Economy
From The Report: Papua New Guinea 2019
View in Online Reader

Efforts to increase public governance are gradually bolstering confidence in Papua New Guinea’s economy, despite national performance being heavily dependent on somewhat-unpredictable extractive industries. These were affected in the first half of 2018 by an earthquake in February, and recovered in the second half when international commodities prices rose. Recovery in liquefied natural gas production and mining operations after the earthquake continued into 2019, yet weeks of political unrest led to the resignation of Peter O’Neill as prime minister in May. Succeeded by James Marape, the former minister of finance, the new coalition government has inherited significant challenges alongside a host of exciting opportunities. This chapter also contains interviews with Dairi Vele, Treasury Secretary; Robert Nilkare, President, Business Council of Papua New Guinea; Paul Barker, Executive Director, Institute of National Affairs; and Stacey O’Nea, CEO, Port Moresby Chamber of Commerce and Industry.

Articles from this Chapter

Overview

The right path: Prudent fiscal and monetary policies work to keep the resource- dependent economy stable
OBG
plus

Efforts to increase public governance are gradually bolstering confidence in Papua New Guinea’s economy, despite national performance being heavily dependent on somewhat-unpredictable extractive industries. These were affected in the first half of 2018 by an earthquake in February, and recovered in the second half when international commodities prices rose. Recovery in liquefied natural gas (LNG) production and mining operations after the earthquake continued into 2019, yet weeks of political unrest…

Interview

Improving position: Dairi Vele, Treasury Secretary, on implementing structural changes to ensure competition on the global stage
OBG
plus

Interview:Dairi Vele How do you assess Papua New Guinea’s measures to reform fiscal policies and improve budget planning? DAIRI VELE: Our current fiscal policy started in FY 2011/12. At that time, we benefitted from high commodity prices so we had some surpluses left and were able to focus on expenditure. A few years later, commodity prices dropped and production rates were hit hard by the El Niño weather phenomenon. The government had to pull back on its expenditure as laid out in the medium-term…

Analysis

More in reserve: A landmark bond issuance eases foreign currency constraints, while other loans and receipts help make ends meet
OBG
plus

Papua New Guinea issued its first sovereign dollar-denominated bond in September 2018, a major achievement for the island nation. Ongoing structural reform and market-focused policies played a key role in attracting foreign capital that year, and the $500m instrument has since led to a steady flow of dollars into the market. In addition to increasing foreign exchange reserves, the debut bond has been earmarked to refinance short-term domestic debt and help fund essential works and services of the…

Interview

Bringing in business: Robert Nilkare, President, Business Council of Papua New Guinea, on unlocking potential in agriculture and tourism
OBG
plus

Interview:Robert Nilkare How can the main obstacles to doing business in Papua New Guinea be overcome? ROBERT NILKARE: The main obstacles to doing business in PNG are infrastructure, law and order, and security on investment. The latter relates to the shortage of foreign currency and had been a serious challenge for the last two years, until our first sovereign bond issue provided some relief to the market at the end of 2018. However, this problem will return unless the support structure…

Analysis

A shift in focus: Plans for greater capital outlay and deficit reduction can be achieved with better fiscal governance
OBG
plus

Efforts to improve the business environment and promote private investment in non-extractive sectors ramped up in 2018 with a new development plan and clearer fiscal priorities. Prior to the pickup in international commodity prices that year, a lengthy downturn in global demand, weak agriculture performance and production halts at key mines weighed heavily on revenue. In August 2016 the administration of former prime minister Peter O’Neill revealed the 2017-21 medium-term budget plan, underpinned…

Analysis

Taking care: Officials place importance on the health care system to improve the lives of citizens and boost economic development
OBG
plus

One factor that is hindering labour productivity and long-term growth in Papua New Guinea is the poor state of public health – although the picture is slowly improving. Advancing the country’s primary health care system is a priority for both the social agenda and economic plans, with the target to achieve universal health care a key part of the Development Strategic Plan 2010-30. A number of challenges must be overcome to implement this, however, particularly widening access and improving delivery…

Interview

Simplifying the process: Paul Barker, Executive Director, Institute of National Affairs, on formalising the market and promoting economic development
OBG
plus

Interview:Paul Barker What kind of impact do foreign investments have in terms of economic development? PAUL BARKER: Australia is a traditional source of trade, investment and donor money for Papua New Guinea. Multilateral organisations like the Asian Development Bank and the World Bank have also been strong partners. In recent years, however, China has played an increasingly important role, entering the market quickly and securing many contracts and projects. A number of China’s state-owned…

Overview

Shifting trade winds: Regional integration among emerging economies and a raft of new multilateral agreements bolster international trade
OBG
plus

Global trade faces protectionist headwinds that are dampening the outlook for growth in the coming years. According to the World Trade Organisation (WTO), trade volumes grew by 3% in 2018 and are expected to decline slightly to 2.6% in 2019 before rebounding to 3% in 2020. This may be the first time since the 2007-08 global financial crisis that growth will fall below a 3% average, as significant uncertainty driven by an escalating US-China tariff war, acrimonious Brexit negotiations, and wariness surrounding US involvement in several multilateral trade agreements affect business confidence and investment decisions. Nevertheless, although US…

Interview

Positive interaction: Stacey O’Nea, CEO, Port Moresby Chamber of Commerce and Industry (POMCCI), on promoting the country’s private sector
OBG
plus

Interview:Stacey O’Nea How do you assess the relationship between the government and private sector bodies? STACEY O’NEA: Through a collaborative partnership approach, POMCCI and other key bodies represent the private sector interfacing with the government through events, trade shows, meetings, dialogue and negotiations. The government’s participation in the various forums and investment summits hosted by industry bodies indicates an ongoing positive relationship. The recent public-private…