• Papua New Guinea:
• Economy

Papua New Guinea - Economy

Overview: Though the country is rich in mineral, agricultural, forestry and fisheries resources, development is still in the early stages, and has been hampered by volatile prices for agricultural and mineral exports. In addition, the main population centres are separated by ocean or inhospitable terrain. GDP grew by 1.9% p.a. 1980–90.

Government policy has been to aim for steady, sustainable growth with an even sharing of the benefits throughout the country. To this end, it holds minority shareholdings in most major industrial and mining developments (up to a maximum of 30% in mineral projects and 22.5% in petroleum projects). However, this growth depends on attracting new investment, especially in mining and energy, and the political situation has generally worked against this.

GDP growth was uneven during the 1990s, registering 15% in 1993 as new mining investment came on stream, but falling to –3.6% in 1995, –3.9% in 1997 and –3.8% in 1998. By 1998 the country was in the most serious financial crisis since independence due to a prolonged drought, the continuing Bougainville crisis, the Asian economic downturn and the falling value of the kina. With the support of the World Bank and IMF, the government embarked on economic reforms including a programme of privatisation. The economy recovered strongly during 1999, growing by 7.5%, but then stalled, with slow growth resuming in 2001, picking up to 2.9% in 2005 and rising to 3.7% in 2006. Inflation persisted at over 10% until 2003 when it was down to 2% and remained consistently low in the period 2004–2006.

Trade: Exports of goods and services account for around 70% of GDP and manufactured exports for around 6% of total merchandise exports (2004). The main exports are gold, crude oil, copper, palm oil and forest products. Imports consist mainly of machinery and transport equipment for mining and other projects, manufactured goods, food, live animals and chemicals. Exports are mainly to Australia (41%), Japan and China, and imports from Australia (45%), Singapore, New Zealand and Japan.

Mining and energy: The country is richly endowed with mineral and hydrocarbon resources. Since commercial gold-mining began in 1989, mining and oil and gas production have made a significant contribution to GDP. Oil production started in 1992 and known reserves in 2003 were expected to last until 2012. There are two oil refineries: one in Gulf of Papua; and one at Port Moresby. The principal copper mine at Ok Tedi in Western Province was developed and operated by an Australian company and then abandoned. Another important mine on the island of Bougainville closed in 1989 at the outbreak of political instability and, after political resolution in Bougainville, rehabilitation needed huge investment. There are substantial reserves of nickel/cobalt at Madang.