Concessional Funds Planned for PNG to Improve Roads and Fight AIDS

MANILA, PHILIPPINES (18 October 2005) - Some $33 million in concessional funds are earmarked for Papua New Guinea over the next two years, under ADB's Country Strategy and Program (CSP) update.

The funds, from ADB's Asian Development Fund, would include an $18 million loan for road improvement and a $15 million grant for HIV/AIDS work in the country. In addition, $42 million in loans from ADB's ordinary capital resources are planned for the road sector over the period.

Final assistance amounts will be linked to factors that include the country's performance in fiscal and sector management, and absorptive capacity.

The updated program also proposes $2 million a year in technical assistance grants to carry out economic, thematic, and sector work on the key priorities of the country strategy.

The strategy for Papua New Guinea focuses on strengthening governance, supporting private sector development, and improving social conditions. Weak public sector management and ineffective public services remain the main development problems.

ADB also envisages expanding the scope of its support for private sector development, possibly through the use of the Trade Finance Facilitation Program, which would offer partial credit and political risk guarantee arrangements to help mobilize external resources. In parallel, initiatives to engage local communities and organizations will be explored, building on ongoing activities.

"ADB aims to expand its support to private sector development by helping to bring about critical change where the foundations for private sector activity are weak or nonexistent," explains Adam Bruun, an ADB Country Programs Specialist.

"Meanwhile, we will continue to assist in social sector policy development and support infrastructure investments in water and sanitation. For roads, the highest priority is to redress the deteriorating existing road system, especially feeder roads and the key Highlands Highway. ADB is also planning to significantly expand its efforts to address the growing HIV/AIDS pandemic in the country."

According to a 2004 report, Papua New Guinea is the only Pacific island country considered to have a generalized HIV epidemic, estimated to number between 45,000 and 75,000 in the 15-45 age group. The number of cases is expected to double every two years.

Over the past five years, economic growth has barely kept pace with population growth. According to projections, poverty has been increasing at an alarming rate in recent years. The proportion of poor estimated to be living on less than US$1 a day is estimated to have increased from 24.6% in 1996 to 39.1% in 2003. Meanwhile, general development continues to be hampered by the poor national peace and order situation.

Since Papua New Guinea joined ADB in 1971, up to the end of 2004, ADB had provided 57 loans totaling US$874 million and 131 TA grants totaling $42.9 million.

CSPs define ADB's medium-term development strategy as agreed with the country. A CSP update is usually prepared every year taking into account the continued relevance of the CSP, its implementation, and ADB's operational program. A new CSP for Papua New Guinea is planned for 2006.

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