Country Operations Business Plan: Papua New Guinea,

Transcription

1 Board of Directors IN October 2014 Country Operations Business Plan: Papua New Guinea, Attached for information is a paper on the above subject. For Inquiries: M. Minc, Papua New Guinea Resident Mission (Ext. 5565) A. Batten, Papua New Guinea Resident Mission (Ext. 5565)

2 Country Operations Business Plan Document Stage: Draft for ConsultationProject Number: October 2014 Papua New Guinea This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

3 CURRENCY EQUIVALENTS (as of 05 September 2014) Currency unit kina (K) K1.00 = $0.42 $1.00 = K2.38 ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund CPS country partnership strategy MFF multitranche financing facility PNG Papua New Guinea TA technical assistance NOTE In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General X. Yao, Pacific Department (PARD) Country Director M. Minc, Papua New Guinea Resident Mission, PARD Team leader A. Batten, Country Economist, PARD Team members G. Ganiga, Project Officer (Transport), PARD A. Ingratubun, Unit Head, Portfolio Management, PARD S. Khan, Senior Transport Specialist, PARD A. Maxwell, Senior Energy Specialist, PARD S. Muramoto, Unit Head, Project Administration, PARD F. Ramos, Project Officer (Energy), PARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

4 CONTENTS Page I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE PARAMETERS 1 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2 APPENDIXES 1. Updated Country Partnership Strategy Results Framework 3 2. List of Linked Documents 6 3. Indicative Assistance Pipeline 7 4. Assistance Program for Current Year 9

5 1 I. CONSISTENCY OF THE BUSINESS PLAN WITH THE COUNTRY PARTNERSHIP STRATEGY 1. Recent economic, social, and political developments. Economic growth in Papua New Guinea (PNG) slowed from 9.8% in 2012 to 5.1% in 2013 as construction on a $20 billion liquefied natural gas project wound down toward completion in mid Record gross domestic product growth of 21% is expected in 2015, led by commencement of gas exports in late While economic performance remains strong, progress against social outcomes continues to be hampered by underlying state fragility and weak service delivery structures. There is currently no official measure of poverty, but social indicators are below those of other countries with similar per capita incomes. PNG is ranked 156th out of 186 countries in the 2013 Human Development Index Country partnership strategy. The country operations business plan, is the fifth under the PNG country partnership strategy (CPS), The strategy was developed in close consultation with the government and other stakeholders, and is aligned with the government s Development Strategic Plan, and Medium-Term Development Plan, Consistent with the direction of the Asian Development Bank s (ADB s) Midterm Review of Strategy 2020, support will be focused on supporting rural populations to access the benefits of economic growth by enhanced transport infrastructure and improving access to finance, primary health services, and electricity, which are vital for better rural service provision and income-earning opportunities. ADB will continue to seek out opportunities for cofinancing and to produce knowledge products that inform and influence national policy debates and support country operations. ADB will also help PNG mitigate the risks of climate change. ADB support for private sector development through state-owned enterprise reform will lower business transaction costs, thereby helping expand small- and medium-sized enterprises and create jobs in the formal economy. ADB will mainstream gender in all general intervention projects. ADB will continue to invest directly in the private sector, using loans, equity, and guarantee facilities as appropriate. 3. Portfolio performance. The 2013 country portfolio review mission found that PNG portfolio performance had significantly improved in ADB recorded disbursements on loans and grants of $182.5 million against a target of $160.0 million. Executing agencies largely submitted loan withdrawal applications to ADB in a timely manner and counterpart funds were available on time, ensuring more timely payments to contractors. However, the mission noted ongoing challenges for portfolio performance, including (i) late submission of audited project financial statements by executing agencies, (ii) lengthy government procurement process, and (iii) limited capacity of executing agencies to manage social and environmental safeguards. The PNG Resident Mission s project administration unit has formulated an action matrix to address these issues. II. INDICATIVE RESOURCE PARAMETERS 4. Resource envelope PNG is a group B country and is eligible for a blend of Asian Development Fund (ADF) and ordinary capital resources borrowing. Indicative lending 1 United Nations Development Programme Human Development Report: The Rise of the South. Geneva. 2 Asian Development Bank (ADB) Country Partnership Strategy: Papua New Guinea, Manila. 3 Department of National Planning and Monitoring Papua New Guinea Development Strategic Plan, Port Moresby: Government of Papua New Guinea. 4 Department of National Planning and Monitoring Papua New Guinea Medium-Term Development Plan, Port Moresby: Government of Papua New Guinea.

6 2 resources for total $649 million, including an allocation of $508 million in ordinary capital resources. The indicative country allocations of ADF resources for PNG during amount to $141 million. The final allocation of ADF resources will depend on the available ADF commitment authority and the outcome of the country performance assessments. Funding from other sources, including ADF subregional pool, will be actively explored. The indicative lending program for totals $653.7 million, comprising $508 in ordinary capital resources and $146.0 in ADF resources. The indicative nonlending program for totals $3.2 million for the country program, of which $1.5 million is for project preparatory technical assistance (TA). 5. Cofinancing. The lending pipeline includes $40 million in cofinancing. In 2015 this includes a $25 million contribution by the European Union to the third tranche of the Highlands Region Road Improvement Investment Program. In 2016, $15 million is scheduled under the second tranche of the Towns Electrification Improvement Program. ADB continues to pursue cofinancing opportunities, in particular for ongoing multitranche financing facilities. 6. Regional technical assistance. ADB will continue to include PNG in regional TA projects that reinforce CPS objectives. 5 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 7. Lending and nonlending programs have been adjusted to conform with the indicative resource parameters for along with Government of PNG requests, while remaining in line with strategic directions of the CPS. 8. Changes to lending program in The Land Transport Improvement Investment Program (multitranche financing facility [MFF], tranche 1) is new for 2016, replacing the Bridge Replacement for Improved Rural Access Project (additional financing) that had been scheduled for the same year. The Highlands Region Road Improvement Investment Program (MFF, tranche 4) and Civil Aviation Development Investment Program (MFF, tranche 4) are both new for 2017, reflecting anticipated progress on the first three tranches. The Strategic Program for Climate Resilience Implementation Project has been moved from 2014 to 2015 because of delays in the original processing timeline. 9. Changes to nonlending program in The Land Transport Improvement Investment Program (MFF, tranche 1) project preparatory TA is new for 2015, replacing the Bridge Replacement for Improved Rural Access Investment Project preparatory TA which had been scheduled for the same year. The Supporting Public Financial Management Phase 3 has been moved from 2015 to 2016, in line with TA resource availability and the expected completion of the second phase in early The Water Supply and Sanitation institutional strengthening TA is new for 2016, reflecting planned nonlending support to the sector during the next CPS period. 10. Results framework. Current value indicators have been updated in the results framework to reflect newly available data. 5 Active regional TA projects currently utilized by PNG are as follows: (i) ADB Pacific Private Sector Development Initiative (Phase 2). Manila; (ii) ADB Technical Assistance for Capacity Strengthening and Institutional Development for Border Management and Trade and Tourism Development in the Pacific. Manila; (iii) ADB Strengthening Coastal and Marine Resources Management in the Coral Triangle of the Pacific (Phase 2). Manila; and (iv) ADB Technical Assistance for Impact Evaluation of Labor-Based Road Work in the Pacific. Manila.

7 UPDATED COUNTRY PARTNERSHIP STRATEGY RESULTS FRAMEWORK (Board endorsement of the CPS: 2010; COBP September 2014) Country Development Goals 1. Real GDP growth will average 8.7% in Nonmineral GDP growth will average 9.0% during this period. 2. An additional 290,800 jobs will be created between 2010 and The under-5 mortality rate will be reduced from 75 per 1,000 in 2010 to 56 per 1,000 in Net enrollment rate in grades 1 8 will increase from 53% in 2010 to 72% in (These are government national targets. ADB support will contribute directly to targets 1, 2, and 3.) Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators 1. Transport (Core Areas 1: Infrastructure and 2: Environment) Expand PNG s national road network that links all of PNG from 8,460 km in 2010 to 10,000 km in 2015 Increase the proportion of national roads that are in good condition from 29% in 2010 to 65% in 2015 All national airports comply with international safety and security standards by 2015 Increase the number of regional airports upgraded for aircraft with higher seating capacity from one in 2010 to three in 2015 Increase the number of domestic maritime transport routes and vessels by 25% between 2011 and 2015 Reduce international port turnaround from 3.0 days in 2011 to 2.5 days by 2015 More efficient, safer movement of people and goods via improved (i) roads in highlands region, (ii) bridges on national priority road network, (iii) national airports, and (iv) port and sea transport capacity Indicator 1: Number of people benefiting from a 25% reduction in their travel time from their communities to nearest market Baseline: 0 (2011) Target: 100,000 (2015) Current value: 0 (2012) Indicator 2: Number of air passengers per year Baseline: 100,000 (2011) Target: 116,000 (2015) Current value: 100,000 (2012) a Indicator 3: Tons of break bulk transferred through Lae Baseline: 2.8 million (2011) Target: 4.0 million (2015) Current value: 2.8 million (2013) b ADB Areas of Intervention Land transport policies and reforms Road maintenance and upgrading Airports, air navigation, and security Development of civil aviation capacity Ports and terminal facilities Small landings, shipping community water transport Widening and upgrading of bridges Increase in rural access to major road networks Improvement of road transport regulations ADB Indicative Resource Allocation in the Next Pipeline and Strategic Priorities $531.5 million for ; 81.1% of total COBP envelope, with $25.0 million in cofinancing, of which: ESG 19% GEM 52% PSD 100% RCI 48% Changes from CPS or Last COBP The CPS is aligned with the 30-year development goals. The COBP updates selected 5-year development goals from the MTDP, Changes from CPS or Last COBP Indicative resource allocation adjusted to cover the programming period Appendix 1 3

8 Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators Indicator 4: Bailey bridges replaced with twolane permanent bridges Baseline: 0 (2012) Target: 25 (2015) Current value: 0 (2013) ADB Areas of Intervention ADB Indicative Resource Allocation in the Next Pipeline and Strategic Priorities Changes from CPS or Last COBP 4 Appendix 1 2. Energy (Core Areas 1: Infrastructure and 2: Environment) Increase the number of households with access to electricity from 12.4% in 2010 to 27.0% in 2015 Better conditions for commercial activity through consumption of reliable, sustainable, and more affordable power supplies in urban areas Reduction in household expenditure on energy services in five provincial towns Baseline: 0% (2011) Target 10% (2015) Current value: 0% (2013) Construction of power generation to meet demand in provincial towns and supply the main grids Provision of power and lighting services to unserviced households $123.7 million for ; 18.8% of total COBP envelope, with $15.0 million in cofinancing, of which: ESG 100% GEM 51% PSD 100% RCI 0% Indicative resource allocation adjusted to cover the programming period 3. Public Sector Management (Core Area: Other) Increase the number of public expenditure and financial accountability indicators scoring A or B from 32% in 2009 to 50% in 2015 More effective and efficient utilization of public finances for service delivery and infrastructure provision, and lower cost of doing business Increase in ADB country performance assessment indicator 8a Baseline: 3.0 (2011) Target: 4.0 (2015) Current value: 3.5 (2014) Stronger oversight of statutory authorities, more effective project evaluation and prioritization $1.0 million for ; 0.1% of total COBP envelope, of which: ESG 0% GEM 0% PSD 0% RCI 0% Indicative resource allocation adjusted to cover the programming period 4. Industry and Trade (Core Area 3: Regional Cooperation and Integration) Development of transport infrastructure and utilities to facilitate trade and give cost advantages to domestic exporting industries (no indicators) Increased flow of goods and services across the border Trade volume between Indonesia and West Sepik province increased Baseline: 0% (2011) Target: 10% (2015) Current value: 7% (2013) Development of border infrastructure for customs, immigration, and quarantine Border trade and investment strategic planning and capacity building 0% of total COBP envelope for ESG 0% GEM 0% PSD 0% RCI 0% No change

9 Sectors Selected by ADB Government Sector Objectives Sector Outcomes that ADB Contributes to and Indicators 5. Finance (Core Area 4: Financial Sector Development) Continued encouragement of the outreach of financial services to the grassroots level through microfinance and other credit facilities (no indicators) 6. Health (Non-Core Operations) Reduce the maternal mortality rate as measured by the incidence of deaths per 1,000 live births from 733 in 2010 to 500 in 2015 Increase proportion of 1- year-old children immunized with three doses of DPT hepatitis B Hemophilus from 70% in Financial institutions sustainably and safely provide financial services to a substantially increased number of clients across PNG Increase in households with active deposit accounts Baseline: 0 (2010) Target: 100,000 (2015) Current value: 19,000(2014) c Greater and more equitable utilization of quality primary health services in rural catchment areas Increase community health posts providing child, maternity, and other public health services with qualified community health workers. Baseline: 0 (2012) Target: 16 (2015) ADB Areas of Intervention Expansion of microfinance services to rural areas Collateral or secured transaction reforms Rehabilitation of rural health facilities and provision of minimum standards for quality primary health care services in rural catchment areas ADB Indicative Resource Allocation in the Next Pipeline and Strategic Priorities 0% of total COBP envelope for ESG 0% GEM 0% PSD 0% RCI 0% 0% of total COBP envelope for ESG 0% GEM 0% PSD 0% RCI 0% Changes from CPS or Last COBP No change No change 2010 to 80% in 2015 Current value: 0 (2013) ADB = Asian Development Bank; COBP = country operations business plan; CPS = country partnership strategy; DPT = diphtheria, tetanus, pertussis; ESG = environmentally sustainable growth; GDP = gross domestic product; GEM = gender equity and mainstreaming; km = kilometer; MTDP = medium-term development plan; PNG = Papua New Guinea; PSD = private sector development; RCI = regional integration. a Data to update indicator is not yet available but will be calculated in 2015 through preparations for the Civil Aviation Development Investment Program (tranche 2). b Indicator update expected in 2015 once new Lae port facility becomes operational. c Increase includes only accounts with Nationwide Microbank. Full industry data will become available at the end of Sources: Department of National Planning and Monitoring Papua New Guinea Medium Term Development Plan, Port Moresby: Government of Papua New Guinea; and ADB Country Partnership Strategy: Papua New Guinea, Manila (accessible from list of linked documents in Appendix 2). Appendix 1 5

10 6 Appendix 2 LIST OF LINKED DOCUMENTS 1. Country Partnership Strategy: Papua New Guinea, Summary Information on Proposed Indicative Lending and Nonlending Products

11 INDICATIVE ASSISTANCE PIPELINE Project/ Program Name Sector Poverty Targeting Table A3.1: Lending Products, Strategic Agendas and Drivers of Change Division Year of PPTA /PDA Total OCR Cost ($ million) ADB ADF Loans Grants Total Gov t Cofinance 2015 Firm 1. Civil Aviation Development Investment Program (tranche 3) 2. Highlands Region Road Improvement Investment Program (tranche 3) 3. Strategic Program for Climate Resilience Implementation Project TRA GI IEG, RCI, GCD, GEM TRA GI IEG, GCD, PAR, GEM TRA, ENE GI ESG, GCD, PAR, GEM PATE PATE PATE Total Standby 1. Power Development ENE GI IEG, ESG, PATE GEM Total Firm 1. Power Development ENE GI IEG, ESG, PATE GEM 2. Town Electrification ENE GI IEG, ESG, PATE Investment Program (tranche 2) GEM 3. Land Transport Improvement TRA GI IEG, GCD, PATE Investment Program (tranche 1) GEM Total Firm 1. Civil Aviation Development Investment Program (tranche 4) 2. Highlands Region Road Improvement Investment TRA GI IEG, RCI, GCD, GEM TRA GI IEG, GCD, GEM PATE PATE Program (tranche 4) Total ADB = Asian Development Bank; ADF = Asian Development Fund; ENE = energy; ESG = environmentally sustainable growth; GCD = governance and capacity development; GEM = gender equity and mainstreaming; GI = general intervention; Gov t = government; IEG = inclusive economic growth; OCR = ordinary capital resources; PAR = partnerships; PATE = Pacific Transport, Energy, and Natural Resources Division; PDA = project design advance; PPTA = project preparatory technical assistance; RCI = regional integration; TRA = transport. Source: Asian Development Bank estimates. Appendix 3 7

12 Table A3.2: Nonlending Products and Services, Assistance Type ADB Amount ($'000) Sources of Funding Others Amount ($'000) Assistance Name Sector Division Source Source Power Development ENE PATE PPTA TASF 1, , Land Transport Improvement Investment TRA PATE PPTA TASF Program Total 1, ,500.0 Total ($'000) 8 Appendix Supporting Public Financial Management (Phase 3) PSM PAUS CDTA TASF 1, , Water Supply and Sanitation Institutional Strengthening WUS PAUS CDTA TASF Total 1, , Total ADB = Asian Development Bank; CDTA = capacity development technical assistance; ENE = energy; PATE = Pacific Transport, Energy, and Natural Resources Division; PAUS = Pacific Urban, Social Development, and Public Management Division; PPTA = project preparatory technical assistance; PSM = public sector management; TASF = Technical Assistance Special Fund; TRA = transport; WUS = water and other urban infrastructure and services. Source: Asian Development Bank estimates.

13 ASSISTANCE PROGRAM FOR CURRENT YEAR Poverty Targeting Table A4.1: Lending Products, 2014 Strategic Agendas and Drivers of Change Division Year of PPTA Cost ($ million) ADB ADF Cofinance Project/Program Name Sector Total OCR Loans Grants Total Gov t 2014 Firm Total ADB = Asian Development Bank, ADF = Asian Development Fund, Gov t = government, OCR = ordinary capital resources, PPTA = project preparatory technical assistance. Source: Asian Development Bank estimates. Table A4.2: Nonlending Products and Services, 2014 Assistance Sources of Funding ADB Others Amount Amount Assistance Name Sector Division Type Source ($'000) Source ($'000) ($'000) 2014 Firm 1. Strategic Program for Climate Resilience Implementation Project (Additional Financing) TRA, ENE PATE PPTA TASF-V Total ADB = Asian Development Bank; ENE = energy; PATE = Pacific Transport, Energy, and Natural Resources Division; PPTA = project preparatory technical assistance; TASF = Technical Assistance Special Fund; TRA = transport. Source: Asian Development Bank estimates. Total Appendix 4 9