Statement by the Prime Minister on the
ADB LOAN AGREEMENT SIGNING WITH GoPNG FOR FUNDING OF LAE TIDAL BASIN PORT DEVELOPMENT
Presented on PM’s behalf by Minister for State Enterprises, Hon. Arthur Somare
[Lae, 12 June 2008]Governor of Morobe Province, Hon. Luther Wenge,
Vice President of the ADB, Mr Lawrence Greenwood.
Mr Charles Andrews, ADB Country Director,
Hon Patrick Pruaitch, Minister for Finance & Treasury
Ladies and Gentlemen,
I am very delighted to officiate at this very important occasion considering the fact that only three weeks ago I witnessed the signing one of the biggest impact project ever for this country and probably the Pacific region, the PNG LNG Project with our private sector development partners, ExxonMobil and the co-ventures.
Today once again, marks a significant milestone for my Government and with another of our multilateral development partner, ADB in fulfilling a commitment to the people of Papua New Guinea.
For the records, I made two promises to the people of this nation in the 2002 general election which I mentioned in my statement to parliament when my government took office in September last year;
- The first promise was to rescue a sinking ship and bring it to surface to rebuild which my government has achieved in the last term of office.
- The second promise is to make this country, Papua New Guinea a better place, where everyone would have equal opportunities to participate in building their homes, villages, communities and country as a whole.
The signing of the ADB Loan Agreement today for this single largest project in the Pacific region is a testament of my government’s ability to live up to those promises and fulfill the expectation with a major infrastructure project like the Lae Tidal Basin Project and including the PNG LNG Gas Agreement that was signed last month.
I am proud to say that the people of this country have trust in my government to deliver and unanimously return my government to office to complete the contract that my National Alliance Party and our coalition partners in government promised during the elections.
As I said in my statement to parliament when we took office last year, my government will start the process by setting a new path for enhanced growth and development for this dignified nation, Papua New Guinea.
Well, this government has been in office since September 2007, only 10 months and we are rolling out major projects like the Lae Tidal Basin Project.
I am sure that these developments will create immense opportunities for everyone in the country to participate meaningfully to building a better nation for our people and the future generation.
My government approved K147 million from GoPNG budget for this project in September last year as our counterpart funding and frontloaded (we paid upfront – previous governments don’t do this, they pay on a piece meal basis and projects were never get completed properly) so that ADB can fast track the approval of $100 million.
Today you have witnessed the fruitful outcome of that process which usually takes a long time to reach and it was not surprising because my government placed great priority on this major infrastructure project as the basis to move forward in our development priorities.
I acknowledge that transport infrastructure supports business and economic growth at the international, regional, national and sub-national level right down the value chain to the rural producers of marketable commodities.
My Governments’ programs and development agendas are guided by broad development strategies under the Medium Term Development Strategy (MTDS) 2005-2010. It identifies rehabilitation and maintenance of existing transport infrastructure as one of the pillars for economic growth, rural empowerment and poverty reduction.
The MTDS states clearly that a well-maintained transport infrastructure is essential for the efficient flow of produce to markets and for the flow of consumer goods and services to rural communities.
My government is absolutely conscious of our need to bridge the infrastructure gap and the consequence of not adhering to this will perpetuate an impoverished society through a lack of appropriate economic infrastructure
My Government since 2002 has adopted a policy of rehabilitating state assets, which includes State Owned Entities (SOEs) that provides public utilities and services such as the PNG Ports Corporation Ltd.
These public utilities are essential enablers and part of the aggregate impact of improved infrastructure that links directly to sustained business growth and economic development.
To overcome many of the legacy issues that plagued our SOEs (which includes inefficiency and politicization of the SOEs), the Government took to a deliberate strategy of appointing Directors with professional and credible background, and appointment on merit rather than political affiliations to the SOE’s Board.
We chose and appointed professional and qualified management teams in consultation with the Independent Public Business Corporation (IPBC) who holds the state’s interest in the SOEs, acknowledging that there exists a capacity gap in our SOEs with the ultimate desire to drive efficiencies in the organizations.
IPBC is an agency of government, established in 2002 under an Act of Parliament to set up a ‘General Business Trust’ (GBT) with all the state’s asset and interest vested with GBT, and held wholly for the benefit of the state and the people of PNG. IPBC is the manager of this GBT.
Through the initial achievements of certain individual initiative the total asset value of the state in the GBT increasing from K1.2 billion in 2002 to about K6 billion in 2007. We expect this figure to increase to about K7 billion by the end of this year.
This provides additional opportunities for IPBC to leverage its asset to provide borrowing and capacity to finance development projects outside of normal government budgetary process or appropriation, especially to fund capital expenditure programmes that complement development initiative that support our rural majority through the Community Service Obligation (CSO), recognizing that we have a population who in essence have a low ability to pay for services provided by our SOEs.
A constrain of this strategy is we would rely on too few on profits-centres to cross subsidize to many of our loss centres.
Another feature of our government recent initiatives especially during these times of fantastic commodities prices boom has been that the government has chosen to provided direct funding, levering the additional revenue, through IPBC to support the PNG Ports Corporation Ltd in its capital expenditure programmes in the last two years to up-grade the current Lae Port facilities and Wewak Port to cater for the increase economic activities on the waterfront.
Lae Port is a hub that is strategically located to serve the Highlands Provinces and the New Guinea Islands including the Mamose region (New Guinea coastal provinces).
I understand the ADB loan facility of US$100 million includes a grant equivalent of US$1.5 million for poverty reduction and US$0.75 million for HIV Aids with counterpart funding from GoPNG of US$46.75 million appropriated in the 2007 budget to fund the Lae Tidal Basin Project.
The total project cost is US$154 million which is about K488.12 million.
It is one of the biggest projects undertaken ever by any government in the past and implemented through IPBC as the government’s managing agent, a unprecedented arrangement never thought of before.
This government is mindful of the impact and value of trade to the country and to achieve its objectives of an export-driven economy, for businesses to export and import, for people to enjoy appropriate shipping services, we need a port operation that must be efficient and sustainable.
The Lae Tidal Basin Project is the concept to take PNG
Lae Port plays an essential role in the social and economic development of PNG. It is important not only for adequate and efficient handling of exports and imports, but also for the efficient movement of goods and people between the remote and sparsely populated areas on the mainland of PNG and islands and the centers of economic activities.
Lae port is PNG’s largest, busiest, and single most important port.
It handles about half of the total throughput of the 22 confirmed ports and more than 60 percent of the total international and coastal trade registered in 16 major ports operated by PNG Ports Corporation Limited (PPCL), and generates over 50 percent of the total revenue.
It serves as a gateway linking the world market to the city of Lae, and Papua New Guinea’s industrial and commercial center, Morobe, Madang province, and the 5 resource-rich Highlands provinces.
The Highlands is home to about half of PNG’s population and represents 50 percent of PNG’s territory.
PNG’s most significant road-the Okuk Highway runs from Lae to the Highlands region, distributing imports ranging from heavy machinery to food products to the region and bringing the country’s major export items to Lae port.
About 50 percent of PNG exports and 90 percent of coffee exports are shipped from Lae port.
Since 1995, Lae port has witnessed an average annual cargo increase of 131,000 tons2, with containerized cargo growing at over 5%, and general cargo, at 2.5 percent per annum.
In 2005, the cargo volume through Lae port reached 2.4 million revenue tons, which stretched Lae port to the limit of its capacity. As a result, port congestion at Lae is frequent, imposing high costs on port users.
In 2005, it was reported that 210 days were spent by all classes of vessels waiting for a berth, and a 1-day delay in the harbor could cost a shipping company $8,000-$15,000.
The situation is expected to deteriorate, as economic prospect for PNG remains strong, and the hinterland of Lae port is experiencing a boom in development activities.
The Tidal Basin Project will include the construction of new port facilities rather than improve the existing port for 3 reasons:
- the existing port has insufficient terminal area for efficient port operations,
- the existing berths have been built on a steep foreshore with increased risks of geotechnical instability, increasing the financial risks of any port improvement project; and
- Future opportunities to extend the existing berths are limited, whereas the project allows additional berths to be built at relatively low marginal cost.
When this Project is completed, the country will have an operational new port facilities and improved livelihoods for our people.
The core of the Project will be the construction of a tidal basin located to the northwest of the existing port facilities, a multi-purpose berth (240 m long and 45–50 m wide), and terminal works including all buildings, storage area, roads, drainage, water, electrics, and sewerage services.
The tidal basin and berth are designed to accommodate vessels with an overall length of 200 m, beam of 32.2 m, and fully laden draft of 12 m.
In addition the project will also involve the harmonious resettlement and livelihood and social improvement for the project affected people; socioeconomic impact monitoring, and gender responsive HIV/AIDS awareness and prevention.
Given this opportunity I have great pleasure and enthusiasm to commit my Government’s full support to see the fruitful completion of this project.
Thank you.
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