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Papua New Guinea: Transport Improvement Project (Loan 2742- PNG)

The Implementation Completion Report (ICR) on the Papua New Guinea Transport Improvement Project (Loan 2742-PNG, approved in FY86) was prepared jointly by the Infrastructure Operations Division of the Asia and Pacific Region and the Borrower. The loan, for US$45.5 million, was approved on July 22, 1986, and closed on December 31, 1994, three years behind schedule. US$2.68 million was canceled due to misprocurement.

The project's objectives were to: (a) improve land transport and reduce vehicle operating costs; (b) enhance air transport and safety; (c) improve efficiency of road maintenance; and (d) strengthen sector institutions. The project included: (i) the reconstruction of 80 km of national roads and regraveling of another 500 km; (ii) the rehabilitation of about 50 bridges; (iii) the improvement of runways, taxiways and aprons at 16 airports and replacement of navigational aids at 14 airports; (iv) the procurement of equipment and materials for road maintenance; and (v) technical assistance, studies, and training for sector institutions.

The project's physical objectives were achieved only partially. A section of the national roads was not reconstructed due to persistent security problems, disputes over right-of-way issues and cost overruns. Delays, causing cost overruns, were occasioned by design revisions, disagreements about design standards, deficient project supervision by consultants, and a shortage of counterpart funds and human resources. Road regraveling targets were exceeded but bridge rehabilitation fell 20 percent short. Safety and physical air-side improvements at the airports were completed at 14 airports. Procurement of equipment and materials for maintenance was reduced because most of the maintenance was executed by contractors. Institutional objectives were only partially achieved as studies were completed but training and technical assistance were curtailed due to lack of funds and counterpart staff.

The economic rate of return (ERR) for the road reconstruction component--ranging from 13 to 28 percent at appraisal--was reestimated at 5 to 16 percent in the ICR; the lower value for the reconstruction of the national road, representing about half of the loan amount, was due to cost overruns. The ERR of the largely successful components for bridges, airports and technical assistance was not calculated. The Operations Evaluation Department rates project outcome as marginally unsatisfactory, institutional development as moderate and sustainability as uncertain. Bank performance is rated as satisfactory; the project was undertaken under very difficult circumstances and a more active Bank involvement during preparation would have been beneficial. These ratings are consistent with those in the ICR.

A key lesson from the project is the critical importance of a correct assessment of institutional risk (particularly of the capacity of the implementing agency) as an integral part of project appraisal.

The ICR is of satisfactory quality. It provides a thorough account of the project's physical and institutional achievements as well as shortfalls in relation to its original objectives. No audit is planned.

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