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The overall project will expand the cargo handling capacity of PNG's largest sea port at Lae, the capital of Morobe province. The overall project will also help improve the livelihood of project-affected people and reduce the prevalence of HIV in Lae and surrounding localities. This involves financing (i) construction of port facilities including a tidal basin, a multipurpose berth, and terminal works; (ii) resettlement and livelihood improvement and social improvement for affected people; (iii) consulting services for project management, construction supervision, financial management, resettlement, and socioeconomic monitoring; and (iv) gender-responsive programs for HIV awareness and prevention. Current project implementation preconstruction activities are mostly complete, including the relocation of 3,200 people from the project site.

As a result of input price increases, the devaluation of the US dollar against the kina, and design modifications, the total current project cost has increased from $154.0 million at appraisal in 2007 to $291.4 million in 2011. The current project rationale is valid and remains applicable. The current project scope has been revised to include some improvements to construction solutions. Additional financing is requested for 65% of the total overall project cost increase, the balance to be provided from government resources.

Development Need. Lae port is PNG's largest, busiest, and most important port. It is a gateway linking world markets with PNG and a large hinterland containing 40% of PNG's population and half of PNG's economic capacity, including hydrocarbon and mineral resources. Lae port's cargo throughput has increased by 7.8% annually since 2006. In 2011, the cargo through Lae port is estimated to reach 3.3 million revenue tons, stretching the port to the limit of its capacity. PNG Ports Corporation Limited (PPCL) is increasing the operational efficiency of Lae port, which will help cope with the existing cargo traffic. However, the need for additional berth space is now critical. A larger and more efficient Lae port will ease a nationally significant infrastructure bottleneck that is impeding economic growth. The overall project is a high priority of the Government of PNG.

The Current Project. The overall project will expand the capacity of Lae port by building a tidal basin (700 x 400 meters [m]) northwest of the present port facilities with a dredged depth of 13 m below sea level, a multipurpose berth (240 m long and 45-50 m wide), and terminal works including all buildings, storage areas, roads, drainage, water, electricity, 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. The procurement of these works is at an advanced stage.

The overall project involves the relocation and livelihood and social improvement of about 3,200 people living on the project site. The government has financed and completed the relocation, and a Japan Fund for Poverty Reduction grant is now financing the livelihood and social improvement program. To minimize the potential risk of new HIV infections, the overall project includes support for an effective and sustainable response to the HIV epidemic in and around Lae port and Morobe province. The Lae Chamber of Commerce is the implementing agency and activities include (i) developing an HIV and AIDS code of conduct for businesses; (ii) improving seafarers' facilities; (iii) strengthening clinical institutional structures; (iv) strengthening nongovernment organizations, AIDS site committees, and the Lae police; and (v) caring for people with HIV.