THE Asian Development Bank on Tuesday approved a US$480 million (K1.35 billion) multi-tranche loan to support the Papua New Guinea Civil Aviation Development Investment Programme.
In a statement issued by the ADB office in Manila, Philippines, the ADB said the funds would support infrastructure rehabilitation and upgrades; build the capacity of the Civil Aviation Authority (CAA), the industry regulator, to operate on a more commercial footing; and establish 10-year performance-based maintenance contracts.
It said the PNG Government was targeting sweeping improvements to its national airports under a US$640 million (K1.8 billion) plan to strengthen aviation safety and services, and to open up new economic opportunities.
“Rapidly deteriorating infrastructure caused by accelerated wear and tear due to higher air traffic volumes, use of heavier aircraft and intense weather conditions have left the country’s 21 national airports struggling to meet International Civil Aviation Organisation (ICAO) safety and security standards,” the ADB said.
“Rehabilitation and upgrades are urgently needed to improve the safety and reliability of flights and to lower costs and that will help expand economic opportunities and access to social services, particularly for remote, rural communities,” it said.
“ADB’s assistance to develop PNG’s main infrastructure facilities reflects a long-term commitment to support higher growth, reduce poverty and catalyse domestic and foreign private investments,”S Hafeez Rahman, director general of ADB’s Pacific Department said.
A key aspect of the programme is helping the Civil Aviation Authority become more self sufficient.
ADB will work closely with the Australian Agency for International Development (AusAID) to strengthen CAA’s capabilities.
PNG’s air network delivers major benefits to the private sector, particularly in the minerals industry, and a study is underway for a potential partnership between the authority and the private sector to fund the operation and maintenance of Jackson International Airport in Port Moresby.
“ADB will also cooperate with other development partners to explore co-financing opportunities at other national airports over the course of the programme,” Allan Lee, principal portfolio management specialist, in ADB’s PNG Resident Mission said.
ADB’s multi-tranche facility will cover 75% of the total program cost of US$640 million with the private sector expected to contribute US$75 million for Jackson International Airport, and the Government providing counterpart funds of US$85 million equivalent.
In the first tranche, ADB will provide US$95 million, out of a total estimated cost of US$112 million, for improvements at five airports that serve about 1.5 million people.
The loans will be sourced mostly from ADB’s concessional Asian Development Fund, with a supplemental amount from ordinary capital resources (OCR).
The OCR loans have a 25-year term, with a grace period of five years, and interest determined in accordance with ADB’s LIBOR-based lending facility.
CAA is the executing agency for the programme, which will be implemented over nine years, with an estimated completion date of December 2018.