000 acres) over the next ten years, but it has reduced the target set for the non- indigenous sector from 120,000 acres to only 50,000 acres. The reduced estimate assumes a growTth rate no higher than has occurred without stimulus during recent years. The Administration states as the main reason for the reduction that relative to other opportunities there is little incentive for further expatriate investment in coconuts. It is clear that the Administration has not envisaged provision of the special conditions and incentives to stimulate further expatriate investment which were strongly recommended by the Survey Mission in order to over- come this very situation. 21. In general, the revised target anticipates an in-crease in copra production of 3.4% annually over the ten year period 1965-1975, against 1/ See Table 9 Statistical Appendix, Main Report  - 5 - 'the Survey Mission's plan for 5.1% annually. The lower projection is due partly to concentration on indigenous growers only, and partly to the adoption of lower yield estimates of 5.5 cwt. as against 7.0 cwt. per acre for mature new palms - a figure based on more recent experience with indigenous production not available to the Survey Mission. 22. The present mission sees no valid reason for ignoring the development potential of the non-indigenous sector during the next ten years as has been the case in the last ten. Later in this report, ref- erence is made to a proposed agricultural development project which would make provision for special credit facilities to non-indigenous copra growers. Cocoa 23. Cocoa production has continued to grow at a fast rate, mainly as a result of immature plantings coming into profit. Production topped 20,000 tons in 1964/65, an increase of 6,000 tons over four years, and a twenty-fold increase over the preceding ten years. 2h. Production would have been even higher but for a severe upsurge in the incidence of the disease "die-back". The disease is not yet under effective control and this has led to major changes in administrative planning. For example, -the large-scale land settlement scheme for Central New Britain, previously based on extensive areas of cocoa, has been re- designed on the basis of oil-palm. 25. Although agreeing in general with the proposal of the Survey Mission for more attention to market preparation, its recommendation that increased emphasis be placed on "base" rather than "flavor" cocoa has not been accepted. The Administration argues that negotiations toward an International Cocoa Agreement suggest that more latitude is likely in "flavor" cocoa, of which the Territory is one of the few suppliers. Since cocoa output of the Territory is less than 0.2% of total world cocoa production, increased rather than decreased emphasis on "flavor" cocoa is deemed justifiable. Accordingly, no moves toward decentralizing pro- cessing have been initiated or are intended. It is proposed, however, to introduce the "Model Cocoa Ordinance and Code of Practice" of F.A.0. when this is finalized. 26. The Administration's overall development plans for cocoa are reasonably close to those recommended in the Survey Mission report. They call for an additional acreage of 140,000 as against 145,000 suggested by the Survey Mission. Lower yield projections, in the light of more recent experience and due to the affect of "die-back'", however, results in a projected growth rate over the next ten years of 8.9% in annual yield as against 13.6% assumed by the Survey Mission Report.  -6- 27. ost of this increase is to come 1-1om indigenous plantings, despite ti e fact that over the past four years 75% of the new plantings of about ,O00 acres each year has come from the non-indigenous sector. Special 'land settlement" schemes along with limited "village concentra- tion" p] intings in the Northern district are expected to alter this ratio in favor of the indigenes. (The program is summarized in Table 4.) Coffee 28. Although the limitations imposed by the membership of the Territory in the International Coffee Organization (I.C.O.) has prevented official stimulation of coffee production, relatively large increases in both acreage and production have occurred over the past four years. Acreage has been stepped up by 47% to over 35,000 acres and output by 218% to 10,800 tons. About 75% of the increased plantings and 72t- of - the increased production havea come from indigenous growers. About one-third of the current acreage has not reached the bearing stage. These figures highlight the problem of quantative restriction of coffee production in a country like the Territory where it is not feasible to prevent native producers planting coffee if they want to do so. 29. Australia and Papua and New Guinea constitute a single member of the International Coffee Organization (I.C.O.). No specific export quota will be applied until production exceeds imports. During FY 1965/66, the Territory's share of the Australian market was only 30% and her exports to other countries approached 6,000 tons. There is a possi- bility that the I.C.O. will impose controls unless the Territory can in- crease her share of the Australian market or increase exports to the "new market" members of the Organization. The Administration, therefore, has no program for increased coffee production but is concentrating on improving disease control, processing and marketing. 30. Under these circumstances, the Administration has no program for increased coffee production. It is concentrating on improving disease con-trol, processing, and marketing. Indigenous co-operative processing has been hihgly successful in the Kundiawa area, with more than 2,000 tonw of green coffee being handled annually in this way.. Non-indigenous growers, previously sole planters of coffee, are being encouraged to diversify, mainly with tea and cattle. A "'Coffee Marketing Board" now imposes a small levy on exports to finance market promotion. Rubber 31. Production has increased slightly to the 5,00() ton mark. There has been no significant change in the structure of the industry, save for specific encouragement by the Administration of indigenes who have now planted nearly 1,500 acres to this tree crop against virtually none four years ago (see Table 6).  - 7 - 32. The Survey Mission's development targets have been altered radically by the Administration. These called for an additional 75,000 acres of non-indigenous plantings in 10 years. The revised program plans for only 18,200 acres. Of these, only 11,000 acres would represent new plantings, the remainder being replacement of old low-yielding stands. The Administration argues that the reduction is in line with stated expansion plans of existing rubber plantations, and that additional land for estate rubber plantations is unlikely to be available, at least in the next five years. This particular issue, however, is under further study. 33. On the other hand, the Administration's proposals for 23,000 acres of indigenous rubber are much more ambitious than those in the Survey Mission Report, where a target of only 12,000 acres was advranced. Essentially, the Administration accepts the Survey Mission's targets of 500 acres a year for the early years of the coming ten-year period, but argues that if this is attained as it should be the rate could easily be stepped up to 3,000 acres per annum in the later years in order to obtain the increase in the target acreage. 34. In general, the revised program (see Table 7) envisages an annual growth in rubber production of 11.8% as against the Survey Mission's estimate of 13.9%, the difference being due to the increased concentration on indigenous production and a decline in expatriate participation. The- major weakness in the revised program would appear to be that no firm de- cisions have yet been made how to process and market native small holder rubber. These particular problems are currently under study. Tea 35. The Bank Survey Mission, impressed with the results of experimental plantings, recommended commercial production of tea on a "nucleus estate" basis on a relatively modest scale. Ten "nucleus estates" each with a capacity of one million pounds of made tea annually were suggested. The program of the Administration which is already well under way calls for nearly ten times this production. Some 4,0000 acres are planned to be in tea culture by 1973/74 of which 24,000 acres would be under non-indigenous control, mostly on the "nucleus estate" pattern, with the remainder coming from 6,000 odd indigenous small holders. The areas being used are in the Mt. Hagen and Mendi areas. 36. To date, some 11,000 acres have been allocated on 800-1,000 acre blocks to private companies owned and operated by expatriates, each of them is to plant its area, establish a factory for processing the output of its "nucleus estate" along with that of 400-600 acres of adjoining indigenous small holders, each owning 1 to 3 acres. Each factory, several of which are under construction, currently involves a capital outlay of $A250,000-9tA300,000. Large numbers of small holders are also on the ground,  - 8 - and planting on both indigenous and non-indigenous areas is proceeding &s fast as the supply of planting material from the Gariana experimental area permits. The actual annual rate of planting is geared mainly to this supply. 37. There has been no lack of qualified expatriate applicants, i.e., companies with tea experience and capital, nor have any difficulties been met in attracting the necessary number of small holders for resettlement on tea projects. 38. An additional 11,000 acres in blocks for "nucleus estates" are planned for early development. Each of these will plant 600 acres of estate tea and process 800 acres of native tea. The major tea developments have so far taken place in the Wagi swamp, near Mt. Hagen. 39. It is not irrelevant to note that this impressive development has occurred without special credits or other financial provisions by the government. Private enterprise has taken care of the capital needs of the expatriate "nucleus estates"; small holdings sufficient to give indigenous settlers adequate subsistence and other cash crop land in addition to tea acreage has avoided the necessity for cash maintenance to indigenes during the four - five years of tea establishment; planting material, access roads, surveying and supervision has come from normal budgetary sources. The Department of Agricultuire has obviously given high priority to the scheme. Even more significant, some 200,000 acres of formerly native owned land has been acquired by the government for tea as compared to the Administration's reluctance to procure unused land for non-indigenous plantation development for cattle and major export crops, The imrnression is left that similar large areas, as recommended by the Survey Tlission, could like,wYise be accuired for cattle, rubber, cocoa, palm oil and copra with deliberate effort. The tea operation also demonstrates considerable private buisness interest given reas3nable investment opportunitie.s even in a country like the Territory. Pyretnrum W0. Following recommendations of the Bank Survey Mission, pyrethrum has been introduced to Highland indigenes as a cash crop. Production has been developed in native gardens of about one fifth of an acre to yield some 250 tons of dried flowers in 1965/66. Production is likely to reach 500 tons by 1967 and to maintain this level thereafter by present methods. Plans are being made to step up the present disappointing yields per acre to better levels and to increase small holder plots to 1 acre each in order to yield five to six times this output. 41. Processing and marketing is in the hands of a highly experienced London based company, Stafford Allen (New Guinea Pty. Ltd.) which has  - 9 - installed a $AhOO,OO factory to extract the insecticide. This company operates under a formal agreement with the Administration. Oil Palm 42. The Survey Mission report recommended the encouragement of private enterprise to pioneer development of an oil palm industry in the sparsely populated areas of New Britain or Bougainville in line with the "nucleus estate" pattern. 43. The Administration has recently concluded an agreement with Harrisons and Crossfield (A.N.Z.) Ltd., a company with extensive Malaysian experience in palm oil production and processing, for the lease of 5,000 acres of potentially suitable land in the Cape Hoskins area of Central New Britain. Over a five-year period, the company is to plant 3,000 acres with germinated nuts imported from its Malaysian estates, construct a suitable factory to process its own crop and that from .an adjoining area of 4,000 acres of small holdings. The Administration will resettle some 50() small holders, each on 15 acres, of which 8 acres will be planted to oil palm in this initial stage. The Administration is to participate financially in the Harrison and Crossfield operation to the extent of providing 50% ($Al.25 million) of the capital needs and is committed to the associated small holder establishment to provide the necessary road and port facilities. As mentioned later, Bank group assistance for this project is sought. 44. The overall program allows for the establishment of an additional "nucleus estate", and a total planting of 20,000 acres in 1965/66 - 1974/75 period. Indigenous small holdings will account for 50% of this total (see Table 8). The necessary land has been purchased; plans to acquire even larger blocks are under negotiation. Up to 400,000 acres, suited to palm oil, copra and cocoa are in sight in the Central New Britain zone. 45. Ecological conditions in many parts of the area appear to be ideal for oil palms and Harrisons and Crossfield - a firm with world-wide experience of the crop - have expressed interest in participating in the development of an oil palm industry. The crop is well suited to land settlement around nucleus estates and has received special consideration since the upsurge in the incidence and severity of "die-back" which forced the abandonment of cocoa as the major crop for the proposed Central New Britain land settlement scheme. Nevertheless, the fact remains that there has been no commercial, or even experimental, production of oil palm in the Territory.  - 10 - Other Crops 46. Little change has occurred in the production of passionfruit, rice, peanuts, bananas and sugar cane. 4,7. Passionfruit has increased slightly. The large potential could readily be exploited on the production side but is dependent on export markets, mainly the U.S. Negotiations to this end are in progress. h8. Rice production is static and seems likely to remain so. 49. Prospects for exporting bananas to Japan are not favorable as that market is dominated by supplies from sources nearer at hand. 50. The area under sugar is still only half that necessary for viable local production, so that efforts with this crop are restricted to experimental work on the cultural side. Cattle 51. The most recent statistical data are summarized in Table 9. Cattle population figures include all animals; breeding cows would be approximately one third of these numbers, or about 15,000 head. This represents an increase of only about 6,000 head since 1962/63. 52. The Survey Mission recommended an aggressive cattle development program for over three years to be stimulated by increased imports of breeding stock, additional leases to expatriates, and the provision of credit to new and existing cattlemen. If implemented this would have brought cattle population to over 70,000 head by now. Natural increase of existing stocks accounts for most of the increase in total numbers, especially since imports during the last two years have fallen to half of those of former years. NTo new ranches have been established, and no special aid has been provided to existing cattlemen to increase their herds. 53. The lack of beef cattle program backed by the Administration had serious consequences in two respects. First, the balance of payments situation has been adversely affected with the value of imported fresh beef in 1965/66 increased 100% over 1962/63, despite a 70% increase in local cattle slaughterings. Acceptance of the Survey YLssion's recommenda- tions would have doubled local production in the same time and reduced the gap between imports and local production of fresh beef to negligible pro- portions: it would certainly have eliminated it over the envisaged ten-year period. Second, the Administration's commitment to the establishment of many thousands of "native cattle projects" is in serious jeopardy. Indigenous smal holdings were to be established, each with 20-30 head of beef cattle. By 1965/66, some 370 such units had been initiated. They are not adequately stocked, the average herd being about 8 head. Two thousand applications have been received in the Highland areas alone but cannot be proceeded with due to shortage of stock. The Administration has ceased accepting further applications; it is particularly ernbarrassed by being unable to use the funds for cattle purchase which accompany each application.  - 11 - 54. Both consequences were foreseen by the Survey Mission which fully documented its views and conclusions. .>5. The main reason for disregarding the recommendations, and the continued absence of any definite cattle development program, appears to be -the view that per acre returns from beef cattle make this industry less attractive as an investment possibility than cash crops. This position ignores that land usable for cattle is currently unused and has no alterna- tive uses in the foreseeable future. It is unsuited for cash crop production. The view also does not take into account that, financially, cattle operations in the Territory are now even more attractive than at the time of the Survey :Mission's visit as local prices rose markedly due to increasing local demand for both live animals and fresh meat. Current returns on cattle operations are high and the capital gains from natural increase are most impressive. .56. This mission strongly recommends that the present situation of livestock should be reviewed and a cattle development program should be worked out. In particular, the evident interdependency of the non-indige- nous and indigenous producer must be fully appreciated and allowed for; new ranches should be established as quickly as possible; existing ranches should be encouraged to continue to import stock; indigenes should be invited to participate in the program as stock becomes available; a determined credit policy should be initiated to support all three groups. Other Livestock 57. No major changes in dairy, pig and poultry production have occurred. The suitability of the Red Poll breed for dual purpose beef and dairy for the Highlands is now disputed in the light of more recent experience; it was recommended by the Survey Mission. Distribution of European-type pigs to indigenes has been abandoned after a survey recommended by the Bank Survey Mission showed that their mortality was very high. It is now attempted to distribute cross-bred (European and native) stock. Poultry production is still limited by need to import foodstuffs. Trials with local materials are being pressed. Project Identification 58. It was found that the Administration was currently interested in Bank Group finance for the proposed palm oil project in Central New Britain, which it considered to be sufficiently well advanced in planning to warrant early appraisal by the Bank. Since this project is likely to involve possible financing of only about $A500,000, and since it was stated that it would be followed soon by loan applications for other crops, each of which were also likely to involve only relatively small amounts, it was suggested that any approach to the Bank tie these individual elements together in an "Agricultural Credit" project similar to those operating in Mexico, Peru and Costa Rica. 59. It was felt that this approach would be more suitable to both parties. The Administration would be able to organize its development plans with more precision on the financial side; the newly established Papua and  - 12 - New Guinea Deielopment Bank, as the possible financial agency of such a project, would be better armned to operate in the agricultural field; the Te:rritory's task of organizing and handling appraisal and supervision missions would be eased; and Bank participation in overall rather than in isolated parts of agriculture would considerably strengthen confidence, particularly of the expatriate sector, in continued and expanding investment in the Territory. The Bank, on the other hand, would have one straightforward "Agricultural Credit" proposal to appraise and supervise; the total loan amount would be of better dimensions in a cost-investment sense; and it would be playing a material part in supporting the new local development bank. 60. Under this concept, which was readily accepted by the Administration both in Canberra and Port Moresby, proposals were examined in some detail for providing credit to producers both indigenous and non-indigenous in the various sectors. The Mission concluded from evidence presented that an "Agricultural Credit Project" was feasible. As a basis for such a project, suitable areas for possible Bank financing were identified and preliminary assistance in project preparation provided. IJhen the mission left the Territory, the Administration proposed intensive work on preparing such a project over the next two months, for early submission to the Bank. 61. Based on the preliminary discussions referred to, the following could be the chief elements of such a project: Agricultural Credit Project Amount Loan Indigenous Assistance Participation $A million Per cent Palm oil (new plantings) 1.6 100 Coconuts & cocoa (new plantings) 1.2 100 Coconut rehabilitation (replantings) 0.35 nil Rubber (new plantings and replantings) 1.2 66 Village concentrations (various) 0.10 100 Cattle (beef) 0.80 nil Total 5.25 70 62. These amounts have been derived from an assessment of the rate of progress feasible in the various sectors over a three-year disbursement period on Bank assistance limited to 50%o of on-farm costs for indigenes, 4O% for non-indigenes, 30% for infrastructure, each on a total cost basis, and on updated estimates of key costs as outlined in the Survey Mission report. 63. The mission would recommend serious consideration of any approach along these lines, on the grounds that the completion of such a loan would go a long waiy toward initiating the Survey Mission's recommendations in an  - 13 - effective manner. It would remove much of the difficulty and disincentive inherent in current financing through annual budgetary allocations from the Commonwealth Government of Australia. It would introduce the "project" approach to development. 64. Any appraisal mission would need to examine c'losely the ability of the new development bank to handle such a loan and the precise proposals of the bank for the use of intermediaries both in the non-indigenous and indigenous sectors. It would also need to apply especially careful criteria to the oil palm sector for reasons already discussed.  Table 1 Non-Indigenous Agricultural Holdings, 1965 (Year ending March 31) No. of Land Tenure Land Use Holdings Freehold Leasshold Total Used Unused Lowlands 524 87,587 429,007 516,594 197,508 319,086 Islands 457 308,188 126,770 434,958 230,b15 204,543 Highlands 238 71 62,535 62,6c6 28,366 3L,,240 Total 1,219 395,846 ,618,312 T,01L,158 5T 577,869 Source: Production Bulletin No. 7, Bureau of Statistics, Administration of the Territory of Papua and New Guinea  Tab'- 2 Coconut Acreage and Copra Production, 196Lt/65 Mature and Immature Acreage Thousand,Acres _ a Producti n Tons a,Non- tE~- Indion-ign dig- District Indigenous enous Total Indigenous enous Total Central 17.1 11.7 28.8 5,697 1,1463 7,160 Gulf 1.8 29.6 31.4 64141 1,608 2,252 Milne Bay 1l.4 23.2 142.6 2,68C, 3,610 6,299 Northern 1.1 4.7 5.8 143 124 267 Western 0.8 7.L! 3.2 1014 143 2L.7 Bougainville 33.2 36.3 69.5 1L!,174 3,815 17,989 Madang 35.9 19.7 55.6 11,744 2,183 13,927 Manus 10.6 6.3 16.9 2,598 601 3,199 YMorobe 5.1 10.5 15.6 666 349 1,015 New Britain 79.0 85.2 1614.2 27,322 11,564 38,886 New Ireland 60.3 50.9 111.2 18,6Sl0 7,507 26,147 Sepik 2.7 30.3 33.0 613 635 1,2218 Total Total for Territory 262.0 320.8 582.8 85,034 33,602 110,635 Per cent Immature 15.7% 14.3% 31.14% a/ For non-indigenous sector year ended March 31, 1965 b/ For indigenous sector year ended June 30, 1965 Sources: Production Bulletin No. 7, Bureau of Statistics- Annual Extension Report 1964/65 of Department of Agriculture, Stock and Fisieries, Administration of the Territory of Papua and New Guinea  Table 3 Coconut Products Program Actual Proj ected 1964/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 197a/75 1. New Plantings - '000 Acres Indigenous 19.6 15.9 16.4 18.8 22.3 24.6 26.7 27.9 29.2 29.1 26.8 Non-Indigenous 4.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Total 23.6 20.9 21.4 23.8 27.3 29.6 31.7 32.9 34.2 34.1 31.8 2. Total Area - '000 Acres Indigenous 290.2 306.1 322.5 341.3 363.7 388.3 415.0 442.9 372.1 501.2 528.0 Non-Indigenous 266.7 268.7 270.7 272.7 274.7 276.7 278.7 280.7 282.7 284.7 286.7 Total 556.9 574.8 593.2 614.0 638.4 665.0 693.7 723.6 754.8 785.9 814.7 3. Production - '000 Tons (Copra Equivalent) Indigenous 33.6 36.9 40.9 44.4 48.4 51.1 54.6 58.o 61.7 65.7 70.6 Non-Indigenous 85.0 85.8 87.3 88.6 89.3 90.8 91.8 92.5 93.5 94.3 95.2 Total 118.6 122.7 128.2 133.0 137.7 141.9 146.4 150.5 155.2 160.0 165.8 4. Value of Production - $A Indigenous 5.7 6.0 6.5 6.9 7.3 7.L 7.6 7.8 8.0 8.2 8.5 Non-Indigenous 14.3 14.2 14.0 13.7 13.4 13.2 12.9 12.5 12.2 11.8 11.4 Total 20.0 20.2 20.5 20.6 20.7 20.6 20.5 20.3 20.2 20.0 19.9 5. Employment - '000 Indigenes engaged in producing coconuts and cocoa. On estates 26.2 26.9 27.7 28.h 29.1 29.9 30.6 31.3 32.1 32.8 33.5 Elsewhere n.a. 188.0 189.0 190.0 192.0 194.0 196.0 198.0 199.0 200.0 201.0 Total n.a. 214.9 216.7 218.h 221.1 223.9 226.6 229.3 231.1 232.8 234.5 Source: Department of Agriculture, Stock and Fisheries, Administration of the Territory of Papua and New Guinea, prepared for the mission.  Table 4 Cocoa Acreage and Production, 1964/65a/ Acres (Mature and Immature) Tons of Dry Beans Non- Non- District Indigenous Indigenous Total Indigenous Indigenous Total Central1 1,725 14 1,739 128 1 129 Milne Bay 722 64 786 40 1 h1 Northern 8,745 3,712 12,457 373 48 421 Gulf 426 - 426 7 - 7 Madang 14,627 2,826 17,453 1,650 117 1,767 E3ougainville 18,875 6,558 25,433 3,784 302 4,o86 New Britain 56,127 16,238 72,365 7,288 4,455 11,743 New Ireland 12,363 709 13,072 778 112 890 Morobe ) 55 5) 60 ) Manus ) 3,371 146 ) 4,707 ) 279 15 ) 362 Sepik ) 235) ) 8) T'otal for Territory 1i6,>81 31,457 148,438 14,327 5,119 19,446 a. For non-indigenous sector year ended March 31; for indigenous sector year ended June 30. Sources: Production Bulletin No. 7, Bureau of Statistics, Annual Extension Report 1964/65 of Department of Agriculture, Stock and Fisheries, Administration of the Territory of Papua and New Guinea.  Table 5 Cocoa Program Actual Projected 1964/65 1965/66 1966/67 1967/68 1968/69 1h69/70 1970/?1 1971/72 1972/73 1973/74 197!/75 1. New Plantings - '000 Acres Indigenous 2.0 2.0 L.3 4.1 4.6 6.2 8.h 9.0 9.6 10.7 11.0 Non-Indigenous 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Total 9.0 9.0 11.3 11.1 11.6 13.2 15.4 16.0 16.6 17.7 18.0 2. Total Area - 0O0 Acres Indigenous 30.1 32.1 36.L 40.5 45.1 51.2 59.6 68.6 78.2 88.9 99.9 Non-Indigenous 118.5 125.5 132.5 131.5 146.5 153.5 160.5 167.5 174.5 181.5 188.5 Total 148.6 157.6 163.9 180.0 191.6 204.7 220.1 236.1 252.7 270.L 288.4 3. Production - '000 Tons Cocoa Beans Indigenous 4.9 6.o 6.8 7.7 8.3 9.5 10.7 11.7 13.1 14.7 16.6 Non-Indigenous 15.7 17.L 19.3 21.3 23.h 24.8 26.3 27.7 29.1 30.6 32.1 Total 2C.6 23.4 26.1 29.0 31.7 3L.3 37.0 39.h 4.2 35.3 48.7 4. Value of Production - $A Indigenous 1.7 1.6 2.4 2.7 2.9 3.3 3.7 4.1 4h.0 5.1 5.8 Non-Indigenous 5.5 4.6 6.7 7.4 8.2 8.7 9.2 9.7 10.2 10.7 11.2 Total 7.2 6.2 9.1 10.1 11.1 12.0 12.9 13.8 14.8 15.8 17.0 Source: Department of Agriculture, Stock and Fisheries, Administration of the Territory of Papua and New Guinea, prepared for the mission.  Table 6 Coffee Acreage and Production, 1964/652/ Acres (Mature and Immature) Production Tons Non- Non- District Indigenous Indigenous Total Indigenous Indigenous Total Central. 477 220 697 23.1 11.5 3h.6 Gulf 3 149 152 b/ 1.0 n.a. Milne Bay 9 646 655 29.5 n.a. Northern 50 1,357 1,407 b/ 75.0 n.a. Southern Highlands I10 114 224 9.0 1.0 10.0 Western - 16 16 - b/ 1.0 Eastern Highlands 1h,445 10,373 14,818 1,457.0 2,382.0 3,839.0 Madang 74 194 268 - 5.8 5.8 Manus - 7 7 - b/ 1.0 Morobe 1,799 3,880 5,679 278.1 538.4 816.5 New Britain 59 90 149 b/ b/ n.a. Western HiSghlands 5,194 3,783 8,977 1,621.3 882.0 2,503.3 Bougainville) 217 ) ) 7.5 ) New Ireland ) 9 96 ) 2,436 ) b/ ) n.a. Sepik ) 2,114 ) ) 33.0 ) Total for 'erritory 12,229 23,256 35,485 3,389.8 3,966.7 7,356.5 a/ For non-indigenous sector year ended March 31; for indigenous sector year ended June 30. b/ T;ss thari one ton. Sources Production Bulletin ilo. 7, Bureau of Statistics; Annual Extens.lon Rep ort 1L964/65 of Department of Agriculture, Stocl. and Fi sheri.s, Administration of the Territory of Papua and New, Guinea.  Table 7 Rubber Acreage and Production by District, 1964/65a/ Acreage (Mature and Immature) Production Tons Non- Non- District Indigenous Indigenous Total Indigenous Indigenous Total Central 24,651 244 24,895 4,038 - 4,038.0 Gulf 2,033 337 2,370 306 5.3 311.3 Milne Bay 581 - 581 142 - 142.0 Northern 5,245 323 5,568 633 21.2 654.2 Western ) 3 ) ) ) - ) Bougainville) 807 4 ) ) 64 ) _ ) 64.o New Ireland) - ) 814) ) - ) Sepik ) -) ) ) -) Morobe - 60 60 - - - Total for Territory 33,317 971 34,288 5,183 26.5 5,209.5 a/ For non-indigenous sector year ended March 31; for indigenous sector year ended June 30. Sources: Production Bulletin No. 7, Bureau of Statistics; Annual Extension Report 1964/65 of Department of Agriculture, Stock and Fisheries, Administration of the Territory of Papua and New Guinea.  Table 8 Rubber Program Actual Projected 1961/65 1965/66 1966/67 1967/60 1965/69 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1. New Plantings - '000 Acres Indigenous 0.2 0.5 1.1 1.6 2.1 2.9 3.4 3.6 3.3 2.5 2.X Non-Indigenous 1.2 2.3 3.7 2.2 1.9 1.6 1-4 1.3 1.3 1.3 1.3 Total 1.4 2.8 4.8 3.8 4.o 4.5 4.8 4.9 h.6 3.8 3.7 2. Total Area - '000 Acres Indigenous 0.4 0.9 2.1 3.7 5.6 8.8 12.2 15.8 19.1 21.6 22.9 Non-Indigenous 33.3 35.3 38.4 Ox 41.4 42.5 42.9 43.3 43.6 44.0 44.4 Total 33.7 36.2 4o.5 43.7 47.0 51.3 55.1 59.1 62.7 65.6 67.3 3. Production - '000 Tons (Smoked sheet, crepe & scrap) Indigenous - - - - 0.1 0.3 o.6 1.0 1.6 2.3 3.8 Non-Indigenous 5.2 5.4 6.4 7.0 7.7 8.3 8.8 9.6 10.6 11.2 12.1 Total 5.2 5.4 6.4 7.0 7.8 8.6 9.4 10.6 12.2 13.5 15.9 4. Value of Production - A Indigenous - - - - - 0.1 0.2 0.4 o.6 0.9 1.4 Non-Indigenous 2.5 2.6 3.0 3.2 3.4 3.6 3.7 3.9 4.2 4.3 4.5 Total 2.5 2.6 3.0 3.2 3.4 3.7 3.9 4.3 4.8 5.2 5.9 5. Employment - '000 Indigenes on Est7tes 6.6 6.9 7.5 7.8 8.1 8.3 8.4 8.5 8.5 8.6 8.9 Other Indigenesa 0.3 0.7 1.1 1.7 2.5 3.4 4.6 5.2 5.8 6.h 7.0 Total 6.9 7.6 8.6 9.5 10.6 11.7 13.0 13.7 14.3 15.0 15.9 a! Excluding approximately 140 indigenes from low yielding rubber. Source: Department of Agriculture, Stock and Fisheries, Administration of the Territory of Papua and New Guinea, prepared for the mission.  Table 9 Oil Palm Products Program Actual Projected 196a/65 1965/66 1966/67 1967/68 1968/69 1969/70 1970/71 1971/72 1972/73 1973/74 1977/Tv 1. liew Plantings - '000 Acres Indigenous 1.1 1.8 2.2 2.0 1.7 0.9 0.3 Non-Indigenous 0.5 1.0 2.0 2.0 2.0 1.0 1.0 0.5 Total 0.5 2.1 3.8 E.2 4.0 2.7 1.9 0.8 2. Total Area - '000 Indiaenous . 2.4 5.1 7.1 8.8 9.7 10.0 Non-Ind;.genous o.5 1.5 3.5 5.5 7.5 8.5 9.5 10.0 Total 0.5 2.6 6.4 10.6 1L.6 17.3 19.2 20.0 3. Production - '000 Tons Indigenous Palm Oil 0.2 0.9 2.2 h.2 Palm Kernels 0.2 O.4 0.8 Non-Indigenous Palm Oil 0.3 1.1 2.8 5.6 8.6 Palm Kernels 0.1 0.2 o.6 1.1 1.7 Total: Palm Oil 0.3 1.3 3 .7 7.6 12.8 Palm Kernels 0.1 0.2 0.8 1.5 2.5 li. Value of Production - $A Indigenous Palm Oil 0.2 0.4 0.8 Palm Kernels 0.1 Non-Indigenous Palm Oil 0.1 0.1 0.5 1.0 1.5 Palm Kernels 0.1 0.2 Total Value 0.1 0.2 0.7 1.5 2.6 5. Employment - '030 Indigenes on Estate 9.1 0.3 0.5 0.7 1.1 1.2 1.3 1.5 Other Indi.genes 0.L 0.6 0.8 1.1 1.2 1.3 1.3 1.2 Total 0.5 0.9 1.3 1.8 2.3 2.5 2.6 2.7 Source: Deoartment of Agriculture, Stock and Fisheries, Adininistrat