Thursday, 18 December 2008 4:40 AM

ADB Approves $400M Multi-Tranche Financing Facility for Papua New Guinea

MANILA, PHILIPPINES - The Asian Development Bank (ADB) has approved a multi-tranche financing facility of up to $400 million to help build and manage a sustainable road system in the five provinces of the Highlands region - one of the most remote areas in Papua New Guinea (PNG).

The Investment Program will focus on the Highlands' core road network of around 1,400 kilometers (km) of major national and provincial roads.

The Highlands region is a major contributor to PNG's economy through its mineral and agricultural exports. It is also home to 40% of the country's population who rely almost exclusively on the road network for movement of people and goods. The road network is vulnerable to damage because of the mountainous terrain, seismic activities, and heavy rain.

"The Investment Program will make ports, markets, and livelihood opportunities more accessible, and lead to savings in travel time and transport costs," said Team Leader Hasan Masood, who is also the Head of Project Administration Unit in ADB's Pacific Department.

The loan is primarily sourced from the concessional Asian Development Fund and supplemented by the Ordinary Capital Resources (OCR), the London Interbank Offered Rate (LIBOR)-based lending facility of ADB. The loan will be made available in four or more tranches over a period of 10 years.

The PNG Government will provide $200 million for the Investment Program. Another $150 million is expected from co-financiers including Japan International Cooperation Agency (JICA).

Support to long-term road maintenance and capacity development of road agencies have also been included in the Program.

The first tranche of $100 million will finance Project 1 which includes roads in Enga and Southern Highland provinces, directly benefiting 400,000 people living near and alongside the roads.

Expected economic and social benefits of Project 1 include increased diversity of cash crops, higher production, more sales by market vendors because of more customers, and better access to schools and clinics.

ADB's multi-tranche financing facility is the most suitable way of financing the Investment Program, as it supports PNG Government's long-term vision for the transport sector and provides flexible options for the Government in terms of timing and the size of each tranche.