ADB-Papua New Guinea Partnership

A woman fetches water from a stream in Papua New Guinea. The Asian Development Bank wants to prioritize water and other urban infrastructure and services in the Pacific Island country. Photo by: ADB / CC BY-NC-ND Papua New Guinea’s economy is performing strongly owing to higher export commodity prices coupled with sound macroeconomic policies and structural reforms. The influx of investments in mining operations and, recently, in liquefied natural gas production also contributed to the 2.9 percent average growth over the past five years. Even so, growth has been beneficial only for a small and mostly urban population. Eighty percent of the poor resides in rural areas and participates in subsistence agriculture. Rural people are disadvantaged due to their isolation, limited economic opportunities and poor access to services. In terms of social development, the country ranks 157th out of 187 countries in the 2014 Human Development Index and will not be able to achieve any of the eight Millennium Development Goals. Meanwhile, the liquefied natural gas project, which is largely owned by foreign investors, is not expected to significantly influence the country’s gross national income. While thousands of jobs were created during the LNG construction phase, employment in fully operational facilities is now limited to a few hundred. While the national government recognizes the economic benefits of extractives, it is also fully cognizant of the industry’s downsides, particularly price volatility in the global market. As such, the government, as outlined in its Vision 2050, will focus on diversifying the economy away from the mining and energy sectors while creating more sustainable income opportunities and improving human development outcomes. In formulating its 2016-2020 partnership strategy for Papua New Guinea, ADB aligned its priorities with the country’s development agenda. As requested by the government, the bank will focus on developing the energy and transportation sectors while still engaging in health, water and other urban infrastructure services. Funding levels and priorities As a Group B country, Papua New Guinea is eligible for both Asian Development Fund and ordinary capital resources borrowing. Since its membership, it has received $1.02 billion in ADF and OCR loans and $74 million in co-financing. Shown below is the bank’s portfolio in Papua New Guinea as of Dec. 31, 2014. For 2016 to 2018, the Pacific island country will receive an indicative allocation of $637 million from the bank. Of this, $504 million will come from OCR, while $133 million will come from ADF. Nonlending program allocation, on the other hand, is projected at $3.2 million to which $1.5 million is earmarked for project preparatory technical assistance. The main thrust of the 2016-2020 partnership strategy is to assist Papua New Guinea in converting its resource wealth into inclusive and environmentally sustainable economic growth. To achieve this, the following sectors will be prioritized: Transport: ADB will work toward a more efficient, safer movement of people and goods by focusing on road and bridges rehabilitation and maintenance, civil aviation safety and security, and transport sector policy. The bank will also support improved sustainability through sector dialogue, support for public-private partnerships, knowledge management and technical assistance. Energy: Under this sector, ADB will focus on providing sustainable and more affordable power supply in urban areas and improving access and use of power supplies for households in rural areas. Bank interventions include construction of power generation infrastructure, trial of innovative rural electrification delivery models, and support for increased private sector investment. Technical assistance on sector planning, policy reforms and capacity building will also be provided by the bank. Health: As requested by the government, ADB will continue to implement rural health access and service improvement programs. This area of engagement will focus on addressing challenges related to maternal and child health, HIV and AIDS, and other infectious diseases. Water and other urban infrastructure and services: ADB aims to have more Papua New Guineans enjoy improved water supply and sanitation services. To achieve these, the bank will finance urban water supply and sanitation infrastructure, and knowledge products related to WASH policies and reforms. Public sector management: Improving the country’s PSM is necessary to ensure that public revenues will translate to better service delivery and livelihood opportunities. Bank activities will focus on improving infrastructure project, evaluation, and prioritization and budgeting, supporting SOE reform and corporatization, and reforming regulatory and legislative barriers to financial access. In addition, environmental sustainability, private sector development, effective gender mainstreaming, knowledge management and partnerships will inform all activities across all priority sectors. Devex analysis Papua New Guinea is now at a crossroads. While the extractives industry drives the country’s growth, it also exposes it to several risks that if not properly addressed can result in macroeconomic instability. The country’s growing dependency on mining, oil and gas exports makes it vulnerable to global economic shocks. At the same time, it threatens the environment and may aggravate the impact of climate change. The Pacific island country’s development partners recognized this challenge and have aligned their programs to support the country’s agenda as outlined in the Development Strategic Plan and National Strategy for Responsible Sustainable Development. ADB, on its end, committed to provide support toward a transparent and accountable resource revenue management. The bank will also prioritize renewable energy options in energy infrastructure and generation expansion designs, and will ensure that the climate technologies adopted in its projects will be complemented by capacity building support. ADB will coordinate with other development partners to ensure program harmonization and to explore possible co-financing opportunities. It will continue to collaborate with the government of Japan, the Japan International Cooperation Agency, Australia’s Department of Foreign Affairs and Trade, the European Union, the European Investment Bank, the World Bank and the government of New Zealand on the transport and energy sectors; with DFAT, World Bank, the EU and the U.N. Development Program on public sector management; and DFAT on rural primary health delivery. Contact Papua New Guinea Resident Mission Tel: (675) 321-0400/0408 Fax: (675) 321-0407 Email: