ADB Supports $640M Plan to Strengthen Aviation Safety, Services, in PNG

News Release | 24 November 2009

MANILA, PHILIPPINES - Papua New Guinea is targeting sweeping improvements to its national airports under a $640 million plan to strengthen safety and services, and to open up new economic opportunities for the resource-rich Pacific country.

To help the government establish a sustainable network, the Asian Development Bank's (ADB) Board of Directors today approved a $480 million multitranche financing facility to support the Papua New Guinea Civil Aviation Development Investment Program. The funds will support infrastructure rehabilitation and upgrades; build the capacity of the Civil Aviation Authority (CAA), the industry regulator, to operate on a more commercial footing; and establish ten-year performance-based maintenance contracts.

Safe, affordable and reliable air services are critical in Papua New Guinea where geographic difficulties limit road travel. However, rapidly deteriorating infrastructure caused by accelerated wear and tear due to higher air traffic volumes, use of heavier aircraft and intense weather conditions have left the country's 21 national airports struggling to meet International Civil Aviation Organization safety and security standards. Rehabilitation and upgrades are urgently needed to improve the safety and reliability of flights and to lower costs - factors that will help expand economic opportunities and access to social services, particularly for remote, rural communities.

"ADB's assistance to develop PNG's main infrastructure facilities reflects a long-term commitment to support higher growth, reduce poverty and catalyze domestic and foreign private investments," said S. Hafeez Rahman, Director General of ADB's Pacific Department.

A key aspect of the program is helping the aviation authority become more self sufficient. ADB will work closely with the Australian Agency for International Development (AusAID) to strengthen CAA's capabilities. The country's air network delivers major benefits to the private sector, particularly in the minerals industry, and a study is underway for a potential partnership between the authority and the private sector to fund the operation and maintenance of Jackson's Airport, the country's largest, in Port Moresby.

"ADB will also cooperate with other development partners to explore cofinancing opportunities at other national airports over the course of the program," said Allan Lee, Principal Portfolio Management Specialist, in ADB's Papua New Guinea Resident Mission.

ADB's multitranche facility will cover 75% of the total program cost of $640 million with the private sector expected to contribute $75 million for Jackson's, and the government providing counterpart funds of $85 million equivalent. In the first tranche, ADB will provide $95 million, out of a total estimated cost of $112 million, for improvements at five airports that serve about 1.5 million people.

The loans will be sourced mostly from ADB's concessional Asian Development Fund, with a supplemental amount from ordinary capital resources (OCR). The OCR loans have a 25-year term, with a grace period of five years, and interest determined in accordance with ADB's LIBOR-based lending facility. The CAA is the executing agency for the program, which will be implemented over nine years, with an estimated completion date of December 2018.