Six per cent of GDP required to maintain Papua New Guinea’s infrastructure

Papua New Guinea requires about 6 per cent of its GDP to maintain its infrastructure assets, according to Craig Lawrence, Principal at Lytton Advisory. He told the Business Advantage Investment Conference in Brisbane that the ‘build and neglect’ approach is twice as expensive as ongoing maintenance.

Lytton Advisory’s Craig Lawrence says infrastructure should be maintained. Source: BAI

In presenting PNG’s infrastructure report card at the conference, Lawrence advocated taking a ‘strategic asset management approach’ to get the most out of PNG’s current assets.

He said the PNG Government’s Budget position ‘highlights challenges’ funding new assets and maintaining current ones.

‘Funding streams are not secured, and the revenue models to attract/reward the private sector are not strong,’ he said.

‘Telecommunications leads the way when it comes to improving PNG infrastructure.’

Lawrence said that PNG has ‘big infrastructure challenges’. These include: climate, topography, population, culture, economics and finance.

He pointed to the need for effective planning, prioritisation, funding strategies of ongoing operations and a consideration of the asset’s lifecycles.

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Demand for internet bandwidth. Source PNG Infrastructure Report Card

Telecommunications

Lawrence said telecommunications ‘leads the way’ when it comes to improving PNG infrastructure.

However, he pointed to a number of issues. Internet costs are high, there is a need for more capacity in Port Moresby, and the ‘country network is not consolidated’.

There is also a need to improve connectivity in the island and western provinces, he said.

‘There are 22,000km of roads, 40 per cent of which are sealed.’

‘The solutions are commercially driven but the government has a role to catalyse and influence the shape of projects.’

Lawrence notes it is a challenging environment when most households have low, or no, cash income, making it hard to adopt a user pays system.

‘But that may change over time as household incomes increase,’ he said.

Growth in PNG’s mobile phone usage. Source: PNG Infrastructure Report Card

Transport

Lawrence said poor transport systems hamper inclusive growth, noting that PNG is lagging behind the rest of the Asia Pacific.

There are 22,000km of roads, 40 per cent of which are sealed. Only 46 per cent of the 4256 kilometres of national priority roads are in good condition, and maintenance is underfunded.

‘There is a lack of national connectivity.’

Lawrence said shipping is also comparatively expensive.

‘PNG is “energy rich” with an abundance of hydro.’

‘Safety is a challenge. A hundred die in small craft annually.’

Unit costs for international air transport are also high.

Energy

PNG is ‘energy rich’ with an abundance of hydro and Lawrence argues that the country could remain self-sufficient in power.

But he said the centralised power grids in Port Moresby and Ramu are not operating well. Demand, he said, is growing at 5.5 per cent per year.

‘There is a disregard of capital expenditure needs, some tariffs are below regulatory levels and regulatory controls are ineffective.

‘There is also some government interference.’

Lawrence said renewable energy is the key to rural electrification, noting the potential for public-private partnerships.

Water

Lawrence said 61 per cent of PNG’s population cannot gain access to a basic water supply and 51 per cent do not have access to improved sanitation.

‘PNG sanitation coverage is the lowest in Pacific. It is one-third of the world average—only the Marshall Islands has lower piped coverage in the Pacific.’

Piped coverage fell from 12 per cent in 1990 to 9 per cent in 2012, but it is at 50 per cent in urban centres.

‘Urban areas are 15 to 18 times more likely to have piped water than rural areas.

‘Urbanisation and pricing reform may open up opportunities.’

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