The Highlands Highway – Linchpin to PNG’s Development?
1
Presentation at the 2015 PNG Update Conference
Christopher Edmonds, Senior Economist; and
Yurendra Basnett, Country Economist (PNG)
ASIAN DEVELOPMENT BANK
Presentation Outline Why improving the Highlands’ transport links is
vital to PNG’s efforts to promote inclusive growth? ► and reduce poverty and improve its performance toward the Millennium Development Goals.
Why have past efforts to develop the Highlands Highway fallen short?
What is needed to improve the Highlands Highway?
► The plan for overcoming past challenges
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Highlands Region of PNG
3
4
Proposed Highlands Highway Project
1,100 km from Lae port to the Taro, covering 5 provinces in the Highlands region and 2 coastal provinces
What’s planned—1,100 km from Lae port to the Taro, 5 Highlands region & 2 coastal provinces.
ADB financing of US$500 million.
Multi-Partner Financing Facility (MPFF): Arranging/Coordinating Govt. and other partners.
Private sector investment sought down the road –through development of “bankable” sections)
Total cost being assessed (existing assessment from a WB study done more than a decade ago).
Timeline 10 years, ADB TA US$1.5 mil. for design + Project Development Assistance available.
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Modality and Scope of the proposed Highlands Highway project
#1: Why improving the Highlands’ transport links is vital to PNG’s efforts to promote inclusive growth?
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Geographic distribution of poverty (one dot = 500 people) Poverty by region (number)
Where are the poor in PNG?
Gibson, 2005.
543
402
288 301
189
373
1942
1214
1078
1376
1095 1181
0
250
500
750
1000
1250
1500
1750
2000
NCD Papuan Highlands Momase UrbanMomase Rural Islands
Kin
a p
er
adult e
quiv
ale
nt
per
year
Poverty Lines (Nominal)
Food '96 Food 09/10
$1.80 per day
Definition of poverty…
PNG off track to meet MDG targets
Poverty rate stable at around 36% (1996–2010)
High gender disparities and gender-based violence
Poverty and Human Development
PNG Upper Poverty Line Estimates (%, population)
Majority of poverty remains in the most remote and densely populated regions…
0
5
10
15
20
25
30
35
40
45
NCD Papuan Highlands Momase Islands
1996
2010
(Contribution to national poverty by region, %)
The number of poor people in the Highlands has increased by about 100,000 since 1996.
Estimated number of people below upper poverty line, 2011
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
NCD Papuan Highlands Momase Islands
Remote regions tend to perform poorer than average in educational attendance…
(% population that never attended school)
0
5
10
15
20
25
30
35
40
45
50
National -1996
National -2006
National -2011
Southern Rural
Highlands Rural
Highlands Urban
Momase Rural
Islands Rural
Lack of connectivity to markets and social services
and literacy rate…
0
10
20
30
40
50
60
70
80
90
National -
1996 National -
2000National -
2011Southern
Rural Highlands
Rural Momase
Rural Islands
Rural
(% population that can read and write above age ten)
..and on health and nutrition outcomes (Prevalence of childhood stunting - %)
0
10
20
30
40
50
60
70
National -2011
National -1996
Southern Rural
Highlands Rural
Highlands Urban
Momase Rural
Islands Rural
Pacific DMC2014 Population
(thousands)
Share
(%)
Poverty
Rate (%)
Estim. No. of
Poor
Share
(%)
Cook Islands 13.5 0.13 0.284 3,834.00 0.10
Fiji 863.1 8.15 0.352 303,811.20 8.02
Kiribati 111.1 1.05 0.218 24,223.57 0.64
RMI 54.5 0.52 0.527 28,747.75 0.76
FSM 102.9 0.97 0.314 32,313.11 0.85
Nauru 10.7 0.10 0.251 2,673.15 0.07
Palau 21.0 0.20 0.249 5,237.52 0.14
Papua New Guinea 7,067.9 66.75 0.360 2,544,453.32 67.19
Samoa 187.4 1.77 0.269 50,403.04 1.33
Solomon Islands 575.0 5.43 0.227 130,525.00 3.45
Timor-Leste 1,205.0 11.38 0.499 601,319.53 15.88
Tonga 103.3 0.98 0.225 23,253.12 0.61
Tuvalu 11.1 0.10 0.263 2,919.30 0.08
Vanuatu 262.6 2.48 0.127 33,345.00 0.88
Total 10,589.2 3,787,058.6
Highlands - about 60% of PNG's total population 4,241
Highlands poverty rate - about 37% 1,569
Share of Pacific poor in PNG Highlands 41.4%
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National and Regional Importance of the Highlands Region
Benefits of Improved Connectivity
• Better transport connectivity Outcome
• Improved network logistics (land, air, sea)
• Focus on lagging Highlands Outputs
• 2/3 of lending resources
• Knowledge: O&M, procurement, budget Inputs
Lack of connectivity to markets and social services poses a major barrier to more inclusive economic growth.
#2: Why have past efforts to develop the Highlands Highway fallen short?
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0%
5%
10%
15%
20%
0
250
500
750
1,000
1974 79 84 89 94 99 04 09 14
Land transport expenditure (constant2000 Kina), lhs
Land transport expenditure (% total), rhs
Source: National Budget Documents (various years), authors calculations.
Kina, millions % total budget
Weak implementation capacity:
Limits benefits of rising public investment
Opportunities for corruption
Creates political pressure for ‘unproductive’ expenditure and reform
Growing Implementation Challenges
0
2,000
4,000
6,000
8,000
2010 2011 2012 2013 2014
Capital spending by quarter (cumulative)
Capital budget (annual appropriation)
Capital spending by quarter (Kina, million)
0%
25%
50%
75%
100%
0
750
1,500
2,250
3,000
2006 2007 2008 2009 2010 2011 2012 2013
Quarterly spending (kina, million), lhs
% of full year spending in quarter (% total), rhs
Source: Similar, original, version of chart can be found in World Bank, PNG Economic Briefing Note, November 2013.
Department of Works and Implementation Budget (Kina, million)
0%
5%
10%
15%
20%
0
500
1,000
1,500
2,000
2004 05 06 07 08 09 10 11 12 13e 14p
Capital spending, lhs Recurrent spending, lhs Personnel costs (% total), rhs
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Piecemeal approach Rehabilitation and upgrading of portions of
the highway Patchwork of partners and institutional
arrangements Poorly integrated implementation Operation and maintenance challenges The nature of pavement deterioration and
asset maintenance needs Cost of reconstruction vs avoided costs
through proper maintenance o For every $1 spent on maintenance -- $4 to $16 savings
on reconstruction
#3: What is needed to improve the Highlands Highway?
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Factors accounting for success:
Alignment
Sector, geographic focus
Programmatic approach
Simple design
Local presence
Performance of ADB Projects
0
50
100
150
200
250
300
2002 03 04 05 06 07 08 09 10 11 12 13 14f 15f
Other
Water supply
Private sector development
Education
Agriculture and fisheries
Health
Public sector management
Energy
Transport
Disbursements by year to PNG ($US, 2002–2015f)
Extensions and delays in ADB loan projects in PNG
0
1
2
3
4
5
1998 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Average project delay (years)
Average no. extensions per project
Source: ADB.
Resource dependency—challenge for inclusive growth
Need for long-term, predictable, financing to build capacity and improve governance
Safeguards—proactive approaches
Women’s empowerment—fundamental to improving social indicators
Resilience—natural disaster and climate change preparedness
Lessons from ADB Experience
Comprehensive, Concerted, Credible approach
Avoiding piecemeal efforts through collaboration with many institutions
Timeline 10 years, ADB TA US$1.5 m for design, Project Development Assistance program opens opportunity for additional funds
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Proposed Implementation approach for the Highlands Highway project
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• Expanding partner funding, including from sub-national governments.
• Lending through MPFF’s to provide predictable finance, long-term capacity development, and support for policy reform.
• Emphasis on private sector engagement and involvement.
• Focus on large contracts that privatize sub-contracting, with strengthened local employment and training incentives for contractors.
• Expand beneficiaries through community based initiatives.
• Strengthen gender-sensitivity of project designs, i.e. bridge access, community roads.
Proposed Implementation approach (continued)
Hope this presentation has— Helped to convince you that improving
Highlands’ transport links is vital to PNG’s efforts to promote inclusive growth?
Explained some of the causes for shortcomings in in past efforts to upgrade the Highlands Highway
Provided insight into how ADB, the PNG Government, and other development partners are planning to improve the Highlands Highway
o The plan for overcoming past challenges
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http://www.adb.org/publications/series/asian-development-outlook www.adb.org/pacmonitor
Asian Development Bank
6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines
Tel + 632 632 4444
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