Papua New Guinea is blessed with abundant natural resources, including mineral and renewable resources such as forests, marine (containing a significant percentage of the world’s main tuna stocks), and agricultural in certain areas. The rugged terrain, which includes high mountain ranges and valleys, swamps, and islands, as well as the high cost of developing infrastructure, combined with other factors (including serious law and order problems in some centers and the customary land title system), makes it difficult for outside developers. Years of inadequate investment in education, health, ICT, and access to financing have hampered local developers. Agriculture, both for subsistence and commercial crops, employs 85 percent of the people and accounts for 30 percent of GDP. Mineral resources, such as gold, oil, and copper, contribute for 72% of total export profits. Oil palm production has increased significantly in recent years (mostly from estates and with considerable outgrower output), and palm oil is now the primary agricultural export. Coffee is the primary export crop among participating households (produced mostly in the Highlands regions), followed by cocoa and coconut oil/copra from the coastal areas, both primarily produced by smallholders, and tea produced on estates and rubber. In the Papuan fold and thrust belt, the Iagifu/Hedinia Field was found in 1986.
Following the 1997 agreement that ended Bougainville’s secessionist unrest, former Prime Minister Sir Mekere Morauta attempted to restore integrity to state institutions, stabilize the kina, restore stability to the national budget, privatize public enterprises where appropriate, and ensure ongoing peace on Bougainville. The Morauta administration was quite successful in getting international help, especially from the IMF and the World Bank in obtaining development assistance loans. Prime Minister Sir Michael Somare has significant difficulties, including restoring investor confidence, continuing attempts to privatize government assets, and retaining the support of members of Parliament.
Because to prolonged economic and social stagnation, the United Nations Development Programme Policy recommended for Papua New Guinea’s classification as a developing country to be demoted to least-developed country in March 2006. The International Monetary Fund, on the other hand, concluded in late 2008 that “a combination of conservative fiscal and monetary policies, as well as strong global prices for mineral commodity exports, have supported Papua New Guinea’s recent robust economic development and macroeconomic stability.” By 2012, PNG has had a decade of solid economic development, with annual growth rates of more than 6% since 2007, even throughout the Global Financial Crisis years of 2008/9. According to the Asian Development Bank, PNG’s real GDP growth rate in 2011 was 8.9 percent, and 9.2 percent in 2012.
This economic growth has been primarily attributed to strong commodity prices, particularly mineral but also agricultural, with the high demand for mineral products largely sustained even during the crisis by buoyant Asian markets, a thriving mining sector, and especially since 2009 by a buoyant outlook and the construction phase for natural gas exploration, production, and exportation in liquid form (exploration, production wells, pipelines, storage, liquefaction plants, port terminals, LNG tanker ships).
The first significant gas project is the PNG LNG project, headed by ExxonMobil, which is set to begin production in late 2014, primarily for export to China, Japan, South Korea, and other Asian nations. This ExxonMobil-led partnership comprises Oil Search, a PNG firm headquartered in Port Moresby, with a 29 percent stake.
A second major project is based on initial rights held by Total S.A., the French oil and gas major, and InterOil Corp. (IOC), which have partly combined their assets after Total agreed in December 2013 to purchase 61.3 percent of IOC’s Antelope and Elk gas field rights, with the plan to develop them beginning in 2016, including the construction of a liquefaction plant to allow export. Total S.A. has a separate joint operating agreement with the PNG firm Oil Search.
Royal Dutch Shell, an Anglo-Dutch conglomerate, said in 2011 that it is contemplating investing in gas exploration and production in Papua New Guinea.
More gas and mineral projects are being considered (including the massive Wafi-Golpu copper-gold mine), and significant exploration is taking place throughout the nation.
Economic ‘growth’ based on extractive industries has a negative impact on local populations. River tailings in the huge Fly River, underwater tailings from the new Ramu-Nickel-Cobalt mine, which began exports in late 2012 (after a delay due to landowner-led legal challenges), and planned submarine mining in the Bismarck Sea have all sparked controversy (by Nautilus Minerals). Other paths to sustainable development should be explored, according to one significant initiative carried out by the PNG Department of Community Development.
The PNG government’s long-term Vision 2050 and shorter-term policy documents, such as the 2013 Budget and the 2014 Responsible Sustainable Development Strategy, emphasize the need for a more diverse economy based on sustainable industries and avoiding the effects of Dutch Disease from major resource extraction projects undermining other industries, as has happened in many other countries. Measures have been taken to mitigate these effects, including the establishment of a sovereign wealth fund, in part to stabilize revenue and expenditure flows, but much will depend on the willingness to make real reforms to effectively use revenue, combat rampant corruption, and empower households and businesses to access markets and services, as well as develop a more buoyant economy with lower unemployment.
Every five years, the Institute of National Affairs, a PNG independent policy think tank, publishes a report on the business and investment environment of Papua New Guinea based on a survey of large and small, local and foreign companies, highlighting law and order issues and corruption as the most significant impediments, followed by poor transportation, power, and communications infrastructure.