Advance Action on Procurement, Recruitment of Consultants

Country/Borrower: Papua New Guinea

Title of Proposed Project: Pilot Border Trade and Investment Development Project

Name and Address of Executing Agency:

Border Development Authority (BDA)
Contact: Mr. Pomat Manuai, Executive Chairman
Address: Somare Crescent-NDB Building
Waigani NCD, Papua New Guinea
Tel.No.: +675 323 8806
Fax No.: +675 323 7696
Email:pmanuai@border.gov.prg

Description of the Project:

The Project will remove the infrastructure bottleneck along the northern transport corridor connecting West Sepik Province (WSP) of Papua New Guinea (PNG) and Papua province of the Republic of Indonesia (Indonesia) and improve the investment environment in WSP to enable WSP to capture the trade opportunities for development. It will finance (i) the border facilities at Wutung, (ii) consulting services for project implementation and construction supervision, (iii) capacity development, and (iv) a social development program including the HIV/AIDS prevention.

Located in the northwest of PNG, WSP is PNG's third largest province with a land area of 3,605 hectares, accounting for 7.77% of the total land. The land area consists of high mountainous region to the south, Sepik basin in the center and the low coastal region to the north. Its four districts are generally mountainous, and mountain ranges are dominated by limestone karst with a large number of caves.

The province is one of the least developed provinces in PNG. It is remote and isolated from PNG's major population and growth centers and is only accessible by air and coastal shipping. Accessibility within the province is also poor. There is no road connection between Vanimo, the capital of the province and the four districts and between the four districts themselves.

There are few economic activities in the province. The modern sector is dominated by the government and timber industry. Logs are exported without being processed. Around 95% of the province's 190,000 population is isolated in the rural areas, surviving on the subsistence agriculture.

The internal revenue of the province totaled less than K2 million in 2007, the highest since 2004. The province almost relies entirely on the national grants to finance the basic service delivery such as education, health, and transport infrastructure maintenance. It received about K5.6 million national grants in 2008 and is guaranteed to receive this level of grants annually until 2013. This will enable the province to cover about 50% of the cost of the service delivery.

The development indicators are among the worst in PNG. The adult illiterate rate for the province is estimated around 55%. Life expectancy at birth is only 45.5 years, significantly shorter than the national average (57.4 years). Infant mortality rate is 71 per 1,000 live births, the fourth highest in PNG. Child mortality rate under age of five is 64 per 1,000. Malnutrition rate is around 40%.

The province, however, has opportunities to improve its development status. First, it is richly endowed with minerals, forest, fishery, and eco-conditions for agricultural crops such as cocoa, oil palm, and vanilla. Culturally, it is also diverse. The province has five different cultural zones and 95 local languages. Each has different rites, traditions, and art styles.

Second, the province shares 260 kilometers of land border with Papua province of the Republic of Indonesia (Indonesia) which is the second richest province in Indonesia and offers products and services at prices 25 to 40% lower than those of PNG. Vanimo, the capital of the province is well connected with Jayapura, capital of Papua province of Indonesia by road. In terms of development status, Jayapura is about 40 years ahead of Vanimo.

Acknowledging the trade benefits, in 1993, PNG and Indonesia signed an agreement on Special Arrangements for Traditional and Customary Border Crossings. Border residents with border crossing cards are allowed to freely enter into and travel within the corresponding part of the border area of the other solely for traditional and customary purposes. Each card holder is entitled to $300 value of goods free from taxes per month.

Indonesia is in demand of beef, beer, tuna, cocoa, vanilla, snack foods, and betel nuts from PNG, while PNG buys spare parts for trucks, rice, water, electronics, textile, and house ware from Papua province of Indonesia. Indonesian official records show that the across-the-border trade volume reached about $7 million in 2007. At the border, it can be seen that people carry betel nuts from PNG to Indonesia and rice from Indonesia to PNG. PNG official records show that WSP increased its cocoa production from 545 tons in 2004 to 1,193 tons in 2007. Its share of PNG total cocoa production rose from 1.6% in 2004 to 2.7% in 2007. Statistics from WSP indicates that about 1,000 tons of vanilla and 664 tons of cocoa were exported to Indonesia through the Wutung border in 2004 and 2008, respectively.

Logging and mining can increase revenues temporarily but will not be in the long-term interest of the province. Constructing roads and delivering services across the vast land with difficult terrains and geotechnical conditions will be costly and unaffordable. The development opportunity for the province lies in strengthening economic cooperation with Papua province of Indonesia and building growth centers.

International experience shows that trade and investment promotes economic growth, creates job opportunities, and develops human capital. Foreign trade and investment will contribute more than the needed finance. More importantly, this will bring with them employment, technical and engineering skills, management know-how, technology, a business culture, and markets.

Expanding the cross-the-border trade with Indonesia will provide people in WSP with a wider choice of products at lower costs and increase their welfare. It will also mean improved market access for PNG exports, increased business opportunities, new investment, job creation, enhanced productivity, as well as more rapid and sustainable growth. Promising economic activities which may be stimulated include cash crop production and processing, tourism, transshipment, fishery, and pharmacy.

Brief Description of Civil Works, Goods to be Procured, Consultancies to be Recruited:

The border facilities are a matter of urgency for the Government, as the official opening of the border has been under consideration for several years. The Government requested ADB's approval of advance action for (i) recruitment of consulting services for investment and tourism promotion and capacity development, and procurement of (ii) two civil works packages for border facilities and (iii) patrol boat.

Civil Works

The Project will construct or refurbish-with electrical, mechanical, and hydraulic services-customs, immigration, and quarantine facilities; resident housing, roads, car parks, and facilities for public convenience such as food house, bus shelter, market, and clinic.

Equipment

The Government requested ADB's approval of advance action for procurement of a patrol boat.

Consulting Services

  1. Training Specialist (international, 12 person-months, intermittent) with the following terms of reference:
    • Identifying and developing annual training programs for four years, in consultation with local Chamber of Commerce, BDA, West Sepik Provincial Administration (WSPA), and Department of Commerce and Industry, including (i) short-term business skill training, (ii) 3-6 months information technology training, (iii) 6-12 months scholarship programs in Indonesia for middle-level government officials and local business people, and (vi) degree study in information technology, business administration, trade, and commerce for junior government officials and new graduates. At least thirty percent (30%) of the trainees should be women, and 50% should be from WSP. The scholarship study is limited to 5 students per year, while the degree study is limited to 1 student each year. The annual training programs should provide the following information: (i) program names, (ii) program providers, (iii) number of participants, (iv) selection criteria, (v) timing, and (vi) cost estimates for each program. Training programs must be related to development of entrepreneurship, business skills, business management, commerce, trade, investment, tourism, agricultural techniques, information technology, and Indonesian language.
    • Developing and arranging signing of a contract with one-year and degree study students to ensure they return to PNG and serve for at least five years.
    • Submitting the annual training programs and a sample contract to BDA, WSPA, and ADB for approval.
    • Organizing training and assisting scholarship and degree study students in undertaking the studies.
    • Evaluating the training programs annually, and submitting annual evaluation reports to BDA, WSPA, and ADB.
  2. Business volunteers (national/international, 3 person-months each, for 2 years), with the following terms of reference:
    • Reviewing the history, culture, religion, natural environment, and ongoing economic activities of WSP, and identifying business potentials, particularly tourism, agriculture, and fishery.
    • Assisting BDA's PMO and Commerce Division of WSPA in promoting investment opportunities in WSP using innovative ways, given the constraints of the telecommunications.
    • Establishing business contacts between BDA, WSP, and potential business partners.
    • Assisting potential business partners in understanding PNG's regulatory framework governing investment and trade, potentials of WSP, and incentives the Government provides.
    • Assisting BDA and WSPA in negotiating business deals.
    • Assisting investors in complying with the Government's rules and regulations with respect to investment approval, business registration, land acquisition, and environment.
    • Establishing a consultation mechanism between the chamber of commerce, BDA, and WSPA, and assisting BDA and WSPA in addressing the grievances of the business sector.
    • Assisting WSPA in providing its agricultural extension services.
    • Compiling tourist guides and trade and investment guide disseminating information on WSP, culture, environment, and government policies.
    • Updating BDA and WSPA on global economic climate and market information.
    • Preparing monthly reports and submitting to BDA, WSAP, and ADB.

Advance action covers invitation of bids, bidding, bid evaluation, and limited contract awards. The advance action will be supported by the TA and undertaken in accordance with ADB's Guidelines for Procurement and Guidelines on the Use of Consultants by Asian Development Bank and its Borrowers. The Government has been advised that approval of the advance action, if granted, does not commit ADB to financing the Project.


Date of Advance Action and Retroactive Financing Approval: 17 August 2009.