CPS Final Papua New Guinea Review Validation · 2020. 4. 28. · Partnership Strategy Final Review...

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CPS Final Review

Validation

Papua New GuineaValidation of the Country Partnership Strategy Final Review, 2016–2020

Validation Report April 2020

Papua New Guinea: Validation of the Country Partnership Strategy Final Review, 2016–2020

This document is being disclosed to the public in accordance with ADB's Access to Information Policy.

Independent Evaluation: VR-38

NOTES

(i) The fiscal year (FY) of the Government of Papua New Guinea ends on 31 December.

(ii) In this report, “$” refers to United States dollars.

(iii) For an explanation of rating descriptions used in Asian Development Bank (ADB) evaluation reports, see Independent Evaluation Department. 2015. 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila: ADB.

Director General Marvin Taylor-Dormond, Independent Evaluation Department (IED)

Deputy Director General Veronique N. Salze-Lozac'h, IED

Director

Walter Kolkma, Thematic and Country Division, IED

Team leader Melinda Sutherland, Senior Evaluation Specialist, IED

Team members Ma. Patricia Lim, Senior Evaluation Officer, IED

Michelle Angieline Dantayana, Evaluation Assistant, IED

The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report.

In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the IED does not intend to make any judgments as to the legal or other status of any territory or area.

Abbreviations

ADB – Asian Development Bank

ADF – Asian Development Fund

CADIP – Civil Aviation Development Investment Program

CAPE – country assistance program evaluation

CHP – community health post

COBP – country operations business plan

CPS – country partnership strategy

CPSFR – country partnership strategy final review

DFAT – Australian Department of Foreign Affairs and Trade

DMF – design and monitoring framework

DOW – Department of Works and Implementation

DSP – Development Strategic Plan

EIRR – economic internal rate of return

FCAS – fragile and conflict-affected situation

GDP – gross domestic product

IED – Independent Evaluation Department

JFPR – Japan Fund for Poverty Reduction

LNG – liquefied natural gas

MDG – Millennium Development Goal

MFF – multitranche financing facility

MTDP – Medium Term Development Plan

NGO – nongovernment organization

NSO – nonsovereign operations

O&M – operations and maintenance

OECD DAC – Organisation for Economic Co-operation and Development’s Development Assistance Committee

PARD – Pacific Department

PBL – policy-based lending

PCR – project completion report

PFM – public financial management

PNG – Papua New Guinea

PPL – PNG Power Limited

PPP – public–private partnership

PPRR – project procurement-related review

PRC – People’s Republic of China

PSD – private sector development

PSDI Private Sector Development Initiative

PSM – public sector management

PVR – project completion report validation report

RCI – regional cooperation and integration

SDP – sector development program

SOE – state-owned enterprises

StaRS – National Strategy for Responsible Sustainable Development

TA – technical assistance

WUS – water and other urban infrastructure and services

Currency Equivalents (as of 26 March 2020)

Currency Unit – kina (K)

K1.00 = $0.29

$1.00 = K3.44

Contents

Acknowledgments ............................................................................................................................ vii

Executive Summary ............................................................................................................................ ix

Map ................................................................................................................................................ xvi

Chapter 1: Introduction ..................................................................................................................... 1 A. Validation Purposes and Procedures ......................................................................................................... 1

B. Country Development Context ................................................................................................................... 1

C. Government Development Plans ............................................................................................................... 5

D. Country Partnership Strategy and ADB Portfolio .................................................................................... 6

E. ADB Operations during the Country Partnership Strategy, 2016–2020 ............................................. 8

Chapter 2: Validation of the Country Partnership Strategy Final Review ..............................................11 A. Relevance ..................................................................................................................................................... 11

B. Effectiveness ................................................................................................................................................ 18

C. Efficiency ...................................................................................................................................................... 28

D. Sustainability ............................................................................................................................................... 37

E. Development Impacts ................................................................................................................................ 41

F. Nonsovereign Operations ......................................................................................................................... 48

G. ADB and Borrower Performance .............................................................................................................. 49

H. Overall Assessment..................................................................................................................................... 50

I. Assessment of Quality of Self-Evaluation ............................................................................................... 51

Chapter 3: Key Issues, Lessons, and Recommendations ......................................................................52 A. Issues ............................................................................................................................................................ 52

B. Lessons ......................................................................................................................................................... 53

C. Recommendations to ADB ........................................................................................................................ 53

Appendixes ......................................................................................................................................55 1. ADB Country Portfolio for Papua New Guinea during the Country Partnership ............................. 56

Stragety Final Review Period, 2016–May 2019

2. ADB Operations (Loans and Grants) Approved, Ongoing and Completed during.......................... 57

2016–May 2019, by Sector for Papua New Guinea

3. List of Sovereign Loans and Grants (including Cofinanced) Approved, Ongoing, .......................... 59

and Completed during 2016–May 2019 for Papua New Guinea 4. List of Nonsovereign Operations Approved, Ongoing, and Completed ........................................... 62

during 2016–May 2019 for Papua New Guinea

5. List of Technical Assistance, Approved, Ongoing, and Completed for Papua ................................. 63

New Guinea during 2016–May 2019

6. List of Sovereign Loans and Grants Completed for Papua New Guinea in ...................................... 65

2016–May 2019

7. Papua New Guinea Rating of Country Program Partnership Strategy Objectivies 2016–2020 ... 66

8. Achievement of Country Development Goals, 2016–2020 ................................................................. 67

9. Linked Document ....................................................................................................................................... 68

Acknowledgments

This report was prepared by an independent evaluation team led by Melinda Sutherland, with Ma. Patricia Lim and Michelle Angieline Dantayana as team members. Director General Marvin Taylor-Dormond, Deputy Director General Véronique N. Salze-Lozac’h, Director Walter Kolkma, and Advisor

to the Director General Benjamin Graham provided overall guidance.

Consultants for the validation report were Barry Hitchcock, Dulciana Somare-Brash, and Alexis Arthur Garcia. Independent Evaluation Department (IED) staff member Toshiyuki Yokota commented on the initial draft. Professor David Kavanamur peer-reviewed the draft report.

The team is grateful to Asian Development Bank staff at headquarters and the Papua New Guinea Resident Mission for their support, and to Government of Papua New Guinea officials and other stakeholders for useful discussions and inputs during the evaluation mission.

The IED retains full responsibility for this report.

Executive Summary

The Asian Development Bank (ADB) country partnership strategy (CPS), 2016–2020 for Papua New Guinea (PNG) sought to assist the country in planning and implementing a successful conversion of its resource wealth into inclusive and environmentally sustainable economic growth. ADB’s sovereign program, comprising approved, completed, and ongoing loans, grants, and technical assistance (TA), totaled $2.11 billion during the period 2016 to May 2019. Transport was the sector receiving the largest amount of support (72% of total financing), followed by health (15%), and energy (9%). This report assesses the ADB-supported program during 2016–2020 less than successful on the borderline. ADB had prepared a strategy and a program of investments intended to address key development constraints in PNG. Support to the transport and energy sectors addressed low levels of access to services and created opportunities for Papua New Guineans to better participate in the modern economy. Health sector support increased access to primary health care while focusing on HIV and maternal and child health. Drawing on recommendations of the 2015 Country Assistance Program Evaluation and a fragility assessment, the multitranche financing facility (MFF) modality was chosen as the primary means to deliver support. Because more than 50% of the overall program had commenced prior to the CPS, 2016–2020, substantial weight is given to performance of the three first-generation MFFs. Although the program improved some capacity weaknesses, thereby resulting in improved implementation performance and achievement of project outputs, the program was rated less than effective because many project and program outputs fell short (especially those of older projects) and did not demonstrably link to the strategic objectives of inclusive or environmentally sustainable economic growth. The program continued to grapple with ongoing risks to effectiveness, efficiency, and sustainability, which have been identified in consecutive CPSs for PNG. Analysis of the current portfolio is nevertheless more positive, as the trend reveals that later MFF tranches are performing better than the first tranches approved during the previous country strategy period. The validation makes four recommendations for ADB’s future support to PNG: (i) develop a more explicit and expanded public sector management capacity development program focused on executing and implementing agencies relating to ADB investments; (ii) build on the support already provided to state-owned enterprises (SOEs) to assist with corporate management and governance reforms, with the objective of improving service delivery and financial performance; (iii) initiate a dialogue with the government on how best to support PNG’s objectives for regional economic integration and connectivity with Asia and deliver a targeted program of support to enhance regional cooperation and integration; and (iv) play a lead role in supporting government efforts to coordinate and harmonize lending among development partners to support improved aid effectiveness.

The Independent Evaluation Department (IED) at Asian Development Bank (ADB) validated the Pacific Department (PARD) country partnership strategy final review (CPSFR) of the country partnership strategy (CPS), 2016–2020 for Papua New Guinea (PNG). The validation assessed those ADB operations approved, closed, and ongoing during the CPS period to provide lessons and recommendations to inform ADB’s future PNG country program. In addition to information presented in the CPSFR, the validation used data from in-country consultations during September

2019 with line departments and agencies, development partners, non-state actors, selected project beneficiaries, and staff at ADB headquarters and PNG Resident Mission.

Country Context

PNG has about 850 unique language groups spread across 8 million people residing in rugged mountainous terrain and an extensive archipelago. The country is richly endowed with natural resources, which include minerals, oil and gas, and

x Papua New Guinea: Validation of the Country Partnership Strategy Final Review, 2016–2020

timber. The economy depends heavily on resource extraction, but exploitation has been hampered by rugged terrain, land tenure issues, and the high cost of developing infrastructure. The cultural diversity, coupled with high levels of poverty, low levels of human development, and weak governance, make PNG a complex development environment. PNG has been a parliamentary democracy since gaining independence in 1975. PNG’s small export-oriented economy is heavily reliant on commodity products, notably minerals plus agricultural and forestry products. Although economic growth has averaged 5.5% over the past decade, this growth has not positively impacted the poverty and human development levels of the broad population, particularly of those living in rural and peri-urban areas. About 87% of the population resides in traditional rural communities, surviving primarily on subsistence gardens and small-scale cash cropping. About 27% of the population is poor and/or faces hardship, and 80% of PNG’s poor people live in rural areas. Although agriculture potential is high in many regions, weak national transport networks and limited service delivery constrain rural workers from participating in the economy.

At the time of formulating the CPS, 2016–2020, PNG’s national development objectives were set out in Vision 2050, which aims to ensure that economic growth by 2050 will be broadly based, less reliant on the mining and energy sectors, and conducive to creating new income-earning opportunities and improving human development outcomes. Vision 2050 national development strategies led to development of the first Medium Term Development Plan (MTDP) 2011–2015, a 5-year plan aligned with PNG’s political cycle. MTDP sought to expand government funding targeting four key pillars of infrastructure, health, education, and law and order. MTDP 2, 2016–2017 outlined PNG’s national and subnational plans to grow the economy and achieve development outcomes relating to the same four pillars. MTDP III, 2018–2022 built on the previous plans and prioritized (i) inclusive economic growth with a renewed focus on agriculture, (ii) infrastructure development, (iii) improved quality of health care, (iv) improved quality of education

and skills development, and (v) improved law and order.

CPS, 2016–2020 and ADB Support

The CPS, 2016–2020 sought to assist PNG in planning and implementing a successful conversion of its resource wealth into inclusive and environmentally sustainable economic growth. ADB planned to maximize the impact of its operations by remaining focused on a small number of larger, high-impact activities while prioritizing opportunities for knowledge transfer and capacity development. Multitranche financing

facility (MFF) was identified as the preferred financing modality because of the facility’s ability to provide long-term, predictable finance for executing agencies while supporting development partner capacity building and coordination, and strengthened country financial management. The majority of ADB support was to be in two core sectors: transport and energy. The other sectors of intended support were health, water and other urban infrastructure and services (WUS), and public sector management (PSM).

The active portfolio during the CPS included 25 projects and programs (36 loans and 17 grants) plus 13 technical assistance projects with a total value of $2.11 billion, including cofinancing. It comprised 9 projects approved, together with 16 projects ongoing and completed, during the CPS period. By financing volume, the sector allocation included transport ($1.52 billion, 72%); health ($307 million, 15%); energy ($199 million, 9%); PSM ($36 million, 2%); industry and trade ($26 million, 1%); and finance ($22 million, 1%). A minimal amount was allocated to WUS ($2.5 million). Consistent with project documents, two relatively small climate change, environment, and disaster risk management projects were included under PSM. ADB’s private sector lending was limited and not strong in its performance.

Assessments The CPSFR assessed ADB’s program in PNG from 2016 to 2020 successful overall. It rated the program relevant, likely effective, likely efficient on the borderline, and having satisfactory development impact. The CPSFR rated the

Executive Summary xi

program less than likely sustainable, however. The sustainability rating primarily reflected weak capacity and lack of government funding to undertake necessary maintenance in the transport sector. The validation finds the program overall less than successful on the borderline. It finds the program relevant, less than effective, less than efficient, and less than likely sustainable. Nevertheless, development impacts and ADB performance are deemed satisfactory. The CPS was well-aligned with ADB’s Strategy 2020 and with the strategic development objectives of inclusive economic growth and environmentally sustainable growth. The program improved access to services and economic opportunities. Access to health assistance in rural areas was improved. Policy-based lending (PBL) is helping PNG strengthen health services through policy reforms and direct investments in health systems by building the health sector and improving public financial management (PFM). Regional cooperation and integration (RCI) were not extensively addressed during this CPS period, and ADB will need to dialogue further with the government on how best to support PNG’s objectives for RCI and connectivity. The CPS can be characterized by its focus on three key sectors: dominance of the transport sector in the resource allocation, increasingly successful use of the MFF to provide long-term support to key sectors and address issues identified in the fragility assessment, and particularly the need to build government capacity. Relevance. The CPS was well-aligned with the government’s development priorities and addressed key constraints to PNG’s future growth. Investment in transport, energy, and health provided access to services and likely improved health outcomes. The CPS was aligned with ADB’s Strategy 2020 and its complementary development agenda of inclusive economic growth, environmentally sustainable growth, and RCI. Operationalization of the RCI agenda could have been stronger, however. ADB’s cross-cutting issues were generally integrated into the program of investment, with emphasis on gender mainstreaming, governance, and capacity building. ADB’s drivers of change partnerships and knowledge solutions were appropriate for the program. Private sector development was

important, but it was too small to have a significant effect and was less integrated. Relevance of the program could have been strengthened had it been more balanced and sought, through a modest amount of PBL, to address sustainability issues particularly in the priority sectors and to assist the government to more vigorously address broader governance, capacity, budget, and resource management issues. Historic challenges with sustainability in the PNG program indicate that more could have been done to address sustainability at design, particularly in the first three MFFs, which commenced well prior to the CPS. It is important to note that more than 50% of the total program had commenced prior to the CPS, 2016–2020, thus reflecting the weight of the three older MFFs. The most recent transport MFF (the Sustainable Highlands Highway Investment Program) under CPS, 2016–2020 attempts to address capacity constraint issues and sustainability risks by identifying the need for ongoing operations and maintenance (O&M) in the design. This indicates that lessons of the past had been learned and were addressed during this CPS. The CPS results framework was only partially useful as a tool to measure the achievements of ADB’s portfolio. There were weaknesses in the outcome indicators and targets, which are set at the national-level (as per ADB guidelines) rather than at the ADB-supported program level. The ADB-supported program is assessed relevant. Effectiveness. Many of the output-level indicator targets for transport, energy, and health are likely to be achieved. The investments are less likely to achieve the intended project- and program-level outcomes, however, or contribute adequately to the larger inclusive and environmentally sustainable development outcomes envisaged in the CPS. Cumulative scope reductions indicate reduced overall effectiveness, even though individual scope changes were approved by Management. The number of completed projects is relatively small and could not be used exclusively to determine overall effectiveness. Of the five projects with project completion reports (PCRs), four were rated less than successful and less than effective. The corresponding data for the three projects with PCR validation reports was that two were rated less than successful and less than

xii Papua New Guinea: Validation of the Country Partnership Strategy Final Review, 2016–2020

effective. Analysis of the ongoing portfolio is more positive, indicating a trend that later MFF tranches are performing better than the first tranches. The effectiveness of the portfolio is dominated by the performance of three older and one newer MFF, comprising 65% of the portfolio. In the earlier years, these tranches were more problematic, influencing the effectiveness rating. The portfolio’s progress toward achieving outcomes during the CPS period is assessed less than effective. Efficiency. Consistent with what can be expected in a fragile country, the portfolio faces significant implementation challenges that center on weak capacity in the areas of procurement, financial management, contract management, and construction supervision. In 2018, 12 projects were rated on track, 2 projects were rated potential problem, and 3 projects were rated actual problem (the latter attributed to low contract awards and disbursements). All three of the PCR validations undertaken rated the projects less than efficient. The efficiency assessment was influenced by less than efficient performance of the transport program. Insufficient government counterpart funding is a constraint across the entire portfolio. The validation assessed several ongoing projects also as less than efficient. Despite challenges over the period assessed, the trend in portfolio performance has been upward, indicating that ADB and the government are learning lessons from implementation challenges and applying solutions to newer investments. PNG’s contract award ratio of 50% for 2018 is impressive when compared to other parts of PARD (41%) and ADB-wide (26%). Time from approval to effectiveness or start-up for all projects during 2016–2018 was 6.5 months on average, which is better than the ADB average of 6.7 months. In 2018, loan and grant disbursements totaled $264 million, which was 105% of PNG’s projected disbursements target of $250 million. The disbursement ratio for PNG (26%) is much higher than the PARD average (17%), but lower than the ADB-wide ratio (28%). This is attributable to advances made to large contracts awarded under three of the MFFs. The staffing of the resident mission was strengthened over the CPS period, thereby increasing ADB capacity to support project implementation and oversight. The resident mission grew from 16 staff in 2015 to 21 staff by 2019. Implementation challenges nevertheless

remain because of insufficient capacity in procurement, financial management, contract management, and construction supervision. ADB-supported operations and the portfolio performance are assessed less than efficient. Sustainability. The review of individual projects in the portfolio and issues identified at sector level raised concerns over the inadequate O&M budget in the transport sector; a need to adjust tariffs in the energy sector while strengthening financial management and corporate governance of the power utility PNG Power Limited; and the need for further reforms in the health sector, for example in the area of procurement and distribution of essential drugs. Chronic underfunding of maintenance in the transport sector places PNG’s transport infrastructure at risk of failing to achieve its anticipated design life, thereby reducing intended benefits and constraining the potential for inclusive economic growth. Shortfalls in government counterpart funding for ADB projects indicate the government’s constrained budgetary situation. This validation assesses the program less than likely sustainable. Development impacts. The program is expected to achieve impacts in its three key sectors. In transport, ADB-supported investments will enable rural populations to participate in the wider economy and to access vital education and health services. Energy investments are utilizing environmentally sustainable technologies to provide access and greater service reliability to underserved urban and rural communities. The health sector program is providing greater access to primary health care for rural communities. ADB support to inclusive growth and environmental sustainability and disaster risk management is assessed satisfactory, particularly at project- and program-output levels. Development impacts are not yet apparent at the country or strategy levels, however. Support to RCI, limited in scope, did not deliver results. Good governance and capacity development, gender equity, knowledge solutions, and partnerships all contributed to outputs achieved by ADB’s program. The modest support to improving the business environment and the small portfolio of nonsovereign operations constituted a less than satisfactory response to PNG’s needs. Social and environmental safeguards were addressed satisfactorily, considering the complex operating

Executive Summary xiii

environment where 95% of land is customary and clans and tribes are heterogeneous. The contribution of the ADB-supported program to development impacts is assessed satisfactory. ADB Performance. The CPS adopted strategic direction, priorities, and implementation that were relevant and appropriate for PNG and in line with ADB’s Strategy 2020. Relevance of the program could have been strengthened by a more balanced program that sought, through a modest amount of PBL, to address sustainability issues and to assist the government to deal more vigorously with its broader capacity, budget, and resource management issues. The CPS identified fragility as an issue, and the program responded to a number of areas identified in the fragility assessment and 2015 country assistance program evaluation. Nevertheless, the program would have benefited from a more explicit approach to addressing fragility. This could have included expanded support to address capacity constraints in government agencies. The validation supports the use of MFFs in PNG, because they facilitated long-term and strong partnerships with counterparts, attempted to build capacity in implementing agencies, afforded the government greater funding certainty, and provided assurance among development partners beyond that which sector development program modalities and standalone projects would likely achieve in these specific sectors (transport and energy). It notes, however, that the first generation of MFFs demonstrated weak performance in their first tranches, and this can be attributed to capacity issues within implementing agencies and initially within ADB. Over the CPS period, ADB strengthened the resident mission with key staff to build its implementation and supervision capacity. ADB’s performance is assessed satisfactory. Given the highly complex development environment, ADB performed relatively well. The government was positive about ADB’s performance. There was clear evidence of good performance in respect to partnerships, including leveraging cofinancing, particularly on health and transport. However, more could be done to engage with the People’s Republic of China (PRC) as the second largest bilateral partner and second-largest lender in PNG. Knowledge solutions included publications, training, and events to transfer knowledge and exchange information.

Borrower performance. ADB has primarily classified PNG as a fragile and conflict-affected situation (FCAS) country since 2007, when it first began to assess the fragility of developing member countries. PNG was not classified as a fragile country during 2013–2015. Markers of fragility in PNG include weak governance and institutional capacity combined with corruption, which impair growth and poverty alleviation efforts; inadequate security and service delivery functions; and high vulnerability to natural disasters and climate change. This fragility manifests itself throughout the PNG program in various ways. For example, the government faces significant financial constraints, resulting in delays of counterpart funding and a lack of O&M allocated through budgets, both of which impact the efficiency, sustainability, and long-term expected benefits of ADB investments. PNG needs to improve PSM and PFM to ensure that limited resources are handled in accordance with prioritized allocations. The financial cost of delivery across PNG’s difficult terrain is high and the costs are increased through the government’s limited capacity, weak management, and persistent corruption. The government will continue to require significant levels of ADB support for institutional strengthening and capacity building across all executing and implementing agencies.

Issues PNG’s public debt levels recently exceeded the limit legislated in the Fiscal Responsibility Act, and ADB is the largest source of new loans that are increasing PNG’s debt stock. While PNG’s present ratio of public debt to gross domestic product is lower than those of most other countries globally, knowledge of the evolving debt context should guide the type of support that ADB plans to provide in the short- to medium-term. For example, budget support through PBL coupled with project lending may be useful for consolidating bad debts and preventing excessive debt accumulation. This could work particularly well if the International Monetary Fund is supportive of the overall macroeconomic framework. As PNG becomes more successful in attracting additional support from non-traditional donors and lenders, there will be a challenge for ADB to

xiv Papua New Guinea: Validation of the Country Partnership Strategy Final Review, 2016–2020

coordinate with an expanded development partner community. PNG has, in recent years, attracted increasing support from emerging bilateral partners and lenders other than members of the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD DAC) who engage with the government according to a different set of rules than those of traditional development partners. ADB has the ability to help the government to develop sector plans and policies that can guide the government and other development partners’ investments. The resident mission does not currently interact with the second largest bilateral development partner and the second largest lender, the PRC, which is providing grants and loans in the same sectors as ADB, including on adjoining roads. Additionally, the largest bilateral partner, Australia, also recently started providing development lending (including budget support) to PNG after traditionally only providing grant assistance. PNG continues to grapple with challenges faced by all FCAS countries. Despite concerted efforts, the government’s capacity to deliver its development agenda remains very weak and can only be addressed effectively by a more rigorous and sustained level of long-term support. When working in a FCAS country, it is crucial to thoroughly understand the country context and risks in achieving development outcomes. Chronic underfunding of O&M impairs the sustainability of investments and increases the risk that infrastructure will fail to achieve its anticipated design life, consequently diminishing intended benefits and constraining potential for inclusive economic growth. The issue can only be addressed effectively when the central government budgetary agencies recognize the importance of adequate O&M budgets to maintain national infrastructure assets. ADB did not deliver a targeted program of support to enhance RCI between PNG and neighboring countries in the Asia Pacific region. While some RCI support was extended through Pacific-wide ADB initiatives, PNG is unable to benefit from an ADB subregional economic cooperation program similar to other ADB flagship RCI initiatives, such as the Greater Mekong Subregion and Central Asia Regional Economic Cooperation programs. PNG is

seeking to strengthen its economic relationships with Asian countries where there is potential to engage in larger markets, and this could be supported through a combination of sovereign and private sector support.

Lessons A narrow sectoral focus enables ADB to demonstrate its comparative advantage. The PNG program benefited from the tight sectoral focus on transport, energy, and health. In fragile situations where capacity is a major constraint to project implementation, limiting the number of sectors improves the likelihood that ADB support will achieve a development impact. MFF can be an effective modality in fragile countries to achieve more than the sum of the parts, and particularly where sustained capacity building efforts are needed to enable implementing agencies to plan and deliver projects. The PNG program was characterized by extensive use of the MFF modality. The MFFs have facilitated stronger partnerships with implementing agencies, afforded the government greater funding certainty, and provided certainty among development partners.

Recommendations to ADB 1. Develop a more explicit and expanded PSM capacity development program focused on executing and implementing agencies relating to ADB investments. Recognizing PNG’s fragility and historic sustainability issues, ADB should build government capacity to address weaknesses in fiscal management and improve investments suffering from reduced counterpart funding and lack of O&M funding. ADB could support secondment of Papua New Guineans to ADB headquarters (as requested by the government through the validation mission). ADB could also strengthen capacity of the Department of National Planning and Monitoring, which administers the Capital Investment Programme, to implement the development policies, plans, and priorities of the government and coordinate all development assistance (as requested by the government through the validation mission). This would also enable ADB to better support PNG in planning and implementing a successful conversion of its

Executive Summary xv

resource wealth into inclusive and environmentally sustainable economic growth. 2. Build on the support already provided to state-owned enterprises (SOEs) to assist with corporate management and governance reforms, with the objective of improving service delivery and financial performance. The menu of support should include use of public–private partnerships to utilize private capital and reduce the financing burden on government. This could initially focus on SOEs in sectors where ADB already engages in, such as energy and civil aviation. 3. Initiate a dialogue with the government on how best to support PNG’s objectives for regional economic integration and connectivity with Asia and deliver a targeted program of support to enhance RCI. Helping PNG participate more in Asia’s regional economy could be an important objective of ADB support. Based on current and expected trade, ADB could help PNG to strengthen its economic relationships with Asian countries where there is more potential to engage in larger markets, with the government’s plan to “Connect PNG” and aspirations to access Asian markets under the “Take Back PNG” policy. Analysis of options and sustained dialogue would enable the development of proposals and require RCI discussion within ADB to occur with the East As ia , Southeast As ia , and Pr ivate Sector Operations departments. ADB would need to reach beyond i ts normal counterparts in government, because successful RCI initiatives often have trade and foreign policy dimensions.

ADB support could be focused on narrow objectives and in sectors where ADB already engages in, such as developing civil aviation links to improve access to and integration with Asian markets. 4. Play a lead role in supporting government efforts to coordinate and harmonize lending among development partners to support improved aid effectiveness. As the largest lender, ADB should use its knowledge and experience to better support government efforts to improve debt sustainability by promoting responsible and sustainable lending among all development lenders, including new partners, such as the PRC (as requested by the government through the validation mission). Consistent with the Paris Declaration on Aid Effectiveness, ADB should support the government as it grapples with increased and unharmonized lending from emerging bilateral partners and non-OECD DAC lenders, who engage with the government according to a different set of rules than the traditional development partners. For example, ADB could help PNG to develop sector plans to guide government and development partner investments. ADB should seek, in particular, to engage with PRC to harmonize development efforts and promote sustainable lending in PNG. It should encourage PRC to attend the monthly Donor Partner Roundtable meetings. This is important inasmuch as PRC is providing grants and loans in the same sectors as ADB, including on adjoining roads (associated facilities).

S O L O M O N S E A

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Sepik River

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CHAPTER 1

Introduction

A. Validation Purposes and Procedures

1. This report was prepared by the Independent Evaluation Department (IED) of the Asian Development Bank (ADB) to validate findings and recommendations of the country partnership strategy final review (CPSFR),1 prepared by the Pacific Department (PARD) for the Papua New Guinea (PNG) country partnership strategy (CPS), 2016–2020.2 The assessment covers loan and grant projects and technical assistance (TA) approved or implemented during 2016–2019. The CPSFR assessed ADB’s operations likely successful overall. ADB’s program had been found to be relevant, likely effective, likely efficient on the borderline, less than likely sustainable, and with satisfactory development impacts. 2. The purposes of this report are to (i) validate the findings and assessments of the CPSFR with respect to the relevance, effectiveness, efficiency, sustainability, and development impacts of the country portfolio; (ii) assess the quality of self-evaluation in the results assessment; and (iii) identify issues, lessons, and recommendations for the CPS, 2021–2025 and for improving the design and implementation of current and future ADB investments in PNG. 3. The report was prepared following the 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations.3 The assessment is based on (i) a review of documents, including the CPS, 2016–2020, the CPSFR, country operations business plans (COBPs), reports and recommendations of the President, project completion reports (PCRs), project completion report validation reports (PVRs), TA completion reports, and country-specific national development strategy documents; (ii) consultations in PNG during September 2019 with stakeholders, including government and nongovernment entities and beneficiaries of development assistance; and (iii) discussions with staff of the PNG Resident Mission and other development partners in the country.

B. Country Development Context 4. Political. PNG has about 850 unique language groups spread across 8 million people residing in rugged mountainous terrain and an extensive archipelago. The country is richly endowed with natural resources, including minerals, oil and gas, and timber; and the economy depends heavily on resource extraction. Exploitation of these resources has been hampered, however, by rugged terrain, land tenure issues, and the high cost of developing infrastructure. The cultural diversity, coupled with high levels of poverty, low levels of human development, and weaknesses in governance, make PNG a complex development environment. Since gaining independence in 1975, PNG has been a parliamentary democracy. Post-independence politics have been marked by periods of instability, but these have been resolved within PNG’s constitutional framework. The most recent change of Prime Minister occurred in May 2019, following resignation of the former Prime Minister, Peter O’Neill, prior to a parliamentary vote of no confidence. PNG’s policy and legislative frameworks are generally strong, but the government faces

1 ADB. 2019. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020. Manila. 2 ADB. 2016. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila. 3 IED. 2015. Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final

Review Validations. Manila: ADB.

2 Papua New Guinea: Validation of the Country Partnership Strategy Final Review, 2016–2020

challenges with compliance and implementation. The government’s development strategy, policy, and plans have broad bipartisan support among the many political parties and independent members of Parliament. Consequently, changes in political leadership do not often result in significant strategy or policy changes. 5. PNG is currently included in ADB’s list of fragile and conflict-affected situation (FCAS) countries. ADB has primarily classified PNG as a fragile country since 2007, when it first began to assess the fragility of developing member countries.4 PNG was not classified as a fragile country from 2013 to 2015, during the development of CPS, 2016–2020. Despite this, PNG’s fragility was recognized in the 2015 country assistance program evaluation (CAPE)5 at the time of preparing the CPS, 2016–2020. The CPSFR noted that core political, security, and service delivery functions were limited and concentrated around urban areas. Moreover, it stated that weak governance and institutional capacity had stunted growth and poverty alleviation efforts. 6. Economic Structure. PNG has a small, open, export-oriented economy that is heavily reliant on commodity products, notably minerals, agriculture products, and forestry products. Although economic growth has averaged 5.5% over the past decade,6 this growth has not yet translated into improved poverty and human development levels among the broad population, and particularly not among those living in rural and peri-urban areas. Evidencing this, PNG was one of three countries in the world that did not achieve even one of its Millennium Development Goals (MDGs).7 It also is not expected to achieve any of its Sustainable Development Goals. Human development indicators are generally very low as measured against regional norms and in some cases are deteriorating. Among those appearing to be deteriorating, for example, is that of law and order.8 High levels of unemployment and rural–urban migration have contributed to high levels of crime, prompting the government to explicitly address law and order issues as a development priority. Weak governance, a difficult policy environment for private sector development (PSD), low skill levels, and difficulties accessing finance, together with the so-called “resource curse” have hampered economic performance and the government’s efforts to diversify the economy away from commodity exports and subsistence agriculture. The commencement of liquefied natural gas (LNG) exports in 2014 and potential for further LNG projects in the medium-term provide opportunities to reduce financing gaps for key service delivery priorities, but careful economic management will be required if these gains are to be translated into economic and human development for the country. 7. About 87% of the population (and 80% of PNG’s poor people9) live in rural areas, reside in traditional rural communities, and survive primarily on subsistence gardens and small-scale cash cropping. Although agricultural potential is high in many regions, weak national transport networks and limited service delivery constrain rural workers from participating in the economy. Physical isolation and a lack of connectivity pose major challenges to expanding access to basic social services. That situation is compounded by underlying state fragility and weak bureaucracy. The rural population has very low levels of access to power, quality drinking water, sanitation, education, and health care. Poorly performing state-owned enterprises (SOEs) constitute an important factor in the weak service delivery in urban and rural areas. Their financial performance has been a drain on public finances and their borrowing a risk to national debt management.

4 ADB. 2007. Annual reports on the country performance exercise (2007–2015). Manila; and World Bank. 2016. Harmonized List

of Fragile Situations FY 17. Washington, D.C. 5 IED. 2015. Country Assistance Performance Evaluation: Papua New Guinea. Manila: ADB. 6 ADB. 2019. Key Indicators for Asia and the Pacific, 2019. Manila. 7 The MDGs were 8 goals that all 191 United Nations member states (including PNG) agreed to try to achieve by 2015. The MDGs

were to: eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other diseases; ensure environmental sustainability; and develop a global partnership for development.

8 Australian Department of Foreign Affairs and Trade. 2019. Aid Program Performance Report 2018–2019: Papua New Guinea. Canberra.

9 ADB. 2015. Country Partnership Strategy, 2016–2020: Poverty Analysis. Manila.

Introduction 3

8. Economic Performance. Economic growth during the CPS implementation period was slower than anticipated, resulting in stagnation in per capita income after 2016 (Figure 1). Gross domestic product (GDP) growth was 2.0% in 2016, 3.0% in 2017, and −0.6% in 2018, when an earthquake disrupted oil, gas, and gold production and exports. This period of slow growth was preceded by 2 years of very rapid growth, when the economy benefitted from the commencement of LNG exports. The growth outlook for 2019 and 2020 is for GDP to expand in the range of 3% to 4%. Inflation moderated during the CPS period from 6.7% in 2016 to 4.5% in 2019 as foreign exchange became more readily available and the money supply contracted.10 The outlook for inflation is 4%–5% over the next 2 years.

9. The current account posted a large surplus in 2018 equal to 26.7% of GDP. Oil and gas prices lifted the surplus and helped to overcome effects of the earthquake. LNG exports made the largest contribution to the surplus. In 2018, the foreign currency reserves grew by 33.6% to $2.3 billion, providing cover for 11.6 months of imports. The main source was $940 million in new external sovereign borrowing (footnote 10). Despite this positive trend, foreign currency rationing remains a serious problem for importers and companies wishing to remit dividends. 10. The government reduced its fiscal deficit during the period from 4.6% of GDP equivalent in 2016 to 2.3% in 2018. In 2018, government revenue increased by 16.3%, benefiting from improved tax compliance and higher collections of mining and petroleum taxes and dividends with the rise in commodity prices. Problems with budget execution remain, however. Late payment of salaries and to contractors is common, as are difficulties in meeting counterpart contributions to foreign-assisted investment projects. The deficit is being financed by external borrowing, including budget support loans from multilateral institutions, loans from lenders other than the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD DAC), and proceeds from a 2018 sovereign bond issuance. External debt has been on the rise in recent years, and it is projected by the Department of Treasury to reach the equivalent of 13.6% of GDP by 2020, when it will be 44.8% of total central government debt (footnote 10). In September 2019, the government confirmed that the current level of public debt-to-GDP (41.3%) exceeded the 35% limit legislated in the PNG Fiscal Responsibility Act 2006. 11 In response, the government addressed this by raising the limit to 45% during the

10 ADB. 2019. Asian Development Outlook. Manila. 11 Government of PNG. 2009. PNG Fiscal Responsibility Act 2006. Port Moresby.

Figure 1: Annual Gross Domestic Product Growth Rate: Papua New Guinea and Selected Pacific Countries, 2008–2018

Sources: Asian Development Bank. GDP Growth in Asia and the Pacific, Asian Development Outlook. Manila. https://data.adb.org/dataset/gdp-growth-asia-and-pacific-asian-development-outlook-ado (for 2013–2018 data); ADB. 2015. Asian Development Outlook 2015: Financing Asia’s Future Growth. Manila (for 2010–2012 data); and ADB. 2013. Asian Development Outlook 2013: Asia’s Energy Challenge. Manila (for 2008–2009 data).

6.6 6.0

7.4

11.3

7.7

3.8

12.5

10.5

2.0

3.0

-0.6

-5

0

5

10

15

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

The Pacific Fiji Papua New Guinea

Samoa Solomon Islands Timor-Leste

https://data.adb.org/dataset/gdp-growth-asia-and-pacific-asian-development-outlook-ado


supplementary budget process.12 The Treasurer described this in Parliament as “a responsible change given our starting point and the likelihood of more bad debts.” While this is a notable matter, it must be acknowledged that PNG’s current public debt-to-GDP is lower than those of most other countries.13 The relatively low limit was set at a time of higher expected economic growth than that which eventuated. New extractive industry investments are expected to commence in the next few years, significantly increasing PNG’s potential to repay current and future debt. 14 ADB is the largest source of the development loans that are increasing debt stock in PNG.15 11. Investment climate and governance. PNG is currently included in ADB’s list of FCAS countries. The CPSFR stated that core political, security, and service delivery functions are limited and concentrated around urban areas, adding that weak governance and institutional capacity have stunted economic growth and poverty alleviation efforts. High levels of corruption also impede development. Transparency International’s 2018 Corruption Perception Index ranked PNG 138 out of 180 countries, giving it a score of 28 out of 100 and classifying it as “highly corrupt.”16 This is a measure of the perceived level of corruption in the public sector. PNG’s low score and rating are indicative of public and private sector efforts and intentions to prevent corruption and promote integrity. PNG ranked 108 out of 190 countries in the World Bank’s 2019 Doing Business index.17 The country ranked relatively better than its overall position on getting electricity (ranked 72), obtaining credit (ranked 44), and protecting minority interests (ranked 9). But, the country ranked relatively worse on starting a business (ranked 143), dealing with construction permits (ranked 124), and registering property (ranked 121). Government arrears in paying contractors contribute to the high cost of doing business and impact the investment climate. 12. The 2015 CAPE also found that weak governance in implementing policies for social inclusion and equity, public sector management (PSM), and enforcement of the rule of law are main reasons for the persistent lack of institutional capacity in PNG, thus making portfolio management a complex task for ADB.18 PNG’s crime rate is among the highest in the world, and law and justice issues adversely affect the business climate. Crime rates are highest in and around major cities, such as Port Moresby, Lae, Madang, Mount Hagen, and Goroka.19 Poor safety and security are primary reasons why PNG currently ranks 135 out of 140 countries in the Economist Intelligence Unit’s 2019 livability index, with a score indicating that “most aspects of living are severely restricted.” 20 Those in PNG’s private sector are concerned about crime, and this influences their business decisions. Evidencing this, World Bank research found that 81% of businesses state that their decisions for further investment or expansion of their operations were affected by the law and order situation in the country.21 Validation mission interviews with the private sector found that those in the private sector perceive law and order, the high costs of electricity and water, access to land, and shortages of foreign currency as issues constraining private sector growth. The chief executive officer of the Manufacturers Council of PNG informed the mission that its surveys of businesses in PNG identified that the exceptionally high cost of providing security often totaled as much as 20% of a firm’s annual turnover.

12 Government of PNG. 2019. Amendments to the Financial Regulatory Act 2019. Port Moresby. Parliamentary speech delivered by

the Honorable Ian Ling-Stucky, Minister for Treasury, on Friday 11 October 2019. 13 Based on April 2018 International Monetary Fund (IMF) data from its World Economic Outlook database and the 41.3% level of

public debt-to-GDP estimated by the PNG Treasurer in October 2019. 14 Examples of new extractives industry investments expected to commence in the short- to medium-term include the Papua LNG

Project, P’nyang LNG Project, and Wafi-Golpu Copper-Gold Project. 15 R. Rajah, A. Dayant, and J. Pryke. 2019. Ocean of debt? Belt and Road and debt diplomacy in the Pacific. Sydney: Lowy Institute. 16 Transparency International. 2018. PNG Country Profile. Port Moresby. 17 World Bank. 2019. Doing Business 2019. Washington, D.C. 18 ADB. 2015. Country Assistance Performance Evaluation: Papua New Guinea. Manila. 19 U.S. Department of State Overseas Security Advisory Council. 2019. Papua New Guinea 2019 Crime and Safety Report.

Washington, D.C. 20 The Economist Intelligence Unit. 2019. The Global Liveability Index 2019. London. 21 S. Lakhani and A.M. Willman. 2014. The Socio-economic Costs of Crime and Violence in Papua New Guinea Recommendations

for Policy and Programs. Research and Dialogue Series: The Socio-economic Costs of Crime and Violence in Papua New Guinea. Paper No. 5. Washington, D.C: World Bank.

Introduction 5

13. Social Development. There is no official measure of poverty in PNG and there is a dearth of reliable and current data from which the situation can be assessed, but existing social indicators demonstrate that PNG’s human development is below that of other countries with comparable per capita incomes. While it is not possible to present current income inequality figures, it is expected that the majority of Papua New Guineans living in rural areas survive on subsistence and small holder farming. That would strongly skew income inequality figures. PNG was ranked 153 out of 189 countries in the 2018 Human Development Index, placing the country in the category of low human development.22 PNG’s position has declined since 2016, when it was ranked 151. PNG’s difficult terrain, lack of transport and other infrastructure, weak governance, and lack of government presence in rural areas result in poor delivery of education, health, and other vital services to the majority of the population. National statistics show that PNG has the fourth highest prevalence of stunting through malnutrition in the world.23 Almost half of PNG’s children are stunted (45%), 24% are underweight, and 14% are suffering from moderate and severe forms of wasting.24 Stunting is a critical development issue, as it results in delayed mental development and reduced intellectual capacity, which in turn affects economic productivity at the national level.25 If left unaddressed, the current levels of stunting and wasting from malnutrition would continue to impede PNG’s economic and human development for generations to come. 14. Gender Equity. PNG ranks very low in all global indicators for advancing gender equality and elimination of violence against women.26 Key issues facing women in PNG include a high level of violence against women and girls; a need for greater economic empowerment, including access to safe markets; and a low level of women’s involvement in national decision making. The incidence of gender-based violence in PNG is considered by some to be of epidemic proportions. Overseas Development Institute research estimates that more than 66% of women will suffer some form of physical or sexual violence in their lifetimes; 41% of men have admitted to having raped someone; and 7.7% of men admit to having perpetrated male rape. 27 Further impeding economic and human development, women are rarely involved in leadership positions. Evidencing this, there are no women representatives in the national Parliament. The Country Gender Assessment found a persistent gap in the percentage of girls and boys of eligible age enrolled in secondary school, tertiary education, and training institutions.28 At primary school level, the gender gap has narrowed. There has been little improvement, however, in key health indicators (e.g., access to reproductive health care, malnutrition among women and children), and especially for the majority of the rural population. Data gathered by the health projects for ADB project sites are said to show some improvement in maternal mortality, but such data was not provided to the validation mission.

C. Government Development Plans 15. At the time of formulating the CPS, 2014–2018, the country’s development priorities were set out in Vision 2050,29 the Development Strategic Plan (DSP), 2010–2030,30 an addendum to the DSP, and the National Strategy for Responsible Sustainable Development (StaRS), 2010–2030.31 The strategy was to be implemented through a series of Medium-Term Development Plans (MTDPs), each of which was to be aligned with PNG’s 5-year political cycle and guided by an accompanying medium-term fiscal strategy to ensure ongoing confidence in the government’s fiscal position and the PNG economy as a whole.

22 United Nations Development Programme. 2018. Human Development Report: Work for Human Development. New York. 23 UNICEF. 2017. UNICEF Annual Report 2017: Papua New Guinea. Port Moresby. 24 UNICEF. 2014. Malnutrition - a Silent Emergency in Papua New Guinea. Press Release. 20 June. Port Moresby. 25 World Health Organization (WHO). 2010. Nutrition Landscape Information System (NLIS) Country Profile Indicators Interpretation

Guide. Geneva. 26 UN Women. 2019. UN Women Papua New Guinea. New York.

27 Overseas Development Institute. 2015. Gender violence in Papua New Guinea: The Cost to Business. London. 28 ADB. 2012. Country Gender Assessment: Papua New Guinea, 2011–2012. Manila. 29 Government of PNG. 2009. PNG Vision 2050. Port Moresby. 30 Government of PNG. 2010. Papua New Guinea Development Strategic Plan, 2010–2030. Port Moresby. 31 Government of PNG. 2014. National Strategy for Responsible Sustainable Development (StaRS), 2010–2030. Port Moresby.


16. Vision 2050 aims to ensure that economic growth by 2050 will be broadly-based, less reliant on the mining and energy sectors, and conducive to creating new income-earning opportunities and improvements in human development outcomes. The DSP provides a strategic planning framework for extending economic growth benefits to the most disadvantaged regions and communities through a more effective transport and utilities network, as well as quality education and health services. StaRS emphasizes reducing the economy’s reliance on nonrenewable resource extraction and encourages development of environmentally sustainable industries and low-carbon technologies in pursuing a more inclusive economic growth path. Together, Vision 2050, the DSP, and StaRS guide all MTDPs and sector strategies. 17. PNG’s first MTDP, 2011–2015, which was extant at the time of developing CPS, 2016–2020, sought to expand government funding targeting four key pillars of infrastructure, health, education, and law and order.32 MTDP 2, 2016–2017 outlined PNG’s national and subnational plan to grow the economy and achieve development outcomes relating to the same key pillars.33 MTDP III, 2018–2022 then built on the previous plans and prioritized (i) inclusive economic growth with a renewed focus on agriculture, (ii) infrastructure development, (iii) improved quality of health care, (iv) improved quality of education and skills development, and (v) improved law and order.34

D. Country Partnership Strategy and ADB Portfolio 18. The CPS, 2016–2020 sought to assist PNG in planning and implementing a successful conversion of its resource wealth into inclusive and environmentally sustainable economic growth. ADB planned to maximize the development impact of its operations by remaining focused on a small number of larger, high-impact activities while prioritizing opportunities for knowledge transfer and capacity development. Multitranche financing facilities (MFFs) were identified as the preferred financing modality because of their capability to provide long-term, predictable finance for executing agencies; support development partner coordination and capacity; and strengthen country financial management. More than 88% of ADB support was to be provided in two core sectors: transport and energy (see next section). The other supported sectors were to be rural primary health delivery, water and other urban infrastructure and services (WUS), and PSM. 19. In transport, operations were to focus on land transport, civil aviation, and possibly maritime transport. ADB identified limited and unreliable infrastructure maintenance funding as a key issue, because it threatened the sustainability of infrastructure projects. In line with the 2015 CAPE recommendations, ADB planned to improve sustainability through ongoing sector dialogue, support for public–private partnerships (PPPs), as well as knowledge management and TA to improve maintenance and operating cost financing. 20. ADB planned to promote environmentally sustainable growth by prioritizing renewable energy options in generation expansion and infrastructure designs that are resilient to the effects of climate change and potential disaster scenarios. In the energy sector, ADB sought to address limited access to affordable and reliable power, which currently reaches just 6%–12% of the population.35 ADB also planned to support economic development and poverty reduction in urban and peri-urban areas by lowering business costs and reducing the country’s reliance on the resources sector for economic growth. Investment projects were to include renewable energy generation and improving transmission and distribution efficiencies on main power grids. ADB was also to support improving electricity services to

32 Government of PNG. 2010. Medium Term Development Plan, 2011–2015. Port Moresby. 33 Government of PNG. 2015. Papua New Guinea Medium Term Development Plan 2: 2016–2017. Port Moresby. 34 Government of PNG. 2017. Papua New Guinea Medium Term Development Plan III: 2018–2022. Port Moresby. 35 During a validation mission interview with PNG Power Limited on 19 September 2019, the PNG Power Limited executive advised

that about 6% of the population is paying to receive power (e.g., through the Easipay system) but it is assumed that as much as an additional 6% receives power from the grid through other means (e.g., by tapping into the lines illegally or via off-grid solutions such as solar power).

Introduction 7

provincial centers through least-cost hydropower projects and improved distribution systems. This approach was to include expanding the existing power grids to peri-urban areas and promoting private sector-led use of innovative models for off-grid power delivery. 21. In health, ADB’s support would focus on the country’s key health challenges of maternal and child health, HIV/AIDS, and other infectious diseases through an integrated approach to health system strengthening. The planned financing modality was policy-based lending (PBL) to support regulatory and management reform and strengthen health workforce recruitment and the country’s weak referral system. ADB aimed to strengthen partnerships with civil society and attract new sources of cofinancing and counterpart funding. 22. The approach in WUS was to support the government in resolving a number of outstanding water, sanitation, and hygiene policy and institutional issues through SOE reforms, PPPs, and knowledge products. The aims were to improve sector performance and address the issues of low levels of access and poor service quality. 23. ADB’s support for PSM was targeted to increasing public sector accountability and transparency so that the government could more effectively and efficiently translate growing public revenues into delivering services and providing infrastructure. With only 0.2% of the total budget directly allocated to PSM, ADB planned to focus support on (i) more transparent and accountable budgeting practices, with an emphasis on natural resource revenue management and improved infrastructure budgeting and coordination; (ii) government efforts to implement a sovereign wealth fund and Extractive Industries Transparency Initiative36 requirements; (iii) access to finance initiatives undertaken under ADB’s Private Sector Development Initiative (PSDI);37 and (iv) advancing SOE reform, particularly implementation of the government’s community service obligation policy. Alignment and partnership with bilateral partners in the sector were to be central to ADB’s approach. 24. The CPS also set out ADB’s approach to incorporating Strategy 2020 thematic drivers of change into the program. Under environmental sustainability, ADB planned to continue to help PNG manage its vulnerabilities to frequent natural disasters and climate change-related risks. To support PSD, ADB would remain focused on developing new private sector operations (PSO) in transport and energy while utilizing loans, equity investments, and credit enhancement products. The CPS planned to build upon the substantial gender mainstreaming efforts made in ADB projects. These would relate in particular to improving access to infrastructure and social services while including gender-specific indicators and targets as integral components of ADB’s CPS results framework. Knowledge solutions were identified as critical for ADB’s strategic approach in PNG. The country knowledge plan identified a targeted program of activities linked to ADB’s planned sector operations. Knowledge solutions for transport and energy were to be focused on improved sector planning and strengthening maintenance and operational management structures to ensure future investments are sustainable and have maximum impact. ADB planned to enhance partnerships with other development partners and explore cofinancing opportunities. ADB was also to partner more closely with civil society organizations and the private sector, with the resident mission deepening its linkages with local universities and civil society to monitor ADB projects and create knowledge products.

36 Extractive Industries Transparency Initiative. https://eiti.org/papua-new-guinea. 37 ADB. 2013. Technical Assistance for the Pacific Private Sector Development Initiative, Phase III. Manila (TA 8378-REG for $30.5

million financed by ADB [$2 million], the Government of Australia [$24 million], and the Government of New Zealand [$4.5 million]).

https://eiti.org/papua-new-guinea


E. ADB Operations during the Country Partnership Strategy, 2016–2020

1. Planned ADB Country Program 25. At the beginning of and during the CPS period, PNG was classified as a Group B country and resources were provided from both the Asian Development Fund (ADF), which is ADB’s concessional lending window, and ADB’s ordinary capital resources (OCR). The indicative resources for 2016–2018 totaled $637 million, including an allocation of $504 million from OCR and $133 million from ADF.38 The final allocations of ADF resources were dependent on the available ADF commitment authority and the outcome of the country performance assessments. 26. The COBP, 2016–2018 was prepared at the same time as the CPS, 2016–2020. In the COBP’s indicative lending program, the transport sector was to be provided more than two-thirds of the resource envelope, with an allocation of $436.0 million (69% of total CPS envelope). 39 Energy was allocated another one-fifth, at $122.7 million (20%), health $40.8 million (6.6%), WUS $31.5 million (5.1%), and PSM $1.0 million (0.2%) (Figure 2). The indicative nonlending program for 2016–2018 totaled $3.2 million, of which $1.5 million was for project preparatory TA. 27. The COBP, 2016–2018 was aligned with the CPS and contained the same resource parameters. The 3-year program included two tranches of the ongoing Highlands Region Road Improvement Investment Program and two tranches (one as standby) of the new Land Transport Investment Program. The transport portfolio also included a tranche of the ongoing Civil Aviation Development Investment Program. Under energy, a tranche release was planned for the ongoing Town Electrification Investment Program and the Power Development Project. The program also included the Health Services Sector Development Program (HSSDP) and the District Towns Water and Sanitation Project. As foreshadowed in the CPS, the dominant financing modality was MFF. Only $15 million of cofinancing was identified. Two relatively small capacity development TA projects were included in the program for public financial management (PFM) and water supply and sanitation institutional strengthening. 28. Evolution of the CPS. There were no significant changes to ADB’s strategic approach during CPS implementation. The program was strongly committed to a set of preexisting MFFs (MFFs comprised 65% of the total support through the CPS, 2016–2020). At the government’s request, however, the strategy focused during the first 3 years of implementation on transport, energy, and health, while WUS and PSM were supported only through limited TA. Under the CPS, the original cost-sharing ceiling for the loan portfolio was up to 85%. However, due to a government shortage of funds and a currency shortage, which led to delays in implementation, ADB increased the loan ceiling up to 90% (as shown under Civil Aviation Development Investment Program [CADIP] 3).

38 ADB. 2015. Country Operations Business Plan: Papua New Guinea, 2016–2018. Manila. 39 The total resource envelope provided in the CPS was for COBP, 2016–2018 and not for the whole CPS period. The total resource

envelope of $637 million consisted of $504 million from OCR and $133 million from ADF. The indicative lending program totaled $632 million, the indicative nonlending program (TA) was $3.2 million for the same period, and their sum was thus $635.2 million. The apparent discrepancy of about $2 million occurs because ADF allocations were not yet confirmed at the time of finalizing the CPS and COBP, 2016–2018, as alluded to in para. 21 of the CPS document and discussed in para. 26 of this document.

Introduction 9

2. Approved ADB Portfolio

29. Active sovereign loans, grants, and TA during the CPS period totaled $2.11 billion, including cofinancing, (see Appendix 1). Transport was the largest sector, at $1.52 billion (72%); followed by health, at $306.65 million (15%); energy, at $198.87 million (9%); PSM, at $36.13 million (2%); industry and trade, at $25.90 million (1%); finance at $22.09 million (1%); and WUS at $2.49 million (0.12%) (Appendix 2).40 The portfolio composition was aligned with the request of the government to focus on transport, energy, and health. Changes made through the COBP processes resulted in sectoral expenditure being different from what was originally anticipated under the CPS, 2016–2020. The proportion allocated to transport and health over the period was higher than originally intended, while energy received less than first projected. Consistent with project documents, two relatively small climate change, environment, and disaster risk management projects were included under PSM. Although

40 Data used to measure performance in the CPSFR covered January 2016 to May 2019, and this validation report covers

performance to November 2019.

Figure 2: Country Partnership Strategy, 2016–2020 Lending Resource Envelope ($ million)

COBP = country operations business plan; PSM = public sector management; WUS = water and other urban infrastructure and services. Sources: ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila; ADB. 2016. Country Operations Business Plan: Papua New Guinea, 2017–2019. Manila; ADB. 2017. Country Operations Business Plan: Papua New Guinea, 2018–2020. Manila; ADB. 2018. Country Operations Business Plan: Papua New Guinea, 2019–2021. Manila.

$436 ,

69%

$123 ,

19%

$41 , 7%

$32 , 5%

$1 , 0%

COBP 2016-2018

Transport Energy Health WUS PSM

$1,151 ,

69%$61 , 4%

$106 , 6%

$51 , 3%$300 ,

18%

COBP 2017-2019

Transport Energy Health WUS PSM

$971 ,

66%$60 , 4%

$50 , 3%

$395 ,

27%

COBP 2018-2020

Transport Energy WUS PSM & Health

$1,201 ,

60%

$451 ,

22%

$38 , 2%

$46 , 2%

$200 ,

10%$30 , 2%

$50 , 2%

COBP 2019-2021

Transport Energy Health WUS

PSM Finance Education


significant efforts were directed to support improved PSM within the three dominant sectors, direct expenditure on PSM as a standalone sector was minimal (0.2% of the total allocation). The finance; industry and trade; and climate change, environment, disaster risk management sectors were outlined in the CPS but not reflected in the CPS results matrix. Operations approved during the CPS period consisted of nine sovereign loans and grants, six TA projects, and two nonsovereign loans and equity investments. 30. Aside from projects approved during the CPS period, this validation also assesses ongoing and completed projects during the CPS period (Appendix 3). More than 50% of the total program commenced prior to the CPS, 2016–2020, reflecting the weight of the three older MFFs. Eight projects totaling $424.1 million were completed during the CPS period. Of the 25 projects in total (32% of the program under review), 5 have PCRs and 3 of those have PVRs. Seven TA projects totaling $7.22 million (including cofinancing) of the total 13 TA projects were completed. Five of these seven have TA completion reports. Additionally, two nonsovereign investments had been approved prior to 2016 and two closed during the CPS period. As of May 2019, the ongoing portfolio consisted of 17 sovereign projects totaling $1,442.7 million, 6 TA projects valued at $16.3 million (including cofinancing), and 2 nonsovereign loans and equity investments totaling $5.0 million (Table 1).

Table 1: Total Asian Development Bank Active Portfolio, 2016–2020

Project Type Number of Projects Approved Amount

($ million)

Sovereign approved and ongoing during CPS period 8 915.2

Sovereign approved and closed during CPS period 1 1.0

Sovereign approved before CPS period and ongoing during CPS period 9 527.5

Sovereign approved before CPS period and completed during CPS period 7 424.1

Sovereign total 1,867.8

Nonsovereign Approved during CPS period 2 5.0

Nonsovereign approved before CPS period and completed during CPS period 2 54.0

Nonsovereign total 59.0

Total 1,926.8

CPS = country partnership strategy. Notes: Values exclude the technical assistance portfolio and cofinancing. The country partnership strategy final review total for the portfolio of $2.11 billion includes cofinancing.

Source: Asian Development Bank database.

CHAPTER 2

Validation of the Country Partnership Strategy Final Review

31. This chapter validates the findings of the CPSFR and provides an overall assessment of the performance of the CPS and ADB’s operations, consistent with the 2015 Guidelines for the Preparation of CAPEs and CPSFR Validations (footnote 3). The analysis also draws on the assessments of PCRs and PVRs for completed projects.

A. Relevance 32. The CPSFR assessed the ADB program under the CPS, 2016–2020 relevant. In making this assessment the CPSFR considered alignment with the national development agenda, alignment with ADB’s strategic agenda and core operational areas, recommendations of the 2015 CAPE, recommendations of a fragility assessment made in 2014, the appropriateness of selected modalities, alignment with PSD, strategic positioning and alignment with development partner programs, effective gender mainstreaming, the quality of the CPS results framework and targets, and the relevance of sector projects and programs. The validation assesses ADB’s program under the CPS, 2016–2020 relevant. 33. Alignment with country needs and government priorities and choice of sectors. The CPS and portfolio composition were well-aligned with the country development agenda, including the goal of transforming resource wealth into inclusive and environmentally sustainable economic growth and the sector selection. The validation mission verified that the government had specifically requested that ADB focus on transport, energy, and health. The government’s national prioritization of these three sectors, among other things, enabled ADB to focus assistance in a way that demonstrated its comparative advantage. Support for transport and energy addressed the need to improve access, and particularly for the rural population. Investment in the health sector sought to improve access to primary health care especially in the key areas of maternal and child health and HIV/AIDS, as well as PFM through the inclusion of PBL as part of a sector development program (SDP). 34. Alignment with ADB’s strategic agenda and core operational areas. The CPS was well-aligned with ADB’s strategic agenda and core operational areas. The portfolio was relatively well-aligned with four of the five core areas of operations under ADB’s Strategy 2020 (infrastructure, environment, RCI, finance sector development, and education), as well as with drivers of change and priority areas of climate change and PSD. The CPSFR noted strong alignment with three drivers of change: gender equity, good governance and capacity development, and partnerships. The program was dominated by infrastructure, and it was through these investments that ADB delivered a number of its other priorities, including partnerships and capacity building. Partnerships comprise a positive feature of the program, with ADB aligning closely with key bilateral development partners to deliver support.41 35. Incorporating recommendations from the CAPE and Fragility Assessment. The CPS took account of the 2015 CAPE recommendations to use MFFs for roads, energy, and civil aviation, as well as to focus

41 Development partners with which ADB frequently engages include Australia, New Zealand, Japan, European Union (EU), and

World Bank. See Appendix 4 for a comprehensive list.


ADB’s limited financial resources on larger projects. The CPS was also informed by the results of a 2014 pilot assessment of fragility in PNG, which had explored the context and implications of instability. Consistent with the CAPE, the fragility assessment supported the use of MFFs to provide long-term financing and to support capacity building within departments, and particularly to develop project pipelines. Coupled with good governance and capacity development, strengthening institutions and PFM were identified as key drivers of change and crucial to improving the cost-effective delivery of public goods and services and broadening inclusiveness. The assessment also recommended that ADB work to ensure inclusiveness of its assistance by pairing large infrastructure projects with TA and grant-financed activities, similar to that which occurred under the Japan Fund for Poverty Reduction (JFPR) grant for the Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities support. The CPS integrated these recommendations. 36. Appropriateness of selected modalities. Following the 2015 CAPE and the fragility assessment and drawing on the experiences of the previous CPS period, MFF was utilized as the dominant modality for the CPS, 2016–2020 to provide the means to address large-scale and national-level projects and programs. The MFF modality demonstrated that it could achieve more than the sum of its parts in PNG’s fragile country context. It provided flexibility with predictable financing and encouraged investment in procurement and advance project preparation. It created an environment more conducive to long-term capacity development and staff training, and it was used to attract cofinancing resources. The program included four MFFs in the transport sector (Highlands Region Road Improvement Investment Program, Sustainable Highlands Highway Investment Program [SHHIP], and Civil Aviation Development Investment Program) and energy sector (Town Electrification Investment Program). Three of the MFFs are relatively old, having been designed and approved more than 10 years ago, indicating that the strategy and delivery modalities were largely predetermined at commencement of the CPS period. The Sustainable Highlands Highway Investment Program, on the other hand, is relatively new, having been approved in 2017. 37. The validation mission’s discussions with government counterparts and sector staff involved in processing and implementing the MFFs confirmed that the modality is appropriate for PNG and that the choice of MFF contributed to improved implementation and capacity development. Development partners confirmed that ADB’s long-term and large-scale approach to supporting the transport and energy sectors through MFFs gave them confidence to cofinance with ADB and to provide complementary investments in the same sectors, where they otherwise might not have done so. The MFF modality provided a framework to attract cofinancing resources to the sectors of operation, directly drawing more than $36 million, or 3% of the total MFF approved tranches. More complementary financing was provided by development partners through separate and additional investments not considered in this report. Government counterparts were of the view that larger contract packages through MFFs are not always best for PNG, and particularly when MFF subcontracting does not go to domestic companies. Consideration should be given to developing the local construction industry and, wherever appropriate, growing domestic private sector opportunities through participation in ADB contracts. The SDP modality was utilized in the health sector, enabling ADB to address policy reforms alongside an investment component. Other projects were either loan- or grant-financed projects, together with standalone and supporting TA. 38. Alignment, cofinancing, and coordination with development partner programs. The CPS aimed to strengthen partnerships with other development partners and leverage cofinancing opportunities. The CPS priorities reflected extensive consultations with development partners, civil society organizations, and the private sector. ADB regularly participates in the monthly Development Partner Roundtable Meetings, co-chaired by Australia and United Nations Development Programme. ADB coordinated closely and cofinanced projects with Australia, through its Department of Foreign Affairs and Trade (DFAT), PNG’s largest bilateral development partner. ADB also cooperated with the governments of New Zealand, Japan, and the European Union (EU). These partnerships focused on increasing the number of beneficiaries under road and energy projects to address poverty reduction more effectively. Notable

Validation of the Country Partnership Strategy Final Review 13

cofinancing included EU cofinancing for Highlands Region Road Improvement Investment Program Tranche 3, and the Government of Australia is supporting the Sustainable Highlands Highway Investment Program, Rural Primary Health Services Delivery Project (RPHSDP), and Health Services Sector Development Program. Australia was a major cofinancier for both the PSDI and the Pacific Business Investment Trust Fund and Investment Facility. TA engaged under the Pacific PSDI Phase III was used to, among other things, strengthen the institutional framework of PSD in PNG by supporting the government in establishing guidelines. IED evaluated the initiative in 2018.42 39. The government and development partners confirmed that ADB’s use of the MFF and SDP modalities contributed to ADB’s success in attracting cofinancing to its operations. For example, the Australian Government informed the validation mission that MFFs signaled ADB’s long-term commitment to support transport and provided a framework within which cofinanciers could effectively engage. ADB also succeeded in attracting support in a number of other areas. The Government of Japan, through the JFPR, provided funds for the project Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities and, jointly with the Government of New Zealand, for the Improved Energy Access for Rural Communities project. Nongovernment organizations (NGOs) and civil society organizations contributed to initiatives in maritime and waterways safety, the energy access program, and health services. ADB has not yet harmonized development efforts with the People’s Republic of China (PRC), which is PNG’s second largest bilateral development partner. The PRC is currently providing grants and loans in the same sectors as ADB, including on adjoining roads (associated facilities). 40. Addressing cross-cutting issues and drivers of change. The CPS primarily aimed to mainstream four of ADB’s five drivers of change into its operations and activities, including good governance and capacity development, gender equity, knowledge solutions, and partnerships. PSD and PSO were relatively minor in comparison to other thematic areas. The thematic areas prioritized for the PNG program were appropriate and consistent with those recommended in the 2015 CAPE and fragility assessment. ADB support for gender equity and good governance and capacity development received particular emphasis during CPS implementation. This was highly appropriate, given that governance, capacity, and gender inequality remain major social, political, and economic challenges for PNG. PNG’s economic and human development is severely impacted by the facts that it has some of the highest rates of family and sexual violence in the world, men outnumber women in paid employment outside of agriculture, and women are often not represented in decision making.43 Evidencing this, no women were elected to the national Parliament in the 2017 election despite the highest number of women ever contesting a PNG national election. ADB’s gender mainstreaming focused on improving access to infrastructure and social services. The CPS results frameworks for transport and health included gender-specific indicators. Gender equity and mainstreaming were integrated into almost all operations during the CPS period, with many projects having a gender action plan. 41. ADB support for good governance and capacity development primarily focused on the infrastructure sectors. Emphasis was given to improving sector planning and strengthening operational management and maintenance to ensure investments are sustainable and have maximum impact. ADB also sought to help address weak public sector governance through its support to the health sector PBL and through TA to strengthen PFM. The Building Resilience to Climate Change in PNG investment was designed to improve government and community capacity to plan and respond to the impacts of climate change. ADB’s capacity to support PNG with knowledge products and solutions was enhanced by strengthening the resident mission and a focused TA program. Knowledge support was aligned with the designated sectors of transport, energy, health, and PSM, and it was assisted by regional knowledge initiatives. 42. ADB’s focus on PSD and PSO was relatively minor in comparison to other thematic areas. ADB sought to address the significant constraints to PSD through a relatively modest portfolio of nonsovereign

42 IED. 2018. Performance Evaluation Report: The Private Sector Development Initiative. Manila: ADB. 43 DFAT. 2019. Aid Program Performance Report 2018-2019: Papua New Guinea. Canberra.


investments. These were small operations in terms of financial resources. Support to PSD and PSO was unfortunately too small and too limited in its ability to address PNG’s need for significant reforms and improvement in the business environment. Support for microfinance included strengthening the regulation and supervision framework. Meanwhile, the PNG component of the PSDI supported reform of the legal and regulatory environment for PSD and activities to improve the business environment and competitiveness. 43. CPS results framework. The CPS results framework was only partially useful as a tool for measuring the achievements of ADB’s portfolio (see Table 2). The country development goals and outcomes listed are those for the government, not for the ADB-supported program, which is only a subset of the overall government program. Nevertheless, this is in line with guidelines provided by ADB since 2010 on CPS results frameworks. Evidencing this concern, the country-level development goals derived from parts of the DSP, 2010–2030 related to employment, incidence of crime, land reform, and the business environment had very weak linkages to ADB’s strategy and program of investment. Two important areas of support, civil aviation and ports and maritime development, were not assigned indicators. A number of other indicators were not ones for which data is collected on a regular basis. For example, the financial cost for rural residents to travel is not traced to verify whether prices have increased or decreased nationally. Finally, because WUS and PSM were supported only by TA (apart from PFM support in health), it was unrealistic to expect that ADB support could influence change in the national-level indicators for these sectors. The results framework was partly updated each year as part of the COBP process, including to update the project pipeline. Although the COBPs updated the key areas of assistance, the quantitative outcome indicators for the three core areas included within the original CPS results framework were not updated, nor were quantitative indicators added for new sector assistance. Although data limitations existing in PNG should be recognized, other indicators could have been chosen because updated data was not available to measure progress. The difficulty encountered by the CPSFR in finding data to report progress in achieving the indicators in the results matrix supports this finding. Including the phrase in the transport indicator section “50% of the projected beneficiaries are women and girls” was not helpful. Subsequent to CPS approval, the government and ADB agreed to move investment resources away from WUS, thereby resulting in a more narrowly focused program of investments. TA support in WUS commenced in 2019. 44. Transport. ADB’s transport operations were well-aligned with the government’s and ADB’s sector priorities from the outset. As the CPS evolved, ADB increased support to transport at the request of the government. This was reflected in the COBPs and increased sectoral expenditure. Lack of transport infrastructure reflects the difficult terrain, relatively high construction costs, and lack of public investment. PNG’s DSP envisages development of a modern transport infrastructure system comprising a network of roads, maritime facilities, and air routes that are integrated in a national network. The government’s sector objective is enhanced national and international connectivity to address regional economic and social inequalities. The MTDP 2 and MTDP III provide a series of specific targets for transport infrastructure development and traffic growth, including a number of economic corridors and so-called “missing links” interprovincial roads. They state additional targets for length of national road improvements, air traffic and sea cargo growth, and efficiency of port terminals. CPS support to the transport sector was well-aligned with these targets and covers civil aviation, roads, bridges, the Lae Port, and other maritime support. It also includes assistance in policy reform and institutional capacity building. 45. ADB support for transport recognized the importance of civil aviation and maritime transportation in PNG and sought to provide an approach integrated with the road system. For example, the Sustainable Highlands Highway Investment Program has been designed to connect PNG’s landlocked mountainous provinces to the coastal province of Morobe and the Lae maritime port (PNG’s largest, busiest, and single most important sea port, serving as the nation’s international gateway and a regional


transshipment hub for the eastern reaches of the South Pacific).44 The relevance and ultimate success of ADB investments rely, however, on the performance of adjoining investments that are financed and coordinated separately by PRC, and ADB did not engage with PRC to harmonize efforts to achieve this integrated approach. For example, PNG drew loans from PRC to improve the roads connecting the Kagamuga Airport (which was upgraded through ADB’s Civil Aviation Development Investment Program) to the Mount Hagen city center and to the Highlands Highway (upgraded through ADB’s Sustainable Highlands Highway Investment Program), as well as for the road connecting the Nadzab Airport (upgraded through ADB’s Civil Aviation Development Investment Program) to the Lae city center, which means the road between the Highlands Highway and the Lae Port (both ADB-financed investments). 46. The CPS intended for ADB to invest $436.0 million (68.3% of the total allocation) in transport over the 4 years. In 2019, a year before completion of the CPS, ADB was on track to exceed this, at $1.45 billion (72% of the total), even also looking at the pipeline. This reflects significant growth in the sector and a slight shift toward infrastructure. Responding to the country’s development needs, ADB increased its total financing for development projects (lending, nonlending, and cofinancing) by 125%, from $743.7 million (2016–2018) to $1.668 billion (2017–2019).45 47. Sustainability of the transport network was recognized as a serious issue from the outset, and particularly for two of the older MFFs, the Highlands Region Road Improvement Investment Program and the Civil Aviation Development Investment Program. This was addressed at the technical level through policy dialogue and support for reform to budget systems. However, these efforts were largely insufficient in design and execution and could not address the primary problem of a constrained national budget and weak budget execution. Nevertheless, this validation assesses ADB’s transport sector operations relevant, owing to the strong alignment with national priorities, appropriate choice of modalities, and project designs that proved to be implementable despite capacity constraints. 48. Energy. ADB’s energy sector operations were well-aligned with the government’s national planning priorities. The government’s sector objective is “improved access to a more reliable and affordable energy supply, including from renewable sources.” Up to 12% of PNG’s population is estimated to have access to electricity. The DSP targets at least 70% access to a reliable and affordable energy supply by 2030, as well as sufficiently installed power generation capacity and distribution to meet future energy requirements. The DSP aims to boost generation capacity from 500 megawatts (MW) in 2010 to 1,970 MW by 2030, more than half of which is to be sourced from hydropower and another quarter from other renewables. The CPS results framework envisaged improved access to a more reliable and affordable energy supply with two sector outcomes: (i) sustainable and more affordable power supply in urban areas, and (ii) improved access and use of power for households in rural areas. ADB support aimed to improve access to energy in provincial town centers and further extend access to rural communities that are difficult to reach. Supporting inclusive and environmentally sustainable economic growth, ADB’s energy program was aligned with ADB’s strategic development agenda under Strategy 2020. Greater emphasis could have been placed on reform of institutions within the energy sector, and particularly PNG Power Limited (PPL), in order to support improved service delivery and sustainable sector financing. ADB appropriately positioned its investments while taking account of the support from other development partners and emphasized the role of renewables and access for the rural population. The CPS intended for ADB to invest $122.7 million (20% of the total allocated) in energy. At the request of the government, however, by 2019 the sector allocation had been raised to $194.90 million. While this amount was greater in financial value, it represented a reduced expenditure in the sector (9% of the total) relative to other sectors. This change was consistent with that presented throughout the COBPs, and it demonstrated ADB’s flexibility and responsiveness to evolving government priorities. The validation assesses the ADB-supported energy program relevant.

44 ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to

Papua New Guinea: Sustainable Highlands Highway Investment Program. Manila. 45 To respond to the country’s development needs, ADB increased its total financing for development projects (lending, nonlending,

and cofinancing) by 125%, from $743.7 million (2016–2018) to $1,668.4 million (2017–2019).


49. Health. ADB’s health sector operations were well-aligned with the government’s national planning priorities. PNG has experienced an extended period of weak national performance in delivery of health services, resulting in poor health outcomes. PNG is one of three countries in the world that did not achieve any MDGs, including none of the health-related goals, and it is unlikely to achieve its Sustainable Development Goals. A number of health indicators continue to decline, and overall health sector performance needs to improve significantly. The core problem of the PNG health sector is an ineffective and inefficient health care system characterized by (i) high cost of service delivery; (ii) weak health sector planning and budgeting; (iii) delays in disbursements; (iv) poor health, financial, and workforce information; (v) weaknesses in procurement and distribution of medicines and supplies; and (vi) decaying infrastructure and fragile referral systems. The programs financed by ADB supported improvements in capacity and delivery of services. In addition to ongoing projects that support HIV/AIDS prevention and control, and rural primary health services, the major vehicle for support is the Health Services Sector Development Program. Use of the SDP modality combining an investment and PBL component was appropriate, as it enabled ADB to address sector issues in a comprehensive manner. The PBL supports fiscal policy, PFM, and health sector reforms while safeguarding funding for basic services during a period of fiscal tightening. The PBL is innovative in the PNG context inasmuch as budget support has not been provided by development partners since the mid-1990s. The PBL has already delivered transformative effects as it has increased the confidence of other development partners also to provide budget support to PNG. Evidencing this, the World Bank subsequently provided budget support to the health sector, and the Australian Government is exploring opportunities to provide budget support to PNG through its new lending facility, the Australian Infrastructure Financing Facility for the Pacific.46 50. The program supports PNG’s progress toward universal health coverage and addresses the key priorities of strengthening primary health care and improving rural service delivery. ADB’s approach recognizes the institutional and geographic complexities in delivering health services in PNG and also attempts to address key PFM weaknesses within the sector. Outcomes of the Health Services Sector Development Program will need to be assessed to determine if the reforms are sustainable and the approach to rural health service delivery can be applied across the country. The CPS intended for ADB to invest $40.8 million (6.6% in total) in health. By 2019, a year before completion of the CPS, ADB had invested $304.45 million, which represents 15% in total for the sector (when considering also the pipeline). This represents a significant financial and sectoral increase within the package of ADB support, and it reflects a heightened emphasis by the government to address health challenges over the period. This validation assesses ADB support to the health sector highly relevant. 51. Water and other urban infrastructure and services. In 2019, TA support was provided to prepare the Water Supply Scheme for Tete Settlement Project and the Urban Water Supply and Sanitation Project. Investment resources originally earmarked for this sector were diverted at the request of the government to the three priority sectors. This approach ultimately enabled a narrower focus on other sectors of the PNG program, which could be seen as appropriate in the fragile country context. That said, only 37% of the population have access to basic drinking water supply and only 18% have access to improved sanitation. PNG did not meet its MDGs for access to improved water supply and sanitation and is not on track to meet its own targets of 70% access by 2030 and 100% access by 2050, as outlined in the DSP and Vision 2050, respectively. PNG’s national water, sanitation, and hygiene policy recognizes the need for substantially improved access to water and sanitation services and improved hygiene, particularly in rural and peri-urban settlement areas. While the limited support provided to date is relevant to PNG’s needs and priorities, it is not yet clear whether ADB should fully engage in this sector and seek to help address issues of institutional and policy reform, sector financing, and sustainability or instead retain its relatively narrow focus on transport, health, and energy, where it is having an impact and demonstrating a comparative advantage in PNG. The CPS intended for ADB to invest $32 million (5.1% of the total CPS envelope) in WUS. In 2019, a year before completion of the CPS, ADB was not on track to achieve this and had invested only $2.5 million (0.1% of the program). Nevertheless, the COBP, 2019–2021 allocated

46 DFAT. 2019. Pacific Regional–Australian Infrastructure Financing Facility for the Pacific: Stepping-up Australia's Pacific

Engagement. Canberra.


indicative resources to WUS.47 The implementation of the CPS did not ultimately accommodate support to WUS over 2016–2020 and, considering this lack of the target’s operationalization, the validation assesses engagement in this sector less than relevant. 52. Public sector management. PNG’s economic situation is volatile, with a narrow economic base highly reliant on global commodity prices for its natural resources’ exports. Large natural resource investment projects and public spending drive growth in the absence of vibrant private sector activity and an extensive subsistence economy. Public service delivery is inadequate, because of insufficient financing and weak government capacity for policy development and implementation.48 This situation inevitably delays responsiveness to unrelenting macroeconomic challenges, including the need for conducive monetary policy and structural reforms to promote PSD. PNG’s intention to improve PSM is documented in Vision 2050, MTDP 2, and MTDP III. ADB provided significant support for the sector (albeit attributed to the health sector) under the Health Services Sector Development Program, which supports PSM and health reform prioritization, sequencing, and implementation; addresses development financing needs; and incentivizes reform implementation. 53. Viewing this as a standalone sector, a relatively small, separate TA project was provided supporting strategic budgeting within a sustainable medium-term fiscal framework, as well as efficient and effective management of public funds in light of highly volatile revenues from natural resources. The TA was designed to help the government take prudent decisions in a strained fiscal environment that requires gradual adjustments, as well as enable the government to reduce the fiscal deficit and stabilize debt levels while safeguarding social spending for basic services, especially to poor and vulnerable groups. Although the TA is necessary, consistent with risks raised in the CPS, aligned with the government’s national planning priorities, and has provided sound technical advice to the government on PFM reforms, it was too small in design and execution to have genuine impact in the context of ongoing fiscal issues confronting PNG. The TA may have had a greater chance of success had it been designed to be part of a larger reform package, possibly involving a PBL, and in coordination with other development partners working in this space. For example, Australia is providing $500 million in grant funding to PNG to support governance through the PNG–Australia Governance Partnership, which is working extensively in PSM, among other things. The CPS intended for ADB to invest $1 million (0.2% of the total CPS envelope) in PSM. In 2019, a year before completion of the CPS, ADB was on track to achieve this, having invested $1 million (and considering also the pipeline). The validation supports the TA, but there was a need for more assistance and for the CPS to afford greater prominence to the sector. 54. PSM is also addressed through a $300 million policy-based loan attached to the Health Services Sector Development Program. Although this support is recorded as a health sector investment, it can be argued that it also is to improve PSM more broadly. The loan has a reform matrix for PSM and PFM, and ADB has made a significant contribution to promote important reforms that go beyond health. The PFM TA was designed to complement the efforts of the Health Services Sector Development Program’s policy-based loan. Overall, the operationalization of support to the PSM sector is assessed relevant. 55. Relevance of implementation risks identified in the CPS. Drawing on ADB’s assessment of the fragile situation, the CPS identified four main risks to program implementation, impact, and sustainability: governance, development impact, sustainability, and social and environmental safeguards. Governance risks to impact and sustainability were related to macroeconomic policy’s running off track, weak governance, and political instability. Political instability was not actually highlighted in the fragile situation’s assessment, however, and could have been omitted from the CPS. Assessment of PNG’s

47 ADB. 2015. Country Operations Business Plan: Papua New Guinea, 2016–2018. Manila. 48 ADB. 2019. Report and Recommendation of the President to the Board of Directors for Papua New Guinea for the Proposed

Health Services Sector Development Program. Sector Assessment (Summary): Public Sector Management. Manila; ADB’s assessment was based on IMF. 2017. Papua New Guinea 2017 Article IV Consultation Staff Report. IMF Country Report No. 17/411. Washington, D.C; IMF. 2015. Papua New Guinea: Public Expenditure and Financial Accountability Assessment. Washington, D.C; and various other documents referenced in footnotes throughout the document.


political legitimacy would indicate that the PNG political system is relatively stable compared to those of many other countries in Asia and the Pacific.49 CPS analysis proved adequate in identifying those risks that emerged during program implementation. The government’s difficult budget situation impacted operations and maintenance (O&M) and counterpart funding for projects, capacity issues slowed project implementation, and significant resources were required to manage safeguards issues effectively. While these challenges in some cases delayed project implementation, the program remained broadly on track. Over the period of the CPS, ADB strengthened the resident mission with key staff to build its capacity in implementation and supervision. Evidencing this, the resident mission grew from 16 staff in 2015 to 21 staff by 2019. Strengthening of the resident mission staff was a factor in mitigating and addressing some risks as many of them became reality. 56. CPSFR Validation overall relevance rating. With the provisos mentioned above, the validation assesses the ADB program under the CPS, 2016–2020 relevant. The CPS was closely focused and aligned with government development goals and plans in the transport, health, and energy sectors and with thematic priorities. Investment in transport, energy, and health also provided the population with access to services. The CPS was congruent with ADB’s Strategy 2020 and its complementary development agenda (inclusive economic growth, environmentally sustainable growth, and RCI). Inclusive development was supported through infrastructure (e.g., community health posts, roads, and airports). The environment was primarily supported through renewable energy investments and the climate-proofing of infrastructure investments, which proved relevant given the number and size of natural disasters in PNG over the CPS period.50 More could have been done in PSM and WUS. The RCI dimension of the program could have been stronger, and so, too, the PSD dimension. While economic integration was improved domestically, support was not targeted at improving PNG’s trade or engagement with neighboring countries in Asia and the Pacific. Other ADB cross-cutting priorities were well-integrated into the program, with emphasis on gender mainstreaming and governance and capacity development.

B. Effectiveness 57. Overall progress toward achieving outcomes during the CPS period for the portfolio had been assessed by the CPSFR as likely effective. The target indicators for transport and energy are said to be likely to be achieved and the targets in health may also be achieved based on the achievement of project- and program-level outcomes, although these could not be linked to higher-level targets. The number of completed projects is relatively small, and their effectiveness ratings cannot be used exclusively for rating the performance over 2016–2020. Of the five projects with completed PCRs, four were rated less than successful and less than effective. The corresponding data for the three validated projects was that two were rated less than successful and less than effective. Analysis of the ongoing portfolio is more positive, revealing a trend of later MFF tranches performing better than the first tranches. In several cases, the government and ADB worked together effectively to address complex challenges to project implementation with the result that project performance improved and satisfactory outputs and outcomes eventuated. The validation assesses effectiveness based on likely outcomes of the current projects, the generally satisfactory achievement of results framework indicators (although primarily at output level), and the improving trend in portfolio implementation performance that increases the likelihood for expected outputs and outcomes to be achieved. On balance, however, the validation assesses the ADB-supported program less than effective.

49 Evidencing this, PNG is a democratic country that regularly conducts open elections as scheduled (every 5 years). There is minimal

threat of overthrow of the existing government or likelihood of illegal and unconstitutional seizure of power by a dictator, the military, or a political faction.

50 Disasters included frequent earthquakes (e.g., the magnitude 7.5 earthquake that devastated the Highlands in 2018); multiple volcanic eruptions (e.g., at Manum Island off Madang and in West New Britain, where communities were evacuated and community health posts and bridge investments impacted); and landslides, landslips, and mudslides (e.g., in 2019 heavy rains created flooding in East New Britain causing soil to slip from the mountains and block the road from the Tokua Airport in Kokopo to Rabaul township).


58. In examining both effectiveness and impact in the PNG context, it is important to acknowledge at the outset that PNG is a fragile and complex development environment. While examination of ADB support over the CPS, 2016–2020 demonstrates that investment outputs are generally being delivered as intended, this does not necessarily translate into improved results when examined against sector- and national-level outcomes indicators and targets. This is consistent with the micro-macro paradox in the performance of international aid, which explains that while there can be success at the project (micro) level this is not necessarily translated to improvement at the country (macro) level. In this context, the aggregate impact of development assistance does not always equal more than the sum of its parts.51 In 2011, World Bank concluded that country‐level aid studies are nevertheless a useful tool for development partners to use in guarding against possible, albeit uncertain, negative impacts of development assistance at the country level.

1. Achievement of CPS Results Framework Outcomes 59. Table 2 summarizes the CPS national targets envisaged in the results framework and IED’s assessment of progress against the targets. The results framework was not a very useful tool for measuring the portfolio’s achievements. Two important areas of support—civil aviation and ports and maritime development—were not assigned indicators; a number of other indicators were not among those for which data is collected on a regular basis; and, because WUS and PSM were supported only by TA (apart for PFM support through the SDP in health), it was unrealistic to expect that ADB support could influence change in the national-level indicators within these sectors.52 Even when they had positive outcomes, moreover, they were unable to address negative trends with other projects. The target indicators for the priority sectors transport and energy are likely to be achieved and the targets in health may also be achieved based on the achievement of project- and program-level outcomes. This is not the whole story regarding effectiveness, however.

51 S. Howes, S.A. Otor, and C. L. Rogers. 2011. Does the World Bank Have a Micro-Macro Paradox or Do the Data Deceive?

Development Policy Centre Discussion Paper No. 5. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1885227. 52 WUS investments were approved in 2019, but these will not impact on results in the timeframe of the CPS.


Table 2: CPS Results Framework – Progress towards Key Outcomes for Sectors selected for ADB Support

CPS Sector Outcomes and Targets CPSFR Stated Achievement on ADB Contribution Validation Comment

1. Transport (Core Area 1: Infrastructure), Government Sector Objectives and Targets: Enhanced national and international connectivity which reduces regional economic and social inequalities. CPS Indicative Resource Allocation: $463 million, 68.3% of total CPS envelope. CPS allocation to June 2019: $1.45 billion (72% as a sector).

More efficient, safer movement of people and goods 1 million rural residents benefiting from a 25% reduction in the cost of travelling from their communities to nearest market by 2020, of which 50% are women and girls.

Road rehabilitation and maintenance: 400 km of core road network upgraded or rehabilitated in the Highlands Region (population over 1 million) by 2020. 800 km of national highways contracted to private sector for long-term maintenance by 2020.

Unlikely to be achieved. Significant scope reductions indicate that fewer people are likely to benefit from the investments than originally intended. Owing to the scope reductions, it is likely that investments will meet the new physical targets (outputs) by the end of the CPS period but not overarching outcomes. Implementation of road rehabilitation and maintenance has recovered from slow initial performance.

200,000 rural residents have access to and utilize climate- resilient bridge infrastructure by 2020, of which 50% are women and girls.

Bridge rehabilitation: 15 bridges rehabilitated and resilient to the impacts of climate change.

Likely to be achieved. Performance issues with one contractor resulted in the need for a rebidding process. The project is on track to deliver all bridges by early 2020.

Port and maritime development: 25% decrease in the average container cost. The public–private partnership approach for Lae Port did not eventuate. Targets for navigation aids have not yet been achieved because of community disputes as well as lack of government counterpart funding.

Unlikely to be achieved. No indicator was set in the results framework. The PVR rated the Lae Port less than successful against its project specific targets and indicators. Maritime and Waterways Safety Project is currently rated as an actual problem. Fifty-seven of the 104 navigation aids are now operational, and 30 more sites are proposed.

Civil aviation safety and security: Three airports with International Civil Aviation Organization certification by 2020. All 22 regional airports helped by ADB project meet national safety standards.

Program level outputs/results targets are likely to be met. No indicator was set in the results framework. After a slow start under tranche 1 of Civil Aviation Development Investment Program, performance improved in subsequent tranches.

2. Energy (Core Area 1: Infrastructure), Government Sector Objectives and Targets: Improved access to a more reliable and affordable energy supply, including from renewable sources. CPS Indicative Resource Allocation: $122.7 million, 20.0% of total CPS envelope. CPS allocation to June 2019: $194.90 million (9.5% as a sector).

Sustainable and more affordable power supply in urban areas 20 gigawatt-hours per annum additional hydropower generation in five provincial urban centers by 2020 (2014 baseline: 0).

ADB projects help construction of power generation capacity 8 gigawatt-hours per annum additional power generation capacity for the Port Moresby grid by 2020. Reduced system transmission losses to 8.0% by 2020. Progress under Town Electrification Investment Program, tranches 1 and 2 was reported as generally satisfactory, but Ramazon Hydropower was removed from the Program because of failed bidding process.

Project-level output/results targets are likely to be achieved. Progress on the Kilakila substation has been delayed because of land disputes. Progress on rehabilitating a range of small hydropower plants and two larger ones suggests the target for hydropower generation will eventually be met.

Improved access and use of power supplies for households in rural areas 20% of households have access to grid-connected electricity by 2020 (2014 baseline: 12%).

Progress under Town Electrification Investment Program, tranches 1 and 2 toward loss reduction and energy access on track.

Project-level output/results targets are likely to be achieved. The CPSFR reported delayed outputs from ADB’s investments in the energy sector but not data confirming the outcome indicators. The tentative conclusion is that the nationwide indicators are unlikely to be achieved but that performance will be assisted by reduced losses and improved energy access in project locations.

3. Health (Core Area: Others), Government Sector Objectives and Targets: Efficient health system which delivers an internationally acceptable standard of health service. CPS Indicative Resource Allocation: $40.8 million, 6.6% of total CPS envelope. CPS allocation to June 2019: $304.45 million (15% as a sector).

Greater and more equitable use of quality primary health services

Health sector reform promoted by ADB policy-based lending aimed at strengthening rural health provision. Number of new community health posts (CHPs) increased by 32 by 2020.

Project-level output/results targets are likely to be achieved. The CPSFR was able to report outputs from ADB’s investments in the health sector but not data to confirm the outcome indicators. The tentative conclusion is that the


CPS Sector Outcomes and Targets CPSFR Stated Achievement on ADB Contribution Validation Comment

Percentage of births attended by trained health personnel increases to 68% by 2020 (2013 baseline: 37%).

Number of new CHPs with the required number of trained health professionals increased by 32 in 2020. Nationwide, there is a 30% increase in population (of which 40% are women) with access to primary health services in rural areas by 2020.

nationwide indicators are unlikely to be achieved but that there is likely to be improved service delivery in the areas covered by ADB investments.

Percentage of pregnant women receiving at least one antenatal care visit increased to 75% by 2020 (2013 Baseline: 65%).

As above As above

Percentage of children under 1 year old receiving diphtheria, pertussis (whooping cough), and tetanus (DPT) immunization increased to 80% by 2020 (2013 baseline: 52%).

As above As above

4. Water and other urban infrastructure and services (Core Area 1: Infrastructure), Government Sector Objectives and Targets: Increased access to reliable clean water in urban centers and to sewerage waste treatment facilities. CPS Indicative Resource Allocation: $31.5 million, 5.1% of total CPS envelope. CPS allocation to June 2019: $2.49 million (0.1% as a sector).

More people enjoy improved water supply and sanitation services Urban population access to improved drinking water supply increased to 95% by 2030 (2013 baseline: 89%).

Technical assistance provided, and an investment project is awaiting effectivity. No direct ADB contribution to achieving target.

Unlikely to be achieved. Contribution to achieving results indicators is unlikely in the CPS timeframe because of diversion of resources to other sectors.

The incidence of annual deaths related to water, sanitation, and hygiene decreased to less than 60 per 100,000 persons by 2020 (2013 baseline: 108 per 100,000 persons)

No direct activities Unlikely to be achieved.

5. Public Sector Management (Drivers of Change: Good Governance), Government Sector Objectives and Targets: High standards of public sector management at all levels and in all government institutions. CPS Indicative Resource Allocation $1.0 million, 0.2% of total CPS envelope. CPS allocation to June 2019: $1 million (0.05% as a sector).

More effective and efficient use of public finances for service delivery and infrastructure provision. ADB country performance assessment indicators 8a: equity of public resource use increased to 5.0 by 2020 (2014 baseline: 4.0)

Unlikely to be achieved. Awaiting the next country performance assessment score, but this target is unlikely to be achieved or be attributable to ADB when considering the minor investment made through technical assistance.

Improved enabling environment for business and finance sector development. Increased return on equity of state-owned enterprises portfolio to 6% by 2020 (2014 baseline: 3%).

Unlikely to be achieved given current operating conditions, as no loan but only a regional technical assistance project was provided in this area.

ADB = Asian Development Bank, CPS = country partnership strategy, CPSFR = country partnership strategy final review, PVR = project completion report validation report. Sources: ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila; ADB. 2016. Country Operations Business Plan: Papua New Guinea, 2017–2019. Manila; ADB. 2017. Country Operations Business Plan: Papua New Guinea, 2018–2020. Manila; ADB. 2018. Country Operations Business Plan: Papua New Guinea, 2019–2021. Manila; and ADB. 2019. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020. Manila.


2. Sector and Project-Level Performance 60. A total of five projects were completed and had PCRs prepared (Table 3). Only one of the five projects was self-evaluated successful, the HIV/AIDS Prevention and Control in Rural Development Enclaves Project. Three of the five projects were validated by IED with only the HIV/AIDs project being rated successful.

Table 3: Assessments of Completed Projects

Sector

Project Completion Report Project Validation Report

Number Successful Number Successful

Transport 3 0 2 0

Energy 0 0 0 0

Health 1 1 1 1

Finance, Industry and Trade 1 0 0 0

Total 5 1 3 1

Sources: Independent Evaluation Department assessments (baseline and target figures were compiled from ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila). The validation report figures were drawn from ADB. 2019. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020. Manila.

61. Transport. The CPSFR rated ADB interventions in the transport sector likely effective on the borderline. The national planned transport sector outcome was enhanced national and international connectivity which reduces regional economic and social inequalities; and the corresponding ADB sector outcome was more efficient, safer movement of people and goods. The two outcome indicators for transport may be partially achieved, but they are set at the national level and without current data they are difficult to verify. Although limited data is available on the contributions of individual projects to the planned outcome, it was potentially achievable as 3.2 million people are now estimated to live in the Highlands Region where the main road projects are focused. Similarly, the population accessing ADB-supported bridges has also increased in the Central and West New Britain Provinces. No specific data has been collated yet on travel cost savings or safety benefits resulting from the projects, although this will be part of PCR preparation. Many transport projects are unlikely to achieve all outputs as originally approved and cumulative scope reductions indicate reduced overall effectiveness. Although individual scope changes were justifiable and approved by Management, they resulted from poor preparation and the changes suggest a likely significant shortfall in outcome achievement at the project and sector levels. That said, whatever improvements to roads and bridges have been made are likely to have enhanced national and international connectivity, reduced regional economic and social inequalities, and supported to some extent the overarching objective of inclusive and environmentally sustainable growth. This validation assesses the ADB-supported transport program as completed and under implementation less than effective due mainly to the scope reductions. For further justification of this rating, see the discussions of individual projects below. 62. Highlands Region Road Improvement Program (2008–2010, $338.3 million, including $20.0 million in EU cofinancing).53 The CPSFR rated this ongoing MFF as a whole likely effective, although the program experienced delays and Tranche 1 was rated less than effective by the PCR. Overall, just 346 kilometers (km) out of the 1,400 km budget allocation have been delivered to date. The MFF design dramatically underestimated the unit cost of road construction and overestimated cofinancing likely to be available from PNG and other development partners. The first tranche was meant to improve 211 km of road and instead achieved 115 km. The change in scope and reduction of outputs occurred because of the government’s decision to postpone two project 1 roads, a lack of government financing of road maintenance, and bridge replacement being required rather than rehabilitation. These events reduced the planned scope of the project, broke the development results chain, and negatively impacted the project’s relevance. The CPSFR rated Tranches 2 and 3 likely effective, with physical components equivalent to 231 km of roads (118 km for Tranche 2 and 113 km for Tranche 3) expected to be

53 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility to

Papua New Guinea for the Highlands Region Road Improvement Investment Program. Manila.


completed, albeit with delays. This still leaves a major shortfall of 1,053.5 km compared to the MFF’s overall target of about 1,400 km. 63. Initially, the project struggled to implement the 18 recommendations of the project procurement-related review (PPRR) relating to establishing an efficient Department of Works and Implementation (DOW).54 However, Tranche 3 is implementing most of the PPRR recommendations made for Tranches 1 and 2. Socioeconomic impact studies are underway for the program, and several impact reports have been provided indicating positive social impacts.55 While the studies are still being reviewed, the data suggests that the (much reduced and more expensive) roads built are of good quality. This means that travel times on project roads to schools, health centers, and village markets have been decreased, thereby indicating more efficient movement of people and goods. 64. Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities Project (2009–2017, $2 million cofinanced by JFPR).56 The CPSFR rated this relatively small completed project effective. The project delivered key results, such as improvement of rural feeder roads and provision of a small community infrastructure, capacity building for income generating activities, increased awareness on gender issues and health, and promotion of gender responsive transportation. Community consultations and participation helped the project gain wider acceptance and ease project implementation. The validation found that ad hoc, small-scale support for communities living along road corridors has now become a modus operandi for ADB road projects in PNG, and has been an important factor in gaining community acceptance and buy-in. 65. Sustainable Highlands Highway Investment Program (2017–2027, $680 million plus cofinancing of $11.5 million by Australia).57 The CPSFR rated the ongoing MFF likely effective. Although it was too early to monitor effectiveness in achieving outcomes and outputs of this MFF, civil works contracts have all been awarded and are reportedly on schedule. Rehabilitation and/or upgrade of 170 km of national Highlands Highway plus maintenance of 430 km is on track according to the resident mission. Because of its recent nature, this project is not counted for the effectiveness rating. 66. Bridge Replacement for Improved Rural Access Sector Project (2011–2019, $238.4 million, including cofinancing of $58.4 million from the European Investment Bank).58 The CPSFR rated the project likely effective. All infrastructure components of the project are currently on track and the Bridge Asset Management System unit has been established in DOW. This project was impacted by management and integrity concerns, which affected implementation and resulted in delays in the delivery of outputs and achievement of outcomes.59 The project struggled to implement the recommendations of the PPRR,

54 ADB. 2017. Project Procurement Related Review: Loans 2496-PNG(COL), 2497-PNG(COL), 3076-PNG(COL), and 3077-PNG:

Highlands Region Road Improvement Investment Program – Projects 1 and 2. Manila. 55 Finnish Overseas Consultants Ltd. 2018. Tranche 1 and 2 Projects Loan-2496 PNG: Highlands Region Road Improvement

Investment Program. Project 1 - Socio-Economic Impact Study. Port Moresby. 56 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Grant Assistance Papua New

Guinea: Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities (Financed by the JFPR). Manila.

57 ADB. 2017. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility Papua New Guinea: Sustainable Highlands Highway Investment Program. Manila.

58 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loans and Technical Assistance Grant Papua New Guinea: Bridge Replacement for Improved Rural Access Sector Project. Manila.

59 Reporting by the media (some of which were published before the ADB PPRR) verified that the former Prime Minister of PNG, Peter O’Neill, was sole shareholder of Wildcat in 2014 when it secured a $32.86 million contract to build 12 of the project bridges, potentially violating the Government of PNG’s procurement guidelines and anticorruption guidelines. Examples of public reporting on this matter are at the following links:

https://www.theguardian.com/world/2018/nov/12/papua-new-guinea-pms-firm-won-32m-contract-despite-serious-irregularities-peter-oneill;

https://www.theguardian.com/world/2018/nov/15/png-opposition-mps-call-for-pm-to-step-down-over-bridge-building-scandal; https://www.rnz.co.nz/international/pacific-news/376246/adb-stays-tight-lipped-on-png-wild-cat-contract-case; http://www.pngblogs.com/2017/06/the-midas-touch-how-peter-oneill-and.html; http://pngicentral.org/reports/the-adb-bridge-scandal;

https://www.theguardian.com/world/2018/nov/12/papua-new-guinea-pms-firm-won-32m-contract-despite-serious-irregularities-peter-oneill


https://www.theguardian.com/world/2018/nov/15/png-opposition-mps-call-for-pm-to-step-down-over-bridge-building-scandal

https://www.rnz.co.nz/international/pacific-news/376246/adb-stays-tight-lipped-on-png-wild-cat-contract-case

http://www.pngblogs.com/2017/06/the-midas-touch-how-peter-oneill-and.html

http://pngicentral.org/reports/the-adb-bridge-scandal


particularly those relating to DOW.60 To date, 6 of the 18 bridges have been completed and the project is reportedly on track to deliver all bridges by early 2020. 67. Lae Port Development Project (2007–2016, $189.2 million).61 This project was assessed less than successful and less than effective in the PCR and PVR. Upgrading of this key port has made an important contribution to overall transport sector development plans and relieved port capacity constraints. At the time of project appraisal, however, it had been envisioned that the new facilities would be operated under a PPP approach and this did not materialize. This investment was completed shortly after CPS commencement. 68. Maritime and Waterways Safety Project (2012–2020, $41.5 million). 62 The CPSFR rated the ongoing project likely effective. The project is currently assessed to be an actual problem project. The original target of 195 operational navigation aids was not achieved owing to community and land disputes, together with a lack of government counterpart funding for site inspections and due diligence prior to identification and confirmation of sites. The target of 195 operational navigation aids was reduced to 132 and then 104. Progress is underway for 57 navigation aids, and 30 additional sites have been proposed. This indicates that the investment is likely to be less than effective in achieving the intended results. 69. Civil Aviation Development Investment Program (2009–2019, $480.0 million).63 The CPSFR rated the ongoing MFF likely effective. It was expected that three airports would be upgraded to International Civil Aviation Organization (ICAO) certification by 2020, while 22 regional airports would meet minimum national safety standards. The PVR assessed CADIP Tranche 1 less than effective in achieving the intended project outcomes, but performance has improved under Tranches 2 and 3. Under Tranche 2, nine national airports have been certified according to ICAO safety and security standards, thus exceeding the design and monitoring framework (DMF) target of six. Twelve national airports have been certified under ICAO safety and security standards. Under the MFF, growth in passenger demand and freight demand has increased from 2009 levels, while airport incidents (delays, diversions, and closures) because of safety or security issues have decreased significantly. Flight times have been reduced following airport capacity upgrading (e.g., in the cases of Goroka and Vanimo), allowing for faster jet aircraft. The CPSFR states that market sites, primarily for women entrepreneurs, were built in Girua, Tokua, and Taru airports, which falls short of the five market sites originally targeted.64 On balance, this validation cautiously assesses the ADB-supported civil aviation program likely effective. 70. Energy Sector. The CPSFR rated ADB’s energy sector operations effective. The national planning goal for this sector was improved access to a more reliable and affordable energy supply, including from renewable sources. ADB’s chosen sector outcomes were sustainable and more affordable power supply in urban areas and improved access and use of power supplies for households in rural areas. Targets of the ADB-supported program included additional 20 gigawatt-hours per annum from hydropower generation in five provincial urban centers by 2020 and 20% of households in rural areas with access to grid-connected electricity by 2020. This validation assesses the ADB-supported energy program effective.

60 ADB. 2017. Project Procurement-Related Review: Loans 2783-PNG and 2784-PNG(SF): Bridge Replacement for Improved Rural

Access Sector Project. Manila. 61 ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Loans, Administration of a Loan

from the OPEC Fund for International Development, and Administration of a Grant from the Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific Papua New Guinea: Lae Port Development Project. Manila.

62 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan Papua New Guinea: Maritime and Waterways Safety Project. Manila.

63 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility Papua New Guinea: Civil Aviation Development Investment Program. Manila.

64 The CPSFR was likely to have meant either the Tari airport or Daru airport.


71. Town Electrification Investment Program (2010–2020, $123.0 million, including $4.8 million in cofinancing from New Zealand).65 The CPSFR rated the ongoing MFF likely effective. The MFF originally targeted about six energy power plants put into operation by PPL. Only three are likely to materialize, however, these being located at Lake Hargy, Ru Creek, and Divune. Tranche 1 was rated likely effective, given rehabilitation of two hydropower plants, in addition to installation of Divune hydropower plant. Tranche 2 is also rated likely effective as it is on track to meet most projected outputs outlined in the revised DMF. All three transmission lines components are being implemented and, once completed, should meet the project target of 25 gigawatt-hours of transmission capacity per annum to provincial areas. Capacity building activities have been implemented as envisaged. Tranche 1 is on track to meet its overall outcome of improved utilization of reliable, clean power to three provincial urban centers. Nevertheless, significant delays occurred and subprojects were changed. Despite project issues, the flexibility of an MFF program helped project implementation, reducing land ownership challenges under Tranche 2 by shifting focus toward rehabilitation of the hydropower plant with a higher generating capacity. Under the original project design, Tranche 2 targeted 31 MW of new and refurbished hydropower (28 MW for two refurbished and 3 MW for one new hydropower plant). Because of ongoing procurement delays, Ramazon Hydropower (3 MW) has now been removed from the MFF program. The remaining 28 MW rehabilitation of two hydropower plants is proceeding as planned. The revised DMF expected outputs and outcomes of rehabilitating two aging hydropower plants to bring them back to their rated capacity of 28 MW have been achieved. This validation assesses that the MFF has provided flexibility required to address implementation challenges as they arose in the sector. On balance, the validation cautiously agrees with the CPSFR’s rating of a likely effective MFF. 72. Improved Energy Access for Rural Communities (2012–2019, $5.0 million in cofinancing of $2.5 million from New Zealand and $2.5 million from the JFPR).66 The CPSFR rated this ongoing project likely effective. The project targets connection of 4,500 households in Oro Province (incorrectly titled as Northern Province in the CPSFR), West New Britain, and Autonomous Region of Bougainville. Additional financing from the Government of New Zealand has helped cover cost increases and the revised target has been raised to 5,000 households. As of January 2019, the total number of connections was reported at 2,350 (47% of target), and it is not yet clear whether the target was met before the grant closing date of December 2019. PPL projects the connections to increase the access rate to electricity from 3% to 9% in Oro Province, from 4% to 8% in West New Britain, and from 1% to 5% in the Autonomous Region of Bougainville. Some households have relocated just to connect to the distribution line. Consequently, more households are expected to be connected in the future beyond the original target. The validation assesses the project as likely effective when completed. 73. Port Moresby Power Grid Development Project (2013–2019, $66.7 million).67 The CPSFR rated the project likely effective but noted the outputs to be at risk of not being delivered because of land disputes that have required police intervention. New community consultations have since occurred and an extension proposed to mid-2019. As a result, the intended outputs and outcomes are now expected to be delivered. 74. Health Sector. The CPSFR rated health sector operations likely effective. The national planning goal for the health sector is to develop an efficient health system that delivers an internationally acceptable standard of health service. The chosen ADB sector-level outcome was greater and more equitable use of quality primary health services. The outcome targets were increase in the percentage of births attended by trained health personnel to 68% by 2020; increase in the percentage of pregnant women receiving at least one antenatal care visit to 75%; and percentage of children under 1 year of age

65 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility

Papua New Guinea: Town Electrification Investment Program. Manila. 66 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Grant Assistance Papua New

Guinea: Improved Energy Access for Rural Communities (Cofinanced by the JFPR and the Government of New Zealand). Manila. 67 ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Loans Papua New Guinea: Port

Moresby Power Grid Development Project. Manila.


receiving diphtheria, pertussis (whooping cough), and tetanus (DPT) immunization increased to 80%. The output-level targets (described as outcome targets) may be met in areas where community health posts have been constructed and have become fully functional, thus indicating that this model of health care is capable of delivering improved health outcomes given sufficient additional investment. This validation assesses ADB overall support for the health sector effective. 75. HIV/AIDS Prevention and Control in Rural Development Enclaves (2006–2016, $27.0 million, including $7.0 million from Australia and New Zealand).68 The PCR and IED’s PVR had rated this project effective. It exceeded the target for facility renovations, increases in number of people tested at enclave health facilities, and number of supervised births in health facilities. The project demonstrated a shift in behavior within communities surrounding the enclaves, as evidenced by the distribution of 4.2 million condoms. It successfully established the HIV serosurveillance unit within the National Department of Health and the behavioral surveillance unit at the National Research Institute. The project is expected to have positively impacted on HIV prevention and rural health services in the enclaves. The CPSFR stated that the expansion and improvement of HIV prevention services, especially testing and treatment services, is likely to have contributed to the stabilization of HIV in PNG. Effectiveness in stabilizing HIV in PNG is nevertheless difficult to demonstrate, as there is limited reliable data available. National Department of Health representatives advised the validation mission that HIV infection rates across PNG are rising and PNG is now ranked as the fourth worst country in the world for drug-resistant HIV, with one in five HIV cases now drug resistant as a result of poor and inconsistent supply of drugs for anti-retroviral therapy. This validation assesses the project effective on the basis that it is likely to have positively impacted HIV prevention and rural health services in the enclaves while it was operating. However, the updated information on the national context indicates that the project would benefit from a project performance evaluation report, as recommended in the PCR and PVR. 76. Rural Primary Health Services Delivery Project (2011–2020, $88.9 million, including cofinancing of $57.7 million from Australia, $9 million from the OPEC Fund for International Development, and $2.2 million from the World Health Organization and Japan).69 The CPSFR rated this ongoing project likely effective. ADB is helping PNG improve health services in two districts within each of eight provinces. It is formalizing links between the state and health providers, upgrading health facilities, training community workers, and rolling out a health and sanitation campaign. The project has been a key partner of the government in establishing community health posts (CHPs) following the principles stipulated in the CHP policy. The project is on track for establishing a total of 32 CHPs (23 of which are already turned over to the government), adoption of CHP policies in 16 districts and 8 provinces, developing partnerships with nonstate parties, and training of community health workers. The CHPs are expected to have improved the percentage of births attended by trained health personnel and percentage of pregnant women receiving at least one antenatal care visit at those sites. The project has trained as many as 1,400 community health workers from provincial governments in middle management and technical capacity. The validation found that local communities support and maintain the CHPs.70 77. This project received additional financing from the Australian Government ($17.65 million, totaling $57.65 million including original grant allocation) to establish seven health centers in Morobe and Western Province. In 2017, Australia’s DFAT commissioned an independent evaluation of its partnerships with six multilateral agencies that work to support health outcomes in PNG.71 It found clear evidence that the new health facilities significantly increased the level and availability of primary health

68 ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development Fund Grant in

Papua New Guinea: HIV/AIDS Prevention and Control in Rural Development Enclaves Project. Manila. 69 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Grant

and Loan Papua New Guinea: Rural Primary Health Services Delivery Project. Manila. 70 This is also consistent with observations of the ADB safeguards policy evaluation country case study mission team. 71 I. Anderson and R. Martin. 2017. Independent Evaluation of DFAT’s Multilateral Partnerships in the Health Sector of PNG. Final

report, submitted 11 December 2017. Canberra: DFAT.


care services compared to the previous situation.72 However, it assessed that the continued lack of essential drugs in the health facilities critically undermines the effectiveness of the investment.73 The governor of one province also questioned the location of several ADB CHPs, arguing that in some cases they were located too close to hospitals with existing birthing facilities and that they could have been better located in other, larger communities where access to other health care facilities was less possible. The validation provisionally rates the project effective. 78. Health Services Sector Development Program, Subprogram 1 and additional financing (2018–2025, $233.0 million, including $38.0 million from Australia).74 The CPSFR rated this relatively new program likely effective. This SDP aims to improve national public expenditure management and strengthen health systems. The program was approved by ADB on 30 May 2018 and combines $100.0 million in PBL (subprogram 1) and a $95.0 million project investment to support whole-of-government and sector policy reforms with health sector investments. The project’s duration is 7 years, and it is expected to close on 30 May 2025. An additional PBL investment of $100.0 million (subprogram 2) was processed separately and became effective on 20 December 2019 and closed on 31 December 2019. Subprogram 3 also valued at $100.0 million is on track to be processed separately in 2020. The project investment will support three target outputs, including upgrading of selected community health centers and district hospitals, project monitoring, and management. Evidencing early success, the project steering group has identified the locations for the two district hospitals and six health centers for upgrade under the project. The first two health centers are on track to be contracted in the first half of 2020 along with the consulting firms for medical supplies and digital health. The PBL is supporting fiscal policy, PFM, and health sector reforms while safeguarding funding for basic services during a period of fiscal tightening. The government has requested $300 million in financial assistance in the form of a programmatic approach, comprising three loans from ADB’s OCR of $100.0 million each for subprograms 1, 2, and 3 to help finance the program. The PBL has contributed to development of the medium-term fiscal strategy for 2018‒2022, which has been approved by the Cabinet and published. Subnational health system management is also being strengthened. The validation provisionally rates the project effective. 79. Water and other Urban Infrastructure and Services. The CPSFR rated the TA support likely effective. The national planning goal for the sector is increased access to reliable clean water in urban centers and to sewerage waste treatment facilities. The chosen ADB sectoral outcome was more people enjoy improved water supply and sanitation services. The targets are an increase in urban population access to improved drinking water supply to 95% by 2030 and a decrease in incidence of annual deaths related to water, sanitation, and hygiene to less than 60 per 100,000 persons by 2020. The Support for Water and Sanitation Sector Management TA supported preparation of the recently approved Water Supply Scheme for Tete Settlement Project (2019–2021, $0.8 million in cofinancing from PRC Poverty Reduction and Regional Cooperation Fund). A more comprehensive Urban Water Supply and Sanitation Project is under preparation. ADB moved this project from the 2018 lending pipeline to the 2019 pipeline and adjusted the cofinancing amount to $6 million. ADB’s contribution to this sector during the CPS

72 For example, the new facilities provide separate, equipped, maternity delivery rooms in 4- and 6-bed wards to enable overnight

stays and 24 hour care; private consultation rooms, as distinct from patients being interviewed in public in the foyer; medical waste incinerators; and good, physically safe, housing for nursing staff adjacent to the facilities to enable 24 hour care. In most cases, none of those attributes had existed previously. The new facilities also provide a visible, significant improvement compared to existing conditions; they were properly equipped with vaccine refrigerators that, as assessed on the basis of a random inspection, were regularly monitored for temperature control.

73 Field visits conducted as part of the DFAT independent evaluation confirmed that ADB-supported health posts, including those within a few kilometers of the provincial capital, where it might be expected supply chains would operate reasonably well, ran out of a range of essential drugs within a month of the facility’s opening and experienced ongoing basic shortages. Importantly, many of the drug stock-outs or shortages were essential to addressing the key burdens of disease in PNG, as they included misoprostol (an essential drug to reduce life-threatening bleeding during childbirth), flucloxacillin and amoxicillin (antibiotics to treat infections), and paracetamol for pain relief and to reduce fever. Condoms were not freely and prominently available in all facilities.

74 ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic Approach, Policy-Based Loan for Subprogram 1, and Project Loans Papua New Guinea: Health Services Sector Development Program. Manila.


period has been modest, as the government requested that planned resources be used elsewhere. While the validation assesses the TA support effective, it assesses the overall sector program less than effective in achieving outcomes originally intended in the CPS, 2016–2020. 80. Public Sector Management. The CPSFR rated TA support for this sector likely effective. The national planning goal for the sector was high standards of PSM at all levels and in all government institutions. ADB’s chosen sector outcome was more effective and efficient use of public finances for service delivery and infrastructure provision. The targets were improvement in country performance assessment indicators 8a (equity of public resource use) to 5.0 by 2020 and increased return on equity of SOE portfolio to 6% by 2020. While the TA provided technically sound support to the government, it could have been more effective and its impact greater if it had been part of a concerted effort by ADB and development partners to address PFM reforms. While the validation assesses TA support effective, it assesses the overall sector program to be less than effective in achieving outcomes originally intended in the CPS, 2016–2020. 81. CPSFR Validation overall effectiveness rating. The validation assesses the ADB-supported program less than effective. This assessment is based on the likely outcomes of the current projects and the results framework indicators against sector targets and outcomes. This assessment of the performance of ongoing projects draws on the material provided by the CPSFR, interviews with internal and external stakeholders, and the ratings provided in PCRs and PVRs for completed projects. The indicators in the results framework in many cases did not provide a ready means to measure progress, and in other cases no indicators were set. In transport, the large Highlands Region Road Improvement Program MFF’s outputs were much reduced, because of severe underestimation of the costs, resulting in the validation’s assessing the program likely less than effective. The target indicators for energy are likely to be achieved and the targets in health may also be achieved based on the realization of project- and program-level outcomes. The number of completed projects over the period is relatively small. Of the five completed projects with PCRs, four were rated by the PCR as both less than successful and less than effective. Analysis of the ongoing portfolio is more positive, as there is a trend of later tranches of MFF performing better than the first tranche. In several cases, the government and ADB worked effectively together to address complex challenges to project implementation with this resulting in improved project performance and eventual achievement of satisfactory outputs and outcomes in the dominant sector. These factors outweigh the weaker performance of projects prepared under the previous CPS.

C. Efficiency 82. The CPSFR rated ADB operations and the portfolio performance as a whole likely efficient on the borderline. The portfolio is dominated by large infrastructure projects and MFFs. Analysis of the portfolio indicates that while the MFFs were less than efficient in their first tranches, later tranches are performing better. Implementation delays—including start-up delays, delays in procurement, and slow civil works construction—affected investments. The CPS addressed risks associated with the quality and timeliness of project implementation—particularly slow procurement and weak project management—and risk mitigation measures were undertaken throughout the period. Budget constraints under the current fiscal position are likely to constrain expenditure for the foreseeable future, and this is likely to continue impacting the availability of counterpart funding. The validation assesses ADB-supported operations and the portfolio performance less than efficient. 83. Overall portfolio performance. ADB assesses project portfolio performance using the following performance indicators: (i) contract awards, (ii) disbursements, (iii) technical conditions, (iv) financial management, (v) safeguards, (vi) gender, and (vii) compliance with loan covenants. As of 31 December 2018, ADB’s active portfolio in PNG was $1.58 billion comprising 26 public sector loans to finance 14 projects ($1.45 billion), 9 grants ($141.2 million), and 5 TA projects ($7.94 million). Transport sector (roads and bridges, airports, and maritime) comprised 70% of the PNG portfolio with loans amounting to $1.03 billion. Ranked second was the health, nutrition, and social protection sector with $280 million


(18%), followed by the energy sector with $191 million (12%). The trend of the overall portfolio ratings for the last 6 years (2012–2018) is shown in Figure 3. The PNG portfolio continues to experience implementation challenges in the forms of (i) procurement issues, including lengthy bid preparation, bid evaluation, and preparation of bid evaluation reports requiring quality improvements and prolonged government approval process; (ii) weak financial management capacity of executing agencies; and (iii) need for proper contract management and stringent construction supervision to ensure full adherence to commercial and contractual commitments and performance.

84. The CPSFR rated ADB operations in the transport sector likely efficient on the borderline and energy sector operations were rated less than likely efficient. The other, much smaller, core program areas of health, WUS, and PSM were rated likely efficient. Noncore support areas of PSD and climate change were rated less than likely efficient. The five completed projects with PCRs all had economic internal rates of return (EIRRs) estimated at appraisal. For four of these projects, the PCR recalculated the EIRR using the data available at the time of project completion. The recalculated EIRR for one project slightly exceeded the appraisal estimate. For the other three projects, the recalculated EIRRs were lower than at appraisal. In two cases, these EIRRs fell below ADB’s cut-off rate of 12%, indicating that those two projects were not economically viable.75 The results are summarized in Table 4 below. EIRR cannot be the sole means for validating the overall CPSFR efficiency rating owing to the limited number of infrastructure projects completed over the period. The sample size is too small to draw firm conclusions beyond that two out of three transport projects achieved viable EIRRs that were broadly in line with the appraisal estimates.

75 ADB reduced the cut-off EIRR from 12% to 9% in 2017 and to 6% for poverty projects, but IED still evaluates against the cut-off

rates accepted at the time of Board approval of a project. The new cut-off rates also were not met.

Figure 3: Overall Portfolio Ratings of ADB Papua New Guinea Portfolio during 2012–2018

ADB = Asian Development Bank, PARD = Pacific Department. Sources: Asian Development Bank Annual Portfolio Performance Reports from 2012–2018; Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2012–2018.

1516

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Table 4: Economic Internal Rate of Return of Completed Projects Project Approval (%) Completion (%) Deviation

Highlands Region Road Improvement Investment Program, Tranche 1

16.5 17.8 Economically viable. That is despite cost overruns and a 10-month delay in completing construction.

Lae Port Development Project

15.8 13.0 Economically viable. Traffic levels were less than projected. The PVR noted weaknesses in the methodology for calculating benefits in both the appraisal and PCR estimates of EIRR.

Civil Aviation Development Investment Program, Tranche 1

45.3 8.8 Not Viable. The PVR expressed concern about the methodology for calculating benefits and traffic forecasts.

HIV/AIDS Prevention and Control in Rural Development Enclaves

32.0 - The EIRR was not recalculated by the PCR. The PVR notes that subsequent estimates of HIV prevalence indicate that the original estimates used to calculate the appraisal EIRR were too high, which would lower the EIRR of the project.

Pilot Border Trade and Investment Development Project

14.1 4.5 Not viable. Benefits were reduced by failure to create an enabling environment in West Sepik Province, including to implement specific investment policies and develop telecommunications.

EIRR = economic internal rate of return, PCR = project completion report, PVR = project completion report validation report. Sources: Independent Evaluation Department and ADB. 2019. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020. Manila.

85. Process efficiency. As of 2018, 12 projects were on track, 2 projects were rated potential problem, and 3 projects were rated actual problem. Low contract awards and disbursements were the main factors contributing to the actual problem rating of the three projects: MFF CADIP Tranche 3, Maritime and Waterways Safety Project, and Port Moresby Grid Development Project. Time from approval to effectiveness or start-up for all projects during 2016–2018 was 6.5 months on average, which is slightly better than the ADB average of 6.7 months. The data also shows that time from approval to effectiveness improved considerably over the 3-year period. The contract award ratio of 50% for 2018 is impressive compared to the PARD average of 41% and ADB-wide average of 26%. The disbursement ratio for PNG (26%), while much higher than the PARD average (17%), is slightly lower than the ADB-wide disbursement ratio (28%) (Table 5).

Table 5: Key Portfolio Performance Indicators (Based on Commitment) for PNG, 2014–2018 Item 2014 2015 2016 2017 2018 Financial Performancea Contract award ratiob (%) 28.7 35.7 21.8 22.8 50.4 PARD-wide contract award ratio (%) - - - 28 41 ADB-wide contract award ratio (%) 27.8 26.1 29.7 27.6 25.7 Disbursement ratio c (%) 24.7 23.0 27.5 24.6 26.0 PARD-wide disbursement ratio (%) - - - 27 17 ADB-wide disbursement ratio (%) 25.7 29.5 27.3 25.8 27.7 Start-Up Compliance Loan (No.*|No.**) 0|4 0|0 4|2 4|6 3|3 Average time from approval to signing (months) 2.8 2.8 2.2 2.0 1.8 Average time from signing to effectiveness (months) 4.3 4.3 5.1 4.4 4.0 ADB-wide average time from approval to signing (months) 3.5 3.5 3.4 3.6 3.5 ADB-wide average time from signing to effectiveness (months)

3.4 3.4 3.3 3.2 3.2

Grant (No.*|No.**) 0|0 3|1 1|3 3|3 3|3 Average time from approval to signing (months) 4.3 4.8 4.3 4.3 2.4 Average time from signing to effectiveness (months) 1.6 2.4 2.3 2.5 2.2 ADB-wide average time from approval to signing (months) 3.1 3.0 3.0 3.0 2.8 ADB-wide average time from signing to effectiveness (months)

2.3 2.4 2.5 2.6 2.6

Technical Assistance (TA) d


Item 2014 2015 2016 2017 2018

Active committed TA portfolio (number|$ million) 8|6.5 6|5.7 4|4.5 5|4.1 5|7.9 Average time from approval to signing of TA

agreement(months) 1.6 1.5 1.8 1.7 1.8

ADB-wide average time from approval to signing of TA agreement(months)

2.6 2.6 2.5 2.6 2.3

Portfolio Ratinge On track [number (%)] 11(64.7) 10(62.5) 7(53.8) 9(60.0) 14(82.4) Potential problem [number (%)] 4(23.5) 4(25.0) 4(30.8) 4(26.7) 2(11.8) Actual problem [number (%)] 2(11.8) 2(12.5) 2(15.4) 2(13.3) 1(5.9) Projects with implementation risk (%) 35.3 37.5 46.2 40.0 17.7 PARD-wide projects with implementation risk (%) 36 27 35 43 27

ADB-wide projects with implementation risk (%) 19.8 24.2 19.6 27.4 24.6

ADB = Asian Development Bank, PARD = Pacific Department, PNG = Papua New Guinea, TA = technical assistance. Note: The portfolio is based on commitments (signing). Data on regional department-wide indicators are rounded as reported in the respective annual portfolio performance reports. Similarly, there is no reported data on these region-wide indicators from 2014–2016. a Contract award ratio does not cover policy-based loans and grants. Disbursement ratio covers investment project loans and grants only. b Contract award ratio is the ratio of total contracts awarded during the year to the total value for contract awards available at the beginning of the year, including newly committed projects (loans and grants) during the year. c Disbursement ratio is the ratio of the total disbursements during the year (including disbursements from newly committed operations during the year) to the undisbursed balance at the beginning of the year. d Includes nonsovereign technical assistance. e Covers all loan and grant projects (including cofinancing). * Number of loans (grants) including supplementary approved during the year (includes additional financing). ** Number of loans (grants) including supplementary signed during the year. Source: Portfolio and Financial Management Department portfolio management indicators, 2014–2018.

86. Contract awards. Figure 4 shows targeted contract awards and the actual contract awards from 2014–2018. In 2018, contract awards for both loans and grants of $470.24 million exceeded the target of $213.96 million by 120% and were also 139% greater than the 2017 contract award of $199.2 million. Major contracts awarded were in the Sustainable Highlands Highway Investment Program Tranche 1 ($197 million) and CADIP Tranche 3 ($81.6 million). The government plans to use advance procurement action in future road sector MFFs to reduce the time from project approval to contract award. The establishment of the National Procurement Commission, which commenced operations in April 2019, offers the prospect of more efficient and credible government procurement if it can attract and retain qualified staff and develop institutional capacity. 87. Disbursements. Figure 5 shows the targeted and actual disbursements for project loans from 2014–2018. In 2018, loans and grants disbursements totaled $263.88 million. This was 105% of PNG’s projected disbursements target of $250.24 million. This occurred because of the advances made to large contracts awarded under the Sustainable Highlands Highway Investment Program Tranche 1, CADIP 3, and Town Electrification Investment Program Tranche 1. Executing agencies’ timely submission of loan withdrawal applications through the Treasury Department to ADB contributed to the good disbursement performance. 88. Policy Compliance. Compliance with key loan covenants has generally been satisfactory. The Lae Port project had a number of instances of noncompliance with covenants, thus causing ADB to suspend disbursement until audited project financial statements and safeguard reports were submitted. More generally, submission of audited project accounts and financial statements has been timely. This has been a recent priority of both ADB and the government. In 2015, 2016, and 2017, the government achieved 100% compliance, and it is expected to maintain this in 2019 for 2018 audited project accounts compliance (both of which are yet to be completed). Private sector firms prepare project-level audits, which are then validated by the national audit office. In 2018, ADB achieved 100% compliance with ADB


safeguards semi-annual monitoring reports. However, three MFF projects were non-compliant with ADB’s Safeguards Policy Statement and Public Communications Policy.76

76 ADB. 25 June 2019. 2019 Tripartite Country Portfolio Review Memorandum of Understanding. Port Moresby.

Figure 4: Annual Contract Awards of ADB Papua New Guinea Portfolio during 2014–2018

ADB = Asian Development Bank. Sources: ADB Operations Dashboard (annual figures); Asian Development Bank Annual Portfolio Performance Reports from 2014–2018; Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2014–2018.

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89. Resident mission staffing and training. ADB strengthened the resident mission with deployment of an international financial management specialist in Q1 2019 to improve audit compliance and financial management of executing agencies. The resident mission has also added a senior procurement specialist to work with ADB’s procurement specialist outposted from the Procurement, Portfolio, and Financial Management Department and with executing agencies to map out further training in procurement for all executing and implementing agencies and coordinate with the newly established National Procurement Commission on possible areas of capacity building support. The resident mission also has a safeguards officer to oversee safeguards as well as investments relating to climate change and the environment. The head of the Portfolio Administration Unit has rolled out a series of core training sessions to build the capacity of resident mission staff as well as external stakeholders.

1. Performance by Sector 90. Transport. The CPSFR rated ADB transport interventions likely efficient, but only marginally so, as operations were challenged by implementation delays, weak management, and cost overruns. The provision of government counterpart funding has been a serious concern since 2016. Project staff noted ADB’s flexibility in using loan savings to increase its share of project financing and make up for government counterpart funding shortfalls. The PNG portfolio has increasingly moved to larger construction contract packages to improve efficiency, among other things, with most of the large transport sector construction currently being undertaken by PRC SOEs. This validation assesses the ADB-supported transport program less than efficient, with all transport projects assessed less than efficient, with the exception of one. 91. Highlands Region Road Improvement Investment Program. The CPSFR rated the MFF program efficient. The PCR for Tranche 1 rated the project efficient despite the delayed and increased costs of construction and the fact that reduced maintenance will have diminished the EIRR. Tranche 1 experienced delays because of land acquisition issues and delays in project procurement. DOW had to resort to police

Figure 5: Annual Disbursement of ADB Papua New Guinea Portfolio in 2014-2018

ADB = Asian Development Bank. Sources: ADB Operations Dashboard (annual figures); Asian Development Bank Annual Portfolio Performance Reports from 2014–2018; Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2014–2018.

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enforcement to settle land issues. Cost overruns affected all three tranches, caused by (i) price increases over 10 years, (ii) depreciation of the kina, and (iii) changes in scope (e.g., from rehabilitation of bridges to construction of new bridges). The CPSFR rated Tranches 2 and 3 likely efficient, as they are meeting target completion dates at the allocated cost despite constraints, and even though the delayed and increased costs of construction and reduced maintenance will have lessened the EIRR. 92. Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities. The CPSFR rated this completed project less than efficient. Though the project achieved its outputs and outcome, the DOW’s inadequate record keeping and archiving led to difficulty in retrieving files for unsubstantiated expenditures during the 2013 financial year. Weak management of the imprest account because of poor management of project expenses, lack of familiarity with ADB processes, and high staff turnover affected the timely implementation and disbursement of funds. The actual closing date was almost 4 years after the original closing date. 93. Bridge Replacement for Improved Rural Access Sector Project. The CPSFR rated this ongoing project less than efficient. Issues arose with the first project contractor for Package 2 comprising 12 bridges in East New Britain. A 2017 PPRR pointed to a number of integrity risks, including inappropriate evaluation of bid requirements, absence of crucial information in the standard bidding documents, substantial disbursement despite slow progress, payments made for ineligible expenses, delayed physical progress, and weak records management.77 Media articles published in PNG, New Zealand, and Australia prior to and after the PPRR were more detailed and stated that the Prime Minister of PNG at the time was the sole shareholder of the company when it secured the $32.86 million contract to build the 12 bridges in East New Britain in December 2014 (footnote 59). One article stated that, “The ADB report shows a company owned by the Prime Minister not only secured a lucrative multimillion-dollar government contract that the taxpayers of PNG will be paying off, but that his company obtained the contract through spurious means and then failed to complete the project” and that “… ADB inspectors found work had begun on three of the 12 bridges and just 10% of work had been completed, despite 60% of the money having been paid.” 78 During the validation mission, stakeholders reported that although the procurement may have violated government procurement and anticorruption guidelines, the matter has yet to be investigated by the government. During the CPS period, the matter was investigated by ADB’s Office of Anticorruption and Integrity (OAI), the contract was terminated, and a new contractor was engaged for the remaining civil works. Delivery of the bridges was delayed, and the cost of construction increased with the second contract, but the total cost for all bridges is expected to remain within the original approved amount for the total project. 94. Lae Port Development Project. The PCR and PVR had rated the completed project less than efficient. At reappraisal, traffic at Lae Port had increased significantly because of the impacts of the PNG LNG project led by ExxonMobil, but port traffic has since decreased. By 2015, actual traffic had grown by only 3%. Given significant delays of almost 2 years in completing the project’s resettlement activities and the shortcomings in delivering and monitoring support for livelihood and HIV/AIDS, the resettlement, livelihood, and HIV/AIDS components were rated less than efficient. 95. Maritime and Waterways Safety Project. The CPSFR rated this ongoing project less than efficient. Already in year 6 of implementation, the project’s contract awards achievement is only 40%. Project implementation delays as long as 20 months have occurred. The two main reasons for implementation delays have been, first, that the project design overlooked the general problem in PNG of lack of skilled personnel and staffing constraints within the project implementation unit and, second, delays in negotiating land with a multitude of diverse clans. A loan extension of 18 months is envisaged. A significant reduction in the number of navigation aids originally planned has resulted in cost savings of

77 ADB Office of Anticorruption and Integrity. 2017. Project Procurement-Related Review: Loans 2783-PNG and 2784-PNG(SF):

Bridge Replacement for Improved Rural Access Sector Project. Manila. 78 https://www.theguardian.com/world/2018/nov/12/papua-new-guinea-pms-firm-won-32m-contract-despite-serious-

irregularities-peter-oneill




$22 million, of which $4 million will be used for navigational aids in another 30 communities. Full implementation of the project was originally expected to result in a 50% reduction in search and rescue costs because of improved surveillance capacity. It is not presently clear, however, whether this cost saving will eventuate, given that the number of navigation aids has been reduced from the original target of 195 to 104. The calculated project EIRR of 14.7% is likely to change when recalculated for the PVR. 96. Civil Aviation. The PCR and PVR had rated Tranche 1 of the CADIP MFF less than efficient. The CPSFR rated the next two tranches efficient, which means the overall MFF CADIP program is assessed to be efficient. Tranche 1 faced major constraints, which caused implementation delays. The DMF had set optimistic output targets while overlooking the executing and implementing agencies’ capacity limitations in project design and implementation. The design also underestimated the government’s weak financial position to meet its counterpart-financing obligations. Delays occurred because of institutional and sector reform, lack of skilled staff, procurement delays, as well as design and land acquisition issues. Cost overruns caused some components under Tranche 1 to be moved to Tranche 2. Tranche 2 is on track and has accrued an estimated $15 million in savings, which has been used to add two new airports: Tokua and Tari. Delays were mostly because government counterpart funding was lacking and due to project implementation for the two additional airports. Tranche 3 absorbed all infrastructure outputs intended under Tranche 4. Because there was insufficient time left for implementing the entire balance of the project scope, an extension is needed. Even though financing was adjusted to 91% ADB financing and 9% government counterpart financing, the project still suffered delays from lack of government counterpart funding. Despite these challenges, the government expressed satisfaction with CADIP and the MFF modality. 97. Energy. The CPSFR rated the energy sector investments less than efficient. PPL and the resident mission confirmed during validation that land acquisition issues and lack of government counterpart funding have slowed project implementation. This validation assesses the ADB-supported energy program less than efficient. 98. Town Electrification Investment Program. The CPSFR rated the ongoing MFF program less than efficient. The program was expected to be completed in 6 years (from 2010 to 2016) for both Tranches 1 and 2. Actual implementation was extended to 10 years, with Tranche 1 closing date moved from 30 June 2017 to 31 December 2019 and Tranche 2 scheduled to close in June 2020. Tranche 2 implementation has encountered delays and is tagged “actual problem” in the portfolio performance rating. The MFF originally targeted about six energy power plants put into operation by PPL. Only three (located at Lake Hargy, Ru Creek, and Divune), however, are likely to be completed, as presented in the revised DMF. Land acquisition has significantly delayed project implementation, including at the Divune hydropower plant and other sites that were dropped from the program. As of 22 May 2019, total cumulative contract awards totaled $31.18 million (51.19%) and disbursements $11.95 million (19.62%). Tranche 1 is not on track to meet urban generation targets, although rural access has improved. Other setbacks include issues with foreign currency payments, government approvals, and poor civil works designs. These impediments in combination with the completion delays are expected to adversely impact the EIRR. 99. Improved Energy Access for Rural Communities. The CPSFR rated this ongoing project less than efficient, with implementation delays running more than 3 years. Community-based civil works contracts, consisting of installation of distribution extensions to villages along the transmission lines constructed under the Town Electrification Investment Program Tranche 1, have been completed for the first grant from the Government of New Zealand and are ongoing under the second JFPR grant. 100. Port Moresby Power Grid Development Project. The CPSFR rated this ongoing project less than efficient. The project has suffered implementation delays, and a proposed extension of 3 years is pending approval. The major cause of delay is land acquisition disputes in several infrastructure components. Procurement also took longer, as there were several rounds of rebidding because of delays and lack of a


pool of contractors interested and/or able to bid. The project has been rated “problematic” in terms of contract awards and disbursements. 101. Health. The CPSFR rated ADB interventions in the health sector efficient despite some implementation delays. Use of provincial tender boards is building procurement competence at the local level, and small contract packages are providing opportunities for local construction contractors to participate. This validation assesses the ADB-supported health program efficient. 102. Health Services Sector Development Program. The CPSFR rated this ongoing program efficient. The EIRR for the project at appraisal was 10.1%, and sensitivity analyses verify that the economic viability of this investment is not very sensitive to unanticipated cost escalations. 103. HIV/AIDS Prevention and Control in Rural Development Enclaves. The PCR and PVR had rated this completed project less than efficient. Start-up implementation was delayed by recruitment, and then changes took place in key personnel in the middle of implementation. Procurement of equipment was delayed by 12 months, and the use of government procurement processes was not adequately accounted for during planning. Reimbursement to enclave operators was delayed because of slow disbursement of funds from the trust account. Separate accounts and alternative procurement processes were established as a result. 104. Rural Primary Health Services Delivery Project. The CPSFR rated the ongoing project efficient. The project’s EIRR at appraisal was 21%. This is expected to fall to 12% owing to a lack of productivity gains following project implementation and a doubling of capital and recurrent costs. With an EIRR of 11.2%, economic analysis of additional financing indicates that the expanded scope of upgrading additional CHPs is economically viable.

105. Other Sectors and thematic priorities. The CPSFR rated the TA for WUS and PSM (Phase 3) efficient. The CPSFR rated PSD; finance; industry and trade; and climate change, disaster risk management and response less than efficient. This validation concurs with these ratings. 106. CPSFR Validation overall efficiency rating. The validation assesses ADB-supported operations and the portfolio performance as a whole less than efficient. The primary sources for the validation are the annual country portfolio review missions, PCRs and PVRs, interviews with resident mission project implementation staff and staff of implementing agencies, key portfolio performance indicators for PNG compared to PARD and ADB more broadly, and the descriptions and analysis provided by the CPSFR. Together, these sources confirm that the ADB portfolio faces significant implementation challenges stemming from weak capacity in the areas of procurement, financial management, contract management, construction supervision, and the government not meeting counterpart funding obligations. Because only five projects were closed during the period and had PCRs, there was only a limited number of projects for which the EIRRs could be reassessed. All three available PVRs rated the projects less than efficient. The number of projects with recalculated EIRRs is relatively small and the results did not impact the overall rating. Early implementation of the MFFs was impacted by limited counterpart capacity and inadequate staff resources at the resident mission, among other things. 107. There is evidence nevertheless that efficiency has improved in later tranches. The trend in portfolio performance is positive, with ADB and the government together being able to learn lessons from implementation challenges and apply these solutions to subsequent investments. The MFF modality is appropriate for PNG as the decade-long timeframe supports the creation of partnerships with line agencies and establishes a framework within which capacity can be developed and lessons learned and applied. The staffing of the resident mission was strengthened over the CPS period, increasing ADB’s capacity to support more efficient project implementation and oversight. The validation mission confirmed that insufficient government counterpart funding remains a constraint and risk across the portfolio. That situation slows implementation and requires continuous monitoring and coordination


between the government and ADB to ensure that it does not impact future project implementation performance.

D. Sustainability 108. The CPSFR rated the performance of ADB-supported operations during the CPS period less than likely sustainable based on an analysis of individual projects and assessment of sector-level issues. Transport sector operations were rated less than likely sustainable, and the other sectors were rated likely sustainable. Eight out of 12 transport sector projects were judged to be less than likely sustainable. All three transport projects completed within the review period and for which PCRs were prepared were rated less than likely sustainable. The two PVRs completed for the projects rated them less than likely sustainable. The validation assesses the performance of ADB-supported operations during CPS, 2016–2020 less than likely sustainable. 109. The 2015 CAPE assessed that it was unlikely PNG projects would receive sufficient funds from budgetary resources to cover O&M costs. It found that weak capacity at all levels of government further limits the likelihood of sustainability. The CAPE concluded that for the outcomes and impacts of ADB projects to be sustainable, the government’s financial and institutional capacity required urgent improvement. Were this not achieved, the CAPE added, much of the country’s economic and social infrastructure would not achieve its expected economic life. 110. The CPS identified sustainability risks as one of the four main risk categories that could impact program implementation and outcomes. The CPS noted that unreliable and generally limited maintenance funding threatened infrastructure sustainability. Annual allocations for infrastructure maintenance were limited and often inconsistent. Disbursements were frequently delayed, leading to interruptions in mobilizing long-term maintenance contracts. The CPS also identified risk relating to natural disasters and hazards. Landslides and floods were common and often damage critical network links, forcing the government to reallocate funds from routine maintenance to emergency works. To manage these risks, the CPS planned that ADB would continue to support the government to strengthen the use of dedicated cost-recovery revenue streams for roads and establish trust funds to support long-term maintenance planning and funding. ADB would also help ensure that infrastructure assets that are most exposed to potential effects of climate change and natural hazards are climate- and disaster-proof. By using the MFF modality, ADB intended to provide government and civil works contractors with an assurance of sustained funding to support long-term, performance-based maintenance contracts. 111. Transport. The CPSFR rated ADB-supported transport interventions less than likely sustainable. In addition to inadequate O&M budget, the road transport sector faces institutional uncertainties. The National Road Authority, which is responsible for road maintenance, is now back under the Department of Roads, but its role is unclear and its only source of revenue is fuel levies. PNG also has limited capacity to supervise axle loads to reduce damage from heavy vehicles. A PNG transport sector strategy has been prepared with assistance from Australia and recently released. It should help to guide more effective investments in the sector, ensure a coordinated approach to transport sector investments, and help to rationalize development partner support to the sector (including from emerging development partners). The validation endorses the efforts of ADB-financed projects to involve local communities in road maintenance. User charges for ports and civil aviation provide revenues for O&M, but both of these require continued support to efficiently program and undertake maintenance requirements. A policy on civil aviation subsidies is also under preparation. 112. The trend in the PNG portfolio has been to move to larger construction contract packages to attract technically qualified and financially capable firms. As a result, most of the large transport sector construction is now being undertaken by PRC SOEs. Advice to the validation mission from all stakeholders (government, resident mission, and private sector) is that this strategy appears now to be having an adverse and unintended consequence of slowing development of the domestic construction industry and


impeding national private sector opportunities, particularly where subcontracting does not go to domestic companies as originally intended. This validation assesses the ADB-supported transport program less than likely sustainable. 113. Highlands Region Road Improvement Investment Program. The CPSFR provisionally rates the ongoing MFF program less than likely sustainable. The National Roads Authority has struggled to start long-term performance-based maintenance of the improved roads under this program because of a lack of funding. Despite an increase in road user charges from K0.13 per liter to K0.23 per liter, the National Roads Authority only receives K0.04 per liter for maintenance while the balance of K0.19 per liter is absorbed by the Department of Treasury. The DOW management has undergone reorganization of core functions, which has seen amalgamation of the National Roads Authority under the DOW while keeping its core functions for road maintenance. This is not expected, however, to change the budget allocation from revenues collected as fuel levy. 114. Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities. The CPSFR rated this completed project likely sustainable. This was a pilot project for community participation in road improvements in the Highlands Region, and it is to be replicated in other areas. The community involvement models that rely on continued support from the communities, NGOs, and the government are effective for rural road rehabilitation, maintenance, small infrastructure rehabilitation, and other activities. Community involvement included identifying roads, markets, and other rural infrastructure. 115. Sustainable Highlands Highway Investment Program. The CPSFR rated the ongoing MFF program less than likely sustainable. The project design ensures maintenance of the Highlands Highway during the implementation package, which ensures sustainability of the infrastructure from start-up to closing of the MFF program. Doubts remain, however, about the government’s capacity to provide adequate funds for maintenance thereafter. DOW supported these concerns. 116. Bridge Replacement for Improved Rural Access Sector Project. The CPSFR rated the ongoing project likely sustainable. Although it is challenging to ensuring budget allocations for road maintenance, bridge infrastructure sustainability generally has a design life of 50 years. The sustainability of the roads leading to and from the bridges is less clear. 117. Lae Port Development Project. The PCR rated the completed project less than likely sustainable given the delays in full operationalization of the port. The financial internal rate of return was re-estimated as 1.39% before taxes and at 0.25% after taxes, lower than the weighted average cost of capital of 3.19%. The current port tariffs are considered regionally competitive, but they could be increased to improve sustainability. 118. Maritime and Waterways Safety Project. The CPSFR rated the ongoing project likely sustainable. The project design included a community engagement program organizing community lighthouse committees and working together with the Department of Lands in each region. The National Maritime Safety Authority has made 20-year lease arrangements with the landowners, and agreements with the committees for upkeep of the navigation aids. This is a relatively innovative approach toward safeguards in the PNG context, where leases are normally paid up front and future generations do not always receive the long-term benefits. The National Maritime Safety Authority is an income-generating agency and receives an annual profit of about K21 million from the navigation levy. 119. Civil Aviation. The CPSFR rated the civil works carried out under the ongoing CADIP MFF less than likely sustainable because the 10-year maintenance contracts planned at appraisal have not been implemented. The investment program’s alternative proposal to establish a maintenance sinking fund to finance future maintenance work has not yet been adopted. Future sustainability will depend on whether


the National Airports Corporation proceeds with the intended 10-year maintenance contracts, which is considered unlikely to occur. 120. Energy. The CPSFR rated ADB-supported interventions in the energy sector likely sustainable. Key challenges in the sector are to provide access to electricity (only 6%–12% of the population is connected to the grid) and to reduce the cost of electricity.79 The power utility, PPL, has good technical capacity, but it urgently needs to improve financial management and corporate governance. Tariffs do not cover costs and there has been no adjustment to tariffs since 2013. This means that PPL has been unable to fully implement its regulatory contract with the government and has had to defer capital expenditures. ADB-financed projects have seen shortfalls in government counterpart financing for energy. There is a flat nationwide tariff with an implicit cross-subsidy to rural and remote consumers. This validation assesses ADB-supported energy program likely sustainable on the borderline. 121. Town Electrification Investment Program. The CPSFR rated the ongoing MFF program Tranches 1 and 2 likely sustainable. PPL is a corporatized entity and conducts business on a full cost recovery basis. Tranche 1 of the investment program loan is being on-lent by the government to PPL, which will repay the loan from operational revenue. PPL is utilizing the financing primarily to replace high-cost diesel generation with low-cost hydropower generation for delivery to existing power customers in provincial urban areas. Because extension of distribution grids to rural households (characterized by low consumption and, therefore, low revenue) is not a financially viable activity for the corporatized PPL, it has not been included into the project. 122. Improved Energy Access for Rural Communities. The CPSFR rated this ongoing project likely sustainable. A key issue with the sustainability of rural connections to the power grid is high outstanding debt and high logistics expenses to collect small amounts of outstanding debt. The prepayment meter system, Easipay, minimizes this issue through upfront payment for power credit while ensuring cash flow for system maintenance. The project is expected to improve environmental sustainability by (i) reducing collection and burning of wood for household energy consumption, and (ii) replacing a number of household or village part-time diesel generators with hydropower, thus reducing diesel consumption. 123. Port Moresby Power Grid Development Project. The CPSFR rated this ongoing project likely sustainable. In terms of technical sustainability, the project design ensures that the proposed systems are suitable for local conditions and the O&M requirements are compatible with utility capacity to ensure sustainable operation. In 2019, the government boosted the budget earmarked for the utilities sector to K615.1 million, a 93.3% increase from its 2018 budget indicating that the benefits will last. 124. Health Sector. The CPSFR rated ADB interventions in the health sector likely sustainable. PNG has a history of recognizing the health sector’s significance through the annual national budget. For example, health was declared a government priority in the 2019 budget, including the funding of free primary health care. A total of $455.9 million (K1.55 billion) was allocated to the health sector for the 2019 budget. That was 9.6% of the total budget and represented a 3.1% increase over the 2018 budget.80 PNG also has a history, however, of not allocating funds for O&M, underspending in the health sector against the budget, and cutting sector budget expenditure through the supplementary budget process. Evidencing this, the 2019 national health budget was reduced by $15.3 million (K52.1 million), with the Treasurer advising that this was expected to impact hospital management services programs, such as the redevelopment and rehabilitation of hospitals.81 Exacerbating concerns, the sustained lack of essential

79 During the validation mission, PPL estimated that only 6.8% of the population was serviced by formal connections, and the 12%

estimate includes those with add-on connections. 80 The Independent State of Papua New Guinea 2019 National Budget Speech “Building A Broader Based Economy” delivered by

Hon. Charles Abel, MP Deputy Prime Minister and Minister for Treasury. Presentation of the 2019 National Budget to Parliament. 13 November 2018. Port Moresby.

81 The National. 15 October 2019. K224 million cut from budget. Port Moresby. Accessed at https://www.thenational.com.pg/k224-million-cut-from-budget/ on 23 October 2019.

https://www.thenational.com.pg/k224-million-cut-from-budget/

https://www.thenational.com.pg/k224-million-cut-from-budget/


drugs in hospitals and clinics is a well-known and widespread issue in PNG affecting many health facilities (footnote 72). This validation assesses the ADB-supported health program less than likely sustainable. 125. HIV/AIDS Prevention and Control in Rural Development Enclaves. The PCR and PVR rated this project successful and likely sustainable. The government’s funding for HIV increased from K6.6 million in 2006 to K26.0 million in 2011. In 2011, the government funded the entire budget for antiretroviral therapy (K15.0 million) following the end of the Global Fund Round 4 grant. Additional funding (K6 million) was also secured by the National AIDS Council Secretariat to support counselling and testing and continue the enrolment of new patients on antiretroviral therapy. However, nearly 70 health facilities have limited capacity because of budget constraints. Despite the relatively positive outlook at completion of the project, the PNG HIV Planning Summit (27–30 August 2019) brought less encouraging reports. The PNG National Department of Health identified that the gains achieved in response to HIV in recent years were under threat due in part to financial pressures on the PNG national budget and because of shifts in focus by development partners. It also reported persistent problems in procuring and supplying condoms, HIV test kits, and antiretroviral therapy (drugs). The department confirmed to the IED mission that long-term funding for antiretroviral therapy is not in place and the frequent and prolonged nationwide stock-outs of antiretroviral therapy are increasing HIV treatment resistance levels and resulting in preventable morbidity and mortality. Alarmingly, PNG now has the fourth highest level of transmitted HIV resistance in the world. This means that one in five people who contract HIV in PNG will experience treatment failure. There is an urgent need for the government to ring-fence the funding of antiretroviral drugs, restore the supply buffers nationally and in all clinics, and thereby ensure that all treatment clinics have consistent supplies of antiretroviral treatment to support reliable access and adherence for patients on treatment. Sustainability of this investment should be examined further through the preparation of a project performance evaluation report. 126. Rural Primary Health Services Delivery Project. The CPSFR rated the ongoing project likely sustainable based on the government’s commitment to cover the costs of personnel, medical supplies, and the O&M of all rural health facilities developed and refurbished under the project. The CHPs established are estimated to have 40-year stability, and staff housing is included to ensure local staffing for each post. The project is designed to ensure that the project health facilities will have community ownership (communities look after the O&M of the facilities). During an IED mission for the safeguards policy evaluation (March–April 2019), the evaluation team undertook an unscheduled visit to a project CHP in the Highlands on a Sunday afternoon and found the local community diligently cleaning the facility. The building and grounds appeared to be in good condition, but the community advised that water had not been available at the CHP for some time. Although health is prioritized in the national budget, the health budget is itself regularly cut or underspent. Consequently, the ADB-supported infrastructure and electronic National Health Information System are not likely to be sustainable unless their maintenance is consistently included in the health sector budget. The sustained supply of essential drugs to the CHPs is another widespread issue affecting many facilities. This issue is related to budget, governance, procurement, and other challenges in the health sector at central and provincial levels. A 2017 DFAT independent evaluation found the lack of sustainable essential drugs supply at the CHPs to be a crucial factor undermining the overall development effectiveness or impact of the investment.82 It is expected that the new Health Services Sector Development Program will address some challenges with the sustainability of this investment. 127. Health Services Sector Development Program. The CPSFR rated the project likely sustainable. Similar to the Rural Primary Health Services Delivery Project, the government has the intention and potentially sufficient resources to meet the maintenance needs of upgraded health facilities in the future.

82 Absence of essential drugs means patients face a choice of three unpleasant outcomes: (i) return to the village with no drugs

and no treatment; (ii) pay out of pocket for drugs from a private pharmacy; or (iii) bypass the more cost-effective health post and seek treatment at the higher-cost hospital, assuming it had the drugs in question. Each of those choices undermines the broader development effectiveness, health outcomes, and value for money of this otherwise well designed and well implemented investment involving ADB, DFAT, GoPNG, and others.


Budget support under Subprogram 1 is expected to support policy and sector reforms necessary to ensure the long-term sustainability of current and previous efforts in the sector. PFM support under the program is intended to benefit the health sector and public sector more broadly by helping to address such core problems in the sector as weak health sector planning and budgeting as well as weakness in procurement and distribution of vital medicines and supplies. Both of these areas bring major risks to the effectiveness and sustainability of all efforts in the sector. 128. Other Sectors. The CPSFR rated efforts in the other sectors likely sustainable, with the exception of the Pilot Border Trade and Investment Development Project (2009–2018, $25.9 million). This validation assesses the ADB-supported industry and trade interventions overall less than likely sustainable and those in the WUS and PSM sectors overall likely sustainable on the margin. 129. CPSFR Validation overall sustainability rating. ADB support during the CPS, 2016–2020 is assessed less than likely sustainable. Shortages of government counterpart funding for ADB transport and energy projects is symptomatic of the government’s constrained budgetary situation. Chronic underfunding of maintenance in the transport sector places PNG’s transport infrastructure at risk of failing to achieve its anticipated design life, thereby reducing benefits and constraining economic growth. PNG is also at risk of falling into a cycle of its road network being primarily constructed by foreign firms using external finance with the assets created needing to be replaced or rehabilitated over a life cycle that is shorter than optimum. The trend in the PNG portfolio has been toward larger construction contract packages to attract technically qualified and financially capable firms. As a result, most of the large transport sector construction is now being undertaken by PRC SOEs. This policy appears to be having the unintended consequence of slowing the domestic construction industry’s development and impeding national private sector opportunities, particularly where subcontracting does not go to domestic companies as originally intended. The Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities Project and the Rural Primary Health Services Delivery Project have demonstrated the viability of including local companies and communities in construction and maintenance. Sustainability in the energy sector is impeded by shortfalls in government counterpart financing. Exacerbating this, tariffs have not been adjusted since 2013 and do not cover costs. Although PPL has good technical capacity, it could benefit from improved financial management and corporate governance. Further reforms in the health sector are required to improve the likelihood of sustainability—particularly in the area of procuring and distributing essential drugs—to arrest falling health status indicators at the national level.

E. Development Impacts 130. The CPSFR rated ADB’s overall contribution to development impacts satisfactory. The rating recognized that ADB’s program in PNG, while large, was relatively small compared to the combined activities of the government and its development partners. The intended impact of ADB support was poorly linked to the government’s overarching country development goals in the CPS results framework. Consequently, success was most evident at sector level. The CPSFR rated ADB’s focus on drivers of change and contribution to PSD, governance and capacity building, gender, partnerships, and knowledge solutions satisfactory. The validation finds the contribution of the overall ADB-supported program to development impacts satisfactory.

1. Progress toward Government’s Overall Targets and Country Partnership Objectives 131. CPS, 2016–2020 linked its intended results to achievement of five PNG development goals described by the government in various chapters of the DSP, 2010–2030. These were to (i) reduce the crime rate, (ii) establish an effective land reform program, (iii) improve the ease of doing business, (iv) create job opportunities in the formal economy, and (v) lower the unemployment rate. These goals were included in the CPS results framework as country development goals (Appendix 8). PNG is off track from achieving any of them. It is unclear why the CPS selected these goals and targets, noting that ADB did


not intend to work in these sectors. Vision 2050 articulates the national development goals and the MTDPs communicate the plan to deliver the strategy. Both documents contain goals that would have been more appropriately linked to CPS, 2016–2020 performance and results targets. 132. Improved outcomes across the priority sectors driving economic growth and human development outcomes require increased investment into the sectors and reforms enabling outreach to a greater proportion of the population predominantly residing in rural areas. Improved performance in revenue collection and in budget formulation and execution are needed to strengthen the government’s capacity to deliver services. PNG is grappling with significant and complex development challenges that constrain private sector growth. These include, among others, a very high cost of doing business, inadequate infrastructure, inadequate business and technical advisory services, land rights issues, as well as safety and security problems. PNG requires significant reforms to improve the environment for PSD. Table 7 summarizes PNG’s Doing Business Rankings corresponding to CPS, 2016–2020.

Table 7: World Bank Doing Business Rankings, 2016–2018 PNG Doing Business Rankings 2016 2018

Overall ranking 119 108

Starting a business ranking 130 143

Dealing with construction permits ranking 126 124

Getting electricity ranking 103 72

Sources: World Bank. 2019. Doing Business 2019: Training for Reform. Washington, DC; and World Bank. 2017. Doing Business 2017: Equal Opportunity for All. Washington, DC. Note: A higher ranking denotes a relatively poorer performance, compared to many other countries.

2. Development Impacts of ADB Activities at Sector Level

133. Transport. The CPSFR rated development impacts in the transport sector satisfactory. The road projects are supporting increased production and diversification of crops; growth of livestock production; and increased commercial activities, including logging and mining. Each of these increases employment opportunities and raises household incomes. The validation team met with beneficiaries and executing agencies providing examples of how ADB-supported road transport projects in the Highlands have enabled inclusive development through improved access to markets, schools, and health facilities and significantly reduced travel times. Major gaps in the road transport network need still to be addressed to ensure long-term economic development and national economic integration, as is intended through the Sustainable Highlands Highway Investment Program. The Lae Port project is playing an integral role in the economic corridor from the coast to the Highlands, although the PCR and PVR concluded that the project did not achieve its envisaged impact of supporting industrial and commercial development. Support for civil aviation is now proceeding well and is strengthening and expanding this important transport mode for PNG, which supports inclusive economic growth and human development by linking remote communities to services and economic opportunities. Expansion of civil aviation services will also support development of the agriculture and tourism sectors. This validation assesses the development impacts of the ADB-supported transport program overall as satisfactory. 134. Energy. The CPSFR rated development impacts in the energy sector satisfactory. The validation mission confirmed through interviews with PPL that ADB support to the sector has improved access to clean, low-cost, and renewable energy in rural communities, thereby supporting enhanced business activity and improving quality of life in beneficiary communities in remote rural locations. ADB investments are expected to improve the reliability of power supplies in Port Moresby, supporting economic growth and human development. ADB support features capacity development and a raft of measures to improve energy efficiency, which support sustained development impact. This validation assesses the development impacts of the ADB-supported energy program satisfactory overall.


135. Health. The CPSFR rated development impacts in the health sector satisfactory. ADB investment projects are expected to have supported HIV prevention and provision of rural health services at project site locations, particularly benefiting women and children. ADB’s emphasis on primary health care and partnership with nonstate service providers has supported the delivery of high-quality CHPs to rural communities. While the ADB investments are expected to have had a positive impact on health indicators, the national data has not been updated and published since 2015. The validation was therefore unable to verify the impact on national health indicators over the CPS period. The CPSFR provided health data relating to the period covering 2011 to 2015, prior to CPS delivery, and was also not able to provide data reflecting higher level outcomes by 2019. A notable feature of ADB’s health sector support has been the use of provincial tender boards to undertake procurement for the CHPs. This has generally been a positive experience, with facilities being constructed and capacity developed at local level, both in terms of developing local procurement capacity and strengthening the local construction industry. This validation assesses the development impact of the ADB-supported health program satisfactory. 136. Other sectors. The CPSFR rated development impacts in the other sectors satisfactory, with the exception of nonsovereign operations (NSO). This validation assesses the development impact of ADB-supported interventions in the other sectors overall satisfactory, with the exception that finance, industry, and trade interventions are assessed overall less than satisfactory.

3. Impacts Relating to ADB’s Strategic Priorities 137. Regional cooperation and integration. ADB sought to support RCI by improving domestic and regional connectivity, facilitating access to markets, and providing targeted knowledge solutions to influence trade policy. Direct support to RCI was limited during the CPS, 2016–2020 period and the results framework did not include an indicator to measure RCI performance. The PCR rated the Pilot Border Trade and Investment Development Project (approved in 2009) less than relevant, less than effective, and less than successful. Specific investment policies and a telecommunication solution for West Sepik Province, which borders Indonesia, were not prepared, thus limiting the project’s impact in developing the province into a dynamic growth center. The validation assesses the contribution of RCI in supporting the achievement of development impact less than satisfactory. 138. Inclusive growth. All projects during the CPS supported inclusive growth as a key objective. ADB maintained a relatively narrow sectoral focus to reduce risks to development impact. This was a valuable approach in addressing PNG’s fragility. ADB’s road investments improved connectivity of the Highlands Region to the main economic growth centers. This improved access via rural roads to market centers, leading to increased exports and integration of the Highlands Region into the national economy. It also improved access to public and social services, likely leading to better health and education outcomes. Road projects such as the Highlands Highway and Highlands rural roads contribute to inclusive growth by creating essential links to underserved and hard-to-reach areas. Support to civil aviation is also supporting safer, more efficient, and more accessible all-weather air transport services, including in remote rural towns. Improved efficiency should reduce airfares, which, together with improved accessibility, should promote inclusive growth; increase access to regional markets and towns; and expand and diversify agricultural production, particularly of cash crops. Port and maritime development has supported export-driven economic growth and rural development while reducing the costs of imported capital goods and consumables. Energy sector investments have improved access of the poor to energy and supported inclusive growth by providing reliable, sustainable, affordable, and clean power to targeted provincial urban centers and rural communities. These investments are enhancing livelihoods, incomes, production, and employment. Support to the health sector has contributed to socioeconomic and pro-poor development through the likely improvement to maternal and child health and the management of HIV/AIDS and other infectious diseases at project sites. Poverty reduction has been supported through better health services, which are likely to have reduced maternal and infant mortality rates and improved reproductive health care and communicable diseases prevention. The validation


assesses the contribution of ADB’s inclusive growth objective in supporting the achievement of development impact satisfactory. 139. Environmental sustainability and disaster risk management. The CPS planned to help PNG manage its vulnerability to natural disasters and climate change-related risks. ADB operations supported climate-proofing infrastructure and increased the climate resilience of vulnerable sectors, but this is in reality simply good engineering practice. ADB-supported capacity building to develop disaster risk response strategies by working with local communities to mitigate the consequences of natural disasters and climate change risks through Building Resilience to Climate Change in PNG, with additional financing provided by the Strategic Climate Fund. The roads and bridges program designed drainage systems to prevent flooding, thereby protecting the infrastructure from greater rainfall to ensure road longevity and the safety of motorists. Climate mitigation measures have been built into civil aviation office, airport terminal, and other building designs to reduce carbon dioxide emissions, such as by using natural ventilation and LED lighting. Navigation aids and rural health facilities use solar panels for power. In the energy sector, ADB appropriately emphasized the role of renewables and access for the rural population. Supporting this, PPL is engaging ADB’s Future Carbon Fund for carbon credits from carbon dioxide emissions under its Clean Development Mechanism. The validation assesses the contribution of the environmental sustainability and disaster risk management objectives in supporting the achievement of development impact satisfactory. 140. Safeguards. Social and environmental safeguards were identified as key risks to the delivery of CPS, 2016–2020. The CPS recognized that complex land ownership structures, weak bureaucratic capacity, and poor contract enforcement mechanisms make managing environmental and social safeguards a challenge for projects. To overcome this challenge, ADB planned to (i) strengthen country safeguard systems under ongoing investment and TA projects; (ii) build capacity of departments responsible for land and environment management by allocating resources within high-risk projects; (iii) support executing agencies for advance preparation of projects, focusing on land acquisition and resettlement; (iv) apply additional staff and financial resources to implement and monitor safeguards at project level; (v) improve coordination between project agencies and departments responsible for land and environment; and (vi) build capacity of project management unit staff, contractors, and civil society. 141. ADB undertook these risk mitigation measures largely as planned and primarily engaged in Category B and C projects, mostly avoiding Category A projects. ADB worked with government counterparts to build knowledge of and compliance with ADB social and environmental safeguards policies. The Conservation Environment Protection Authority supports projects by ensuring environmental permits are obtained prior to construction work, and ADB and the executing agencies engage with a focal person in the National Lands Department to coordinate and follow up on lands-related documents and compensation matters. Nevertheless, government counterpart funding of land compensation for projects requiring land acquisition and resettlement remains pending in some projects. During 2018, the PNG program achieved 100% compliance with ADB safeguards semiannual monitoring reports.83 In 2019, three MFF projects were deemed noncompliant with the Safeguards Policy Statement 2009, and this was raised by the resident mission with the government at the Tripartite Country Portfolio Review. The resident mission’s employment of a national officer responsible for safeguards and climate change investments has strengthened resident mission and counterpart capacity. The experience gained by ADB in dealing with customary land issues and land acquisition matters is resulting in more efficient management and supervision of safeguards issues.

83 Government of PNG and ADB. 2019. 2019 Tripartite Country Portfolio Review Memorandum of Understanding. Port Moresby.


4. Drivers of Change 142. Private Sector Development. The CPS envisaged that ADB would develop new PSO, using loans, equity investments, and credit enhancement products while focusing on opportunities in transport and energy. PSD initiatives were to support ADB efforts to improve the business environment. ADB planned to continue to support financial inclusion through ongoing engagement and policy dialogue regarding microfinance. ADB also planned to review all infrastructure projects for their potential to be delivered directly by the private sector or via PPP. Regional TA has supported reform of the legal and regulatory environment for PSD, and development of strategies and reform activities to improve the business environment and competitiveness. ADB has also supported a microfinance program, which targets partner financial institutions to sustainably and safely provide financial services to more clients, and strengthening Bank of Papua New Guinea regulation and supervision of microfinance institutions and savings and securities societies. The pilot border trade and investment project (discussed under RCI) and regional TA supporting a Pacific Business Investment Trust Fund were deemed not successful. Taking account of the small portfolio of nonsovereign investments and the limited TA provided in support of PSD, the overall contribution of PSD support in achieving development impacts was less than envisaged in the CPS and is assessed less than satisfactory. 143. Good Governance and Capacity Development. ADB’s capacity building has focused on its infrastructure projects and included improving sector planning and strengthening O&M management. ADB helped reform civil aviation institutions, restructure the Civil Aviation Authority, and establish National Airports Corporation. Capacity building in the energy sector centered on PPL, which enabled the utility to conduct awareness programs on electricity safety for communities along transmission lines. In the health sector, ADB supported the strengthening of health systems and PFM. TA was directed to strengthening government capacity for prudent fiscal management by prioritizing spending within a sustainable fiscal envelope and undertaking a fiscal and PFM reform program. ADB also supported government efforts to comply with its Revised Standards for Anti-Money Laundering and Combatting the Financing of Terrorism. While the governance and capacity development efforts are likely to have been sound, PNG is a fragile country and the impact might have been greater had the contribution been larger in scale and part of a concerted effort by ADB and development partners to address governance and capacity constraints. Support for governance and capacity development is assessed less than satisfactory. 144. Gender Equity. The CPS planned to undertake gender mainstreaming efforts in ADB projects, particularly to improve access to infrastructure and social services, and gender-specific indicators and targets were included in the results framework. ADB integrated gender equity and mainstreaming into all operations during the CPS period, with 100% of projects and programs having at least some gender elements in 2019. Project designs encouraged gender-focused skills development and training components, particularly in major national infrastructure projects. Gender action plans were also prepared, including measurable indicators and targets plus monitoring and evaluation of progress. 145. All transport projects adopted gender mainstreaming activities. For instance, market sheds were built for women entrepreneurs on roadsides and at airports (e.g., at Kokopo). IED met with women who have stalls at the market shed at Kokopo during the ADB Safeguards Evaluation country mission during March–April 2019 and confirmed that the market sheds deliver economic and social benefits for women as intended. The bridges program included a gender action plan, which ensured that civil works designs included measures to remove physical barriers to access by women and children. The validation mission visited bridges on the Hiritano Highway at the Laloki and Brown Rivers, and sighted pedestrian walkways and stairways constructed as a part of the program. The mission also met women who use the walkways and stairways in their daily routines, such as when doing laundry, fetching water, and walking children to school. Beneficiaries confirmed that the new infrastructure was of particular benefit to them as women. Support was provided to women’s groups to take up employment and business opportunities associated with road rehabilitation and maintenance. The Sustainable Highlands Highway Investment


Program incorporated a gender action plan including awareness training, roadside water points for washing and laundry, enhanced road-related economic opportunities for women, and female participation in community consultation for project design and implementation. 146. All energy projects included gender mainstreaming activities. The Town Electrification Investment Program gender action plan includes community training programs, such as the safety programs on electricity. The validation mission confirmed through discussion with PPL that it is monitoring electricity connections for female-headed households and encourages contractors to employ at least 30% female staff in community contracts. Gender equity was a major component of the Improved Energy Access for Rural Communities grant project and included a community outreach program (41% of participants were women) and community-based civil works contracts (29% of contractors are female). Port Moresby Grid’s gender action plan supported 50% female participation in community consultations and training workshops in newly connected communities on electricity safety, operation of prepayment meters, energy efficiency, and household utility budgeting. 147. All health projects incorporate gender action plans. The Rural Primary Health Services Delivery Project outcome focus is on increasing health services for antenatal care, family planning, deliveries at facilities, and immunization for rural women and children. Half of the trainees who participate in gender awareness training, including for sexual and reproductive health care, are women. The validation confirmed that the project incorporates gender equity and mainstreaming by establishing gender-friendly facilities, upskilling the health workforce on reproductive health and maternal health, and providing training in gender-based budgeting. 148. In the PSD driver of change, the regional PSDI incorporates economic empowerment of women as one of its outputs. This involving three initiatives: consumer policy and economic empowerment of women, gender mainstreaming, and empowering women in the informal sector. In the environmental sustainability and disaster risk management thematic area, the Building Resilience to Climate Change project is developing gender-responsive disaster response strategies on adaptation to climate change, and 30% of the people being trained in NGOs and provincial staff are women. Project activities include food processing and preservation in communities while targeting 50% female participation. 149. While the validation found that support for effective gender mainstreaming generally achieved the objectives set out in the CPS, it notes that PNG is a fragile country and the impact might have been greater had the contribution been larger in scale and part of a concerted effort by ADB and development partners to jointly address gender equity. The ADB-supported gender equity program is assessed satisfactory, but only on the borderline, as more specific gender-themed TA could have been initiated by ADB to improve gender equity in PNG. 150. Knowledge solutions. The PNG country knowledge plan sought to implement a targeted program of activities closely linked to ADB’s planned sector operations. Knowledge solutions for transport and energy were to be focused on improved sector planning and strengthening maintenance and operational management structures to ensure future investments are sustainable and have maximum impact. In health and urban water supply, ADB was to support knowledge-driven policy reforms before engaging in project operations. PSM knowledge efforts were to be focused on supporting effective, transparent, and accountable resource revenue management. Although no flagship knowledge solutions were produced over the period, the validation confirmed that ADB provided publications, training, and events to transfer knowledge and exchange information. For example, safeguards and PFM training were provided to the government. 151. ADB’s operations in PNG have mainstreamed knowledge solutions, including through publications and events in PNG, and through regional initiatives. Knowledge transfer has taken place during capacity building components of projects and through interactions between ADB staff, government officials, and other stakeholders. In macroeconomic management, ADB has provided


support in fiscal management and revenue management. The increased number of international staff in the resident mission has facilitated the exchange of information and knowledge transfer, including through the addition of a safeguards officer, procurement specialist, and financial management specialist. Regional knowledge initiatives have included wider support in the areas of fintech solutions and financial sector supervision. ADB has updated the planned program of knowledge publications and events in the annual COBPs. While more could have been done, ADB’s supported knowledge products and services achieved what was intended and as such are assessed satisfactory. 152. Partnerships. The CPS aimed to strengthen partnerships with other development organizations and explore cofinancing opportunities. It also aimed to foster partnerships with civil society and the private sector. Cofinancing as a percentage of the total ADB approved amount (leverage ratio) from January 2016 to May 2019 was 13%, which is relatively low when compared with the ADB-wide cofinancing level (30%) and significantly lower than that for the Pacific Division overall (67%).84 Australia, the largest bilateral donor, has cofinanced and cooperated closely with ADB on a number of activities. Under the Sustainable Highlands Highway Investment Program, Australia committed an $11.5 million grant to be administered by ADB. The JFPR funded a grant project Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities alongside the Highlands Region Road Improvement Investment Program. The EU is providing additional grant support that benefits rural communities and farmers in roadside villages adjacent to the roads covered by the program. The bridges program involves cofinancing with European Investment Bank. The Town Electrification Investment Program has additional financing of about $38 million from the Government of New Zealand. The Improved Energy Access for Rural Communities project consists of a $5 million grant, jointly financed by the Government of New Zealand and Japan and administered by ADB. Australia is supporting the two ongoing health projects, including a grant of about $58 million for the Rural Primary Health Services Delivery Project. The OPEC Fund for International Development is providing a loan of $9 million for the project. The microfinance project received financing from Australia totaling about $9 million. Australia also contributed $3 million to the Building Resilience to Climate Change project. 153. Partnerships with NGOs and civil society organizations are significant. The Maritime and Waterways Safety Project has successfully undertaken community consultations and organized community lighthouse committees. The rural community energy access program fostered community engagement, with community-based civil works contracts to lower the cost of implementation and improve community ownership and prepayment meters for rural communities. The Rural Primary Health Services Delivery Project is also helping provincial and district governments to develop and formalize partnerships with nonstate providers of health services by forming a partnership board. 154. ADB does not currently engage with the PRC to coordinate and harmonize development support and assistance in PNG. The PRC and PNG established diplomatic relations in 1976, shortly after PNG achieved independence. PRC is the second-largest bilateral development partner in PNG, and from 2006–2016 it provided 27 projects valued around $440.30 million.85 This amount is expected to have increased significantly in the past 3 years, however, based on media reporting of undertakings given by PRC in advance of and during Asia Pacific Economic Cooperation (APEC) meetings in Port Moresby in 2018. PRC provides PNG with concessional loans, grants, and technical advice in the following sectors: transport; health; education; government and civil society; social infrastructure and services; agriculture, forestry, and fishing; communications; humanitarian aid; and industry, mining, and construction. PRC is supporting the construction and refurbishment of significant transport infrastructure. This includes roads in Mount Hagen and Lae that adjoin ADB roads (e.g. the Highlands Highway and Highlands rural roads), making these roads associated facilities. PRC is providing significant assistance toward human development. In health, for example, PRC has supported the PNG–China–Australia Trilateral Malaria Control Cooperation program, the Enga Provincial Hospital Project, the Sampun Day Clinic, among

84 Sources are ADB Operations Dashboard (annual figures); Asian Development Bank Annual Portfolio Performance Reports from

2014-2018; Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2014–2018. 85 Lowy Institute for Public Policy. 2019. Chinese Aid in the Pacific. Sydney. https://chineseaidmap.lowyinstitute.org/

https://chineseaidmap.lowyinstitute.org/


others. Education assistance includes a significant number of scholarships, as well as support for technical colleges and universities. In addition to the development program, there is large PRC investment in PNG, involving SOEs and smaller traders. PRC SOEs are successfully obtaining the largest PNG government contracts funded through ADB lending, particularly in transport infrastructure. 155. ADB has been successful in developing partnerships with the traditional development partners and has attracted significant cofinancing, most notably from Australia. ADB also participates in regular development partner coordination meetings, which are co-chaired by United Nations Development Programme and Australia. ADB’s portfolio of MFFs offers an important framework that could be used to attract further cofinancing. Performance in relation to partnerships overall is assessed satisfactory at the margin while acknowledging that ADB is yet to engage with PRC as a key development partner in PNG. 156. CPSFR Validation overall development impacts rating. The validation finds ADB’s overall contribution to development impacts satisfactory. ADB’s program is achieving impacts in its three key sectors of operations. In transport, ADB investments are providing access to remote rural populations to enable their participation in the wider economy and to access vital government services, including education and health. Energy investments are utilizing environmentally sustainable technologies to provide access and greater reliability of service to underserved communities in both urban and rural areas. Support to the health sector is providing greater access to primary health care for remote rural communities with a focus on improving maternal and child health as well as addressing prevention and management of HIV/AIDS. ADB-supported work in RCI, inclusive growth, and environmental sustainability and disaster risk management was satisfactory, but more could be done to support increased international connectivity beyond port and airport access. Governance and capacity development work, effective gender mainstreaming, knowledge solutions, and partnerships all contributed positively to impact achieved by the ADB-supported program in PNG. The modest level of support to improving the business environment and the small portfolio of NSO were assessed as constituting a less than satisfactory response to PNG’s needs.

F. Nonsovereign Operations 157. There have been four NSO activities in PNG and the CPSFR rated overall performance less than successful. This validation assesses overall performance of NSO activities less than successful. An extended annual review report regarding the 2006 equity investment of $5 million into the Kula Fund II was prepared in 2017. That investment was found to be consistent with the development needs of the Pacific, CPSs, private sector assessments, and ADB’s Pacific Strategy 2005–2009, but the investment was rated less than successful. 158. In 2011, ADB approved a $9 million equity investment and $40 million loan to support BMobile’s telecommunications network expansion in PNG ($8 million taken up and $30 million loan disbursed). This was not a satisfactory investment, and ADB exited in October 2016. ADB recovered its loan but sold its equity at a loss. The investment did not adequately address the risk of external challenges. 159. ADB expanded its trade finance program into PNG in 2017 with a guarantee and loan facility of $1 million approved for Kina Bank. The facility has not been used to date, because of the bank’s non-submission of quarterly financial reports, restrictive covenants imposed on the bank, and limitations imposed by the central bank on trade finance instruments due to PNG’s foreign currency shortages. ADB engagement with Kina Bank has been successful, as it has paved the way for future and ongoing NSO engagement. There has been some capacity building of Kina Bank staff through annual due diligence assessments conducted by ADB staff and consultants and through tailored training in trade finance. 160. In 2017, ADB approved a $100 million facility with Olam International in the agriculture and natural resources sector under the Agricultural Value Chain Development Project. It covered four countries, including PNG. From the $100 million, $4 million was directed to Olam’s operations in PNG:


$1 million to finance capital machinery (processing facilities in Morobe and Eastern Highlands provinces) and $3 million for working capital to assist Olam in procuring cocoa and coffee from smallholder farmers. The facility is supported by TA that will provide training to 3,000 smallholder coffee farmers in PNG, with implementation expected to commence in 2020. 161. CPSFR Validation overall nonsovereign operations rating. The validation assesses NSO performance over the CPS less than successful. For PSO to become a significant part of ADB’s support to PNG, significant staff resources would need to be devoted to identifying and developing possible investments. A further constraint is the limited availability of potential investments and their generally small size. Depending on the outcome of the initiative under the Agricultural Value Chain Development Project, there may be potential to undertake further small-scale investments in the sector supported by TA.

G. ADB and Borrower Performance 162. ADB performance. The CPSFR rated ADB performance satisfactory on the basis that the CPS adopted strategic direction, priorities, and implementation approaches that were relevant and appropriate for PNG and in line with ADB’s Strategy 2020 and 2030. The CPS sector focus supported economic growth with improved infrastructure, including transport and energy; improved human development through improved health services; and an improved environment for PFM and PSD. ADB selected appropriate modalities, including the use of MFFs, which have helped improve implementation performance, offered flexibility and funding certainty, and created an environment conducive to long-term capacity development. The recent focus on larger loans allowed larger contract packaging to encourage international contractor involvement. This approach was used to address risk associated with capacity constraints in the domestic construction industry. This validation assesses ADB performance satisfactory. 163. ADB investments are primarily designed by staff located in ADB headquarters in Manila and implementation is usually devolved to the resident mission for ongoing management. The staffing of the resident mission was strengthened over the CPS period, thereby increasing ADB capacity to support project implementation and oversight. The resident mission grew from 16 staff in 2015 to 21 staff by 2019. ADB collaborated closely with traditional development partners in PNG in formulating and implementing projects and in mobilizing cofinancing, although more could be done to engage with emerging development partners, particularly PRC. 164. Feedback from the government on ADB’s responsiveness and as a partner was very positive, with several officials reporting they were very happy to work with ADB because of its responsiveness and flexibility. Given government weaknesses, effective development partner coordination and collaboration remain essential for avoiding duplication and ensuring harmonization of activities. ADB’s main counterpart agencies were very positive about its performance in PNG. They described ADB as responsive and willing to listen to and incorporate government views in project design. They underlined the importance of continuing to support capacity building and institutional strengthening, and in this context the government requested ADB to consider secondments of PNG government staff to ADB headquarters and support, for example, to develop the domestic construction industry and enable it to be more competitive when bidding against large foreign SOEs on government and ADB roads. 165. While the validation generally endorses the conclusions of the CPSFR, the relevance of the program could have been strengthened by ADB’s supporting a more balanced program that sought, through a modest amount of PBL, to address sustainability issues in the transport sector and assist the government to address more vigorously the broader budget, resource management issues, and capacity challenges. A number of MFFs experienced weak performance under their first tranches, which can be attributed to capacity issues within both implementing agencies and ADB. ADB’s decision to strengthen its resident mission with key staff to improve internal capacity in implementation and supervision has


turned MFF performance around. The validation confirms the good performance in respect to knowledge management and partnerships, including cofinancing. 166. Given the complex operating environment, ADB performed well throughout the CPS, 2016–2020 in terms of organizing the ADB team for operation, preparing implementable projects, being responsive to client needs, carrying out procurement and supervision, designing and implementing safeguards, carrying out policy dialogue, coordinating aid, and adhering to its policies in providing support to achieve the strategic objectives. The PARD and OAI actions to identify and remedy the performance of challenging investments, such as the East New Britain bridges, demonstrated ADB’s transparency and commitment to ensure integrity of operations in a complex and high-risk operating environment. ADB performance is assessed satisfactory. 167. Borrower performance. The CPSFR found that the government and its implementing agencies have generally performed satisfactorily. Given capacity weaknesses and the fragility of the operating environment, however, the implementation of some programs has been less than effective. The government faces significant financial constraints, which have resulted in delays to counterpart funding. It will need to improve PFM to ensure that limited resources are handled in accordance with prioritized allocations. Until this occurs, O&M is likely to continue to be largely neglected, thus perpetuating the cycle of unsustainable infrastructure investments being funded by overseas loans and constructed by foreign-owned companies. The government is likely to continue to require significant levels of ADB support for institutional strengthening and capacity building across executing and implementing agencies. The need to improve revenue mobilization along with budget formulation and execution is an immediate priority. Establishing and maintaining macroeconomic stability is fundamental to enabling and protecting the development gains. The law and order situation in PNG continues to deteriorate, corruption remains rife, and weak governance continues to impede basic service delivery. PNG has yet to commit significant resources to address the systemic corruption thriving within all levels of government and thereby impeding the establishment of a competitive market, inclusive development, and effective public administration. The Bridge Replacement for Improved Rural Access Sector Project in West New Britain presents an example of bad practice in PNG. 168. CPSFR Validation overall ADB and borrower performance rating. ADB performance is assessed satisfactory. ADB adapted its strategy and operations over time to address design limitations with the first generation MFFs, which had commenced prior to the CPS, 2016–2020, and ADB was highly responsive to the government’s evolving needs. The financial costs of delivery across PNG’s difficult terrain are high and the costs are increased because of limited capacity, weak management, and persistent corruption at all levels of government.

H. Overall Assessment 169. The CPSFR rated ADB’s program in PNG from 2016 to 2020 successful overall. It rated the program relevant, likely effective, likely efficient on the borderline, and having satisfactory development impact. However, the CPSFR rated the program less than likely sustainable. The sustainability rating reflected weak capacity and lack of government funding to undertake necessary maintenance in the transport sector. The CPSFR also rated the performance of ADB and the borrower satisfactory. 170. The validation assesses the ADB-supported program performance less than successful on the borderline and deems it to be relevant and with satisfactory development impacts. It assesses the performance less than effective, less than efficient, and less than likely sustainable (Table 8). Compared with the CPSFR ratings, the validation includes downgrades on both effectiveness and efficiency. The validation assesses ADB performance satisfactory and declines to rate the borrower.


Table 8: Comparative Assessment of Country Partnership Strategy Final Review and Validation Ratings

Evaluation Criteria CPSFR Ratings Validation

Ratings Main Reasons for Difference in Assessments

Relevance Relevant Relevant Not applicable

Effectiveness Likely effective Less than effective

The intended outcomes of several investments have been diminished through cumulative scope reductions as a result of poor preparation. This indicates reduced overall effectiveness.

Efficiency Likely efficient on the borderline

Less than efficient

The ADB portfolio faces significant implementation challenges stemming from weak capacity in the areas of procurement, financial management, contract management, and construction supervision. The government’s failure to meet its counterpart funding obligations presents another challenge.

Sustainability Less than likely sustainable

Less than likely sustainable

Not applicable

Development impacts

Satisfactory Satisfactory Not applicable

Nonsovereign operations

Less than successful

Less than successful

Not applicable

Overall rating Successful Less than Successful, on the borderline

The less than likely sustainability rating and less than successful nonsovereign operations combined with reduced ratings for effectiveness and efficiency lowered the overall rating for the program.

ADB performance Satisfactory Satisfactory Not applicable

Borrower performance

Satisfactory Not rated The decision to not rate this criterion is consistent with the Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations.

CPSFR quality Satisfactory Not applicable ADB = Asian Development Bank, CPSFR = country partnership strategy final review. Sources: Independent Evaluation Department; ADB. 2019. Country Partnership Strategy Final Review: PNG, 2016–2020. Manila; and Pacific Department.

I. Assessment of Quality of Self-Evaluation 171. The validation finds the quality of the CPSFR satisfactory in spite of reducing both the effectiveness and efficiency ratings of the program. The CPSFR adequately described the content and performance of the portfolio. It included clear summaries of the performance and outcomes of individual projects and useful analysis of issues and constraints at the sector level. It also clearly described the development context and the range of issues affecting program- and project-level performance. A comprehensive matrix of the scoring for each project and sector made the rating process more transparent, although this validation did not always agree with the ratings provided. The CPSFR considered the findings of PCRs, PVRs, and TA completion reports of completed operations and together with its own analysis presented findings, lessons, and recommendations. The CPSFR set out a range of recommendations aimed at improving project implementation and sustainability, and it suggested possible options for development of the next CPS.

CHAPTER 3

Key Issues, Lessons, and Recommendations 172. This chapter presents the key issues, lessons, and recommendations that emerged from the validation. The CPSFR identified five lessons and issues, and these are supported by the validation. These concerned (i) project implementation, (ii) counterpart funds, (iii) funding for maintenance, (iv) MFF modality, and (v) other lending modalities. The following issues, lessons, and recommendations are added.

A. Issues 173. PNG’s public debt levels recently exceeded the limit legislated in the Fiscal Responsibility Act, and ADB is the largest source of new loans that are increasing PNG’s debt stock. While PNG’s present ratio of public debt to gross domestic product is lower than those of most other countries globally, knowledge of the evolving debt context should guide the type of support that ADB plans to provide in the short- to medium-term. For example, budget support through PBL coupled with project lending may be useful for consolidating bad debts and preventing excessive debt accumulation. This could work particularly well if the International Monetary Fund is supportive of the overall macroeconomic framework. 174. As PNG becomes more successful in attracting additional support from non-traditional donors and lenders, there will be a challenge for ADB to coordinate with an expanded development partner community. PNG has, in recent years, attracted increasing support from emerging bilateral partners and lenders other than members of the Organisation for Economic Co-operation and Development’s Development Assistance Committee (OECD DAC) who engage with the government according to a different set of rules than those of traditional development partners. ADB has the ability to help the government to develop sector plans and policies that can guide the government and other development partners’ investments. The resident mission does not currently interact with the second largest bilateral development partner and the second largest lender, the PRC, which is providing grants and loans in the same sectors as ADB, including on adjoining roads. Additionally, the largest bilateral partner, Australia, also recently started providing development lending (including budget support) to PNG after traditionally only providing grant assistance. 175. PNG continues to grapple with challenges faced by all FCAS countries. Despite concerted efforts, the government’s capacity to deliver its development agenda remains very weak and can only be addressed effectively by a more rigorous and sustained level of long-term support. When working in a FCAS country, it is crucial to thoroughly understand the country context and risks in achieving development outcomes. 176. Chronic underfunding of O&M impairs the sustainability of investments and increases the risk that infrastructure will fail to achieve its anticipated design life, consequently diminishing intended benefits and constraining potential for inclusive economic growth. The issue can only be addressed effectively when the central government budgetary agencies recognize the importance of adequate O&M budgets to maintain national infrastructure assets.

Key Issues, Lessons, and Recommendations 53

177. ADB did not deliver a targeted program of support to enhance RCI between PNG and neighboring countries in the Asia Pacific region. While some RCI support was extended through Pacific-wide ADB initiatives, PNG is unable to benefit from an ADB subregional economic cooperation program similar to other ADB flagship RCI initiatives, such as the Greater Mekong Subregion and Central Asia Regional Economic Cooperation programs. PNG is seeking to strengthen its economic relationships with Asian countries where there is potential to engage in larger markets, and this could be supported through a combination of sovereign and private sector support.

B. Lessons 178. A narrow sectoral focus enables ADB to demonstrate its comparative advantage. The PNG program benefited from the tight sectoral focus on transport, energy, and health. In fragile situations where capacity is a major constraint to project implementation, limiting the number of sectors improves the likelihood that ADB support will achieve a development impact. 179. MFF can be an effective modality in fragile countries to achieve more than the sum of the parts, and particularly where sustained capacity building efforts are needed to enable implementing agencies to plan and deliver projects. The PNG program was characterized by extensive use of the MFF modality. The MFFs have facilitated stronger partnerships with implementing agencies, afforded the government greater funding certainty, and provided certainty among development partners.

C. Recommendations to ADB 180. Develop a more explicit and expanded PSM capacity development program focused on executing and implementing agencies relating to ADB investments. Recognizing PNG’s fragility and historic sustainability issues, ADB should build government capacity to address weaknesses in fiscal management and improve investments suffering from reduced counterpart funding and lack of O&M funding. ADB could support secondment of Papua New Guineans to ADB headquarters (as requested by the government through the validation mission). ADB could also strengthen capacity of the Department of National Planning and Monitoring, which administers the Capital Investment Programme, to implement the development policies, plans, and priorities of the government and coordinate all development assistance (as requested by the government through the validation mission). This would also enable ADB to better support PNG in planning and implementing a successful conversion of its resource wealth into inclusive and environmentally sustainable economic growth. 181. Build on the support already provided to state-owned enterprises (SOEs) to assist with corporate management and governance reforms, with the objective of improving service delivery and financial performance. The menu of support should include use of public–private partnerships to utilize private capital and reduce the financing burden on government. This could initially focus on SOEs in sectors where ADB already engages in, such as energy and civil aviation. 182. Initiate a dialogue with the government on how best to support PNG’s objectives for regional economic integration and connectivity with Asia and deliver a targeted program of support to enhance RCI. Helping PNG participate more in Asia’s regional economy could be an important objective of ADB support. Based on current and expected trade, ADB could help PNG to strengthen its economic relationships with Asian countries where there is more potential to engage in larger markets, with the government’s plan to “Connect PNG” and aspirations to access Asian markets under the “Take Back PNG” policy. Analysis of options and sustained dialogue would enable the development of proposals and require RCI discussion within ADB to occur with the East Asia, Southeast Asia, and PSO departments. ADB would need to reach beyond its normal counterparts in government, because successful RCI initiatives often have trade and foreign policy dimensions. ADB support could be focused on narrow objectives and


in sectors where ADB already engages in, such as developing civil aviation links to improve access to and integration with Asian markets. 183. Play a lead role in supporting government efforts to coordinate and harmonize lending among development partners to support improved aid effectiveness. As the largest lender, ADB should use its knowledge and experience to better support government efforts to improve debt sustainability by promoting responsible and sustainable lending among all development lenders, including new partners, such as the PRC (as requested by the government through the validation mission). Consistent with the Paris Declaration on Aid Effectiveness, ADB should support the government as it grapples with increased and unharmonized lending from emerging bilateral partners and non-OECD DAC lenders, who engage with the government according to a different set of rules than the traditional development partners. For example, ADB could help PNG to develop sector plans to guide government and development partner investments. ADB should seek, in particular, to engage with PRC to harmonize development efforts and promote sustainable lending in PNG. It should encourage PRC to attend the monthly Donor Partner Roundtable meetings. This is important inasmuch as PRC is providing grants and loans in the same sectors as ADB, including on adjoining roads (associated facilities).

Appendixes

APPENDIX 1: ADB COUNTRY PORTFOLIO FOR PAPUA NEW GUINEA DURING THE COUNTRY

PARTNERSHIP STRATEGY FINAL REVIEW PERIOD, 2016–MAY 2019

ADB = Asian Development Bank, CPS = country partnership strategy, No. = number of projects. a Includes five project grants funded solely by cofinancing partners, with two of those approved during CPS period (see Appendix 3). b Includes standalone and attached technical assistance with one TA project funded solely by Japan Fund for Poverty Reduction (see Appendix 4).

Sources: Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2014–2020.

ADB Support Carried forward

from the Previous CPS During CPS Period Total

Type of Operation/Financing Modality No.

ADB Approved Amount

($ million)

Cofinanced Approved Amount

($ million) No.

ADB Approved Amount

($ million)


($ million) No.

ADB Approved Amount

($ million)


($ million)

Sovereign Operations

Loans and grantsa 16 951.62 103.31 9 916.21 116.32 25 1,867.83 219.63

Technical assistanceb 7 3.97 9.83 6 6.70 2.99 13 10.67 12.82

Subtotal 23 955.59 113.14 15 922.91 119.31 38 1,878.50 232.45

Nonsovereign Operations 2 54.00 - 2 5.00 - 4 59.00 -

Total 25 1,009.59 113.14 17 927.91 119.31 42 1,937.50 232.45

APPENDIX 2: ADB OPERATIONS (LOANS AND GRANTS) APPROVED, ONGOING, AND COMPLETED DURING

2016–MAY 2019, BY SECTORa FOR PAPUA NEW GUINEA

Sector Number of

Projects

Total ADB Approved Amount

($)

Total Cofinancing Aped Amount

($)

Sovereign Operations Energy 4 184,900,000 9,766,300

Approved before CPS period but ongoing and/or completed during CPS period 3 124,000,000 9,766,300 Approved during CPS period 1 60,900,000 -

Finance 1 13,000,000 9,093,990 Approved before CPS period but ongoing and/or completed during CPS period 1 13,000,000 9,093,990 Approved during CPS period 0 - -

Health 4 230,000,000 75,850,000 Approved before CPS period but ongoing and/or completed during CPS period 2 35,000,000 58,200,000 Approved during CPS periodb 2 195,000,000 17,650,000

Industry and Trade 1 25,000,000 - Approved before CPS period but ongoing and/or completed during CPS period 1 25,000,000

Approved during CPS period 0 - -

Public Sector Management 2 1,000,000 24,250,000 Approved before CPS period but ongoing and/or completed during CPS period 1 - 24,250,000 Approved during CPS period 1 1,000,000 -

Transport 12 1,413,930,000 99,865,001 Approved before CPS period but ongoing and/or completed during CPS period 8 754,620,000 2,000,000 Approved during CPS periodb 4 659,310,000 97,865,001

Water and Other Urban Infrastructure Services 1 - 800,000 Approved before CPS period but ongoing and/or completed during CPS period 0 - - Approved during CPS period 1 - 800,000

Subtotal (Sovereign Operations) 25 1,867,830,000 219,625,291 Approved before CPS period but ongoing and/or completed during CPS period 16 951,620,000 103,310,290 Approved during CPS period 9 916,210,000 116,315,001

Nonsovereign Operations

Agriculture, Natural Resources and Rural Development 1 4,000,000 - Approved before CPS period but ongoing and/or completed during CPS period 0 - - Approved during CPS period 1 4,000,000 -

Finance 2 6,000,000 - Approved before CPS period but ongoing and/or completed during CPS period 1 5,000,000 - Approved during CPS period 1 1,000,000 -

Information and Communication Technology 1 49,000,000 - Approved before CPS period but ongoing and/or completed during CPS period 1 49,000,000 -

Approved during CPS period 0 - - Subtotal (Nonsovereign Operations) 4 59,000,000 -

Approved before CPS period but ongoing and/or completed during CPS period 2 54,000,000 -

Approved during CPS period 2 5,000,000 -

58 Appendix 2

ADB = Asian Development Bank, CPS = country partnership strategy/ a Includes projects approved during the CPS period and those approved before the CPS period but that are ongoing or were completed during July 2014–May 2019. b Includes additional financing for projects approved during the CPS period and the original projects of which were approved before the CPS period. These are counted as single projects (with the later financing counted as part of the original project).

Sources: Country partnership strategy final review data; ADB. 2019. Country Partnership Strategy Final Review: PNG, 2016–2020. Manila; Procurement, Portfolio and Financial Management Department project completion report and technical assistance completion report ratings as of May 2019; and Asian Development Bank Controller’s Department database as of December 2018.

Sector Number of

Projects


($)

Total Cofinancing Aped Amount

($)

TOTAL (All Operations) 29 1,926,830,000 219,625,291

Approved before CPS period but ongoing and/or completed during CPS period 18 1,005,620,000 103,310,290 Approved during CPS period 11 921,210,000 116,315,001

APPENDIX 3: LIST OF SOVEREIGN LOANS AND GRANTS (INCLUDING COFINANCED) APPROVED, ONGOING, AND

COMPLETED DURING 2016–MAY 2019 FOR PAPUA NEW GUINEA

Project Number

Project Count Project Name

Loan/ Grant

Number Approval

Date Closing

Date

Total ADB Approved

Amount ($)

Total Cofinancing Approved

Amount ($)

Self-Assessment Rating | IED Validation

Rating Lending Modality

Source of ADB Funds

Source of Co-

financing Energy Approved before CPS period but ongoing and/or completed during CPS period 41504-023 1 Town Electrification Investment Program

- Tranche 1 L2713 6-Dec-10 31-Dec-19 40,900,000

MFF Project OCR

L2714 6-Dec-10 31-Dec-19 16,400,000

COL

Additional Financing GR0469 9-Dec-15 31-Dec-19 - 4,766,300 Project NZG2 41504-024 2 Improved Energy Access for Rural

Communities GR0288 19-Apr-12 26-Nov-18

2,500,000

Project

NZG2

GR9163 19-Apr-12 31-Dec-19

2,500,000

Project

JFPR 43197-013 3 Port Moresby Power Grid Development

Project L2998 26-Apr-13 31-Jul-19 51,700,000 -

Project OCR

L2999 26-Apr-13 31-Jul-19 15,000,000 -

Project COL

Subtotal (3) 124,000,000 9,766,300 Approved during CPS period

41504-025 4 Town Electrification Investment Program - Tranche 2

L3544 4-Jul-17 30-Jun-20 55,900,000 -

MFF Project OCR

L3545 4-Jul-17 30-Jun-20 5,000,000 -

COL

Subtotal (1) 60,900,000 - Sector Total (4) 184,900,000 9,766,300 Finance

Approved before CPS period but ongoing and/or completed during CPS period

44304-013 5 Microfinance Expansion Project GR0226 28-Oct-10 30-Jun-19 - 6,000,000

Project

AUSG

L2686 28-Oct-10 30-Jun-19 13,000,000 -

COL

Additional Financing GR0425 9-Feb-15 30-Jun-19 - 3,093,990 Project AUSG Subtotal (1) 13,000,000 9,093,990 Approved during CPS period

Subtotal (0) - - Sector Total (1) 13,000,000 9,093,990 Health


39033-022 6 HIV/AIDS Prevention and Control in Rural

Development Enclaves (ADF Grant)

GR0042 25-Apr-06 17-Feb-16 15,000,000 7,000,000 S | S Project COL AUSG | NZG2

41509-013 7 Rural Primary Health Services Delivery Project

GR0259 30-Sep-11 30-Apr-20 - 40,000,000

Project

AUSG L2785 30-Sep-11 30-Apr-20 20,000,000 -

COL

L8274 21-Dec-11 30-Jun-19 - 9,000,000

OFID Grant 21-Dec-11 30-Apr-20 - 2,200,000

WHO |

JICA Subtotal (2) 35,000,000 58,200,000 Approved during CPS period

41509-013 (7) Rural Primary Health Services Delivery Project (Additional Financing)

GR0259 23-Nov-17 30-Apr-20

17,650,000

AUSG

51035-001 8 Health Services Sector Development Program, Subprogram 1

L3664 31-May-18 03-Apr-19 100,000,000 -

Sector Program

OCR

60 Appendix 3

Project Number


Loan/ Grant

Number Approval

Date Closing

Date

Total ADB Approved

Amount ($)


Amount ($)



Source of ADB Funds

Source of Co-

financing

9 L3665 31-May-18 30-Nov-25 45,100,000 -

Sector Project

OCR

L3666 31-May-18 30-Nov-25 49,900,000 -

COL Subtotal (2) 195,000,000 17,650,000 Sector Total (4) 230,000,000 75,850,000 Industry and Trade


42135-013 10 Pilot Border Trade and Investment

Development Project L2591 27-Nov-09 30-Jun-18 25,000,000

Project COL Subtotal (1) 25,000,000 - Approved during CPS period

- -

Subtotal (0) - - Sector Total (1) 25,000,000 -

Public Sector Management


46495-002 11 Building Resilience to Climate Change in Papua New Guinea

GR0447 21-Oct-15 30-Apr-22 - 24,250,000

Project SCF Subtotal (1) - 24,250,000 Approved during CPS period

52115-001 12 Earthquake Emergency Response Project GR0568 20-Mar-18 04-Oct-18 1,000,000

Special Assistance

APDRF

Subtotal (1) 1,000,000 - Sector Total (2) 1,000,000 24,250,000

Transport


40037-013 13 Mobilizing the Private Sector to Respond to Gender and HIV/AIDS Issues

GR0102 18-Dec-07 25-Feb-15

- LS | LS Project

HIV-HFPF

Lae Port Development Project L2398 18-Dec-07 30-Jun-16 60,000,000

OCR

L2399 18-Dec-07 30-Jun-16 40,000,000

COL

L8237 04-Dec-07 30-Jun-14

OFID 40037-043 Lae Port Development Project -

Additional Financing L2803 10-Nov-11 30-Jun-16 85,000,000

Project OCR

L2804 10-Nov-11 30-Jun-16 4,120,000

COL

40173-023 14 Highlands Region Road Improvement Investment Program - Project 1

L2496 22-Dec-08 7-Aug-17 71,200,000

LS MFF Project COL

L2497 22-Dec-08 7-Aug-17 28,800,000

40173-022 15 Extending the Socioeconomic Benefits of an Improved Road Network to Roadside Communities

GR9130 2-Mar-09 4-Dec-17 - 2,000,000 S Project

JFPR

43141-023 16 Civil Aviation Development Investment Program - Project 1

L2588 1-Dec-09 15-Jul-16 25,000,000

LS | LS MFF Project OCR

L2589 1-Dec-09 15-Jul-16 50,000,000

COL

L2590 1-Dec-09 15-Jul-16 20,000,000

COL

43200-024 17 Bridge Replacement for Improved Rural Access Sector Project

L2783 28-Sep-11 30-Jun-19 40,000,000

Project OCR

L2784 28-Sep-11 30-Jun-19 50,000,000

COL

44375-013 18 Maritime and Waterways Safety Project L2978 18-Dec-12 30-Sep-20 41,500,000

Project COL

43141-043 19 Civil Aviation Development Investment Program - Tranche 2

L3069 25-Nov-13 24-Nov-19 115,000,000

MFF Project OCR

L3070 25-Nov-13 24-Nov-19 15,000,000

COL

List of Sovereign Loans and Grants (including Cofinanced) Approved, Ongoing, and Completed in 2016–May 2019 for PNG 61

Project Number


Loan/ Grant

Number Approval

Date Closing Date

Total ADB Approved

Amount ($)


Amount ($)



Source of ADB Funds

Source of Co-

financing 40173-043 20 Highlands Region Road Improvement

Investment Program - Project 2 L3076 4-Dec-13 30-Jun-19 40,000,000

MFF Project COL

L3077 4-Dec-13 30-Jun-19 69,000,000

OCR Subtotal (8) 754,620,000 2,000,000 Approved during CPS period

43200-024 (17) Bridge Replacement for Improved Rural Access Sector Project Loan 2-Mar-16 30-Jun-18

58,400,000

Project EIB 40173-044 21 Highlands Region Road Improvement

Investment Program - Tranche 3 GR0485 19-Jul-16 29-Apr-20

19,990,000

MFF Project

EU

L3404 19-Jul-16 30-Jun-20 38,900,000

COL L3408 19-Jul-16 30-Jun-20 70,410,000

OCR

43141-044 22 Civil Aviation Development Investment Program, Tranche 3

L3496 8-Dec-16 24-Nov-19 213,000,000

MFF Project OCR L3497 8-Dec-16 24-Nov-19 35,000,000

COL

48444-004 23 Sustainable Highlands Highway Investment Program Tranche 1

GR0538 10-Jul-17 30-Jun-22

11,500,000

MFF Project

AUSG L3547 10-Jul-17 30-Jun-22 272,000,000

OCR

L3548 10-Jul-17 30-Jun-22 30,000,000

COL 46495-003 24 Building Resilience to Climate Change in

Papua New Guinea (additional financing)

GR0598 3-Sep-18 30-Apr-22

2,975,001

Project

AUSG GR0600 3-Sep-18 30-Apr-22

5,000,000

SCF

Subtotal (4) 659,310,000 97,865,001 Sector Total (12) 1,413,930,000 99,865,001

Water and Other Urban Infrastructure Services


Subtotal (0) - - Approved during CPS period

50372-001 25 Water Supply Scheme for Tete Settlement

GR0638 21-Feb-19 30-Jun-21 - 800,000

Project

PRCPRRCF

Subtotal (1) 800,000 Sector Total (1) 800,000

Total approved before CPS period but ongoing and/or completed during CPS period (16) 951,620,000 103,310,290

Total approved during CPS period (9) 916,210,000 116,315,001 TOTAL (25) 1,867,830,000 219,625,291

L = Loan, GR = Grant; LS = less than successful, PS = partly successful, S = successful; ADB = Asian Development Bank, ADF = Asian Development Fund, APDRF = Asia Pacific Disaster Response Fund, AUSG =

Australian Grant, COL = concessional ordinary capital resources lending, CPS = country partnership strategy, EIB = European Investment Bank, EU = European Union, HIV-HFPF = Cooperation Fund for Fighting

HIV/AIDS in Asia and the Pacific under the Health Financing Partnership Facility, IED = Independent Evaluation Department, JFPR = Japan Fund for Poverty Reduction, JICA = Japan International Cooperation

Agency, MFF = multitranche financing facility, NZG2 = New Zealand Grant, OCR = ordinary capital resources, OFID = OPEC Fund for International Development, PRCPRRCF = People's Republic of China Poverty

Reduction and Regional Cooperation Fund, SCF = Strategic Climate Fund, WHO = World Health Organization.

Sources: Asian Development Bank (ADB) Controller's Department database as of 31 June 2019; ADB eOps and ADB's project website, as of 31 June 2019; IED. ADB project success ratings database.

APPENDIX 4: LIST OF NONSOVEREIGN OPERATIONS APPROVED, ONGOING, AND COMPLETED DURING 2016–MAY

2019 FOR PAPUA NEW GUINEA

ADB = Asia Development Bank, CPS = country partnership strategy, No. = number, OCR = ordinary capital resources, TA = technical assistance.

Source: Independent Evaluation Department.

Project Number

Investment No.

Loan / Gu No.

Project Count Project Name Approval Date


($ million) Subsectors Status Source of Funding

Agriculture, Natural Resource and Rural Development Approved during CPS period

7525 3586 1 Olam International Limited (Agricultural Value Chain Development)

27-Oct-17 4,000,000 Agro-Industry, Marketing, and

Trade

This is regional TA. OCR

Subtotal (1) 4,000,000 Sector Total (1) 4,000,000

Finance Approved before CPS period but ongoing and/or completed during CPS period

7237

2 Kula Fund II Limited 29-Jun-06 5,000,000 Investment Funds This is regional TA. Equity Facility

Subtotal (1) 5,000,000 Approved during CPS period

3 Kina Bank Limited 7-May-17 1,000,000 Trade Finance Under Trade Finance Program

Guarantee

Subtotal (1) 1,000,000 Sector Total (2) 6,000,000

Information and Communication Technology Approved before CPS period but ongoing and/or completed during CPS period

7328 2745 4 Bmobile Limited 25-Mar-11 49,000,000 ICT

Equity Facility |

OCR Subtotal (1) 49,000,000 Sector Total (1) 49,000,000 Total approved before CPS period (2) 54,000,000 Total approved during CPS period (2) 5,000,000

TOTAL (4) 59,000,000

APPENDIX 5: LIST OF TECHNICAL ASSISTANCE APPROVED, ONGOING, AND COMPLETED FOR PAPUA NEW GUINEA

DURING 2016–MAY 2019

Project Number

TA Number

TA Count Project Name

Approval Date Closing Date


($)

Total Cofinancing

Amount ($)

Self-Assessment

Rating TA

type

Source of ADB Fund

Source of Cofinancing

Energy Approved before CPS period but ongoing and/or completed during CPS period

46012-001 8264 1 Implementation of the Electricity Industry Policy

10-Dec-12 21-Dec-16 1,000,000

S PATA TASF

Subtotal (1) 1,000,000 - Approved during CPS period

47356-001 9428 2 Power Sector Development Investment

Program 22-Nov-17 9-Mar-20 1,200,000 2,000,000

PPTA TASF AUSG

Subtotal (1) 1,200,000 2,000,000 Sector Total (2) 2,200,000 2,000,000 Health


Subtotal (0) - - Approved during CPS period

51035-002 9321 3 Preparing the Health Services Sector

Development Program 30-May-17 31-May-19 800,000

PPTA TASF

Subtotal (1) 800,000 - Sector Total (1) 800,000 -

Industry and Trade


42135-013 7393 4 Trade and Investment Institutional Strengthening*

27-Nov-09 18-May-16 900,000

PS CDTA TASF

Subtotal (1) 900,000 - Approved during CPS period

Subtotal (0) - - Sector Total (1) 900,000 -

Public Sector Management

Approved before CPS period but ongoing and/or completed during CPS period 44379-012 8213 5 Supporting Public Financial Management,

Phase 2 12-Nov-12 31-Dec-16 1,000,000

LS CDTA TASF

43199-012 7782 6 Facilitating Public-Private Partnerships 23-Feb-11 4-May-16 - 800,000 PS CDTA JFPR 46510-001 8378 7 Pacific Private Sector Development

Initiative, Phase III-PNG 6-Jun-13 31-Dec-19

8,080,000

PATA

AUSG

Subtotal (3) 1,000,000 8,880,000 Approved during CPS period

50204-001 9209 8 Supporting Public Financial Management

(Phase 3) 19-Oct-16 31-Oct-19 1,000,000

CDTA TASF

Subtotal (1) 1,000,000 -

Sector Total (4) 2,000,000 8,880,000 Transport


64 Appendix 5

Project Number TA

Number TA

Count Project Name Approval

Date Closing Date


($)

Total Cofinancing

Amount ($)

Self-Assessment

Rating TA

type

Source of

ADB Fund

Source of Cofinancing

43201-012 8123 9 Regulating and Sustaining Road Transport 25-Jul-12 10-Sep-18 1,000,000

S PATA TASF

46495-001 8362 10 Strategic Program for Climate Resilience Implementation Project

25-Sep-14 1-Dec-17 70,000

PPTA TASF

(Supplementary) 2-May-13 1-Dec-17

750,000

SCF

(Supplementary) 13-Nov-15 1-Dec-17

200,000

SCF

Subtotal (2) 1,070,000 950,000

Approved during CPS period

52201-002 9644 11 Preparing the Civil Aviation Investment Program 16-Nov-18 30-Jun-20

1,500,000

PATA TASF

48444-001 9117 12 Multipartner Financing Facility for the Highlands Highway 13-May-16 5-Jul-18

1,500,000

PPTA TASF Subtotal (2) 3,000,000 - Sector Total (4) 4,070,000 950,000 Water and Other Urban Infrastructure Services


Subtotal (0)

- -

Approved during CPS period

49454-001 9298 13 Support for Water and Sanitation Sector Management

6-Feb-17 10-Jul-20 700,000

CDTA TASF

(Supplementary) 13-Jul-18 31-Dec-19

738,000

AUSG (Supplementary) 15-May-19 10-Jul-20

250,000

BAMGF | WFF-MTF

Subtotal (1) 700,000 988,000 Sector Total (1) 700,000 988,000

Total approved before CPS period (7) 3,970,000 9,830,000 Total approved during CPS period (6) 6,700,000 2,988,000

TOTAL (13) 10,670,000 2,818,000

ADB = Asian Development Bank, AUSG = Australian Grant, BAMGF = Bill and Melinda Gates Foundation, CDTA = capacity development technical assistance, CPS = country partnership strategy, JFPR = Japan Fund for Poverty Reduction, PATA = policy advisory technical assistance, PNG = Papua New Guinea, PPTA = project preparatory technical assistance, SCF = Strategic Climate Fund, TA = technical assistance, TASF = Technical Assistance Special Fund, WFF-MTF = Water Financing Facility-Multi-donor Trade Finance

Ratings: HS = highly successful, LS = less than successful, PS = partly successful, S = successful. *Attached technical assistance.

Sources: Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2016–2020.

APPENDIX 6: LIST OF SOVEREIGN LOANS AND GRANTS COMPLETED FOR PAPUA NEW GUINEA IN 2016–MAY 2019

Health Approved before CPS period but ongoing and/or completed during CPS period 39033-022 6 HIV/AIDS Prevention and Control in

Rural Development Enclaves (ADF Grant)

GR0042 25-Apr-06 17-Feb-16 15,000,000 7,000,000 S | S Project COL AUSG | NZG2

Industry and Trade Approved before CPS period but ongoing and/or completed during CPS period 42135-013 10 Pilot Border Trade and Investment

Development Project L2591 27-Nov-09 30-Jun-18 25,000,000 Project

Public Sector Management Approved during CPS period 52115-001 12 Earthquake Emergency Response Project GR0568 20-Mar-18 4-Oct-18 1,000,000 Special

Assistance APDRF

Transport Approved before CPS period but ongoing and/or completed during CPS period 40037-013 13 Mobilizing the Private Sector to Respond

to Gender and HIV/AIDS Issues GR0102 18-Dec-07 25-Feb-15 - LS | LS Project HIV-HFPF

Lae Port Development Project L2398 18-Dec-07 30-Jun-16 60,000,000 OCR L2399 18-Dec-07 30-Jun-16 40,000,000 COL L8237 04-Dec-07 30-Jun-14 OFID 40037-043

Lae Port Development Project - Additional Financing

L2803 10-Nov-11 30-Jun-16 85,000,000

Project OCR

L2804 10-Nov-11 30-Jun-16 4,120,000 COL 40173-023 14 Highlands Region Road Improvement

Investment Program - Project 1 L2496 22-Dec-08 7-Aug-17 71,200,000 LS MFF Project COL

L2497 22-Dec-08 7-Aug-17 28,800,000 40173-022 15 Extending the Socioeconomic Benefits

of an Improved Road Network to Roadside Communities

GR9130 2-Mar-09 4-Dec-17 - 2,000,000 S Project JFPR

43141-023 16 Civil Aviation Development Investment Program - Project 1

L2588 1-Dec-09 15-Jul-16 25,000,000

LS | LS MFF Project OCR L2589 1-Dec-09 15-Jul-16 50,000,000

COL

L2590 1-Dec-09 15-Jul-16 20,000,000

COL Approved during CPS period 43200-024 (17) Bridge Replacement for Improved Rural

Access Sector Project Loan 2-Mar-16 30-Jun-18 58,400,000

Project

EIB

ADB = Asian Development Bank, ADF = Asian Development Fund, APDRF = Asia Pacific Disaster Response Fund, AUSG = Australian Grant, COL = concessional ordinary capital resources lending, CPS = country partnership strategy, EIB = European Investment Bank, EU = European Union, GR = Grant, HIV-HFPF = Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific under the Health Financing Partnership Facility, IED = Independent Evaluation Department, JFPR = Japan Fund for Poverty Reduction, JICA = Japan International Cooperation Agency, L = Loan, MFF = multitranche financing facility, NZG2 = New Zealand Grant, OCR = ordinary capital resources, OFID = OPEC Fund for International Development, PRCPRRCF = People's Republic of China Poverty Reduction and Regional Cooperation Fund, SCF = Strategic Climate Fund, WHO = World Health Organization. Ratings: LS = less than successful, PS = partly successful, S = successful. Sources: Procurement, Portfolio, and Financial Management Department portfolio management indicators, 2016–2020.

Project Number


Loan/ Grant

Number Approval

Date Closing

Date


($)

Total Cofinancing Approved Amount

($)



Source of ADB Funds

Source of Co-

financing

APPENDIX 7: PAPUA NEW GUINEA RATING OF COUNTRY PROGRAM AND COUNTRY PARTNERSHIP

STRATEGY OBJECTIVES 2016–2020

Sector Programs and Cross-Cutting Objectives Sector Share Relevance Effectiveness Efficiency Sustainability

Development Impacts

Overall Rating

Sector 20% 20% 20% 20% 20%

Public Sector Management 2% 2 1 2 2 2 1.8 Industry and Trade 1% 2 2 1 1 1 1.4 Health 15% 3 2 2 1 2 2.0 Energy 9% 2 2 1 2 2 1.8 Transport 72% 2 1 1 1 2 1.4 Finance 1% 2 1 1 2 1 1.4 Water and Other Urban Infrastructure and Services

0.1% 1 1 2 2 2 1.6

CPS Cross-cutting objectives Regional Cooperation and Integration 1 1 Inclusive Growth 2 2 Environmentally Sustainable Growth 2 2 Private Sector Development 1 1 Good Governance and Capacity Development

2 2

Gender Equity 2 2 Partnerships 2 2 Knowledge Solutions 2 2.0 Weighted Score of Sovereign Operations 2.0 1.3 1.2 1.1 1.9 1.47

Overall Rating Sovereign Program Relevant Less than Effective

Less than Efficient

Less than Likely

Sustainable

Satisfactory Less than Successful

Nonsovereign Operations 3% Development

Results

ADB Investment Profitability

ADB Work Quality

ADB Additionality

1.0

Overall Sovereign and Nonsovereign Program Rating

1.46 Less than Successful

Source: Independent Evaluation Department

APPENDIX 8: ACHIEVEMENT OF COUNTRY DEVELOPMENT GOALS, 2016–2020

Country Development Goals Established in the Development Strategic Plan, 2010–2030

National Development Goals Achievement Stated in Country

Partnership Strategy Final Review Validation Comment

Crime. Medium Term Development Plan III sets a target to reduce the crime rate to 70 per 100,000 population by 2015.

Not achieved. The 2017 crime rate in PNG was 83.7 per 100,000 population—13.7 points behind the target.

Not achieved. The high crime rate in part reflects a lack of sufficient employment and income earning opportunities, which the economy has not been able to create.

Land ownership. Establish an effective land reform program that will mobilize 20% of PNG’s land under a formal administration system.

Not achieved. The government has initiated reforms, but methods to assess whether such reforms are able to include 20% of land mass remain uncertain, particularly considering that 97% of land in PNG is customary land.

Not achieved. PNG’s system of customary land ownership presents unique challenges and opportunities for its integration into the modern economy.

Ease of doing business. PNG set a target to be rated among the top 40% of countries in the World Bank’s Cost of Doing Business report by 2020.

Not achieved. In 2019, PNG was ranked 108 out of 190 countries—placing it in the top 57% of countries in the report.

Not Achieved. PNG requires significant reforms to improve the environment for private sector development.

Formal employment. Create job opportunities in the formal economy, with a target of creating an additional 500,000 jobs in the formal economy by 2020.

Not achieved. Slow economic activity has contributed to a decrease in formal jobs, from about 384,161 jobs in 2015 to 356,885 in 2018.

Not Achieved. Slow economic activity in the resource and non-resource sectors of the economy continue to impede growth in formal employment.

Unemployment. PNG established the target of lowering the unemployment rate in urban areas to below 10%.

Not achieved. The urban unemployment rate has not changed significantly since 2014 and remained at an estimated 20% in 2018.

Not achieved. The services, manufacturing, and other non-resource-related business have not grown quickly enough to absorb new entrants to the labor market and reduce unemployment.

Sources: Baseline and target figures were compiled from ADB. 2015. Country Partnership Strategy: Papua New Guinea, 2016–2020. Manila. Country partnership strategy final review stated achievement figures were drawn from ADB. 2019. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020. Manila.

APPENDIX 9: LINKED DOCUMENT

1. Country Partnership Strategy Final Review: Papua New Guinea, 2016–2020 https://www.adb.org/sites/default/files/linked-documents/CPSFR-PNG.pdf

https://www.adb.org/sites/default/files/linked-documents/CPSFR-PNG.pdf

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