Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 53727-PG

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

INTERNATIONAL FINANCE CORPORATION

COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT

FOR THE

INDEPENDENT STATE OF PAPUA NEW GUINEA

FOR THE PERIOD FY08-FY11

March 30, 2010

Papua New Guinea, Pacific Islands and Timor-Leste Country Management Unit

East Asia and Pacific Region, EAP

East Asia and Pacific Department

International Finance Corporation, IFC

This document has a restricted distribution and may be used by recipients only in the performance of their official

Duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Acknowledgements

This CAS Progress Report was produced by a multi-sectoral team that included: Laura Bailey,

Natasha Beschorner, Sean Bradley, Peter Cusack, Dodi Doiwa, Adriana Eftimie, Chas Feinstein,

Marianne Grosclaude, Graeme Hancock, Wendy Hughes, Susan Ivatts, Erik Johnson, Angela

Khaminwa, Nick Menzies, Aleta Moriarty, Gavin Murray, Raymond Palangat, Demetrios

Papathanasiou, Sudesh Ponnappa, Joy Sagati, Kanthan Shankar, Manohar Sharma, Aparnaa

Somanathan, Jim Stevens, John Strongman, Mona Sur and Sonya Woo.

The World Bank Group greatly appreciates the close collaboration with the Government of

Papua New Guinea in the preparation of this CAS Progress Report, as well as valuable feedback

from members of civil society, the private sector, and development partners.

This document has a restricted distribution and may be used by recipients only in the performance of their official

Duties. Its contents may not otherwise be disclosed without World Bank authorization.

The Country Assistance Strategy for Papua New Guinea (Report 41571- PG) was discussed in November 2007

CURRENCY EQUIVALENTS

(Exchange rate effective as of March 1, 2010)

Currency Unit: Papua New Guinea Kina (K)

K 1 = US$0.3725

US$ 1 = K 2.6846

WEIGHTS AND MEASURES: Metric System

FISCAL YEAR: January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AAA Analytical and Advisory Activities

ABG Autonomous Bougainville Government

ADB Asian Development Bank

ASM Artisanal and Small-Scale Mining

ASTAE Asia Alternative Energy Program

AusAID Australian Agency for International Development

CAS Country Assistance Strategy

CAE Country Assistance Evaluation

CBO Community-Based Organization

CDD Community-Driven Development

CEM Country Economic Memorandum

CGAP Consultative Group to Assist the Poor

CPAR Country Procurement Assessment Report

CPI Consumer Price Index

DM Development Marketplace

DME

DP

Di-methyl Ether

Development Partners

DSA Debt Sustainability Analysis

DSDLG District Service Delivery and Local Governance

EAP East Asia and Pacific

EC European Commission

ECP Enhanced Cooperation Program

EITI Extractive Industries Transparency Initiative

ESW Economic and Sector Work

FCP Forestry and Conservation Project

FCPF Forest Carbon Partnership Facility

FIAS Foreign Investment Advisory Service

FODE Flexible and Open Distance Education

FSAP Financial Sector Assessment Program

FTI Fast Track Initiative

GDLN Global Development Learning Network

GDP Gross Domestic Product

GEF Global Environment Facility

GEF-PAS GEF Pacific Alliance for Sustainability

GoPNG Government of Papua New Guinea

GTL Gas-to-Liquids

HIV/AIDS Human Immunodeficiency Virus/Acquired Immunodeficiency

Syndrome

IBRD International Bank for Reconstruction and Development

IDA International Development Association

IFAD International Fund for Agriculture Development

IFC International Finance Corporation

IMF International Monetary Fund

IT Information Technology

IRC Internal Revenue Commission

ISN Interim Strategy Note

JCS Joint Country Strategy

JSDF Japan Social Development Fund

LICUS Low Income Countries Under Stress

LNG Liquefied Natural Gas

MDG

MDTF

Millennium Development Goal

Multi-Donor Trust Fund

MIGA Multilateral Investment Guarantee Agency

MSME Micro, Small, and Medium Enterprises

MTDS Medium-Term Development Strategy

NGL Natural Gas Liquids

NGO Non-Governmental Organization

NPV Net Present Value

NZAID New Zealand Agency for International Development

PAC Public Accounts Committee

PEP-Pacific Private Enterprise Partnership for the Pacific

PERR Public Expenditure Review and Rationalization

PESD Public Expenditure and Service Delivery

PETS Public Expenditure Tracking Survey

PIC Public Information Center

PFR Public Finance Review

PNG

PNG LNG

Papua New Guinea

Papua New Guinea Liquefied Natural Gas Project

PNGSDP Papua New Guinea Sustainable Development Program, Ltd.

PNGSEL Papua New Guinea Sustainable Energy, Ltd.

PPAP Productive Partnerships in Agriculture Project

PPP Public-Private Partnership

PTF Partnership for Transparency Fund

RDP Rural Development Program

REDD Reduced Emissions from Deforestation and Degradation

RMRP Road Maintenance and Rehabilitation Project

SADP Smallholder Agriculture Development Project

SEFP Sustainable Energy Financing Project

SWAp Sector-Wide Approach

SIOA Strengthening Institutions of Oversight and Accountability

SWG Sector Working Group

TA Technical Assistance

TSLP Teacher‟s Solar Lighting Project

UN United Nations

UNAIDS Joint United Nations Programme on HIV/AIDS

UNDP United Nations Development Programme

WB World Bank

WHO World Health Organization

TABLE OF CONTENTS

PAPUA NEW GUINEA

COUNTRY ASSISTANCE STRATEGY – PROGRESS REPORT

I. Introduction .......................................................................................................................... 1

II. Economic and Policy Developments .................................................................................... 1

III. Progress Towards CAS Outcomes ....................................................................................... 4

IV. Adjustments to CAS Based on Implementation Progress .................................................... 7

V. Risks ................................................................................................................................... 13

TABLES

Table 1. Adjusted CAS Outcomes Expected by FY2011 ………………………………… .............. 6

Table 2. Changes in the CAS Program for FY2008-11 ...................................................................... 8

TEXT BOXES

Box 1: New Strategic Frameworks for National Development ....................................................... 3

Box 2: Gender-Inclusive and Gender-Focused Programming in PNG ............................................ 7

Box 3: Addressing the “Youth Challenge” through the CAS Program ........................................... 9

ANNEXES

A. Country at a Glance ............................................................................................................ 15

B. CAS 2008-2011, Revised Results Matrix .......................................................................... 18

C. Selected Indicators of Bank Portfolio Performance and Management ............................... 26

D. IBRD/IDA Program Summary ........................................................................................... 27

E. IFC and MIGA Program ..................................................................................................... 28

F. Summary of Non-Lending Services ................................................................................... 29

G. IBRD/IDA and Grants Operations Portfolio ...................................................................... 30

H. IFC Committed and Disbursed Outstanding Investment Portfolio .................................... 31

I. Social Indicators ................................................................................................................. 32

J. Key Economic Indicators ................................................................................................... 33

MAP – IBRD 33463 .............................................................................................................................. 36

IDA/IBRD IFC

Vice President: James W. Adams Rashad-R. Kaldany

Country Director: Ferid Belhaj

Kanthan Shankar

Karin Finkelston

Task Team: Laura E. Bailey

Erik Johnson

Gavin Murray

Peter Cusack

1

I. INTRODUCTION

1. This CAS Progress Report assesses implementation of the Bank‟s FY2008-11 Country

Assistance Strategy (CAS) at mid-term. The program presented in the CAS was a menu of

possible assistance activities of interest to Government which allowed flexibility to focus on

issues and areas where Bank Group assistance holds the most promise. The first two years of

CAS implementation, therefore, have been a disciplined process of selectively prioritizing this

menu with the Government of Papua New Guinea (GoPNG) and key stakeholders, with strong

consideration given to building counterpart relationships and candidly assessing comparative

advantage vis-à-vis other development partners. This flexibility, so essential to the process of

rebuilding relations with Government and re-launching an active portfolio of projects,

necessarily required choices and trade-offs during the first two years of CAS implementation.

2. While the objectives of the FY2008-11 CAS remain relevant, progress towards those

objectives has been mixed; the program proposed in the CAS has been adjusted to accommodate

the changes in the country‟s economic dynamics posed by the global economic crisis and the

new large-scale natural gas projects, and has been recalibrated to take due account of the

capacity constraints present as the portfolio is rebuilt. The program has also been slightly refined

to be appropriately responsive to the Government‟s development agenda as expressed in their

two new strategy frameworks: National Vision 2050 and the Long-Term Development Strategy

(2010-2030).

3. The cross-cutting issues of gender and youth, critical aspects of the challenge of socially

inclusive and equitable development, remain important dimensions in development efforts in

Papua New Guinea. Both themes have been carried through in CAS implementation through a

dual approach of focused interventions and mainstreaming in sectoral operations; these themes

are further explored in boxes 2 and 3 later in this Progress Report.

II. ECONOMIC AND POLICY DEVELOPMENTS

4. PNG‟s economy is weathering the impact of the global economic crisis well, with a

robust pace of economic growth. In 2009 the economy slowed modestly to 3.9 percent,

compared with the growth of 6-7 percent in 2007-08; this continues the longest uninterrupted

period of economic growth – seven years – since PNG‟s independence in 1975. The growth

remains broad-based, extending to both the extractive industry and other sectors (in particular

construction and telecommunications). Although formal sector employment is modest, solid

formal employment growth has also continued, with the conditions in the skilled segment of the

labor market very tight.

5. Prudent macroeconomic management during the most recent commodity boom helped

PNG build resiliency to cope with the current global crisis. During the boom years the

government prudently capped growth of government spending, saved temporary windfall

mineral revenue and paid down its most expensive external debt; the non-mineral budget deficit

(a key indicator of fiscal stance in a resource rich economy) remained largely steady around 5-6

percent of GDP, close to the estimated long-term sustainable level. With the decline of prices of

copper and oil, two of PNG‟s main export commodities, these prudent policies provided fiscal

space to adjust to the external shock.

2

6. PNG faces a challenge, however, in calibrating the magnitude of fiscal response to the

global crisis, given the already robust growth performance of PNG‟s economy and volatility of

PNG‟s future mineral revenue stream. Currently, indications are that the growth of public

expenditure financed by windfall revenue savings from trust accounts has accelerated

significantly in 2009 and the non-mineral budget deficit may increase in 2009 to 10-11 percent

of GDP. Medium-term fiscal pressure will also arise from contingent government liabilities,

such as external borrowing to fund the state stake in the PNG Liquefied Natural Gas Project

(PNG LNG) and investment commitments to landowners to enlist their support.

7. The prospect of the PNG LNG Project is also helping to buoy the economy.

Implemented by a consortium of international and domestic investors led by Exxon Mobil, the

project is estimated to cost around US$17 billion including finance charges, which is more than

double PNG‟s current annual GDP. The project received the Final Investment Decision approval

in December 2009, and Sales and Purchase Agreements were completed in February 2010.

Major construction and capital contracts have been issued, and gas production is scheduled to

start in 2014. Inflow of investment for project‟s design and early works, and the boost to private

sector and consumer confidence, helped counter the bad global economic news in 2008-2009,

and buffered the negative impact of the terms-of-trade shock.

8. In response to the global crisis, monetary and exchange rate policies have been made

more flexible to maintain external sustainability and to curb inflationary pressures. The collapse

of commodity prices in the fall of 2008 and capital outflows had an immediate effect on PNG‟s

foreign exchange reserves, which declined from the high of US$2.7 billion in mid 2008 to less

than US$2 billion by early 2009 (a fall of 25 percent). Following the tightening of monetary

policy in late 2008 through early 2009, and the somewhat delayed adjustment of the exchange

rate, foreign exchange reserves stabilized and reached reaching $2.4 billion in end October from

$2.1 billion in end 2008. The monetary tightening helped bring inflation under control; after

peaking at 13.5 percent in the third quarter of 2008, headline inflation dropped to 7 percent by

mid-2009, but sustained high spending from trust accounts, and increased private sector activity

driven by PNG LNG, has renewed inflationary pressure in 2009, and 9.5 percent is estimated for

2010. Monetary policy has moved more towards neutrality and the exchange rate has

appreciated somewhat, mostly unwinding movements during the global crisis.

9. In the medium-term, PNG is facing significant volatility in its export and budget revenue

base, underscoring the need for continued prudent fiscal management and expenditure smoothing

of recent years. The PNG LNG project holds a major upside potential in terms of growth and

revenue for the PNG economy, especially after production starts in 2014. As with other major

natural resource projects, however, tax revenues from PNG LNG project are not expected to start

flowing until the end of the next decade, several years after the start of production. Meanwhile,

in the nearer-term (2011-2013) state revenues from existing extractive projects are projected to

start declining. Given these uncertainties and the volatility of future revenue streams, it will be

important to continue the prudent fiscal policy laid out in the Medium-Term Fiscal Framework,

aimed at expenditure smoothing commodity price and production cycles. The 2010 Budget

indicated that stimulus spending will continue from an increased development budget and from

trust funds, and that none of the additional minerals revenue forecast for 2010 will be allocated

to debt repayment; both of these signals are potentially worrying.

10. Translating strong macroeconomic performance and extractive industry revenues into a

broad improvement in living standards remains a key challenge. Ensuring the integrity of the

3

Box 1: New Strategic Frameworks for National Development

The National Vision 2050 articulates the aspirations and long-term vision of the country and

identifies the seven strategic focus areas that are deemed necessary to deliver “a smart, wise, fair,

healthy, and happy society by 2050”: human capital development (including gender, youth, and

people empowerment); wealth creation; institutional development and service delivery; security and

international relations; environmental sustainability and climate change; spiritual, cultural, and

community development; and strategic planning, integration, and control.

The Long-Term Development Strategy (2010-2030) maps out the development path the Government

seeks to take for the next 20 years, with the goal of “becoming a prosperous middle income country

by 2030”. This path will be implemented through a series of five-year plans which detail specific

public investments and policies to advance the following objectives: human development (with a

focus on basic health systems and universal basic education); equality and participation (through

improved transport services, electricity, education and health status, and business assistance);

national sovereignty and self reliance (through good governance and broad-based growth);

sustainable management of natural resources and environment; and “PNG ways” reflecting the

traditional wisdom and knowledge of the people. The LTDS makes explicit provision for a

significant public investment program to channel mineral resources into improved public

infrastructure.

public financial management for service provision, improving efficiency of sectoral spending,

strict control over the size and performance of the civil service, and transparency and

accountability in budget management will be crucial in converting the forthcoming windfall

revenue into palpable improvement in service delivery. In this regard, redoubled efforts to

improve the quality and efficiency of spending and strengthen overall governance will be

important. Action to invigorate the existing mechanisms is critical, perhaps building upon high-

profile efforts such as the regular coverage in one of the nation‟s newspapers of the

parliamentary Public Accounts Committee and its investigations.

11. There has been important progress in key areas of structural reform in recent years; in

particular, opening markets in telecommunications and air transport has produced major welfare

gains for the population. To leverage higher levels of domestic and foreign investment – and the

diversified economy and increased employment that could eventuate – attention is needed to

challenges such as maintaining law and order, improving the business climate, commercializing

parastatals, reducing the regulatory and licensing burden, and equitably accessing resources

(including land) for development. Developing infrastructure – electricity, telecommunications,

road and other transport – continues to be a critical precondition for accelerated private sector-

led growth, and the Bank will intensify its dialogue with GoPNG in order to identify useful

opportunities.

12. The Government has recently engaged in two processes whose results together provide

the strategic context and framework for development assistance going forward: the National

Vision 2050, which articulates the aspiration of diversifying away from minerals wealth towards

broader growth and employment and improved service delivery, and the Long-Term

Development Strategy (LTDS) 2010-2030, which provides more specific guidance on key

national priorities that allow the WBG to refine our proposed support to GoPNG. Specifically for

the Bank Group, the LTDS framework invites a strategic approach in the energy sector and

offers entry points for community infrastructure and subnational service delivery.

4

III. PROGRESS TOWARDS CAS OUTCOMES

13. Progress towards CAS outcomes has been mixed, with some notable advances in

extractive industries sector governance and in pro-poor access to productive infrastructure, and

notable disappointments in public financial management reform and mechanisms for improved

subnational service delivery. To some extent, the lagging performance against expected CAS

outcomes is due to the delay in re-launching the portfolio, with projects approved by the Bank

Board in 2008 not being signed and becoming effective until mid-2009. Given the Bank‟s

somewhat turbulent relationship with past Governments, especially on issues such as land reform

and forestry sector governance, the process of rebuilding relationships in order to relaunch the

portfolio was necessarily effort- and time-intensive.

14. The World Bank Group has been particularly mindful to collaborate with other

development partners under GoPNG leadership. While the size of the Bank's portfolio is small in

comparison with other donors (particularly Australia), the neutrality of the multilateral structure

allows the Bank to leverage technical expertise and broker unique connections in other regions

whose innovation and experiences might be of interest to GoPNG, including from other

resource-rich countries who have successfully advanced their development agendas.

15. In the public finance arena, Bank inputs currently focus on providing analytical work on

the challenges in macroeconomic management of minerals wealth; GoPNG considers this the

highest priority for Bank involvement, and a renewed policy dialogue process is underway based

on the Bank‟s Economic Note on Managing Resource-Induced Volatility, delivered in March

2010. National authorities have requested a Financial Sector Assessment Program (FSAP) to be

undertaken in May 2010. While activities proposed in the CAS to directly support oversight

institutions and engage in operational reforms in procurement and public financial management

have not been taken up by Government, the PNG authorities have welcomed Bank analytical

work on the challenges in managing resource-induced volatility, and an Economic Note on that

topic was delivered in March 2010.

16. In addition, the GoPNG Treasury decision to progress discussions on implementation of

the Extractive Industries Transparency Initiative (EITI) represents a welcome advance in the

governance reform agenda. Taken together with the ongoing progress in mining sector

governance, and the signal that GoPNG is considering a similar sector program for the petroleum

sector, prospects for improved mineral governance are improving. Given the centrality of

mineral wealth to the country‟s revenue and growth profile, Bank support for sector governance

is critical.

17. Progress has been made in laying the groundwork for improvements in the business

regulatory environment. While PNG‟s position on the global “Doing Business” scale suffered in

comparison to neighbors who enacted important reforms, the remainder of the CAS period

should see PNG also enacting reforms that will help improve its standing, and could also see the

first public-private partnerships inked under the new ADB-supported Public-Private Partnership

(PPP) policy framework. IFC engagement in PPP has focused on providing advice on specific

transactions and investment options to state enterprises. Progress in strengthening the financial

sector has been less straightforward, with Government making slow progress on planned

payments system reform, establishment of a private credit report bureau, and taking a laissez

faire stance on regulation of potential mobile phone banking. IFC has worked to establish

partnerships in the banking sector, including provision of a trade finance facility for a

5

commercial bank. The December 2009 request for preparation of an IDA-IFC Risk-Sharing

Facility to support SME access to finance promises to improve overall access to financial

services and to increase PNG enterprises‟ uptake of significant near-term subcontracting

opportunities associated with large enclave projects.

18. The World Bank continues to coordinate closely with the Asian Development Bank and

AusAID on their ongoing work in public finance and fiduciary reforms. As a successor to the

Public Expenditure Review and Revitalization (PERR) process, these three donors (joined

recently by the European Union) have proposed a Framework for Enhancing Fiscal Management

to GoPNG as a platform for deepening policy reform in the most critical public finance areas.

The Bank is also complementing the work of other development partners on governance and

transparency (Australia with the Attorney General‟s Office and the Ombudsman‟s Commission,

and UNDP with the Public Accounts Committee of Parliament) by focusing on extractive

industry transparency (as described above), by intensifying fiduciary capacity building efforts in

Bank-supported projects to strengthen governance „from within‟, and by undertaking analytical

work to understand the resource allocation process at the local level including the roles and

activities of policy-makers, administrators, and communities.

19. World Bank support to improve productivity and livelihood opportunities is gathering

speed after delays early in the CAS period, and investments in key cash crop subsectors are now

poised to begin delivering tangible benefits for rural smallholders by the end of 2011. Efforts to

identify an appropriate niche for Bank support to improved subnational service delivery,

anticipated to be channeled through a community-driven approach involving block grants, also

suffered delays, due both to a need for better coordination with other donors interested in this

areas, and to Government‟s request in August 2009 that donors delay new project design efforts

until the new national strategy documents (Vision 2050 and LTDS) were launched. Discussions

with potential national and provincial government partners were renewed in March 2010, and a

joint decision with Government on a mutually agreed approach to subnational community-driven

work is expected by June 2010.

20. Of concern to GoPNG and all development partners is how little progress has been made

towards the MDGs, most especially in health and education; momentum is stalled or negative in

most areas, in spite of significant attention and public debate. Although the Government has not

yet requested Bank financing for program loans in health or education, strong and well-

coordinated sector dialogue is ongoing and the Bank has responded quickly to requests for

analytical work in both areas. In education, joint appraisal of GoPNG‟s UBE plan has been

completed to support a possible Fast Track Initiative grant application to the Catalytic Fund, and

early grade reading assessments are underway; in health, a sector human resources and payroll

study is nearing completion and will be complemented by a fiscal space analysis coordinated

with the Departments of Health and Treasury, and preparations for an HIV-AIDS Integrated Bio-

Behavioral Survey is now underway with all funding secured. Considering the critical and

dramatic improvement in service delivery needed to galvanize progress towards the MDGs, and

the opportunity presented by the medium-term revenue flows from resource projects, the Bank is

redoubling efforts to approach the challenge of quality budget execution and service delivery

from a „sectoral angle‟.

6

21. Table 1 shows the adjusted outcomes expected in the CAS period; outcomes tied to the

budget process and to oversight institutions were dropped to reflect GoPNG preference for other

donors than the Bank in those areas, and additional CAS outcomes are offered for new

interventions requested by GoPNG in EITI and SME Access to Finance.

Table 1: Adjusted CAS Outcomes Expected by FY2011

Strategic Longer-Term Country Outcomes CAS Outcomes the World Bank Group Expects to

Influence

CAS Pillar I: Promoting and maintaining sound economic and natural resource management

Promote sound macroeconomic and public

expenditure management

GoPNG shows continued awareness of the importance of

maintaining fiscal discipline and a stable macroeconomic

environment

Promote good governance through

independent and capable oversight

institutions and improved citizen monitoring

Expanded and strengthened multi-stakeholder mechanisms to

review overall policymaking and extractive industries

Increased public availability of accessible information to

support monitoring of government performance

Promote well-governed, sustainable

extractive industries offering significant

benefits at local as well as national levels

Strengthened institutional structures in the mining sector,

emphasizing transparent management and resource

distribution

Program in place to leverage extractive industry and enclave

project revenues for broader SME employment

Promote effective and sustainable

management of PNG‟s natural resources

Strategic framework for disaster risk management and

climate change adaptation and mitigation adopted by

GoPNG, and investment program supported by partners

CAS Pillar II: Improving livelihoods and service delivery, especially for the rural poor

Promote the ability of the private sector to

provide significant employment and

livelihood opportunities

Stronger business enabling environment, with improved

financial infrastructure

Greater number of public-private partnerships in

infrastructure

Improve livelihoods through policies and

investments that promote inclusive,

sustainable growth

Sustainable increases in commercial agriculture production

and artisanal and small-scale mining

Support the development of more responsive,

accountable local governments that deliver

cost-effective public services for community

needs

Models for improved local service delivery tested through

partnerships between government and civil society, and

within and across communities

Help develop well-managed national and

local transport services

Improved condition of roads and bridges in selected

provinces

Expand access to reliable, affordable

electricity to support service delivery and

rural enterprise development

Strategic energy sector planning launched to provide

framework for investment in lower-carbon and lower-cost

electricity in rural centers and urban concentrations

Facilitate provision of reliable, affordable

access to telecommunications

Expanded access to affordable and reliable

telecommunications services in rural areas and outside Port

Moresby

Improve human development outcomes

across the country

Increased resources supporting higher primary school

participation and grade retention

Improved evidence base for health sector policies and plans

More effective national HIV/AIDS response through

evidence-based policy and interventions

Note that outcomes in italics are planned results from new program activities not foreseen in the original CAS.

7

IV. ADJUSTMENTS TO CAS BASED ON IMPLEMENTATION PROGRESS

22. The overall objectives of the FY2008-11 CAS remain valid with some adjustments. The

CAS is consistent with the National Vision 2050 which outlines the strategic directions for the

country, and with the Long-Term Development Strategy which covers a 20-year period, which

will be further operationalized through a succession of four 5-year plans. The timing of this CAS

Progress Report to coincide with these strategic frameworks has allowed a realignment of key

support envisioned in the CAS in such areas as energy and subnational service delivery to better

respond to national priorities and engage with strong champions within GoPNG.

23. The changing global and country-specific economic dynamics have provided new

opportunities not originally foreseen in the CAS, such as support for improved access to finance

for small- and medium-scale enterprises overall, and to fully exploit the subcontracting

opportunities emerging from extractive and enclave projects, as well as a shift in the energy

sector from small-scale pilot activities to sector-wide strategic dialogue and possible technical

assistance. Some adjustments are also required where the Government has chosen not to request

IDA support, notably as regards direct financial support to strengthening oversight institutions of

governance, and operational involvement in public financial management reform; the Bank is

coordinating closely with other development partners who are providing assistance in those

areas, including the European Union and the whole-of-government program from Australia.

Box 2: Gender-Inclusive and Gender-Focused Programming in PNG

Gender aspects of the development challenge in PNG are both profound and multi-dimensional; girls

are less likely to attend and complete school, women face difficulties accessing finance and entering

the formal economy, and violence against women is at epidemic levels. While many inspiring

examples of girls and women achieving success are available, and media are increasingly reporting

upon those good news stories, systematic efforts to remove the policy, institutional, and attitudinal

barriers have not been launched on large scale, and too little attention is paid to the critical linkages in

dialogue and awareness between girls and boys, and women and men.

The CAS program in many ways „grew up‟ around a foundational set of gender concerns: severe

constraints to girls growing up healthy and educated in an environment of respect with boys, and to

women participating actively and without fear in economic and community life. In building a pipeline

of projects, the Bank built on stakeholder interest to use trust fund resources to engage with women

living in mine- and petroleum-impacted communities. Now mainstreamed into one of the active IDA

credits, and implemented with strong support from GoPNG, the Chamber of Mines and Petroleum, and

local women‟s groups, the “women in mining” work has underpinned a second-generation of

initiatives, including lessons learning research with government and corporate stakeholders on

equitable benefits sharing from enclave projects. It has also helped define a targeted intervention to

empower women in post-conflict Bougainville while simultaneously building capacity of their local

governments to engage with both men and women in community development planning.

As the Bank portfolio has grown under the CAS, other interventions have been gender-informed and

gender-focused: the work with youth (see Box 3) focuses on both young women and young men in

employment and education initiatives, with design aspects that acknowledge their different challenges;

the agricultural livelihoods interventions include specific elements which support and protect access

by women to income-generating opportunities. By explicitly acknowledging the gender dynamics at

play in livelihoods and social sector interventions, a pattern is established through which future gender

interventions – whether mainstreamed or targeted – will retain a primary position in the strategic

support provided by the Bank.

8

Table 2: Changes in the CAS Program for FY2008-11 Completed or Ongoing Activities in Bold; new additions in Italics; other listings are under preparation

Pillar

Promoting and Maintaining Sound

Economic and Natural Resource

Management

Improving Livelihoods and Service

Delivery, Especially for the Rural Poor

World Bank – IDA Credits and Core AAA

IDA Credits (TA and Investment)

FY09 Mining TA Oro Province Reconstruction and

Development

Smallholder Agriculture Development

FY10

IDA-IFC Risk-Sharing Facility: Finance for

SMEs (joint with IFC) Rural Communications

Productive Partnership in Agriculture

Urban Youth Employment

FY11

Strengthening Oil-Gas Sector Governance Second Chance Education (FODE)

Community Infrastructure and Local Governance

Energy Sector TA and Strategy

Road Maintenance and Rehabilitation II

Programmatic Support to Health Sector

Operations Accessing Regional and Global Resources (TA and Investment)

FY09 Sustainable Energy Financing (GEF-PAS) Teachers’ Solar Lighting (GEF)

FY11 Climate-Proofing Infrastructure for Adaptation

(GFDRR)

Fast-Track Initiative Programmatic Support for

Basic Education

AAA (TA and ESW)

FY09 Climate Change Stocktaking Socioeconomic Survey of Roads Repair

FY10

Economic Note on Managing Resource-

Induced Volatility

Climate Change and Adaptation Strategy

Assessment of Universal Basic Education Plan

Health HR Payroll Assessment

Household Income and Expenditure Survey

Adolescent Girls Scoping Study

FY11

Public Expenditure Tracking Survey or

Sectoral PERs (arising from Economic Note) HIV/AIDS Population Bio-behavioral Survey

Political Economy Analysis of Local

Development Planning, Resource Allocation,

and Benefit Sharing

Poverty Reports derived from HIES

Integrated Review of Roads

IFC

FY08 PNG Microfinance Ltd.

Informal Economy Phase I

FY09

Regulatory Simplification and Investment Policy

and Promotion

Informal Economy Phase II

Digicel (telecommunications) investment I

Tourism Development (Pacific Regional): Identifying Barriers to tourism sector

development

FY10

IDA-IFC Risk-Sharing Facility: Finance for

SMEs (joint with IDA)

Special Economic Zone legislation,

regulation and policy

Tourism Development (Pacific Regional): Responding to sector impediments (investment

focus)

Digicel (telecommunications) investment II

ECOM (coffee) investment

KK Kingston (manufacturing and services)

investment

9

FY11

Public-Private Partnerships in Infrastructure:

Support to Special Economic Zone policy Potential investments in: telecommunications,

agribusiness, financial institutions,

manufacturing

Digicel distributor training

Agriculture supply chain finance

Mobile phone banking technology providers

ECOM coffee and cocoa farmer training

24. The sequencing of investment operations has been adjusted to ensure effective use of

available IDA funds taking account of implementation capacity and level of support within

GoPNG. Adjustments in the lending program are presented in Table 2 on the previous page.

25. At CAS mid-point, five projects are active: RMRP, Mining TA 2, SADP, and the

Sustainable Energy Financing Project (SEFP), a GEF-funded initiative which has recently been

restructured to dovetail with the smaller pilot Teachers Solar Lighting Project (TSLP). One

project is scheduled to be considered by the Board together with this Progress Report; the

Productive Partnerships in Agriculture Project (PPAP) will support productivity and market

access improvements for cocoa and coffee smallholder producers. The Urban Youth

Employment Project, which supports training and labor-intensive public works programs in Port

Moresby, is presented for consideration this month. The final project for FY10 is scheduled for

Board discussion in May: the Rural Communications Project will finance increased access in

rural areas to mobile telephony and to nurture broader, more competitively priced internet

coverage in rural areas.

26. A robust pipeline of investment projects are envisioned for preparation and appraisal in

FY2011. A follow-on transport sector project will build upon the accomplishments of the Roads

Maintenance and Rehabilitation Project as part of a series of infrastructure interventions aimed at

Box 3: Addressing the ‘Youth Challenge’ through the CAS Program

Young people under the age of 20 account for almost half of the PNG‟s total population, and they

constitute a disproportionate part of the urban poor. In Port Moresby, the largest city in PNG, youth

between the ages of 15 and 29 represent about 35 percent of the total population as compared to 28%

nationally; and it is estimated that the youth cohort will grow by at least another 13 percent by 2015

due to natural population increases and in-migration. In urban areas, many youth are living without

the traditional support of clan networks, at risk of alienation and poverty. The prospect of being

marginalized by their community or missing the rising tide of economic growth tops the list of fears

many youth express, and participation in raskol street crime (by young men) and sex exchanges for

cash (by young women) is reportedly growing. As past research has focused on young men, new Bank

analytical work is focusing on the challenges facing adolescent girls, to inform our interventions.

While there is considerable Government and donor commitment to „dealing with‟ youth-at-risk through

health and education programs, there is much less attention paid to disadvantaged youth, most of

whom have not completed school and lack the basic competencies or credentials required for the

workplace. The Urban Youth Employment Project will offer some of those youth a chance to become

economically active through a mix of skills training, personal viability training, and targeted labor-

intensive job opportunities, making a concerted effort to foster their social and economic integration

into mainstream society. A subset of PNG youth has the near-term potential to gain skilled

employment beyond public works, but they lack the credentials that would help them to differentiate

themselves in the labor market. The Second Chance Education (FODE) Project will work to improve

the quality of services offered through the Flexible Open and Distance Education program, ensuring

that more students complete a quality tutor-supported program and receive a recognized equivalency.

10

increasing reliable access for rural populations to markets and services. A new operation to

support community infrastructure development through block grants, with capacity building

support to provincial and district authorities, is in preparation. Strong support from GoPNG for a

small credit supporting improved access to Second Chance Education (FODE) will allow the

Bank to advance the first IDA credit for social sector work under this CAS, and may lead the

way toward further lending in support of human development priorities. The Government has

requested that the revised lending program should also accommodate consideration of three

projects not foreseen under the CAS. The IDA-IFC Risk Sharing Facility would expand access to

finance for SMEs; an Energy Sector Strategy project is being discussed to replace the Rural

Electrification operation, to help GoPNG develop a robust and comprehensive energy sector

strategy to support low-carbon choices; and a Oil and Gas Sector Governance Project, financing

technical assistance for the Department of Petroleum and Energy, is under consideration. Final

determination of which projects are financed through the remaining IDA15 resources and which

are prepared for consideration under the subsequent replenishment will be informed by the

ongoing improvements in dialogue with GoPNG and in portfolio performance.

28. The International Financial Corporation has sought to expand both investment and

advisory activities in PNG, whilst continuing to focus on a regional approach in its Pacific

engagement. Recent IFC investments have focused on telecommunications (Digicel PNG),

microfinance (PNG Microfinance Limited) and agribusiness (ECOM). Consistent with its Pacific

Initiative, IFC continues to explore opportunities for investment in and support to local PNG

businesses and foreign investors in the resources, finance, and service sectors. At the

Government‟s request, the Bank-IFC teams fielded a series of missions to identify and pre-

appraise a possible Risk Sharing Facility to help expand access for SMEs overall, which may

also support the growth of business and jobs through the near-term increase in economic

opportunities associated with the resources sector. The IFC‟s technical assistance activities in the

area of investment climate (business enabling environment) include drafting of national Special

Economic Zone legislation and regulations, as well as policy advice. IFC‟s engagements with

potential parties to public-private partnerships and access to finance are well-coordinated with

key donor parties including the ADB.

29. The FY2008-11 CAS is a joint strategy document, IDA and IFC staff are co-located in

Port Moresby and conduct joint staff meetings, and considerable progress has been made in

coordinating IDA and IFC operations through the joint field office.

30. MIGA‟s assistance in Papua New Guinea is limited to a single guarantee operation worth

US$76.6 million in gross exposure. The guarantee covers a portion of equity investment and a

loan by a syndicate of commercial lenders for the Lihir open-pit gold mine in New Ireland

province, which facilitated several hundred million US dollar foreign investment.

31. Portfolio performance was adversely affected by lengthy delays between Board approval

and signing of the Financing Agreements by the GoPNG, but most parameters are now

improving as the working relationship with key counterpart agencies is rebuilt and staff gain

experience. Disbursements were very low for the first 18 months of the CAS period, but have

since picked up; the disbursement ratio currently stands at 15.3 percent. Of the five active

investment projects (3 IDA/IBRD and 2 GEF), implementation status reports rated two

satisfactory or above as regards to development objectives and one as satisfactory as regards

11

implementation progress; there is now one problem project (SADP, rated Marginally

Unsatisfactory for both implementation progress and achievement of development objective1)

and no potential problem projects. Beginning in FY2011, portfolio reviews will identify cross-

cutting implementation issues and potential solutions; equally important, the Bank has begun a

program of fiduciary training and capacity building to support improved portfolio performance.

32. Efforts to rebuild the IDA portfolio in PNG have highlighted the loss in familiarity with

IDA systems amongst key GoPNG counterparts as a consequence of years of low program

activity. Therefore, new initiatives to rebuild capacity in fiduciary and implementation processes

were launched in the last half of FY2010. In addition to the overall unfamiliarity with Bank

systems, the authorities may have limited capacity to prepare projects in the period leading up to

and immediately following elections; the Bank will thus redouble efforts to accelerate

processing.

33. Although capacity across implementing partners is uneven and familiarity with IDA

systems is being rebuilt, the Bank has been able to selectively nurture innovations that represent

„cutting edge‟ development interventions well-contextualized for the PNG setting. For example,

the Rural Communications project uses a simple output-based aid model that takes advantage of

strong government interest and a rapidly modernizing regulatory and business environment in the

telecommunications sector to break new ground in increasing rural telecoms access.

34. In addition to investment operations, the Bank is pleased to be able to provide assistance

in building public sector and civil society capacity in support of the GoPNG Treasury decision to

progress towards implementation of EITI. Immediate support will include sponsoring attendance

at regional workshops, deploying specialized support in-country (shared with the Solomon

Islands who are also joining EITI), and fielding a mission to support preparation of a PNG

proposal to the EITI MDTF, once Government is ready to commence work.

35. The World Bank Group program in Papua New Guinea is complemented by a trust fund

portfolio of 19 trust funds totaling US$3.935 million. These trust funds provide targeted support

to project preparation, key analytical work (such as the HIV/AIDS Bio-behavioral survey) as

well as to the cost of increased international staffing presence in the World Bank Office Port

Moresby.

36. Harmonization and aid effectiveness are important priorities for all of PNG‟s major

development partners, and the Bank participates actively in the DP Roundtable, the Gender

Forum (co-chairing the Thematic Working Group on Women‟s Economic Empowerment), and

in key working groups under the GoPNG Committee on coordination and aid effectiveness. The

Bank works closely with Australia across its whole-of-government presence, with regular

consultations both in-country and in Canberra, and has strong partnerships with the Asian

Development Bank, NZAID, USAID, and the European Union. In consideration of the PNG

authorities‟ strong interest in learning from Asia‟s regional leaders for examples and lessons, the

Country Office is building a robust dialogue with regional development partners including Japan,

China, Indonesia, and Malaysia. The Bank supports the PNG United Nations agencies in their

1 In addition to the delays in project launch occasioned by a long gap between Board approval and GoPNG

signature, implementation of SADP has also been affected by the fact that it is currently the subject of a Request for

Inspection lodged in December 2009 with the World Bank‟s independent Inspection Panel.

12

“Delivering As One” program, sitting as a regular member of the UN Country Team and

consulting regularly with UNDP and specialized agencies on relevant sectoral initiatives.

37. At an operational level, new Bank-financed projects place an emphasis on moving

towards Government-led sector programs where possible; in sectors where pooled financing is

less advanced, Bank operations have been designed in close coordination with other partners to

support a common Government-defined strategy. For the remainder of the CAS period, the

potential community infrastructure project would complement interventions by AusAID and the

EU, while the design of the new transport project and possible energy strategy credit are framed

within the GoPNG sector dialogue process in close collaboration with ADB and AusAID.

38. During CAS implementation, the Bank has initiated new partnerships with the private

sector and civil society, including a new program of outreach events through the GDLN and the

PIC, and a „listening program‟ of lunchtime meetings led by the Country Manager. Alongside

these partnerships, the Bank frequently meets with business associations, civil society, and

academic organizations on issues related to Bank analytical work, project design and

implementation and key issues in policy dialogue. Indeed, this consultative base was used as the

foundation for gathering information for this CAS Progress Report: three simultaneous channels

of consultation were undertaken, each seeking to create opportunities for candid and substantive

feedback. Strategic conversations were conducted one-on-one by the Country Manager with key

GoPNG counterparts and development partners, and group meetings were facilitated by the

Country Office team with all current and prospective project implementing partners. At the

same time, the IDA Country Manager and the IFC Country Coordinator jointly chaired meetings

private sector representatives and business associations, and similar roundtable meetings were

held with civil society, research institutions, and think tanks. Finally, sectoral and task teams

conducted structured interviews about Bank performance with their project counterparts. The

results of all three „streams‟ of consultation were brought together at a professionally facilitated

workshop in December 2009, which underpinned this CAS Progress Report.

39. Significant potential is also seen in the World Bank Group‟s increasingly multi-

dimensional relationship with the PNG Sustainable Development Program (PNGSDP), the

independently governed trust that receives the majority share of revenues and dividends from the

Ok Tedi mine and allocates them for development interventions. Working together with GoPNG

and provincial governments, other stakeholders, and PNGSDP, the Bank Group has an

opportunity to leverage systemic changes in service delivery and livelihoods in rural areas. The

first such example was IFC‟s recent partnership with PNGSDP in PNG Microfinance. The

Bank‟s unique ability to work with and through government to strengthen mechanisms that can

be co-financed by PNGSDP well into the future offers an important opportunity to reverse the

historical decline in state effectiveness in PNG‟s poorest rural provinces. PNGSDP is currently

providing co-financing in the amount of approximately $10 million to SADP and $17 million to

RMRP. Substantial co-financing in the amount of $14 million (in addition to the $25 million

provided by the World Bank) is being provided to the PPAP by the International Fund for

Agriculture Development (IFAD).

40. The FY2008-11 CAS results framework has been revised, updated and streamlined, to

reflect adjustments in the lending and analytical work programs, implementation progress and

efforts to harmonize with the Government‟s new national strategic directions (see Annex B).

Milestones and indicators have been adjusted based on changes in timing of new projects and

13

progress in implementation. The updated Results Matrix is shorter and more realistic than the

original.

V. RISKS

41. The risks highlighted in the FY2008-11 CAS remain valid. These risks have materialized

to varying degrees and the Bank‟s program continues to support mitigation efforts. While overall

economic activity has remained robust during the global crisis, and the 2008 fall in commodity

prices was well-managed through the medium-term fiscal and debt strategies, the 2009 budget

implementation and the 2010 budget plans signal both inflationary pressures and a softening of

the commitment to reduced public debt. Mindful of the limited appetite for policy dialogue on

public expenditures, the Bank will continue to use all opportunities with Government to provide

neutral and empirically-based advice on managing resource-induced volatility.

42. The country has not experienced heightened political conflict, and currently enjoys stable

governance. The remaining CAS period includes the lead up to elections in 2012 as well as a

period of fiscal challenge as revenues lag expenditures (mining output drops and LNG is still

under construction). This dynamic could lead to a decline in the governance environment, and

the Bank will continue to mitigate this risk by focusing on improved transparency and

accountability in extractive industries.

43. The disconnect between ambitious expectations around LNG-led jobs and the reality of

growing unemployment, especially among urban youth, may lead to increased criminal activity

and deteriorating social stability. Evidence of these dynamics has grown in late 2009 and early

2010, and while Bank projects support employment opportunities in Port Moresby, increasing

violence is already manifest in second-tier cities. The Bank will intensify efforts to identify

investments to improve livelihoods.

44. Natural disasters continue to pose a risk of significant economic disruption and social

dislocation, and the CAS will seek to increase the profile within GoPNG (currently focused on

carbon finance) for participation in regional disaster risk reduction initiatives. Perhaps equal in

possible impact to natural disasters is the risk from HIV/AIDS; early indications for sentinel sites

are that PNG is potentially among the highest risk countries in the world; the bio-behavioral

study that the Bank is leading will obtain more information on this risk.

45. Lack of ownership for broad-based public expenditure reform and lack of support for

Bank engagement with national oversight agencies stalled progress on related CAS initiatives.

As noted above, PNG‟s progress in improving the investment climate has been mixed, and

PNG‟s Doing Business has fallen behind that of more rapid reformers. Failure to arrest this

decline and make more substantial progress on the investment climate will jeopardize IFC‟s

ability to realize the goals described above and in Annex B, and limit the potential benefits of

private investment on the development of PNG more broadly. The Bank will continue to work

with other development partners and with champions in GoPNG to build broad-based

constituencies for change, reaching out to civil society and the media by helping them access

information. The Bank can only be effective if the approach is a long-term engagement

characterized by respect, persistence, and dialogue. Weaknesses in fiduciary systems also impede

implementation, and success will depend on strengthening GoPNG‟s capacity to apply and

monitor fiduciary guidelines.

14

46. Efforts to promote closer coordination between the Government and development

partners have yielded some results, notably through the 2008 collective agreement on a localized

aid effectiveness compact (the Kavieng Declaration), but momentum has slowed since signature.

The Bank will continue to communicate the importance of harmonization, and will seek to

increase collaborative efforts with other development partners.

15

Annex A: Country at a Glance

Papua East

Key D evelo pment Indicato rs New Asia & Low

Guinea Pacific income

(2008)

Population, mid-year (millions) 6.6 1,912 1,296

Surface area (thousand sq. km) 463 16,299 21,846

Population growth (%) 2.4 0.8 2.2

Urban population (% of to tal population) 13 43 32

GNI (Atlas method, US$ billions) 6.8 4,173 744

GNI per capita (Atlas method, US$) 1,040 2,182 574

GNI per capita (PPP, international $) 1,870 4,969 1,489

GDP growth (%) 6.6 11.4 6.4

GDP per capita growth (%) 4.1 10.5 4.2

(mo st recent est imate, 2003–2008)

Poverty headcount ratio at $1.25 a day (PPP, %) 36 a 17 ..

Poverty headcount ratio at $2.00 a day (PPP, %) 57 a 39 ..

Life expectancy at birth (years) 57 72 57

Infant mortality (per 1,000 live births) 50 22 80

Child malnutrition (% of children under 5) .. 13 28

Adult literacy, male (% of ages 15 and o lder) 62 96 72

Adult literacy, female (% of ages 15 and o lder) 53 90 55

Gross primary enro llment, male (% of age group) 60 111 100

Gross primary enro llment, female (% of age group) 50 109 89

Access to an improved water source (% of population) 40 87 68

Access to improved sanitation facilities (% of population) 45 66 39

N et A id F lo ws 1980 1990 2000 2008 b

(US$ millions)

Net ODA and official aid 326 412 275 317

Top 3 donors (in 2007):

Australia 276 262 198 281

European Commission 0 45 1 20

New Zealand 2 3 7 13

Aid (% of GNI) 13.1 13.3 8.3 5.5

Aid per capita (US$) 102 100 51 49

Lo ng-T erm Eco no mic T rends

Consumer prices (annual % change) 12.1 7.0 15.6 10.8

GDP implicit deflator (annual % change) 7.1 4.1 13.1 11.6

Exchange rate (annual average, local per US$) 0.7 1.0 2.8 2.7

Terms of trade index (2000 = 100) .. 80 100 159

1980–90 1990–2000 2000–08

Population, mid-year (millions) 3.2 4.1 5.4 6.6 2.6 2.7 2.5

GDP (US$ millions) 2,546 3,220 3,521 8,239 1.9 3.8 2.9

Agriculture 35.4 30.9 35.8 33.6 1.8 4.5 1.9

Industry 28.7 32.4 41.4 47.9 1.9 5.4 3.8

M anufacturing 10.2 9.6 7.5 5.6 0.1 4.6 3.7

Services 35.9 36.8 22.8 18.4 2.0 -0.6 3.5

Household final consumption expenditure 60.9 59.0 44.6 58.2 0.4 3.4 0.4

General gov't final consumption expenditure 24.1 24.8 16.6 10.0 -0.1 2.5 1.1

Gross capital formation 25.2 24.4 21.9 19.4 -0.9 1.9 -1.1

Exports of goods and services 43.2 40.6 66.2 72.5 3.3 5.1 6.3

Imports o f goods and services 53.3 48.9 49.2 60.1 -1.3 3.4 6.3

Gross savings .. .. .. ..

Note: Figures in italics are for years other than those specified. 2008 data are preliminary. .. indicates data are not available.

a. Country poverty estimate is for earlier period. b. A id data are for 2007.

Development Economics, Development Data Group (DECDG).

(average annual growth %)

(% of GDP)

10 5 0 5 10

0-4

15-19

30-34

45-49

60-64

75-79

percent of total population

Age distribution, 2007

Male Female

0

10

20

30

40

50

60

70

80

90

100

1990 1995 2000 2007

Papua New Guinea East Asia & Pacific

Under-5 mortality rate (per 1,000)

-10

-5

0

5

10

15

20

95 05

GDP GDP per capita

Growth of GDP and GDP per capita (%)

16

Annex A: Country at a Glance, continued

B alance o f P ayments and T rade 2000 2008

(US$ millions)

Total merchandise exports (fob) 2,215 5,397

Total merchandise imports (cif) 1,491 3,794

Net trade in goods and services 339 488

Current account balance 300 228

as a % of GDP 8.5 2.8

Workers' remittances and

compensation of employees (receipts) 7 13

Reserves, including gold 304 2,745

C entral Go vernment F inance

(% of GDP)

Current revenue (including grants) 30.5 32.6

Tax revenue 23.8 26.9

Current expenditure 23.5 18.3

T echno lo gy and Infrastructure 2000 2007

Overall surplus/deficit -1.1 4.4

Paved roads (% of to tal) 3.5 ..

Highest marginal tax rate (%) Fixed line and mobile phone

Individual 47 47 subscribers (per 100 people) 1 6

Corporate 25 25 High technology exports

(% of manufactured exports) 20.2 67.1

External D ebt and R eso urce F lo ws

Enviro nment

(US$ millions)

Total debt outstanding and disbursed 2,556 1,418 Agricultural land (% of land area) 2 2

Total debt service 304 974 Forest area (% of land area) 66.5 65.0

Debt relief (HIPC, M DRI) – – Nationally protected areas (% of land area) .. 8.0

Total debt (% of GDP) 72.6 17.2 Freshwater resources per capita (cu. meters) 141,535 126,658

Total debt service (% of exports) 12.2 14.8 Freshwater withdrawal (billion cubic meters) 0.1 ..

Foreign direct investment (net inflows) 96 -30 CO2 emissions per capita (mt) 0.50 0.73

Portfo lio equity (net inflows) .. ..

GDP per unit o f energy use

(2005 PPP $ per kg of o il equivalent) .. ..

Energy use per capita (kg of o il equivalent) .. ..

Wo rld B ank Gro up po rtfo lio 2000 2008

(US$ millions)

IBRD

Total debt outstanding and disbursed 244 158

Disbursements 43 4

Principal repayments 29 30

Interest payments 15 9

IDA

Total debt outstanding and disbursed 92 72

Disbursements 0 2

P rivate Secto r D evelo pment 2000 2008 Total debt service 3 4

Time required to start a business (days) – 56 IFC (fiscal year)

Cost to start a business (% of GNI per capita) – 23.6 Total disbursed and outstanding portfo lio 0 1

Time required to register property (days) – 72 o f which IFC own account 0 1

Disbursements for IFC own account 0 1

Ranked as a major constraint to business 2000 2007 Portfo lio sales, prepayments and

(% of managers surveyed who agreed) repayments for IFC own account 0 0

n.a. .. ..

n.a. .. .. M IGA

Gross exposure 47 0

Stock market capitalization (% of GDP) 49.3 118.3 New guarantees 0 0

Bank capital to asset ratio (%) .. ..

Note: Figures in italics are for years other than those specified. 2008 data are preliminary.

.. indicates data are not available. – indicates observation is not applicable.

Development Economics, Development Data Group (DECDG).

0 25 50 75 100

Control of corruption

Rule of law

Regulatory quality

Political stability

Voice and accountability

Country's percentile rank (0-100)higher values imply better ratings

2007

2000

Governance indicators, 2000 and 2007

Source: Kaufmann-Kraay-Mastruzzi, World Bank

IBRD, 183IDA, 73

IMF, 0

Other multi-lateral, 493

Bilateral, 335

Private, 1,040

Short-term, 91

Composition of total external debt, 2007

US$ millions

17

Annex A: Country at a Glance, Millennium Development Goals

With selected targets to achieve between 1990 and 2015(estimate closest to date shown, +/- 2 years)

Go al 1: halve the rates fo r extreme po verty and malnutrit io n 1990 1995 2000 2007

Poverty headcount ratio at $1.25 a day (PPP, % of population) .. 35.8 .. ..

Poverty headcount ratio at national poverty line (% of population) .. 37.5 .. ..

Share of income or consumption to the poorest qunitile (%) .. 4.5 .. ..

Prevalence of malnutrition (% of children under 5) .. .. .. ..

Go al 2: ensure that children are able to co mplete primary scho o ling

Primary school enro llment (net, %) 66 .. .. ..

Primary completion rate (% of relevant age group) 48 52 .. ..

Secondary school enro llment (gross, %) 11 13 .. ..

Youth literacy rate (% of people ages 15-24) .. .. 67 64

Go al 3: e liminate gender disparity in educat io n and empo wer wo men

Ratio of girls to boys in primary and secondary education (%) 80 .. .. ..

Women employed in the nonagricultural sector (% of nonagricultural employment) 28 .. 32 ..

Proportion of seats held by women in national parliament (%) 0 0 2 1

Go al 4: reduce under-5 mo rtality by two -thirds

Under-5 mortality rate (per 1,000) 94 84 76 65

Infant mortality rate (per 1,000 live births) 69 62 57 50

M easles immunization (proportion of one-year o lds immunized, %) 67 42 62 58

Go al 5: reduce maternal mo rtality by three-fo urths

M aternal mortality ratio (modeled estimate, per 100,000 live births) .. .. .. 470

B irths attended by skilled health staff (% of to tal) .. 53 41 42

Contraceptive prevalence (% of women ages 15-49) .. 26 .. ..

Go al 6: halt and begin to reverse the spread o f H IV/ A ID S and o ther majo r diseases

Prevalence of HIV (% of population ages 15-49) .. 0.1 0.3 1.5

Incidence of tuberculosis (per 100,000 people) 250 250 250 250

Tuberculosis cases detected under DOTS (%) .. 1 7 15

Go al 7: halve the pro po rt io n o f peo ple witho ut sustainable access to basic needs

Access to an improved water source (% of population) 39 39 39 40

Access to improved sanitation facilities (% of population) 44 44 44 45

Forest area (% of to tal land area) 69.6 68.1 66.5 65.0

Nationally protected areas (% of to tal land area) .. .. .. 8.0

CO2 emissions (metric tons per capita) 0.6 0.5 0.5 0.7

GDP per unit o f energy use (constant 2005 PPP $ per kg of o il equivalent) .. .. .. ..

Go al 8: develo p a glo bal partnership fo r develo pment

Telephone mainlines (per 100 people) 0.7 0.9 1.2 0.9

M obile phone subscribers (per 100 people) 0.0 0.0 0.2 4.7

Internet users (per 100 people) 0.0 0.0 0.8 1.8

Personal computers (per 100 people) .. .. 5.2 6.4

Note: Figures in italics are for years other than those specified. .. indicates data are not available.

Development Economics, Development Data Group (DECDG).

P apua N ew Guinea

0

25

2000 2002 2004 2006 2007

Primary net enrollment ratio (..)

Ratio of girls to boys in primary & secondary education (..)

Education indicators (%)

0

10

2000 2002 2004 2006 2007

Fixed + mobile subscribers

Internet users

ICT indicators (per 100 people)

0

25

50

75

100

1990 1995 2000 2007

Papua New Guinea East Asia & Pacific

Measles immunization (% of 1-year olds)

18

Annex B: Papua New Guinea CAS 2008-2011, Revised Results Matrix

Longer-Term Development Agenda for PNG Expected Contribution of the CAS to National Development Results Partnerships

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

PILLAR I: PROMOTING AND MAINTAINING SOUND ECONOMIC AND NATURAL RESOURCE MANAGEMENT

Promote sound

macroeconomic and

public expenditure

management

“Strengthen public

expenditure

management through

ensuring fiscal

sustainability, strategic

prioritization of

available resources,

and cost-effective

implementation of

programs (MTDS p.

33)

Vulnerability to

commodity price swings Low to moderate risk of

debt distress

GoPNG shows continued

awareness of the importance

of maintaining fiscal

discipline and a stable macro-

economic environment

Inflation in lower single digits

(Baseline: 2.3% in 2006) Increased international

reserves (Baseline: US$ 1.4

billion at end-2006) Reduced public debt burden

(Baseline: 39% public debt to

GDP in 2006)

Regular monitoring of

macroeconomic management,

and engagement with GoPNG

when there are slippages

Completed:

PERR

New AAA:

Economic Note;

possible PER

ADB AusAID–ECP IMF

1 CAS outcomes are those to which the World Bank expects to influence directly through its interventions. Achievement of these outcomes will be measured by listed

outcome-level indicators.

19

2

An

nex

B9

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

Promote good

governance through

independent and

capable oversight

institutions and

improved citizen

monitoring

“Support strengthening

of „watchdog‟ and

legal oversight bodies,

to improve efforts to

detect and prosecute

fraud and corruption in

government.” (MTDS

p. 54)

Insufficient human and

financial resources

devoted to oversight

Effectiveness of citizen

monitoring hampered by

limited availability of

accessible budget/audit

information, especially at

community level, and by

lack of transparency in

use of extractive industry

royalties/grants by sub-

national governments

Expanded and stronger multi-

stakeholder mechanisms to

review overall policymaking

and extractive industries

GoPNG joins with civil

society and industry to form

multi-stakeholder structures for

PNG to join and implement

EITI Increased public availability

of accessible information to

support monitoring of

government performance

Media, NGOs, and CBOs are

using and analyzing factual

information from audit reports,

sub-national and national

budget documents – evidenced

by press coverage

Cabinet-level discussion and

adoption of discussion paper

signaling GoPNG intent to

join EITI MDTF grants approved and

underway to support GoPNG

and civil society in moving

forward under EITI candidate

status

Capacity building program

underway to support civil

society and GoPNG in

reporting and analysis

required for EITI audits

Media publishes regular

features on deliberations of

the Public Accounts

Committee

Completed:

PERR

Ongoing:

New AAA:

possible overall

or sectoral PER

New TA:

possible EITI

MDTF grants

ADB AusAID–ECP IMF

EITI

Secretariat Private sector NGOs

Promote strong, well

governed, sustainable

extractive industries

offering significant

benefits at local and

national levels

“Transform the non-

renewable income

stream from mining

and petroleum into…

Incomplete institutional

framework in mining and

petroleum sectors

Strengthened institutional

structures in mining sector,

emphasizing transparent

management and resource

distribution

Mineral Resources Authority

operating effectively, with

clearly defined governance

arrangements; Bougainville

Dept. of Mines operational

Mineral Resource Authority

internal management

procedures established and

staff trained

Bougainville Division of

Ongoing:

Women in

Mining

New Lending:

Mining TA 2;

possible Oil-Gas

Sector

ADB AusAID EU Japan PNGSDP

Private sector

20

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

sustainable income…”

(MTDS p. 16)

Country Indicator:

Commercial use of

natural resources

increased through

environmentally

friendly technologies

by 2020 (MDG #7)

Lack of exploration due

to high cost and limited

information, despite high

mineral potential in some

areas

Missed opportunities

for revenue collection

from existing mining and

petroleum operations

Increased annual spending on

mining/petroleum exploration,

including in Bougainville

(Baseline: US$ 50m in 2007)

3 additional tax audits of EI

companies completed by

Internal Revenue Commission

(Baseline: 2 as of 2007)

Mines established Geological database

completed and available to

investors

Capacity building of Internal

Revenue Commission

underway

Governance TA

Promote effective

and sustainable

management of

natural resources “Sustainable

development is…an

explicit objective.”

(MTDS p. 44)

Country Indicator: Implement principles

of sustainable

development by 2010-

15 (MDG #7)

Inadequate attention to

climate change impacts

on sustainable

development

Inadequate enabling

environment and SME

capacity to access

inclusive and

employment-intensive

multiplier effects from

enclave development

Strategic framework for

disaster risk management and

climate change adaptation /

mitigation adopted by

GoPNG, investment program

supported by partners

Improved attention to disaster

risk management in climate-

change strategy

Program in place to leverage

enclave revenues for broader

growth and employment Increased availability of

credit for SMEs (Baseline TBD,

data disaggregated by gender)

Climate Change Stocktaking

completed, contributing to

GoPNG‟s prep for COP15 Agreed approach with

DMPGHM on adaptation and

disaster risk management Strategic Plan on climate

resilience prepared Minimum of two PNG

financial institutions

expanding lending to SMEs Targeted outreach to women

SME owners results in

expanded share of SME

lending to women-owned

businesses

New Lending:

GEF-PAS; TA Pilot

Program on

Climate

Resilience

(PPCR) New AAA:

Climate Change

Framework and

Stocktaking

AusAID EC NZAID GEF NGOs

PILLAR II: IMPROVING LIVELIHOODS AND SERVICE DELIVERY, ESPECIALLY FOR THE RURAL POOR

Promote the ability of

the private sector to

provide significant

Stronger business enabling

environment, with improved

financial infrastructure

Improved business

registration and licensing

Ongoing: IFC

investment in

PNG Micro-

ADB AusAID

21

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

employment and

livelihood

opportunities

“Trigger the private

sector…to become

productively engaged

in growing the

economy, by

harnessing the

entrepreneurial spirit.”

(MTDS p. i)

Cumbersome business

registration processes Very large informal

sector (80% of workers) Underdeveloped

financial infrastructure

and limited access to

credit, especially for

MSMEs

Underdeveloped

tourism assets

Failing infrastructure

and underperforming

state-owned enterprises

Business regulations

simplified (Baseline: 56 days in

2007)

Growth in number of MSMEs

in formal sector, as measured

by active registered MSMEs

paying taxes (Baseline: 12,740

in 2009) Improved potential in niche

industries, including tourism

Increased tourism measured

by new investments and visitors

(Baselines: investment data

TBD; 17,000 visitors 2005) Public-private partnerships

supporting infrastructure New PPPs established

(Baseline: 0 PPPs under

development in 2007)

procedures introduced

National policy on informal

economy development and

integration formulated

PNG Microfinance Ltd.

operational, with 3-year

institution-building program

underway

Barriers to tourism

investment identified

Development of Special

Economic Zone policy

supports new fisheries

industrial park

finance Ltd. New Lending/

Investments:

IDA-IFC

Risk-Sharing

Facility;

Possible IFC

initiatives in:

manufacturing;

renewable

energy and

agribusiness.

New AAA:

IFC and WBG

ICAS:

Doing Business;

informal sector;

financial infra;

tourism

ADB

EIB

Improve livelihoods

through policies and

investments that

promote inclusive

and sustainable

growth

Inadequate agricultural

extension services limit

agricultural productivity

Sustainable increases in oil

palm production and

artisanal and small-scale

mining (ASM)

Increased smallholder income

from oil palm production in Oro

and West New Britain

Increased palm oil

production through improved

extension services and road

Ongoing: ASM

(JSDF); Women

in Mining

(JSDF)

New Lending:

AusAID EC NZAID PNGSDP NGOs Private sector

organizations

22

An

nex

B9

2

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

“Directly promote

economic growth in

PNG‟s renewable

resources sector.”

(MTDS p. 36)

Country Indicator: Increase agriculture

production by 10%

and subsistence

agriculture by 34% by

2015 (MDG #1)

and sustainability

Harmful impacts of

ASM offset income and

employment benefits for

miners and their families

Insufficient information

on poverty and rural

sources of growth

(Baseline: 2006 smallholder oil

palm income in project areas =

approximately K75.1 million)

Increased ASM employment

and incomes, as measured by

Small Scale Mining Association

(Baseline: preliminary estimate

is 100,000 as of 2008) Increased access for urban

youth to skills training and

daily employment schemes

(Baseline: existing (non-UYEP)

public works job placements =

485 per year, 2009 data) Development Partners and

GoPNG use updated data on

poverty and living standards for

policy and program design

access for smallholders

ASM training, capacity

building, and extension

services expanded to 3

additional communities, with

increased support to women

and youth

Labor-intensive employment

and skills development

activities underway in Port

Moresby

National household income

and expenditure survey

launched and data available

for analysis

SADP

Mining TA 2

UYEP

New AAA:

HIES

Support the

development of more

responsive,

accountable local

governments that

deliver cost-effective

public services based

on community needs

“Significantly improve

the quality of life of

PNG‟s rural majority,

especially by

improving services…”

Poorly performing sub-

national government

institutions and under-

resourcing of frontline

services

Poor communication/

collaboration between

state and non-state actors

limits accountability

Limited incidence of

communities of interest

that transcend traditional

Improved local service

delivery partnerships between

government and civil society,

within and across

communities Local service delivery in pilot

areas increased, as measured by

project-level indicators (e.g.

infrastructure, social services)

Civil society partnerships

(including women‟s

associations) established in

targeted communities, in

piloting of at least one

alternative model of

community-led service

delivery agreed by

Government and incorporated

into a Bank-supported project

Joint meetings conducted

between local and national

women‟s associations, and

local governments in mining

areas

Ongoing:

Women in

Mining; TKY

New Grants: Women in

Bougainville;

PNGSDP pilot

New Lending:

SADP; UYEP;

RSDLG

New AAA:

Equitable

ADB AusAID UN NZAID EU

Private sector

Local and

international

NGOs

23

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

(MTDS pp. 30-31) social groups collaboration with local

governments Benefit Sharing

Help develop well-

managed national

and local transport

services

“By linking markets

and reducing costs,

maintenance and

rehabilitation

programs for roads,

wharves and airstrips

will be a powerful

force for economic

development,

particularly in rural

Papua New Guinea.”

(MTDS p. 36)

Lack of reliable sector

data

Poor quality of roads

due to insufficient

maintenance

Declining planning and

project management

capacity

Improved condition of roads/

bridges in selected provinces

Increased % of national roads

rehabilitated and maintained to

“fair” or better condition in

RMRP provinces (Baseline:

20% in 2002) Improved condition of access

roads, measured by a decrease

in annual crop losses (Baseline:

16% loss in 2006)

Increased private sector

contracting of road maintenance

measured by % of competitive

bid contracts in RMRP

provinces (Baseline: 40% 2002)

Wider adoption of the Road

and Bridge Asset

Maintenance systems to

maintain up-to-date records

and plan future works Reconstruction and

maintenance of provincial

access roads in Oro province

Training and support

program for small and

medium-sized private

contractors in place

Ongoing:

RMRP;

New Lending:

Oro Province

Reconstruction

RMRP II;

SADP

New AAA:

ADB

AusAID

PNGSDP

Expand access to

reliable, affordable

electricity to support

service delivery and

enterprise

development

“Improve basic

services such as

electricity…” (MTDS

p. 31)

Absence of appropriate

strategy for rural

electrification High cost and limited

availability of fuel,

especially in remote areas

Improved availability and

lower cost of electricity

services in selected rural

centers and towns

Significant increase in share

of households, schools and

health services connected to the

grid (Baselines: 7% in 2007,

25% in 2000, and 62% in 1999)

Plan for energy sector

strategy to be developed

based on technical assistance

and following wide

consultation, providing base

for investments in low-carbon

rural and urban investments

Ongoing: TSLP

(GEF)

New Lending:

Energy Strategy

and TA (IDA)

New AAA:

ADB AusAID EIB Japan PNGSDP PNGSEL

24

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

Facilitate provision

of reliable, affordable

access to

telecommunications

infrastructure and

services “Foster the expansion

of nation-wide tele-

communications

system through

development of a

sound policy,

regulatory and

institutional

framework.” (MTDS

p. V)

Inconsistent policy

direction

Inadequate coordination

and fragmented

responsibilities among

GoPNG institutions Monopolistic market

structures in all sectors

(fixed, mobile,

international gateway)

Expanded access to

affordable, reliable

telecommunications in rural

areas and outside POM

Teledensity increased by 10%

(Baseline: 3% in 2007)

At least one public payphone

per 500 people providing basic

services in towns >1,000 people

in targeted provinces

Average user cost of basic

telecom services decreased by

10%, as measured by cost of 3-

min local calls (mobile) and 60-

min Internet access (Baselines:

3.6PGK and 15PGK, end-2009)

Rural communication policy

adopted and implementation

launched PPP-based rural telecom

access program designed and

launched in at least 2

provinces

Competition in basic

telecom services introduced:

at least 2 mobile operators

active by 2009

Completed:

Rural Telecom

Options Study

New Lending:

Rural

Communi-

cations;

IFC investment

in telecom

sector

New AAA:

WBG Pacific

Regional

Telecommuni-

cations Impact

Study

PNGSDP

Improve human

development

outcomes across PNG

“Empowering Papua

New Guineans…

through basic

education and primary

health care will…

directly improve living

standards [and]

promote economic

Limited progress on

universal basic education Low primary retention Insufficient baseline

data against which to

measure performance

Increased resources

supporting higher primary

school participation and

grade retention Higher GoPNG budget

allocations and increased multi-

donor support for universal

basic education

Priority education policies

in place and costed

Administrative data in use

on selected effectiveness

indicators

New Lending:

Possible

programmatic

support to

health and basic

education

ADB AusAID China EU GFATM JICA NZAID UK UNDP UNFPA UNICEF

25

Strategic and

Longer-Term

Country Outcomes

Major Challenges to

Achieving Development

Outcomes

CAS Outcomes and Outcome-

Level Indicators1

Intermediate Indicators of

Progress toward CAS

Outcomes

WBG

Interventions

to Support

Outcomes

Development

Partners

growth.” (MTDS p.

11)

Country Indicators:

Primary gross

enrollment inc to 85%

by 2015 (MDG #2) Primary cohort

retention up to 70% by

2015 (MDG #2) IMR reduced to 44

per 1,000 (MDG #4) Spread of HIV/AIDS

controlled by 2015

(MDG #6)

Stalled health outcomes,

including low

immunization rates and

high infant and maternal

mortality

Insufficient data on HIV

prevalence, trends, and

transmission patterns

Improved evidence base for

health sector policies and

plans 2011 NDoH evidence-based

budget submission successfully

leverages increased resources in

recurrent budget More effective national

HIV/AIDS response through

evidence-based policy and

interventions

Information on extent/nature

of HIV/AIDS available to

support GoPNG and donor

interventions

Stronger evidence base

for health sector resource

management

Improved distribution and

allocation of human

resources for health

National HIV/AIDS

population bio-behavioral

survey designed and launched

New AAA:

Basic Education

(FTI);

Health HR

Payroll Review

Health Sector

Fiscal Space

Analysis

HIV/AIDS

Population Bio-

Behavioral

survey (IBBS)

USAID WHO

National and

international

NGOs

26

Annex C: Selected Indicators* of Bank Portfolio Performance and Management

Indicator 2007 2008 2009 2010

Portfolio Assessment

Number of Projects Under Implementation a 2 3 3 3

Average Implementation Period (years) b 6.3 2.2 3.2 3.8

Percent of Problem Projects by Number a, c 0.0 0.0 33.3 33.3

Percent of Problem Projects by Amount a, c 0.0 0.0 14.0 22.6

Percent of Projects at Risk by Number a, d 50.0 33.3 33.3 33.3

Percent of Projects at Risk by Amount a, d 75.4 63.5 14.0 22.6

Disbursement Ratio (%) e 72.9 3.0 13.7 15.3

Portfolio Management

CPPR during the year (yes/no)

Supervision Resources (total US$)

Average Supervision (US$/project)

Memorandum Item Since FY 80 Last Five FYs

Proj Eval by OED by Number 34 2

Proj Eval by OED by Amt (US$ millions) 682.6 17.0

% of OED Projects Rated U or HU by Number 48.5 0.0

% of OED Projects Rated U or HU by Amt 43.2 0.0

a. As shown in the Annual Report on Portfolio Performance (except for current FY).

b. Average age of projects in the Bank's country portfolio.

c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP).

d. As defined under the Portfolio Improvement Program.

e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the

beginning of the year: Investment projects only.

* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio,

which includes all active projects as well as projects which exited during the fiscal year.

27

Annex D: IBRD/IDA Program Summary

Proposed IBRD/IDA Base-Case Lending Program

Fiscal year Proj ID US$(M) SMU

2010 Rural Communications Project 15 CITPO

Urban Youth Employment Project 13.5 SD

Productive Partnerships in Agriculture 25 SD

Result 53.5

2011 Flexible and Open Distance Education 5 HD

SME Access to Finance Project 20.5 FP

National Rural Electrif ication 7.5 SD

Rural Service Delivery & Local Governance* 25 SD

Transport Sector Project (RMRP II)* 25 SD

Health Sector Reform* 9.5 HD

Result 67.5

Overall Result 121

* These five proposed IDA credits are under consideration for either the remainder of IDA15 or for funding

under the successor replenishment. Precise decisions on prioritizing these within the overall lending

envelope will be made before December 2010 in consultation with GoPNG based on their still-pending

elaboration of the new five-year development plan.

28

Annex E: IFC Investment Operations Program

2007 2008 2009 2010*

Commitments (US$m)

Gross 0.00 40.00 4.00 80.18

Net** 0.00 40.00 4.00 80.18

Net Commitments by Sector

Telecommunications 0.00 40.00 0.00 80.00

Microfinance 0.00 0.00 0.00 0.18

Private Equity Funds 0.00 0.00 4.00 0.00

Total 0.00 40.00 4.00 80.18

Net Commitments by Investment Instrument

Equity 0.00 0.00 4.00 0.18

Loan 0.00 40.00 0.00 80.00

Total 0.00 40.00 4.00 80.18

* As of February 28, 2010

** On IFC’s own account

29

Annex F: Summary of Non-lending Services

Product Completion FY Cost (US$000)

Recent completions

Country Procurement Assessment Report 2007 162

Communications Sector Review 2008 257

CDD Stocktaking and Roadmap 2008 174

Framework for Extractive Industries Governance 2010 110

Ongoing

Climate Change Strategy 2010 177

Urban Youth Empowerment Studies (EAAIG) 2010 220

Economic Report on Managing Volatility 2010 150

Human Resources for Health - Operational Review 2010 85

Resource Distribution and Benefit Sharing Research (EAPJ4P) 2011 100

HIV/AIDS Population Bio-behavioral Survey (GAIDS) 2011 125

Poverty Reports/HIES Phase II 2011 271

Planned

Assessment of Universal Basic Education Plan 2010

Adolescent Girls’ Scoping Study 2010

Crime and Violence Study 2011

Recipient Executed Trust Fund Grants - Ongoing

Energizing the Pacific - PNG 2010 1,000

Teachers' Solar Lighting 2010 992

30

Annex G: Operations Portfolio (IBRD/IDA and Grants)

Closed Projects 43

IBRD/IDA *

Total Disbursed (Active) 55.43

of w hich has been repaid 3.79

Total Disbursed (Closed) 785.22

of w hich has been repaid 603.83

Total Disbursed (Active + Closed) 840.65

of w hich has been repaid 607.62

Total Undisbursed (Active) 65.57

Total Undisbursed (Closed) 0.00

Total Undisbursed (Active + Closed) 65.57

Active Projects

Project ID Project NameDevelopment

Objectives

Implementation

ProgressFiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd

P102396 Mining Sector Inst Strengthening TA 2 MS MS 2008 17 15.15777

P004397 Road Maintenance and Rehabilitation Project S S 2002 40 37.31 23.04812 -15.5614 15.1986

P079140 Smallholder Agriculture Development Project MU MU 2008 27.5 27.36399 1.264

Overall Result 40 81.81 65.56987 -15.4044 15.1986

Original Amount in US$ Millions Disbursements a/

Difference Between

Expected and Actual

Supervision Rating

Last PSR

31

Annex H: IFC Committed and Disbursed Outstanding Investment Portfolio

(In USD Millions)

Committed Disbursed Outstanding

FY Approval Company Loan Equity

**Quasi

Equity *GT/RM

Partici

pant Loan Equity

**Quasi

Equity *GT/RM

Partici

pant

2010 Digicel PNG 80 0 0 0 0 80 0 0 0 0

2009 Kula Fund ii 0 3.34 0 0 0 0 1.48 0 0 0

2005/10 PNG Microfinance 0 0.4 0 0 0 0 0.22 0 0 0

Total Portfolio: 80 3.74 0 0 0 80 1.7 0 0 0

* Denotes Guarantee and Risk Management Products.

** Quasi Equity includes both loan and equity types.

32

Annex I: Social Indicators

Latest single year Same region/income group

East

Asia & Low-

1980-85 1990-95 2002-08 Pacific income

POPULATION

Total population, mid-year (millions) 3.6 4.7 6.6 1,912.4 1,295.8

Grow th rate (% annual average for period) 2.6 2.6 2.5 0.8 2.2

Urban population (% of population) 14.0 14.1 12.5 43.3 31.7

Total fertility rate (births per woman) 5.2 4.7 3.8 1.9 4.2

POVERTY

(% of population)

National headcount index .. .. .. .. ..

Urban headcount index .. .. .. .. ..

Rural headcount index .. .. .. .. ..

INCOME

GNI per capita (US$) 680 1,040 1,040 2,182 574

Consumer price index (2000=100) 31 57 167 146 152

Food price index (2000=100) .. .. .. .. ..

INCOME/CONSUMPTION DISTRIBUTION

Gini index .. .. .. .. ..

Low est quintile (% of income or consumption) .. .. .. .. ..

Highest quintile (% of income or consumption) .. .. .. .. ..

SOCIAL INDICATORS

Public expenditure

Health (% of GDP) .. .. 2.6 1.8 1.6

Education (% of GNI) .. .. .. 2.7 3.4

Net primary school enrollment rate

(% of age group)

Total .. 66 .. 93 73

Male .. 71 .. 93 76

Female .. 61 .. 93 69

Access to an improved water source

(% of population)

Total .. 39 40 87 68

Urban .. 88 88 96 84

Rural .. 32 32 81 60

Immunization rate

(% of children ages 12-23 months)

Measles 33 42 58 90 76

DPT 40 62 60 89 77

Child malnutrition (% under 5 years) 25 .. .. 13 28

Life expectancy at birth

(years)

Total 54 56 57 72 58

Male 51 53 55 70 57

Female 56 59 60 74 59

Mortality

Infant (per 1,000 live births) 74 62 50 22 80

Under 5 (per 1,000) 103 84 65 27 126

Adult (15-59)

Male (per 1,000 population) 480 425 422 163 306

Female (per 1,000 population) 418 386 306 102 269

Maternal (per 100,000 live births) .. .. 470 150 780

Births attended by skilled health staff (%) .. .. 42 87 42

CAS Annex B5. This table w as produced from the CMU LDB system. 03/01/10

Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to

change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one

year of age or at any time before the survey.

33

Annex J: Key Economic Indicators

Estimate

Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013

National accounts (as % of GDP)

Gross domestic producta

100 100 100 100 100 100 100 100 100

Agriculture 39 36 36 34 36 36 36 36 37

Industry 41 45 45 48 45 45 45 44 43

Services 20 19 19 18 20 19 20 20 20

Total Consumption 71 64 67 68 80 78 77 77 76

Gross domestic fixed investment 18 18 18 18 18 18 18 18 18

Exports (GNFS)b

74 82 81 72 56 61 62 63 63

Imports (GNFS) 64 66 68 60 56 58 59 59 59

Gross domestic savings 29 36 33 32 20 22 23 23 24

Gross national savingsc

31 29 29 29 18 20 21 21 22

Memorandum items

Gross domestic product 4,899 5,605 6,387 8,239 8,200 8,390 8,594 8,820 9,078

(US$ million at current prices)

GNI per capita (US$, Atlas method) 680 720 860 1,040 1,140 1,200 1,220 1,220 1,230

Real annual growth rates (%, calculated from 83 prices)

Gross domestic product at market prices 3.6 2.6 6.5 6.6 3.9 3.7 3.3 3.0 2.4

Real annual per capita growth rates (%, calculated from 83 prices)

Gross domestic product at market prices 1.1 0.1 4.0 4.1 1.5 1.4 4.3 1.2 0.6

Balance of Payments (US$ millions)

Exports (GNFS)b

3,511 4,477 5,055 5,711 4,505 4,946 5,220 5,420 5,594

Merchandise FOB 3,278 4,205 4,750 5,397 4,197 4,646 4,920 5,130 5,298

Imports (GNFS)b

3,369 3,959 4,692 5,223 4,899 5,183 5,434 5,605 5,714

Merchandise FOB 1,979 2,281 2,759 3,221 2,962 3,179 3,375 3,511 3,596

Resource balance 142 518 363 488 -394 -238 -215 -185 -120

Net current transfers 434 276 350 318 302 319 334 352 371

Current account balance 205 126 112 228 -546 -393 -371 -344 -282

Net private foreign direct investment 68 193 462 277 263 277 291 306 322

Long-term loans (net) -19 135 -217 -100 139 57 65 83 49

Official -49 .. -127 -131 -38 -30 .. .. ..

Private 29 .. -91 32 177 87 .. .. ..

Other capital (net, incl. errors & ommissions) 62 205 300 -400 371 149 136 85 43

Change in reservesd

-315 -659 -657 -5 -227 -90 -121 -131 -132

Memorandum items

Resource balance (% of GDP) 2.9 9.2 5.7 5.9 -4.8 -2.8 -2.5 -2.1 -1.3

Real annual growth rates ( YR83 prices)

Merchandise exports (FOB) 11.1 -10.1 0.8 0.3 15.5 -0.2 3.5 3.1 2.4

Merchandise imports (CIF) 32.6 10.5 9.7 -7.1 -3.6 4.0 3.0 2.3 2.0

Actual Projected

34

Annex J: Key Economic Indicators, continued

Actual Estimate Projected

Indicator 2005 2006 2007 2008 2009 2010 2011 2012 2013

Public finance (as % of GDP at market prices)e

Total revenues and grants 34.9 36.7 37.3 32.6 27.1 26.5 26.6 27.0 ..

Mineral tax revenues 7.6 11.7 12.8 10.2 4.8 4.3 4.1 4.3 ..

Current expenditures 20.1 17.6 19.3 18.3 18.4 18.0 18.3 18.4 ..

Current account surplus (+) or deficit (-) 14.9 19.1 18.0 14.3 8.7 8.5 8.2 8.5 ..

Capital expenditure 11.2 12.3 9.9 9.9 16.0 14.2 9.7 9.6 ..

Foreign financing -1.1 -1.3 -2.3 -1.9 0.1 0.8 0.9 1.1 ..

Monetary indicators

M2/GDP 33.4 41.1 48.1 45.0 62.2 62.2 62.2 62.2 62.2

Growth of M2 (%) 29.5 38.9 27.7 11.4 38.8 6.3 5.4 5.1 4.8

Private sector credit growth / 155.7 126.1 470.9 -1312.9 67.4 124.6 120.1 115.1 116.9

total credit growth (%)

Price indices( YR83 =100)

Merchandise export price index 104.5 149.2 167.2 189.5 127.6 141.5 144.8 146.4 147.6

Merchandise import price index 176.9 182.4 197.2 241.7 232.7 239.0 245.0 248.3 248.9

Merchandise terms of trade index 59.1 81.8 84.8 78.4 54.8 59.2 59.1 59.0 59.3

Real exchange rate (US$/LCU)f

100.7 101.0 96.6 109.4 .. .. .. .. ..

Central Bank's Repo rate 9.0 7.5 7.0 9.0 9.0 9.0 9.0 9.0 9.0

Consumer price index (% change) 1.8 2.4 0.9 10.8 5.3 5.0 4.6 4.2 3.7

GDP deflator (% change) 15.9 9.9 2.6 11.6 -3.3 2.5 2.0 2.0 2.4

a. GDP at factor cost

b. "GNFS" denotes "goods and nonfactor services."

c. Includes net unrequited transfers excluding official capital grants.

d. Includes use of IMF resources.

e. Consolidated central government.

f. "LCU" denotes "local currency units." An increase in US$/LCU denotes appreciation.

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MAP SECTION

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