How new transport links promote growth in Papua New Guinea

 

Papua New Guinea’s topography is characterised by mountainous terrain, rivers and around 600 islands. The country’s geographic diversity is accompanied by abundant natural resources, but challenges in transport connectivity have prevented their full benefits from being unlocked. Travelling by road can be complicated and expensive, with many routes in need of maintenance; as a result, the transport of people and goods often relies on sea and air networks, which incur high costs for businesses operating in PNG. The ripple effects of improved infrastructure are vast – not only because the easier movement of goods and people can benefit the high-potential agriculture and tourism sectors, but also since improved connectivity will enhance the ease of doing business and facilitate greater development opportunities for the more than 80% of Papua New Guineans who live in rural areas.

Policy & Oversight

One of the key aims of the government’s PGK27.2bn ($8bn) Medium-Term Development Plan (MTDP) 2018-22 is to improve the quality and efficiency of transport infrastructure in order to support sustainable and inclusive economic growth. To this end, the government and sector stakeholders are investing in the upgrade and expansion of many of the country’s motorways, the redevelopment of airports and the construction of new international wharves. These developments will help to reduce the cost of doing business and make PNG a more attractive destination for trade and investment.

The 2020 budget focuses on strategies to expand the country’s non-resource sectors in an effort to diversify the economy, and improving infrastructure is highlighted as a key step to achieving this. The Connect PNG Programme, outlined in the budget, is designed to widen access to electricity, improve internet connectivity, enhance road infrastructure and reform state-owned enterprises. Transport spending was initially expected to reach PGK1.9bn ($560.3m) in 2020, representing 10% of the budget, up from PGK1.3bn ($383.4m), or 8% of the total, in 2019. However, it remains to be seen whether the government will reallocate funding in the second half of the year after it deployed a PGK5.7bn ($1.7bn) stimulus package to alleviate the effects of Covid-19. In the immediate aftermath of the crisis, transport and logistics activity was stalled by restrictions on the movement of people and goods. In addition to the direct impact of border closures and lockdown measures, the sector was affected by construction-related delays due to restrictions on the movement of workers and materials.

In recent years PNG’s transport infrastructure development has also received support from multilateral organisations such as the World Bank and the Asian Development Bank (ADB), and has benefitted from bilateral cooperation with partners including the government of Australia and China, and the Japan International Cooperation Agency. The country also receives funding in the form of loans, grants and technical assistance to implement its programmes.

The Department of Transport and Infrastructure (DoT) is tasked with formulating sector policy, guided by the 2014-30 National Transport Strategy (NTS). The department works alongside other agencies such as the National Airports Corporation, PNG Ports and the National Maritime Safety Authority.

Roads

The road network is the backbone of PNG’s transport system. Road construction projects are overseen by the Department of Works, while the National Roads Authority is responsible for road maintenance and the National Road Safety Council is charged with reducing the risk of accidents. In spite of their importance, PNG’s roads have historically been underfunded and much of the network is in poor condition. This hinders not only the movement of people, but also the transport of goods outside PNG’s major centres – particularly during the rainy season.

Public transport in both rural and urban areas is provided primarily through public motor vehicles (PMVs), which are privately owned minivans, open-tray trucks and 25-seater buses. There are around 9000 PMVs on PNG’s roads, as well as a number of trucks, taxis, buses and vans owned by small private players. The licensing of PMVs, taxis and heavy freight transport is overseen by the Road Traffic Authority, which also manages vehicle inspection, registration and driver licensing.

The government aims to ease road congestion through the National Road Network Strategy (NRNS) 2018-37, which is aligned with the wider goals of the MTDP and the NTS. The vision of the NRNS is to establish a sustainable and well-managed road network by first prioritising the maintenance of existing roads and bridges, and then developing new infrastructure.

Of the country’s total road network, which covers approximately 8740 km, 38% was deemed to be in good condition and 31% in fair condition in 2017, ahead of the NRNS implementation. In order to maximise the economic benefits of these repairs, the NRNS is prioritising infrastructure development in five key economic corridors. The initial project launch planned for a total budget of PGK21.1bn ($6.2bn), to be allocated in three phases: PGK4.5bn ($1.3bn) will be allocated between 2018 and 2022 to improve 2309 km of core national roads; followed by a PGK4.8bn ($1.4bn) tranche over a second five-year phase to develop 2502 km of priority national roads; and a final PGK11.8bn ($3.5bn) allowance in 2028-37 to add 4639 km of non-priority national roads to the network.

Motorways & Missing Links

The 1200-km Highlands Highway connects 1800 km of regional roads, linking coastal provinces to the port of Lae and servicing some 3m people. The motorway, considered a lifeline for the region, was allocated $680m for development works by the ADB in 2017. The 10-year Sustainable Highlands Highway Investment Programme is designed to rehabilitate and maintain 430 km of the route, as well as upgrade bridges, establish logistics platforms and improve safety. The 12-year Highland Region Road Improvement Investment Programme, which ended in July 2020, focused on improving feeder roads. The development works have already had a positive effect on communities in the region. “Farmers can now transport their produce to a wider range of markets,’’ Bashirullah Khpalwan, infrastructure specialist at the ADB in PNG, told OBG. “The improved connectivity has completely transformed their livelihoods.”

However, there is still more to be done to improve road connectivity. The capital, Port Moresby, is not connected by road to the second-largest city, Lae. There is hope that a project proposed by the ADB will address this. The Land and Maritime Transport and Trade Corridor Programme is designed to resolve three missing links in the motorway network – Vanimo to Aitape, Bogia to Angoram and Wau to Malalua – by connecting provinces via feeder roads to the main route. Khpalwan told OBG in June 2020 that negotiations with the government to finance the preparation of the project were set to take place soon. Funding is expected in the form of a multi-tranche loan over a 10-year period, with the first tranche to exceed $170m.

Maritime Transport

Maritime transport offers one solution to PNG’s missing road connections. Indeed, in maritime regions – which account for 15 of PNG’s 22 provinces – over half of the population lacks access to land or air transport, and is therefore dependent on maritime routes for connectivity.

The responsibility of ensuring that both citizens and businesses can access maritime transport falls to the DoT’s Maritime Transport Division. The DoT works alongside other autonomous maritime agencies, such as the National Maritime Safety Authority, which regulates marine safety standards and navigational aids, and PNG Ports, which oversees harbour management and the maritime compliance of ports, land wharves and jetties throughout the country.

PNG has 23 declared ports, 15 of which are managed by PNG Ports. One of the most important sites is the port of Lae, a commercial port located at the end of the Highlands Highway, which serves five inland provinces and handles almost half of all cargo across the country’s wharves. Port Moresby, meanwhile, handles around 25% of PNG’s cargo, and serves the capital and Central Province. Kimbe, which trades mainly palm oil, is the third largest of PNG’s fully commercial ports.

There are also several hundred small jetties and landings across the coastal regions and islands, including navigable river systems for village access. One stated aim of the MTDP is to upgrade as many as 22 ports and wharves, with the goal of having 120 wharves and jetties in good condition by 2022.

PNG is well served by international shipping lines, dominated by north-south services between Asia and Australasia. Container throughput, which the government expects to grow five-fold between 2010 and 2030, was recorded at 341.3m twenty-foot equivalent units in 2018. There are three major shipping lines in the country – Consort Express Lines, Steamships and Bismark Maritime – which provide scheduled shipping services for containers and break-bulk cargo between the main ports. In addition, some smaller operators serve both major and minor ports. At a local level, passengers, agricultural products and essential supplies are transported between coastal communities by small work boats, known as banana boats.

Raising Efficiently

Efforts are under way to improve international cargo services at two of the country’s major shipping hubs – the South Pacific International Container Terminal (SPICT) at Lae Tidal Basin and Motukea International Terminal (MIT) in Port Moresby. In September 2017 a 25-year concession was awarded to Philippines-headquartered port operator International Container Terminal Services Inc (ICTSI) to manage, operate and develop the terminals. MIT, located 12 km from Port Moresby’s central business district, is the only facility in the capital that handles international containers, offers mobile cranes and caters to vessels with draughts under 12.5 metres. SPICT is the largest container-handling facility in PNG, and is equipped with new hybrid gantry cranes with rubber tyres as part of ICTSI’s plans to strengthen and enhance the terminal’s overall efficiency.

Figures from PNG Ports, the owner of both shipping hubs, suggest that the efficiency of operations at both terminals has improved substantially in recent years. Ship turnaround times more than halved from 38 hours in 2015 to 18 hours as of June 2020, while truck turnaround times fell from 50 minutes to 25 minutes over the same period, according to local media. Cargo loading and offloading times were also reduced from at least two days in 2015 to less than one day in 2020, and the berth waiting period for anchored vessels dropped dramatically from 16 hours to one hour.

ICTSI also introduced an electronic data-storage system, which has helped to speed up the process of locating containers. However, some sector players note that more needs to be done to align ICTSI’s systems with other relevant stakeholders. “ICTSI has successfully digitalised procedures in terms of removing the requirement for physical documents, but there is still a need for greater integration with other port agencies, such as the Customs and quarantine departments,” Adam Melville, operations supervisor at freight forwarding company Deugro, told OBG. “A one-stop window would be an ideal solution to this,” he added.

Some plans to raise efficiency have been accelerated as a result of the Covid-19 pandemic. For example, work processes have been fast tracked and redesigned to reduce the need for physical contact. Once movement restrictions ease, quarantine and Customs processing will need to be expedited, automated and digitalised as much as possible for the international transportation of both passengers and freight.

Air Travel

The Air Transport Division of the DoT oversees international and domestic air transport operations, and issues licences to carriers within PNG. The country has 46 airports – some of which are under the control of the national government, while others are managed by provincial authorities or private owners – and around 450 airstrips. A number of agencies – largely state-owned enterprises – play a role in maintaining these facilities and ensuring adherence to safety standards. These include the Civil Aviation Safety Authority, PNG Air Services, the Rural Airstrip Agency and the National Airports Corporation. As a sign of what is to come for the development of PNG’s aviation industry, the latter organisation aims to operate a total of 15 smart airports by 2030.

The country’s main carrier is Air Niugini, which operates the majority of PNG’s international routes from Port Moresby Jacksons International Airport. The state-owned company also operates domestic services from Port Moresby, alongside PNG Air, which listed on the country’s stock exchange in 2008, and Madang-headquartered Travel Air. Meanwhile, Mission Aviation Fellowship, based in Mount Hagen, is a church-sponsored airline that serves remote rural airstrips in the Highlands Region to provide community support and emergency relief, as well as services for freight and commercial passengers. A number of small fixed-wing and helicopter outfits also offer charter services to smaller airfields and remote worksites.

Air transport plays a key role in PNG’s supply chain logistics. In many cases, a flight is the only means of reaching the country’s commercial centres and main towns, which leads to complex supply chains – in some cases combining multiple modes of transport – that can incur high costs. “It is important to be willing to improvise, as different methods of transport often have to be used on different occasions,’’ Melville told OBG. The method employed depends on customers’ needs and how quickly they require goods to be transported. “If a client places urgency on a particular item, and they do not want to wait for a sea voyage, then air charter is the next-best option,” he explained.

Air travel was placed on hold in early 2020 in response to the global outbreak of Covid-19. PNG declared a state of emergency on March 23, 2020 – just one day after the country’s first case was reported – and closed its borders. Under the imposed restrictions, only emergency personnel, medical experts, diplomatic staff and repatriated citizens were permitted to enter the country, and every incoming passenger was tested and asked to self-isolate. While domestic flights were also halted, routes were permitted to reopen two weeks later, and most domestic air travel resumed on April 7. The state of emergency was lifted in midJune 2020 – by which time there had been only nine reported Covid-19 cases on PNG soil – but international flights remained suspended.

Airport Renovations

In 2009 the ADB granted PNG’s aviation sector $480m to upgrade 22 airports as part of the Civil Aviation Development Investment Programme. Many of the country’s airports do not fully comply with international safety and security standards, and air-side runway pavements, terminal buildings and utilities are often in poor condition. This limited compliance not only poses a risk of accidents, but also facilitates the illegal movement of goods. The project’s completion is expected in 2021 – an extension of the initial 2017 end-date.

Meanwhile, efforts are under way to transform Lae Nadzab Airport into PNG’s second international airport by upgrading its facilities and equipment. A contract was signed in December 2019 between the Japanese government, contractor Dai Nippon Construction and the National Airports Corporation to undertake development works for the PGK700m ($206.5m) project. The project will be majority funded by an overseas development assistance loan from the Japan International Cooperation Agency, supplemented by a PGK114m ($33.6m) contribution from PNG’s government. The renovation works include widening and reinforcing existing runways, taxiways and aprons; constructing a new passenger terminal and car park; and transforming the existing passenger terminal into a cargo facility. In February 2020 local media reported that the project was ready to launch and the government of Morobe Province had reassured stakeholders that, despite disagreements with local landowners, the renovation was set to be completed in 2022.

The upgraded airport will help to ease the entry of workers for the proposed $5bn Wafi-Golpu mining project, for which negotiations are expected to continue once restrictions related to Covid-19 are lifted. Regardless of the status of the mining project, the strategically positioned airport will provide a more central point of entry for international visitors than Jacksons International Airport, and will also facilitate a greater number of domestic flight routes.

Outlook

Improving PNG’s connectivity is key to enabling inclusive economic growth, and the government has committed to investing in improvements to roads, ports and airports accordingly. While the full impact of Covid-19 on the sector remains to be seen, developing transport infrastructure is integral to the country’s medium- and long-term goals, and a vital stepping stone to economic diversification. Better connections and improved integration between different modes of transport will lower the cost of doing business and make the country a more attractive destination for investment. As a result, the transport sector is likely to remain at the forefront of PNG’s development agenda.

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The Report: Papua New Guinea 2020

Transport & Logistics chapter from The Report: Papua New Guinea 2020

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