Key industries across the Highlands region are set to see major improvements as extensive transport upgrades take shape. The poor condition of the Highlands Highway is a major constraint on inclusive growth, exacerbated by the lack of logistics facilities for perishable and high-value goods. While significant investment is still needed, the 10-year Sustainable Highlands Highway Investment Programme (SHHIP) is expected to facilitate mining activity and promote agri-business across the region, backing government plans to boost exports and encourage self-sufficiency, while also raising rural incomes.
Flagship Development
In June 2017 the Asian Development Bank (ADB) announced a financing facility not exceeding $866.5m for the expansion and rehabilitation of the Highlands Highway, the main transport artery in PNG. With the Highlands region home to seven landlocked provinces and approximately 40% of the population, upgrades to the highway are key to galvanising growth in targeted industries, including coffee and cocoa, which are the second-and third-largest agricultural exports, respectively. In addition to supporting rural industry, this is expected to increase efficiency in mining supply chains.
The SHHIP aims to improve traffic flow and safety on the highway, which runs from Lae Port, through mountainous regions and into the Enga Province. Known for its agricultural exports, including coffee, tea, cocoa and vegetables, the Highlands region is expected to increase its contribution to GDP as better roads bring down logistics costs. According to the ADB, the modernised 1200-km, two-lane highway will link urban centres to rural communities, and connect 1800 km of local feeder roads. While it has been neglected, the Highlands Highway is key to providing goods and services to the region. The programme is expected to help establish logistics platforms and services for agricultural production, aligning with the national development and transport strategies.
Loan Agreement
With the programme expected to cost around $1bn, the ADB will provide $680m in direct funding, with an additional $187m coming from other development partners and $148.5m from international governments. In the first tranche, the ADB and PNG government agreed to a loan of $272m with a 20-year repayment period, while the Australian government committed $11.5m in co-financing. Some $193m of the first stage will be used for construction, $47.3m is allocated to consulting services, and project management is expected to cost $12.2m. As per the official loan agreement between the ADB and the government, interest and other charges shall be payable on a semi-annual basis starting in 2022.
Schedule
Defined as a project of national significance, the SHHIP could serve as a model for other national roads. Expected to be completed in December 2021, the first stage will maintain 430 km and upgrade 170 km of the two-lane Highlands Highway from Lae Nadzab Airport to Kagamuga Airport. At the same time, it will promote road safety for pedestrians and road passengers, while strengthening the institutional capacity of the Department of Works.
With the necessary funding secured, the SHHIP is expected to transform the region’s transport network. Alternative routes such as the Madang Road exit route through the north of the Highlands Highway, a southern exit and projects in the Gulf Province are expected to improve connectivity and lower transport costs.
While the 10-year SHHIP is still in its early stages, its intent to preserve and improve roads will facilitate the safe movement of people, goods and services between the Highlands region and the main port in Lae, thus promoting greater efficiency and economic potential. In addition to the benefits of the SHHIP, China Railway Group and the PNG government signed agreements worth $4bn in November 2017 for three projects to upgrade a further 1600 km of highways, many of which are in remote regions (see overview).
