Highlands Region Road Improvement Investment Program - MFF and Project 3

In terms of project design, in-depth analysis of various loan modality options and risks assessment, taking in consideration the ountry’s huge capacity and institutional gaps, can help design an appropriate loan modality. For example, a sector lending, which can also run for a decade and sustain capacity support to the sector, requires a sector analysis that covers a thorough analysis of the factors that affect the performance of the sector, including policy, institutional or regulatory frameworks, as well as the sustainability of the investment. Having this available during project design could provide more basis for needed reforms that are more realistic and attainable and go beyond having maintenance contracts and a new sector plan. Other analyses prior to approval, which could help better design a project are an institutional analysis and capacity assessment, a prerequisite for sector lending. These analyses are particularly important for fragile and conflict-afflicted situations and small-island developing states such as PNG. In addition, the dynamic changes, such as newly established agencies, reorganization, or restructuring, are institutional conditions that provide a sector program greater opportunity for ADB to engage with the government in policy discussions and provide policy and knowledge support.