PNG government finds opportunity in hosting APEC 2018

Papua New Guinea’s international profile received a boost when it was selected to host the 2018 APEC meetings. The main event – the APEC Leaders’ Summit to be held in November 2018 – is expected to see world leaders including US President Donald Trump and Chinese President Xi Jinping converge at Port Moresby to discuss and negotiate a host of regional issues.

Economic Benefits

In January 2018 Charles Abel, deputy prime minister and treasurer, told media that PNG’s APEC chairmanship duties will offer many economic benefits, with the country set to host more than 20,000 visitors from 21 APEC member states for a series of meetings held throughout the year, supporting the ongoing macroeconomic recovery that should see GDP growth hit 2.4% in 2018, up from 2.2% in 2016.

This optimism echoed that of Prime Minister Peter O’Neill, who in November 2017 highlighted the progress that had been made in preparation for the APEC meetings, stating that recent government reforms under the auspices of APEC had stimulated economic activity, reduced production costs and increased PNG’s connections to international markets. Prime Minister O’Neill said that APEC also provides the opportunity to advance the country’s policy agenda, emphasising trade-in-services promotion, digital economic development, next-generation trade and investment, and greater inclusion of women and the youth. The events have initiated a surge of investment in Port Moresby for projects, including a series of transportation infrastructure upgrades. Additionally, the events are likely to bolster tourism and retail growth, which have slumped in the wake of the macroeconomic slowdown.

Event Costs

While APEC may stimulate PNG’s economy, the expenses are also considerable. According to the IMF, PNG’s government planned to spend some PGK3bn ($936.6m) over 2015-18 on APEC preparations, equivalent to 7% of all government expenditure over the period. As reported by the Lowy Institute, an Australian think tank, the Philippines spent an estimated $200m on hosting APEC in 2015, while China spent $6bn in 2014. Health and education expenditure will reach PGK3.5bn ($1.1bn) and PGK3.7bn ($1.2bn), respectively, over the same period. APEC was allocated PGK300m ($93.7m) of spending in the 2018 budget. Although Deloitte reports that the government’s top priority in the 2018 budget will be hosting APEC to boost its international profile and attract new foreign investment, it notes that the country’s 2017 supplementary budget halved capital expenditure to almost PGK1.3bn ($405.8m).

Global Competition

With government funding in short supply, bilateral partners have taken a more high-profile role in financing APEC infrastructure, offering PNG the opportunity to reap considerable benefits. Increasingly viewed as a high-profile geopolitical showdown, the 2018 APEC summit has highlighted rising competition between China, Australia, Japan and the US, with leaders of all four expected to be in attendance at the APEC Leaders’ Summit.

For example, The Australian newspaper reported that “China is rapidly outspending Australia in providing aid and gifts to PNG”, including the $35m Port Moresby International Convention Centre, which opened in April 2018, and a $40m six-lane highway connecting the centre to Parliament. China has also reportedly been involved in training programmes for PNG’s police force, although such a partnership has not been widely publicised. Furthermore, in April 2018 the authorities announced that China and PNG are negotiating a free trade agreement, which may be signed in November 2018. Another Australian media outlet, ABC News, has claimed that Australia has been PNG’s largest international donor, reporting that the country has provided some $108m to support PNG’s hosting of APEC.

Although the budgetary burden of APEC could be the cause of near-term fiscal pain, the event could significantly strengthen the country’s regional and global bilateral relationships, which should in turn support mid- and long-term trade and investment growth.

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The Report: Papua New Guinea 2018

Trade & Investment chapter from The Report: Papua New Guinea 2018

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