Speaking at a Business Advantage PNG webinar, two of the region’s largest infrastructure investment funds – the Asian Development Bank and the new Australian Infrastructure Finance Facility for the Pacific – have announced major support for road and electricity projects in Papua New Guinea, with more to come.
Papua New Guinea is badly in need of working infrastructure from telecommunications to ports, from roads to power, but with a constrained government budget the question is: how is it going to pay for it?
One way is to look to its international partners such as the Australian Infrastructure Financing Facility for the Pacific (AIFFP), a recently created A$2 billion (K5.5 billion) fund set up as part of Australia’s Step-Up Pacific program.
Benedict David, Head of the AIFFP, said that the facility is keen to align itself with the priorities of PNG’s government.
‘We have board approval for our investment in Markham Valley Solar,’ he said. ‘That is part of the broader commitment to the PNG Electrification Partnership that was agreed in 2018. We are investing in a large-scale solar farm.
‘Also, we have recent approval of finance for the Tina River transmission line project as part of the Tina River Hydropower Project in the Solomon Islands.’
David added that the impact of COVID-19 has seen some leeway with how the fund is allocated as well as a focus on ‘local projects that drive local employment – for example, road maintenance – where we can provide quick turnaround finance for projects that drive and maximise local contractors and local employment.’
Talking figures, the AIFFP’s Chief Investment Officer Robert Jauncey said the facility is ‘primarily a lending facility’ that has taken a while to get its project pipeline up and running. But he added that the Markham Valley Solar Farm was a great start.
Construction for the project, which will connect to the Ramu electricity grid which supplies Lae, Madang and the Highlands, is expected to commence in 2021. The AIFFP’s funding will be provided through PNG Power.
‘One of the key projects being considered under this facility is the long-awaited road to connect PNG’s north and south coast, including Lae and Port Moresby.’
‘Looking forward, I am confident that AIFFP might be able seek approval from the government for A$300 million in new investments by the end of this fiscal year, Jauncey said. ‘If we are able to do that, that would make us the second largest financier for Pacific Governments after the Asian Development Bank (ADB).’
He added that A$250 million (K636 million) was committed to the PNG Electrification Partnership, and the facility was looking at national building investment. like the Trans-Island Highway, and that they were willing to work with Timor-Leste with the development of an undersea cable. But PNG has the potential to see a lot of the fund go its way.
‘We have indicated to the PNG government that, should they want it, we could be talking in the vicinity of approximately half [the A$2 billion fund],’ Jauncey said. ‘If they are able to prepare investable projects.’
Roads to recovery
The Asian Development Bank is continuing its support for PNG’s infrastructure.
David Hill, the ADB’s PNG Country Director, told the webinar that the bank has had some success this year working with the Department of Works on a new US$31 million (K108 million) Transport Sector Preparatory Project. This facility has been created to help PNG’s government get infrastructure projects up and running, avoiding a common delay between the announcement of a project and the procurement and commencement.
One of the key projects being considered under this facility is the long-awaited road to connect PNG’s north and south coast, including Lae and Port Moresby.
Hill said the route is not yet fixed.
‘A key piece of doing this road is going to be the land acquisition. That will have to be sorted out in the first instance. Additionally, in the Highlands region, we would like to expand the Highlands Highway west to Mt Hagan and those feeder roads into the Highlands Highway.’
Another focus will be the 1500 km northern region road corridor from the Indonesia–PNG border though Vanimo, Wewak, Madang, and Lae with the Highlands highway and southern region corridor.
Hill said these projects mark an additional investment to the currently announced US$400 million (upgrade of the Highlands Highway due to ‘great demand to extend the Highlands Highway west’.
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