Document of

The World Bank

FOR OFFCIAL USE ONLY

Report No. 12625

PROJECT COMPLETION REPORT

INDEPENDENT STATE OF PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT(LOAN 2265-PNG)

DECEMBER 23, 1993

Infrastructure Operations DivisionCountry Department IIIEast Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit CFA Franc (CFAF)US $1.0 = 276.625CFAF 1 million = US $3,615SDR 1.0 = US $1.371

ABBREVIATIONS AND ACRONYMS

ACCT Agence Culturelle et de Cooperation TechniqueAfDB African Development BankBOAD Banque Ouest-Africaine de DeveloppementCCCE Caisse Centrale de Cooperation EconomiqueCFD Caisse Francaise de DeveloppementCIDA Canadian International Development AgencyDE Department of EnergyEdF Electricite de FranceESIE Ecole Superieure Interafricaine d'ElectriciteESMAP Energy Sector Management Assistance ProgramFNE Fonds National de l'EnergieGOS Government of SenegalMDIA Ministere du Developpment Industriel et de l'ArtisanatPPF Project Preparation FacilitySAL Structural Adjustment LoanSAR Societe Africaine de RaffinageSENELEC Societe Nationale d'ElectriciteTEP Tonne Equivalent PetroleUNDP United Nations Development Program

FOR OFFICIAL USE ONLY

THE WORLD BANKWashington, D.C. 20433

U.S.A

Office of Director-GeneralOperations Evaluation

December 23, 1993

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Papua New GuineaRoad Improvement Project (Loan 2265-PNG)

Attached is the "Project Completion Report on Papua New Guinea - RoadImprovement Project (Loan 2265-PNG)" prepared by the Infrastructure OperationsDivision, Country Department III, East Asia and Pacific Regional Office, with theBorrower providing Part II.

The project substantially met its physical investment objective,albeit with some delay caused by inadequate project preparation. Costs weresubstantially higher than anticipated at appraisal. The project's principalinstitution building objective --establishment of an efficient road managementsystem-- was not realized. Only a fraction --less than 10 percent-- of thetechnical assistance and training foreseen at appraisal was actually engaged, andthat with considerable delay. Similarly, assistance to the local constructionindustry, another institution building component included at appraisal, did notcome to fruition under the project. Instead, this is now being addressed underthe ongoing Transport Improvement Project (Loan 2742-PNG). The economic rate ofreturn (ERR) of the project is estimated at more than 10 percent --the same asat appraisal-- for the Provincial roads and bridge components; and at eight to20 percent for the National roads component -- slightly less than at appraisal.

Overall, the outcome is rated satisfactory. But its sustainabilityis uncertain given the uncertainty of future maintenance funding in combinationwith institutional weaknesses, particularly in the provinces. The institutiondevelopment impact is rated negligible.

The PCR is generally satisfactory. Its economic analysis, however,is poor: no traffic counts were undertaken, the ERRs for the Provincial roads andfor the project's bridge component appear to be ex ante rather than ex post ERRs,and the detailed information underlying the overall ERR estimates is missing.

The project may be audited.

Attaclement

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be discLosed without World Bank authorization.

FOR OMCIAL USE ONLY

PAPUA NEW GUINEA

ROAD MIPROVEMIENT PROJECT(LOAN 2265-PNG)

PROJECT COMPLETION REPORT

CONTENTS

Preface ..................... , i

Evaluation Summary .i

PART T- PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity .12. Project Background .13. Project Objectives and Description ........................ 24. Project Design .................................... 35. Project Implementation ............................... 46. Project Results .................................... 77. Project Sustainability ................................ 88. Bank Performance .................................. 89. Borrower Performance ............................... 9

10. Consulting Services .10

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE

Provincial Roads Improvement .11Improvement of National Highways .14Consultant Services .14Technical Assistance .15Sunmnary .15

PART III: STATISTICAL INFORMATION

1. Related Bank Loans and Credits .182. Project Timetable .203. Loan Disbursements .214. Project Implementation .225. Project Costs and Financing .236. Project Results .257. Status of Covenants .278. Use Of Bank Resources .28

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

PROJECT COMPLETION REPORT

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT(LOAN 2265-PNG)

PREFACE

This is the Project Completion report (PCR) for the Road Improvement Projectin Papua New Guinea, for which Loan 2265-PNG in the amount of US$31.0 million wasapproved on April 19, 1983. The loan was closed on June 30, 1992, following twoextensions to the original closing date of June 30, 1989. It was fully disbursed and the lastdisbursement was made on November 4, 1992.

The PCR was prepared by the Infrastructure Operations Division of CountryDepartment III of the East Asia and Pacific Regional Office (Preface, EvaluationSummary, Parts I and III) and by the Borrower (Part II).

Preparation of the PCR was based on information contained in the Staff AppraisalReport, Legal Documents, Supervision Reports, Consultants' Progress Reports,Correspondence in Project Files, Internal Bank Memoranda and the findings of a Missionto Papua New Guinea in November 1992.

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PROJECT COMPLETION REPORT

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT(LOAN 2265-PNG)

EVALUATION SUMMARY

Project Objectives

1. The project objectives were to (a) improve rural mobility throughimplementation of a rehabilitation and improvement program for roads and bridges,(b) improve road maintenance through the establishment of an efficient management systemand (c) assist in developing the domestic transport and construction industries. In addition,the project was intended to help in establishing a strategy for transport sector development.The project concept was innovative in that for the first time since the Bank's start ofhighway operations in 1970, the Bank was directing its attention to roads other than thetrunk routes and to the strengthening of local government institutions (paras. 2.4 and 3.1).

Implementation Experience

2. The provincial roads and national bridges programns were implementedsatisfactorily but civil works for the Highlands and Enga Highways did not commence onschedule because of the time taken to carry out final engineering which was longer thanestimated. Delays in the commencement of works ranged from about 17 months for theEnga Highway to about 30 months for the Kudjip-Minj section of the Highlands Highwayand 60 months for the Watabung-Chuave section. But once the works commenced, therate of progress was satisfactory. Land acquisition problems continued to affect some ofthe roads and bridges. Despite the variety of procurement methods employed there wereonly a few difficult problems (paras. 5.1-5.10).

3. All the studies under the project were executed promptly after loaneffectiveness. The training component was delayed through lack of preparation and, dueto the very difficult procedures for hiring staff consultants, only a reduced technicalassistance component was eventually carried out. The assistance to the local contractingindustry is currently being undertaken in the Transport Improvement Project (Loan 2742-PNG) and the Special Interventions project (Loan 3289-PNG) (para. 5.12).

Project Results

4. In addition to the improvement of the Highland and Enga Highways, 261 kmof provincial roads were constructed, as compared to an appraisal plan of 277 kmn and

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1,230 m of national bridges compared to a plan of 1,517 m. The project's objective toimprove travel conditions on the rural roads and facilitate through traffic on the nationalroad network by the construction of bridges was achieved. The project has contributedto the improvement of the road maintenance and management systems and the developmentof a more efficient trucking industry. A transport development strategy that governs policyand investment programs in the transport sector has been drafted iparas. 6.1 and 6.2).

5. The road improvements confer immediate benefits to the highway users inthe form of lower vehicle operating costs and passenger time savings. Based on theassumptions used at appraisal, the economic returns on the investments in the EngaHighway and a section of the Highlands Highway are 19.6 and 8.0 percent, respectively,compared to an appraisal estimate of 21.2 and 12.2 percent. This reflects the higher costs,and lower than expected traffic at completion. From current experience, the rehabilitationprograms for the provincial roads and national bridges are expected to yield economicreturns in excess of 10 percent (para. 6.3).

Project Sustainability

6. Although the maintenance budget for the national roads was cut sharply in1990, maintenance continues to be satisfactory on the national roads and funding has beenrising, albeit, in modest amounts. There is, however, doubt about the ability of theprovincial governments to maintain satisfactorily the provincial roads because of the lackof provincial capability to administer the roads and their dependence on central governmentfor technical assistance. While an attempt was made under the project to assist theprovinces through the central government agencies, the Transport Improvement Projectthat followed did not address the matter of strengthening provincial capability. The riskis very real that the provincial roads improved under the project may not be maintainedsatisfactorily and that the project benefits may not be sustained (paras. 7.1 and 7.2).

Findings and Lessons learned

7. The project achieved a major objective in continuing the improvement of the600 km Highlands Highway to paved standards. The first attempt at implementing aprovincial roads program was also successful and several studies were accomplished thatwill help planning of future investments. However, a lesson learned from the disruptionof the construction schedules for the Highlands and Enga Highways and increases inconstruction costs is that detailed engineering for trunk roads should be completed duringthe project preparation stage and not deferred to be carried out during projectimplementation (paras. 4.4 and 5.1).

8. The Government intends to produce and use standard bidding documentsbased on the Bank's sample bidding documents in all future Bank-financed projects. Itmay help in reducing the need for constant reference to the Bank for review. But, thereis an irreducible amount of time that will have to be expended by both Bank andGovernment staff in dealing with referrals to the Bank for its comments and approvals ofprocurement procedures and documents (para. 9.2).

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9. Another lesson learned is the need to make a more thorough study of theprovincial institutions and to continue the start made in the project to develop theprovincial road networks so as to enable project benefits to be sustained. Finally, frequentchanges in Bank staffing tend to slow down project preparation and interrupt continuityin sector dialogue with the Government (para. 8.2).

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PROJECT COMPLETION REPORT

PAPUA NEW GUINEA

ROAD IlPROVEMENT PROJECT(LOAN 2265-PNG)

PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE

1. Project Identity

Project Namne Road Improvement ProjectLoan Number 2265-PNGLoan Amount US$31.0 millionRVP Unit East Asia and Pacific RegionCountry Papua New GuineaSubsector Transport

2. Project Background

2.1 Unlike many developing countries in East Asia and the Pacific, Papua NewGuinea has a very small population (3.8 million) compared to its land area (461,700 km2).It is endowed with abundant mineral and oil resources, good agricultural potential andgreat natural beauty. However, the country's history, adverse topography and loweducation and skill levels have conspired to present it with formidable obstacles toeconomic development. Papua New Guinea continues to be dependent on aid from avariety of sources and on expatriates for the manning of public and private establishmentsand undertakings. Local skills and capital are not available to exploit fully the country'snatural wealth.

2.2 The population is predominantly rural (85 percent) and much of the attentionof the Government since the late seventies has been directed at programs to improve thequality of life in the rural areas. More importantly, the Government was taking steps tostrengthen local government administration and to decentralize much of the functions thatimpinge directly on the lives of the rural people. The provision of adequate rural transportfacilities became an important component of the Government development strategy whichcalled for greater participation by the provincial governments in the administration of therural road networks and a capacity at provincial government levels to plan, construct andmaintain roads.

2.3 The Government's overall objective was to connect the widely scatteredpockets of population, principally along the Highlands Highway corridor, in order to

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facilitate the marketing of agricultural produce and exportable crops such as copra, cocoa,coffee and cardamon and thereby switch agriculture from a subsistence level to an incomeearning activity. The linking of population centers would also have the effect of fosteringa sense of nationhood in a country of several hundred tribal groupings and dialects andcontribute to more efficient administration and effective delivery of government health,education and agricultural extension services.

2.4 The project concept fitted in with Government policy to give priority to theneeds of the rural population and was a major shift from the approach of the three earlierBank-financed road projects which focused exclusively on improvements to sections of theHighlands Highway. Some attention was paid to institutional issues in the Third HighwayProject (Loan 1856-PNG) but none in regard to the provincial road systems. The projectunder review in this report was the fourth Bank-financed road project in Papua NewGuinea. The Bank decided to begin looking at the whole road network including theprovincial roads and at strengthening the local capability at central government andprovincial levels.

3. Project Objectives and Description

3.1 Project Objectives. The project objectives were to: (a) improve ruralmobility through implementation of a rehabilitation and improvement program for roadsand bridges; (b) improve road maintenance through the establishment of an efficientmanagement system; and (c) assist in developing the domestic transport and constructionindustries. In addition, the project was intended to help in establishing a strategy fortransport sector development which was expected to lead to policy action plans andassociated investment programs.

3.2 Project Description. The project consisted of:

(a) the rehabilitation or improvement of about 15 provincial road segmentstotaling approximately 277 km;

(b) rehabilitation or replacement of about 32 bridges on national roads havingan estimated total length of 1,517 m;

(c) improvement of two sections of the Highlands Highway (29 km) and thefirst section of the Enga Highway (about 25 km);

(d) consulting services for feasibility studies, detailed engineering andconstruction supervision, for transport policy studies and for the preparationof a transport sector development plan and associated investment programs;

(e) technical assistance to establish efficient procedures for transport sectordevelopment functions in general and highway management andadministration in particular, and to assist in the development of the domesticconstruction industry; and

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(f) training of highway maintenance personnel.

The project also included provisions for a study to investigate potential hydropowerresources.

4. Project Design

4.1 From the outset the project was conceived by the Government and Bank asa rural transport project and it led to the commissioning of consultants to undertake a studyto prepare investment packages for a selected number of provinces and to train provincialstaff in project identification and evaluation. The consultants (Germany/UK) werefinanced under the Third Highway Project (Loan 1856-PNG/Credit 1030-PNG). The studyinvolved the collaboration of several Government agencies-DTCA, Department of Worksand Supply (DWS), Department of Finance, National Planning Office, Provincialadministrations and Department of Agriculture-but the agencies were not able to providecounterparts to work with the staff of the consultants. It was quickly realized by the Bankthat it would take a long time before the provinces could be staffed by local nationals. Asa result, the emphasis of the study shifted instead to improvement of project identification,evaluation and ranking of priorities at the central government level in the DTCA andDWS.

4.2 Five major issues were apparent during project appraisal: (a) projectpreparation was still at the stage of preliminary studies and engineering and little had beendone to assess manpower needs particularly at the provincial level and to prepare a detailedtraining program for implementation at central and provincial levels; (b) the fundsallocated in the lending program were not sufficient to cover the project costs; (c) theGovernment was opposed to going to ICB for sections of the Highlands and EngaHighways which it proposed to construct by project managed force account I/ (PMFA);(d) acquisition of right-of-way had been a problem in earlier projects and a major causeof cost overruns; and (e) there were concerns about Government compliance withcovenants relating to sectoral issues in the ongoing Third Highway Project. Only (b)above was raised as an issue in the issues paper following the appraisal mission and thedecision memorandum recorded none. The other issues surfaced during reviews by seniormanagement and were the main topics of discussion at negotiations.

4.3 At negotiation a Bank loan amount of US$31.0 million was agreed and itwas proposed that the shortfall of about US$7.0 million would be provided by the KuwaitiFund for Arab Economic Development Fund (KFAED). With regard to sector issues, theGovernment agreed in a side-letter to: (a) reorganize the road maintenance administration;(b) continue its review of transport user charges; and (c) evaluate the impact of modifyingthe transport regulatory framework with a view to establishing an economic and efficienttransport system.

1/ PMFA is the execution of works by a departmental construction team rnansged by acontractor/DWS staff/consulting firm and supervised by another consulting firm. The teamoperates like a contractor employed to execute works under a contract with the department.

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4.4 In retrospect, there is little doubt that the timing of the appraisal waspremature in regard to the Highlands and Enga Highways and sufficient time was notallowed for the completion of studies and final engineering in the project implementationschedules. Moreover, as the project was intended to improve the capacity of the centraland provincial government agencies in planning, administration, and maintenance of thenational and provincial road networks, project preparation may have benefitted from anassessment of manpower levels and the design of a structured training program forimplementation under the project. The adoption of a program approach to the rehabilitationof the provincial roads and national bridges enabled a degree of flexibility in adjustmentof the scope of the programs and in maximum utilization of loan funds. Unfortunately,the provincial road program was not continued in the Transport Improvement Project(Loan 2742-PNG) that followed and the focus of Bank lending reverted to national roadsand central government institutions.

5. Project Implementation

5.1 Overview. In the event, there were long delays of about 17 months and 30months respectively in the commencement of construction of one section of the HighlandsHighway and the Enga Highway and nearly five years in the case of the KFAED-financedsection of the Highlands Highway. The construction costs exceeded appraisal estimatesby substantial amounts as a result of the delays and increased quantities following detailedengineering. However, the total project cost in dollar terms was only slightly higher thanthe appraisal estimate as a result of the decline in value of the local Kina vis-a-vis theUS Dollar. As for technical assistance to DTCA and DWS for management andoperations improvements, design improvements, road and bridge maintenance anddevelopment of local contracting industry, the Bank underestimated the complexity and thetime required for selection and appointment of individual consultants in staff positions andmost of the appointments did not take place.

5.2 Provincial Roads and National Bridges Rehabilitation Programs.Implementation began immediately after loan effectiveness in October 1983 with civilworks on three of the roads included in the provincial roads rehabilitation andimprovement program and three of the bridges included in the bridges rehabilitation andreplacement program for which detailed engineering had been completed by consultants.The programs were divided into three phases and the studies and final engineering for thesecond and third phases were carried out by the DWS and consultants as civil worksprogressed on the first phase. Projects selected for each phase had to have an ERR of atleast 10 percent.

5.3 The roadworks for the most part were carried out by force account withsome local contractors employed in haulage and earthworks and the bridge works by LCBcontracts. The start of civil works on many of the roads and bridges in the two programswas about a year or more behind schedule because of delays in carrying out detailedengineering and difficulties encountered in the acquisition of the right-of-way. Landacquisition problems continued to be an obstacle to progress but, overall, the delays werecompensated to some extent by faster construction.

5.4 In all, 261 km of provincial roads were constructed compared to anappraisal plan of 277 km and 1,230 m of national bridges compared to a plan of 1,517 m.The original programs were accomplished about a year behind appraisal schedule. Duelargely to price escalation, there was a 62 percent cost overrun in this component.Construction of some of the provincial roads and national bridges were supervised byDWS staff.

Improvement of Highlands and Enga Highways

5.5 Togoba-Tambul Road. This road is located in the Enga Province and isa part of the road from Togoba to Wapenamanda for which feasibility studies and detailedengineering had been completed at the time of appraisal. The road was divided into twocontracts so as to give better opportunity for local contractors and to enable constructionto commence on the road section for which the right-of-way had already been acquired.However, there was a delay of about 17 months in the commencement of the civil worksfor the first contract as a result of the need for additional materials investigations anddelays in bidding. The delay on the commencement of the second contract was evenlonger because of slow progress on land acquisition and design adjustments to the roadalignment caused by an error in the setting out of the first contract.

5.6 By the time these problems had been resolved in 1986, the originalcontractor prequalification which was carried out in 1983 had become outdated but aftera lengthy exchange of correspondence the Bank agreed to an update of the originalprequalified contractors and to advertising locally for a fresh prequalification. The finalroad length constructed was 32.5 km, an increase of 7.5 km and the construction cost wasabout K 348,700 per km, compared to an appraisal estimate of about K 241,280 per km,an increase of about 44.5 percent due mainly to price escalation on the second contractwhich did not commence until the end of 1987 and increase in quantities.

5.7 Kudjip-Minj Road. This road is located in Western Highlands Provinceand is part of the Highlands Highway. Detailed engineering had not been carried out attime of appraisal. There was substantial delay in the completion of detailed engineeringand bid evaluation was not completed until late February 1986. Further delay occurredwhen the Government recommended the contract award to the second lowest evaluatedbidder because of poor performance by the lowest bidder on another Government contractand the Bank could not approve the award. The contract was finally awarded to the lowestevaluated bidder and signed in June 1986.

5.8 This 13 km section of the Highlands Highway was completed in six months,about seven months ahead of the contract schedule, at a final cost of about K 246,800 perkm compared to an appraisal estimate of about K 176,900 per km, an increase of about39.5 percent reflecting price escalation between 1983 and 1986 and increase in quantities.

5.9 Watabung-Chuave Road. This road is located in the Eastern HighlandsProvince and is also part of the Highlands Highway. The feasibility study and preliminaryengineering was carried out by consultants during project implementation. This formedthe basis of an appraisal by KFAED but the loan agreement with KFAED was not effective

until January 1990. Detailed engineering was initially undertaken by DWS and later byconsultants who did the final review. Progress on the detailed engineering was madedifficult by objections from landowners to soils investigations on their lands and theconstruction of the road was plagued by problems associated with land acquisition, cropcompensation and a breakdown of law and order.

5.10 After a delay of about five years, civil works construction began in late 1989and was completed in September 1992. The works were carried out by PMFA at a costof about K 698,800 per kim compared to an appraisal estimate of K 312,500 per kim, anincrease of about 123 percent, due to price escalation and increase in quantities. The casefor Government's support of PMFA as opposed to ICB is not strengthened significantlyby the experience on the construction of this road. Firstly, the costs per km are muchhigher than the costs per km of the other two roads in the Highlands and Enga Provinceconstructed by contract awarded under ICB even allowing for price escalation in theintervening time. Secondly, PMFA costs may be generally understated in that all costs arenot properly accounted for particularly those relating to mobilization and demobilizationand suspension of works. PMFA has to face the law and order problem and is notimmune to attacks by the local tribesmen but, on the other hand, the attacks are lessintense and it allows for the use of a more flexible response by management. Also, thisroad was completed while its contemporary, the Togoba-Ialibu Road (ICB contractfinanced under Loan 2742-PNG) is virtually stalled. In addition, it should be borne inmind that the Watabung-Chuave Road was one of the more difficult sections of theHighlands Highway.

5.11 Technical Assistance and Training. In addition to consulting services forfeasibility studies, detailed engineering and construction supervision and preparation offuture projects, the project included provisions for consulting services to carry out anumber of policy studies and to furnish technical assistance and training to DTCA andDWS staff. Five studies were undertaken by consultants originating from the countriesindicated: (a) Transport Investment Program (France); (b) Transport Data Base (NewZealand); (c) Provincial Liaison Training (UK); (d) Transport Operations Policy (UK); and(e) Boat Services Feasibility (New Zealand). The Transport Operations Policy Studybrought within the scope of a single exercise, the study of (a) airport user charges andaviation pricing and cost recovery issues and (b) an investigation of the regulation of thetransport industries with reference to the road freight industry. Originally, these wereenvisaged as separate studies in the appraisal report. The studies findings are beingimplemented by the Government.

5.12 The studies were carried out satisfactorily and enabled the Government tocomply with the covenants in the loan agreement for the preceding Third Highway Projectcalling for improvement in highway maintenance planning, levying of appropriate usercharges, opening up the trucking sector to nationals and moving towards an efficienttransport system including privatizing its freight and passenger and coastal shippingservices. While the studies were carried out satisfactorily as scheduled at appraisal, verylimited use was made of the technical assistance and training component. Althoughattempts were made to recruit expatriate staff to work in the DTCA and DWS, they failedchiefly because Government recruitment procedures were not adaptable easily to the

recruitment of individual consultants and enormous delays occurred in resolving the issuesthey raised. The assistance to the local contracting industry is being carried out under theongoing Transport Improvement Project (Loan 2742-PNG) and the Special InterventionsProject (Loan 3289-PNG) with the establishment of a dedicated construction industry unitin the Department of Trade and Industry. This unit was established because DOW haddemonstrated only limited interest in assisting the contracting industry.

5.13 Project Variations. There was no significant departure from the projectas appraised, not counting the reduction in the scope of the technical assistance component.Also, near the end of the project, the Bank agreed to transfer payments of a few completeditems from Ln. 2742-PNG, so as to use up the funds remaining (US$2.6 million) in theloan. This transfer was restricted to jointly (Ln. 2265/2742-PNG) financed items.

6. Project Results

6.1 Project Objectives. The project's objective to improve travel conditionson some of the rural roads and provide access to the trunk routes was achieved by theaccomplishment of the provincial road program. Many of the national roads alsobenefitted from the construction of bridges which are expected to facilitate through traffic.The project has contributed to the improvement of the road maintenance and managementsystems by organizing the systematic and routine collection and processing of transport -

data and training by consultants. The trucking industry is already showing evidence ofthe impact of the relaxation of government controls with the movement towards largertrucks. A transport development strategy that governs policy and investment programs inthe transport sector has been drafted and is being followed in practice.

6.2 Physical Results. The physical progress of the project varied from theappraisal schedule as a result of the longer than anticipated time taken to complete finalengineering during project implementation and was interrupted in some instances by landacquisition problems. But once civil works commenced, the rate of progress of the workswas satisfactory.

6.3 Impact of Project. While it is not feasible to deduce the impact, on thecountry's economy, of the modest improvements of the transport system under the project,the irnprovements confer immediate benefits to the highway users in the form of loweroperating costs and passenger time savings. With the increase in competition in truckinglikely to develop due to the easing up of the regulatory framework of the industry, it isreasonable to expect that the lower transport costs will be translated into lower consumerprices. The Government has neither provided updated traffic counts nor re-estimated theERR at project completion. Hence, using revised costs and an estimated 20 percentreduction of the traffic expected at appraisal, the Kudjip-Minj section of the HighlandsHighway improved under the project is expected to yield an overall economic return (ERR)of 19.6 percent compared to an appraisal estimate of 21.2 percent and the Enga Highwayan ERR of 8.0 percent compared to an appraisal estimate of 12.2 percent. From currentexperience, the rehabilitation program for the provincial roads and national bridges areexpected to yield an ERR in excess of 10 percent. The ERR for the Watabung-Chuave

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section of the Highlands Highway was not available at appraisal, but it is a central link inthe highway and should have similar returns as adjacent sections (about 15 percent).

7. Project Sustainability

7.1 The sustainability of project benefits, which accrue primarily to vehicleoperators as a result of improved road driving conditions, will depend on the ability of theGovernment to maintain the improved road sections and to intervene in a timely mannerto strengthen the road pavement or otherwise improve the roads as traffic reaches thresholdlimits. The planning and programming of national road maintenance has been largelybased on standard allocations for different classes of roads and the results of visualinspection. Funding has been good except for 1990 when a big reduction was made, butmaintenance on the national roads has continued to be satisfactory. Overall, funding hasdeclined in real terms and funds are also not used efficiently because they are released ona quarterly basis in amounts inconsistent with the actual maintenance needs during aparticular quarter. Weaknesses in planning and implementation also play a prominent role.

7.2 There is, however, doubt on the ability of the provincial governments tomaintain in good repair the provincial roads because of their limited institutional capacity.The culture of the DWS staff has been to give more attention to the national roads forwhich the staff has primary responsibility. While the project under review in this PCRnoted the weaknesses of the provincial institutions and made an attempt to assist themthrough the central government agencies, the Transport Improvement Project that followeddid not address the matter of strengthening the provincial capability to administerprovincial road networks. The risk is very real that the provincial roads improved underthe project may not be maintained properly.

8. Bank Performance

8.1 The initial project brief was circulated in the Bank towards the end of 1979when the preceding Third Highway Project was being readied for negotiations. Despitethe early initiative taken in launching the project, the project was not appraised until aboutthree years later and did not reach the Board until 15 months had elapsed. Even then theproject had not been fully prepared. Bank staff assigned to the project was constantlychanging during project preparation. There is no doubt that the focus of the project andits complexion changed with all of the staff changes and the monitoring of progress onproject preparation suffered. Worse still, the start made in the project to develop theprovincial roads and address the question of strengthening the provincial institutions wasnot continued in the Transport Improvement Project that followed.

8.2 The project achieved a major objective in completing the improvement ofthe 600 km Highlands Highway to paved standards. The first attempts at implementinga provincial road rehabilitation program were also successful and several studies wereaccomplished that will help planning of future investments. However, some lessons maybe learnt from the experience in the project:

(a) Bank appraisal should be scheduled only after evidence that projectpreparation including detailed engineering would have been substantiallycompleted by that time;

(b) the provincial roads study should have included more work on theorganization and management of the provincial institutions, an assessmentof manpower and recruitment and training needs and the design of a trainingprogram for implementation under the project; and

(c) frequent changes in Bank staff during project preparation seemed to slowdown project preparation and interrupt continuity in sector dialogue with theGovernment.

9. Borrower Performance

9.1 The Government was reorganized during the project period with the DTCAsplitting into two departments, namely, Department of Transport (DOT) and Departmentof Civil Aviation (DCA). The DWS relinquished its responsibility for supplies andbecame the Department of Works (DOW). Although the reorganization has enabled DOTand DOW to concentrate on their central functions, the divestment of DOT's planning role -in civil aviation, which is now the exclusive responsibility of the new DCA, may haveresulted in less efficient transport coordination.

9.2 Except for the delays in submission of the annual audited project accounts,the Government's overall performance has been satisfactory. The two projectimplementation agencies, DOT and DOW have generally understood and complied withBank requirements. Despite a large number of subprojects and a variety of procurementmethods, procurement has, for the most part, been free of serious problems. However,the administration of procurement continues to take a heavy toll on staff time incommunicating with the Bank for its comments and approvals. The DOW's intention toproduce and use standard bidding documents based on the Bank's own sample biddingdocuments may help in reducing the need for constant reference to the Bank for review.But, there is an irreducible amount of time that has to be expended by both Bank andGovernment staff in dealing with referrals to the Bank for its comments and approvals ofprocurement procedures and documents.

9.3 Towards the end of the project, progress was also affected adversely by thebudgetary process. Basically, due to financial constraints, the Department of Finance andPlanning released funds to the executing agencies in inconsistent and inadequate amounts.This effectively reduced the rate at which the project could be implemented. This situationstill prevails to a large extent in PNG but Government has promised to address it.

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10. Consulting Services

10.1 The consulting services under the project as implemented fall into threecategories: (a) feasibility studies and detailed engineering; (b) construction supervision; and(c) various studies. The performance of the consultants who originated from Australia,Britain, France and New Zealand was satisfactory.

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PART 11: PROJECT REVIEW FROMBORROWER'S PERSPECTIVE

This Project Completion Report is prepared on the basis of the Bank's "Guidelines forPreparing Project Completion Reports". It is being prepared before Parts I and II arereceived from the Bank. There is also no reference to Economic Rates of Return (ERR)as it is understood that Department of Transport has written to advise the Bank that theData for preparation of ERRs are not available. It is also understood that a start has beenmade by Departinent of Transport in the collection of such data but this will be a longprocess and the information will not be available in time for finalization of this Loan.

The Loan Agreement was dated 29 April 1983. The original closing date was to havebeen 30 June 1989. This was subsequently extended to 30 June 1991 and then to 30 June1992.

For reasons that will be noted where appropriate through the report all funds had not beenexpended as the closing date for the Loan approached. To enable funds to be applied tothe maximum extent possible the Bank was most co-operative and have its "no objection'to certain project groups which are within the scope of both loan agreements and had beencompleted and initially reimbursed under Loan 2742 to be transferred into Loan 2265.This had the effect of enabling all funds under Loan 2265 to be applied and drawn downand at the same time it partly restored capacity under Loan 2742 for new projects to beintroduced for completion within the remaining period of Loan 2742. In this regard itmust be noted that, at the time, it was confidently expected that Loan 2742 would beextended for a further period of 12 months to enable such additional work to be done.Advice from the Bank in this regard is at present anxiously awaited.

The Bank's injunction to make this document brief (Annex A, Part II, Clause 3) has beennoted. However the report does of necessity cover a very wide range of projects carriedout under a very wide range of conditions.

This report will briefly examine the implementation of projects in general under each ofthe main categories, referring to particular aspects or problems which arose and the lessonsto be learnt from them.

The total amount of the Loan, US$31.0 million, has been fully drawn down.

The main categories of projects under the Loan were as follows -

A - PROVINCIAL ROADS IMPROVEMENT

Improvement of a total of approximately 261km (82%) of Provincial Roads was completedout of a projected length of 318km. As would be expected those for which designs werecomplete, where land matters had been resolved or which presented least difficulty werecompleted earliest.

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The works completed serve to improve communication and commerce in their areas eitherby providing roads where possibly none existed previously or which were verysubstandard, or by reconstruction of existing provincial roads so that they are lessvulnerable to the effects of adverse weather conditions than previously. By the nature oftheir construction, the nature of the country that they traverse and the generally significantwet periods in PNG, all of these roads present an ongoing maintenance requirement whichall provinces are not equally geared up to meet. From time to time, it has been necessaryto draw one or other Provincial Government's attention to the need for maintenance workon a road previously improved under the Loan

Two projects cali for particular comment -

BUNDI ACCESS ROAD

This work was originally referred to in the Appraisal Report as the Bundi-Ua road forwhich the appraisal estimate was K400,000 for a length of approximately 12 km. Thisportion of the route was located on the southern side of the Imbrum River andincorporation much of the old Ua Road. Because of concerns of construction andmaintenance costs on the southern side and the need to service a major cardamonplantation on the northern side which was considered to have considerable export potential,the route was switched to the northern side. Because of the greater length of new road,estimated initially at 23km, the revised estimate for the work became K1.6 million. Aftermuch consideration, work was commenced in March 1988. Part of the work was by ForceAccount, part by Project Managed Force Account. These methods were selected as beingmost flexible in the difficult terrain which was to be traversed. Detailed engineering wasprepared only for the bridge sites of which three were envisaged initially. Constructionin very steep side slope in broken to hard rock ground and rainforest did not proceed atanywhere near the rate expected. After completing approximately 10 kilometres and twobridges the cost had reached K2.437 million. Provision of funds in the National Budgetran out in 1990 and work at the site stopped. The Bank subsequently insisted that detailedengineering be provided for the rest of the work and that it be carried out by contract.This detailed engineering is now being prepared under Loan No 2742. At this stage itdoes appear that construction, when it does re-commence, will be loan funded.

MAI-TADJI ROAD

This road was not included in the original Appraisal Report. It was subsequently includedin Category IlId, (Road Links to be Identified).

Construction was by project managed force account. It was divided into three stages. Thefirst section completed traversed lightly undulating rainforest country with reasonableproximity to coronous gravel. The second section ranged from the previous stage toextensive swampland and then ascended into the foothills of the Torricelli Range withdesigned maximum gradient of 19.9% and elevation up to approximately lOOm. Thethird section commenced at the southern end and traversed steep undulating country withsome heavy timber until it also was to ascend the Torricelli Mountains. The swamp areasrequired extensive rearend tipping of river gravel hauled in by truck This was slow and

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expensive. As work into the Torricellis commenced it became clear that the gradesencountered were to be much steeper than expected. The whole Torricelli section wascovered with heavy rain forest on clayey ground with steep side slopes and unexpectedaquifers when isolated sections of calcareous rock were encountered. As these problemswere commencing, the Contractor's plant which had then been on the job forapproximately two years was becoming less reliable. It is believed that this was in partthe result of problems arising from the flow of National funds at various times whenpayments to the plant contractor were delayed. When the work was commenced the designconsisted of a preliminary alignment and longitudinal section. The investigation consultantreferred to this as a preliminary alignment which would need to be refined when a finalsurvey was carried out. In the event it was proved that conditions were much moreadverse than believed when the work was commenced. Part of the problem was the severenature of the terrain over the central 12km of the 53km project, the whole of which wasgenerally inaccessible except for local village paths over some sections. A new alignmentover the missing section has been located but still needs considerable investigation. Theoriginal estimate for the 53km originally intended was K3.499 million, work to date(approx 33km, including construction of two bridges and purchase of the superstructurefor two others) has cost K3.309 million. The alternative route for the missing section isexpected to be 22km in length.

Both of these jobs indicate the need for satisfactory survey and a detailed knowledge ofthe terrain even if a detailed design is not to be prepared. The difficulties of terrain,weather, plant reliability, communication with remote areas should not be underestimatedand estimates for such work must be realistic. Over optimistic estimates not only causesevere budgetting problems in the context of annual expenditures but may upset prioritiesor the order in which projects should be undertaken, both on a national and provinciallevel or may lead to work being undertaken on an economic basis which otherwise mightnot be undertaken at least within the time span proposed. These projects also illustratedthe problems which can arise when only one contractor is approved in accordance with theBank's requirements as a source of hired plant to qualify the work for recoupment underthe Loan.

Yet even on these roads and particularly the Mai-Tadji road, which they have not beencompleted as through routes, their construction thus far has led to opening up of new areasto settlement, gardening and in the case of Mai-Tadji road, to local commercial timbergetting, mainly of sizes suitable for housing and small business accommodation.

B - BRIDGE REPLACEMENT

The appraisal report allowed for the construction of 17 bridges (including three rivertraining works) at an estimated cost of K2.8 million. Two of the bridges (est costK315,000) were deleted and the remaining fifteen bridge works were completed for K2.84million, an average increase of 14% for those works which were completed. Part IIIprovided for up to 15 further bridges for which K1.4 million was allowed; a total of 11bridges and a total of nineteen culverts were actually constructed at a cost of K3.64 millionwhich being significantly later in the Loan period would have experienced someinflationary effect. A total of 835m of bridges, three river training works and the nineteen

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large culverts were constructed under the section covered by the original appraisal report.Thirteen bridges totalling a further 396m in length plus three river training works and onelarge culvert were subsequently transferred from loan 2742 with a cost of K2.561 million.In the case of each new bridge and large culvert it can be claimed that the road networkhas been significantly improved either by increased amenity, safety or reliability for roadusers or by reducing the likelihood of interruption by flooding or washaways. While thetotal expendiure under this loan was K9.044 million compared with K4.2m originallyallowed, it is considered that this has been a worthwhile investment in this country of veryhigh annual rainfalls in most areas. River training is a matter which still requiresconsiderable investigation. It is an activity on which considerable sums can be spentsometimes to great effect, sometimes with considerable apparent effect until particularoccurrences render the work again ineffective. Major river training projects should onlybe undertaken after considerable study, based on as long a history for the site as possible,as well as of current trends and taking into account as wide and as likely a range ofsolutions as possible.

IMPROVEMENT OF NATIONAL HIGHWAYS(Highland and Enga Highways)

A 32.5km section of the Enga Highway (Appraisal Estimate 25km - K6.032 million)between Togoba and Tambul was completed at a cost of K11.333 million over a periodof four years. As this was an average of four years after the preparation of the appraisalestimate so that increased costs reflect an element of inflation as well as the effect of siteconditions. The recent Bank Supervision Mission (November 1992) commentedfavourably on the condition and maintenance of this section of the road.

A 13 km section of the Highlands Highway between Kudjip and Minj was completed fora cost of K3.209 million (Appraisal Estimate K2.3 million). These costs also reflect someinflation plus the effect of site conditions.

Construction of the Highlands Highway between Watabung and Chuave was financed bythe Kuwaiti Fund (KFAED) and was accordingly deleted from the Loan.

The reasonable costs experienced on these works indicate the benefits of carrying out thework by contract when the extent and nature of the project can be adequately defined anddocumented beforehand.

CONSULTANT SERVICES

A - ENGINEERING SERVICES FOR DEPARTMENT OF WORKS

One project was deleted and one transferred to Loan 2742. The remaining seven werecompleted with direct application to then proposed future works, most of which have alsobeen completed. The benefits of these projects carried out by consultants selected byprocedures conforming to the Bank's requirements have therefore been obtained.

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B - STUDIES FOR DCTA

All of the studies were completed, generally in accordance with the Appraisal Estimate.

C - STUDIES FOR WATER RESOURCES

This item was not included in the original appraisal but was included later with the Bank's"no objection". Two studies were carried out at a cost of K1.059 million for the Bureauof Water Resources as follows -

a) Hydropower Inventory: This study reflects the problems which arise when projectsproposed for inclusion in loans are not funded or are only partly funded in NationalBudgets for the period when it was expected that a project might proceed. Instrumentationwas carried out at only about half of the proposed sites and the Bureau reported severaltimes on shortage of funds and of personnel to carry out field work. Such work as hasbeen done will be a useful basis for future work and application, particularly as the needfor augmented or new energy sources arises.

b) Flood Estimating Manual: This project was successfully completed, the Manual isdistributed and is applied in particular design situations. Approaches have been receivedby the Bureau from several consultants for its agreement to incorporating aspects of theManual in design software.

TECHNICAL ASSISTANCE

The Appraisal Report allowed an amount of K1.43 million for this item, but expenditureamounted to only K193,000. Some items were deleted, one was transferred to Loan 2742.Because these generally do not lead directly to visible physical improvements their fundingand staff availability appear not always to receive priority. These items do requiresignificant staff input in preparation, but staff concerned is generally fully occupied withmatters of more immediate concern. Such items in future loans should be marked forearly consideration and allocation of appropriate resources.

SUMMARY

Based on experience with this Loan the following are matters that should be kept in mindwhen a future loan is being considered -

* Only projects that can clearly be completed within the period of the loan should belisted. For road and bridgework this involves sufficient investigation and detailedengineering having been undertaken and an assurance that land matters have been finalisedor are capable of being finalised before work is due to commence.

* Consideration should be given at the appraisal stage to national priorities, not just theprerequisites listed above because once a project is listed in a loan it tends to overshadowother, possibly more important, works which are not loan funded.

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* Development of model tender/contract documents acceptable to the Bank is desirableto facilitate approval of individual projects when submitted to the Bank.

* It must be understood that unless a project is funded in the National Budget and wherenecessary in succeeding Budgets, it can not start or continue in spite of its being scheduledin the loan with funds available under the loan. Bank Missions have often criticised non-commencement or poor rates of progress when this has been the cause. While projectsmay be listed in budget proposals by participating Departments, inclusion of projectsand/or the amounts allowed in the Budget for such projects is determined by NEC.

Loan Funded Projects should be identified separately in Budget proposals, along with thename of the Funding Agency, with funds nominated to enable the implementation of eachproject in accordance with its particular target. Since these funds are reimbursable,suitable procedures should be devised to ensure sufficient cash flow throughout the projectlifetime.

* While Contract/Consultancy Agreements are usually a sound means of procurement theBank should accept that at times Force Account/In House Design also have a place whenthere are particular problems or circumstances associated with a particular project. In bothdesign and construction it is desirable for the Departments/Authorities to develop in-houseexpertise not only to be able to undertake projects at short notice but also adequately tosupervise/direct the operations of contractors and consultants. While Force Account is byno means perfect, examples could also be cited where design or supervision by outsidershas also been found wanting. In this regard, such in-house experience not only providesa sound foundation for the organisation itself but contributes to the private sector whensuch experienced personnel migrate to the private enterprise organisations.,

* The Bank's guidelines for selection of design consultants do not allow flexibility so faras preference to locally established consultants or to an even distribution of work amongsuch consultants. This is a matter which could be discussed with the Bank whenconditions for future loans are being considered.

* Turnover of staff in a relatively small organisation leads to discontinuities which hamperthe steady flow of investigations and submissions to the Bank.

* Each loan should contain a significant proportion of investigation/detailed engineeringso that designs and documentation will be readily available for any following loan.

* Technical assistance items require significant preparation and input by client authorities,including National Budget provisions which are often overlooked, even when the projectis to be carried out by consultant. This is usually not an immediate priority area for theprovision of funds so that such project often fall behind and in some cases are not evencommenced before the loan period is complete. These projects generally affect futureplanning and are thus often relegated to lower priority. Significant client input is requiredbecause only the client knows exactly what is required and it is possible for consultants togo off at a tangent if not adequately guided. In such cases the terms of reference is aparticularly important document.

- 17 -

* The Bank has generally been prompt in replies and approvals although on occasion,delays have occurred, eg with the detailed engineering for Bundi Access Road whereapproval to the consultancy took a considerable time and eventually the project wastransferred to Loan 2742

* Replies also appear to take longer where there is some difference of opinion betweenthe Bank and the participating Authority, eg whether a work should be by force accountor extension of the loan period is sought. This may be aggravated when correspondencehas to pass through a third authority rather than direct between the Bank and theauthority/department concerned.

* Generally the Bank has been receptive and helpful, eg in the transfer of completed itemsfrom Loan 2742 to Loan 2265 to enable the funds to be applied to the maximum extentpossible.

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PART III: STATISTICAL INFORMATION

1. Related Bank Loans and/or Credits

Loan/credit

Approval amountLoan/Credit title Purpose (FY) (USS m) Status Commenu

First Highway Project Construction and 1970 9.0 Completed. Per- Project costs exceeded byCr. 204-PNG improvement of formance Audit about 90%. ICB bidsLn. 693-PNG sections of the Report was issued were higherthanhpprmisal

Highlands Highway in 1977 estimates indicating that atthat time conditions maynot have been attractive toforeign contractors.

First Port Project Irnprovementsto the 1972 9.2 Completed. A loan condition in re-Cr. 326-PNG ports at Kieta, Lae gard to cost based tariffs

and Port Moresby was not complied with.

Second Highlands Road Construction and 1977 19.0 Completed. Pro- ICB bids were higher thanImprovement Project improvement of ject Completion apprmisal estimates byCr. 677-PNG further sections of Repont prepared about 759% and the project

the Highlands High- together with the was reduced in scope.way Third Highway

Project

Second Pors Project LAnd reclamation, 1978 3.5 Completed. The Although the project wasLn. 1551-PNG civil works, pro- ProjectCompletion completed satisfactorily

curement of pilotage Report was issued below cost estimates, itlaunches and tech- in 1982. had limited developmentnucal assistance and impact. About 0.5training million of loan funds

were cancelled.

Third Highway Project Improvement of 1980 30.0 Completed. Project Project achieved most ofLn. 1856-PNG further sections of CompletionReport its objectives but,Cr. 1030-PNG the Highlands High- was prepared in disclosed poor detailed

way, preparation of 1986. A Perfor- engineering resulting ina road maintenance mance Audit Re- inadequate protectionprogram, procure- port is currently against earth tremorsment of traffic under review, which are frequent in thecounters and Highlands.technical assistancefor preparation offuture projects

Road Improvement Improvement of 1983 31.0 Completed Subject of this ProjectProject n a t i o n a I a n d Completion Repon.Ln. 2265-PNG provincial roads,

construction ofbridges and tech-nical assistance.

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1. Related Bank Loans and/or Credits (cont'd)

Loan,creditamount

Loan/Credit title Purpose Approvil (USS m) Status Comments

Transpon Improvement Construction and 1987 45.5 Ongoing Loan closing date hasProject improvement of been extended twice dueLn. 2742-PNG national roads and mainly to construction

bridges, resurfacing delays caused by civilof airporn runways, distur-bances.taxiways andaprons, procurementof navigational,

meterological andcommunieation aidsand technicalassistance andtraining.

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2. Project Timetable

Date Date DateItem planned revised actual

Identification (Project Brief) 08/--/80 - 091--/80Preparation 05/-/81 01/--/82 12/--/82 LaAppraisal Mission 071--/81 04/--/82 04/27/82 LkLoan/credit negotiations 01/--/82 10/--/82 02/08/83 XcBoard approval 03/--182 03/29/83 07/19/83Loan/credit signature - - 04/27/83Loan/credit effectiveness 07/31/83 /d 11/29/83 /d 10/21/83Loan/credit closing - - 06/30/88Loan/credit completion 06/30/89 06/30/92

/a Preparation considered sufficient for appraisal.Lb Departure of appraisal mission.IC Date of completion of formal negotiations.a Latest date for effectiveness.

Comments: The project coincided with the Government's decision to decentralize government administrationwith the formation of 19 provincial governments. The Government was also pursuing a policy ofgiving priority to establishing an adequate rural road network to link the Highlands Highway,which traverses the relatively more populated central highlands region of the country, with themarketing centers. The initiating brief in July 1979, although citing institutional obstacles to theadministration of provincial roads, supported the Government's policy in this direction. The projectwas initially described as a Rural Roads Improvement Project. Gradually, however, the focus ofthe project tended to dissipate with the inclusion of improvements to sections of the Highlands andEnga Highways. The focus on rural roads was lost in June 1981 when the project attempted toinclude provisions to improve other transport modes and was renamed Transport DevelopmentProject I. In the end, the project came to be called appropriately the Road Improvement Projectand the only issue raised by the appraisal mission was the insufficiency of funds allocated in thelending program. Several sector issues surfaced during review by senior management and they werediscussed in detail at loan negotiations and agreements reached on an action program which includeda timetable to complete project preparation.

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3. Loan/Credit Disbursements

Cumulative Estimated and Actual Disbursements (US$ million)FY84 FY85 FY86 FY87 FY88 FY89 FY90 FY91 FY92 FY93

Appraisal Estimate 3.5 8.5 16.0 21.7 27.2 31.0 - - - -

Actual 1.3 3.9 8.4 15.2 18.4 22.4 23.3 27.5 28.8 31.0Actual as % of Estimates

Date of Final Disbursement: November 4, 1992

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4. Project Implementation Indicators

Leos Awrad Ettmi. Rewod E.timt ActualC 4.P.wu AppmWoo AUJl SI.5 C V.a. Swm CorPkw S5 CPr C Cq"

A. Prmi Roo" Rnlbition

C.tloryr I

Silo 1 otk,a 36.0 km 35.0 hu 0C/-/93 03/3144 07/-/Y4 02-/V7 Force AountT- * - H.4u 13.5 32.0 09/15/93 06/30/14 11/-43 OB/-414 Force A.o5DoUbs - Kibu 11.0 14.0 09/15313 12/3144 11/-43 07/116 Force AomMLi - Nsk 21.0 21.0 1I/OM1S3 1011514 11/-13 11/-44 Force Acca.

Catcio,y 11

Taizrgora - K .oulor 25.0 25.0 01/0145 06/304/6 03/1-7 11/-/57 LCB for Eanwuarb o.blM I Kol 35.0 33.0 07M0144 03/-/l7 01-4U6 101-/Il LCB for Earthok onlyA *CL - Mnyoy 36.0 36.0 01/01/b4 12/3146 12/V-M 03/-M 4 91-46 /a LCBBmdi Ama. Rd 12.5 37.0 01/MJ44 I12V 031-u 121-,91sT Proj NIt-SIdM Force Aou

Kihno - N . 20.0 20.0 04/0134 12/31415 071-_4 07/-197 Force AcW.ow RJ-, - Ubeigubi 17.0 17 0 10M1/25 03/3117 06/-47 02M-/U LCB

Ca,ro, a 50.0 84.0 10/01/5 03/31/N 01/-4 06/-/92 LCB for Ewtbeoke oky/LCB/Fcrcc Aoor

7. Bridse Rebbiliudon and

Cotoxory I

Kci ) ) 07,0143 06/3045 Dslad fro zeIjaKenp Wck6 001413 04/3O 5 061-IS 07/-44 06t/- LCBTu I I i 01/014 09/3044 10/-43 0/-,14 Foro A tcooatW -o r 5.0 m }218.0 m OBM 1 /94 04-.5 LCBH4n-i 1 1 07 1 X3 06/30/744 - 09/-44 LCBGidai } 07143 04/304W5 O4-45 03/-/6 For AaxSii.r Cmek 0701/33 04/30414 091-/-3 01/-/14 LCBUbo ) 1 0710113 06130/4 091-/13 01/-/24 LCB

Category 1

Ni I ) 05/-44 01/-45 Force AoAhwi mE 11/-/24 04/-/5 LCBWaini t 11/-44 ov-/ LCB

D or 21/-R7 051/-/16 LCBAiuyc 1592.0 m 1266.0 m 1L0/014 109/30L16 11/-4S4 11/-45 LCBNeneI cce 04/-44 11/-Y4 Fono A[rcl [ J I 1 11/-45 10/-Y7 For AR.hi& } 1 1 1 11/-/B5 061-47 Forc AaxWoA.I I I DolAd frm Po

Ca rory 50C.0 m 1230.0 m 07/01414 06/307 02V-Y6 12/-/91 hch m b*m (396 km)

Livasmbod ftum Loan 2742-PNG

C I n ...... Of FEHi1Ha

Io Enaa LLhryn

Ttobe --Te.l 25.0 32.5 01/0144 12/31/56 06/-15 I1/-/ ICBK.djip- Mi 13.0 13.0 01/1414 12V31D5 071-/56 12.-Y6 KCBW.L.luay . Clow 16.0 16.0 03/31/15 06/30W Oll/-Y9 09/-/92 KumxiB fwnad.

D. Conolting SeMra. TAsauLacce & T-dul

Po.icy Rcvi- 01MI/03 12/3116 0/331413 12-/86 ALI a_cim a&asd and oudaaWiLihm tbil -rk

h.IoU- S Ywi4,6

DTCA Prvinil Lu.W. 01014 Ct31/594DWS bwt. St,a,gU.4g 07,01Y3 12/3116 -/-/k9 061-/91 L- 'iLd to r_ok- d oraoti. epecdL.inD DWS Roud sad Bridp Mr i-Pgroam ind. Trainm 01/1414 32/3145 DzsIad from Phec

Do,lopwt of kln K Inustruy 01/0144 1311h4 Trtrvtm to Law 2742-PNOHCv R Sbdy Couple-d

1s Worb I rudo .r i oa

- 23 -

5. Project Costs and Financing

A. Project Costs(USS million)

Appraisal Estimate Actual ExpendituresLocal Foreign Total Local Foreign Total

Provincial Roads Rehabilitationand Improvement 2.94 4.40 7.34 4.57 6.85 11.42

Bridge Rehabilitation andReplacement Program 1.98 3.67 5.65 3.38 6.28 9.66

Improvement of Highlands andEnga Highways 6.28 11.65 17.93 10.40 19.31 29.71 /a

Consulting Services 1.08 5.42 6.50 0.87 3.91 4.78

Technical Assistance and Training 0.30 1.77 2.07 0.03 0.17 0.20

Right-of-Way 0.60 - 0.60 0.46 - 0.46

Subtotal 13.17 26.92 40.09 19.71 36.52 56.23

Contingencies- Physical 1.55 3.03 4.58- Price 3.18 6.19 9.37

Total Proiect Cost 17.90 36.14 54.04

Front End Fee on Bank Loan 0.23 0.23 - 0.23 0.23

HydroPower Study 0.20 1.00 1.20 - 1.22 1.22

TOTAL FINANCING 18.10 37.37 55.47 19.71 37.97 57.68

/a Includes the cost of construction of Watabung - Chuave Road (US$12.57 million) financed by KFAED.

- 24 -

B. Project Financing

Lon Fih.A,smm Revised (IBRD) KUWATI Dinic TouJ(13R.DI EEtimia /a lb Fad Fwds F.zm-

USS s USS USS USS U4s US

(I) Clvil -orb(a) Hizy

(K-djp M-i SUi .i 2,00,000 65 2,230,00 65 2,267,000 1,221,OOD 3,488,CD3(b) Witad 9h;y

(Watah .Chbe S.I.MS 4,300,C0 65 - 7,000,000 4,1910,SU 11,I D,000(C) All dsm 8,900,0D0 65 15,900,000 65 22,544.496 13,313,504 35.S,00.

(2) Coi .uls' wrvea,

and uwiDng 8,300,000 IC0 5,900,000 100 5,2D0,994 967,0036 6. 168,000(3) Eq*vAaaiAsl 1,000,01 IC0 756,741 756,741(4) Fro Ead F_ 230,769 230,769 Am. D- 230,769 230,769{i) Uahfloosiad 7,269,231 5,769,231 -

TOTAL 3 LO. 31.000,C 31 ~0000 7.00 19,681,510 576151

Is Rem.DlocaLin of Lean proc.d. en April 6, 197.A of Api 2D, 1993

- 25 -

6. Project Results

A. Direct Benefits

Appraisal Estimate atIndicators Estimate Closing Date

A. Provincial Roads Rehabilitation 277 km 261 kmand Improvement

B. Bridge Rehabilitation and 1,517 m 1,230 mReplacement

C. Improvement Highlands and 54 km 61.5 kmEnga Highways

- 26 -

B. Economic Impact

Indicators Estimate At Closing Date

A. Provincial Roads Rehabilitation > 10 > 10and Improvement

B. Bridge Rehabilitation and > 10 > 10Replacement

C. Improvement of Highlands andEnga Highways- Kudjip-Minj Section 21.2 19.6- Togoba-Tambul Section 12.2 8.0

- 27 -

7. Status of Covenants

Covenant Subject Deadline Status

Section 3.05 Acquiaition of land and land rightu including right- Immediately after land Complied withof-way for construction of civil works and furnish acquisitionpromnptly to the Bank afner such acquisitiondocurnentary evidence satisfactory to the Bank, allbefore award of construction contract.

Section 3.06 Maintain in good repair roads improved under the - Comaplied with for theproiect. national roads. Further

Bank aaisunce will beneeded to reorganizenaintenance of provincialroads on a systematic basis.

Section 3.07 Furnish to the Bank for iu approval the program October 31 of Complied withfor the civil works to be carried under Part A preceding year.(Provincial Roads) and Part B (National Bridges)for each year.

Section 3.08 Trnspon Sector Development Strategy July 1, 1985 Complied with- furniah for Bank reviewed a Transport

Sector Development Stategy- after taking into account Banks' comments,

subrit to this National Econonic Council(NEC)

Section 4.02 (a) Maintain project records and accounts in Comnplied withaccordance with sound accounting practices

Section 4.02 (c) ii) Audit project accounts for each fiscal year June 30 Substantial delays:snd furnish to Bank certified copy of audit annuallyreport

Date of Report1983 Nov. 16, 19871984 April 21, 19871985 April 21, 19871986 April 21, 19871987 October 5, 19891988 October 5, 19891989 Sept. 12, 19901990 Oct. 30, 19911991 Not available

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8. Use of Bank Resources

Stage of Month/ Days in Specialization Performance Types ofproject cycle year Persons field represented /a rating status problems

Throueh AppraisalIdentification 7/80 2 21 2EPreparation 1 2181 2 6 1E,lHPreparation II 6/81 1 7 IEPreappraisal 11/81 2 5 lE,lHAppraisal 5/82 3 28 1E,1H,ISE

Board Approval 4/83

Supervision 1 8/83 1 9 1H - Report missing from fileII 11/83 2 7 lE,lH 2

III 5/84 1 10 1H 2IV 8/84 2 9 lE,lH 2v 2/85 1 10 1H 2

VI 7/86 1 9 1H 2VII 7/87 1 6 1H 2

VIII 11/87 2 7 2H 2IX 7/88 2 10 lE,lH 2X 11/88 1 7 IF 2

Xi 11/89 2 5 lF,lH 2XII 3/90 2 6 IF,lH 2

XIII 9/90 2 8 IF,lH 2XIV 6/91 3 6 IF,lE,lH 2XV 11/92 1 7 IH 2

/a E: EconomistH: Highway EngineerF: Financial Analyst