At project appraisal, poor road conditions were adversely affecting the economy of Papua New Guinea’s (PNG) Highlands Region and the country’s export earnings. Travel times on the roads were excessive and routes were difficult, and in many locations, unsafe. Recurrent traffic interruptions on the major road links had increased the isolation of communities, led to export and business income losses, worsened social conditions, and contributed to social unrest and the breakdown of peace and security conditions. In response, the government came up with an investment plan for road restoration in the Highlands, which included 935 kilometers (km) of road upgrading and 776 km rehabilitation of critical national and provincial road links.
The Road Maintenance and Upgrading (Sector) Project, approved by the Asian Development Bank (ADB) for an original loan of $63 million in November 1999, represented a six-year time-slice of the government's road restoration investment plan in the Highlands Region. It aimed to finance 220 km of upgrading and 450 km of rehabilitation works in the Highlands’ road network, which then served about half of the country's population, and facilitated more than 70% of its exports. In June 2006, ADB approved two supplementary loans for the project. Aggregating $53 million, these two loans aimed to support an additional four-year time-slice of the road restoration investment plan, amounting to 270 km of upgrading and rehabilitation subprojects, as well as enable the original project to achieve 91% of its targeted road length. At the time, while all the original project funds had already been committed, accomplishment reached only 50.4% of the targeted length.
However, even though ADB had learned lessons from its previous five loans to the PNG road sector and strong measures were identified to mitigate risks, these mitigation measures were not implemented and the formulation process of the original project did not seem adequate to arrive at a sound design. For instance, the original project design did not identify the road subprojects, a failure that was rectified during the appraisal of the supplementary loans. Without identification of the subprojects, relevant community support was not generated, and land and other compensation issues not settled in a timely manner. By assuming that the executing agency (EA), the Department of Works (DOW), had the capacity to undertake the technical, financial, economic, and safeguards evaluation of subprojects, the sector loan approach, which requires only the economic appraisal of a single road subproject, may have further contributed to the design failure. It also appears that the sector loan modality adopted for this project was not suitable.
The availability of counterpart funding, including the government’s capacity and willingness to provide this, was not thoroughly assessed; the timelines for procurement and implementation were unrealistic; no mitigating mechanisms were put in place to address contracting difficulties associated with the remote locations of the subprojects, law and order difficulties, as well as the deficiencies of local contracting firms; and the implementation arrangements assumed an unrealistic capacity of the DOW. Insufficient attention was likewise paid to assessing road upgrading and rehabilitation unit costs for contracting in remote areas with likely law and order issues, and where local contractors were the only likely bidders for the contracts. Given the limited capacity of the local contractors, the road distance outputs envisaged at appraisal were significantly optimistic.
Some design improvements were incorporated during the appraisal of the supplementary loans, and through closer supervision by ADB’s Papua New Guinea Resident Mission a steady improvement in the capacity of the DOW and the implementation process were achieved. However, the shortage of counterpart funding, procurement processing delays, and limited capacity of local contractors remained throughout implementation.
Using the number of kilometers of roads with reduced roughness as criterion, the project’s output at completion was well below targets. Only 291.1 km of the total 940 km appraisal targets for all three loans were constructed/rehabilitated. Of this, 182.3 km of provincial roads were completed under the original project, representing 27.2% of its 670 km appraisal target. The remaining 108.8 km of provincial roads were delivered under the supplementary loans, comprising 40.3% of their 270 km total appraisal target.
Outputs related to annual routine and period road maintenance, baseline data, and socioeconomic impact assessment did not eventuate. Significant training, capacity building and implementation support had been provided; however, the sustainability of these outputs was diminished by DOW staff transfers and staff leaving to work in the private sector where wages were higher.
The DOW served as project EA, and the Highlands Region Maintenance Group, the implementing unit.
