ADB's Work in Papua New Guinea

ADB has been working with Papua New Guinea (PNG) since 1971 and is the country’s largest multilateral development partner.

The economy of PNG is dominated by labor-intensive agriculture and capital-intensive extraction of oil and gas, gold, copper, and other minerals. Mining and petrochemicals now account for over 25% of PNG’s gross domestic product and over 80% of its exports. The country continues to face significant challenges in making economic growth more inclusive and sustainable. Many areas of service delivery—such as health, education, transport, energy, and water—remain weak, particularly in rural areas.

Since 1971, ADB has committed loans totaling $2.9 billion, grants of $214.4 million, and technical assistance worth $81.3 million for PNG.

Aerial view of the business district in Port Moresby, Papua New Guinea

In 2017, ADB approved $680 million for the Sustainable Highlands Highway Investment Program. The 1,200-kilometer (km) highway connects 1,800 km of regional and feeder roads and services 3 million people in the rural hinterland. The program will rehabilitate and sustainably maintain 430 km of the highway, upgrade bridges, improve road safety, help establish logistics platforms and services for agricultural production, and support transport sector reforms.

ADB is providing $400 million for the Highlands Region Road Improvement Investment Program. Under the first two tranches of the program, the bank invested $209 million to reconstruct 233 km of priority roads. Under the third tranche, ADB provided $109.3 million, including cofinancing of $19.99 million from the European Union, to rebuild four road sections totaling 114 km. ADB has also committed $90 million, including cofinancing of $58 million from the European Investment Bank, to replace 33 single-lane bridges with permanent two-lane bridges along five national highways.

Tea growers along Kindeng-Kondipina Road, part of the ADB’s Highlands Region Road Improvement Investment Program

The aviation industry is another high priority for the Government of PNG to achieve the objectives outlined in the Medium-Term Development Plan 2018–2022, which places tourism, agriculture, and transport connectivity as central pillars to meeting development targets. ADB is providing $480 million through the Civil Aviation Development Investment Program to improve 21 airports that handle the bulk of PNG’s domestic passenger and freight traffic. The investment will expand access to markets and job opportunities for remote communities, driving economic growth and poverty reduction.

In energy, ADB has funded the Town Electrification Investment Program, with the first two phases totaling $150 million. The bank is also supporting the Port Moresby Power Grid Development Project, set to be completed in 2022. Both these projects are helping to expand renewable energy supply through hydropower generation, distribution, and transmission. A separate grant, provided by the governments of Japan and New Zealand, is helping connect households to the new electricity services.

ADB’s Town Electrification Investment is helping build renewable energy facilities to meet critical electricity supply gaps in six provincial urban centers

An ADB-supported microfinance project continues to expand access to credit and financial services for rural communities in some of PNG’s poorest and most isolated regions. The project aims to make about 120,000 rural residents more financially literate.

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments from ADB’s own funds (in equity and direct loans) in 2019 amounted to $3.00 billion for 38 transactions in economic and social infrastructure, the finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2019, ADB mobilized $3.28 billion of longterm cofinancing and $3.69 billion of cofinancing in trade finance, microfinance, and supply chain finance programs. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $13.78 billion as of 31 December 2019.

ADB and the Government of Papua New Guinea promote partnerships with local and international NGOs to bring rural primary health care services

Financing Partnerships

Financing partnerships enable ADB’s development partners, governments or their agencies, multilateral financing institutions, and commercial organizations to participate in financing ADB projects. The additional funds are provided in the form of loans and grants, technical assistance, and other nonsovereign cofinancing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee cofinancing, and cofinancing for transactions under ADB’s Trade Finance Program and Supply Chain Finance Program.

ADB began cofinancing operations in Papua New Guinea in 1980. Since then, sovereign cofinancing commitments for Papua New Guinea have amounted to $306.52 million for 21 investment projects, and $10.17 million for 14 technical assistance projects. Nonsovereign cofinancing for Papua New Guinea has amounted to $152.64 million for one investment project and $0.22 million for one technical assistance projects.

In 2019, Papua New Guinea received $38 million in grant cofinancing from the Government of Australia for additional financing of the Health Services Sector Development Program –Subprogram 1, and $0.80 million in grant cofinancing from the People’s Republic of China Poverty Reduction and Regional Cooperation Fund for the Water Supply Scheme for Tete Settlement.

Projects Cofinanced, 1 January 2014–31 December 2018

Operational Challenges

The 2019 review mission of the ADB portfolio in PNG highlighted that, although the government has progressed in resolving some implementation bottlenecks, the following issues remain a significant risk: (i) delays in procurement and approval of contracts; (ii) insufficient counterpart funding; (iii) low capacity of executing and implementing agencies in contract management coordination and insufficient understanding of social and environmental safeguards issues; and (iv) weak capacity of contractors and consultants in project management and coordination.

To manage the key risks associated with an expanded lending pipeline for PNG, ADB will focus on improving project readiness and introduce risk-based procurement measures.

Future Directions

ADB expects to potentially increase its program to about $2.7 billion for PNG across 2021-2023. The current programming period includes new infrastructure projects, particularly in the transport sector, that will help drive inclusive economic growth, improve the delivery of basic services, increase regional connectivity, and build resilience to climate change.

ADB will work with the Government of Australia, the European Union, the International Monetary Fund, the World Bank, and other donor partners to develop a coordinated response to the economic downturn in PNG and increase the country’s resilience to external shocks.