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Chapter | Transport & Logistics from The Report: Papua New Guinea 2020

Papua New Guinea’s topography is characterised by mountainous terrain, rivers and around 600 islands. Travelling by road can be complicated and expensive, with many routes in need of maintenance; as a result, the transport of people and goods often relies on sea and air networks, which incur high costs for businesses operating in PNG. The ripple effects of improved transport infrastructure are vast – not only because the easier movement of goods and people can benefit the high-potential agriculture and tourism sectors, but also since improved connectivity will facilitate greater development opportunities for rural communities. While the full impact of Covid-19 on the sector remains to be seen, developing transport infrastructure is integral to the country’s medium- and long-term goals, and a vital stepping stone to economic diversification. Better connections and improved integration between different modes of transport will lower the cost of doing business and make the country a more attractive destination for investment. This chapter contains interviews with Robert Howden, Managing Director, Express Freight Management; and Rupert Bray, COO, Steamships Trading Company.

Chapter | Energy from The Report: Papua New Guinea 2020

Papua New Guinea’s development has been driven by its resource wealth and, while policymakers are focused on long-term diversification, extractive industries still underpin the economy. Since his election, Prime Minister James Marape has made clear his intention to secure greater revenue for the government from future extractive projects, with the aim of nurturing economic growth and investing in human capital development. As such, his first year in office has seen protracted negotiations on major new liquefied natural gas (LNG) projects, including the $13bn Total-led Papua LNG project and the expansion of the P’nyang gas field. In terms of power, meanwhile, there is political will and international support to help PNG reach its goal of 70% electrification by 2030. However, creativity will be needed to mitigate the challenges presented by the country’s difficult terrain, low population density, complex land rights framework and lack of spending power in rural communities. This chapter contains an interview with Kieran Wulff, Managing Director, Oil Search.

Chapter | Mining from The Report: Papua New Guinea 2020

Alongside the upstream energy sector, mining has long served as the backbone of Papua New Guinea’s economy. In 2019 the mining and quarrying sector accounted for 10.3% of GDP and was a major source of foreign exchange earnings. Like the other extractive industries, mining has emerged as a priority for reform under the administration of Prime Minister James Marape. The country has significant deposits of gold, copper and other precious metals, many of which remain untapped. However, the future of some mining projects in the pipeline remain uncertain, given protracted negotiations between the government and mining companies. Looking further ahead, the government appears keen to rebalance the sector towards greater public ownership of mines, although it is expected that the capital and expertise of private investors drawn to transparent regulations will still be required. This chapter contains an interview with John Lewins, CEO, K92 Mining.

Chapter | Insurance from The Report: Papua New Guinea 2020

Papua New Guinea’s insurance market is closely indexed to the country’s economy, which prior to the Covid-19 outbreak in early 2020 had been projected to grow at an average of 3% per year through to 2022. However, the pandemic effectively shuttered PNG for several months, and reduced global demand for the commodities that drive its export earnings. The insurance market therefore faces an uncertain future. On the one hand, the impact of Covid-19 may pose a substantial challenge to the country’s health system and economy in the recovery period, with repercussions for insurers. On the other hand, the economic pressures caused by the crisis may result in healthy restructuring of the industry, particularly as measures to reduce transmission drive the uptake of digital insurance services. The sector’s future will also be contingent on the government’s ability to continue important financial sector reforms, as well as the level of demand for mega-project risk-mitigation services. This chapter contains an interview with Jeremy Norton, General Manager, Tower Insurance.

Chapter | Banking from The Report: Papua New Guinea 2020

Prior to the outbreak of Covid-19, Papua New Guinea’s banking sector was healthy. Liquidity increased substantially over recent decades, with the liquid asset ratio of commercial banks growing from 40% in 2003 to 49.6% in 2017. However, the pandemic has brought substantial macroeconomic challenges throughout the world, leaving no country unaffected. Although PNG has benefitted from its geographical isolation in terms of public health, its economic recovery will be highly dependent on international commodity prices, from where it receives the majority of its foreign currency. Nevertheless, the banking sector remains resilient due to the strength of key market players and decisive action on the part of policymakers. Ongoing policy initiatives to address spatial and social inequalities will prove crucial to the sector’s long-term objectives, as will efforts to boost digital penetration and financial education. This chapter contains interviews with Loi Bakani, Governor, Bank of Papua New Guinea; and Ian Tarutia, CEO, National Superannuation Fund.

Chapter | Economy from The Report: Papua New Guinea 2020

Papua New Guinea has an abundance of wealth in hydrocarbons and minerals that provides it with a solid foundation for economic growth, but also leaves the country vulnerable to the volatility of global commodity markets. As such, the government is following a long-term economic development strategy that aims to expand the state’s revenue share from lucrative extractive projects, encourage offshore processing of natural resources, promote inclusive growth and attract new investments in sectors deemed to offer significant potential, notably agriculture. The government took decisive actions to prevent community transmission of Covid-19, which constrained business activity in the first half of 2020 but also left the country well placed to bounce back without widespread public health consequences. If policymakers can maintain their success in containing the virus and conclude negotiations for resource projects while channelling revenue towards other productive sectors, the prospects for investment are bright. This chapter contains interviews with Sasindran Muthuvel, Minister for State-Owned Enterprises; and Ian Ling-Stuckey, Treasurer.

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