Papua New Guinea - Land Mobilization Project

Dkcumnt of The World Bank FOR OFFICIAL USE ONLY AAI 3cS/o.-4p>4- Report N. P-4969-PNG MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT. OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$19.6 MILLION TO THE INDEPENDENT STATE OF PAPUA NEW GUINEA FOR A LAND MOBILIZATION PROJECT APRIL 12, 1989 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.  us$1.00 - Kina 0.90 1 bectare (ha) 2.47 acres (ac) 'AIDAB - Australian International Development Assistance Bureau DLPP - Department of.Lands and Physical Plamg NoV - rraidus of OUcderstanding PNG - apua" now Guinea VNDP/SN#2EM United Nations Development irogramme/Strengthening National and Provincial Economic Management Project-- GOVRNMNTOF PMmU NEW GUINEA January 1 0December 31 -~~~~~~~~~~~~~~~~~~~~~~  U~~~~~~~~~~~~~~~~~ - FM Of AL Via OmNLY - PAPUA NEW GUIEA LA MOBILIZATION PROJECT LOAN AMD PROJECT SUMMARY Borrower: The Independent State of Papua Nev Guinea US$ 19.6 million eqitivalent Tersa: Twenty years, including five-year grate perio4, at the Bank's standard variable interest rate. Financin: Plan: Government US$16.8 million Government of Australia US$ 6.4 million IBRD US$19.6 million -Total MUSS42.8 million Uconomic R,ste of Return: Not applicable Staff A inralsal Relort: Report No. 7592-PNG ZiaDa: IBRD-20745 IBRD-13732R- This document has a rosuticd ditdbution and may be used by rocipients only in the performance. of their offcia duties Its conwtens may not otherwise be Aiscbsed without Worl Banlc suthotizaftio  MIORAMDUR AND RECQTION OF THE PRESIDENT , .OF THE INTERNATIONAL BAK FOR RECONSTRUCTION AND DEVEMPMT TO THX EXECUTIVE DIRECTORS ON A PROPOSED WM TO THE INDEPENDENT STATE OF PAPUA NEW GUInEA FOR A LAND 4OBTLIZATION PROJECT 1. The following memorandum and recomwendation on a proposed loan to The Independent State of Papua New Guinea for U$19.6 million equivalent is submitted for approval. The proposed loan would be for twenty years, including a five-year grace period, at the Bank's standarrd variable interest rate. The project would be cofinanced By the Government of Australia for US$6.4 million equivalent. 2. Bac Papua New Guinea has a population of 3.5 million and a land area of 46 million ha of which 14 million ha (30%) are considered suitable for agricultural production. About 3.2 millidn ha (7%) are estimated to be in regular agricultural use and 3.7 million ha (8%) in low intensity use or rotational fallow. Forests cover about 78% of the land area of which half may have potential for timber production (15 million ha); between 50,000 to 60,000 ha are being logged annually. Land is crucial for the devalopment of almost all sectors, especially agriculture, urban services, transport and infrastructure. While land is a relatively abundant resource, the inability to identify, mobilize and transfer lands. with productive potential has constrained investments and thereby, economic development. The land administratiou system in Papua New Guinea has suffered in comparison with investse4ts in other government services and as a result it has been unable to cope with the demands placed on it. The emergence of a modern economy, with rising demands on land aiministrae.ion threatens to overwhelm the present system. 3. Land is categorized into two major groups: alienated land owned by the state and customary land for which ownership is vested in about 700 clans and lesser groups (kinship and family). The Government has leased out less than half the alienated land and little is known of the potential or occupancy of the remainder. Complex legal and admimistrative processes for allocating leases and institutional weaknesses including shortage of management and professional skills, poorly developed interagency coordi- nation and the absence of a clear pollcy environment, have created backlogs and delays in land administration transactions, and delays in the development of all sectors where land transfer is critical. In addition, the traditional systems of land distribution by clans is under pressure from Ai growing and more mobile population. Land disputes exceed the capacity of the mediation mechanisms. There is a growing concern about the need for national and provincial institutions and legislation to keep pace with developments in land ownership. The lack of adequate land and resource information further delays land mobilization.  4. Rationale for Bank nvolvernent. The project is an integral part of the Banik' a strategy to strengthen Papua New Guine.a'a institutional and - human resource- capabilities and to support the critical sectors of agiculture, forestry, transport, mining and urban services. As land is critical to the continued development of all those sectors and weak land administrationi an impediment to uobtlizing land., Bank support for improving the management of land administration would assist in addressing land sector issues vhich are a constraint to investments, and economic growth. The Governmeat has formulated and begun implementing (on Janudavy 1, 1989) a long-term (10-15 year) Land Mobilization Program to address thei land sector issues, which consists of: (a) creating a clear policy and legislative environment to promote investment in land; (b) enabling customary land owners to increasingly participate in the development of their own land; (c),providing effective land ,services to all land.users (surveying, -tLde registration, valuation, land transfer and disposal, mapping, landI acquisition, physical planning, dispute settlement); (d) transferring land administration responsibilities from the national Goverrment to the provincial governments; and (e) optimizing the use of the stock of alienated land. The Program would require long-2ta Am* involvem-nt and support in addressing institutional and-policy issuetc.-'The proiJect would support thea first five years of the Program, as part of the Government'sa Medium Termi Development Strategy.' 5. The experience of previous Bank agriculture projects have been evaluated in the Projoct Performance Audit Report-(PPAR) No. 7001, the main lessons from which were that projects should: (a) have a clear focus and operate within existing institutions; (b) be limited to realistic estimates of implementation capacity; (c) beo viwed as one stage in a sustainable long-term program approach; and (d) carefully monitor and manage technical assistance. Theie lessons have been Incorporated in the design of this project, especially in project managemeolt and impltmentation arrangements. 6. Pro2iect Objectives. Tahe primcty objective of this first Bank assisted land sector project is to improve the manag(ment of land administration in Papua New Guinea. Other related objectives include: (i) imsproving land use planning, policy, management, legislation, procedures, professional standards, quality of land services and physical facilities; (ii) imprving the capacity of the Deparvtment of Latrds and Physical Planning (DLPP) to develop land policy, promote land registration, deliver land services, generate land-based revenues, and improve the land dispute settlement capacity; (III) developing an improved and cost- effective system to expedite identification and allocation of alienated land; (iv) commencing development of an acceptable and cost effo-tive method of customary land mobilization; (v) developing a system for the decentralization of land administration to the provinces; (vi) developing an up-to-date land and resource information base available to all land users. 7. Proi hct Desreitioa. Project compounents would include:' n (1) PXo gmprogram agpro: (a) introducing program budgeting/management., accounting and monitoring procedures; (b) establishing a Program Management  U L 3-. Committee; (c) establishing an initerdepartmental National Land Mngmn Committee; (4) constructing regional and provincial offices And staff housing in~ the.provinces; (e) coordinating and managing tech Aicol assistanq~.;, (f) studying the role of the private se-ctor (surveyors) in land administration; and (g) strengthening professional standards; (2) ralg] InstitUti2n Building: strengthening the 2olicy and4 institutional inrsrute by (a) completing the restructuring of DLPP; (b) reviewing the systems for setting land rents, land dispute settlement, and land allocation and transfer; (c) drafting legislative and procedural amendments for administration of alienateid land; (d) consolidating land legislation; (e) drafting national framework legislation for the registration of customary land; (f) improving the land dispute.settlement capacity; and improving personnel services by recruitment of staff and inten~sive staff .training; (3) lo_bilizin_g Alienated Land: (a) establishing regional offices, and provincial,pffices with coordinated work programs; (b) addressing a backlog of 7,000 incomplete land administration trans- actions; and (c) stocktaking of about 300,000 ha of Government land -which has not been in reguilar use; (4) Mobiliging Customar Land: <a) assisting provincial Land Management Committees in formulating a policy framework for customary land mobilization and registration; and (b) assisting the provincees to draft legislation for customary land registration and developing the necessary administrative procedures and manuals;- (5) Decentralization of Alienated Land Administration: (a) assisting provincial Land M(anagemient Committees in developing suitable policies; (b) establishing consolidated Lands Divisions in the provinices;,and (c) boordinating the transfer of DLPP staff to tbe provinces; (6) LandAn Resource Infgrmation: (a) completing the Papua New Guinea Land Information' Systeau; (b) enhancing the mapping capacity of the National Mapping Bureau; and (c) establishing a Mapping Advisory Committee. 8. The project, to be implemented over five years, would provide funds for technical assistance, civil works, equipment and furniture, and incre-mental staff salaries. Total project cost is estimated at US$42.8 million, of which US$4.3 million would be in duties and taxes and US$18.3 million in foreign exchange. The proposed Bank loan of US$19.6 million would finance ,50.9% of total project cost, including 60.6% 'of foreign cost and 42.0% of local cost. The Government of Australia would cofinance (paralell finance) with a grant of US$6.4 million. A breakdown of costa and financing plan are shown in Schedule A. Retroactive financing of US$1.0million is included under the project for eligible expenditures after January 1, 1989. Amounts and methods of procurement and disbursement are shown ixA,Schedule B. A timetable of key processing events and the status of.Bank Group operations in Papua New Guintea are given in Schedule C and D respectively. Maps are also attached.~ The Staff Appraisal Report No. 7592-PNG dated April 12, 1989 is being distributed separately. 9. Agreed Actions. The Government has agreed to the-following: (a) complete the reorganization of DLPP by December 31, 1989; (b) timetable for filling of key staff positions in the Department; (c) establish the National Land Management Committee and the Mapping Advisory Committee by December 31, ,1989; (d) terms of reference for all technical assistance (consultancy services and studies) along with implementation schedules for studies, including review of resulting recommendations with the Bank and  4 - ~ ~~~~~~~~~ r subsequent Implementation; (e) draft legislative and procedural amendmentst for improving alienated land administration by June 30, 1990; and (f) conduct annual review of the Land Nobilization Program between the - Government and Bank, with Government of Australia participation.; by April 30 of each year. Prior to loan effectivanese, the Government, would enter into key consultant contracts and the Australian Gtant Agreement would become effective. 10. IAnmfitn . Benefi' under the project are expected from starting a process of improving the eiticiency of land management, which has been recognized as a key systemic constraint on development of the'6conomy. The main benefits derive from more efficient land administration leading to lower transaction costs, minijized delays in undertaking investments in prodsetive sectors, greater revenue collection, and incentives 'for land- users to invest in land-based activities. Clarification of clan authority in land distribution and registration of customary land would ultimately reduce land disputes. 11. Risks. The main risks include ineffective management of the Land Mobilization Program, inability to coordinate and absorb 520 staff-months ofr tecnical assistance, quality of staff that can be retained or recruited into key positions, inadequate budget allocations, unwillingness or inability of national government agencies and provinces to cooperate and use coordinating mechsnisms, and the failure of'parliament to approve amendments to land laws. To minimize these risks, the project design includes: a management component and techbical assistance for management and information systems; a Memorandum of Understanding on project imple- mentation between the Department and other key departments and joint (Government and Bank) annual reviews to facilitate effective management and implementation; provision of consultancy services to administer the technical assistance and assigning the responsibility for managing the work and absorbing the output of technical assistance to individual work-units of the Department; staff training and development-activities; and , establishment of the National Land Management Committee. The advanced state of project preparation and the Government decision to begin implementation of the Land Mobilization Program on January 1,'1989 demonstrates Government's commitment to the,project. 12. Recommendatio. I am satisfied that the proposed loan would, comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan.' Barber B. Conable President -Attachments Washington, D. C. April 12, 1989  -5~~~~~~~~~~~~. Z&NEV GUNEA ,~ ~~~~~~lN MOIIAI, RJC ~ A~WI~ FINA,ScheduleNAI, 5 2 9 :_/A DX" Toal ---------- (US$ million) --- Program Nanqe.nt .5.? 4.1 9.8 Go.ral Institution Building 2.1 1.1 3.2 Noblizing Alienated Ld 4.7 0.9 5.6 Mobilizing Customary Land 0.7 0.1 0.8 Deontralization of Alienated Land Admin4stration 1.3 0.0 1.3 Land and Resource Information 6.0 10.0 16.0 P-ysical Contingencies 1.0 0.8 1.8 Price Contingencies 3.0 ' 1.3 4.3 Totl Prola Costs X 9> 1 ILA h /a Includi4 taxes and duties amounting t US$4.3 million equivalent. Zansnlinr Plan: 120i ----------(US$ million)------ Government 15.2 1.6 16.8 Government of Australia 0.9 5.5 6.4- IBRD 8.5 11.1 19.6 Xgtal _iL.  6 *6*; tcheduleB PAPUA NEW GUINEA 1UND MOBLIZATIO PROJECT Procurement Method Total &St Project Element ICB LCB Other -N.A. ------------------(US$ million)- Technical AzoLstance 2.6 2.9* 5.5 - (2.6) (0.0) (2.6) Capital Works (Civil Works) 5.7 2.7* 8.4 (5.7) (0.0) (5.7) Capital Assets I (Equipment and Furniture) 5.4 3.0* 8.4 (5.4) (0.0) (5.4) Incremental Staff Salaries 9.0. 9.0 (5.9) -59 Travel 1.1, 1.1 (0.0) (0.0) Utilities 2.4 2.4 (0.0) (0.0) Materials and Supplies 2.1 2.1 (0.0) (0.0) Plant and Transport 0.6 0.6 (0.0 (0.O) Special Services 3.2 3.2 (0.0) (0.0) Other 0.9 0.9 (0.0) (0.0) Other Emoluments - 1.2 1.2 (0.0) (0.0) Total 5.4 5.7 2.6 29.1 42.8 (5.4) (5.7) (2.6) (5.9) (19.6) N0If Figures in parentheses are the respective amounts financed by the Bank. * Procurement would foLlow Government of Australia procedures.  .~~~ - , bisbursementsm ('US$*) Technical Assistance and Contract Staff 4.4 100% of expenditures Capital Works (CL vif Works),- 5-4 . 100% of expenditures incurred on or before December 31, 1989 and 90% thereafter. Capital Assets (Equipment and Furniture) 5.1 100% foreign expenditures; 100% of local expenditures - (oex-factory); and 85% of local expenditures for other items precured locally. Incremental Salaries of Local Staff 3.7 100% of expenditures for contract staff;, and 80% in 1989, 70% in- 1990, 60% in 1991, 50% in 1992, and 40% in 1993 for other staff. Unallocated 1.0 Estimated IBRD Diabursemnts IRpDIscal - ear 990 199 199 122k 1224 --.-------(US$ million)------------- Annual 2.0 5.8 4.1 5.0 2.7 Cutulative 2.0 7.8 11.9 16.9 19.6  Schedulg CG PApUA NEW GUIJNE~ LAN MOaIZATION PROJECT. Timetable of &eL Proiect Processig- Event= (a) Time taken to prepare: 2 1/2 years (b) Prepared by: Goternment, supported by AIDAB and UNDP/SNAPE4 financed consultants. (c) First IBRD mission: February 1986. (d) Appraisal mission departure: September.29, 1988. (e) Negotiations: February 27 - March 3, 1989. (f) Planned Date of Effectiveness: August 1989. (g) List of relevant PCRs and PPARs: Southern Highlands Rural Development Project (Cr. 841-PNG), Popondetta Smallholder Oil Palm Development Project, (Ln. 1333-PNG) and Second Agricultural Credit Project (Cr. 1149-PNG) (PPAR No. 7001)  Schedule D 9- 1 THE STATUS OF BANK GROUP OPERATIONS IN PAPUA NEW GUINEA A. Statement of Bank Loans and IDA Credits /a /b - (as of September 30, 1988) Amount (US$ million) Loan or - (less cancellations) credit Fiscal Undis- number Year Borrower Purpose Bank IDA bursed Nine loans and twelve credits fully disbursed 93.5 110.7 - 2125-PNG 1982 PNG Engs Provincial Development 6.0 1.7 1279-PNG 1983 PNG Petroleum Technical Assist. - 3.0/c 0.1/d 2265-PNG 1983 PNG Road Improvement 31.0 - 11.3 2276-PNG 1983 PNG Agric. Support Serv. 8.5 - 2.6 2395-PNG 1984 PNG Secondary Education 49.3 - 24.3 2475-PNG 1985 PNG West Sepik Provincial 9.7 - 5.7 2608-PNG 1986 PNG Nucleus Estate & Smallholder 27.6 - 25.4 2624-PNG 1986 PNG Third Agricultural Credit 18.8 - 6.8 2722-PNG 1986 PNG Yonki Hydroelectric 28.5 - 21.9 2742-PNG 1987 PNG Transport Improvement 45.5 - 44.3 Total 318.4 113.7 -~ -Of which has been repaid 33.7 2.3 Total now outstanding 284.7 111.4 Amount sold ' 54 Total Loans Now Held by Bank and IDA 269.3 111.4 Total Undisbursed 144.0 0.1 144.1 B. Statement of IFC Investments - None /a The status of the projects listed in Part A is described In a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. /b Prior to exchange adjustments. WeT Credit amount is SDR 2.7 million (equivalent of US$3.0 million at time of commitment). /d Amount expressed here is US$'equivalent of undisbursed SDR amount in terms of US$ equivalent valued at exchange rate applicable on date of this statement.  j t z ' v \2 ~IR I AN J A YA (I ND ON ES IA ) ---------------------a----- I o x x/;g ~~~~~~~~~~~~~~~~~----- ------ Cb ~ -------- -- ----------- 4~~~~~~~~~~------ --- -' ' ----R - I _ - _ __ I~~~I L X g A a J D * + P | C C~~~~ A q \ < d t; 4 g T g g a i X Z~~~~~~~~~G ox !IllI!Ii,I4l / ' X \ 2 2 t :;  IRIAN JAYA i- I 3 _ 'I-| , r 38 ,,1 it 0 1 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~/ I _ g-~~ ~~~ - ; , 5 B ___-~~~XEsusshs I f $'- 1/-- 'L I E t 8 go ix /- "s f > ,,'I,, It * - - - - - - - - - - - - > / I / v t " t t | j t g ~ I <1 f "Z Q I - @ m z -'t 3111I c:<_ 1 r z ' '- 3- Z