National Sustainable Development Program

The Company continued its two-pronged approach in identifying opportunities. The first involves support for community-level programs, and the second involves large investments with major established partners. Investigations during the year focused on opportunities for investment in agriculture, especially oil palm and rubber, road rehabilitation, telecommunications, power, and shipping, as well as hospital facilities. These initiatives are currently either under investigation or in development. Some of these are described in the next sections.

Supporting National Sustainable Development Projects

The Company received numerous requests and proposals covering health, education, environment, water supplies, agriculture, and fisheries which required investigation, especially in relation to project management and sustainability. One outcome of these requests and needs assessment is the establishment of separate funds for small urban centres and community power, hospital facilities and equipment rehabilitation, and the Company's support for a national microfinance institution.

Two projects were approved for funding support under the National Community Sustainable Development Program fund. The Company approved funding support of US$62,000 (K200,000) for construction of a single storey classroom and materials for roof tile and furniture making, as well as refrigeration maintenance for the Badili Vocational Centre in the National Capital District. The supervision and construction of the classroom will be undertaken by students. The Centre provides training for grade 6 to 10 school leavers to help them develop skills for self employment and self-reliance. A second project for Pari Village women's centre, health clinic and school was approved. The project will provide a much-needed focus for facilitating village community organisation, leadership training and confidence-building with the support of the local church and member of parliament. The Company agreed to contribute up to US$75,000 (K240,000) to this project.

Supporting National Hospital Equipment and Facilities Rehabilitation Program

The Company approved US$1.5 million (K5 million) as seed capital for a National Hospital Facilities and Equipment Rehabilitation Fund to leverage other donor and corporate funding towards improving medical equipment and facilities at the major hospitals throughout the country. It is also hoped that these contributions, and those of others, will help generate an overall improvement in basic hospital services. The Company has approved support from the Fund during the year to renovate the maternity wing of Port Moresby General Hospital, support for the Fred Hollows initiative to establish and operate an Eyes Facilities and Training Program for PNG at the Port Moresby General Hospital, and the replacement of critical medical equipment including a steriliser at the Boram Hospital in Wewak, at a total cost of US$0.27 million (K0.87 million).

Providing Microfinance Services

Following previous study reports and its own assessment, the Company established PNG Microfinance Limited (PNGMFL) as the best approach to provide financial services to low-income earners in the formal and informal sectors in Papua new Guinea's urban areas and rural communities. The Company has provided US$1.8million (K6.0 million) as equity in PNGMFL and will provide a further US$0.5 million (K1.5 million) as a grant for capacity building programs for PNGFML.

The Bank of South Pacific and the World Bank's International Finance Corporation have both given in principle agreement to take up equity of US$1.2 million (K4 million) and US$1 million (K3 million) respectively in PNGFML. Agreement was reached with Ok Tedi Development Foundation and the ANZ Bank to transfer its microfinance project branches in Tabubil and Kiunga to PNGMFL.

An Interim Board and management team has been appointed, a business plan and operational policies and procedures approved, and a head office established.

On 24 December 2004. the Bank of PNG granted PNG Microfinance Limited a license to operate as a microfinance service provider throughout Papua New Guinea, paving the way for progress to be made in establishing branches in the NCD, Western Province and other parts of the nation.

Supporting National Road Infrastructure Maintenance and Rehabilitation

The Company decided to reallocate its funding commitment of US$2.2 million (K7 million) to the Highlands Highway project in 2004 to support the government's counterpart financing contributions to the World Bank-sponsored National Roads Rehabilitation and Maintenance project covering six provinces. As the first phase, the Company agreed to fund roads in Oro and Central Provinces and agreed to investigate the requirements of the four other provinces for support in 2005.

Supporting National Energy and Electrification Program

Following investigations carried out in 2003 and 2004 into urban and rural power locations in Western, Central, Gulf, East and West New Britain, Bougainville and New Ireland provinces, the Company decided to establish:

• a company, PNG Sustainable Energy Limited (PNGSEL), with Snowy Mountains Engineering Corporation (SMEC), to develop large energy projects using alternative sources of energy, including hydro, geothermal, on a commercially sustainable bases; and
• a Sustainable Energy Fund (SEF) with an initial capital contribution of US$1.5 million (K5 million) to support sustainable power projects for small urban centre and rural communities, appointing PNGSEL as project manager with responsibility for long-term sustainability.

PNG Sustainable Development Program Limited and SMEC agreed to contribute US$500,000 each as initial capital for establishment of PNGSEL and the investigation and negotiation of initial major energy projects for investment.

The Company has also agreed to engage PNGSEL as its agent in delivering sustainable power to small urban centres and rural communities. PNG Sustainable Energy Limited has also been assigned the task of implementing a Small Urban Centre and Rural Power Program in the Western Province and the rest of Papua New Guinea. This program is being funded by PNG Sustainable Development Program Limited.