Papua New Guinea - Third Highway Project

Document of The World Bank I FOR OFFICIAL USE ONLY Report No. 2838a-PNG PAPUA NEW GUINEA STAFF APPRAISAL REPORT THIRD HIGHWAY PROJECT April 24, 1980 Transportation Division 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 = Papua New Guinea Kina (K) US$1.00 = K 0.71 K 1.00 = US$1.41 K 1 million = US$1,410,000 ABBREVIATIONS AADT - Annual Average Daily Traffic AWM - Area Works Manager BPC - Budget Priority Committee DTCA - Department of Transport and Civil Aviation DTWS - Department of Transport, Works and Supply DWS - Department of Works and Supply ERR - Economic Rate of Return NEC - National Executive Council NPC - National Planning Committee NPEP - National Public Expenditures Plan NPO - National Planning Office PNGHB - Papua New Guinea Harbours Board PWM - Provincial Works Manager PMV - Public Motor Vehicle VOC - Vehicle Operating Costs UNDP - United Nations Development Programme WEIGHTS AND MEASURES Metric British/US Equivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 square kilometer (km2) = 0.386 square mile (sq mi) 1 kilogram (kg) = 2.205 pounds (lbs) 1 metric ton (m ton) = 2,204 lbs or 1.102 US short ton (sh ton) FISCAL YEAR January 1 to December 31  FOR OFFICIAL USE ONLY PAPUA NEW GUINEA STAFF APPRAISAL REPORT OF A THIRD HIGHWAY PROJECT Table of Contents Page No. I. TRANSPORT SECTOR A, Geographic, Demographic and Economic Background * 9 9 9 9 9 9 I 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 1 B. The Transport System . . . . . . . . . . . . . . . . . . . 3 C. Transport Administration . . . . . . . . . . . . . . . . 7 . . 7 D. Transport Planning and Coordination . .T . . . . . . . . . . 17 2. HIGHWAYS A. The Network. 9 .......*..***. . . 15 B. Traffici. . . . . . . . . . . . 10 C. Highway Administration, Staff and Training...... .. .. .13 D. Highway Planning . . . . . .. . . . . . . . . . . 15 E. Financing. . . . . . . *o . . . . . . a . . 16 F. Enginieering .. . . .. . . .. . .* ...0.#. 1 G. Construction . . . . . . . . . . . . . . . . 17 He Maintenance. . . . . .. . . . . . . . . . . . . . 19 I. Previous IDA/Bank Financed Projects. . . . . . .* . 20 3. THE PROJECT A. Description. . . . . . . . . . . . . . . . . . . . . . . . . . 22 B. Cost Estimates and Foreign Exchange Component. . . . . . . . . 25 C. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . 27 D. Implementation, Procurement and Environmental Aspects . . 28 E. Disbursements . 9 . . . . . . * . . . . * . * 29 4. ECONOMIC EVALUATION A. General. . . . . . . . . . . 29 B. Development Potential and Traffic . 30 C. Benefits of the Project .o. . . ...... .. .. .. .. . 33 5. AGREEMENTS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . 35 This Report was prepared by Messrs. R. Rafloski (Economist), G. Trnka (Engineer), E. H. Chittleburgh (Training Advisor) and edited by Christine Morgan. Tbe document ha a muicted distributon and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation.  -2- ANNEXES 1. Description of Highlands Highway 2. Technical Assistance for Maintenance: Outline Terms of Reference 3. Technical Assistance to Provincial Governments for Rural Transport: Outline Terms of Reference 4. Project Related Documents and Data Available in the Project File TABLES 1. Vehicle Fleet 2. Road Transport Statistics by Provinces 3. PNG Harbours Board Administered Ports 4. Volume of Major Exports 5. New Transportation Projects Proposed in NPEP 6. Expenditures on Roads 7. Central Government Expenditure by Function 8. Road Infrastructure - Composition of Expenditure and Revenue 9. Design Standards for Rural Roads 10. Estimated Cost of Project 11. Project Implementation Schedule 12. Schedule of Estimated Disbursements 13. Traffic Projections on the Highlands Highway 14. Vehicle Operating Cost on the Highlands Highway (Unpaved road) 15. Vehicle Operating Costs on the Highlands highway (Paved Road) 16. Net Benefit and Cost Flows 17. Sensitivity Analysis of Costs and Benefits on Economic Rate of Return CHARTS 1. World Bank 21086 - Organization of the Department of Transport and Civil Aviation 2. World Bank 21018 - Organization of the Department of Works and Supply MAP IBRD 11428R2  1. TRANSPORT SECTOR A. Geographic, Demographic and Economic Background 1.01 Panua New Guinea (PNG) is an island country located in the tropics about 100 miles to the north of Australia. It comprises the eastern half of the island of New Guinea (the mainland) and some 600 smaller islands of which about half a dozen are of major importance. PNG has a land area of about 462,000 sq km (about the size of Spain) spread over some 2,000,000 sq km of the Western Pacific Ocean. Both the mainland (comprising about 85% of the land area) and the major islands are dominated by massive mountains. The central mountain range of the mainland, which forms a complete divide between north and south, is not a single chain but a complex system of ranges separated by broad upland valleys. These valleys, with altitudes of 5,000-10,000 feet, form the Central Highlands./l The foothill zones have become deeply cut by river systems resulting in an intensely rugged topography. Volcanic areas of the mainland, which are limited to relatively small zones, have also produced difficult formations. 1.02 In addition to limitations imposed by the mountains, extensive swamps cover large areas. On the southwest coast of the mainland, the great delta plain of the Daru coast is one of the most extensive swamps in the world. There are also large swamps on the northwest coast. From the mountains of the hinterland, the river systems carry heavy loads of alluvium with which they are building their deltas. There are extensive mangrove and nipa palm swamps at the mouths of most of the rivers. In addition, the large Sepik and Ramu Rivers flow for hundreds of miles through extensive riverine swamps of sago, bamboo and forest. Scattered settlements are found in the swamplands but the numbers are small. 1.03 The main consequence of the rough, broken topography and the swamps is to make a very large proportion of the land virtually unusable for agriculture and forestry. These topographic conditions, the extensive swamps and the numerous islands have created small pockets of widely dispersed population centers, often difficult to access. These features explain the extremely high cost of providing transport facilities to many parts of the country, and the high cost of their maintenance. Over 40% of PNG's population of approximately 2.9 million is concentrated in the Central Highlands and less than 15% of the total population is urban./2 Although the Government has instituted a program of localization expatriates, who form about 1% of the population, still play a vital role in technical, administrative and business functions. /1 Comprising the provinces of Eastern Highlands, Western Highlands, Southern Highlands, Enga and Chimbu. /2 Urban Center populations (1977) are: Port Moresby 105,900; Lae 62,500; Rabaul 33,200; Madang 21,500; Wewak 20,500; Kieta-Arawa-Panguna 19,700; Mt. Hagen 14,900, and Goroka 12,500.  -2- 1.04 PNG's economy is characterized by relatively small employment in the modern monetary sector; the majority of the productive population is engaged in the traditional, largely subsistence, agricultural sector. The modern sector, dominated by a large open-pit copper mine on Bougainville, and the expatriate community, which predominates in the government sector and a variety of small manufacturing and service establishments, contributes about 70% of GDP. Agriculture, forestry and fishing which employ 85% of the labor force, provide the remainder, with over half of the sectoral output coming from subsistence agriculture. Cash agriculture is growing fairly rapidly, with production concentrated in three crops (coffee, cocoa and copra) for export: MAJOR EXPORTS Annual growth FY68 FY71 FY74 FY77 FY68-77