The technical assistance (TA) will support the Asian Development Bank's (ADB's) ongoing engagement in public financial management in Papua New Guinea (PNG) by focusing on areas that are identified in the framework for fiscal enhancement and are aligned with the priorities of ADB's ongoing programs and projects in PNG. The TA will (i) support the design and implementation of systems for financing the construction and maintenance of infrastructure from the sovereign wealth fund, and (ii) strengthen the accountability of statutory authorities to the national government.
|Project Name||Supporting Public Financial Management, Phase 2|
|Country||Papua New Guinea|
|Project Type / Modality of Assistance||Technical Assistance
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
|Sector / Subsector||
Public sector management - Public administration - Public expenditure and fiscal management
|Gender Equity and Mainstreaming|
|Description||The technical assistance (TA) will support the Asian Development Bank's (ADB's) ongoing engagement in public financial management in Papua New Guinea (PNG) by focusing on areas that are identified in the framework for fiscal enhancement and are aligned with the priorities of ADB's ongoing programs and projects in PNG. The TA will (i) support the design and implementation of systems for financing the construction and maintenance of infrastructure from the sovereign wealth fund, and (ii) strengthen the accountability of statutory authorities to the national government.|
|Project Rationale and Linkage to Country/Regional Strategy||
The sovereign wealth fund aims to reduce fiscal volatility by safeguarding sudden increases in revenues. Parliament approved the Organic Law on Sovereign Wealth Fund Management on 21 February 2012; the law offers significant advantages for directing the management of volatile resource revenues over current policies. The law provides for the creation of a number of new funding mechanisms and agencies that will receive revenues accruing to the government as a result of its equity stake in the liquified natural gas project. Under the law, all future mining, oil, and gas revenues will be deposited into an offshore stabilization fund, which will be overseen by an independent board and subject to enhanced governance, transparency, and asset management rules. Withdrawals from the stabilization fund will be fully integrated into the national budget process and restricted to the average of the past 15 years of mineral revenues.
Working in close coordination with the interdepartmental sovereign wealth fund implementation secretariat, and the development partners sovereign wealth fund coordination group, the TA will support arrangements for financing the maintenance and construction of infrastructure from the sovereign wealth fund. The TA will support the design and early implementation of these arrangements, either based on a proposed independent authority model that will fund investment in infrastructure, or an alternative arrangement once agreed by the government.
The PNG sovereign wealth fund secretaries committee has approved an implementation plan to operationalize the sovereign wealth fund in 2013. The Department of Treasury has asked ADB to help address a number of key implementation issues related to integrating the proposed structure into their existing systems. Key issues to be addressed include the (i) policy and legislative framework, (ii) institutional framework, (iii) definition of public infrastructure assets, (iv) management structure, (v) criteria for project selection, and (vi) project and financial operating issues. The role of existing agencies and the relationship of any new arrangement with the existing agencies needs to be considered.
Currently, the Department of Finance does not have a unit dedicated to monitoring the approximately 80 statutory authorities in PNG. In 2008, the government commissioned a report into the governance of statutory authorities, which recommended the establishment of a dedicated statutory authorities unit. More recently, statutory authorities have expressed concern about the lack of engagement between central agencies and the statutory authorities, and they requested that a first point of contact be identified. The Department of Finance has therefore approved the establishment of a new statutory authorities monitoring branch.
The current accountability framework for statutory authorities is deficient in a number of areas, including (i) noncompliance with reporting provisions, financial measures, structures and policies; (ii) lack of demonstrable service delivery improvements and outcomes; (iii) the operation of competitive programs and strategies that undermine government's public programs and national priorities; (iv) dilution of policy control and direction in the management and protection of finances, key assets and natural resources; and (v) control failures by central agencies resulting in statutory authorities collecting and retaining increasing streams of public revenues and committing to unsustainable increases in year-on year expenditures.
The Department of Finance has, therefore, requested ADB support to assist in the initial establishment and operation of the new statutory authorities monitoring branch. The branch will monitor compliance of statutory authorities with the governance framework and, more generally, will monitor the performance of statutory authorities against their performance plans.
|Impact||Effective and efficient utilization of public finances for service delivery and infrastructure provision.|
|Description of Outcome||Strengthened PFM systems through improved transparency, accountability, and efficiency in national government management and use of public resources|
|Progress Toward Outcome||The PFMTA Phase II continues to make progress towards the more effective and efficient utilization of public finances for service delivery and infrastructure provision. This has included through the strengthening of public financial management systems through improved transparency, accountability, and efficiency in managing and using public resources by the national government.|
|Description of Project Outputs||
1. Support the design and implementation of system for financing the construction and maintenance of infrastructure from the sovereign wealth fund.
2. Strengthen the accountability of statutory authorities to the national government.
|Status of Implementation Progress (Outputs, Activities, and Issues)||
Outputs under section 1 of the TA have included (i) a comprehensive draft concept paper on various options for financing the construction and maintenance of infrastructure from the sovereign wealth fund, (ii) a final concept paper that incorporates commentary from peer reviewers, (iii) presentation of the concept paper and peer review recommendations to the sovereign wealth fund implementation secretariat and other relevant stakeholders. The infrastructure financing expert has also administered consultation workshops disseminating findings of the analysis.
Outputs under section 2 of the TA have included (i) development of a work plan for the new Statutory Authorities Monitoring branch within Department of Finance, (ii) development of financial instructions covering performance and financial reporting by statutory authorities, (iii) creation of a a database to support the branch in its monitoring role, and (iv) ongoing work towards the development of monitoring reports for a pilot group of statutory authorities.
Activities under both of these components of the TA have now been completed with a final report prepared and submitted.
Summary of Environmental and Social Aspects
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||In conceptualizing the assistance, preliminary consultations were conducted during the preparation of the country partnership strategy. A fact-finding mission took place from 3 to 7 September 2012 to discuss and agree the TA. The government concurred with the impact and outcome, the methodology and key activities, and the cost, financing, and implementation arrangements.|
|During Project Implementation|
|Consulting Services||The TA will require international consultants (estimated 25 person-months) with skills and expertise in economics, finance, PFM, or governance, particularly in fund management governance arrangements, and statutory authority governance. All consultants will be engaged as individuals. ADB will engage consultants in accordance with its Guidelines on the Use of Consultants (2010, as amended from time to time).|
|Procurement||The TA is estimated to cost $1,000,000, of which the full amount will be financed on a grant basis by ADB's Technical Assistance Special Fund (TASF-IV). The government will provide counterpart support in the form of office accommodation for consultants, provision of counterpart staff and support services, and other in-kind contributions. Disbursements under the TA will be made in accordance with ADB's Technical Assistance Disbursement Handbook (2010, as amended from time to time).|
|Responsible ADB Officer||Basnett, Yurendra|
|Responsible ADB Department||Pacific Department|
|Responsible ADB Division||Papua New Guinea Resident Mission|
Department of Treasury
6/F The Treasury Building, Lamana Road
P.O Box 542, Waigani Drive, NCD
Papua New Guinea
|Concept Clearance||14 Aug 2012|
|Fact Finding||03 Sep 2012 to 07 Sep 2012|
|Approval||12 Nov 2012|
|Last Review Mission||-|
|Last PDS Update||23 Jan 2015|
|Approval||Signing Date||Effectivity Date||Closing|
|12 Nov 2012||11 Dec 2012||11 Dec 2012||31 Oct 2014||31 May 2016||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|1,000,000.00||0.00||0.00||0.00||0.00||0.00||1,000,000.00||12 Nov 2012||735,911.03|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
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|Title||Document Type||Document Date|
|Supporting Public Financial Management, Phase 2: Technical Assistance Report||Technical Assistance Reports||Nov 2012|
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
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Evaluation Documents See also: Independent Evaluation
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