Document of

The World Bank FILE COPY

FOR OFFICIAL USE ONLY

Report No. 4184-PNG

STAFF APPRAISAL REPORT

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

March 8, 1983

Transportation Division 2Projects DepartmentEast Asia and Pacific Regional Office

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 - Papua New Guinea Kina (K)

US$ 1.00 = K 0.7435K 1.00 = US$1.3449

K 1 million = US$1,344,900

ABBREVIATIONS

,AADT - Annual Average Daily TrafficADB - Asian Development Bank

AWMO - Area Works Manager OfficeBPC - Budget Priority CommitteeBRRP - Bridge Rehabilitation and Replacement ProgramDTCA - Department of Transport and Civil AviationDWS - Department of Works and SupplyERR - Economic Rate of ReturnFA - Force Account (Day Labor)ICB - International Competitive BiddingLCB - Local Competitive BiddingNEC - National Executive CouncilNPC - National Planning CommitteeNPEP - National Public Expenditures PlanNPO - National Planning OfficePMFA - Project Managed Force AccountPRTS - Provincial Rural Transport StudyPWMO - Provincial Works Manager OfficeRTWP - Rural Transport Works ProgramUNDP - United Nations Development ProgramVOC - Vehicle Operating Costs

VPD - Vehicles Per Day

WEIGHTS AND MEASURES

Metric British/US Equivalent

1 meter (m) - 3.28 feet (ft)1 kilometer (km) - 0.62 mile (mi)1 square kilometer (sq km) - 0.386 square mile (sq mi)1 kilogram (kg) - 2.205 pounds (lbs)1 metric ton - 2,204 lbs or 1.102 US short ton (sh ton)

FISCAL YEAR

January 1 to December 31

FOR OFFICIAL USE ONLY

PAPUA NEW GUINEA

STAFF APPRAISAL REPORT

ROAD IMPROVEMENT PROJECT

Table of Contents

Page No.

I. TRANSPORT SECTOR .............................................. 1

A. Background ............................. 1................. B. The Transport System .. 2C. Transport Administration .. 3D. Transport Planning and Coordination .. 4E. Previous Bank-Financed Projects .. 5F. Transport Sector Issues .. 6

II. HIGHWAYS .. 6

A. The Network .. 6B. Traffic .. 7C. Administration, Staff and Training .. 8D. Planning .. 9E. Engineering ............... ............................ 9F. Construction ........................................... 9G. Maintenance ............... ............................. 11H. Financing .. 12

III. THE PROJECT .13

A. Objectives .. 13B. Main Features ........................ 13C. Detailed Description .. 14D. Status of Preparation .. 17E. Cost Estimates .. 17F. Financing .. 20G. Implementation .. 20H. Procurement .. 21I. Disbursements .. 23J. Environmental Aspects ............................., 24

The report is based on the findings of the Appraisal Mission consisting ofMessrs. L. Schiffman (Engineer), B. Coukis (Economist) and S. C. Hardy(Procurement Adviser) who visited Papua New Guinea in May 1982. Mr. G. Trnka(Engineer) assisted in preparing the report.

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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Page No.

IV. ECONOMIC EVALUATION ....................................... 24

A. General .................................................. 24B. Rehabilitation and Improvement of Provincial Roads .24C. Bridge Rehabilitation and Replacement Program .25D. Improvement of Highlands and Enga Highways .26E. Economic Rate of Return .27F. Risks .27

V. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS .28

TABLES IN THE TEXT

3.1 Summary of Project Costs .184.1 Sensitivity Analysis of ERR .27

ANNEXES

1. Action Program for Project Implementation .302. Project Related Doc-uments and Data Available in the Project

File .34

TABLES TO THE MAIN REPORT1. Expenditures on Transport by National Government,

1972/73-1984/85 .372. Road Infrastructure: Estimated Revenue from Road User

Charges and Composition of Expenditures, 1977-81 .383. Roads in Papua New Guinea, 1981 .394. Vehicle Fleet by Type, 1975-79 .405. Road Transport Statistics by Province, 1980 .416. Road Transport Output, 1975-79 .427. Road Design Standards (DWS) .438. Rehabilitation and Improvement of Provincial Roads .449. Bridge Rehabilitation and Replacement Program .45

10. Improvement of Highlands and Enga Highways .4611. Consulting Services - Engineering .4712. Consulting Services - Studies .4813. Technical Assistance and Training .4914. Summary of Project Costs .5015. Schedule of Estimated Disbursements .5116. Distribution of Benefits from Rehabilitation and

Improvement of Provincial Roads (Category I) .5217. Operating Costs on Unpaved Roads .5318. Operating Costs on Paved Roads .54

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Page No.

CHARTS

1. Department of Transport and Civil Aviation - OrganizationChart ... 55

2. Department of Works and Supply - Organization Chart ........ 56

3. Implementation Schedule .................................... 57

MAPS

1. IBRD 16664R - Transport System ............................ 58

2. IBRD 16665R1 - Project Components .59

1. TRANSPORT SECTOR

A. Background

1.01 Papua New Guinea (PNG) has an area of 461,700 sq km and a popula-tion of about 3.0 million (in 1980); during the last decade the populationhas grown at a rate of 2.3% per annum. PNG comprises the eastern half ofthe island of New Guinea and of about 600 other islands, most of them smalland uninhabited.

1.02 PNG is extremely mountainous. The central mountain range of themainland forms a complete divide between north and south, and consists ofnumerous ranges separated by broad upland valleys. These valleys, withaltitudes of 5,000-10,000 ft. form the Central Highlands where about 40% ofPNG's total population is concentrated. In addition to limitations imposedby the mountains, extensive swamps cover large areas. Topographicconditions have created small pockets of widely dispersed population.

1.03 Steep slopeb, lhigh altitudes and extensive swamps allow only 10%of the land surface to be used for agricultural purposes. Agriculture,forestry and fishing employ about 85% of the labor force but account foronly 25% of GNP. Half of the agricultural output comes from subsistencefarming. Coffee, cocoa and copra were introduced fairly recently and almostthe entire output is exported. The modern sector is dominated by miningactivities: a large copper mine in Bougainville has been operating since1972 and an even larger mine in Ok Tedi is scheduled to open in themid-1980s. As trained and experienced PNG nationals are in short supply,expatriates dominate the middle management and professional grades in thepublic sector and manage almost all manufacturing and serviceestablishments.

1.04 Since independence in 1975, the Government, rather than emphasizegrowth and an expanding modern sector, has chosen to attempt a more equi-table distribution of the national product among the PNG population."Localization" and "decentralization" are two major policy aims. Locali-zation is to accelerate the transfer of administrative and managementfunctions from expatriates to locals, and decentralization aims at thereallocation of political and administrative powers from the national to 19provincial governments. Both aims are politically motivated, they are,however, administratively demanding and financially expensive.

1.05 Throughout the 1970s, the economy grew at an annual rate of 2%,or about 0.1% less rapidly than the population. Commodity exports werestrong, Government revenues remained sizeable and prudently managed, andannual grants from Australia continued to provide needed budgetary support.Depressed commodity prices since 1979 and the resulting financial difficul-ties of the Government, however, demonstrated that a higher growth rate isrequired to support basic needs and the welfare of the rural population.The 1981 estimate of per capita GNP is US$820 p.a. but it includes

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expatriates. Of the estimated 1.1 million economically active persons inPNG only about 15% are formally employed. This extremely low employmentrate is caused partly by high minimum wages and partly by a deliberateGovernment policy to limit foreign investments in the country. As themajority of the population is expected to continue to be in subsistenceagriculture during the 1980s, the Government will derive most of its incomefrom mining royalties and from the annual grant from Australia (US$263million in 1980). Despite the country's dependence on the modern sector andon the foreign grant, provision of improved services to the rural areas,where most of the people live, is a political necessity for the Government,and better land transport has the highest priority.

B. The Transport System

1.06 The transport system reflects the country s geography, topographyand early stage of development. Air and water transport play a compara-tively large role because land transport is difficult and expensive, and majorroads do not reach the majority of the population (Map IBRD 16664R). There isno railway. Copper and timber are the bulkier exports and they move throughspecial harbor facilities. The remaining exports (coffee, copra, cocoa) andimports plus domestically produced beer and soft drinks, generate almost allthe freight traffic both for road haulers and for coastal and inter-islandshippers. In terms of gross tonnage, imports are almost three times thevolume of exports (excluding copper and timber).

1.07 The Government is aware of the inadequacies in the transport sys-tem. Tariffs are high, the safety record poor, maintenance expensive, andmanagement of larger operations mainly in the hands of expatriates. Sincedomestic construction capacity is in its infancy stage, major works requireforeign contractors. Demands to extend and upgrade the road network exist,but at the same time, there are pressures to reduce the recurrent budget, tolimit expatriate recruitment, and to press forward with localization andprovincialization (paras. 2.09 and 2.20).

Highway Transport

1.08 The highway subsector and its administration are discussed indetail in Chapter II.

Air Transport

1.09 Air transport plays an important role in providing access to thehinterland. PNG has 425 operational airports and airstrips and the nationalairline Air Niugini flies scheduled services to 18 of those airports; anadditional 133 airports are serviced by small commercial operators. AirNiugini has a virtual monopoly in domestic civil aviation. Other operatorsare obliged by the National Airline Commission, the country-s regulatorybody for air transport, to use small aircraft and not to compete directly

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either with Air Niugini or among themselves. Operating costs are highbecause of flying conditions, infrastructure costs, seasonal demandvariations, high labor costs, and lack of effective competition. For AirNiugini, average annual load factors are 60%; for other operators they arebelow 50%. Both passenger and freight rates are comparatively high. Totalvolume of air freight has been slowly decreasing; passenger flows between1975 and 1980 show a shift from urban-rural to urban-urban patterns.

Maritime Transport

1.10 PNG relies heavily on water transport for inter-island and coastaltraffic. There are 13 relatively well equipped major sea and river ports.Sixteen are managed by the Papua New Guinea Harbours Board and two by miningcompanies. In addition, there are some 400 minor ports with limited facili-ties serving the coastal trade. The Project includes studies of severalproposed boat service projects expected to improve access to isolatedcommunities (para. 3.08). In 1980, overseas cargo throughput in the mainports amounted to 3.7 million tons and coastal cargo to 824,000 tons. Themain ports have overseas shipping services provided by 15 companies.Secondary ports are serviced by 176 smaller boats. Private operations aresupplemented by a government fleet consisting of 61 vessels. The high costsgenerated by this fleet have recently caused the Government to review thefleet-s viability. The performance of coastal shipping resembles that ofroad transport: a few large firms with expatriate management dominate whilesmall, local operators work at the margin. Tiere too, inefficiencycontributes to high tariffs. Tariff control is based on a system ofdistance zones and shorter journeys are frequently penalized.

C. Transport Administration

1.11 The Department of Transport and Civil Aviation (DTCA) isresponsible for transport planning, policy and administration, includingregulating the different transport modes (Chart 1). DTCA consists of:

(a) the Policy and Planning Division, responsible for planningthe transport sector, and for the preparation of projects to befunded through the National Public Expenditures Plan (NPEP);

(b) the Civil Aviation Division, responsible for the licensing ofinternal air service operations, for approving airline timetables,and for setting fares and freight rates;

(c) the Maritime Division, responsible for the provision and main-tenance of navigation aids and the administration of shippingregulations;

(d) the Division of Land Transport, responsible for the regulationand licensing of road traffic; and

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(e) the Civil Aviation Agency, an autonomous agency whose operatingexpenses are paid for by a grant from the Australian Government,responsible for aircraft control, electronics, airworthiness,and other safety-related operations.

1.12 The Department of Works and Supply (DWS) is responsible for allcivil works and their maintenance. Construction and maintenance of roadsoutside the national network come under the authority of provincialgovernments and municipalities which, however, generally engage DWS to carryout the work on an agency basis.

D. Transport Planning and Coordination

1.13 DTCA originates plans for the improvement of transport infra-structure. Coordination of all economic and social planning work is theresponsibility of the National Planning Office (NPO) which compiles annualinvestment programs for each sector and presents them to the Budget PriorityCommittee (BPC); both NPO and BPC are under the jurisdiction of the Ministryof Finance. BPC reviews each sectoral program and submits a consolidatedinvestment program to the National Planning Committee (NPC). NPC submitsthe program, together with appropriate recommendations, to the NationalExecutive Council (NEC) consisting of Cabinet Ministers. NPC and NECjointly review the annual investment programs in the light of theGovernment s development policy and available funds. The results of thisreview are incorporated into NPEP: this is an annually updated publicinvestment program, drawn up on a four-year rolling basis.

1.14 Investments in the transport sector are part of the NPEP. Apartfrom the NPEP, the Government does not have an explicit transport develop-ment program. A Transport Development Plan, drafted in 1981 by DTCA, wasnot accepted by Government which, instead, directed DTCA to prepare a mediumterm transport strategy. This was to be published in early 1982 as a WhitePaper but the necessary work has not yet been completed. In the absence ofan accepted long-term master plan, DTCA carries out reconnaissance studiesof existing facilities, identifies shortcomings, and assesses improvementsrequired to meet transport demand. In addition, it incorporates into itsannual submissions to the NPO justifiable projects identified by otheragencies of the national government and evaluates projects put forward byprovincial governments who seek financial assistance. As a matter ofpolicy, DTCA emphasizes projects which are continuations or extensions ofprevious development programs and closely scrutinizes proposals for newschemes to ensure they respond to genuine needs. The absence of a transportinvestment plan does not allow infrastructure improvements to be schedluled ina coordinated manner. During negotiations, the Government agreed to adhere toa timetable for addressing the transport planning issue.

1.15 The 1981-85 NPEP allocated about 15% of public investment totransport: four-fifths of that amount was earmarked for roads and bridges on

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the national network, the remainder for the improvement of provincial andlocal roads. The 1982-86 NPEP allocates similar proportions: in 1982,expenditure for roads and bridges were about K 32.0 million (US$41.4 million)of which somewhat less than half was for maintenance. Table 1 shows expendi-tures for transport works over the 1972-85 period. Table 2, however, showsthat revenues from the use and ownership of vehicles are low and amount toabout 30% of the total expenditure on roads. The size of the implied subsidyemphasizes the need for an increase in road user charges (para. 1.18).

E. Previous Bank-Financed Projects

1.16 The Bank Group has assisted the transport sector through threehighways and two ports projects. Two of the highways projects and bothports projects have been satisfactorily completed. At this juncture, only thePerformance Audit Report (June 16, 1977) for the First Highway Project(Credit 204/Loan 693-PNG) is available; it found that the Bank Group's refusalto provide supplementary finance for the 90% project cost overrun wasunnecessarily harsh and that international competitive bidding (ICB)under the conditions prevailing in PNG during 1970 may have contributed tocost escalation. During preparation of the Second Highlands Road ImprovementProject (Credit 677-PNG), approved in 1977, it was found that the bidsreceived under ICB for improvement of the Highlands Highway exceeded costestimates by 75%; and the project was subsequently reduced.

1.17 The Third Highway Project (Loan 1856/Credit 1030-PNG) approved in1980, is currently underway and provides US$30 million for the improvement ofsome 138 km of the Highlands Highway (Map IBRD 16665R1), for consultingservices, technical assistance for road maintenance, and training. The bidsreceived under ICB for the improvement of the Highlands Highway were withinthe appraisal cost estimate; and a sound basis for ICB cost estimating hasthus been established. After a slow start, the rate of progress inimplementing this project had improved and civil works are now about 50%complete. Recently, civil unrest in the area has again slowed progress. Inaddition, substantial increases in required earthwork due to unstable slopesis expected to appreciably increase project costs and delay completion.Disbursements continue to lag substantially behind appraisal estimates dueto initial implementation problems and slow processing of withdrawalapplications by the Government. Seminars concerning withdrawal procedureshave been held with the executing agency and procedures regardingcertification of expenditures have been streamlined to speed up processing.Project completion is now expected during 1984, about 12 months behind theappraisal schedule. Implementation of the technical assistance for roadmaintenance has also been substantially delayed. The Government has nowappointed the technical assistance consultants to carry out a study ofmaintenance needs, including training, and work will begin during March1983. The proposed project provides for a continuation of this effort, andfor implementation of study recommendations, including training.

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F. Transport Sector Issues

1.18 The Bank Transport Sector Review of 1979 identified a series ofissues which need to be addressed. These were: sector planning, efficiencyof transport operations, participation of PNG nationals in transport relatedactivities, and balance between public expenditures for, and public revenuesfrom, transport operations. During negotiations of the Third Highway Projectin 1980, the Government and the Bank agreed that: (a) proposals would besubmitted to the NEC by June 1981 to increase user charges in all threemodes to cover at least current expenditures; (b) a proposal for the deregula-tion of the trucking industry would be submitted to the NEC by June 1981;(c) the Government would explore measures to liberalize operations in civilaviation and coastal shipping and would inform the Bank of its proposedactions by end-1981; and (d) the Government would report to the Bank annuallyon progress in the development of the domestic construction industry.

1.19 Difficulties in implementing political objectives such aslocalization and decentralization, scarcity of experienced national staff, theabsence of a transport strategy framework, and the technical intricacy ofissues such as pricing policy and deregulation suggest that much more timethan originally envisaged would be needed to appreciably improve transportsector management and operations. It is encouraging, however, that theGovernment has become, over the past two years, increasingly aware ofsignificant operational benefits that would materialize by the formulation ofsound transport policy. Thus, transport policy issues are a subject ofcontinuing dialogue between the Government and the Bank. The proposed projectwill focus on infrastructure improvements as well as on planning,institution-building and training issues (paras. 3.08 to 3.11). Duringnegotiations, agreement was reached with the Government that it would adhereto a timetable for addressing the policy and manpower issues and that itwould, by July 1, 1985, prepare and furnish to the Bank for review a transportsector development strategy, and, after taking the Bank-s comments intoaccount, submit it to the NEC for consideration (para. 5.01).

2. HIGHWAYS

A. The Network

2.01 PNG has a road network of about 19,000 km of which about 940 km aresealed (Table 3). About 5,000 km are maintained by the National Government,and the remainder are the responsibility of the provincial and local govern-ments. Roads are primarily located in and near the main coastal towns, and inthe Central Highlands. Because of the high construction costs associated withthe extremely mountainous terrain, difficult soil and harsh climaticconditions, the road system is not linked and consists of a number of regionalnetworks. The condition of many roads is poor because of inadequatemaintenance and damage from overloaded vehicles. Moreover, missing or weakbridges diminish the usefulness of existing roads; in some areas, access roadssimply do not exist.

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2.02 For planning purposes, DTCA separates roads into three functionalcategories: (a) arterials which are highway and trunk roads, mainlyservicing interregional transport; (b) collectors connecting main populationor commercial centers to arterials; and (c) locals, which serve a ruralarea, sometimes connecting with the collector roads. The arterials numberabout 5,000 km and collectors and locals about 13,000 km. In addition, thereare about 1,000 km of urban roads. For purposes of administeringconstruction, improvement and maintenance, roads are also classified asnational or provincial including "district" roads.

B. Traffic

2.03 There are an estimated 55,000 vehicles in PNG, with new registra-tions averaging about 11,000 vehicles annually over the past five years.About 38% of all vehicles are cars and station wagons; 32% light trucks; 15%heavier trucks; 5% buses; 6% motorcycles, and 4% tractors (Table 4). Truckshave been steadily increasing their share of new registrations, particularlyin the Highlands Region. Lack of vehicle maintenance, overloading of bothpassenger and freight vehicles, and poor road conditions result in high annualscrapping rates. Relationships among population, motorized vehicles andkilometers of road on a province by province basis are shown in Table 5.

2.04 Road traffic volumes are generally low, both for passengers andfreight. Travel demand is seasonal and peaks just after the annual coffee,copra and cocoa sales. Most road traffic is short distance; long distancepassenger traffic is chiefly by air, and by sea for freight. An importantexception is the Highlands Highway which runs for a distance of about 600 kmfrom the main port at Lae through Mt. Hagen to Mendi providing an essentialfacility for the Central Highlands. The Highlands Highway carries anaverage traffic volume in excess of 600 vpd, of which over 40% are trucksand buses. Because of the improvements to the road there has been a gradualshift from trucks of 5 to 7-ton capacity to 12-ton trucks with 10-tontrailers, used particularly on the long distance runs. Estimates of vehiclekilometers by vehicle type are shown in Table 6.

2.05 For-hire road transport operations are limited to the area of theHighlands Highway and are dominated by several large, expatriate-managedcompanies which provide an efficient, reliable and well-supported service.Small, local operators work mostly as subcontractors. According to a recentstudy, truck freight rates on the Highlands Highway are 40% above the "cost-plus-overhead" total and this is partly due to overregulation of routes,tariffs and licensing. Another constraint is the scarcity of local entre-preneurs and managerial staff. Unless changes are made to the prevailingrate-fixing structure and the regulation of licenses, road improvements willprovide profits to operators rather than savings to consumers. The proposedproject would provide for a review of the road freight industry in order toincrease participation of PNG nationals (para. 3.08). Outside the HighlandsHighway, passengers and freight are mostly carried by "Public Motor

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Vehicles". These are privately owned minibuses, often the property ofcommunity groups. Rates are set by negotiation between operators andclients, sometimes mediated by local government councils or by provincialauthorities.

2.06 Lack of enforcement of existing safety regulations and poor vehiclemaintenance result in a relatively high incidence of traffic accidents, espe-cially on the Highlands and Enga Highways. The project will enhance trafficsafety on the Highlands and Enga Highways sections proposed for improvementby providing wider, paved roads; improved visibility for drivers; and adequateshoulders for pedestrians.

C. Administration, Staffing and Training

2.07 Responsibility for planning, construction and maintenance of theroad network is divided between the National Government and the 19provincial governments. The national roads are administered by DTCA and DWS.Provincial and local roads are the responsibility of the provinces andthe municipalities, respectively.

2.08 While DTCA handles policy and planning matters, DWS directlyhandles all works on national roads, both capital and recurrent, through itsfield organization. There are five Area Works Manager Offices (AWMO):Boroko, Lae, Madang, Mount Hagen, and Rabaul; and 20 Provincial WorksManager Offices (PWMO), one in each Province plus one for the NationalCapital District. An organization scheme of the DWS operational sections,related to transport, is shown in Chart 2.

2.09 Most senior and middle management posts in Government agencies areheld by expatriates engaged on short-term (2-3 years) contracts. QualifiedPNG nationals are in extremely short supply in most technical agencies. InDWS, about 80% of the professional staff are expatriates. The Government iscontinuing active recruitment overseas but the introduction in 1979 of reducedsalary scales and revised terms of contract has made recruitment difficult andmany positions remain vacant. The deficit in skilled personnel has been madeup by short-term engagement of consultant staff for key positions. Althoughthe Staff Development and Training Section of DWS continues to carry outtraining courses to accelerate staffing with qualified nationals, theseactivities have been hampered by: (i) shortage of national instructors; (ii)limited training equipment; (iii) insufficient training curricula; and (iv)inadequate training methodology. Training efforts have so far been centeredon fellowship programs and on courses for semi-professionals, technicians andforemen. It is acknowledged that it will take many years to train local stafffor all professional positions. The proposed project will provide technicalassistance to help with the training effort at the DWS headquarters and in theprovinces (paras. 3.09 and 3.11).

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D. Planning

2.10 The DTCA Policy and Planning Division carries out reconnaissanceof existing road networks and assesses improvements required to meet trans-port demand. Specifically, it focusses on gradually improving road accessinto rural areas, and connecting, with all weather roads, the majorpopulation and production centers among themselves and with major ports.

2.11 The Provincial Rural Transport Study (PRTS), financed through theThird Highway Project (Loan 1856/Credit 1030-PNG) was carried out by aconsortium of British and West German Consultants (T.P.O'Sullivan/GITEC).The study reviewed rural transport needs in the thirteen least developedprovinces of PNG; five provinces were studied in 1981 and eight more in1982. On the basis of the study findings, DTCA conceived a Rural TransportWorks Program (RTWP). RTWP is a rolling program from which high priorityitems are selected for upgrading each year, depending on the volume ofavailable funds; for the next few years RTWP will emphasize rehabilitationand improvement of provincial roads. DWS completed a detailed NationalRoads and Bridges Inventory in 1979 and identified structures with seriousproblems. Following the site inspection of more than 100 bridges, DWS andDTCA formulated a rolling Bridge Rehabilitation and Replacement Program(BRRP) to improve or replace bridges on national roads which will be insti-tuted on a permanent basis.

E. Engineering

2.12 DWS is responsible for the engineering of road works, and hasformulated design standards, which are presently being revised and updated,for various types of roads and terrain conditions (Table 7). Although theRoads and Bridges Section of DWS undertook the design of some major projectsin the past years, a large proportion of its design work is carried out byconsultants, most of whom are subsidiaries of foreign, mainly Australian,firms. In general, the quality of engineering is satisfactory, and theproposed project will provide technical assistance to aid DWS in makingfurther improvements (para. 3.11) to its in-house capability.

F. Construction

2.13 As domestic construction capacity remains limited, most majorconstruction works on national roads have been carried out by foreigncontractors, especially for externally financed projects. Some constructionworks on national roads have also been carried out by force account (daylabor) or by its variant, Project Managed Force Account (PMFA), whichinvolves the use of subcontractors, labor and plant hired under a constructionmanagement team of consultants engaged by DWS. An 8.5 km section of theHighlands Highway near Kundiawa was built through PMFA under the SecondHighlands Road Improvement Project (Credit 677-PNG) and PMFA will again beused for some selected roadworks under the proposed project (para. 3.23). Theuse of PMFA would provide increased work for domestic road contractors andthus assist their further development; and it would also provide trainingopportunities for PNG nationals in construction operations (para. 3.23).

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2.14 Provincial governments often employ DWS on an agency basis eitherto execute, or call contracts for, the construction of small projects onprovincial and village roads. Roadworks on village roads are carried outlargely by manual labor but sometimes with equipment, usually supplied byDWS, which also provides technical assistance to the local governmentcouncils.

2.15 Construction costs in PNG are high and may reach, in mountainousterrain, up to K 500,000 (US$650,000) per km of two-lane national road andK 100,000 (US$130,000) per km of provincial road. Despite high costs, civilengineering contracts in PNG are not of a magnitude, either in scale orfrequency, to support a comprehensive domestic contracting industry. Localcontracting firms can be divided into three categories: (a) domestically ownedand managed; (b) domestically owned and managed by expatriates; and (c)subsidiaries of overseas contracting companies. The firms in category (a)tender only for plant-hire contracts, while the firms in category (b) are ableto bid for smaller civil works contracts. Only firms in category (c) wouldhave the capacity to execute major construction works, such as the sections ofthe Highlands and Enga Highways included in the project. At present,sufficient road construction equipment is available in the country to caterfor its likely needs.

2.16 As the Government wishes to promote the domestic road construc-tion industry, the Second Highlands Road Improvement Project (Credit 677-PNG)included a component providing technical assistance to domestic road con-struction contractors. Under this component, a. consultant drafted a con-tractor-s manual in 1978 and concentrated later on field training for six orseven domestically owned and managed firms which owned a basic equipmentfleet and had the entrepreneurial spirit necessary for their further devel-opment. However, the relative shortage of suitable small road constructionor maintenance contracts hampered the success of these training efforts.Under the Third Highway Project (Loan 1856/Credit 1030-PNG), the Governmentundertook to investigate further ways of promoting the domestic road con-struction industry and report to the Bank Group each year until 1984 on anymeasures taken. As the results have been disappointing so far, the proposedproject contains provisions to revive and continue the previous efforts todevelop the industry. During the project period, DWS would supply work togenuine domestic contractors by careful apportionment of small roadworks(para. 3.23).

2.17 Major construction projects which are externally financed areusually supervised during construction by the consultants who carried outthe detailed engineering. Smaller or locally financed contracts aresupervised from DWS Headquarters or by PWMOs, sometimes with consultantassistance. The quality of supervision is generally satisfactory and theproposed project will provide technical assistance to aid DWS in furtherimproving its in-house capability (para. 3.11).

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G. Maintenance

2.18 Maintenance of national roads and bridges is carried out by DWSthrough its AWMOs and PWMOs. While the technical standard of maintenance onnational roads is satisfactory, the level of maintenance services providedis often inadequate. Nevertheless, emergency situations such as landslides,culvert washouts, and bridge abutment erosion receive prompt attention. Thecost of road maintenance in PNG is high, due on the one hand to extremelyadverse topographic and climatic conditions, and on the other to inefficien-cies in DWS maintenance operations. Maintenance requirements are alsoexpected to increase in future as a result of road network extension andtraffic growth. In the past, adequate funds have been provided by theNational Government for maintenance of national roads, but some maintenancefunds have been diverted to road improvement works.

2.19 DWS has considered for some time establishing a central MaintenanceBranch at its headquarters to plan, direct and monitor road maintenance andits cost. At present, maintenance expenditures are not properly monitoredand verified against budgets or physical accomplishments; they are ofteninflated by the cost of minor construction and improvement projects and arenot determined by road standards and conditions, or traffic levels andcomposition. Lack of such data limits the scope for well conceived policiesfor maintenance operations, for efficiency and spending levels, for roadstandards and necessary road improvements. The Third Highway Project (Loan1856/Credit 1030-PNG) included technical assistance services for improvingmaintenance operations. For over two years, the Government had delayed theappointment of the consultants; the consultants have now been appointed andwork will begin shortly. The proposed project would continue to providetechnical assistance to DWS for building a maintenance information, monitor-ing and cost accounting system, including training (para. 3.11). Duringnegotiations, the Government agreed to prepare and submit a detailed actionprogram for the improvement of maintenance operations for Bank review byMarch 31, 1984, and to subsequently implement the agreed program, includingsetting up a Maintenance Branch within DWS and appointing suitable nationalstaff for training by December 31, 1983 (para. 5.01). In addition, and inorder to improve its training efforts, the Government agreed, during nego-tiations, to prepare and submit for Bank review, a detailed action programfor the implementation of a road maintenance training program by September 30,1983, and to subsequently implement it under the proposed project(para. 5.01).

2.20 Maintenance of provincial and local roads, which is the responsi-bility of the provincial governments, is inadequate. Certain provincesallocate a reasonable amount of money for maintenance while others allocatevery little and concentrate on building new roads. Except for two provinces(Chimbu and Bougainville), maintenance of provincial and local roads is beingcarried out by DWS as an agent of the provincial governments. However, theextent of maintenance works and the provision of funds depend entirely onthe provincial governments. The proposed project will assist the provincial

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governments to develop a rational strategy for maintenance on provincial andlocal roads (paras. 3.09 and 3.11).

H. Financing

2.21 Financing for construction, improvement and maintenance of nationalroads is provided from the National Government's annual budget. In addition,provincial governments fund works on provincial roads through their untiedgrants and other internal funds or by using tied grants appropriated throughthe NPEP. Some provincial governments make bulk allocations to districtcouncils or communities for maintenance or minor road improvement. Provincialgovernments also have some revenue generating authority and may obtainadditional funds for roadworks through the levy of local taxes.

2.22 The Government's allocation for roadworks for 1982 is aboutK 32.0 million (US$41.4 million), which is exclusive of provincial untiedgrant funds intended for such activities. Of this total, about K 19.0 million(US$24.6 million) is for construction and about K 13.0 million (US$16.8 mil-lion) for maintenance. No figures are available for provincial expenditures.

2.23 The Government-s annual expenditures on roads increased, with somefluctuations during periods of peak construction activities, from someK 20.0 million (US$25.9 million) to about K 32.0 million (US$41.4 million)during the period 1972/73-1979/80. As a percent of total expenditures theseamounts have averaged about 7% p.a. Annual maintenance costs for thenational system have varied between K 10.0 and K 19.0 million (US$12.9 andUS$24.6 million) for this period, depending on funds available rather thanrequirements. While the highway system had not increased substantially overthis period, DWS reports that maintenance budget requirements are risingappreciably due to increasing costs. Fund allocations, however, are expectedto remain at about K 15.0 million (US$19.4 million) p.a., indicating thatroad maintenance may not receive adequate funds in future. It is thereforenecessary that increased efficiency be introduced through better programmingand monitoring of maintenance operations.

2.24 At this juncture, the Government is preparing a Second Road Improve-ment Project considered for financing by the Asian Development Bank (ADB).The proposed ADB project would provide for improvement of about 40 km ofnational roads, consulting services, and technical assistance for preparationof a future project. The ADB project is estimated to cost about US$15.6 mil-lion and is scheduled for appraisal in early 1983.

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3. THE PROJECT

A. Objectives

3.01 The main project objectives are to improve rural mobility throughrehabilitation and improvement of roads and bridges, highway maintenancethrough the establishment of an efficient management system, and to assist indeveloping the road transport and construction industries. The project alsoaims to assist in establishing a strategy for transport sector developmentleading to policy action plans and associated investment programs.

B. Main Features

3.02 The project comprises:

(a) rehabilitation or improvement of about 15 provincial road segmentstotaling approximately 277 km, comprised of: (i) Categories Iand II - 10 roads (227 km); and (ii) Category III - about 5 roads(50 km);/l

(b) rehabilitation or replacement of about 32 bridges on nationalroads having an estimated total length of 1,520 lineal meters,comprised of: (i) Categories I and II - 17 bridges (1,017 linealmeters); and (ii) Category III - about 15 bridges (500 linealmeters);/l

(c) improvement of two sections of the llighlands Highway (29 km) andof the first section of the Enga Highway (about 25 km);

(d) consulting services for feasibility studies, detailed engineeringand construction supervision, for transport policy studies, and forthe preparation of a transport sector development plan andassociated investment programs;

(e) technical assistance to establish efficient procedures fortransport sector development functions in general and highwaymanagement and administration in particular, and to assist in thedevelopment of the domestic road construction industry; and

(f) training of highway maintenance personnel.

/1 Category I items are those for which detailed engineering has been

completed. Category II items are those for which detailed engineeringis underway but not yet completed; and Category III items are those thatare to be identified during the course of project implementation.Construction of Category I items is scheduled to begin during the firstyear of the Project. Construction of items in Categories II and III willbegin in later years.

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Funds will be also be provided to carry out a Hydropower study for theDepartment of Minerals and Energy in order to review potential hydropowerresources.

C. Detailed Description

Rehabilitation and Improvement of Provincial Roads

3.03 The 10 road segments included in Categories I and II (Table 8) whichare to be rehabilitated and improved under the project were selected fromRTWP. They are mostly rough and narrow gravel and earth roads, impassablefor a good part of the year due to inadequate drainage and lack ofmaintenance. These roads, totaling 227 km in seven provinces (Map 2) fallinto two categories according to their status of preparation. The firstcategory includes four road segments totaling 81.5 km whose implementation isscheduled during 1983. The second category, comprised of six road segmentstotaling 145.5 km (Table 8) is scheduled for implementation in later years(Annex 1 and Chart 3). The roads will be rehabilitated or improved largelyon existing alignments, to DWS Rural Road Standard (Class 3) or Access RoadStandard (Classes 1 or 2) (Tables 7 and 8) depending on the volume ofanticipated traffic. All roads will be provided with gravel surfacing;bridges will be strengthened or replaced and drainage improved. Pavementswill be designed for an axle load of 18,000 lbs. In addition to these 10road segments, the project provides for about five additional road links,totaling approximately 50 km (Category III - Table 8) which are to beidentified from the continuation of the PRTS, now ongoing. Funding for theroads included in Categories II and III under the project would be limited tothose with an Economic Rate of Return (ERR) of 10% or higher. If one of thesegments fails to meet this criterion, it would be replaced with anothersegment selected from RTWP that would be acceptable to the Bank.

Bridge Rehabilitation and Replacement Program

3.04 Under BRRP, the project would include the replacement andrehabilitation of 17 bridges (Categories I and II - Table 9) on nationalroads in six provinces, for a total length of 1,017 lineal meters. Thesebridges fall into two categories according to their status of preparation;the first includes eight bridges (Map IBRD 16665R1) totaling 425 linealmeters and the second, nine bridges totaling 592 lineal meters (Table 9).The bridges are either in imminent danger of collapse, have an extremely lowload restriction placed upon them, or require abnormally high maintenanceexpenditures; they would be built to DWS Design Standard, Loading Class T44(Table 7). In addition to these 17 bridges, the project provides forapproximately 15 more bridges (Category III - Table 9), totaling about 500lineal meters, which are to be identified as part of the ongoing BRRP.Funding for the bridges included in Categories II and III under the project

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would be limited to those with ERR of 10% or higher. If one of the bridgesfails to meet this criterion, it would be replaced with another bridgeselected from BRRP that would be acceptable to the Bank.

Improvements of the Highlands and Enga Highways

3.05 The project will improve three sections of the Highlands and EngaHighways, totaling about 54 km (Map IBRD 16665R1). Two of these sections,namely Kudjip to Minj (13 km) and Watabung to Chuave (16 km), are theremaining unimproved sections on the Highlands Highway between the port ofLae and Mount Hagen and their condition accounts for high vehicle operatingand road maintenance costs. The third section, Togoba to Tanbul Turnoff,covers the first 25 km of the Enga Highway which is the continuation of theHighlands Highway towards Wabag. The Government intends to continueimproving the highway up to Wabag (an additional 68 km) over the next decade.

3.06 All three sections have rough and narrow gravel surfaces which havedeteriorated because of inadequate design, lack of maintenance and significanttraffic. They will be improved to DWS Rural Road Design Standard, Class 1(Tables 7 and 10), mainly on existing alignments, provided with improveddrainage and paved using double bituminous surface treatment. At somelocations, embankments will be raised to control flood damage and slopesstabilized. Bridges will be rehabilitated or replaced, as and wherenecessary.

Consulting Services

3.-07 The project would provide about 700 man-months of consultingservices in total (Tables 11 and 12). Consulting services for feasibilitystudies, preliminary and detailed engineering and construction supervision ofthe road and bridge components would total about 440 man-months; and another75 man-months of services would be provided for construction management andmonitoring of the civil works for the Watabung-Chuave section and of someprovincial roads which will be built using PMFA (para. 3.23). In addition,the project would provide 70 man-months of consulting services to undertakefeasibility studies and detailed engineering needed for the preparation offuture projects (Table 11).

3.08 The project would also include a total of 82 man-months ofconsulting services for DTCA to cater for shortages in experienced staff inorder to assist with a series of transport policy studies to be undertakenduring 1983/85 which will cover operational topics such as the preparation ofa transport development plan leading to an investment program for 1985-90;establishment of data information systems to support transport planning;review of the road freight industry to develop measures for the increasedparticipation of PNG nationals; review of airport user charges to rationalizetariffs; and a review of bus operations in Port Moresby and Lae (Table 12).In addition, the project includes 40 man-months of consulting services toundertake feasibility studies and preliminary engineering for several boatservices projects identified by the PRTS. Outline terms of reference foreach of the consulting services included in the Project have been agreed upon

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between the Government and the Bank (see Project File) and detailed terms ofreference will be approved by the Bank prior to the appointment ofconsultants.

Technical Assistance and Training

3.09 As continuing shortages of qualified national staff impede theGovernment s localization policy, assistance is needed in the transportsector to strengthen planning, and supervisory and monitoring capacity bothat the national and at the provincial government levels. The project willassist in the strengthening of DTCA and DWS by financing technical assist-ance and training by consulting firms totaling 156 man-months (Table 13).

3.10 For DTCA, the project will provide one senior adviser (12 man-months) to assist in provincial liaison, planning and training programs andin promoting the upgrading and localization of DTCA's planning and programmingcapabilities at the national level. Outline terms of reference for theseservices have been agreed upon between the Government and the Bank (seeProject File) and detailed terms of reference will be approved by the Bankprior to the appointment of the adviser.

3.11 For DWS, the project will provide five experts (132 man-months).Three senior advisers, for a two-year period, will assist in improving DWSorganization, management and operations (24 man-months), in improvinghighway design, management and supervision of construction (24 man-months),in helping to set up and initially operate a permanent, rolling program forbridge inspection, rehabilitation and replacement on a nationwide basis (24man-months) and in preparing and carrying out a program of incentives andassistance designed to promote the growth and capabilities of indigenousroad construction contractors (12 man-months). Two maintenance experts (48man-months) and one maintenance training adviser (12 man-months) will assistDWS and the provincial governments in improving road maintenance planning,programming, execution, monitoring and cost accounting, and in practicaltraining. They will assist in establishing and operating a MaintenanceBranch and a Training Unit for maintenance within DWS (which DWS will setup by December 31, 1983 - para. 5.01). The training adviser will workwithin the Training Unit of the Maintenance Branch, and would particularlyassist in: (i) determining detailed training needs in the road maintenancearea using, as a basis, the results of the Road Maintenance Study now beingcarried out under the Third Highway Project; (ii) preparing and beginning theimplementation of a three-year maintenance training program at the nationaland provincial levels; and (iii) organizing and supervising training ofnational instructors. Outline terms of reference for all these technicalassistance consulting assignments have been agreed between the Government andthe Bank (see Project File). During negotiations, arrangements to prepareAction Programs for improvement of maintenance operations, for establishingtraining needs and for implementing a training program was agreed between theGovernment and the Bank (para. 5.01). DWS will submit the detailed actionprogram for maintenance training for Bank review by September 30, 1983, and

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the detailed action program for the improvement of maintenance operationsfor Bank review by March 31, 1984 (para. 5.01). The technical assistanceadvisers will aid DWS in this effort. Detailed terms of reference forall technical assistance assignments will be approved by the Bank prior tothe engagement of consultants.

D. Status of Preparation

3.12 As the project consists of many small components scattered all overthe country, preparation has been difficult, time consuming and costly. Forrehabilitation and improvement of provincial roads and for bridges onnational roads, feasibility studies and preliminary and detailed engineeringhave been completed for the four roads and the eight bridges included inCategory I, the first year's construction program. Feasibility studies andpreliminary engineering for the six roads and nine bridges included in thesecond category are presently ongoing and will be completed during 1983. Forthe remaining five roads and 15 bridges in the third category, feasibilitystudies and preliminary engineering will be undertaken during 1983/84. Thiswork is being carried out by DWS, DTCA, and consultants according to amethodology and timetable agreed with the Bank. Detailed engineering for thesecond category bridges having an acceptable economic rate of return will beundertaken during 1983/84. For the second and third category roads and thethird category bridges, detailed engineering will be carried out, for thoseroads and bridges having an acceptable economic rate of return, during thecourse of project implementation.

3.13 For the Kudjip-Minj section of the Highlands Highway, feasibilitystudies and preliminary engineering have been completed by DTCA and DWSwith the help of consultants (Beca, Carter and Hlollings, PNG). A consultantwill be selected and appointed shortly for the Watabung-Chuave section andfeasibility study and preliminary engineering will be completed during 1983.Detailed engineering for the Kudjip-Minj section will be completed during1983; for the Watabung-Chuave section, it will be carried out under theproposed project, subject to an acceptable economic rate of return being shown(para. 3.27). The feasibility study for the Togoba-Wapenamanda section of theEnga Highway, which includes the Togoba-Tanbul Turnoff section, was preparedby consultants (Rendel, Palmer and Tritton, UK) with financing under theSecond Highway Project (Credit 677-PNG). Detailed engineering and tenderdocuments for the Togoba-Tanbul Turnoff section have been prepared by DWS withthe help of consultants (Cardno and Davies, PNG), and have been completed.

E. Cost Estimates

3.14 The total cost of the Project, including contingency allowances,is estimated at about K 40.2 million or US$54.0 million equivalent. Totalproject cost includes: (a) physical contingencies of 10% to 25% of base costson all civil works items depending on the status of engineering andanticipated project complexity in each case; and (b) price contingencies

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amounting to about 21% of base costs on all items, including physicalcontingencies, (estimated for both foreign and local costs at 8.0% for 1983;7.5% for 1984; 7.0% for 1985; and 6.0% for 1986 and later years). Overall,physical and price contingencies combined represent about 26% of the totalproject cost. The cost estimates exclude all taxes and duties since theGovernment would exempt the project from such charges. Detailed costestimates are given in Table 14 and are summarized below in Table 3.1.

Table 3.1: SUMMARY OF PROJECT COSTS

ForeignLocal Foreign Total Local Foreign Total exchange--- (K million) ---- --- (US$ million)--- (% of

total)

Provincial Roads Rehab-ilitation & Improvement 2.18 3.28 5.46 2.94 4.40 7.34 60

Bridge Rehabilitation andReplacement program 1.47 2.73 4.20 1.98 3.67 5.65 65

Improvement of Highlandsand Enga Highways 4.67 8.66 13.33 6.28 11.65 17.93 65

Consulting Services 0.80 4.03 4.83 1.08 5.42 6.50 83

Technical Assistance andTraining 0.22 1.32 1.54 0.30 1.77 2.07 85

Right-of-Way 0.45 - 0.45 0.60 - 0.60 0

Base Costs (Feb. 1983 9.79 20.02 29.81 13.17 26.92 40.09 67prices)

ContingenciesPhysical 1.15 2.26 3.41 1.55 3.03 4.58 66Price 2.36 4.60 6.96 3.18 6.19 9.36 66

Total Project Cost 13.30 26.88 40.18 17.90 36.14 54.04 67

Front End Fee on Bank loan 0.17 0.17 - 0.23 0.23 100

Hydro power study 0.15 0.74 0.89 0.20 1.00 1.20 83

Total FinancingRequired 13.45 27.79 41.24 18.10 37.37 55.47 67

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3.15 For the Highlands and Enga Highways sections, the average improve-ment cost per km (excluding contingency allowances and right-of-way) isestimated at about US$350,000 equivalent. Including contingencies andright-of-way, the cost would be about US$475,000. For the two sections onthe Highlands Highway (representing about 25% of the total project cost),the cost estimates are tentative because detailed engineering is still to bedone. For provincial roads, rehabilitation or improvement costs would averageabout US$30,000 per km; including contingencies and right-of-way, the cost perkm is estimated to be about US$40,000 equivalent. Unit prices for allconstruction items are based on an analysis of the cost of labor, materials,depreciation, operation of equipment, and contractors- overhead and profit,taking into account recent bids received for similar works. A 10% physicalcontingency allowance for quantity and time overruns is considered adequatefor those project components for which detailed engineering is complete and nospecial problems are anticipated. For other project components, a physicalcontingency of 15% to 25% was used. Cost estimates are considered to bereasonable.

3.16 Consulting services for detailed engineering, and supervision ofconstruction for project roads and bridges will require about 375 man-months(Table 11) at a total estimated cost of US$3.7 million equivalent. Thesecosts are based on experience on the Second and Third Highway Projects andamount to about 12% of the estimated construction cost for the project roadsand bridges. Consulting services for construction management of PMFA workswill require about 75 man-months (Table 11) at an estimated cost ofUS$800,000. This cost is included in the estimate of construction cost forthe works involved. Consulting services for feasibility studies andpreliminary engineering for the sections of the Highlands Highway included inthe project will require about 65 man-months at an estimated cost ofUS$670,000 equivalent. Consulting services for the feasibility studies anddetailed engineering of future projects will require about 70 man-months at atotal estimated cost also of US$670,000 equivalent (Table 11); consultingservices for the transport policy studies will require a total of 82man-months at an estimated cost of US$1.12 million equivalent (Table 12).Consulting services for feasibility studies and preliminary engineering forthe boat services projects (Table 12) will require about 40 man-months at atotal estimated cost of US$360,000 equivalent. These costs are consideredto be reasonable, are based on the cost of similar consultant's services underprevious projects in PNG and other countries, do not include contingencyallowances, and reflect the varying complexity of each consulting assignment.

3.17 Consulting services for technical assistance and training willrequire a total of 156 man-months (Table 13) at a cost of about US$2.1 millionequivalent, without contingencies. These costs are based on the cost ofsimilar consultant's services provided under previous projects in PNG and inother countries. For all consulting services, technical assistance andtraining under the project, the man-month rate for expatriate experts isestimated to be about US$11,000 (or US$9,500 excluding local costs forequipment, vehicles, housing and administrative costs). The costs includesalaries, social costs, firm's overhead and profit, subsistence and otherallowances, and reimbursable items such as local and international air travel.These costs are considered reasonable.

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F. Financing

3.18 Financing for the Project, including its foreign exchange cost(US$36.14 million, representing about 67% of the total cost) and aboutUS$580,000 equivalent of local costs incurred in connection with consultingservices and technical assistance, would require an amount of approximatelyUS$36.7 million equivalent; including the capitalized front-end fee on theBank loan (US$230,769), the amount required would be about US$36.9 millionequivalent. The Kuwait Fund has indicated its interest in providing on aparallel financing basis, the amount of US$7.0 million equivalent. Theamount required, therefore, would be approximately US$30.0 million. However,during negotiations the Government requested that funds to enable theDepartment of Minerals and Energy to carry out a Hydropower Resources Surveybe included in the loan. Including the foreign exchange cost of this survey(US$1.0 million equivalent), the proposed Bank loan would be in the amount ofUS$31 million (para. 5.03). The Loan would include US$900,000 equivalent ofretroactive financing for project preparation work undertaken after July 30,1982 by DTCA and DWS, through consultants (Beca, Carter and Hollings - PNG,Cardno and Davies - PNG, and Ove Arup & Partners UK), including the cost oftraffic surveys, soils explorations and analyses. The Government wouldfinance the balance of the local costs of about US$17.5 million equivalentthrough annual budgetary allocations.

G. Implementation

3.19 The project extends the assistance of previous transport projectsfrom the national to the provincial government level by financing rehab-ilitation and improvement of provincial roads. Tables 8 and 9 show theprovincial roads and bridges on national roads for which implementation isscheduled to begin during the first year of the project period (Category I)and these identified for later implementation. For Categories II and IIIroads and bridges included in the Project, the Government will submit byOctober 31 of each year beginning in 1983, a proposed list of roads andbridges to be implemented beginning in the following year for Bank reviewand approval (para. 5.01). Chart 3 shows the implementation schedule forCategory I roads and bridges and a tentative schedule for Categories II andIII. Because of the lack of management capabilities and technical expertisein the provinces, the provincial road component will be implemented by DWS;after their completion, the provincial roads will be maintained initially byDWS using its own financial resources. During negotiations, arrangements formaintenance of the provincial roads under the project were agreed with theGovernment (para. 5.01). When provincial capabilities reach a satisfactorylevel, the responsibility for maintaining these roads will be transfered toprovincial governments. To expedite this process, the project will includetechnical assistance and training in maintenance, through DWS, to provincialstaff. In addition, it will provide technical assistance for transportplanning, through DTCA, to provincial planners. DWS will be responsible forproject implementation, with the exception of the transport policy studies,the boat services feasibility studies and the technical assistance for ruraltransport planning which the DTCA Policy and Planning Division (Chart 1) willhandle. Within DWS, the Works Division (Chart 2) will manage rehabilitation

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and improvement works for roads and bridges as well as related consultingservices and technical assistance. Training will be handled by the StaffDevelopment and Training Section of the DWS Administration Division (Chart 2)in cooperation with the DWS Maintenance Branch which would be established.The previous two Bank-financed road projects have been carried out throughDTCA and DWS; except for shortage of staff, no special administrative diffi-culties are anticipated, particularly since substantial technical assistanceto these agencies has been included in the Project.

3.20 Civil works would be carried out by contract, force account andPMFAo PMFA is a modified version of force account whereby DWS forms a projectmanagement and monitoring team to carry out force account works whosesupervisory members are engaged through consultants. Except for the lack ofbidding, the work is then performed as if a contractor had been hired,including provision of a priced bill of quantities and monthly bills certifiedby a supervising consulting engineer. DWS will engage qualified consultantsto carry out feasibility studies, preliminary engineering and detailedengineering where required (Table 11); to supervise civil works contracts andPMFA works on the Highlands and Enga Highways, as well as on provincial roadsand bridges (Table 11); and to provide technical assistance and training(Table 13). DTCA will retain qualified consultants to carry out studies(Table 12) and to provide technical assistance to provincial governments forrural transport planning (Table 13).

3.21 The project will be executed over a five-year period and should becompleted by mid-1988.- Contractors will be responsible for maintaining theirrespective works for a 12-month period after completion. All project roads,including provincial roads, will be maintained after completion by DWS fromits normal maintenance budget which would be increased to provide for theadditional roads (para. 5.01). A schedule showing implementation phases foreach project component is attached as Chart 3. An implementation action pro-gram for DWS and DTCA is shown in Annex 1. During negotiations, the imple-mentation schedule was agreed with the Government, attached to the LoanAgreement as a Side Letter, and assurances obtained that the Government would:(a) adhere to the agreed action programs (para. 5.01); (b) submit semi-annualprogress reports to the Bank; (c) monitor overall implementation of the Pro-ject; and (d) prepare a completion report within six months of the ClosingDate.

H. Procurement

3.22 Prior to the appraisal of this Project, the Government had stronglyrequested that the Bank permit the use of PMFA for the Togoba-Tanbul Turnoffsection of the Enga Highway instead of ICB, due to the poor security situa-tion in the area, the training benefits that could be realized, the opportu-nity to promote the domestic construction industry, and its perception thatICB would result in increased costs of construction. Therefore, the appraisalmission made a thorough examination of the factors affecting the choice of anoptimal procurement method for this road section. The appraisal missionconcluded that, in the case of the Togoba-Tanbul Turnoff section, ICB wasindeed the preferred method of procurement rather than PMFA for the followingreasons: (a) while security problems exist, contractor's prices and scheduleswould allow for this. The costs involved were not considered to be greaterthan those expected for PMFA; (b) in contrast to the situation existing during

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the implementation of the previous highway projects, there now is sufficientinterest among the international contracting community that responsivebidding under ICB can be expected; and (c) the Government's objectives ofpromoting the domestic construction industry and of extending its trainingefforts will be furthered under the Project by using PMFA to carry out partof the works for the Watabung-Chuave section of the Highlands Highway (earth-works and drainage) and some of the provincial road works. These procurementarrangements (para. 3.23 and Tables 8, 9 and 10) were agreed by DWS and DTCAduring appraisal, were confirmed by the Government during negotiations andwere incorporated into the Loan Agreement.

3.23 Civil works for the improvement and paving of the Togoba-TanbulTurnoff and Kudjip-Minj Roads on the Enga and Highlands Highways, totalingabout US$15 million equivalent, including contingencies, will be procuredunder two separate contracts through ICB in accordance with the Bank-sGuidelines for Procurement (July 1980). Contractors will be pre-qualified.Payments under construction contracts in PNG are made exclusively in localcurrency, whether the project is externally financed or not. Since thecurrency is freely convertible, this regulation does not impede internationalcontractors. Civil works for paving and bridges on the Watabung-Chuave sec-tion of the Highlands Highway (totaling US$3.5 million), for selected provin-cial road works and for bridges on national roads (totaling US$13.5 million),including contingencies, will be procured under contracts (value of eachpackage not exceeding US$1.0 million equivalent) through Local CompetitiveBidding (LCB) procedures which are satisfactory. The balance of the improve-ment works for the Watabung-Chuave section of the Highlands Highway (US$5.6million equivalent), the provincial road works and the works for the bridgeprogram (US$4.1 million equivalent) will be carried out by DWS, partly throughforce account (day labor) and partly through PMFA in packages not exceedingUS$750,000 equivalent. During negotiations, agreement was reached between theGovernment and the Bank concerning the specific form of procurement to be usedfor each identified project component (Tables 8, 9 and 10), and reflected inthe Loan Agreement. During the review of each year's program, agreement willbe reached concerning the specific form of procurement to be used for CategoryIII provincial roads and bridges on national roads (Tables 8 and 9). Civilworks contractors will be eligible to bid for one or several packages. Thebidding will be arranged in stages so that unsuccessful bidders could bid onsubsequent rounds. Opportunities wil also be provided to domestic contrac-tors, primarily through subcontracting portions of larger contracts or PMFAworks. The contract tender documents tinder LCB will provide for the use ofnominated subcontractors selected by DWS. For PMFA, a monitoring systemutilizing a separate consulting firm engaged for the purpose will be set up tomeasure the cost effectiveness between those road sections carried out usingPMFA and those executed by contracts under ICB. PMFA will also provide foron-the-job training of PNG engineers who will be attached to the constructionmanagement and supervision teams.

3.24 All bidding packages for civil works estimated to cost US$500,000equivalent or more will be subject to the Bank's prior review of procurement

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documentation. Consultant services for engineering, construction supervi-sion, studies, technical assistance and training would be obtained inaccordance with the relevant Bank Guidelines (August 1981).

3.25 Contractors will be free to choose their own construction methods,including the most economical use of mechanical equipment and labor, subjectto their work complying with the technical specifications. While use oflabor-intensive methods will be encouraged, it would be impracticable tostipulate that contractors should carry out the work largely by labor becauseof the relative shortage of construction labor in the area, the high wagerates and because it would be technically difficult to achieve satisfactoryquality. Nevertheless, it is expected that the works will give directemployment, on average, to about 800 workers over a period of four years.

3.26 The Government will acquire the right-of-way, will take thenecessary steps to complete this acquisition prior to awarding contractsand will furnish the Bank satisfactory evidence that required land andrights to land are available for project purposes (para. 5.01). Difficultiesover right-of-way acquistion have been common in the past but the DWS SurveyDivision is quite capable of handling the acquisition for the project andthe necessary arrangements to acquire the needed right-of-way are wellunderway. For the first year's program, all necessary right-of-way has beenobtained.

I. Disbursements

3.27 Disbursements would be made for: (a) 65% of total expendituresfor civil works; and (b) 100% of total actual expenditures for consultingservices, technical assistance and training. All expenditures would be fullydocumented except those for civil works carried out by DWS through forceaccount (day labor) which would be reimbursed on the basis of statements ofexpenditure certified by DWS. These reimbursements under the Statement ofExpenditure procedure will be made on the basis of a previously agreed totalestimated cost for each road or bridge in accordance with the periodiccertification by DhS as to the percentage of the work completed. Supportingdocumentation would be retained by DWS and made available for review by Bankstaff. Disbursements against the construction cost of the Kudjip-Minj;section of the Highlands Highway would be made conditional on satisfactorycompletion of detailed engineering demonstrating the cost-effectiveness andtechnical feasibility of the proposed improvement. For the Watabung-Chuavesection of the Highlands Highway, inclusion as part of the Project would bemade conditional on satisfactory completion of feasibility studies and pre-liminary engineering demonstrating, the feasibility and economic justifica-tion of the proposed improvement. Disbursements against the constructioncost of the Watabung-Chuave Road would be made conditional on satisfactorycompletion of detailed engineering demonstrating the cost-effectiveness andtechnical feasibility of the proposed improvement (para. 5.02). Table 15shows a schedule of estimated disbursements which follows, with some minor

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modifications, the regional profile in order to provide for unexpecteddelays in implementation. Payments will be subject to internal audit by theDWS and by the Government Auditor-General's Office; and the Government'sauditing arrangements are satisfactory.

J. Environmental Aspects

3.28 The project is not expected to cause any environmental or ecologi-cal problems. No major changes in the alignment of project roads will bemade. Wider and better constructed shoulders will contribute to roadsafety. Suitable design of drainage and slope stabilization will ensure thatthe works will not cause or aggravate flooding, erosion or land slides.Paving the road sections on the Highlands and Enga Highways will eliminatethe present danger and nuisance caused by dusty, slippery and muddy surfaces.

4. ECONOMIC EVALUATION

A. General

4.01 The project comprises infrastructure improvements and technicalassistance/consultancy services aimed primarily at staff training and thedevelopment of sound planning and operational procedures. Benefits fromsuch services cannot be satisfactorily quantified and have been excludedfrom the economic evaluation.

B. Rehabilitation and Improvement of Provincial Roads

4.02 This component would finance the improvement of four provincialroads whose economic and technical feasibility has been established andwhose implementation is scheduled to begin in 1983 (Category I), plus itemswhich would emerge from feasibility studies now underway (Categories II andIII) and whose implementation will begin in later years of the project.Selection and evaluation procedures have been developed as part of the PRTSand consist of three successive screens: the first excludes items notmeeting specified thresholds for population served but passes items withstrong local support. The second screen broadly compares costs and benefitsderived from engineering estimates and provincial parameters describingproduction, travel and consumption responses to improved transport. Thethird screen evaluates items showing positive net present values (at 10%rate of discount): preliminary engineering is then carried out and adefinitive comparison of economic costs and benefits is undertaken. Workingpapers on the identification/screening procedure and on the detailedevaluation of the four roads are in the Project File.

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4.03 Costs considered in the evaluation are investment expenditures,and maintenance costs over the assumed 20-year life of a road. Benefitsarise mostly out of vehicle operating cost savings and include those accru-ing to producers of marketed agricultural output, to travellers, and toconsumers of goods imported into the area served by the road. Agriculturebenefits represent reduction in transport costs for the current productionplus the net value of agricultural output induced by the road improvement(after taking into account production response lags and the costs ofnecessary inputs). The comparative extent of each type of benefit isdetermined by field investigation to postulate yield increases and otherresponse rates. Benefits to travellers are reductions in trip costs tocurrent travellers only. The net value of new trips generated by theimproved road (particularly where the road allows access to wage-employmentactivities) was initially considered as an additional benefit. Fieldinvestigations suggested that reliable estimates could not be made of traveldemand induced by increased income. Hence, improved accessibilitybenefits" are exclusively based on current trip-making patterns and, as afurther conservative step, values of time savings resulting from theimproved road have been ignored in the evaluation. Benefits to consumers ofimported goods are also measured conservatively: they reflect reduction of

transport costs and no account is taken of additional volumes of importedfreight resulting from rising incomes. Table 16 shows net benefit flows forthe provincial roads in Category I.

4.C4 Category I roads show 1982 traffic volumes of 50-300 AADT and ERRsfrom 13.9-25.9% (Table 16). Category II and III roads are expected to showa minimum ERR of 10%.

C. Bridge Rehabilitation and Replacement Program

4.05 This component would finance an initial replacement of eightbridges on national roads whose economic and technical feasibility has beenestablished and whose implementation is scheduled to begin in 1983 (CategoryI), plus items which would emerge from feasibility studies now underway(Categories II and III) and whose implementation will begin in later yearsof the project. Identification and initial screening of the items to beincluded in the BRRP was done by DWS. Subsequently, DWS and DTCA carriedout comparisons of costs and benefits of different remedial solutions.Traffic flows before and after improvements and the corresponding cost andbenefit streams for the eight Category I bridges are in a working paper inthe Project File. The evaluation approach is summarized below.

4.06 Increasing the load-bearing capacity of a deficient bridge on amain road promises significant benefits: low bridge load limits at anypoint of the road influence adversely traffic composition (and hence costs)over the entire road. DWS and DTCA collected data for typical loads carriedby each class of vehicle and, after assuming the removal of bridge loadlimitations, estimated the traffic composition (and the correspondingvehicle operating cost savings) likely to result from shifting part of the

- 26 -

traffic to larger, more efficient vehicles. Benefits would emerge slowlywhile all bridges on a link connecting two traffic centers are beingstrengthened. The nature and rate of traffic response to bridge improvementwould vary, depending on the level of economic activity and the status of thetransport industry in the area. The evaluation method takes into accountthis variable response by allowing 5-10 years for the full manifestation ofbenefits.

4.07 Category I bridges show 1982 traffic volumes of 50-200 ADT andERRs from 10.5-174.5%. Category II and III bridges are expected to showa minimum ERR of 10%.

D. Improvement of the Highlands and Enga Highways

4.08 Three road segments, with a combined total of about 54 km, wouldbe improved under this component, reducing vehicle operating costs for aheavy commercial vehicle from US$1,117 to US$828 per one thousand kilometers,and for a passenger car from US$184 to US$122 per one thousand kilometers(Tables 17 and 18).

4.09 The Kudjip-Minj (13 km) section of the Highlands Highway showeda November 1982 total traffic volume of 705 vehicles per day, resulting in anERR of 21.2%. A working paper, prepared by DTCA, on the economic evaluationof this section and showing details on estimated vehicle operating cost andmaintenance savings is in the Project File. The Kudjip-Minj and theWatabung-Chuave (16 km) sections are the two unimproved sections remainingon the Highlands Highway. As preliminary engineering studies and recenttraffic count data for the Watabung-Chuave section were not available at thetime of negotiations, the Government and the Bank agreed that DWS and DTCAwould complete preliminary engineering and economic justification studiesfor this segment in order to demonstrate the feasibility of the proposedimprovements. If the feasibility results prove unacceptable, the financingprovision would be reallocated to other project components, such asprovincial road or bridge rehabilitation components. If the results areacceptable, detailed engineering and road improvement costs would befinanced under the project.

4.10 The Togoba-Tambul Turnoff road section (25 km) is the first partof the Enga Highway linking the Mount Hagen area with Wabag. A feasibilitystudy for the Togoba-Wapenamanda portion of the Enga Highway was completedin 1980 and included, as its first part, the Togoba-Tanbul Turnoff section.Traffic estimates for this section were updated in May 1982 and show an ADTof 305 resulting in ERR of 12.2%. Tables 17 and 18 show vehicle operatingcosts on unpaved and paved roads similar to this section. A working paperon the economic evaluation of the Togoba-Tanbul Turnoff section, containingdetailed analyses of traffic and vehicle operating cost projections with andwithout the proposed improvements, is in the Project File.

- 27 -

E. Economic Rate of Return

4.11 Items whose implementation is scheduled to begin in 1983 includefour provincial roads, eight bridges on national roads, the Kudjip-Minjsection of the Highlands Highway and the Togoba-Tanbul Turnoff section ofthe Enga Highway (representing about 49% of the total project cost for civilworks). Taken together (Table 16) these 14 items show an overall ERR of33.2%. Under the agreed criteria, items under preparation and proposed forinclusion in the project ought to show a minimum ERR of 10%. DTCA hasdeveloped an evaluation methodology acceptable to the Bank and demonstratedcapacity to apply it on proposed project items. At completion, the project

as a whole ought to show ERR of 20% or better. Table 4.1 below summarizesERR calculations for the 14 items for which preparatory work has been

completed under alternative assumptions concerning increases or decreases ofthe cost and benefit streams.

Table 4.1: SENSITIVITY ANALYSIS OF ERR

Economic rateCosts Benefits of return

(%)

As estimated . . . . . . . As estimated . . . . . . . 33.2As estimated . . . . . . . Plus 10% . . . . . . . 35.8As estimated . . . . . . . Minus 10% . . . . . . . 30.5Plus 10% . . . . . . . As estimated . . . . . . . 30.8Minus 10% . . . . . . . As estimated . . . . . . . 36.1Plus 10% . . . . . . . Minus 10% . . . . . . . 28.3

F. Risks

4.12 Four types of risk affect the project. First, the possibilitythat costs may be higher and benefits lower than anticipated; this has beendealt with through the conservative assumptions in the evaluation methodologyand the sensitivity analysis summarized in the preceding table suggests thateven a simultaneous increase of costs and decrease of benefits by 10% stillpreserves the overall ERR above 28%. A second risk is connected withpotential difficulties over right-of-way acquisition. To reduce this risk,construction schedules have been extended to allow for necessary protractednegotiations. A third risk is that improvements to be financed through theproject may not be adequately maintained after completion; this is to bedealt with through arrangements with DWS to undertake maintenance of allproject roads. The fourth risk is that the project's policy andinstitutional objectives (strengthening transport planning, highwaymanagement and maintenance, and staff training) would not be met because thenecessary expatriate staff would not be recruited according to schedule, orbecause the Government would not assign sufficient numbers of national

- 28 -

officers to work with the foreign experts. To reduce this risk, the projectimplementation schedule has been extended, and programs for improvingmaintenance and staff training have been agreed with the Government.

5. AGREEMENTS REACHED AND RECOMMENDATIONS

5.01 During negotiations, agreement was reached with the Government onthe following:

(a) the Government to adhere to an agreed timetable for addressing thetransport sector issues, namely transport planning (paras. 1.14and 3.08), modal deregulation (paras. 1.19 and 3.08) user charges(paras. 1.19 and 3.08), and development of domestic contractors(paras. 1.19, 2.16 and 3.11);

(b) the Government to prepare and furnish to the Bank for review byJuly 1, 1985, a Transport Sector Development strategy and, aftertaking the Bank-s comments into account, submit it to the NEC forconsideration (para. 1.19);

(c) DWS to furnish to the Bank for comments by March 31, 1984 andsubsequently implement a detailed action program for the improvementof maintenance operations satisfactory to the Bank, including theestablishment of a Maintenance Branch and the appointment of appro-priate national staff for training not later than December 31,1983 (paras. 2.19 and 3.11);

(d) DWS to prepare and furnish to the Bank for comments by September 30,1983, an action program for the implementation of a road maintenancetraining program and subsequently implement a detailed trainingprogram for its maintenance staff under the project (paras. 2.19and 3.11);

(e) DWS to submit prior to October 31 of each year beginning in 1983,for Bank review and approval, its proposed list of provincialroads and bridges on national roads for which implementation is tobegin during the following year (para. 3.19);

(f) the Government to acquire all land and rights to land for purposesof the Project prior to the award of construction contracts for theproject component(s) affected and will furnish the Bank satisfac-tory evidence that such land and rights to land will be availablefor purposes of the Project (para. 3.26);

(g) DWS to properly maintain its national road system and the provincialroads included in the project, using its own financial resourceswith adequate funds being provided for the purpose (para. 3.19); and

- 29 -

(h) the Government to adhere to the action program for projectimplementation (para. 3.21) and the action program for theimprovement of the transport sector which were attached to theLoan Agreement in the form of a Side Letter (para. 3.21).

5.02 During negotiations, it was agreed between the Government and theBank that disbursements for the construction of the two road sections on theHighlands Highway will be made only after satisfactory completion of: (i)feasibility studies and preliminary engineering for the Watabung-Chuave Roaddemonstrating the feasibility and economic justification of the proposedimprovement and thereby confirming its inclusion in the Project; (ii) detailedengineering for the Watabung-Chuave Road, to be undertaken only if itseconomic justification has been satisfactorily established, demonstrating thecost-effectiveness and technical feasibility of the proposed improvement; and(iii) detailed engineering for the Kudjip-Minj Road demonstrating thecost-effectiveness and technical feasibility of the proposed improvements(para. 3.27).

5.03 Subject to the above, a suitable basis exists for a Bank loan ofUS$31 million equivalent, for a period of 17 years, including a grace periodof four years.

ANNEX 1

-30- Page 1

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Action Program for Project Implementation

DateAction Start Complete

A. Rehabilitation and Improvment of Provincial Roads

1. Category I

a. Acquire necessary right-of-way March 1983 Aug. 1983b. Appoint consultants for construction

supervision Feb. 1983 Aug. 1983c. Construction and improvement works Aug. 1983 Sept. 1984

2. Categories II and III

a. Appoint consultants for detailedengineering and constructionsupervision Dec. 1982 March 1985

b. Acquire necessary right-of-way Mar. 1983 Dec. 1986c. Detailed engineering and letting of

construction contracts Mar. 1983 Dec. 1986d. Construction and improvement works Jan. 1984 Feb. 1988

B. Bridge Rehabilitation and ReplacementProgram

1. Category I

a. Let construction contracts Mar./July 1983 Aug./Oct 1983b. Acquire necessary right-of-way March 1983 Aug. 1983c. Appoint consultants for construction

supervision March 1983 Aug. 1983d. Construction and improvement works Aug. 1983 Apr. 1985

2. Categories II and III

a. Appoint consultants for detailedengineering and constructionsupervision June 1983 Sept. 1983

ANNEX 1- 31- Page 2

Action Program (Continued)

DateAction Start Complete

b. Detailed engineering and letting ofconstruction contracts Sept. 1983 June 1984

c. Acquire necessary right-of-way June 1983 June 1984d. Construction and improvement works July 1984 Dec. 1987

C. Improvement of Highlands and Enga Highways

1. Kudjip-Minj Section

a. Appoint consultants for detailedengineering March 1983 April 1983

b. Detailed engineering April 1983 Sept. 1983c. Letting of construction contract Oct. 1983 Feb. 1984d. Appoint consultants for construction

supervision Oct. 1983 Dec. 1983e. Acquire necessary right-of-way Jan. 1983 Feb. 1984f. Construction and improvement works March 1984 Jan. 1986

2. Watabung - Chuave Section

a. Appoint consultants for feasibilitystudies and preliminary engineering March 1983 July 1983

b. Carry out feasibility studies andpreliminary engineering Aug. 1983 Dec. 1983

c. Appoint consultants for detailedengineering, if justified Dec. 1983 Feb. 1984

d. Detailed engineering March 1984 Sept. 1984e. Letting of construction contract(s) Oct. 1984 March 1985f. Appoint consultants for technical

assistance in construction management Jan. 1985 May 1985g. Appoint consultants for construction

supervision and monitoring Jan. 1985 May 1985h. Acquire necessary right-of-way Jan. 1984 May 1985i. Construction and improvement works May 1985 June 1988

3. Togoba-Tanbul Turnoff Section

a. Acquire necessary right-of-way June 1982 Dec. 1983b. Letting of construction contract Oct. 1983 Jan. 1984c. Appoint consultants for construction

supervision May 1983 Nov. 1983d. Construction and improvement works Jan. 1984 Jan. 1987

ANNEX 1- 32 - Page 3

Action Program (Continued)

DateAction Start Complete

D. Consulting Services and Technical Assistancefor Transport Policy Review, Studies, Plan-ning, Institutional Strengthening, and Training

1. For DTCA

a. Agree TOR, appoint consultants andcarry out policy review and otherstudies and transport investmentprogram Jan. 1983 Dec. 1986

b. Agree TOR, appoint consultants andcarry out program to provide technicalassistance to provinces for transportplanning Jan. 1983 July 1984

c. Agree TOR, appoint consultants andcarry out feasibility studies and pre-liminary engineering for boat serviceprojects identified through the PRTS Jan. 1985 Dec. 1986

d. Agree TOR, appoint consultants andcarry out feasibility studies, pre-liminary engineering and detailedengineering to prepare future project June 1984 Dec. 1986

2. For DWS

a. Agree TOR, appoint consultants andcarry out program to provide technicalassistance to DWS for institutionalstrengthening and technical training June 1983 Dec. 1986

b. Prepare and submit for Bank review anaction program for the implementationof the road maintenance trainingprogram March 1983 Sept. 1983

c. Agree TOR and appoint consultants toprovide technical assistance in roadmaintenance to DWS and provinces June 1983 Oct. 1983

ANNEX 1- 33 - Page 4

Action Program (Continued)

DateAction Start Complete

d. Prepare and submit for Bank review anaction program for the improvement ofroad maintenance operations Oct. 1983 Jan. 1984

e. Institute Maintenance Branch in DWSand appoint appropriate national stafffor training June 1983 Jan. 1984

f. Carry out road maintenance trainingprogram for DWS and provinces withassistance from consultants March 1984 Dec. 1985

g. Agree TOR and appoint consultants toassist DWS in preparing and carryingout a program of incentives andassistance designed to promote thegrowth and capabilities of indigenousroad construction contractors June 1983 Dec. 1984

- 34 -

ANNEX 2Page I

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Project-Related Documents and Data Available in the Project File

A. General Reports and Studies on the Transport Sector

A-i The National Public Expenditure Plan, 1982-1985, Government of PNG.

A-2 Road Freight Transport Study, August 1980, Rendels Economics(Australia).

A-3 Transport Policy and Programmed Expenditure 1979-1982, DTCA.

A-4 An Assessment of Transport User Charge Policy and Rates in PNG,1981, DTCA.

B. General Reports and Studies Relating to the Project

I. Studies and Reports

B-1 Feasibility Study of the Togoba - Wapenamanda Road, January 1980,by Rendels and Partners (Australia).

B-2 Technical Assistance to Local Civil Engineering Contractors, FinalReport 1979, Rendels and Partners (Australia).

B-3 Transport Data Base Study, November 1981, by RPT Economic StudiesGroup (UK).

B-4 Provincial Rural Transport Study, 1982, by T.P. O'Sullivan &Partners and GITEC Consult GMBH (UK/Germany), Volumes I, II,Planning Manual, Appendices and five Provincial Reports (ninevolumes).

B-5 Highlands Highway Project Kundiawa, Intensive Construction Group,Final Report, 1979, Snowy Mountains Engineering Corporation(Australia).

B-6 Proposed Rural Transport Works: Engineering and Economic Studiesand Analyses, 1982 by DTCA and DWS.

B-7 Vehicle Operating Cost Savings: Working Paper by DTCA, 1982.

- 35 -

ANNEX 2Page 2

B-8 Proposed Bridge Rehabilitation and Replacement Program: Engineer-ing and Economic Studies and Analyses, Phases I and II, 1982 byDTCA and DWS.

B-9 National Road and Bridge Inventory, DWS, 1979.

B-10 Coastal Shipping Survey, January 1982, by Shiptraco (Germany).

II. Detailed Engineering Reports

B-il Detailed Engineering for the Highlands Highway Between Waterais andTogoba, 1974, Valentine, Laurie and Davies (Australia).

B-12 Detailed Engineering for the Enga Highway Between Togoba and theTanbul Turnoff, 1982, DWS.

B-13 Rural Road Links: Preliminary Engineering Studies, DWS andConsultants, 1982.

B-14 Bridge Rehabilitation and Replacement Program: PreliminaryEngineering Studies, DWS, 1982.

B-15 Bridge Replacement Program: Phases I and II, EngineeringAssessment, and Bridge Layout Plans, 1982, DWS.

B-16 Preliminary Engineering Studies and Reports: The Togoba-WabagRoad - Enga Highway, May 1982 by Cameron McNamara Kramer(Australia), 12 volumes.

B-17 Preliminary Engineering Study: Chuave to Minj Road - HighlandsHighway, December 1975 by DWS.

B-18 Project Managed Force Account (PMFA) for Highlands Highway Project(Kundiawa):

a. Costing Manual, 1977, DWS.

b. Management Controls and Reporting Manual, 1977, DWS.

III. Government Reports

B-19 Provincial Financial Control Manual, DWS, 1982.

B-20 Capital Works, Maintenance Programming and Administration Manual,1981, DWS.

- 36 - ANNEX 2Page 3

B-21 Planning, Engineering and Construction of Penetration Roads, 1979,DW S.

B-22 Provincial Works Manager's Guidance Manual, 1979, alS.

B-23 Information Booklet - Staff Development and Training Division,1981, DWS.

B-24 Local Government Technical Information Handbook, 1975, DWS.

B-25 Standard Specifications for Road and Bridge Works, 1978, DWS.

B-26 Provincial Accounting Practice Manual, March 1980, DWS.

B-27 Rural Roads Manual, 1977, DUS.

C. Selected Working Papers

C-1 Parameters for Price Contingency Calculations.

C-2 Cash Flow Analysis and Contingency Calculations for ProjectComponents.

C-3 Economic Rate of Return and Sensitivity Analysis Calculations.

C-4 Detailed Cost Estimates.

C-S Terms of Reference for Consultancy Services andTechnical Assistance.

C-6 Provincial Roads and Bridges on National Highways:Economic Methodology and Analysis.

C-7 Togoba-Tanbul Turnoff Section (Enga Highway): Economic Methodologyand Analysis.

C-8 Kudjip-Minj Section (Highlands Highway): Economic Methodologyand Analysis.

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Expenditures on Transport by National Government(K million)

1972/73 1973/74 1974/75 1975/76 1976/77 1978 1979 1980 1981 1982 1983 1984 1985(Est.) (Forecast) -----

RoadsCapital works 11.6 7.0 10.5 11.7 16.4 15.0 13.8 17.1 15.7 19.0 20.0 21.0 21.0Maintenance 9.9 13.2 18.9 16.6 17.9 10.5 12.7 14.9 14.8 13.0 14.0 15.0 16.0

Total 20.5 20.2 29.4 28.3 34.3 25.5 26.5 32.0 30.5 32.0 34.0 36.0 37.0

WharvesCapital works 0.2 0.1 0.2 0.2 0.2 0.3 - 0.1 0.1 0.1 0.1 0.2 0.2Maintenance 0.1 0.1 0.1 0.1 0.1 0.1 - 0.2 0.1 0.1 0.1 0.2 0.2

Total 0.3 0.2 0.3 0.3 0.3 0.4 - 0.3 0.2 0.2 0.2 0.4 0.4

AerodromesCapital works 0;3 0.7 0.7 0.7 0.8 0.7 0.8 0.1 0.3 1.5 1.0 1.0 1.0Maintenance 0.7 1.0 1.6 1.3 1.4 1.8 2.0 2.2 2.6 2.5 2.7 2.9 3.0

Total 1.0 1.7 2.3 2.0 2.2 2.5 2.8 2.3 2.9 4.0 3.7 3.9 4.0

Source: DWS/DTCA.

October 1982

- 38 -

Table 2

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Infrastructure - Estimated Revenue from Rboad User Charges andComposition of Expenditure, 1977-81

(K million)

1977 1978 1979 1980 1981

Revenue

Automotive gasoline tax 3.2 3.3 3.4 3.4 5.6

Diesel tax 0.4 0.5 0.5 0.5 2.6

Vehicle registration & other fees 1.8 2.0 2.2 2.8 2.2

Import duties 5.7 5.8 8.3 9.1 9.9

Total 11.1 11.6 14.4 15.8 20.3

Expenditure

Capital 16.4 17.0 22.3 25.6 24.2

Maintenance 17.9 18.5 22.5 25.4 25.8

Administration 1.0 2.1 3.3 2.4 2.6

Police 1.8 2.0 2.1 2.4 2.8

Total 37.1 39.6 50.2 55.8 55.4

Notes: (1) Figures do not include revenue from the general import levy of 2.5%.

(2) Estimated policing costs are equivalent to 10% of total policeexpenditure.

(3) Provincial components within expenditure totals are approximateestimates based on partial data.

Source: DTCA.

October 1982

- 39 -

Table 3

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Roads in Papua New Guinea, 1981(Length in km)

National ProvincialProvince Sealed Unsealed Sealed Unsealed Total

Western - 81 4 409 494Gulf - 18 3 270 291Central (incl. NCD) 244 564 - 1,149 1,957Milne Bay 2 31 - 299 332Northern 16 416 4 367 803Southern Highlands 31 217 - 1,238 1,486Enga - 91 3 750 844Western Highlands 54 110 10 1,016 1,190Chimbu - 100 4 660 764Eastern Highlands 25 161 15 1,265 1,466Morobe 167 172 22 949 1%310Madang 31 340 25 584 980East Sepik 6 189 22 873 1,090West Sepik - 142 3 486 631Manus - - 2 149 151New Ireland - - 9 1,400 1,409East New Britain 26 58 116 1,000 1,200West New Britain 24 361 9 538 932North Solomons - - 60 1,155 1,215

Total 626 3,051 311 14,557 18,545

Note: National roads include oil palm roads in Northern and West New BritainProvinces, Port Moresby urban roads and some "temporary" national roadsin addition to the national highways.

Sources: 1979 National Roads Inventory, selected reports and Provincial Inven-tories and Department of Works and Supply estimates. Collated byDepartment of Transport and Civil Aviation. The overall level ofaccuracy for provincial road totals is low.

October 1982

- 40 -Table 4

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Vehicle Fleet by Type, 1975 to 1979

1975 1976 1977 1978 1979 1980

Cars and station wagons 17,923 17,726 17,228 17,150 17,730 18,481

Light commercial vehicles(utilities, vans and4-wheel drive) 11,192 11,681 13,311 14,047 15,617 16,291

Trucks 5,829 6,424 6,479 6,514 7,121 7,981

Buses 885 1,125 1,497 1,987 2,397 2,870

Motorcycles 3,815 3,866 3,436 2,892 2,860 2,351

Tractors 1,786 1,753 1,812 1,728 1,711 1,796

Total 41,430 42,575 43,763 44,318 47,436 49,770

Source: National Statistical Office.

February 1983

- 41 - Table 5

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Transport Statistics by Province, 1980

Motor vehicles Km of roadMotorized Km of per 1,000 per 1,000

Province Population vehicles roads inhabitants inhabitants

Western 78,881 60 494 0.8 6.3Gulf 64,167 176 291 2.7 4.5Central /a 240,003 16,194 1,957 67.5 8.2Milne Bay 127,841 304 332 2.4 2.6Northern 77,273 753 803 9.7 10.4Southern Highlands 235,647 884 1,486 3.7 6.3Enga 164,476 579 844 3.5 5.1Western Highlands 262,886 3,340 1,190 12.7 4.5Chimbu 178,490 590 764 3.3 4.3Eastern Highlands 277,180 2,521 1,466 9.1 5.3Morobe 310,526 7,583 1,310 24.4 4.2Madang 211,209 2,429 980 11.5 4.6East Sepik 220,903 1,722 1,090 7.8 4.9West Sepik 114,119 327 631 2.9 5.5Manus 25,844 70 151 2.7 5.9New Ireland 65,705 941 1,409 14.3 21.4East New Britain 133,530 4,908 1,200 36.8 9.0West New Britain 89,229 1,167 932 13.1 10.4North Solomons 128,890 5,222 1,215 40.5 9.4

Total 3,006,799 49,770 18,545 16.5 6.2

/a National Capital District is included in figures for Central Province.

Sources: DTCA, National Statistical Office, National Census Office.

February 1983

- 42- Table 6

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Transport Output, 1975 to 1979

Estimated Vehicle-Kilometers by Vehicle Type(Millions)

1975 1976 1977 1978 1979 1980

Cars and station wagons 300 300 290 290 300 310

Light commercial vehicles(utilities, vans and4-wheel drive) 440 460 520 550 610 640

Trucks 440 490 490 500 540 610

Buses 60 80 100 140 170 200

Other vehicles 60 60 50 50 50 40

Total 1,300 1,390 1,450 1,530 1,670 1,800

Note: These estimates derive from Vehicle Registration, tatistics, togetherwith assumptions on average vehicle-kilometers per vehicle type takenfrom a report on Vehicle Operating Costs by Rendels Economics (August1979).

Source: DTCA

February 1983

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Road Design Standards (DWS)

MaximumMax. speed Absolute Desirable length at Maximum Overallfor sight minimum minimum General Absolute absolute length width

Design distance radius radius maximum maximum maximum desirable between PavementClass of road Terrain speed benching curve curve gradient gradient grade grade shoulders width

(km/hr) (km/hr) (m) (m) (/im) (W/m) (m) (m) (m) (m)

Primary Flat/Rolling 80 100 200 paved 350 .04 .07 No limit 12/a 6.5250 gravel 10.5

Hilly 60 80 125 paved 250 .06 .08 600 1,200 11/a 6.5130 gravel 10

Mountainous 40 60 50 paved 90 .08 .10 250 500 8.5 6.060 gravel

Rural Flat/Rolling 60 80 125 paved 250 .06 .08 600 1,200 10.5/b 6.0class 1 130 gravel 8.5

Hilly 50 60 95 paved 150 .08 .10 300 600 8.0 6.095 gravel

Mountainous 30 50 30 paved 50 .10 .12 250 500 7.5 5.530 gravel

Rural Flat/Rolling 60 80 130 gravel 250 .06 .08 600 1,200 8.5 3.6class 2 Hilly 40 50 60 gravel 75 .10 .12 250 500 7.0 3.6

Mountainous 25 40 20 gravel 30 .12 .14 150 300 7.0 3.6

Rural Flat/Rolling 50 60 95 gravel 150 .08 .10 500 1,000 7.0 3.6class 3 Hilly 30 40 30 gravel 50 .10 .12 250 500 6.0 3.6

Mountafinous 25 30 20 gravel 30 .12 .14 150 300 6.0 3.6

Accessclass 1 As for rural class 3 5.0 3.6

Access As for rural class 3 3.6 Full widthclass 2 as required

Bridge Loading: National Association of Australian State road Authorities (NAASRA), Bridge Design Specification (1976); Standard Vehicle Loading Class T 44.

Pavement: Axle load 18,000 lbs (design based on projected number of repetitions of "equivalent 18,000 lbs axle loads").

/a The higher is to be adopted where traffic volume is between 2,500 and 5,000 v.p.d./b The higher is to adopted in rolling terrain where sight distances are limited.

Note: DWS classifies traffic for rural roads in terms of three categories: Light - 0 to 160 vpd (Access Class 1 & 2, and Rural Class 3)Medium - 120 to 500 vpd (Rural Class 2 and 3)Heavy - over 500 vpd (Rural Class 1 and 2) a

Source: Department of Works and Supply. m

October 1982

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Rehabilitation and Improvement of Provincial Roads

Fstinated Estimated Met',od ̂ f

Proposed Improvement cost /a ERR procure-Item Province Description Class /e Surfacing (Kina million) {x) ment

Category I /b1. Sila-Itokama Road Oro Rehabilitation of 36 km Access Class 2 Gravel r.125 l1q. PMFA

2. Henagaru-Tunakau Road Eastern lilghlands Rehabilitation of 13.5 km Access Class 2 Gravel 0.150 25.9 PMFA3. Doliba-Kilau Road Simbu Rehabilitation of 11 km Access Class 2 Gravel 0.185 20.8 PMFA4. Mai-Nuku Road West Sepik Improvement of 21 km Access Class 2 Gravel 0.116 13.9 PMFA

Subtotal 81.5 km 0.576

Category II _c1. Aseki-Menyamya Road Morobe Improvement of 36 km including

replacement of the KortleBridge Rural Class 3 Gravel 1.135 - LCB

2. Ua River-Bundi Road Madang Improvement of 12.5 km Access Class 2 Gravel 0.400 - LCB J3. Kilau-Nomane Road Simbu Rehabilitation of 20 km Access Class 1 Gravel 0.264 - PMIFA 4. Manemp-Mants River-Kol Road Western Highlands Rehabilitation of 35 km Access Class 2 Gravel 0.540 - LCB X

5. Tsingoropa-Koinambe Road Western Highlands Rehabilitation of 25 km Access Class 2 Gravel 0.504 - LCB

6. Wamu River-Ubaigubi Road Eastern Highlands Rehabilitation of 17 km Access Class 2 Gravel 0.437 - LCB

Subtotal 145.5 km 3.280

Category III /dOther provincial road links to

be later identified (approx-imately 5 road sections) 50 km 1.600 - /f

Total 277 km 5.456 -

/a In February 1983 prices, without contingencies.

Tb Category I items identified by the Provincial Rural Transport Study (PRTS). Feasibility studies, preliminary engineering and detailed englneering forCategory I items have been completed. Category I represents the first year½s construction program.

/c Category II items constitute components identified by the PRTS, for which feasibility studies and preliminary engineer4ng are underway.

Detailed engineering will follow for those roads found to be economically justified./d Category III items are yet to be identified and will be included in the Project only if their economic justification can be satisfactorily

established./e See Table 7 for classification details.If To be determined. H

Source: DTCA/DWS and Mission.

February 1983

- 45- Table 9

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Bridge Rehabilitation and Replacement Program

Total Method ofLength estimated Estimated procure-

Item Province/Location (Lin. m.) cost /a ERR ment(Kina) (%)

(million)

Category I1. Kaugel River Bridge West Highlands/Mt. Hagen-

Mendi Road 55 0.300 211.3 LCB2. Kemp Welch River Bridge Central/Magi Highway 78 0.380 57.3 LCB3. Tuoima River Bridge Morobe/Lae-Wau Road 50 0.100 174.5 FA4. Wasego River Bridge Madang/Ramu Highway 45 0.150 128.2 LCB5. Hapmet Creek Bridge West Sepik/Sepik Highway 30 0.165 11.5 FA6. Gilagil River Bridge Madang/Coastal Highway 117 0.300 10.5 LCB7. Sikor Creek Bridge Madang/Coastal Highway 20 0.070 25.6 LCB8. Ulingan River Bridge Madang/Coastal Highway 30 0.115 } LCB

Subtotal 425 1.580

Category II1. Niumen River Bridge West Sepik/Coastal Highway 60 0.165 - FA2. Akanai East Bridge West Sepik/Coastal Highway 30 0.085 - LCB3. Wainingi River Bridge West Sepik/Coastal Highway 60 0.110 - LCB4. Drinumor River Bridge West Sepik/Coastal Highway 72 0.350 LCB5. Aitape River Bridge West Sepik/Coastal Highway 78 0.075 - LCB6. Nenema River Bridge Enga/Enga Highway 40 0.175 - LCB7. Ormond River Bridge Central/Magi Highway 92 0.130 - FA8. Raihu River Bridge West Sepik/Coastal Highway 60 0.115 - FA9. Waghi River Bridge West Highlands/Highlands

Highway 100 0.015 - FA

Subtotal 592 1.220 -

Category IIIOther bridges to be identified

(approximately 15 bridges) 500 1.400 - /c

Total 1,517 4.200 -

/a In February 1983 prices, without contingencies.

/b Detailed engineering for Category I bridges has been completed, and is underway forCategory II bridges. Category I represents the first year's construction program.

/c To be determined.

Source: DTCA/DWS and Mission.

February 1983

- 46 -

Table 10

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Improvement of Highlands and Enga Highways

Estimated EstimatedLength Approx. Improvement cost /b ERR Method of

Item (km) AADT class /a (Kina mln) (%) procurement(1982)

Highlands HighwayWatabung-Chuave Road 16 500 Rural Class 1 5.000 - PMFA/LCBKudjip-Minj Road 13 600 Rural Class 1 2.300 21.2 ICB

Enga HighwayTogoba-Tanbul Turnoff 25 300 Rural Class 1 6.032 12.2 ICBRoad

Total 54 13.332 -

/a See Table 7 for classification details.

/b In February 1983 prices, without contingencies.

Source: DTCA/DWS and Mission.

February 1983

-47 Table 11

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Consulting Services - Engineering

CostItem Estimated (Kina /a

man-months million)

1. Construction Supervision for Rehabilita-tion and Improvement of Provincial Roads 45 0.350

2. Construction SupervisionBridge Rehabilitation andReplacement Program 40 0.300

3. Construction Supervision of Highlands andEnga Highway sections 130 1.000

4. Detailed Engineering of Kudjip-Minjand Watabung-Chuave Roads 90 0.650

5. Detailed Engineering of Provincial Roads(Categories II and III) 50 0.300

6. Detailed Engineering of Bridges(Categories II and III) 20 0.130

7. Feasibility Studies and PreliminaryEngineering for Kudjip-Minj and Watabung-Chuave Roads (Highlands Highway) 65 0.500

8. Feasibility Studies, Preliminary Engineeringand Detailed Engineering to prepare futureproject 70 0.500

Subtotal 510 3.730

9. Construction management and monitoringfor PMFA works /b 75 0.600

Total 585 4.330

/a Without contingencies. Prices as of February 1983./b Cost for these services included in construction cost estimates.

Source: DTCA/DWS and Mission.

February 1983

- 48 -Table 12

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Consulting Services - Studies

CostEstimated (Kina /a

Item man-months million)

1. Transport Investment Program 35 0.374

2. Transport Data Base 9 0.094

3. Financial Data Reporting System 2 0.021

4. Port Moresby/Lae Public Transport Systems Study 8 0.083

5. Road Freight Industry Study 10 0.099

6. Aviation User Charges Study 3 0.031

7. Boat Services Feasibility Studies and PreliminaryEngineering 40 0.270

8. Other Studies 15 0.128

Total 122 1.100

/a Without contingencies. Prices as of February 1983.

Source: DTCA/DWS and Mission.

February 1983

- 49-Table 13

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Technical Assistance and Training

CostEstimated (Kina /a

Item man-months million)

Technical Assistance to DTCA

Provincial liaison planning and training 12 0.112

Technical Assistance to DWS

Organizational studies, management and operationalimprovements 24 0.208

Improvements to road and bridge design andconstruction supervision systems and capabilities,including training /b 48 0.498

Road and bridge maintenance improvement program,including training 60 0.624

Program to promote the development of the domesticroad construction industry, by providing incen-tives and assistance to indigenous contractors 12 0.100

Total 156 1.542

/a Without contingencies. Prices as of February 1983.

/b Includes assistance in setting up a permanent, rolling program for bridgerehabilitation and replacement.

Source: DTCA/DWS and Mission

February 1983

- 50 -Table 14

PAPFUA NEW GUINEA

ROAD IMPR0OEMERBT PR0OECT

S-rnary of Project Costs Ia

Local Foreign total Local Foreign total lProj-ct co-poceoto Loogth cost .ocheogo toot coot ... ha.se/d east foreigoIt.o doscriptioo (k.) ---- (K illito) --- ---- (US$ illion) --- aohasgs

A. lohabilitotico & Irprov.ecnt of Provi-ctol RoadsCategory I

Silo-ltotaca Road 36.0 0.050 0.075 0.125 0.067 0.101 0.168 60H-oagaco-To..kac Rood 13.5 0.060 0.090 0.150 0.081 0.121 0.202 60Doliba-Kilau Rood 11.0 0.074 0.111 0.185 0.100 0.149 0.249 60hai-fokp Road 21.0 0.046 0.070 0.116 0.062 0.094 0.156 60

Sobtotal 81.5 0.230 0.346 0.576 0.310 0.465 0.775 60

Coto0ory IIAaeki-Mcoyasya Road 36.0 0.454 0.681 1.135 0.611 0.916 1.527 60UR Rivor-RBodi Road 12.5 0.160 0.240 0.400 0.215 0.323 0.538 60Kilau-No-ane Rood 20.0 0.105 0.159 0.264 0.141 0.214 0.355 60Maccop-Roots River-Kol Rood 35.0 0.216 0.324 0.540 0.290 0.436 0.726 60Tsingoropa-Koi-a=be Road 25.0 0.202 0.302 0.504 0.272 0.406 0.678 60WOco River-Ubaigubi Road 17.0 0.175 0.262 0.437 0.236 0.352 0.588 60

Subtotal 143.5 1.312 1.968 3.280 1.765 2.647 4.412 60

Catego-y IIIOther lick. to bh ideotified 50.0 0.640 0.960 1.600 0.861 1.291 2.152 60

Sobtotal (A) 277.0 2.182 3.274 5.456 2.935 4.403 7.338 60

B. Bridge Rohabilitatioe 4 Roplaceoent FroeracCategory I

Ktegel Ricer Bridge 0.105 0.195 0.300 0.141 0.262 0.403 65Ke-p Welch Rover Bridge 0.133 0.247 0.380 0.179 0.332 0.511 65Totina Rover Bridge 0.035 0.065 0.100 0.048 0.087 0.135 65Wa-reo River Bridgo 0.052 0.098 0.150 0.070 0.132 0.202 65Hapret Crook Bridge 0.058 0.107 0.165 0.078 0.144 0.222 65Gilagil River Bridge 0.105 0.195 0.300 0.141 0.262 0.405 65Sikor Crook Bridge 0.025 0.045 0.070 0.033 0.061 0.094 65Ulingan 0I1er Bridge 0.040 0.075 0.115 0.054 0.101 0.155 65

Sobttol 0.553 1.027 1.580 0.744 1.381 2.125 65

Category IINiie River Bridge 0.038 0.107 0.165 0.078 0.144 0.222 65Akhaci Boot Bridge 0.030 0.055 0.085 0.040 0.074 0.114 65Ociciegi River Bridge 0.038 0.072 0.110 0.051 0.097 0.148 65Drinp=or River Bridge 0.123 0.227 0.350 0.166 0.305 0.471 65Ajitpe Rover Bridge 0.026 0.049 0.075 0.035 0.066 0.101 65Ne-e-a REvor Bridge 0.061 0.114 0.175 0.082 0.153 0.235 65Oreo_d River Bridge 0.046 0.084 0.130 0.062 0.113 0.175 65Raiho Rover Bridge 0.040 0.075 0.115 0.054 0.101 0.155 65Waghi River Bridge 0.005 0.010 0.015 0.006 0.014 0.020 65

S6brotal 0.427 0.793 1.220 0.574 1.067 1.641 65

Category IIIOther bridges to bh identified 0.490 0.910 1.400 0.659 1.224 1.883 65

Shbtotal (B) 1.470 2.730 4.200 1.977 3.672 5.649 65

C. Laprove-e-t of Higblaods and etg Righ-aysTegohb-Tatbel T.rnoff Road 25.0 2.111 3.921 6.032 2.840 5.273 8.113 65Kcdjip-MOioj Rood 13.0 0.805 1.495 2.300 1.082 2.011 3.093 65Watahbog-Ch-avo Road 16.0 1.750 3.250 5.000 2.354 4.371 6.725 65

Subtotal (C) 54.0 4.666 8.666 13.332 6.276 11.655 17.931 65

D. C.o.slting Services1. eglnoi e..g Rerric.s (DRo)

Co_otroctio_ s.pervtst. for r-ehbilitstionand iepr-veoeet of p-ovi.elel coeds 0.070 0.280 0.350 0.094 0.377 0.471 80

Cctsirtcti. supervsibin of bridgerehebilitatiop a roplacenevi program 0.060 0.240 0.300 0.080 0.323 0.403 80

Co..trtctice superviioo of BHghcl-d a-dEBgs highvry sections 0.200 0.800 1.000 0.269 1.076 1.345 so

Detailed cogie.eriog of provincial roads(Categories II cod ILI) 0.075 0.225 0.300 0.101 0.303 0.404 75

Derailed e-gineeriSg of bridges(Categories II and III) 0.032 0.098 0.130 0.043 0.132 0.175 75

Feasibility otedics cod preliti-ary

engineering f-r Kedjip-Mi.o andWbataheg-Ches-e Roads(retracti-ve ...anciog) 0.050 0.450 0.500 0.067 0.605 0.672 90

Detailed e-gi..crieg of Kedjip-M4ij aodOatabeeg-Cheeve Reads 0.098 0.552 0.650 0.133 0.742 0.875 85

Feasibillry stodies & detoiled egi..oriogto prepare futrer project 0.050 0.450 0.500 0.067 0.605 0.672 90

Subtotal (1) 0.635 3.095 3.730 0.854 4.163 5.017 83

2. Stodies (DTCA) 0.165 0.935 1.100 0.222 1.258 1.480 85

Subtotal (D) 0.80 4.030 4.830 1.076 5.420 6.496 83

E. Techeical Asei.tt-ce and Trali=i1. For DTCA:

DTCA provicciol liainon, ple..iog &traiciog 0.011 0.101 0.112 0.015 0.136 0.151 90

2. For DWS:Orgaoieaticoel etedies, oa dageoeet cod

eper-ticoal optoeve_ents 0.031 0.177 0.208 0.042 0.238 0.280 85IyPvoec-ts to -rd and bridge dosigo

a=d co.st..cttco oopervision systeeaed capebilitier, i.cledIeg traicieg 0.075 0.423 0.498 0.101 0.569 0.670 83

Road a-d bridge eaitteceece Inpre--eetprogram. Itclodiog training 0.094 0.530 0.624 0.126 0.713 0.839 85

Progras to pro=ote the d-velepeest of thedomestic reod reostreottio itodetry 0.015 0.085 0.100 0.020 0.114 0.134 85

subtotol (2) 0.213 1.215 1.430 0.289 1.634 1.923 81

Subtotal (E) 0.226 1.316 1.542 0.304 1.770 2.074 85

F. Right-sf-Way 0.450 - 0.450 0.605 - 0.605 0

Total (A to F) 9.794 20.016 29.810 13.173 26.921 40.094 67

G. CVia.p4enciesPhysi7Il7/b 1.154 2.256 3.410 1.552 3.034 4.586 66Price /c 2.360 4.600 6.960 3.174 6.187 9.361 66

Subtotal (G) 3.514 6.856 10.370 4.726 9.221 13.947 66

TOTAL PROJCT COST 13.308 26.872 48.180 17.899 36.142 54.041 67

Is Fri coo ae of Fobroery 1983.7T PhysIeal cootiogoePy for civil cooke varies bt.-ec 101 sod 250, depesdi.s sn state of prep-rstien of detailed

eegloeeriag serb, sod aaticipated complesities./c Price iec'eses OD all items, itclodiog physial ceotieg.ncies, at estiated rae- of 8.00 fte 1983, 7.50 for 1984,

7.00 for 1985, and 6.00 for 1986 cod later years./d K 1.00 - US$1.3449 (Febreary 1983).

Source: DTCA. DWS, C-aceltoeco aed Mission.

Fobr-ary 1983

- 51 -Table 15

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

Schedule of Estimated Disbursements

Cumulative disbursementsat end of semester

Fiscal Year and Semester (US$ million)

1984

First 1.50 /aSecond 3.50

1985

First 5.50Second 8.50

1986

First 11.5Second 16.0

1987

First 19.0Second 21.7

1988

First 25.2Second 27.2

1989

First 30.0Second /b 31.0

/a Includes $900,000 of retroactive financing.

/b Closing Date - June 30, 1989.

February 1983

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

DISTRIBUTION OF BENEFITS FROM REHABILITATION-AND IMPROVEMENT OF PROVINCIAL ROADS

Category I Items: Benefit Streams(K 000)

Provincial roads Bridges Togoba-S ila- Henagaru- Doliba- Kaugel Kemp Kudjip- Tanbul Con-

Itokama Tunakau Kilau Mai-Nuku River Welch Tuoima Wasego Hapmet Gilagil Madang-Bogia Minj Turnoff- bined Combined NetYear Road Road Road Road Bridge Bridge Bridge Bridge Bridge Bridge Road Bridges Road Road cost benefits flow

1 -142.3 -143.8 -173.5 -126.6 -325.0 -395. 0 -125.0 -160.0 -122.0 -373.0 -360.0 -1,512.0 -2,000.0 5,9 58.2 - -5,9 58.2-28.3 3.4 1.5 -10.4 673.9 73.1 130.5 198.8 3.7 10.0 16.0 -1 ,008.0 -2,452.0 3, 498.7 1,110.9 -2,387.8-26.7 7.4 3.7 -9.4 700.1 155.0 276.6 206.8 3.8 10.0 33.9 520.7 473.0 36.1 2,391.0 2,354.9-25.1 10.3 5.6 -8.4 728.9 246.4 439.8 215.0 3.9 92.5 53.8 546.8 487.0 33.5 2,830.0 2,796.5

5 -18.3 22.3 20.8 -2.0 758.0 348.2 621.6 223.6 4.0 10.0 76.1 574.1 516.0 20.3 3,174.7 3,154.4-22.5 4.6 -36.0 -76.5 788.4 461.4 823.6 232.6 73.1 10.0 100.8 602.8 547.0 135.0 3,644.3 3,509.3 ,,

-1.4 51.3 52.8 16.2 819.9 586.9 873.0 241.9 4.1 113.7 128.2 632.9 580.0 1.4 4,100.9 4,099.5 512.9 71.2 72.4 31.9 852.7 622.1 925.4 251.6 4.4 10.0 158.6 664.6 615.0 - 4,292.8 4,292.839.8 102.5 99.5 52.5 886.8 659.4 980.9 261.6 4.5 10.0 192.1 697.8 652.0 - 4,639.4 4,639.4

10 59.5 120.0 111.2 66.1 922.3 699.0 1,039.7 272.1 4.6 135.0 203.6 732.7 691.0 - 5,056.8 5,056.866.9 104.8 50.9 -4.5 959.2 740.9 1,102.1 283.0 74.4 10.0 215.9 769.3 732.0 4.5 5,109.4 5,104.999.2 141.4 131.4 88.4 997.5 785.4 1,168.2 294.3 4.6 10.0 228.8 -74.2 776.0 74.2 4,725.2 4,651.0

119.3 146.8 136.2 99.7 1,037.4 832.5 1,238.3 306.1 5.0 156.4 242.5 842.2 823.0 - 5,985.4 5,985.4124.0 152.4 141.1 103.3 1,078.9 882.5 1,312.6 318.3 5.1 10.0 257.1 890.6 872.0 - 6,147.9 6,147.9

15 128.9 158.1 146.2 107.0 1,122.1 935.4 1,391.4 331.0 5.3 10.0 272.5 935.1 907.0 - 6,450.0 6,450.0121.6 132.6 79.3 29.1 1,167.0 991.5 1,474.9 344.3 75.1 177.9 288.9 981.9 943.0 - 6,845.1 6,845.1139.1 169.9 156.8 114.7 1,213.6 1,051.0 1,563.4 358.1 5.6 10.0 306.2 1,031.0 981.0 - 7,139.4 7,139.4144.5 176.4 162.3 118.7 1,262.2 1,114.1 1,657.2 372.4 5.8 10.0 324.6 1,082.5 1,020.0 - 7,491.7 7,491.7150.0 182.9 168.0 122.9 1,312.7 1,180.9 1,756.0 387.3 5.9 199.5 344.1 1,136.7 1,061.0 - 8,051.6 8,051.6

20 155.6 277.5 280.1 127.2 1,365.2 1,251.8 1,862.0 402.8 101.8 90.0 364.7 1,193.5 1,104.0 - 8,576.2 8,576.2

ERR 13.9 25.9 20.8 13.9 211.3 57.3 174.5 128.2 11.5 10.5 25.6 21.2 12.2 33.2 H

Source: DTCA

February 1983

- 53 - Table 17

PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECT

VEHICLE OPERATING COSTS (1,000 KMS) ON UNPAVED ROAD (1982 PRICES)

(KINA)

COST COMPONENT CAR SMALL MEDIUM. HEAVYCOM. COM. COM.

Fuel (Litres consumed) 128 210 238 367Cost/litre 0.28 0.28 0.27 0.27Fuel cost 36 59 64 99

MaintenanceCost of parts 13 39 49 123LaborQuantity 1.22 2.85 11.76 11.76Cost/hour 11 11 11 11Labor cost 13 31 129 129

TyresNumber 0.309 0.309 0.122 0.344Cost/type 44 40 67 205Tyre Cost 12 12 8 71

CrewNumber 0 44 100 67Cost/hour 0 0.9 1.9 2.2Crew cost 0 40 190 147

Lubricating OilQuantity 2.4 3.6 8.0 8.0Cost/litre 2.0 2.0 2.0 2.0Oil cost 5 7 10 16

DepreciationCost 50 27 25 64

Total Running Cost 129 215 481 649Overhead Cost factor 0.10 0.33 0.33 0.33Overhead Cost 13 71 159 214

Total OperatingCost/1000 Kms 142 286 640 863

Source: DTCAOctober 1982

- 54 - Table 18

PAPUA NEW GUINEA

RAOD IMPROVEMENT PROJECT

VEHICLE OPERATING COSTS (1,000 KMS) ON PAVED ROAD (1982 PRICES)

(KINA)

COST COMPONENT CAR SMALL MEDIUM HEAVYCOM. COM. COM. COM.

Fuel (litres consumed) 119 214 226 387Cost/litre .28 .28 .27 .27Fuel cost 33 60 61 104

MaintenanceCost of parts 3 9 22 55

LaborQuantity 0.52 1.16 5.87 5.87cost/hour 11 11 11 11labor cost 6 13 65 65

TyresNumber 0.045 0.045 0.066 0.185Cost/tyre 40 40 67 205Tyre cost 2 2 4 38

CrewNumber 0 44 100 67Cost/hour 0 0.9 1.9 2.2Crew/cost 0 40 190 147

Lubricating OilQuantity 1.2 1.8 4.0 4.0Cost/litre 2.0 2.0 2.0 2.0Oil cost 2 4 8 8

Depreciation Cost 39 22 25 63Total Running Cost 85 150 374 480Overhead Cost Factor 0.10 0.33 0.33 0.33Overhead Cost 9 50 123 160

Total Operating Cost/1000 KMS 94 200 497 640

Source: DTCAOctober 1982

CEARTS I

PAPUA NEW GUINEA: ROAD IMPROVEMENT PROJECTDepartment of Transport and Civil Aviation

Organzation chErt

I I I I~~~~~~~~~~~~~-I.PE

STATUTORY-BODIES 11 CVIAIATIQ.

rr rn Po mnd, m

POLICA&PLANNING M O LANAGEMENTSERVICESDIVISION

EC~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ST ERTR

ciorr An An AlonAyr ~~~MAlno AETnAn Am I Ar.iiArrv-IrAoA-o

AIVLAVATION D IIrAVISIONrA MARlTIM AON AAricTRAASrrRTvDAVIrSriInnrrvnon v An

to,,, v,ve,v,mm Oi mmmi,,, AAA A,H,i Am an, Wn,IO name L 2NA

S L f , I S rtc l l Asu~~~~~~~~~~~~~~~~~~~ST_] u;

LAS A ~S1'XHW

TROLLER | ;; ' iirn-CIILVITINDVIIO A--TMDVSO 2^PLADRNPRDVSD

SUFT .1.

CIART 2PAPUA NEW GUINEA: ROAD IMPROVEMENT PROJECT

Departrment of Works and SupplyFunctions and Linas of Rasp.smibility and Conmmunication

Organi,ation Chart

FIRST ASSISTANT FIRST ASSISTANT |FIRST ASSISTAN

SECRETARY SECRETARY SECRETARY

-OMINISTRATIONOK r LOITIS

1A3 _~~~~~~~~~~~~~~~~~E1|ASST SECRETARY A| SECRTARY ASST SECRETARY

A| | OPECRTARTIN

SERVICES RAHETINS ASH TRAINING TRANSPORT PRINTER RERRCEIi

CACOANYS~ ~~~~~~~~~~~ ~ ~~~~~~~ MAYAFF TEHIA CLRIA RANAGHR AN AENN PANOPERTY

H } {H ~~~~~~~~~RANSH TRANIS ARHl RRIHIOEIS I |

S OACLAR ADANT L ATN HAGENERAL AERA8R

SERVICES | SERVICEH CNTRACSSRE

S H | Pl ANNING F _ NAT50CRADPKDD1 _ LAE _ MADAN HT EHA EN _AAL

l l l l _| 80ROKD l A ~~~~~PHTHNDETTA | | WEWSAK MENHI S IM8E~~~~~~~~~~~~~L = UNT YJ l{H17 7 .1 JWA.A~ -E -EV

Tr---d ILORENGAU |R _| EKETA

ST,~ RiE Dp8Rlment of RIOIISPRIT and Civil AR,O,TTo j-11,{ 982

- 57 -

CHART 3PAPUA NEW GUINEA

ROAD IMPROVEMENT PROJECTImplementaflon Schedule

CY 1983 1984 1985 1986 198 7 1988 1989EVEWT-

EVE.'9T 1 2 3 4 1 2 3 4 2 3 4 1 2 3 4 1 2 34 1 2 3 4 1 2 3 4

I. IMPORTANT EARLY ACTMTIES

A BOARD PRESENTATION - 3/29/83

B. LOAN EFFEC'TIY - 6/30/83 1

C. SELECTION OF CONSULTANTS

II. IMPILEMENTATION // / 7 7 7 7 / , 7 // /

A REHABILITATION & TMPRCNF'EMENT OF . . . . .PROVINCLAL ROADS

1. Category I

a. Mai-Nuku RoadC

b. Dollba-KElau Road

c. S9a-Itokamc Road

d. Henagaru-Tunakau Road

2. Category II

a. Tsingoropa-Koinambe Road =II II T Y - m U - U - U . - U

b. Manemp-Mants Rlver-Kol Road i I _ - U _ -_ _ - - U -c, Aseki-MenyomYa Road r ME _ _ - - - - _ - - Id, Lla River-Bundl Road mom it _ - U U - * - - - -

e, Kailu-Nomane Road as ii - U -f. Wamu River-Ubaigubi Road i r - - m -_ - m m T

3, CATEGORY U " - -| -s U U T - - -. B. BRIDGE REHABILITATION AND REPLACEMENT

PROGRAMICategory I

a, TuOiomra

b. Wasego i i

c. KempWelch M mo U - m U m - _

d. Sikor I

e.UlinganII

f. HapmnetIg. GlIagullii-m - -m- m ih. Kaugel i - - U U U El Im

2. CaTegory If

3. Category ]iIiim - -U - m U U -U UI

C. IMPROvEMENTS TO HIGHLANDS ANDENGA HIGHWrAYS

1. Togoba-Tanbul Tumoff Road a | - m - - -m-

2. KudJip-MInj Road a U -_ - - U - U *

3. Watabung-Chuove Roaa dii Iii - - m- -- i U -

DOONSULTiNG SERMCES AND TECHNICALASSISTANCE FOR POLICY REvEW ANDINSTrtTLONAL STRENGTHENINSG

1. PollcyReviewStudles U U - -2, Instltutional Strengthening

a. DTCA Provincial Liaison - - - - U

b. DWS Inst. Strengthening - - -- 11-_

c. DWS Rds. and Bridge Maintenance.Program, Including Training - U - U U I I I - r r I - _ r

3. Development of Local ConstructionIndustry amB

E. RIGHT-OF-WAY ACQUISMTON - - - - U - -

Legend (CMI Works)

- m -* 'Continuation of Program (later phases) Not Included In This Project IIIIIIUEUEIg Tendering and Award Period

Constructlon RainySeason

- -- - . Guarantee PeroldFebruary 1983 Worid Bank-24746

1 R A N J A Y A (INDONESIA)

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________________________________________ ~~~~~~~~~~~~~~~~~~~~~~~~~IBRD 16665 Ri

44? 153,~~~~~~~~~~~~~~~~~~~~50io FEBRUARY 1g88

PAPUA~ NMP UINEA'

WEST . ~~ROAD IAMPROVEMENT :PROJECT 'yGA

5ff P/K FAST 5ffPlK PRO:JECT COMPOJNENTS

3- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ N

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Highland and Enga Highways Sections

2 . F~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ A S T Provincial Roads (Categories:I & U

K.' /GHIANP 1 0 K ~~~~~~~~~~~~~:OA4ORQBF NEW: 8 RI TA IN: 8('ricgfs (Category I)PEIOU)S PROJECTS

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_ .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~THIRD PROJECT LOAN 1856 CREDIT 1030 PNG

Ke~ea~o '..-~.-.,--,-- ------- *--,--y--------'----~----7' -* 0 Projects by Other Agencies

'0 NORTHERN I ~~~~~~~~~~~~~~~~~~----f~uture Major Roads (National)

"~~~~~~~~" / ~~~~~~~~~~~~Nctios l Radsor 'N I Maj~~~~~Zor Provincial Roads

~~ c~~~~ 5e~~~~a~~~~ P'opoadett. "/K zcCRive rs/ .. ~~~~~~~~~Mountainous Areas (2O00O-3O0QOMeters)

9~~~~ I ~~~~~~ v,,~~~~~~~ ~~~~--.--~~~~~~~~;~~~~ I - - ~~~~~~~~District Boundaries

---- '~~~~~~. GUlf ~~~~~~~. ~~~ 2 roBoY.; I - -- ~~~~~~~~~~jriternationai Boundaries

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