Rugged terrain, tropical climate and a widely dispersed population present formidable challenges to Papua New Guinea’s transportation sector as it struggles to keep pace with rising economic growth. While the influx of investment over the past decade as the result of the construction of the PNG Liquefied Natural Gas (LNG) project has been a boon to the economy, the unprecedented size of the development has put significant strain on the transportation and logistics sector. To sustain this growth and support the country’s primary industries such as agriculture and extractive resources, several major infrastructure projects are currently under way. The success of these projects will be critical in improving access to the country’s more remote areas where major energy, mining and agricultural investments are being made, in order to expedite the movement of goods to air and seaports.

Growth Needs

Investment is especially crucial due to the budgetary constraints of years past, which have left a legacy of a deteriorating road, air and maritime transport systems and contributed little in the way of major capacity expansions. Efficient movement of goods and people is further restricted due to the fact that the capital, Port Moresby, is not linked to the rest of the country by road and there is no railway network.

Private sector investment and external contributions from organisations such as the World Bank and Asian Development Bank (ADB) have stepped in to fill some of these gaps, while government explorations into public-private partnerships in the future should create further opportunities in the sector moving forward. In total, PNG will be receiving the largest amount of ADB investment for the 2014-16 period of all Pacific transport spending, totalling $484m, according to the bank.

Long-Term Investments

While the increased spending on badly needed infrastructure projects should begin to yield positive results within a few years, current development projects represent only a starting point in terms of the government’s long-term plans for the sector. The transportation industry is featured prominently in major developmental programmes, including the PNG Strategic Development Plan 2010-30 (PNGSDP), the Medium-term Development Plan 2011-15 (MTDP) and Vision 2050.

Targets under the PNGSDP call for a tripling of the national road system by 2030 in a move which is projected to add more than 119,000 formal and informal jobs to the country and contribute PGK2.85bn ($1.2bn) to GDP. In addition to expanding the length of national roads from 8460 km in 2014 to 25,000 km by 2030, the plan also calls for upgrading existing roads (of which currently only 2512 km, or 28.7%, are rated as being in good condition) to 100% in good condition. Shorter-term goals laid out in the MTDP call for 75% of national priority roads to be in good condition by 2015 along with 22 national airports to be in full compliance with safety certification standards by 2015.

Budget For Works

Targets for the water transport sector under the PNGSDP include improving service to the county’s 14 maritime provinces by tripling the number of routes serviced and the number of vessels plying their waters. Port upgrades are also planned to bring them closer to international norms and slash international port turnaround times from current average of three days to just one day by 2030.

To achieve these objectives, the government is allocating substantially more resources to the sector than it has in the past. Annual expenditures by the Department of Works (DoW), which carries out transportation projects such as road construction, are slated to remain strong through at least for the next few years with annual outlays ranging from PGK1.65bn ($670.7m) to PGK1.78bn ($723.6m) each year from 2013 to 2017, according to the 2014 national budget. These include dozens of projects all over the country, the most significant of which include PGK143.3m ($58.3m) for the Highlands region road improvement investment (see analysis), PGK100m ($40.7m) each for Lae city roads and national roads rehabilitation and maintenance, and another K170m ($69.1m) for Port Moresby’s roads.

“The 2014 national budget seems to be putting a strong emphasis on infrastructure, something that was long overdue. While Port Moresby has now a lot more shiny buildings and shiny cars than in the past, outside the capital city the situation has gone backwards in terms of physical infrastructure,” Geoff Cundle, the CEO of maritime firm Steamships, told OBG.

Private Sector Participation

With infrastructure often insufficient to support the logistical needs of resource extraction projects located in remote areas, the private companies operating these projects frequently develop road, air and sea transportation networks themselves. These developments can range from upgrading a stretch of road or a bridge to handle heavy duty to carving 3.2-km-long runways out of the jungle capable of accommodating some of the world’s largest cargo planes. While these improvements are necessary to carry out business operations, this infrastructure also benefits local communities by opening up access to previously underserved regions.

Recognising the importance of such private sector initiatives, the government is encouraging infrastructure investment by allowing investors to recoup some of their costs through the infrastructure tax credit (ITC) scheme. Available to taxpayers engaged in mining, petroleum and natural gas, primary production and tourism activities, the ITC provides tax relief on approved expenditures including infrastructure development projects by offsetting their cost against the income tax liability of the company undertaking the development. The effective result of the ITC is that the government still bears the full cost of the projects through a reduction in revenue rather than an increase in expenditure.

Bigger Breaks

The government upped the ante in 2013 with the passage of an amendment to section 219C of the Income Tax Act on the ITC scheme which empowered the National Executive Council (NEC) to approve expenditure on individual national infrastructure projects so that ITCs can be claimed above the previous 0.75% threshold. In addition, the amendment allows companies to claim expenditures exceeding the cap but not approved by the NEC as an ITC for up to 20 income years. However, the amendment also limits the application of ITC to national infrastructure projects to those approved prior to November 19, 2013 to protect state mining and energy revenue streams.

According to a case study carried out by the Development Policy Centre at the Crawford School of Australian National University, the country’s four largest resource projects (Lihir Gold, Oil Search, Ok Tedi Mining and Porgera Joint Venture) spent an average of PGK61.2m ($24.9m) a year from 2009 to 2011 on local infrastructure investments funded by the national government under the ITS scheme.

In addition to these individual private sector improvement projects, the government is looking to privatise some of the construction for priority highway projects. Current building programmes have been carried out by the DoW and then handed off to the National Road Authority for upkeep and maintenance, but these are planned to be supplemented by contracting out individual stretches of road to contractors who will then operate the highways as toll roads.

Road Trip

Much of the country’s existing national road network – at 30,000 km in total according to government estimates listed in the MTDP – was constructed under Australian rule prior to the country’s independence in 1975. Since then the majority of the highways have fallen into disrepair due to a lack of maintenance and heavy rains in many areas which cause landslips and severe damage to unpaved roads. As of 2014 approximately 60% of PNG’s 8460 km of national roads and 80% of provincial and feeder roads were in poor condition, according to the 2014 budget.

These deteriorating conditions are exasperated by an uptick in usage of heavy trucks used in the construction and support of large resource projects and the growing use of passenger cars due to the rising affluence of the population. Annual sales of vehicles from registered garages (which excludes undocumented second-hand cars) rose by 72% between 2009 and 2012 to reach 10,503 units, the PNG Motor Traders Association told OBG. Heavier commercial vehicles, which are particularly hard on roadways, accounted for 77% of all sales during that three-year period. Heavy-duty trucks experienced the strongest growth, increasing by 147%, followed by passenger cars at 77%.

Priority Projects

In an effort to shore up the country’s declining road network, PNG has teamed up with the Australian government to carry out a development programme with the goal of ensuring that 75% of 16 priority national roads are in good condition by 2015. These 16 priority highways constitute so-called missing links in the road network and developmental corridors. These links consist of the Highlands Highway (HH), Buluminiski Highway, Koroba-Mendi Road, PorgeraTogoba Road, New Britain Highway, Sepik Highway, West Coast Road, Baiyer Road, Hiritano Highway, Coastal Highway, Kokoda Road, Wau Road, Buka Road, Magi Highway, Ramu Highway and Northern Road. Once completed, these missing links will fill the existing gaps and constitute a true national highway system connecting potentially productive regions across PNG. The Partnership for Development Transport Infrastructure Schedule includes maintenance and rehabilitation of national priority roads, better functioning transport sector agencies, and improving safety and security standards to international norms.

According a review of progress of the programme made in 2013, Australia’s Ministry of Foreign Affairs noted that the sector was on track to meet these targets thanks in part to increased infrastructure spending by the government, but that institutional capacity for implementation remained limited and developmental budget growth had not been matched by recurrent budget increases for maintenance.


This was addressed in the 2014 budget in which funds for maintenance were included, bringing state expenditure for roads and bridges for the year to PGK1.42bn ($577.2m) according to the Treasury Department. This represents roughly half of the PGK2.72bn ($1.1bn) allocated to the infrastructure sector as a whole in the 2014 budget, which was up by 44.7% over the 2013 budget allocation of PGK841.3m ($342m).

As part of the roads rehabilitation and maintenance programme, PGK100m ($40.7m) will be spent in 2014 by the DoW to upgrade and seal the gravel sections of priority roads and maintain sealed roads. This includes a PGK89.8m ($36.5m) contract signed in January 2014 by the DoW for Dekenai Constructions to carry out seal upgrades on the Hiritano Highway between Malalaua and Epo in Gulf Province. Of the 4200 km of national priority roads, 3000 km were sealed, leaving 1200 km gravelled at the beginning of 2014.

The country’s other primary industrial and commercial centres are also benefitting from renewed attention in 2014 as well with PGK100m ($40.7m) set aside for work on new and existing roads in Lae. The agricultural centre of Mount Hagen will receive another PGK40m ($16.3m) for the same purpose, while the tourism hotspot of Kokopo was allocated PGK15m ($6.1m) for upgrade works at the Tokua Airport and connecting road network. Moving forward with efforts to fill in some the missing links and roads in economic corridors, the budget has also earmarked funds for the development of priorities including the Sepik Coastal Highway, Western Highlands-Madang Highway, East New Britain Highway, Gulf-Morobe Highway and Gulf-Southern Highlands-Hela Highway.

The World Bank approved $126.5m in funding in March 2014 for the rehabilitation of hundreds of kilometres of roads along the coastal provinces, according World Bank statements. Implemented through the second phase of the road maintenance and rehabilitation programme (RMRP), the first road to be refurbished is a 50-km stretch of the East Coast Road in Milne Bay connecting Alotau and East Cape Point. The funding is being made available through a credit from the bank’s International Development Association along with $30.5m provided by the PNG government. Previous work on the original RMRP was done on the Hiritano Highway connecting the Gulf and Central Provinces.

One of the most crucial projects under way involves shoring up the extensive HH and feeder road network connecting the agricultural and resource industries in the highlands with the port in Lae (see analysis).

Capital City

Another major project allocated in the 2014 budget is for the upgrading of Port Moresby’s deteriorating and potholed road network. This will include PGK170m ($69.1m) earmarked for upgrading and maintaining existing roads as well as for the construction of new roads. The 2014 outlay is part of the larger PGK700m ($284.6m) project comprising PGK400m, ($162.6m) from the state and PGK300m ($122m) via a soft loan from the Exim Bank of China to improve six major roadways in the National Capital District (NCD). It is hoped that the projects will be finished by the time PNG hosts the 2015 South Pacific Games and the 2018 Asia Pacific Economic Cooperation (APEC) meetings.

The largest expenditure, at PGK196m ($79.7m), is to build a four-lane, 10.7-km divided Gerehu-Hanuabada road constructed by China Harbour Engineering Company PNG. This will link to the next 8-km stretch, Gerehu-9 Mile, worth PGK122m ($49.6m), which will also be four lanes and built by the same contractor. Another high-profile project is the PGK160m ($65m) Kookaburra Road project connecting Sir John Guise Drive to the Hubert Murray Highway, including a flyover at the Erima Junction, being built by Hawkins PNG. The second phase of the Gordons Industrial Road project to upgrade roads around the city’s industrial centre will be carried out by Global Construction at a cost of PGK85m ($34.6m). The last two projects comprise a fourlane stretch between Erima and 9 mile (4.3 km at a cost of PGK77m, $31.2m) including a four-lane bridge and the Morea Tobo Road (PGK57m, $23.2m), which is 1.2 km of four-lane road and 4.7 km of two-lane road.


The marine subsector is a crucial cog in PNG’s national transportation network due to the country’s heavy reliance on imported goods, its lack of a comprehensive land-based options and the presence of numerous islands outside the main landlocked territory PNG shares with Indonesia. This infrastructure has been under increasing stress in recent years, however, as the massive influx of materials needed for the country’s large-scale investments push the capabilities of the ports to their limits. Container traffic has already risen 35.9% over a five-year period from 254,592 twenty-foot equivalent units (TEUs) in 2007 to 326,141 in 2012. While investment and related traffic are easing as the massive PNG LNG construction phase winds down, the development of a host of other new resource projects as well as continued economic diversification should continue to spur growth of commercial shipping. Given the lack of established land connections, PNG’s extensive river networks also serve as key transportation arteries, particularly the Sepik and Fly Rivers.

The country’s two primary seaports are Port Moresby Port, located in Fairfax Harbour, which supports the capital and its commercial interests, and another on the northern coast in Lae, catering to the country’s agricultural and mineral extraction industries. The vast majority of commercial shipping traffic is routed through these two ports, which accounted for 79% of all movements, or 753,444 TEUs, between 2010 and 2012. Other important regional ports are located in Alotau (on the southern tip of New Guinea), Wewak (on the north coast), Rabaul (in New Britain), Kieta (Bougainville) and Lorengau (Manus Island). State-owned PNG Ports has authority over the country’s 23 ports and manages 15.

Due to increased demands of growing investment and trade which are projected to rise further in the future, the port in Lae is in the midst of a massive overhaul while the Port Moresby port has outgrown its original home and is in search of a new site for relocation.

Easing Congestion

New facilities will be crucial as current congestion is impeding economic growth due to logistics delays and high costs imposed upon users. Upgrades are not limited to the primary commercial and industrial ports, as traffic continues to increase at many of the smaller ports around the country. A rise in tourist interest is spurring the upgrades that began in 2013 at Alotau, which will feature a PGK41m (16.7m) project to accommodate larger cruise ships, while the port in Daru, located on a small island just off the southern coast of Western Province, is also being refurbished.

Future port expansions are also expected to support the growth of 10 economic corridors across the country and unlock the potential of logistically limited areas. One likely candidate for new facilities includes Madang, with its close proximity to the Highlands region, Ramu nickel mine and the Pacific Marine Industrial Zone. Intermodal support is also being improved in the area, in particular the 375-km highway connecting the Western Highlands centre of Baiyer with Madang.

Another potential site is Kikori in Gulf Province just south of the Highlands, a region currently devoid of major deepwater port facilities but primed for a resource boom spearheaded by the Elk-Antelope oil and gas project. As more large-scale resource extraction projects get under way, further purpose-built upgrades will be necessary around the country as well.

Moving On

Despite numerous upgrades over the years to help boost efficiency and capabilities of Port Moresby Port, the 42,000-sq-metre facility has been stretched to its operational limits due to increased traffic in the past few years. The port’s central location along the waterfront is a limiting factor in the port’s capacity ceiling due to fact that the site’s footprint is ultimately constrained by its surrounding commercial interests as well as the logistical snarls created by fleets of large tractor trailer rigs rumbling through the city’s major thoroughfares and parking along its streets.

“I believe the Port Moresby port facilities will be relocated outside of the city centre because the wharf infrastructure is pretty old and the government is looking into using it as a cruise ship terminal,” Kurt Behnke, the general manager of Papua New Guinea Dockyard, told OBG. “It will happen, it is just a matter of time.”

Although the relocation is viewed largely as an inevitability, especially since Sir Mekere Morauta, the former minister for public enterprises, stated that the NEC had endorsed a PNG Ports relocation plan in 2012, no clear timetable for the move has been set. Likely locations for a new port are across the bay on the western shores or at the 71-ha man-made Motukea Island, which already houses ship maintenance and construction facilities, Customs operations and other support infrastructure. Operated by Australia’s Curtain Brothers (CB), the private port has recently undertaken an expansion which will add 4 km of wharf to the site. Government transportation sector plans indicate that inter-connectivity of Motukea Island into the national road infrastructure is a priority and the state has already approved expanding the highway linking the port to Port Moresby to four lanes as well as long-term plans to incorporate it into the Trans-Island Highway by 2030. The PNG LNG pipeline has also been a boon for the CB port.

Other private operations in the immediate area include Bismark Maritime Wharf, Steamships MES Wharf and Napa Napa InterOil Port. In spite of these private competitor ports, all located with Fairfax Harbour offering berthage and wharfage services, their markets are well delineated leaving little overlap in head-to-head commercial competition. Both Port Moresby Port and CB can handle containers and dry bulk goods, with the former also providing liquid bulk (petroleum and bunker fuel) and passenger services as well as the majority of container traffic. Bismark and Steamships work only domestic coastal routes, with the latter accounting for the lion’s share of the market, while the InterOil port handles crude oil and refined petroleum products.

Lae Upgrade

Perhaps the most significant upgrade currently being made to the country’s maritime transport sector is the expansion of the industrial port in Lae. The gateway to the highlands serves not only as the primary access point for the agricultural sector and a number of mining and energy projects in the region, but also as a feeder port supporting numerous outlying islands. As a result, more than half of the country’s total container traffic passed through the port from 2009 to 2012. Since 1995, annual cargo handled has increased by 131,000 tonnes each year, including growth exceeding 5% per annum for containerised cargo and 2.5% for general cargo, according to the ADB.

To keep up with the growth of marine traffic, the government is in the midst of a PGK1bn ($406.5m) port expansion which is expected to raise the port’s throughput by 50% upon completion in 2015. Cargo handling at the port is also expected to increase by 1.4m revenue tonnes per year and boost the number of annual ship calls from 600 to 900, according to the ADB. Improvements for the port involve constructing new port facilities, including a berth, tidal basin and terminal works, buildings and storage areas, roads and drainage, and support infrastructure such as water, electricity and sewerage services. Consultancy contracts for the project were signed in 2011 with bids for the major civil works involving dredging and the construction of the wharf and terminal awarded in March 2012 to China Harbour Engineering Company. Ground was broken on the construction phase in June 2012. There has been significant progress on the project since then in spite of cost overruns, and as of December 2013 site clearance and excavation, dredging and reclamation operations had been completed along with 85% of the wharf, 30% of slope protection works, and 5% of the container terminal and yard.

Total investment in the project is estimated to come to some $291.4m, with the ADB footing the bill for the majority of these expenditures and the government chipping in $94m. Funding from the ADB is sourced from loans issued by the Asian Development Fund and the OPEC Fund for International Development along with other capital resources that cover a range of non-infrastructure works in the city as well as the port upgrades, including a $750,000 grant for HIV/ AIDS prevention and $1.5m from the Japan Fund for Poverty Reduction.

Work will continue at Lae throughout 2014, for which the government has allocated PGK437.4m ($177.8m) to the development of the city, including PGK270m ($110m) earmarked for the port itself with the remaining funds to be used for supporting infrastructure such as improvements to the road network around the port to facilitate onward transport. Full port operations are expected to be up and running sometime in 2015.

Navigational Aid

Complementing the expanded shipping capacity, the government is also working to improve the safety and navigability of its waters as traffic increases. Also developed with the assistance of the ADB, the Maritime and Waterway Safety Project (MWSP) will aid not only commercial operations but also improve conditions for the 65% of the population living in coastal regions. The $47.9m project is managed by the National Maritime Safety Authority (NMSA) and will replace and maintain 99 navigational aids, install another 33 along the coastline, conduct hydrographic surveys, expand the automatic identification system network, and provide safety awareness and training sessions in rural communities. Expected to be completed by 2018, the project is funded mainly by ADB sources.


A second challenge remains to be addressed in the form of administrative and bureaucratic inefficiencies. The root of these problems stems from long lag times and procedural complexities required by the various government agencies regarding importing and exporting goods through PNG’s ports. As a result, PNG was ranked 134th out of 189 economies in terms of trading across borders by the World Bank’s “Doing Business 2014” annual ranking. This was well off the East Asia and Pacific regional average of 77 and far behind Pacific Island peers: Fiji (111), Palau (96), Kiribati (77), Tonga (63), Marshal Islands (62) and Samoa (58). In spite of various streamlining programmes proposed by the relevant government agencies, the report has measured no notable reform in the sector since its initial inclusion on the list in 2009.

“The different government bodies such as PNG Ports, Customs, quarantine and Ministry of Trade are not all dancing the same dance so the changes made to speed things up often don’t work as they should,” Khu Heong Chye, group agency manager (South Pacific) at Carpenters Shipping Agency, told OBG.

The problems are most apparent for importing goods, which requires on average 32 days to complete compared to the East Asia and Pacific regional average of 22 days and 10 days in OECD high-income nations. As a result, the average cost to import a container into PNG is $1250, 41% higher than the regional average of $884 per container. The largest expense incurred is the $450 paid for ports and terminal handling over an average of seven days, followed by $300 each for Customs clearance and technical control (four days) and inland transportation and handling (two days). There is also an additional $200 in expenses to cover the 19 days of document preparation.

It takes roughly one-third less time to export goods with an average timeframe of 23 days, compared to the regional average of 21 days and 11 days in OECD high-income countries. Export costs are marginally less than imports at $1149 per container, but still significantly higher than the regional average of $856, giving other competitors a substantial edge in export markets.

Ports and terminal handling are again the most substantial costs at $360 per container over an average of four days, followed by Customs clearance and technical control ($300), documents preparation ($275), and inland transportation and handling ($214).

“PNG Customs is still working to overcome delays, even though most of those are due to errors by shippers who are not complying with our legal requirement of submitting cargo manifests 48 hours prior to berthing. This service is now available through our e-system,” Ray Paul, the commissioner at PNG Customs, told OBG.

Taking Flight

PNG’s aviation sector is also embarking on a major makeover which is expected to provide a major facelift of its primary airport infrastructure (see analysis) as well as a restructuring of its national carrier, Air Niugini (ARL). Owned by the state of PNG through the Independent Public Business Corporation, ARL has experienced a surge in passengers in recent years and is in the midst of upgrading its fleet to keep up with demand. ARL dominates the country’s air market and has a near monopoly on international flights to 10 international cities as well as 21 domestic routes.

A second carrier, Airlines PNG, operates primarily as a domestic airline serving 22 town and cities throughout the country, in addition to charter services. The carrier’s fleet comprised 14 de Havilland Canada DHC Dash 8-102s and another eight de Havilland Canada Twin Otter DHC-6 300s as of early 2014. Both aircraft are well suited for short field take-off and landings encountered at some of the smaller, more remote airstrips as well as the challenging conditions encountered in the high altitudes of remote resource development mining and energy projects. While ARL holds a significant edge in domestic market share, Airlines PNG has been steadily chipping away at the lead as its seats per week has increased from around 7500 in October 2011 to around 14,000 by September 2013, according to data from the Centre for Aviation and Innovata. Over the same time ARL seats per week have declined from around 32,000 in 2011 to 31,000.

Virgin Australia also operates a code-share agreement on a limited basis between Port Moresby and Cairns, Australia, while Qantas has code-share agreements from Port Moresby to Cairns and to Brisbane, Australia, with these covering both passenger and freight traffic. Some 3500 seats per week are booked on ARL from PNG to Australia, compared with around 1000 seats each for the Australian carriers.

Meanwhile, ARL added six new aircraft in 2013 to its stable of Boeing 737s, Boeing 767-300ERs, Fokker100s and various Bombardier Dash-8 models. The company is also retrofitting some of its older planes to make them more comfortable leading up to the Pacific Games to be held in the country in 2015. The flag carrier also has a Boeing 787 on order for delivery in 2017, and it is expected to be listed on the Port Moresby stock exchange in the near future, although no clear timetable for the listing has been announced.


PNG’s transportation sector looks to be turning a corner as a number of substantial infrastructure upgrades are now in full swing. The HH project along with the upgrade of the port in Lae should go a long way to easing congestion and boosting economic opportunities in related sectors. Improvements at other ports, combined with the eventual relocation of governmentowned facilities in the capital, should further ease congestion for domestic and international shipping lines, although monopolistic domestic shipping practices could offset some of the efficiencies gained in terms of lowering user costs. In the skies, much-needed improvements in the country’s airports and airlines should also improve efficiency, comfort and safety.