The arrival of a new government in 1997 produced a marked change in AIDS policy. The prime minister, Bill Skate, seeking to differentiate his policies from those of his predecessor, Julius Chan, took a direct interest in the issue, as did the secretary of Health, Dr Puka Temu, supported by his minister, Ludga Mond. Legislation to establish a National AIDS Council was fast-tracked, and the prime minister issued in August 1997 a directive calling on all departments, provincial governments, NGOs, churches, donors and the private sector to collaborate in the formulation of a national strategy on HIV/AIDS. Political support opened new possibilities for developing policy and programs.

The initial proposal for a new medium-term plan (MTP) was put forward by a team of UNAIDS/AusAID consultants. They anticipated the standard six-month arrangements for medium-term plans which had been drawn up under UNAIDS guidance in many countries. This preference was reinforced by a Papua New Guinea team that visited Uganda and returned to urge that Uganda's MTP be taken as a template for Papua New Guinea. What emerged was very different, for the process of consultation was taken seriously and led to a strategic document unusual, if not unique, in its genuinely multi-sectoral focus and its central concern with social, economic and ethical issues.

Although the Department of Health provided most resources, it agreed, in an exceptionally generous moment, that the Office of National Planning and Implementation (ONPI) should serve as lead agency. Thomas Lisenia of ONPI chaired both a multi-sectoral coordinating committee and a small secretariat, which served as interim secretariat for the National AIDS Council. A position as full-time coordinator, vital to the exercise, was funded by the UN Development Program and Katherine Lepani left the National Research Institute to take this post.

Six priority areas were defined and multi-sectoral working groups were established to focus on these:

With over eighty people drawn from all sectors, in and out of government, the working groups met separately between September and December 1997 to produce draft strategy papers on their areas; several individual members drafted concept papers, and consultative workshops were organized. Lepani attended all meetings and pulled together the working party drafts into a draft MTP.

When the National AIDS Council legislation was passed by parliament in December 1997, Skate embraced a man living with AIDS, and a woman living with AIDS spoke movingly on national television, attempting to break the political and public silence on living with AIDS. The Council and its secretariat were in place by June 1998 when the National HIV/AIDS Medium-Term Plan 1998–2002 (Papua New Guinea 1998) was launched. Puka Temu, then secretary for Health, argued at the launch that the process by which the plan had been developed was a suitable model not only for other policy areas in his own department, but throughout government. Acknowledgment was given in the plan to the vision and direction provided by Carol Jenkins.

As these developments materialized, AusAID, which had been slowly working its way towards support for AIDS programs in the region, announced a vast increase in AIDS funding for Papua New Guinea. When Australia had been asked for support of the first MTP, a feasibility study for a major Australian project was undertaken early in 1993 (Plummer 1993) and this was followed up the next year with another mission (Moodie et al. 1994). In 1996 a Sexual Health and HIV/AIDS Prevention and Care Project was established, with K3.5 million, to help the Department of Health; this was the largest AIDS project until then in Papua New Guinea. Under the direction of Dr Susan Crockett the project focused on upgrading sexual health clinics and training counsellors.

Up to this time, the Australian commitment to provide primarily budget, rather than project, aid to Papua New Guinea had meant that any major AIDS funding was dependent on Papua New Guinea government priorities. With the rise of political interest in AIDS within Papua New Guinea, the Australian government indicated that it would make available much more substantial funding, and was asked by the Papua New Guinea government to channel this through its new MTP. In March 2000 Australia announced that K100 million was being provided for a National HIV/AIDS Support Project (2000–5), initially directed by Crockett.

On replacing Bill Skate as prime minister in 1999, Sir Mekere Morauta made clear that he supported the AIDS policies of his predecessor, and Lady Roslyn Morauta became prominent in support of AIDS NGOs. A number of local AIDS organizations had sprung up. Perhaps best known were the work of Sister Rose Bernard, who had organized care and counselling for people living with AIDS in the Western Highlands for a decade, and the Friends Foundation, established for similar purposes by Tessie Soi, a social worker at Port Moresby General Hospital. However, NGOs received little financial support and were, as in other sectors, looked upon with suspicion and scepticism by government officials.

Meanwhile, the incidence of HIV climbed inexorably. By 1999 AIDS was reported as the leading cause of death at Port Moresby General Hospital (Papua New Guinea Post-Courier 7 December 1999). By mid 2001, 3900 cases of HIV infection had been reported, still on the basis of limited testing, with 65 per cent from the National Capital District, where most testing was conducted. An estimated HIV incidence of 10,000–15,000 cases was accepted by the National AIDS Council on the advice of an expert epidemiology workshop.