Multi-modal transport plan targets nationwide connectivity in Papua New Guinea

Located on the eastern half of the island of Papua, Papua New Guinea is home to a rich supply of natural resources. However, with a geography characterised by tall peaks and deep ravines, miles of challenging coastline and a climate that encourages year-round vegetation, infrastructure can be difficult to place, install and maintain. While these topographical challenges sometimes make it problematic to move resources and people around PNG, issues around security and budgetary constraints up the ante further when it comes to creating a secure and more efficient transportation network.

In many respects, the country’s ability to grow its economy – and build on the growth already achieved – will depend on its will to improve its transport infrastructure. Unreliable land, air, and marine transport services threaten to hamper and depress efforts to maintain recent economic progress. This is in part because large segments of the population are unable to reach job sites or employment centres, or in many cases even access social services such as health care and education. In 2014, less than 13% of the country’s population of 5.2m was living in an urban area, and four out of five inhabitants lacked access to transport of any kind, according to World Bank statistics.

Providing access to a predominantly rural population is made more difficult by the fact that the country’s area spreads over 600 islands, at altitudes ranging from sea level to 4500 metres. Rough terrain often makes land transport between isolated areas practically impossible, while infrastructure limitations mean that neither sea nor air transport offer comprehensive solutions. Furthermore, in recent years the sustainability of PNG’s transport infrastructure has been threatened by the effects of climate change, such as increased rainfall and coastal flooding.

Plans & Strategies

Despite the challenges, both the PNG government and its partners in the aid community and the private sector recognise that the achievement of many of the country’s goals hinges on its ability to safely and efficiently transport resources and cargo around the country – as well as into and out of it, via seaports and airports.

Working towards these goals, successive PNG governments have partnered with outside governments and aid agencies in order to modernise and extend the country’s transport and logistics infrastructure, with roads, ports, runways and depots targeted for improvement. Due to successful collaborations with development partners and donors in the past few years, significant improvements have been made. Additionally, to secure further investment in the country’s transport networks, the government has introduced a series of coordinated national, provincial and district transport development plans.

A series of rolling medium-term transport plans have been introduced. The present one, the Medium-Term Development Plan 2 (MTDP2), runs from 2016 to 2017, and forms part of the National Transport Strategy 2014-30. Additionally, the National Strategy for Responsible Sustainable Development, signed in March 2014, is meant to encourage sustainable transport infrastructure, among other initiatives. Lastly, all transport-sector plans are aligned with both the Development Strategic Plan (DSP), which runs from 2010 to 2030, and PNG Vision 2050.

Structure & Ownership

Several organisations are responsible for carrying out these plans and strategies. The Department of National Planning and Monitoring harmonises transport strategy with other ministerial policies and plans, while the main governmental agency responsible for transport, planning and coordination is the Department of Transport and the Department of Works (DoW) focuses on implementing infrastructure projects on the ground.

The DoW’s National Roads Authority (NRA) is responsible for maintaining roads and land-based transport infrastructure. For ports, the state-owned PNG Ports Corporation operates 16 of PNG’s ports, with private corporations operating the remainder.

Airports are run by the National Airports Corporation, which owns and manages all of PNG’s 22 international and regional airports, while PNG Air Services provides air navigation services.

Budget 2016

With the economy having undergone a downturn in 2015, a question mark has been raised over the government’s ability to sustain funding for its transport infrastructure plans.

In its 2016 budget, the government announced that transport sector funding was set to comprise 8.8% of total expenditure, reaching PGK1.25bn ($428.1m) – an increase on 2015’s funding of PGK1.07bn ($366.6m). However, the funding forecast for the sector was set to decline dramatically post-2016, more than halving to PGK612.9m ($209.2m) in 2019.

This reflects the difficulty faced by many governments that base their budgets on the receipts from hydrocarbons production and output. PNG underwent a swift and unexpected collapse in revenue when oil prices plummeted in 2014 and 2015. As liquefied natural gas (LNG) prices are linked to oil prices, and there is currently a worldwide LNG oversupply, the fortunes of the country’s key energy project and revenue producer, PNG LNG, experienced a negative knock-on effect. Adding to this is a drought that has seen mining operations shuttered and damaged food production in large swathes of the country.

The consequences are being felt by many in the logistics sector. “Although we deal mainly in kinas, the shortage of hard currency is affecting us indirectly as most of our clients are struggling to buy new equipment,” Tony Raats, general manager for PNG at Agility Project Logistics, told OBG.

Aid Partners 

For many years, the PNG government has received aid in many forms from the Asian Development Bank (ADB), the World Bank and the Australian government, among other sources. At the same time, the government welcomes private investment to assist in developing transport infrastructure.

Until recently, the lack of a formal and transparent process for evaluating and processing public-private partnership (PPP) projects in PNG has hindered their advancement. However, this changed in September 2014 with the government’s endorsement of the PPP Act. Part of wider reforms to increase private investment in the delivery of infrastructure services, this legislation established a centre to assist in developing, tendering and implementing PPPs in the country.

The ADB is assisting in the implementation of the PPP Act, with support funded partly through its Pacific Private Sector Development Initiative (PSDI). The initiative is co-financed by ADB and the governments of Australia and New Zealand.

In June 2015 the Australian government granted A$8m ($5.9m) to the PSDI to support requests from the PNG government for ongoing assistance in areas such as implementing the PPP framework, as well as finance, competition, reforming state-owned enterprises (SOEs) and focusing on projects that empower women economically. In recent years, the PDSI has assessed PPP options for the National Airports Corporation and is continuing to contribute to ADB infrastructure projects by identifying potential PPPs and ensuring that they are aligned with PNG’s Community Service Obligation (CSO) Policy for SOEs.

The PNG government reiterated in the 2016 budget speech that it is enthusiastic about PPPs, while also promising to improve the climate for such cooperative ventures. It highlighted that it is looking out for private-sector partnership opportunities with contractors for transport infrastructure projects.

In May 2016 the ADB announced it intended to expand its infrastructure development partnership with PNG in an effort to reduce poverty in the country. The ADB will focus on linking isolated areas to larger centres through transport upgrades with the goal of opening up new economic opportunities. It will achieve this by engaging more closely with provincial governments in implementing ADB projects. According to the PNG Development Effectiveness Brief, cumulative ADB assistance to PNG grew from $1.27bn in 2009 to $2.13bn in 2015.

The World Bank is also active in PNG, largely through the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD), which contribute resources to improve the quality of infrastructure investment and the effectiveness of public service delivery. The World Bank’s Country Partnership Strategy for PNG, the current iteration of which runs from 2013 to 2016, calls for a core programme that includes IDA and IBRD investments in transport infrastructure.

Australian Aid

Neighbouring Australia is PNG’s largest aid partner, providing assistance of approximately A$500m ($368.2m) annually, according to the World Bank. It has a long and committed history of offering development assistance to its neighbour. Recently, Australia has shifted the focus of its aid in favour of initiatives that focus on private sector-led growth and trade, pledging to increase this figure from 23% to 30% of its aid over the next three years.

Administered by Australia’s Department of Foreign Affairs and Trade, the Aid Investment Plan Papua New Guinea 2015/16 to 2017/18 was enacted in September 2015. It established a detailed strategic framework for the provision of official development assistance from Australia to PNG.

Within the PNG transport sector, the plan focuses Australia’s support primarily on the rehabilitation of priority roads; the improvement of aviation, maritime safety and security standards; and the provision of operational reforms for the PNG government agencies involved in the transport sector.

The Australian government has been involved in improving PNG’s transport sector infrastructure since 2007, when it launched the PNG-Australia Transport Sector Support Programme (TSSP). Australian aid is targeted at increasing development in the region and supports PNG’s priorities and strategic direction through alignment with the DoW’s Corporate Strategic Plan, which runs from 2015 to 2019.

Now in its second five-year phase, the programme has allocated funds of up to A$400m ($294.6m) to PNG’s transport sector between 2014 and 2019.

The bulk of TSSP funding goes towards roads, assisting the DoW in maintaining sections of the core network of 16 national priority roads and supporting major, complex rehabilitation works on routes that are crucial for economic development.

The TSSP funding is also funnelled into assisting PNG’s aviation and maritime transport services, with the purpose of enabling them to become compliant with international standards.

A number of TSSP projects have heralded important breakthroughs for PNG’s transport infrastructure and performance. Around 17,500 km of roadworks were performed in phase one, which ran from 2007 to 2014 and was valued at PGK950m ($342.3m).

Impact

Phase two of the TSSP has already effected significant improvements to PNG’s maritime and road infrastructure. In May 2016, the National Maritime Safety Authority announced it had acquired a new form of communications technology, the Global Maritime Distress Safety System, that will enhance maritime safety by using terrestrial and satellite technology as well as shipboard radio systems to improve the quality of communications between vessels and search-and-rescue teams. Under the TSSP, PNG and Australia invested PGK8.9m ($3m) in the project, which will help to bring PNG into compliance with International Maritime Organisation standards.

Other phase two TSSP projects have so far included tackling road fatalities – more than 1200 people die on PNG’s roads annually, according to World Health Organisation estimates – by educating key road safety stakeholders in safer traffic management and embedding road safety in engineering planning to reduce traffic accidents; spending PGK11.6m ($4m) on resealing roads in Arawa town and from Arawa to Kieta Port; sealing 26 km of road from Momote Airport to Lorengau Town; improving the roads surrounding the market in Lorengau Town and upgrading and resealing the road from Momote Airport to Lorengau Town on Manus Island; and maintaining around 400 km of Bougainville’s road network each year. In addition, A$8.5m ($6.3m) was earmarked for scoping and design work to be carried out on the 195-km East Coast Madang-Ramu Highway.

A longer-term project under the TSSP has seen training conducted and upgrades made to the DoW’s Asset Management Branch. This has led to improvements in a number of operational areas, such as road safety analysis, database management, long-term planning and performance-improvement assistance for contractors. “Better data collection and management supports more robust business cases during the budget process,” David Wereh, secretary of the DoW, said of the work in February 2016. “This is a great boost to many transport sector stakeholders.”

However, the fate of this assistance is now in question, delayed by issues surrounding an agreement between Australia and PNG to settle refugees at a detention centre on PNG’s Manus Island, which has since been ordered to close. The agreement, which is a component of the “Pacific Solution” – the Australian government’s policy of transporting asylum seekers to detention centres on Pacific Ocean island nations – linked Australia’s aid to PNG’s operation of the detention centre. In April 2016 Australia’s foreign minister said its closure would make it necessary for Australia to renegotiate the aid package to PNG.

Linking Up Roads

The length of PNG’s public road network is estimated to stand at about 25,000 km. However, of this, only about 16,540 km has been actually identified and recorded, leaving about 8460 km unaccounted for, according to the World Bank. Of those roads that were identified by the World Bank, 52% (8422 km) were classified as national and 48% (8119 km) were provincial roads.

Major segments of the national network are characterised as discontinuous, i.e. connecting only relatively well-developed areas in key commercial centres, while leaving poorer regions underserved. Indeed, about 35% of the population lives more than 10 km from a national road, and 17% do not have access to any roads, according to the World Bank.

The increased trade predicted in the DSP is expected to necessitate substantial growth in the coverage and quality of the national road network, with the plan expected to benefit both commercial stakeholders and ordinary citizens. The DSP advocates rehabilitation and construction to expand the portion of PNG’s national road network that is in good condition to 25,000 km by 2030, and estimates that doing so will directly contribute PGK2.2bn ($751m) to the nation’s income and result in the creation of some 120,000 jobs. Around 250 km of national roads and 50 km of roads per province are scheduled to be built per year during the MTDP2 period. In addition, government transport officials are intent on maintaining a focus on increasing road length, durability, sustainability and maintenance.

Advantages In The Air

In light of the country’s rugged topography and terrain, limited road network and large rural population, PNG has developed a wide range of air services. Indeed, the DSP foresees the country’s aviation industry as playing a vital role in its socioeconomic development over the next 10-15 years. Currently, the country’s 22 airports serve more than 3m people annually. State-owned Air Niugini holds an effective monopoly over many of the country’s routes, despite a government policy that encourages competition in air services (see analysis).

With PNG’s domestic air travel market growing at close to 20% annually since 2011 and preparations under way for hosting the APEC conference in 2018, work to improve airport infrastructure around the country is ongoing. As part of this, plans have been tabled to build a new terminal at Port Moresby’s Jacksons International Airport in order to handle international flights more efficiently.

However, funding shortages have hit both airport and air safety infrastructure, and a lack of maintenance means conditions on runways, taxiways and aprons in most major airports are poor, causing frequent diversions and cancellations. For its part, the DSP recognised that the condition of the country’s 22 airports had deteriorated to “an unacceptable state, thus breaching the international compliance requirements for safety and security of the airports”.

To remedy this state of affairs, the PNG government, in partnership with the ADB, is investing nearly PGK2bn ($682.7m) to upgrade PNG’s 14 jet airports and eight non-jet airports to bring them into line with international standards. The investment programme is focussed on five national airports: Port Moresby, Mount Hagen, Gurney, Wewak and Hoskins.

In addition to physical infrastructure upgrades, the ADB has assisted the PNG government in establishing a number of governmental agencies and policy frameworks to improve aviation standards throughout the country. These extend to the establishment of the Civil Aviation Safety Authority, the National Airports Corporation and PNG Airport Services.

The ADB is also providing $480m in loans for the $640m Civil Aviation Development Investment Programme (CADIP), which targets improvements to all of PNG’s national airports via extensive upgrades to runways, navigation systems, service equipment and security. The programme also seeks to strengthen airport pavements, develop aircraft parking bays, purchase fire trucks and upgrade navigation and air traffic management systems.

By the end of 2015, funds provided via CADIP had helped complete work on the highest-priority national airport projects. These included expanding the domestic aircraft parking apron and updating the instrument landing system at Port Moresby’s Jackson Airport, enlarging the runway at West New Britain Province’s Hoskins Airport to accommodate bigger aircraft and building a new international airport terminal at Mount Hagen’s Kagamuga Airport.

Essential Waterways

Economically more feasible than air travel – and a necessary adjunct to it – waterways make up essential transit thoroughfares in PNG. The country has 14 maritime provinces, and it is estimated that at least 59% of the country’s population depends on water for transportation. With much of the population dispersed across isolated pockets along the coast and upriver, travelling by boat is sometimes the only transport option for many in PNG.

In addition to its commercial ports, PNG has numerous wharves, jetties and beach landings that comprise the country’s maritime services infrastructure. However, in line with the rest of the country’s transport sector, the majority of PNG’s maritime infrastructure is in poor condition and faces underfunding.

“The lack of foreign currency in the market is affecting the thinking of the corporate landscape, as expansion is out of question at the moment,” Alan Poulton, general manager of freight services firm GFS Limited, told OBG. “If we have to wait as much as 3 weeks to get as little as $30,000 at the moment, we can’t even imagine what it would take to finance projects worth million of dollars”.

Despite this, annual throughput at the major ports has been growing. Container port traffic grew from 313,598 to 382,301 twenty-foot equivalent units between 2011 and 2014, according to the World Bank. Seaborne cargo passes through Port Moresby, Rabaul and Lae, the latter of which is the main import-export point for the Highlands region.

Though handling less cargo than major ports like Port Moresby, the most frequently visited ports are Madang on the north coast, which receives many small coastal vessels, and Kimbe in New Britain, known for its export of agricultural goods.

Coastal services are provided by primary and secondary shipping lines, with scheduled or semi-scheduled services calling at the major and the smaller ports. Smaller specialised regional shipping companies provide specific services to industry, including chartered services. Small commercial craft and community-based operators provide general and semi-commercial goods and passenger services. In addition, the government subsidises some provincial maritime passenger services.

The DSP included forecasts that international and domestic coastal cargo throughput in all of PNG’s ports would increase five-fold between 2010 and 2030. Working under a scenario in which the efficiency of marine and port services improves by about 2% annually, the DSP estimated that the country’s marine infrastructure would need to expand at least three-fold to support this growth, including acquiring up to 20 ships to serve coastal regions. If the capacity of shipping services is to increase and the country’s major ports are to be rehabilitated and upgraded, partnership with the private sector is likely to be crucial in effecting this change (see analysis).

Outlook

Clearly the government is working steadily to improve and extend the country’s transport infrastructure under relatively difficult economic and climatic conditions. With delegates from the APEC conference arriving in less than two years, and the FIFA Under-20 Women’s World Cup being held in November 2016, the pressure is on to make tangible improvements to the transport network.

The government has made a positive step in attracting private investors by implementing better PPP policies and procedures, while outside assistance, both financial and skills-based, will be called upon for the necessary extension, maintenance and security of the country’s transport infrastructure.