Interview: Stefano Mocci
What policy measures would be most effective in boosting GDP growth in PNG?
STEFANO MOCCI: Since 2003 GDP growth in PNG has averaged almost 5% per annum, driven primarily by resource sector development and government spending on infrastructure. PNG’s largest liquefied natural gas project, the $19bn PNG LNG project that launched in 2008, has driven the most recent episode of growth acceleration. With the signing of the new $13bn Papua LNG gas project, further growth is envisioned in the near future. Rising growth is expected to support poverty reduction and ensure shared prosperity. However, policy measures to engender growth in the non-resources sector need to be further developed, particularly since most of the working population are engaged in this sector.
To this end, the government and the World Bank are seeking to improve the productivity of the agriculture sector through the Productive Partnerships in Agriculture Project. It will seek to ameliorate the ease of doing business, with a special focus on the non-resources sector. It is critical to introduce policies that seek to improve key trade corridors; expand access to credit; and ensure the stability of rules, regulations and policies. Deepening and widening access to quality services to support human and physical capital development is key to enhancing opportunities for all citizens.
In addition to microeconomic policies that support growth, we must also continue to pursue sound macroeconomic policies. It is essential to create the necessary fiscal space and maintain efficient public expenditure – even in the face of volatile revenue flows due to unstable commodity prices – by implementing fiscal anchors. Towards this goal, the government has adopted fiscal rules and is in the process of establishing a sovereign wealth fund. This will help the country better manage its resource wealth. It will also allow for the transfer of revenue receipts from the resources sector to implement growth-enhancing policies in the non-resources sector. Strengthening the monetary policy framework for a more flexible exchange rate regime is also crucial, and the Bank of PNG is implementing a strategy to ensure price stability.
To what extent can public-private partnerships (PPPs) help catalyse infrastructure development?
MOCCI: Efforts to improve access to electricity, clean water and higher-quality sanitation need to be accelerated. Electricity access remains low: the rate of on-grid power access is currently around 12-13%, while off-grid access is about 8%. To improve access to electricity, the government plans to direct some of the gas supply from the Papua LNG gas agreement towards domestic energy consumption. We are already supporting private-led initiatives through the International Finance Corporation, including the Lighting PNG project, which provides off-grid solutions and aids the development of the rooftop solar market for captive purposes. We are also exploring other opportunities for future private sector involvement, such as in the Naoro Brown Hydropower Project.
Digital connectivity, meanwhile, has improved markedly. Mobile telecommunications have transformed rapidly since the introduction of market competition reforms and the entry of Digicel in PNG in 2007. This has led to increased network coverage and substantially lower prices, resulting in GDP expanding by an estimated 2.5 percentage points. These improvements have also facilitated the rollout of online government services through the PNG government portal.
PPPs and NGOs could be better leveraged for service delivery, including through tendering processes and establishing clear accountability. The education system is a good example of where church-affiliated organisations have achieved better outcomes in service delivery than government institutions. Exploring alternative models of service delivery and supporting those that work could deliver quick gains in service quality while also easing the fiscal burden of service expansion.
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