Economy
From The Report: Papua New Guinea 2017
View in Online Reader

Despite some weak headline numbers, Papua New Guinea’s economy is set to see a recovery in 2017. Depreciation of the kina and the shortage of US dollars have slowed imports and led to pockets of strength. Robust activity at the small and medium-sized enterprise level and in the informal sector is ongoing, while key statistics, such as the current account, are indicating a return to balance. The recent drought has come to an end, and two major mines are back on-line and ramping up production. Importantly, commodity prices seem to have stabilised globally. The near- to medium-term conditions are right for GDP to edge back up into a more comfortable range. Major gas and mining projects could contribute significantly to growth, while reforms currently being put into place are likely to add to the sustainability of the economy.

This chapter contains interviews with Thomas Abe, Managing Director, Kumul Consolidated Holdings; Dairi Vele, Secretary of the Treasury; and Sir Kostas Constantinou, Managing Director, Lamana Development.

Articles from this Chapter

Overview

Signs of recovery: Instituting reforms to help accelerate GDP growth and balance the books
OBG
plus

Despite some weak headline numbers, Papua New Guinea’s economy is set to see a recovery in 2017. Depreciation of the kina and the shortage of US dollars have slowed imports and led to pockets of strength. Robust activity at the small and medium-sized enterprise (SME) level and in the informal sector is being observed, while key statistics, such as the current account, are indicating a return to balance. The recent drought has come to an end, and two major mines are back on-line and ramping…

Interview

Balancing act: Thomas Abe, Managing Director, Kumul Consolidated Holdings (KCH), on improving public efficiency
OBG
plus

Interview: Thomas Abe How does KCH reconcile the need to be competitive and profitable with meeting social obligations within state-owned enterprises (SOEs)? THOMAS ABE: KCH has a number of objectives. Apart from the objective of holding and enhancing the value of SOEs and investments, KCH also has the more general objective of entering into arrangements which further the development of Papua New Guinea as a whole. There is no doubt that SOEs must be efficient and competitive to fulfil their overall…

Interview

Managing change: Dairi Vele, Secretary of the Treasury, on budgets and fiscal responsibility
OBG
plus

Interview: Dairi Vele How would you characterise budget priorities in light of the current fiscal and economic situation? DAIRI VELE: We have had the same budget priorities over the past seven years. When you have a long period of growth and a short period of hypergrowth, the culture of largess starts to set in. Papua New Guinea fell into this trap of overemploying public servants, expanding from 80 agencies to over 125, and from 70,000 government employees to 130,000. As such, our priorities have…

Analysis

Prudent but tough: The 2017 budget cuts expenditure and introduces tax changes
OBG
plus

Getting the books to balance will be a significant challenge for Papua New Guinea going forward. Although the country has made some deep cuts in expenditures, it will be years before the government takes in as much as it needs to operate. The authorities have few options in the short term other than carefully balancing interests. As it works to reduce outlays, the government has to focus on ensuring the cuts do not cause long-term damage to the economy. Revenue VS Expenditure To stay…

Interview

Greater cooperation: Sir Kostas Constantinou, Managing Director, Lamana Development, on boosting private investment
OBG
plus

Interview:Kostas Constantinou What regulations and incentives are needed to incubate private sector economic growth? KOSTAS CONSTANTINOU: Most private sector businesses look for stability and consistency in policies related to tax, investment and labour. Sometimes what is more important is not what should change but what should be preserved. For example, if there are tax laws in place when businesses make investment decisions that extend over five to 10 years, then to the extent possible…

Analysis

The debt picture: Borrowing levels have risen in the past few years
OBG
plus

Papua New Guinea was well prepared for the 2008 financial crisis, as it had reduced its debt and had some room to manoeuvre. The country’s obligations dropped from around 70% of GDP in the early 2000s to about 20% a decade later. This, in part, explains why the crisis was so short lived, according to the Asian Development Bank (ADB). However, after 2012, the government took an expansionary stance and started to accumulate debt. The total owed more than doubled, from PGK8.5bn ($2.7bn) in…

Analysis

Shifting focus: New non-mineral policies to bolster SMEs and promote the development of a more balanced economic base
OBG
plus

To date, Papua New Guinea has dealt with its economic challenges relatively defensively. It has instituted deep spending cuts to get the budget balanced, maintaining or increasing outlays only where vitally necessary. While the results have been impressive in terms of absolute numbers, the response is conventional. PNG has remained economically liberal and open, and it has largely stayed on the same path for decades. However, in the face of economic headwinds, the country is considering more…