Papua New Guinea : Lae Port Development Project - Additional Financing

Project Name

Lae Port Development Project - Additional Financing

Project Number

40037-043

Country / Economy

• Papua New Guinea

Project Status

Closed

Project Type / Modality of Assistance

• Loan

Source of Funding / Amount

Loan 2803-PNG: Lae Port Development Project (additional financing)

Source	Amount
Ordinary capital resources	US$ 85.00 million

Loan 2804-PNG: Lae Port Development Project (additional financing)

Source	Amount
Asian Development Fund	US$ 4.12 million

Strategic Agendas

• Inclusive economic growth

Drivers of Change

• Gender Equity and Mainstreaming

Sector / Subsector

• Transport / Water transport (non-urban)

Gender

Some gender elements

Description

The overall project will expand the cargo handling capacity of PNG's largest sea port at Lae, the capital of Morobe province. The overall project will also help improve the livelihood of project-affected people and reduce the prevalence of HIV in Lae and surrounding localities. This involves financing (i) construction of port facilities including a tidal basin, a multipurpose berth, and terminal works; (ii) resettlement and livelihood improvement and social improvement for affected people; (iii) consulting services for project management, construction supervision, financial management, resettlement, and socioeconomic monitoring; and (iv) gender-responsive programs for HIV awareness and prevention. Current project implementation preconstruction activities are mostly complete, including the relocation of 3,200 people from the project site.

As a result of input price increases, the devaluation of the US dollar against the kina, and design modifications, the total current project cost has increased from $154.0 million at appraisal in 2007 to $291.4 million in 2011. The current project rationale is valid and remains applicable. The current project scope has been revised to include some improvements to construction solutions. Additional financing is requested for 65% of the total overall project cost increase, the balance to be provided from government resources.

Project Rationale and Linkage to Country/Regional Strategy

Development Need. Lae port is PNG's largest, busiest, and most important port. It is a gateway linking world markets with PNG and a large hinterland containing 40% of PNG's population and half of PNG's economic capacity, including hydrocarbon and mineral resources. Lae port's cargo throughput has increased by 7.8% annually since 2006. In 2011, the cargo through Lae port is estimated to reach 3.3 million revenue tons, stretching the port to the limit of its capacity. PNG Ports Corporation Limited (PPCL) is increasing the operational efficiency of Lae port, which will help cope with the existing cargo traffic. However, the need for additional berth space is now critical. A larger and more efficient Lae port will ease a nationally significant infrastructure bottleneck that is impeding economic growth. The overall project is a high priority of the Government of PNG.

The Current Project. The overall project will expand the capacity of Lae port by building a tidal basin (700 x 400 meters [m]) northwest of the present port facilities with a dredged depth of 13 m below sea level, a multipurpose berth (240 m long and 45-50 m wide), and terminal works including all buildings, storage areas, roads, drainage, water, electricity, and sewerage services. The tidal basin and berth are designed to accommodate vessels with an overall length of 200 m, beam of 32.2 m, and fully laden draft of 12 m. The procurement of these works is at an advanced stage.

The overall project involves the relocation and livelihood and social improvement of about 3,200 people living on the project site. The government has financed and completed the relocation, and a Japan Fund for Poverty Reduction grant is now financing the livelihood and social improvement program. To minimize the potential risk of new HIV infections, the overall project includes support for an effective and sustainable response to the HIV epidemic in and around Lae port and Morobe province. The Lae Chamber of Commerce is the implementing agency and activities include (i) developing an HIV and AIDS code of conduct for businesses; (ii) improving seafarers' facilities; (iii) strengthening clinical institutional structures; (iv) strengthening nongovernment organizations, AIDS site committees, and the Lae police; and (v) caring for people with HIV.

Impact

Enabling environment for industrial and commercial development is created

Project Outcome

Description of Outcome

Port bottleneck constraining trade is relieved

Progress Toward Outcome

As at 30 November 2014, the contractor has completed 97% of the planned works (site clearance- 100% completed, wharf- 100%, excavation/dredging/reclamation-100%, slope protection- 81% complete and container terminal /yard or land works is at 100% complete).

A completion ceremony for the phase one was held on 17 December 2014.

Implementation Progress

Description of Project Outputs

(1). New port facilities are operational.

(2). Livelihood of directly and indirectly affected people is improved

(3). HIV&AIDS incidence in Lae is reduced

Status of Implementation Progress (Outputs, Activities, and Issues)

PROCUREMENT OF MAJOR CONTRACT PACKAGES:

(I) CONSTRUCTION SUPERVISION CONSULTANCY:

The National Executive Council approved the awarding of contract to Korea Engineering Consultants Corp. (KECC) on 7 July 2011. The contract was signed on 29 Dec 2011 and consultants mobilised in late March 2012.

PORT FACILITIES: The major civil works involving dredging and the construction of the wharf and the terminal was grouped into one contract package to attract international bidders. Bids were issued on 19 Jan 2011 and closed 21 April 2011. The EA awarded the contract (K734 million) on 26 March 2012 to China Habour Engineering Company Ltd. The contractor commenced work on 30 June 2012.

The Phase one construction work has been completed in line with the construction schedule. As at 30 November 2014, the contractor has completed 97% of the planned works (site clearance- 100% completed, wharf- 100%, excavation/dredging/reclamation-100%, slope protection- 81% complete and container terminal /yard or land works is at 100% complete).

A completion ceremony for the phase one was held on 17 December 2014.

(III) ADDITIONAL FINANCING: Due to costs increase, additional financing of $89.12 million was approved by ADB on 10 Nov 2011, the Loan and Project Agreements were signed on 30 April 2012 and the loans were declared effective on 21 June 2012.

Disbursements from additional financing loans commenced in August 2013 and have been fully utilized as at the completion of phase one.

Livelihood improvement programs and social infrastructure works is being procured and works commenced in Qtr 1 2012. Japanese Government on 13 Dec 2011 approved EA's request to extend closing date from 11 June 2011 to 11 June 2013. This has been further extended to 11 June 2014 and then further extended again to 31 October 2014 for disbursement purposes.

The JFPR funded Livelihood and Social Improvement Program was targeted to benefit the affected people (APs) and indirectly affected people (Labu). Progress achieved to date include: (i) a program of civil works for improving social infrastructure and services for the poor communities and refurbishment of 11 schools where project affected children study and eight health centres where project affected people have resettled. Improvement on all eleven (11) schools and eight (8) health centers have been completed with the delivery of water tanks school and medical supplies to health centers as additional works, (ii) Program for APs and Labu. Four service providers were engaged to implement the livelihood activities under the project and these activities have been completed.

The Morobe Provincial Administration engaged Nationwide Microbank Ltd to facilitate this activity. After BK's contract was terminated, MPA negaged new service providers to support this program.

To be assessed after completion

To be assessed after project completion.

Geographical Location

Lae

Safeguard Categories

Environment

B

Involuntary Resettlement

C

Indigenous Peoples

C

Summary of Environmental and Social Aspects

Environmental Aspects

Involuntary Resettlement

Indigenous Peoples

Stakeholder Communication, Participation, and Consultation

During Project Design

During Project Implementation

Contact

Responsible ADB Officer

Hill, David J.

Responsible ADB Department

Pacific Department

Responsible ADB Division

Papua New Guinea Resident Mission (PNRM)

Executing Agencies

Independent Public Business Corporation(IPBC)

Timetable

Concept Clearance

19 Jul 2012

Fact Finding

18 Jul 2011 to 12 Aug 2011

MRM

12 Sep 2011

Approval

10 Nov 2011

Last Review Mission

-

Last PDS Update

23 Sep 2015

Funding

Loan 2803-PNG

Loan 2804-PNG