Environment of Papua New Guinea - Economy

Economy

Papua New Guinea is richly endowed with natural resources, including mineral and renewable resources, such as forests, marine (including a large portion of the world's major remaining tuna stocks), and in some parts for agriculture. The rugged terrain, including high mountain ranges and valleys, swamps and islands, and high cost of developing infrastructure, combined with other factors, including serious law and order problems in some centres, and the system of customary land title makes it difficult for outside developers, whilst local developers are also handicapped by years of deficient investment in education, health, ICT and access to finance. Agriculture, both for subsistence and cash crops provides a livelihood for 85% of the population and continues to provide some 30% of GDP. Mineral deposits, including gold,oil/, and copper, ], account for 72% of export earnings. oil palm production has grown steadily over recent years (largely from estates, but with extensive outgrower output), with palm oil now the main agricultural export, but in terms of households participating coffee remains the major export crop (produced largely in the Highlands provinces), followed by cocoa and coconut oil/copra from the coastal areas, each largely produced by smallholders and tea, produced on estates and rubber .

Former Prime Minister Sir Mekere Morauta tried to restore integrity to state institutions, stabilize the kina, restore stability to the national budget, privatize public enterprises where appropriate, and ensure ongoing peace on Bougainville following the 1997 agreement which ended Bougainville's secessionist unrest. The Morauta government had considerable success in attracting international support, specifically gaining the backing of the IMF and the World Bank in securing development assistance loans. Significant challenges face the current Prime Minister Sir Michael Somare, including gaining further investor confidence, continuing efforts to privatize government assets, and maintaining the support of members of Parliament.

In March 2006 the United Nations Development Programme Policy called for Papua New Guinea's designation of developing country to be downgraded to least-developed country because of protracted economic and social stagnation. However, an evaluation by the International Monetary Fund in late 2008 found that "a combination of prudent fiscal and monetary policies, and high global prices for mineral commodity exports, have underpinned Papua New Guinea's recent buoyant economic growth and macroeconomic stability. By 2012 PNG had enjoyed a decade of positive economic growth, at over 6% since 2007, even during the Global Financial Crisis years of 2008/9. PNG's Real GDP growth rate as at 2011 was 8.9%., and estimated 9% for 2012. This economic growth has been primarily attributed to strong commodity prices, particularly mineral but also agricultural, with the high demand for the mineral products largely sustained even during the crisis from the buoyant Asian markets a booming mining sector, and particularly since 2009 by buoyant outlooks and the actual construction phase for the PNG LNG project, by a consortium led by Exxon and scheduled to commence production in late 2014, for export largely to China and the East Asian market Liquefied Natural Gas; Further gas and mineral projects are proposed (including the large Wafi-Golpu copper-gold mine), with extensive exporation ongoing across the country. Economic 'development' based on the extractive industries also carries difficult consequences for local communities, and theer has been much contention around river tailings in the vast Fly river, submarine tailings from the new Ramu-Nickel-cobalt mine, commencing exports in late 2012 (after a delay from landowner-led court challenges), and from proposed submarine mining in the Bismarck Sea (by Nautilus minerals). One major project conducted through the PNG Department for Community Development suggested that other pathways to sustainable development should be considered.

The PNG Government's long term Vision 2050 and shorter term policy documents, including the 2013 Budget emphasise the need for a more diverse economy, based upon sustainable industries and avoiding the effects of Dutch Disease from major resource extraction projects undermining other industries, as has occurred in many countries experiencing oil or other mineral booms, notably in Western Africa, undermining much of their agriculture sector, manufacturing and tourism, and with them broad-based employment prospects. Various measures have been taken to mitigate these effects, including through the establishment of a sovereign wealth fund, partly to stabilise revenue and expenditure flows, but much will depend upon the readiness to make real reforms to effective utilisation of revenue, tackling rampant corruption and empowering households and businesses to access markets, services and develop a more buoyant economy, with lower costs, especially for small-medium enterprises.