Papua New Guinea - Rural Development Project

Document of C The World Bank FOR OFFICIAL USE ONLY FILE CoPY Report No. 1985-PNG PAPUA NEW GUINEA RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT June 22, 1978 Projects Department East Asia and 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.  CURRENCY EQUIVALENTS Currency Unit = Kina (K) K 1= $1.37 $1 = KO.73 K 1,000,000 = $1,370,000 WEIGHTS AND MEASURES Metric System 1 kilogram (kg) = 2.20 pounds 1 metric ton (1,000 kg) = 0.98 long tons 1 kilometer (km) = 0.62 miles 1 square kilometer = 100 ha 1 hectare (ha) = 2.47 acres GOVERNMENT OF PAPUA NEW GUINEA FISCAL YEAR January 1 - December 31  FOR OFFICAL US ONLY ABBREVIATIONS AFTSEMU - Agricultural Field Trials, Studies, Extension and Monitoring Unit APO - Aid Post Orderly ASL - Above sea level BTWG - Building Technology Working Group Council - Local government or village councils CSIRO - Commonwealth Scientific, Industrial Research Organization DCC - District Coordinating Committee DOIC - District Officer-in-Charge DPI - Department of Primary Industry DWS - Department of Works and Supply FCC - Field Communication Centers HAC - Highlands Agricultural College HEO - Health Extension Officer HQPCC - Headquarters Project Coordinating Committee HQPM - Headquarters Project Manager MCH - Maternal Child Health MP - Member of Parliament NEC - National Executive Council or Cabinet NHC - National Housing Commission NMB - National Mapping Bureau OBD - Office of Business Development PCC - Provincial Coordinating Committee PPCC - Provincial Project Coordinating Committee PPFC - Provincial Project Financial Controller PPM - Provincial Project Manager PNG - Papua New Guinea PNGBC - Papua New Guinea Banking Corporation PNGDB - Papua New Guinea Development Bank RDT - Rural Development Technician RIP - Rural Improvement Program SHDA - Southern Highlands Development Authority SHDC - Southern Highlands Development Corporation (Holdings) Pty. Ltd. SEMA - Southern Highlands Management Authority SHP - Southern Highlands Province UPNG - University of Papua New Guinea WP - Western Province 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 lank authorization.   PAPUA NEW GUINEA RURAL DEVELOPMENT PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. I. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. Project Background . . . . . . . . . . . . . . . . . . . . 1 B. Project Related Sectors .I.. . . . . . . . . . . . . . . I C. Government Policy ... . . . . . . . . . . . . . . . . . 6 II. THE PROJECT AREA . . . . . . . . . . . . . . . . . . . . . . . 8 III. PUBLIC ADMINISTRATION. 9 A. Introduction.. . . .9 B. Structure of Government .10 C. The Situation in the SHP . . . . . . . . . . . . . . . . . 11 IV. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . 13 A. Project Objectives ... . . . . . . . . . ....... . 13 B. Brief Description ... . . . . . . . . . ...... . . 14 C. Detailed Features . . . . . . . . . . . . . . . . . . . . 15 D. Project Cost .... . . . . . . . . . . ...... . . . 30 E. Financing .... . . . . . . . . . . . ...... . . . 32 F. Procurement . . . . . . . . . . . . . . . . . . . . . . . 33 G. Disbursement .... . . . . . . . . . . ...... . . . 34 V. PROJECT ORGANIZATION AND MANAGEMENT. . . . . . . . . . . . . . 35 A. The Project Organization and Management Concept . . . . . 35 B. The Southern Highlands Management Authority . . . . . . . 36 C. The Southern Highlands Development Corporation (Holdings) Pty. Ltd. . . . . . . . . . . . . . . . . . 37 D. The Tea and Coffee Enterprises . . . . . . . . . . . . . . 37 E. Extension Services ... . . . . . ..... . . . . . . . 38 F. Media Unit . . . . . . . . . . . . . . . . . . . . . . . . 38 G. Department of Works and Supply . . . . . . . . . . . . . . 38 H. The National Housing Commission . . . . . . . . . . . . . 39 I. The Executing Agencies ... . . . . ..... . . . . . . 39 This report is based on the findings of an appraisal mission that visited Papua New Guinea in September 1977, consisting of Messrs. M. J. McGarry (Bank), R. A. Cash, F. A. Connor, R. Frame, H. W. Mitchell, C. J. Redfern and Ms. G. Buchbinder (Consultants).  Page No. J. Operation and Maintenance . . . . . . . . . . . . . . . . 42 K. Policies for Sublending . . . . . . . . . . . . . . . . 42 L. Accounting and Auditing ................ . 42 M. Monitoring and Evaluation ..... . . . . . . . . . . . 43 VI. AGRICULTURAL PRODUCTION ...... . . .. . .. . . .. . . 43 A. Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . 43 B. Tea ............. ...... ..... .. . 44 C. Cardamom . . . . . . . . . . . . . . . . . . . . . . . . . 46 VII. MARKETS, PRICES AND FINANCIAL ANALYSIS . . . . . . . . . . . . 46 A. Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . 46 B. Tea . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 C. Cardamom . . . . . . . . . . . . . . . . . . . . . . . . . 47 D. Silk . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 VIII. BENEFITS AND JUSTIFICATION . . . . . . . . . . . . . . . . . . 48 A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . 48 B. Nutrition . . . . . . . . . . . . . . . . . . . . . . . 48 C. Quantified Benefits . . . . . . . . . . . . . . . . . . . 50 D. Risks . . . . . . . . . . . . . . . . . . . . . . . . . . 52 IX. AGREEMENTS REACHED AND RECOMMENDATIONS . .. . . . . . . . . . 52 ANNEXES 1. The Project Area - The Southern Highlands Province . . . . . . . 55 2. Areas Selected for Subsistence Studies . . . . . . . . . . . . . 62 3. Supporting Tables and Charts .66 4. Selected Documents and Data Available in the Project File . . . . 74 LIST OF SUPPORTING TABLES AND CHARTS (ANNEX NO. 3) Table No. 1. Exports of Major Commodities, FY73-77 . . . . . . . . . . . . . 66 2. Major Export Crops - Participation of Papua New Guineans and Expatriates, 1972-73 . . . . . . . . . . . . . . . . . . . . . 67 3. Economic Rate of Return Calculations on the Coffee Component . 68 4. Economic Rate of Return Calculations on the Tea Component . . 69 5. Economic Rate of Return Calculations for Cardamom and Silk Component . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6. Economic Analysis of the Poroma to Koroba Road . . . . . . . . . 71 7. Phasing of Project Costs . . . . . . . . . . . . . . . . . . . 72 8. Estimated Schedule of Disbursement . . . . . . . . . . . . . . . 73  Chart No. World Bank 18358 - Partial Structure of the Papua New Guinea Government World Bank 18362 - Provincial Government - Government Department Relationships World Bank 18395 - Project Organization Chart - Interrelations at National and Provincial Government Levels LIST OF MAPS IBRD 13269 - Southern Highlands - Population IBRD 13267 - Project Components - Roads, Electric Power Line, Tea and Coffee IBRD 13387 - Health Component IBRD 13388 - Education Component   I. BACKGROUND A. Project Background 1.01 The Government of Papua New Guinea (PNG) has requested an IDA credit to help rinance an integrated rural development project in its Southern Highlands Province (SHP). The SHP is one of the poorest and remotest provinces in PNG. Furthermore, it is probably one of the most backward areas of the world. Project components include nutrition, cash cropping (cardamoms, mulber- ries, coffee, tea), health, roads, electrification, and formal and nonformal education. This project would represent the first Bank Group effort aimed specifically at the rural poor in PNG. IDA assistance would be focused mainly on providing additional funds to enable the Government to implement the project, building the technical and administrative capability of the provincial agencies, and introducing a system for monitoring and evaluating the development impact of these initiatives. 1.02 The Government was responsible for the preparation with assistance from the IDA. The initiative and ideas for project preparation originated mostly at the provincial level and this is regarded as an important feature of project design and should greatly increase the likelihood of success. B. Project Related Sectors General 1.03 PNG became independent in 1975. It is a land of mountainous terrain, scattered over a mainland and several large and small islands. It has a land area of about 498,600 sq km, which is slightly larger than the Republic of the Philippines, and a population of about 2.8 million. Rugged mountains rising to over 4,500 m, thick forests, vast swamps and large rivers divide the country into many diverse ecological zones. These natural barriers have undoubtedly led to the wide cultural and linguistic diversity found among the people. The people of PNG are classified as Melanesians, but smaller admixtures of Micronesian stock occur around the Admiralty Islands. Because of the nature of the terrain, local groups are isolated from each other and a tremendous amount of diversity exists. 1.04 Some 2.4 million people or 86% of the PNG population live in rural areas where social services are generally poor, economic opportunities limited and productivity low. Unemployment as such is virtually nonexistent since being unemployed is not a viable option. The natural increase of the rural population is about 2.9% p.a. and the annual rate of migration to the towns and cities is about 1.5%. Consequently, the rural population is growing at about 1.4% per year, and the urban population at about 12% p.a., placing considerable demands on the public sector for urban infrastructure and services.  1.05 The total labor force in PNG is estimated at about 1.25 million, of which only 150,000-170,000, or 13%, are engaged in wage employment, including the public and private sectors and plantations. In 1976, there were about 353,000 people, including expatriates, or 28% of the work force, in monetized activities. Of these, about 185,000, or 52%, were in primary activities, which includes people who are involved partly in subsistence and partly in cash crop activities. Since the growth of population is about 2.9% per year, about 36,000 people enter the labor force yearly. Growth of wage employment is not expected to exceed 3% p.a. over the next decade and will cover less than 20% of the labor force by 1990. 1.06 GNP per capita in 1976 was estimated at about $490. The imputed per capita income of subsistence farmers, however, is only about $150. According to Bank estimates, about 75% of the rural population live in absolute poverty, i.e. per capita incomes of less than about $220. Agricultural Sector 1.07 The agricultural sector is the largest in the economy and has contributed about 30% of GDP in recent years, down from over 40% in the late 1960s. Another 20-25% of domestic output comes from one copper mine, the Bougainville Copper Ltd. opencast mine at Panguna in the North Solomons Province. Another 20-25% of domestic output is generated by the activities of the central government. The remaining 20-30% of output comes from manufacturing, wholesale and retail trade, hotels and tourism, finance and insurance, nongovernment construction and personal services. 1.08 Apart from forestry and fisheries, there are three subsectors within the agricultural sector: (a) subsistence agriculture; (b) smallholder cash crop production; and (c) plantations. The share of subsistence agriculture in the economy declined from about 27% of GDP in 1968 to about 17% in 1975. This does not mean that subsistence agricultural output has declined in absolute terms, only that it has declined in relative importance. It is estimated that about 70% of all families depend upon subsistence agriculture for a living. In many areas, however, cash enterprises produce coffee, cocoa, oil palm, cattle, poultry, and, in a few areas, vegetables alongside traditional subsistence activities such as pig farming and taro, sweet potato, yam and cassava production. There are 500 to 600 plantations, mostly in the northern half of the mainland and the larger islands, which are generally owned by expatriates but increasingly being acquired by locals. These plantations employ about 22% of the total wage earners in PNG, or 35,000 people. 1.09 The total value of commodity exports over the period FY73-77 has averaged K 385.1 million annually, of which about K 135.1 million, or 35%, originated in the agricultural sector (Annex 3, Table 1). The main agricul- tural exports are coffee, cocoa and copra. This is a remarkable change from the years prior to the commencement of copper exports from the North Solomons Province in 1970/71 when agricultural commodity exports accounted for up to 90% of the total value of exports. Expatriates play the dominant role in the production of nearly all important export crops, but in recent years Papua New Guinean producers have become increasingly significant (Annex 3, Table 2).  -3- Roads 1.10 Mainland PNG is divided geographically into three regions by a central elevated plateau and mountain chain (Highlands) which separate the low-lying alluvial coastal plains on the north coast from those on ^-he south. The Highlands comprise about half of the total area of the mainland and contain 40% of the population. Roads linking the Highlands to the north coast have been constructed in the last 30 years, but there is still no connection to the south coast and the capital at Port Moresby. 1.11 The total length of all classes of roads maintained by the Government and local government councils amounts to 19,537 km. Of this total, 7.5% is classed as highway and 87% as trunk, feeder and access roads. Much of the emphasis on road construction in past years has been directed at regions producing crops that are marketable overseas. The Highlands have benefitted from this in that expatriate landholders started growing coffee in the 1950s, and production from both plantations and smallholders became sufficiently important to develop the Highlands Highway from the Port of Lae on the north coast to Mendi in the SHP. The Bank helped finance part of this road improvement under two previous projects. 1.12 More recently, political pressures at the village level have shifted the Government's attention towards providing basic road access to remote communities, and current objectives regarding road construction in PNG are to: (a) construct a highway linking all main population centers; and (b) provide access roads to all areas and population centers for access to markets, and to facilitate access to them by government agencies in education, agriculture and health. Health Service 1.13 The number of hospitals, health centers, health subcenters and aid posts in PNG as of January 1974 was as follows: Health institution Government Church Total Hospital - general 18 2 20 - special 1 8 9 Health centers 97 40 137 Health subcenters 43 155 198 Aid posts 1,280 167 1,547 The structure of the health service is pyramidal; the hospital is on top with health centers and subcenters at the next level and aid posts at the base. Ideally, there should be no more than one hospital per province. At the next level the health center serves a population of a defined area which does not  -4 - overlap that of another health center. Each center should service a minimum population of 5,000 and a maximum of 20,000; the optimum rural size is considered to be 12,000. The present ratio of health centers to population is 1:22,400 (range 1:9,900-1:30,400). 1.14 Health centers differ from hospitals in that they provide for compre- hensive health services including health improvement. Health center staff have the additional job of patrolling, i.e. carrying out health center functions at a distance from the center. Each aid post, for example, should be visited every three months. Special patrols carry out immunization campaigns in rural areas. Centers are staffed by a health extension officer (HEO), who is the officer-in-charge, as well as by nurses and orderlies. 1.15 A health subcenter is an institution providing, within a health center area, a limited range of services, including the treatment of out- patients, health education, community health nursing, and obstetric care. Subcenters have some maternity beds. Staffing includes either nurses and orderlies, or orderlies alone. 1.16 The aid post is an institution providing base level comprehensive health service to a small defined population of from 500-3,000. Services provided include outpatient treatment, health education, and advice on environmental improvement. The aid post also cooperates with the health center in disease control activities and community health nursing. An aid post orderly (APO) is the only staff. At the present time, the ratio of aid posts to population is 1:1,547 (range 1:990-1:5,360). 1.17 The crude birth rate remains high in PNG at 44.6 while the crude death rate has gradually declined to 16, resulting in a population growth rate of about 2.9% p.a. 1.18 The disease pattern in PNG is typical of a developing country. Of the leading hospitalized conditions treated (73% of the total) for all age groups, 65% were due to infections. Over 66% of deaths were also due to infections. The major infectious diseases, as in many developing countries, are pneumonia and gastroenteritis. Typically, these diseases have the greatest impact on the very young and very old. Though in the past up to 50% of children in some areas may have died before reaching age 5, there has been a significant lowering of the under-5 death rate in recent years. The infant mortality rate is now estimated to be 89 with a 1-4 mortality rate of about 12 per year. This reduction in the under-5 mortality rate is probably the main factor in the fall of the crude death rate. 1.19 Per capita recurrent expenditure for health services at about $12 is high for a developing country and is supported to a considerable extent by overseas aid rather than being related to internal revenue. For 1977/78, the Department of Health will receive a recurrent budget of 7.8% of government expenditure. There are wide inequalities in the distribution of resources per capita between districts (K 3.16-16.21 in 1972/73) and between rural and urban areas (K 6.69-22.06 in 1972/73).  -5- Educational System 1.20 Formal education and training in PNG are divided into primary, secondary and tertiary (postsecondary and higher education) levels. (a) Primary Level 1.21 This level covers six years beginning at age seven. In 1976, 238,318 children were enrolled in about 1,800 community-based primary schools, i.e. 57% of 7-12 year olds, an increase of about 8,000 over the 1975 figure. The number of students enrolled in Grade I in 1976 was almost 52,000, or about 68% of 7 year old children. The long-standing, long-term objective is for universal primary education. The 1976-80 Education Plan proposes to expand the primary system so as to enroll 82% of the 7 year age group in Grade 1 by 1980 and 92% by 1985. Educational planners think this objective is possible despite a rapid growth in the school-age population, and they foresee it being achieved by an increase in the number of teachers trained and in the student/ teacher ratio. 1.22 If this target is realized, the imbalances in educational oppor- tunities between provinces and between the sexes would be largely eliminated. However, while near universal primary education can possibly be achieved in the more developed provinces by 1985, this goal is considered overly optimistic for the less developed highlands provinces. This is because of the highly dispersed settlement pattern in the highlands and because of the extreme reluctance of highlands parents to educate their daughters. Until this attitude changes, there is little hope that 92% of the total 7 year age group will be enrolled in these areas by 1985, although it is possible that a very high percentage of boys will be enrolled by that time. Thus, while it may be possible to equalize educational opportunity between provinces in the near future, it will be much more difficult to equalize opportunity by sex. (b) Secondary Level 1.23 Provincial high schools offer a four-year course in two stages of two years each. In 1976 there were 29,465 students enrolled in 80 high schools, about 12% of all children aged 13-16. The Grade 7 intake in 1975 represented 33.4% of the 1974 Grade 6 enrollments but only 16% of the whole 13-year age group. Forty percent of high school students are forced to leave school at the end of Grade 8. 1.24 There were seven new high schools opened in 1975, mainly in disadvan- taged provinces and mainly in temporary buildings. This rate of expansion is not likely to be sustained in the next few years, although 34 new schools have been approved for opening by 1980. The rationale for this expansion is both to increase Grade 7 enrollment to 18.3% of the 13 year old age group by 1980 and to equalize educational opportunity for children by location as well as by sex. In 1975 the proportion of 13 year olds enrolled in Grade 7 ranged from 6.9% in the Eastern Highlands Province to 48.9% in East New Britain. The imbalance in sex ratio is such that girls made up only 30% of Grade 7 enroll- ments in 1975. Although 70% of students are boarders, government policy is  - 6 - that new schools should be small day high schools for about 250 students rather than large boarding schools. C. Government Policy Problems 1.25 The central development problem facing the Government is the dual nature of the society that is emerging as economic and social change has come to a people that until this century was almost untouched by modern influences. This duality raises not just issues of equity and social justice but affects the very cohesion of the nation. In many ways the emergence of a dual society was inevitable, at least in the short run, once the country began the process of modernization and economic growth. How to contain the social pressures resulting from this duality while pursuing economic growth and modernization is the essence of the problem facing the Government. Government Objectives 1.26 The Government White Paper entitled National Development Strategy, published by the National Planning Office in October 1976, sets out the key priorities and objectives as follows: (a) Improved Distribution of Income. The White Paper states that a more equitable distribution of income is a government objective. It also explicitly states that the development strategy is not one of maximizing growth and recognizes that trade-offs may exist between the goals of maximizing growth of the total economy and bringing about a more equitable distribution of income. (b) Improved Regional Distribution of Social Services. Since access to social services (such as health and education) varies tremendously between provinces, the Government's objective is to increase relatively the level of social services in the provinces with the lowest levels. (c) Satisfaction of Basic Needs. Given the backwardness and poverty of PNG, the Government considers that direct action to attack the problems of malnutrition, illiteracy, sickness, inadequate clothing and poor housing is the only course of action likely to significantly contribute to a solution of these problems in this century. (d) National Integration. Given the problems of communications in PNG and the vital importance of further integrating such a diverse people politically, economically, socially and culturally, the Government places high priority on road construction and other means of communication. (e) Increasing the Monetary Sector. The long-term objective of the Government is for all the people to participate in the monetary economy.  -7- Government Strategies 1.27 The strategies proposed for attaining these objectives are as follows: (a) Nutrition Strategy. The Government White Paper states t at an important element of the National Expenditure Plan will be joint programs of extension and health education aimed at introducing nutritionally superior food crops and at educating rural people on more suitable diets, particularly for children. A position of nutrition planner has been established at the National Planning Office. An Interdepartmental Food and Nutrition Action Committee conducts nutrition activities at the provincial level. The Govern- ment gives the highest priority to the development of farming systems which increase or sustain subsistence production per head. With 70% of the population depending on subsistence farming for a living, the importance of these efforts is apparent. The Government is also committed to correcting and preventing deleterious nutritional practices as evidenced by its recent decision on baby bottles. It outlawed over-the-counter sale of baby bottles; doctors' prescriptions for bottles will be required in those instances in which breast feeding is not possible. (b) Rural Development Strategy. Directing a higher proportion of government expenditures to rural areas, especially the poorer provinces, is the principal government instrument to improve both the regional and interpersonal distribution of income, to focus directly on basic needs, and to further national integration. As central government activities generate 20-25% of domestic output, the allocation of government expenditures bears directly and power- fully on the distribution of income. Since in 1976 only about 28% of the work force were in monetized activities and only 13% in wage employment, price policy and such are not directly effective instruments to achieve government objectives for over 70% of the population. The key policies concerning rural development deal with coordination of extension services, which are now provided by specialists from a number of departments; diversification and improvement of agricultural production, with high priority given to food for domestic markets and improved nutrition; introduction of appropriate, usually labor-intensive technology; promotion of small-scale industries that are located in rural areas or support rural industry; development of means to mobilize local savings for local investment; redirection of the education system away from formal schooling towards nonformal and vocational training; and redistribution of health services toward rural areas. Recognizing the need for basic road communication, the Government places high priority on providing road access to all villages. (c) Self-employment Strategy. Growth of wage employment is likely to be well under 3% p.a. for the next decade and will cover less than 20% of the labor force by 1990. Therefore, the Government's development policies aim at the generation of additional opportunities for income earning through self-employment, especially in rural  -8 - areas. Cash cropping and livestock production are regarded as the principal areas with good opportunities and prospects. Bank Group Involvement in the Sector 1.28 There is basic agreement between the Government and the Bank on the problems of rural areas and the strategies for best coping with these problems. The role of the Bank Group to date has been a relatively minor one, but increased involvement is expected over the coming years. 1.29 Past lending in rural areas has been for roads, education, cash cropping and livestock production. While such involvement was, and still is, consistent with the Government's development strategy outlined above, the scope of the involvement needs to be broadened. The proposed project is a new departure for the Bank and would help the Government to make a comprehensive and coordinated attack on the problems of one province in a way consistent with national objectives. 1.30 Bank Group projects for the next few years will continue to assist the Government to improve the extension and credit system for agriculture, to further expand the communication system and to increase cash cropping, but are also likely to include more provincial integrated rural development projects such as the proposed project. II. THE PROJECT AREA 2.01 The project would be carried out in the SHP. The greater part of the province lies between 1,500 and 4,000 m above sea level (ASL) and consists of highland valleys and steep limestone ridges. Rainfall is high, the lowest mean annual amount being 2,450 mm and the highest 4,500 mm. In general, the soils of the SHP are infertile. Generally, areas below 1,800 m ASL are frost-free, but above 2,500 m frosts are common. The climate is characterized by a lack of seasonal contrast. The combination of high rainfall and poor soils greatly limits the agricultural potential of the area. Coffee, tea, cardamoms and mulberries appear to be the only promising cash crops. 2.02 The first recorded contact between the people of the SHP and the outside world occurred in 1922 and the next in 1935, when Australian patrols contacted parts of the area. Sustained contact, however, only occurred after World War II. 2.03 The people in the SHP do not live in villages but in scattered garden hamlets. They wear a minimum of clothing. Houses are constructed mainly of grass or pandanus leaves on a light timber frame with the roof close to the ground (to conserve warmth); the normally smoky atmosphere inside contributes to the prevalence of pneumonia and other respiratory diseases. The culture of the people prior to World War II was neolithic. 2.04 The population of the province is about 235,000 with an average family size of 6.3. It is estimated that about 90% of the provincial labor force (age 10 years and over) are involved in subsistence agriculture and home  duties, and only 4% in money raising activities (coffee, tea, cattle, cardamoms and silk) on a more or less permanent basis. The remaining 6% are either students or otherwise occupied. Most of the work on subsistence food cropping, pig rearing, child care, cooking, etc., is done by the women. The men clear new lands, hunt -nd engage in social activities. 2.06 The pattern of land tenure is generally the same throughout the SHP, the basic feature being that inheritance is patrimonial. Although clan lands have recognizable boundaries, the basis of land use is individual ownership. According to a knowledgeable Southern Highlander, some past attempts to inter- pret the land tenure system as group or communal ownership have been very mis- leading. 2.07 According to the 1971 census, some 8.1% of the population of the SHP over 10 years old were literate (national average 31%); given the recent introduction of formal education, most of these would have been in the 10-20 age group. Some 6.4% of those aged over 10 years could speak English and 5.6% Pidgin; the rest could speak one or more of the 16 indigenous languages or dialects of the province. Nationally, 57% of 7-12 year olds and about 14% of 13-17 year olds are enrolled in school, whereas in the SHP the respective figures are 44% and 6.5%. These are among the lowest rates in the country. Only about 15% of high school students in the SHP are female compared to a national figure of 29%. 2.08 The SHP ranks last nationally in per capita expenditure for health. In 1977, the per capita expenditure was about $4 and of this about 44% was spent on the Mendi Hospital to which relatively few people have effective access. A major problem is the high turnover of nursing staff because they wish to return to their home districts, usually on the coast. The primary health care level in the SHP is near the bottom nationally with an aid post/ population ratio of 1:2,060. Over 53% of the population live more than one hour's walk from the nearest aid post. Malnutrition (<80% of standard weight for age) occurs in 30-40% of children less than 5 years old and severe mal- nutrition (<60% of standard weight for age) ranges between 0.2 and 5.5%. There is a very close relationship between weight for age and mortality. For instance, data collected by the Pneumonia Research Center at Tari in the SHP show that while about 5% of children over the 80% line die before reaching 31 months, 11.3% of those between the 80-60% line die, and 50% of those under the 60% line die. In the SHP, about 203 children per 1,000 born die before reaching five years, which is the second highest rate among the 19 provinces of PNG (Annex 1). III. PUBLIC ADMINISTRATION A. Introduction 3.01 In October 1976, administrative policies regarding restructuring of the public service and the establishment of a system of provincial government were determined, and the Constitution was duly amended to provide them. This policy of decentralization will result in three levels of government being active in the province - the national, the provincial, and local government.  - 10 - B. Structure of Government 3.02 Central Government. PNG has a Westminister type of government. There is a National Parliament with 102 elected members, representing the legislative branch of government. The National Executive Council (or Cabinet) comprises the Prime Minister and 20 other members of ministerial rank. Reporting to the National Executive Council (NEC) are the National Planning Committee and a number of ad hoc committees. The judiciary consists of the Supreme Court and the National Court, and district, local and village courts. 3.03 Administration is carried out by means of a number of centralized government departments each headed by a secretary, the right-hand man of the minister. These departments are: the Prime Minister's; Public Services Commission; Decentralization; Education; Foreign Affairs and Trade; Police; Defense; Labor and Industry; Commerce; Lands and Environment; Finance; Health; Public Utilities; Primary Industry; Transport and Civil Aviation; Works and Supply; and Justice (World Bank Chart No. 18358). 3.04 Local Government, Area Authorities and Provincial Governments. Local government councils (councils) serve about 95% of the population. They provide the means whereby the people can participate in the planning and implementation of many government activities that affect their lives and welfare. The present local government system originated in ideas derived from Western society, though it is already broader in scope than its Western model. Area authorities were proclaimed under the Local Government Act and still exist in provinces that have not yet been granted provincial government. They draw their members from councils and representatives from noncouncil areas. Members of Parliament (MPs) from the province and the Provincial Commissioner are ex-officio, non- voting members. The area authorities' main functions are to advise the central government on development priorities in the province and to allocate Rural Improvement Program (RIP) funds to councils and other organizations. Provincial governments will soon supersede the area authorities in all provinces. 3.05 Decentralization of Government. The Government is now in process of modification by the decentralization of identified powers to provincial governments, a principle to which the central government is firmly committed. The Organic Law on Provincial Governments was passed by Parliament in March 1977, which implemented Part VIA (Provincial Government and Local Level Government) of the Constitution, and 8 out of 19 provinces had already established provincial governments by August 1977. This is in the process of being effected for the SHP. The basic principles underlying the decentra- lization process are that: there will be one national public service; there will be a minimum duplication of activities; there will be a clear division of responsibilities between national and provincial levels; and there will be delegation of financial powers in step with responsibilities. 3.06 The expected structure of the Southern Highlands Provincial Government is shown in World Bank Chart No. 18362.  - 11 - C. The Situation in the SHP 3.07 Provincial Government. Provincial Government was granted to the SHP under the Organic Law on Provincial Government by Charter dat-d March 17, 1978. The Constitution of the SHP came into effect on the same day and this provides that the Provincial Government consists of: (a) the Assembly, having all the law-making powers capable of being conferred on it by National Constitutional laws; and (b) the Cabinet, responsible for the Executive Government of the Province. The Assembly will consist of the Premier, who is elected directly by the people of the Province, members representing and elected by 26 constituencies, and not more than two appointed members. The Cabinet will consist of the Premier, the Deputy Premier and at least seven, but not more than nine, members of the Assembly nominated by the Premier to be Ministers and approved by the Assembly by an absolute majority vote. The Constitution provides that, until the first provincial elections are held, the Constituent Assembly for the SHP, which formulated the Constitution in accordance with the Organic Law, will have the powers and functions of the Provincial Assembly and the Executive Committee of the Constituent Assembly will have the powers and functions of the Provincial Cabinet. It is this interim arrangement that prevails in the SHP at present, but the first provincial elections must be held within two years to effect the full transition to elected and responsible provincial government. 3.08 Provincial Secretariat. The Constitution of the SHP establishes a Provincial Secretariat and allows for an Act of the Assembly to make provisions in respect of it. No such Act has been passed to date but the clear intention, as with all provincial governments, is that a small policy secretariat will be appointed directly by the Provincial Government to provide advice and assistance to the Provincial Assembly and the Provincial Cabinet. This is allowed for by the Organic Law on Provincial Government, which further provides that the National Government shall make an unconditional grant to each provincial government to cover the salaries and allowances of six staff members for the provincial secretariats. The Provincial Secretariat will be headed by the Provincial Secretary. 3.09 Public Service at Provincial Level. The Organic Law on Provincial Government limits the size of a provincial secretariat to six persons but provides that members of the National Public Service may be assigned to a provincial government as provincial administrative staff. This is consistent with the principle of maintaining one public service throughout the country to operate at both provincial and national levels. The intention is that there will be a department within the National Public Service for each province that has been granted provincial government and that the officers from various functional departments who work in that province will be trans- ferred to the "provincial department" for that province within the National Public Service. There will in due course thus be a Department of the Southern IIighlands which will have Divisions for Primary Industry, Business Development,  - 12 - Education, etc. This Department will be headed by the Administrative Secretary for the SHP. The Administrative Secretary will be a National Public Servant and will control his department in accordance with National Public Service legislation, but in matters of policy he will receive his directions from the Provincial Government. One of the main roles of the Administrative Secretary will be to coordinate the various parts of the public service in the province, and for this purpose the Provincial Government may decide to establish coordinating committees under his chairmanship. 3.10 Provincial Government Functions. The Organic Law on Provincial Government provides for a threefold division of matters which may be the subject of legislation: primarily provincial subjects on which only provincial governments may legislate, concurrent subjects on which both the National Government and provincial governments may legislate, and all other subjects on which only the National Government may legislate. Primarily provincial subjects are very limited in scope. Concurrent subjects cover a wide range but most of them are already extensively provided for by existing National Government legislation. For the time being, it is expected that most provinces, including the SHP, will refrain from enacting their own laws on most concurrent subjects, but administrative powers in these fields will be devolved upon provincial governments by way of delegations under the National Government legislation. The National Government is in the process of devolving powers in this way on provincial governments and at the same time transferring staff in the functional departments to the separate provincial departments. The timetable for this is as follows: Stage 1 - January 1, 1978: responsibility for Provincial Affairs, Primary Industry, Business Development and Education transferred. Stage 2 - July 1, 1978: responsibility for Health and Government Liaison transferred. Stage 3 - January 1, 1979: responsibility for the functions of other affected departments transferred. 3.11 District Organization. The province is divided into seven adminis- trative districts (Mendi, Tari, Koroba, Kagua, Ialibu, Pangia and Nipa) each containing on average two councils and controlled by a district officer-in- charge (DOIC) responsible for the maintenance of order, the development of the district, and the coordination of the activities of the officials within it. Every district is divided in turn into patrol post areas controlled by assistant district officers, and staffed by an assistant patrol officer, a medical assistant and an agricultural assistant. Technical departments and divisions frequently have officers stationed at district headquarters if necessary. 3.12 District Coordinating Committee. Each district has a District Coordinating Committee (DCC) which is chaired by the DOIC and whose members are the senior representatives of the various departments and divisions in the district. Its role is to discuss, propose and implement projects at village level.  - 13 - 3.13 Local Government Council Organization. There are 14 councils in the SHP and they are an important tier of government. According to the Local Government Act, a council is a body corporate by the name under which it is established with perpetual succession and a common seal and, subject to legislation, has power to acquire, hold, dispose of, mortgage or pledge property, to enter into contracts, to borrow money, to invest funds, to institute and defer actions, suits and other legal proceedings, and to do all other things necessary for the purposes of its functions and duties. Councils would play important roles in the proposed project. 3.14 Councils are required to make annual reports on their operations to the Minister for Decentralization for presentation to Parliament. 3.15 Southern Highlands Development Authority. In November, 1976, the SHDA was proclaimed and duly constituted under the provisions of the local government legislation. It is presently located in the provincial offices in Mendi. It is composed of nine members, six elected from the Provincial Govern- ment and three appointed by the Prime Minister. 3.16 The SHDA is the business arm of the Provincial Government. Its function is to enter into business on behalf of the Provincial Government and to exercise such other powers, functions, duties and responsibilities as may be required for the successful management of any business. It provides management services on a fee basis according to the type of service contract entered into. 3.17 As presently constituted it possesses a proclamation but no detailed charter defining its principal and ancillary objectives other than the very broad statements contained in its proclamation of formation. These statements are susceptible to wide interpretation, e.g. the provision of management services was interpreted as entering into business. It can invest in both major or minority equity without objective criteria since its board is restricted to public servants and there is no qualified, experienced professional manager or financial executive on its staff. For these reasons it would be replaced under the project by two new institutions: (a) the Southern Highlands Management Authority (SHMA), dedicated exclusively to the provision of management services and expected to be ultimately self-supporting from its fees revenue; and (b) the Southern Highlands Development Corporation (Holdings) Pty. Ltd. (SHDC) as an investment trust company wholly owned by the Provincial Government with power to invest and hold equity in new or existing businesses. The SHMA and the SHDC would play important roles in the proposed project. IV. THE PROJECT A. Project Obiectives 4.01 The proposed project would be aimed at helping to achieve the Government's objectives of a more equitable interregional distribution of income, improved regional distribution of social services, satisfaction of basic needs, national integration and increasing the percentage of the  - 14 - population in the monetary economy (para. 1.26). IDA participation is also expected to contribute to improvements in project design and implementation procedures and to a systematic monitoring of the projec.is impact. The project would represent the first step in what will clearly be a long process of developing the economy of the province and helping the Southern Highlanders to raise their present low standard of living to a substantially higher level. B. Brief Description 4.02 The project would include: (a) measures to improve the nutrition of the people by developing the knowledge and capability to effect improvements in the subsistence sector (field trials, training of extension staff and agricultural data collection); (b) establishment of about 1,280 ha of coffee, 850 ha of tea and the related processing and support services; (c) establishment of about 100 ha of cardamoms; (d) establishment of an infant sericulture industry in the SHP by culti- vating about 40 ha of mulberries on 400 smallholdings and providing the associated technical and processing facilities; (e) construction of 60 km of electricity transmission line mainly to supply power to the coffee mill and tea factory; (f) construction and staffing of a nursing school and in-service training complex, three health subcenters, and support for a data collection and epidemiology unit; (g) upgrading and construction of 138 km of main road running east west through the SHP, 40.5 km of feeder road serving existing and proposed tea blocks, and the installation of small bridges and culverts under about 900 km of minor feeder roads; (h) construction of two secondary schools and provision of materials to provincial primary and secondary schools and the teachers college; and (i) strengthening the staff devoted to nonformal education and providing materials and transport; an appropriate technologist would also be recruited and given the necessary workshop facilities and consultants as required.  - 15 - C. Detailed Features Nutrition/Subsistence Component 4.03 Not much is known about the subsistence agriculture of the region except that it is presently not meeting the nutritional requirements of some of the people, especially the children. Because the population is so precariously perched on the border between nutritional adequacy and malnutrition, great care has to be exercised in introducing change into the subsistence farming system. For this reason the nutrition component of the project would basically concentrate on generating the information needed to effect changes in food crop production conducive to improvements in the quality of the diet, and on training all the extension services' staff in communication techniques. 4.04 Provision would be made under this component of the project: (a) to conduct field trials and village demonstrations of new crops or crop varieties, rotations and husbandry methods; (b) to provide in-service training courses for the Division and Department of Primary Industry (DPI) extension workers in food crops improvement, using existing knowledge and new techniques; (c) to collate and review the extensive existing data and studies relevant to subsistence farming in the Highlands; (d) to collect data on land use, farm management, nutrition and demography required for monitoring and evaluating project results and for preparing further rural development projects; and (e) to construct and staff a media unit at Mendi to be run by the Office of Information to provide logistical and advisory support in communication techniques to all government extension services working in the province. 4.05 AFTSEMU. The project would staff, house and equip a new Agricultural Field Trials, Studies, Extension and Monitoring Unit (AFTSEMU). Six senior staff would be required for a total of 25 man-years; these positions would almost certainly have to be filled by expatriates during the project period. Broad terms of reference for the unit's work would be to carry out objectives (a), (b), (c) and (d) listed in para. 4.04. By December 31, 1981, the unit would be required to submit to the Provincial Project Coordinating Committee (PPCC) and to IDA a full written review of its work and knowledge gained up to that time; this would include draft recommendations on policies and future activities in the field of subsistence agriculture (and nutrition). Assurances to this effect were obtained at negotiations. 4.06 Training would be an important function of AFTSEMU. In addition to training the 70 DPI extension staff within the SHP, it is proposed to second  - 16 - students/graduates from the Highlands Agricultural College (HAC) at Mount Hagen and other training colleges to work with the unit for an average of three months per trainee. This would result in a large spin-off of knowledge and skills to personnel working in other provinces of PNG in addition to those working in the SHP. The project would provide for a total of 32 counterpart trainees to be attached to AFTSEMU for three months each during project years two to five. 4.07 The six internationally recruited staff needed to staff the AFTSEMU would be a Team Leader, two Food Crops Agronomists, Extension Training Officer, Cash Crop Agronomist and Monitoring and Evaluation Officer. It was assured during negotiations that prior to filling these positions, the Government would consult with IDA and give it time to comment on the qualifi- cations, terms of reference, and terms and conditions of employment of the persons proposed to fill these positions. 4.08 In a number of fields it would be more economical for AFTSEMU to employ short-term consultants than to maintain an expanded permanent study team. Provision for about eight man-months of short-term consultancies per year appears justified. Consultants would definitely be required by AFTSEMU in social science/anthropology, livestock, and land use analysis. Other fields to which consultancy funds could be allocated, with the approval of the Provin- cial Project Manager (PPM), would be: nutrition; food marketing/processing; soils; building technology; company law and business management (e.g. tea companies). It was assured during negotiations that prior to recruiting consultants, Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the consultants proposed. 4.09 The project would finance houses for the internationally recruited staff, a duplex for consultants, vehicles, equipment, training facilities, salaries and operating costs of AFTSEMU. 4.10 Only a very limited land use survey has been carried out in the province (in the Upper Mendi area) since a broad-scale survey carried out by the Commonwealth Scientific, Industrial Research Organization (CSIRO) in 1965. Better information on current land use is needed for extension work, and only periodic updating will permit accurate assessment of the extent of changes. Rather than attempt detailed surveys on the ground in a difficult country and on a subject that can easily excite local suspicions, the project would provide for five sample areas covering a total of about 500 sq km to be flown and 1:5,000 orthophoto maps to be produced. Such mapping has not previously been carried out in the province although certain parts were flown and mapped at 1:50,000 in 1959 and 1973. Flying would be carried out on contract, super- vised by the National Mapping Bureau (NMB) who have had previous experience with orthophoto methods and are equipped to produce the maps. NMB estimates cost for flying, ground control, triangulation and map production for 500 sq km in five areas of the SHP at about $62,000. Land use interpretation and a written report would probably have to be provided by a consultant land use analyst. Background and justification for selection of the five areas proposed for orthophoto mapping and land use analysis are given in Annex 2.  - 17 - 4.11 Media Unit. Extension work in the SHP in all fields would benefit from access to better communication techniques and materials. Production facilities are presently located in seven Field Communication Centers (FCC) throughout PNG and are operated by the Office of Information of the Ministry of Information and Broadcasting, with the nearest one to the SHP being at Mount Hagen. Some use is already made of the Mount Hagen FCC by Southern Highlands staff, but its location in another province restricts its usefulness. The Government recently opened a local radio station at Mendi, but so far there is a complete lack of suitable material either in pidgin or local languages to support extension work. National government policy recognizes the importance of rural-oriented communication services in promoting rural development. The Government has therefore adopted the policy of establishing media units (FCCs) in all 19 provinces as finance permits. 4.12 It is proposed that a media unit of the standard FCC-type be estab- lished at the provincial headquarters in Mendi by the second year of the project. This unit would have facilities for offset printing, photographic reproduction and audio-visual operations, as well as providing communication planning expertise to determine the best use of these media in conjunction with departmental extension programs. The unit would be operated and staffed by the Government Liaison Division of the Office of Information: this would ensure continuity after the end of the project period. 4.13 The project would provide an office building, equipment, salaries for two staff and operating expenses for four years since the unit would not need to be operational for the project until the second year. Included in project costs are salaries for an expatriate Media Unit Director, to be replaced by a national after two years, and a national Field Officer. The Government establishment already provides for a Liaison Officer and an Assistant Liaison Officer to be stationed at Mendi. A government assurance was obtained at negotiations that these posts would be filled by suitably trained staff to ensure the proper operation of the media unit; and that prior to recruiting a Media Unit Director, the Government would consult with IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the person proposed to fill this position. Cash Crops 4.14 The poor soils of the SHP, coupled with the cool, wet climate and high transport costs, severely limits the range of crops presently suitable for cash cropping. Coffee, tea and, to a much lesser extent, cardamom and mulberry are the only cash crops that at present seem to offer expansion possibilities. Cash cropping in the SHP is a very recent experience: cardamom was introduced in about 1974, tea and mulberry in about 1969, and coffee in the 1960s. Many efforts to promote cash cropping among subsistence farmers (smallholders) have failed in the SHP. For instance, pepper, pyrethrum and cinchona were tried and failed. In neighboring provinces, however, smallholder coffee has prospered following the establishment of successful commercial operations which demonstrated to the local people how to grow the crop.  - 18 - 4.15 The council-owned coffee blocks in this proposed project would serve the demonstration function for subsistence farmers in the SHP and attract them into coffee production. A Smallholder Coffee Extension Specia- list would be recruited to help the DPI extension staff avail fully of the demonstration effect. In this way, it is hoped to repeat the successful experience of neighboring provinces where 70% of coffee is now produced by smallholders. 4.16 In order to avoid establishing a provincial economy totally depen- dent on coffee, the first steps would also be taken to establish a tea industry in the SHP. The long-term expectation is that this industry too would be predominantly a smallholder industry. The initial step into tea production, however, is generally a vertically integrated operation based on estate production, because before planting tea one needs an assured factory outlet, and before building the factory one needs a guaranteed supply of green leaf. In the proposed project, each of the tea blocks would be owned by a company in which the SHDC (para. 3.17) would be the major shareholder. The tea factory would be owned by the SHDC with possibly a private tea company as a partner. Smallholder tea production would be encouraged by the DPI extension service concurrently with the block development under this project, but a major expansion in smallholder tea production is not expected to occur until later, under a possible phase two project. 4.17 The provincial government and councils would also derive much needed revenues from these commercial ventures. Such revenues are essential to improving the welfare of the mass of the people by increasing the level of services the province can sustain, e.g. primary education, some aspects of health, roads. 4.18 The SHMA would be established under the project as a purely manage- ment company and would derive its income from management and technical service fees (para. 3.17). It would manage the council coffee and cardamom blocks, the coffee mill, the tea blocks and the tea factory. All coffee, tea, and other minor cash crop development under this project would be on a commercial basis. This means that the owners of enterprises would put up equity, and loan funds would be obtained from the Papua New Guinea Development Bank (PNGDB) and the Papua New Guinea Banking Corporation (PNGBC). 4.19 Coffee. This component would: (a) extend the 350 ha area of the ten existing local council coffee blocks by 50 ha in total and establish a further five council blocks with an average size of 50 ha: the total area to be planted would be 300 ha (IBRD Map No. 13267); (b) establish 45 group coffee blocks with an average size of 10 ha, the total area to be planted being 450 ha; the blocks would be owned by some or all of the members of the clan that owned the particular pieces of land developed;  - 19 - (c) establish approximately a further 530 ha of smallholder coffee on about 2,500 holdings, thus increasing the area of smallholder coffee in the SHP from about 500 ha to 1,030 ha; (d) build a coffee mill in the SHP for hulling parchment cilfee produced by the council blocks, group blocks, smallholders and the private estate; (e) recruit a Coffee and Cardamom Supervisor to the DPI staff to oversee the overall development of coffee in the western part of the province and also to supervise the cardamom component; and (f) recruit a Coffee Extension Specialist to work with smallholders. 4.20 The coffee component would increase the number of council coffee blocks to 15, which would be owned by 12 councils. Of the two council areas not involved, one, Erave, has the only privately owned coffee plantation in the province, and the other, Kutubu, is in a very isolated area too low for growing arabica coffee. Cardamom is deemed a more suitable crop in the Kutubu area (Pimaga site) than robusta coffee, mainly because the area relies solely on air transport and, thus, the higher value for weight cardamom has the advantage. 4.21 In all except one case, council coffee blocks would be on land purchased by the central government and leased on a 99-year term to the council or a company owned by the council. The one area of land not pur- chased has been leased by the central government from its owners for 25 years from 1976 and released to the council concerned. 4.22 Each group coffee block would be established on land owned by the business group formed by some or all of the members of the clan or subclan that owns the land. They would probably be established around the council blocks and be fairly evenly distributed throughout the areas where coffee would be grown. About 30 business associations of various kinds have been established by groups of Southern Highlanders in recent years. 4.23 The 15 council blocks would act as "nucleus estates" around which smallholder coffee development would be encouraged, both on an individual and on a group basis. The blocks would act as centers for demonstration, pro- duction of seedlings, training of laborers who would later become producers and collection points for parchment coffee. The 530 ha of smallholder coffee proposed under this project would be produced by about 2,500 smallholders with an average lot of around 0.2 ha. Though very difficult to estimate, it is thought likely that the 450 ha of group coffee blocks proposed would be owned by about 1,800 smallholders. The Coffee Extension Specialist would aid these developments. It was assured during negotiations that, prior to recruiting the Coffee Extension Specialist and the Coffee and Cardamom Super- visor, the Government would consult with IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the persons proposed for these positions.  - 20 - 4.24 The coffee mill would be built in 1978, the first year of this project, and would process all the parchment coffee produced in the SHP, regardless of source. If the coffee mill were to be delayed past 1978, the Coffee Industry Board fears that many small, inefficient mills might be built in the SHP instead of the one proposed. 4.25 Tea. This component would: (a) establish five tea blocks on government-owned land in the four eastern council areas of the SHP. Each block would be owned by a company in which the SHDC would be the major shareholder. Minor shareholders may include the local council and local people (including the previous clan owners of the land), either as groups or as individuals. The area under tea blocks in the SHP at present is about 140 ha. The total area that would be planted to tea blocks under this project would be about 800 ha (IBRD Map No. 13267); (b) establish on 125 smallholdings about 50 ha of tea (present area about 20 ha); (c) build a tea factory; and (d) pave and upgrade some 40.5 km of feeder roads serving the tea blocks to Access Class 2 standard. 4.26 The five tea blocks would average about 160 ha each and would be developed at Inambu (Iaria), Apenda, Ita, Lamane and at one other site to be selected. These blocks would serve as "nucleus estates" around which small- holder tea development would be encouraged. The blocks would be used as centers for demonstration, production of planting material and purchase of green leaf from the smallholder "outgrowers". 4.27 The 50 ha of smallholder tea would be produced by about 125 small- holders at convenient points for leaf collection near the blocks or along the roads to the tea factory. The amount of smallholder tea to be established during the five-year project period would be small; however, if the tea component is successful and tea growing becomes more popular with the small- holders, the area of smallholder tea could easily be expanded once the nursery program for the blocks is completed at the end of the third project year. Funds would not be needed for additional infrastructure and staff. 4.28 It is proposed that the factory would be constructed in 1981 but would only start operating in 1982 when the estimated annual output would be 686 tons of made tea, reaching maximum production of 1,886 tons p.a. in 1986. This is the minimum production needed to justify building a tea factory in the SHP. As leaf production continues throughout the year in PNG, with only minor seasonal variation, the factory would operate year-round.  - 21 - 4.29 Minor Cash Enterprises - Cardamoms and Silk. This component would provide for: (a) the establishment of a 50 ha council block at Erave, and 25 ha cou_.il blocks at Pimaga and Komo, for the production of cardamoms; (b) the encouragement of cardamom production by smallholders in the vicinity of the cardamom council blocks; and (c) the cultivation of 40 ha of mulberries by 400 smallholders in eight locations in the SHP, and the associated developments necessary to produce silk. 4.30 Cardamom. The cardamom blocks would provide revenue for the two councils (Erave and Pimaga) that would not have coffee blocks in the project. Cardamom would provide a high-value product that is worth the high cost of air transport from these three remote areas where road access is either non- existent or very difficult (IBRD Map No. 13267). 4.31 Cardamom is presently being grown at Erave at the DPI center on smallholdings and on a coffee estate. There is also a plot of cardamom interplanted under banana trees at Pimaga. The climatic conditions make Erave, Pimaga and Komo suitable for cardamoms. The DPI extension staff would encourage smallholders in the vicinity of these council blocks to also grow cardamoms. 4.32 Silk. It is proposed that 8 ha of mulberries be developed annually during the five-year project development period. These 40 ha would be owned by about 400 families where each family would have 0.1 ha. The food crop for silk, mulberry, can grow on marginal land which would be unsuitable for the cultivation of other plantation crops. It is also fast growing and production can be achieved within eight months of planting. 4.33 A silk subcenter would be built in each of the eight areas in the SHP where sericulture would be encouraged (IBRD Map No. 13267). The silk subcenter would receive eggs from the Kagamuga Silk Center, hatch them and rear the larvae to the third instar. The larvae would be fed with leaves from a communal mulberry plot, which would be established at each subcenter. The third stage larvae would be distributed to smallholders who would raise them to the stage where they would produce cocoons, which would then be sold to the silk subcenter. A Silkworm Pathologist and a Silk Fiber Technologist would each be recruited for five years under this project. It was assured during negotiations that prior to filling these posts, the Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the persons proposed to fill these posts.  - 22 - Electrification 4.34 The electrification component of this project would consist of extending the Yonkie transmission line about 60 km from Mount Hagen to Kaupena, the site of the coffee and tea factories being constructed under this project. The initial capacity of the transmission line would be 22 kVA, but provision would be made for the later addition of a 66 kVA line (IBRD Map No. 13267). Health 4.35 This component would support: (a) construction and operation of a nursing school and in-service training complex; (b) construction and operation of health subcenters in Kagua and Ialibu Districts; and (c) support for a data collection and epidemiology unit. 4.36 Nurse and In-service Training. In discussing nurses' training the National Health Plan states that "despite the lower level of education of entrants, priority will be given to Highland districts in the opening of new government schools, with Mendi being given first priority." It is proposed that a training complex be constructed adjacent to the Mendi Hospital. The complex would consist of male and female dormitories, messing facilities, classrooms, administrative block, tutor and ancillary staff accommodation, and security fencing for the female nurse area. Accommodation would be provided for nurses, nurse's aides, staff and students for in-service training. Teaching demonstration material and messing facilities would be shared by the various staff categories. The complex is expected to have the capacity to train 30 first-year nurses, 25 second-year nurses, 20 third-year nurses and 30 nurse's aides, and be able to accommodate 12 male and 12 female in-service training personnel at any one time. Based on present dropout rates, 15 graduates per year would be expected under the proposal. The nursing school would serve both SHP and Western Province (WP). There is no nursing school in WP and Mendi would be the closest area for study. 4.37 Technical assistance in the form of specialists in nursing education (school principal) and health training are also required. The principal would assist in assembling the nursing school staff and be responsible for preparing the curriculum and school policy. The provincial health training officer - ideally a medical officer - would be responsible for design and implementation of an in-service training program for all staff, particularly field-oriented staff. This officer would convene a training committee of health section heads and the principal tutor of the nurse training school to assist in course content and methodology. If the nursing principal or the health training officer are expatriates, a PNG counterpart would assume primary responsibility after 3-4 years. It was assured during negotiations that prior to filling the post  - 23 - of principal of the nurse training school and health training officer, the Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the persons proposed to fill these posts. 4.38 The justification for the training complex rests prt.Larily on projected need for more nurses and the lack of health training facilities in SHP. If present staff is not expanded by 1981, there would be a shortage of 114 nurses in SHP. In WP there would be a shortage of 44 nurses by 1981. 4.39 Compounding the situation is the implication of localization. The national nurse work force is not a particularly mobile one. There is reluc- tance on the part of coastal domiciled nurses to accept rural postings, especially in the Highlands. At present, only 30% of SHP nurses are in fact Southern Highlanders and there are constant requests from nurses for transfers back to coastal areas. Unfortunately, the capacity of coastal nurse training schools far exceeds the capacity of Highland schools. Nor is it feasible to redress the area imbalance by increasing Highland intakes at coastal schools. SHP is conservative and parents are often unwilling to release girls for training at coastal centers. 4.40 Provincial nurse's aide training (about 30 per year) is currently undertaken at the Mendi Hospital. The training functions under makeshift conditions which places an unreasonable burden on both staff and trainees. No accommodation is provided and trainees are boarded with missions and friends. No classroom is available and the staff dining room at the hospital is used for all lectures. There is no tutor sister and the hospital matron undertakes training in her spare time. Training at the moment is hospital- oriented. 4.41 The field staff, particularly APOs and community nurses, are often given limited in-service training. Most basic training has been done outside the province at centers that often lack relevance to SHP field situations. Various health improvement sections within the province have attempted in-service training, but to date many of these programs have been planned and presented in isolation from other sections. Heavy work loads by supervisory staff have prevented continuous attention being given to staff training. HEOs are supposed to visit APOs on a regular basis; however, the HEO has numerous responsibilities and the APOs may only be seen in the field every three to six months. In a recent evaluation of the aid post orderly system in the SHP, a medical anthropologist noted that possibly the most important improvement to be made in the system was the provision of frequent feedback through in-service training. In-service training (about two weeks per year) would give the APOs clear instructions on how and why they should modify or continue their activities. Frequent supervisory visits would also help to achieve this. It must be emphasized that the APO is the only health worker in frequent contact with villagers.  - 24 - 4.42 Health Subcenters in Kagua and Ialibu Districts. It is proposed that health subcenters be built in the Sumi and Sumbura areas of Kagua and the Kisenapoi area of Ialibu. At each subcenter a block (standard design), a ward, two staff houses and one utility block would be required. Two trained nurses and four nurse's aides would staff each subcenter. Kagua Health Center, serving a population of over 25,000, currently has three qualified sisters (1:8,480). Cases of late obstructed labor occur more frequently in Kagua than other areas. Ialibu Health Center, serving a population of 24,400, also has only three sisters (1:8,140). The national policy for staffing is estimated at one nurse per 3,000 accessible population. The population of both these areas is often physically difficult to reach. Adequate distribution of physical services is an important prelude to improving accessibility and utilization of services (IBRD Map No. 13387). 4.43 The Data Collection and Epidemiology Unit. It is proposed that support be given to the data collection system of the Pneumonia Research Unit at Tari. This would mean providing support for field staff, a vehicle, a director for the unit and funds for analysis of data. The unit was established in 1970 with the aims of: (a) defining the problems of respiratory infection; (b) evaluating a pneumococcal vaccine; and (c) determining the pattern and causes of mortality or morbidity. 4.44 The present state of the data is that records have been coded, translated to punch cards and stored on magnetic tape. Analysis is now being conducted at the University of Sydney Computer Center by Dr. Ian Riley, the original director of the project. In brief, the established files are: (a) demographic data 1972-74 - biweekly morbidity on 12,250 persons; (b) demo- graphic data 1974 - similar information from the mortality area with listing of 13,383 persons; (c) mortality information - details of 2,100 deaths from 1970-76; (d) acute respiratory diseases 1971-74; (e) chronic (nontuberculosis) lung disease for 1971 and 1974; (f) retrospective fertility for 774 women 1975/76; (g) social monitoring in 1975/76 of a random sample of 1,594 persons - includes income, cash cropping, contact with news media, housing, religion, education, and knowledge, attitude and practice of contraception; and (h) nutrition - retrospective analysis of maternal infant welfare records 1965-74. 4.45 Present funding of the unit from national and provincial budgets expired in May 1978. The body of baseline data on births, deaths, migratory patterns, wealth, nutritional status, etc., affords a unique oppor- tunity to evaluate the impact of the economic programs upon these parameters. Support should continue for the unit and a director (an epidemiologist or demographer). It was assured during negotiations that prior to filling the post of director of the unit, the Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the person proposed to fill the post. Ideally, a coordinating parent body should be found for the unit. Such a group might be composed of members of the Institute for Medical Research in Goroka and representatives from the Provincial Health Office and AFTSEMU.  - 25 - Roads 4.46 This project would support: (a) up--.ading and construction of 138 km of main road between Poroma and Koroba: (b) paving and upgrading of 40.5 km of feeder roads serving existing and proposed tea blocks; and (c) installing small bridges and culverts under about 900 km of minor feeder roads (IBRD Map No. 13267). 4.47 Poroma to Koroba Road. A section by section costing has been carried out and is as follows: km $'000 Poroma to Nembi Escarpment 4.2 325 Nembi Escarpment 4.0 1,094 Nembi Escarpment to Nipa 15.1 1,049 Nipa to Margarima 26.5 1,523 Margarima to Tari 46.0 1,697 Tari to Koroba 42.0 2,161 Subtotal 137.8 7,849 Engineering supervision (8%) 628 Base cost estimate 8,477 4.48 Design has been carried out in accordance with the standards for Rural Class III between Poroma and Margarima and Access Class I between l4argarima and Koroba. 4.49 Final design has been carried out for the road between Poroma and the Nembi Escarpment. Construction is actually complete for the first 6 km and an estimate of cost has been prepared based on final quantities for the remaining length of road. 4.50 The Nembi Escarpment is the most difficult part of the road. A deviation was originally planned but found to be impractical. The existing alignment has been surveyed and a preliminary design undertaken to improve tight curves and gradient. Cost estimates have been based on the above preliminary design giving preliminary quantities. The steep grades on the Nembi Escarpment would be sealed to improve traction. 4.51 On the Nembi Escarpment to Nipa section, preliminary survey has been carried out with the exception of 10.2 km where a final center line survey has been undertaken. Two kilometers of final design has been carried out and used as a basis to provide a linear rate for estimating, since the terrain traversed is similar for the total length of this section.  - 26 - 4.52 For the Nipa to Margarima section, contours were prepared from con- trolled aerial photography giving an accuracy of + 1 m. These have been used to prepare a longitudinal section for grading together with cross sections for estimating quantities. The preliminary design has been rigorously checked in the field. Cost estimates are based on this design procedure. 4.53 The most difficult parts of the road between Margarima and Koroba, which is that part going through the Tari Gap, have fortunately already been built. For instance, the 33 km from Teigo to Tigibi traversing the Gap requires only minor earthworks to improve sight distance on corners and to provide extra passing areas. Only preliminary design has been completed for the remaining parts of the Margarima to Koroba road. 4.54 Three small bridges are required to be constructed between Poroma and Margarima. Of the nine existing bridges between Margarima and Tari, only one needs to be replaced but three require strengthening. From Tari to Koroba there are five existing bridges, three of which are wooden and would be replaced. The other two would need strengthening, and there is a possibility one would need relocating. 4.55 A full materials investigation has been undertaken for the entire road from Poroma to Koroba and preliminary indications are that there is no shortage of pavement material anywhere along the route. 4.56 Feeder Roads. This component would involve minor earthworks to improve sight distance, the provision of an all weather pavement to carry a greater number of vehicles and, where required, bridges and culverts. These roads would give access to tea blocks. While a minimum standard of Access Glass 2 is desirable, this would not always be possible because it would entail excessive costs for many sections of the roads. 4.57 Culvert and Bridge Component. This component envisages provision of funds for councils to procure and install culverts and bridges for existing feeder roads not serving tea producing areas. This would allow the annual K 500/km grant for road maintenance to be fully employed on repairs of the road surface rather than on repair of inadequate drainage structures. In some areas where drainage is a problem, 25-50% of the maintenance funds and effort are directed towards repair of log bridges. The result of this work would be to improve village communications and facilitate access by extension service officers. Formal Education Component 4.58 This component would provide for: (a) construction and operation of two new secondary schools; (b) recruitment of an Agricultural Lecturer at Dauli Teachers College; (c) provision of materials, supplies and equipment to community schools, high schools and the Dauli Teachers College.  - 27 - 4.59 Two new high schools would be built, one at Koroba and the other at Pangia (IBRD Map No. 13388). The construction of the Koroba high school would begin in 1979 and take four years to complete. Construction of the Pangia school would begin in 1980 and would also take four years. 4.60 An Agricultural Lecturer at Dauli Teachers College would be hired into a permanently established position; this person would be a national officer and would teach preservice and in-service students agricultural practices relevant and useful in the community school situation. 4.61 Community schools, high schools and the Dauli Teachers College would be supplied with materials, supplies and equipment to be used to demonstrate community development projects (mostly concerned with improved subsistence and nutrition) as follows: (a) Community Schools. One hundred and twenty community schools would each be provided with materials, etc., worth a total amount of K 500 over the project period. These tool kits would contain the following items: gardening equipment, spades and bush knives; cooking equipment; equipment for a poultry project; and practical books and teaching materials. (b) High Schools. Seven high schools would each be provided with materials, etc., worth a total of K 3,000 over the project period. These tool kits would contain the following items: ovens and other village type cooking facilities; food processing equipment; poultry and other livestock raising equipment; gardening tools and seeds; and materials necessary to develop practical skills and village level technology. (c) Dauli Teachers College. The Dauli Teachers College would be supplied with materials, etc., worth K 4,000 over the project period. Its tool kit would contain the following items: gardening tools and seeds; food processing equipment; poultry and other livestock raising equipment; and village level technology equipment. Different schools would probably select different projects and would thus use their equipment allocations in various ways, subject to the approval of the provincial education board. 4.62 The Dauli Teachers College would be provided with hired transport for field trips for 50 days p.a. and high schools for 25 days p.a., as follows: (a) High Schools. Transport for a community involvement program would initially be on a pilot project basis, but if successful, all schools would be phased in. Hire of transport for staff and student programmed involvement in community projects of K 500 p.a. per school. This is the equivalent of 25 hire days p.a. of a long-wheel base, four-wheel drive vehicle.  - 28 - (b) Dauli Teachers College. Transport for practical field trips by students and the Agricultural Lecturer would amount to K 1,000 p.a., equivalent to 50 days hire p.a. The money would be used to hire a variety of vehicles depending on the destination, number of students and nature of the visit. Nonformal Education 4.63 The adult education staff in the SHP would add to its present staff of one Provincial Adult Education Officer: (a) one Provincial Adult Education Coordinator; and (b) seven District Adult Education Officers. The Adult Education Coordinator would be internationally recruited and would be hired for a period of three years. Part of his job would be to train the Provincial Adult Education Officer to assume his duties and to replace him. It was assured during negotiations that prior to filling the post for Adult Education Coordinator, the Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the person proposed to fill the position. 4.64 District Adult Education Officers would be based at each of the seven district centers. In order for these personnel to adequately carry out their tasks, further inputs in terms of transport, accommodation and travel funds, materials, funds for training courses for villagers and allowances for selected village level motivators would be necessary. 4.65 These officers are to be provided with transport in the form of motorcycles and four-wheel drive vehicles. Two vehicles would be allocated (one at Mendi and one at Tari) as well as six trail-model motorcycles once all the district level officers are employed. Additional funds for accommoda- tion and travel would be necessary so that the officers could travel within their districts and attend provincial level workshops and meetings. Learning materials (including literacy primers, books, pamphlets, etc., in various languages) would be needed to assist both literacy and practical education activities. Other practical materials required include tools, equipment, etc., which would be used by various practical training centers and community group projects. 4.66 Short training courses would be conducted for community leaders and other people nominated by their communities. These courses would focus attention on local community development problems and practical possibilities for improving village life. Certain part-time instructors (e.g. literacy training teachers and field extension assistants) not based in their own villages would require allowances. Such people would play a major role in assisting and supplementing the work of the District Adult Education Officers. 4.67 The adult education officers would assist in involving formal education institutions (community schools, high schools and the teachers college) in the process of village level development. These institutions can contribute by educating students to community development needs and by exercising a more direct influence within the local community.  - 29 - 4.68 Vocational centers have the stated aim of preparing trainees for life in the village situation. Their curricula and programs are more varied and flexible than those of the "mainline system." There have been problems relating to follow-up assistance for ex-trainees and the fact that most of thl trainees are Grade 6 leavers who only do a one-year course. At present the center at Pangia is one of five in the country testing a pilot program in community education as part of the Bank's First Education Project. The center is to become more extension-oriented, more responsive to local needs, and better able to provide training in the village and to adults as well as school leavers. This new focus only started in early 1977 and it is as yet too early to evaluate its results; should they be favorable, it is proposed that the other three vocational centers in the province start to reorient their emphasis and programs in a similar fashion. In order to do this it would be necessary for: (a) vocational center staff to become involved in the provincial in-service program; in addition special training sessions would be necessary to enable staff to learn from Pangia's experience and also from that of adult education officers; (b) four-wheel drive vehicles to be supplied to vocational centers to enable field extension and training programs to be implemented; and (c) inputs to be made available for practical activities (gardening, chickens, pigs, etc.) at vocational centers with emphasis on those that can fulfill community and extension needs. 4.69 Appropriate Technologist. A specialist in the field of practical application of small-scale technology would be recruited for a period of two years by the Office of Business Development (OBD) of the Department of Commerce. He would be oriented primarily towards developing both relevant domestic techno- logies and those that could have small-scale commercial application. This specialist would be essentially a practical multipurpose tradesman/craftsman who could work alongside village people and groups to determine how appropriate a particular technology may be. He would be required to assist with existing activities and individuals throughout the province (e.g. vocational centers and missions) and would also work closely with adult education officers. 4.70 Short-term consultancies (e.g. for such activities as bakeries, shoe repair, etc.) would be required in various fields by the appropriate technologist to provide expertise not available in the province. As various technologies are identified that seem to have potential for improving the quality of village life and/or increasing the income-earning opportunities available to village people, the specialists would be recruited to work directly with the interested local person or, as appropriate, with the provincial extension work force. It was assured during negotiations that prior to recruiting the appropriate technologist the Government would consult IDA and give it time to comment on the qualifications, terms of reference, and terms and conditions of employment of the persons proposed to fill the posts.  - 30 - 4.71 Workshop facilities already constructed in Mendi would be used as a site for the design and manufacture of various devices such as stoves, brick making presses and small hydraulic pumps. National assistants, recruited from the ranks of technical school graduates or from the private sector, would work with the specialist and carry on the program after he leaves. Provincial Project Management 4.72 In addition to the manpower inputs for AFTSEMU (para. 4.05, 4.08 and 4.13), smallholder coffee (para. 4.19), health (paras. 4.37 and 4.45), and nonformal education (paras. 4.63, 4.69 and 4.70), the project would finance additional technical and administrative assistance. This would consist of the following, (a) the PPM, (b) the Provincial Project Financial Controller (PPFC), and (c) stenotypist, clerk and accounting machinist to be attached to the provincial management unit at Mendi. The cost of this provincial management unit would be about $600,000 over about six years. D. Project Cost 4.73 Total project costs are estimated at $32.2 million, of which $15.5 million, or 48%, represents foreign exchange. Unit prices for equipment, materials and supplies, salaries and civil works are based on recent quotations received by the agencies responsible for implementing the various components. All costs are indexed to a common level, April 1978, and this is the base level for the project. Physical contingencies of 10% have been added to the base cost estimates in the noncommercial activities (otherwise physical contingencies are incorporated in the base cost estimates). Costs due to expected price increases over the implementation period amount to about 19% of total base cost plus physical contingencies, assuming the following annual inflation rates: Annual inflation rate 1978 1979 1980-83