Stephen P. Groff, Vice-President, Asian Development Bank (ADB) : Interview

Interview : Stephen P. Groff

To what extent are transport and infrastructure challenges hampering economic growth?

STEPHEN GROFF: The lack of transport infrastructure and associated services significantly hinder connectivity and growth in Papua New Guinea. Geography and the lack of transport infrastructure networks isolate large segments of the population from social services, regional markets and income-earning opportunities. Approximately 60% of the population resides on 6500 km of coastlines and waterways, often without access to roads. Water transport is predominant, especially on smaller islands. A major constraint is the unequal distribution of infrastructure. It is not possible to travel by land between most provinces or ports. Although coastal shipping services and aviation attempt to overcome network gaps, outside of major regional centres, many services are not cost-effective. PNG has 22,000 km of road assets. Addressing the deteriorating conditions of road infrastructure remains one of PNG’s most pressing challenges, and while the overall condition of priority roads has improved in recent years, estimates indicate that the accident rate remains very high. Rural accessibility is moderate, with 68% of the rural population living within 2 km of access to an all-season road. Climate change is another risk to communities and to the sustainability of transport infrastructure.

How will the Highlands Highway project impact connectivity and economic development?

GROFF: The poor condition of the Highlands Highway, the country’s most strategic road, and the resulting inadequacy of transport services have made the Highlands region’s agricultural products costly and limited their competitiveness in domestic and international markets. The absence of agricultural logistics facilities further restricts the development of value chains for perishable and high-value products. Given that most rural households engage in agricultural activities, the condition of the Highlands Highway is a major constraint on the region’s inclusive growth and sustainable development. Over the years ADB has provided phased and complementary interventions in PNG’s transport sector, augmenting the nation’s network. The $1bn investment programme approved in 2017 – of which the ADB’s contribution is $680m – is expected to have a transformational impact on PNG. The emphasis is on developing a safe and integrated transport network, ensuring domestic and international connectivity, and the movement of people and goods at a low cost. If successfully implemented, the ADB expects the programme to become a model for PNG’s other roads.

Is the public-private partnership (PPP) framework in PNG effective for attracting foreign investment?

GROFF: Currently, there is no formal PPP framework in PNG. A national PPP Policy was adopted in 2008, which formed the basis of a PPP Act, passed by Parliament in 2014. The PPP Policy and PPP Act were prepared with an ADB-financed technical assistance project called the Private Sector Development Initiative. However, the PPP Act has yet to be implemented, and in 2016 the PNG Treasury announced its intention to amend it. To date, no changes to the PPP Policy have been announced, nor has any draft of an amendment been circulated for consultation. As such, it is not clear what changes are being sought. In the absence of a framework for PPPs, transactions are at risk of being prepared in an ad hoc manner by state-owned enterprise, which can create some confusion among investors, and increase the risks and costs of private sector participation. To improve the situation it is critical to formalise and implement a PPP Act that clearly sets out the process for PPP project identification, evaluation, tendering and implementation. Together with the needed technical capacity to implement the law, this framework would significantly enhance investor confidence, reduce the risks of participating in PPP transactions and improve their chances of offering value for money for the government of PNG.