Thursday, 20 December 2007 3:10 PM

Papua New Guinea's Lae Port Receives $108.25M for Expansion

MANILA, PHILIPPINES - The Asian Development Bank (ADB) and its development partners are providing a financial assistance package totaling $108.25 million to expand Lae Port, the largest and most important port in Papua New Guinea.

ADB is extending a $100 million loan for the Lae Port Development Project, which involves the construction of port facilities including a tidal basin, a multipurpose berth and terminal works including buildings, storage areas, roads, drainage, water, electricity and sewerage services.

The OPEC Fund for International Development, the multilateral financing facility of the Organization of Petroleum Exporting Countries (OPEC) that channels aid to developing nations, is providing a $6 million loan to fund the civil works for the port facilities.

A $1.5 million grant from the Japan Fund for Poverty Reduction will finance the livelihood enhancement activities and social services involved in the resettlement of those who will be affected by the project.

There will also be a $750,000 grant from ADB's Cooperation Fund for Fighting HIV/AIDS in Asia and the Pacific to minimize the potential risk of new HIV/AIDS infections. The fund was set up in 2005 and focuses on operational support, to ensure that HIV/AIDS concerns are adequately addressed in ADB core business activities; and on increasing capacity at country and regional levels to address HIV/AIDS.

To complete funding for the project, the government of Papua New Guinea is providing $45.75 million.

Papua New Guinea's economy relies heavily on trade. The port sector is particularly critical since of the 20 provinces comprising the Pacific island nation, 15 are on the coast and more than 60% of the nation's six million people are widely dispersed. There is no national rail or road network.

"The port sector is important not only for the adequate and efficient handling of exports and imports, but also for the efficient movement of goods and people between the remote and sparsely populated areas on the mainland and islands and the centers of economic activity," said Li Cai, Infrastructure Specialist of ADB's Pacific Department.

Lae Port serves as a gateway linking the world market with a large hinterland, which comprises half of Papua New Guinea and where about half the population lives. Since 1995, the port has experienced an average annual increase in cargo of 131,000 tons, with containerized cargo growing more than 5% and general cargo by 2.5% annually. In 2005, the volume of cargo through Lae Port reached 2.4 million revenue tons, stretching it to the limit of its capacity. Frequent congestion at the port results in high costs for users and hampers international and domestic trade. The situation is expected to worsen as the country's economic prospects remain strong. Some shipping companies have expanded their fleets and are demanding efficient and modern port infrastructure and management.

"The PNG macroeconomic outlook has improved considerably as a result of strength in commodity prices. The Highlands region, with the Highlands Highway and Lae Port, forms the backbone of the economy, and is experiencing a boom in development activities. Unless Lae port is expanded, and capacity increased, Lae port will become a binding constraint to the continued economic prosperity of this island nation." said Philip Erquiaga, Director-General of ADB's Pacific Department.