ADB's Work in Papua New Guinea

Papua New Guinea (PNG) is a lowermiddle income country, classified by ADB as both a fragile and conflict-affected situation and a small island developing state.

The economy of PNG is small, open, and export-oriented. Mineral products (including oil, gas, liquid natural gas, gold, and copper) account for roughly 84% of all exports, with agriculture, forestry, and marine products contributing the other 16%. The economy is estimated to have contracted by at least 2.9% in 2020, largely due to the impacts of the coronavirus disease (COVID-19) pandemic.

ADB has been working with PNG since 1971 and is the country’s largest multilateral development partner. ADB’s recent engagement has focused on key development challenges, including weak governance and institutions, a large infrastructure deficit, and poor service delivery (especially in rural areas, where more than 80% of the population resides).

The Tubusereia fishing village, Central Province in early morning

Since 1971, ADB has committed loans totaling $3.4 billion, grants of $19 million, technical assistance worth $79.2 million, and ADB-administered cofinancing of $217.9 million for PNG.

To strengthen PNG’s public sector management, ADB committed and disbursed $100 million in December 2020 under the State-Owned Enterprises Reform Program.

In other measures, ADB is financing large-scale investments in transport. In 2017, the bank approved the Sustainable Highlands Highway Investment Program with a project ceiling of $1 billion. The program will rehabilitate and sustainably maintain 430 kilometers of highway, upgrade bridges, improve road safety, help establish logistics platforms and services for agricultural production, and support transport sector reforms. Meanwhile, through the Highlands Region Road Improvement Investment Program, ADB has provided $400 million for the construction and rehabilitation of over 347 kilometers of roads. It also committed $90 million for the Bridge Replacement for Improved Rural Access Project, which included cofinancing of $58 million from the European Investment Bank, to replace 33 single-lane bridges with permanent two-lane bridges along five national highways. In aviation, ADB is providing $480 million through the Civil Aviation Development Investment Program to improve 21 airports.

Construction of feeder road to Highlands Highway

ADB has funded the Town Electrification Investment Program, with two tranches totaling $150 million. The bank is also supporting the Port Moresby Power Grid Development Project, set to be completed in July 2022. Collectively 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.

The Health Services Sector Development Program is strengthening health systems through policy reforms and direct investments, while the Rural Primary Health Services Delivery Project, cofinanced by the Government of Australia and the Organization of the Petroleum Exporting Countries Fund for International Development, is constructing up to 32 new rural health posts and training health workers in better primary health care.

Villagers visit the Tsinjipai Community Health Post for information and treatments

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments in loans and equity investments from ADB’s own funds in 2020 amounted to $1.4 billion for 38 transactions in economic and social infrastructure, finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2020, ADB mobilized $1.9 billion of long-term project cofinancing and $3.3 billion of cofinancing through its Trade and Supply Chain Finance Program and Microfinance Program. Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $14.3 billion as of 31 December 2020.

Total outstanding balances and commitments of ADB’s nonsovereign transactions in the country as of 31 December 2020 was $7.4 million, representing 0.1% of ADB’s total nonsovereign portfolio.

Financing Partnerships

Financing partnerships enable ADB’s financing 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 and Supply Chain Finance Program and Microfinance Program.

ADB began cofinancing operations in PNG in 1980. Since then, sovereign cofinancing commitments for PNG have amounted to $307.63 million for 21 investment projects, and $10.37 million for 14 technical assistance projects. Nonsovereign cofinancing for PNG has amounted to $152.64 million for one investment project and $0.22 million for one technical assistance project.

In 2020, PNG received $1.11 million grant cofinancing from the European Union for the Highlands Region Road Improvement Investment Program – Project 3 (Additional Financing).

A summary of cofinanced projects is available at Papua New Guinea: Cofinancing.

Operational Challenges

PNG faces operational and implementation challenges similar to other fragile and conflict-affected situations. To improve program implementation, the country must address: (i) delays in procurement and approval of contracts; (ii) insufficient counterpart funding; (iii) low capacity of executing and implementing agencies in contract management, and insufficient understanding of social and environmental safeguards; 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 introducing risk-based procurement measures.

Future Directions

The overall objective of ADB’s country partnership strategy for PNG is to support diversified, sustained, and inclusive growth through three strategic pathways. The first pathway serves to enable diversified economic growth through improvements to infrastructure, including in transport and energy, and to bolster the private sector. The second pathway aims to improve governance and financial management and strengthen institutions, including state-owned enterprises, to deliver efficiencies, improve public service delivery, and cope with fragility. This pathway incorporates responses to external shocks, including the COVID-19 pandemic. The third pathway seeks to achieve inclusive growth, with a focus on human development outcomes, and building resilience to climate and disaster risks. ADB will support these strategic objectives through policy analysis and advice, sovereign and nonsovereign financing facilities, and strategically targeted technical assistance.