Economic Update

30 Jul, 2017

Increased investments in infrastructure and courtship of new markets should help accelerate growth in Papua New Guinea’s tourism sector in the coming years, as part of government efforts to extend the industry’s benefits to less-developed regions.

Investment package

In early June the World Bank announced it would provide PNG with a $20m credit to support a range of projects aimed at strengthening its tourism industry and boosting sustainability.

The funds will be used to implement an integrated approach to tourism in the provinces of East New Britain and Milne Bay, which will serve as a pilot programme for a plan to develop and expand PNG’s overall tourism offering, according to a World Bank statement.

Chosen for their high tourism potential, the two provinces contain a variety of attractions that could draw in visitors and build momentum for the industry in other regions.

As part of ongoing government efforts to spread the benefits of the tourism industry to a wider share of the population, investments will be made to upgrade local infrastructure, strengthen the sector workforce, create opportunities for women, and improve the planning, marketing and promotion of each destination.

“PNG’s tourism industry has been steadily growing over the past decade, leading to jobs and development across the country,” Jerry Agus, CEO of the PNG Tourism Promotion Authority, told local media. “East New Britain and Milne Bay are two key starting points to make that happen and show the world what this extraordinary country has to offer.”

Sector trajectory

While it will take time to build tourism products in areas outside the capital city of Port Morseby, the potential for increased momentum in the industry seems clear.

In its 2017 report on PNG’s tourism sector, issued in March, the World Travel & Tourism Council (WTTC) forecast solid growth for the industry, with expansion set to accelerate over the coming decade.

The report said direct and indirect revenue would increase by 3.4% on last year’s PGK971m ($304m), and expand by 5.5% per annum over the next 10 years to reach PGK1.7bn ($532.4m) by 2027. By that time the sector would represent 2% of GDP, up from 1.9% in 2016.

This growth will be sustained by a steady rise in inbound traffic: the WTTC expects 181,000 foreign arrivals this year, up 10.7% on 2016, followed by growth of about 3.6% each year until it reaches 279,000 in 2027.

Chinese focus

One plank in the government’s plan for a sustainable tourism industry is to further court the Chinese market as a key source of visitors.

PNG has been working to create infrastructure clusters that can handle large-scale tourism, as well as to open new direct air links with high-potential markets, particularly China, according to Prime Minister Peter O’Neill.

“There are more than 100m Chinese people who visit countries throughout the world,” he told a business forum in Port Moresby in mid-May. “All we want is a small fraction of that market.”

In late May President O’Neill told local media that direct flights between Shanghai and Port Moresby would be established in the coming years, a measure he said would provide “more gateways for expanding business and tourism”.

Currently, Chinese travellers bound for PNG must stop over in Hong Kong, Indonesia or Singapore, adding to the length of travel.

In early June PNG officials said they hoped the Port Moresby-Shanghai link would become operational by the end of this year, with Air New Guinea serving the route once a week.

Another proposed measure to draw Chinese visitors is a unilateral lifting of visa requirements, further easing travel compared to the current system, whereby visas are free but must be obtained before departure.

PNG is a growing target for Chinese business and investment, with Beijing funding infrastructure projects such as roads, seaports and airports ­– developments that can support growth in the tourism industry – as well as buying into the country’s mining industry.

Current estimates put China’s direct investment in PNG at more than $2bn, while bilateral trade totalled $2.6bn last year; both these developments are bringing higher numbers of Chinese officials and business representatives to the country.

By sharpening the focus on sustainability, expanding beyond traditional destinations and targeting key source markets like China, the WTTC said PNG’s tourism sector could increase leisure travel’s share of earnings (currently at 58.4%) as more visitors discover what the country has to offer.