Economy of Papua New Guinea

Papua New Guinea is classified as a developing economy by the International Monetary Fund. The economy is largely dependent on natural resources, where capital investment is dominated by mining and oil, while most labour is taken up by agriculture. As of 2018, natural resource extraction made up 28% of overall GDP, with substantial contributors including minerals, oil, and natural gas. Timber and marine resources are also exported, The EEZ forms the largest fisheries zone in the South Pacific. The dominant deep-sea fishery is tuna. There are also inland and coastal fisheries. 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 the buoyant Asian markets, a booming mining sector and by a buoyant outlook and the construction phase for natural gas exploration, production, and exportation in liquefied form (liquefied natural gas or "LNG") by LNG tankers, all of which will require multibillion-dollar investments (exploration, production wells, pipelines, storage, liquefaction plants, port terminals, LNG tanker ships). Formal employment is low. There is a minimum wage, but it has declined in real terms since independence. The closure of the Bougainville mine led to issues with government finances, however an expansion of exports of oil, minerals, and forestry products led to economic recovery in the early 1990s. This growth did not decrease inequality however, and government services declined. This economic decline both caused and was exacerbated by increases in violence. Local violence damaged infrastructure, and defence expenditure increased. In 1986 the public services lost a significant degree of independence, leading to their becoming more politicised. Increasing government expense and resulting rising debt led to significant economic trouble. The Papua New Guinean kina was devalued and put on a floating exchange rate in 1994, and the country obtained an emergency loan from the World Bank in 1995. GDP grew around 9.4% a year from 2008 to 2015, although this ranged from 0.7% from 2014 to 2015 to 21.1% from 2009 to 2010. According to the Asian Development Bank its GDP was expected to grow 3.4% in 2022 and 4.6% in 2023. ==Mineral resources==

in southwestern Papua New Guinea Significant exported minerals include gold, copper, cobalt, and nickel. Oil and liquified natural gas (LNG) are also significant resource exports. and Hidden Valley. As of 2014, talks of resuming mining operations in the Panguna mine have also resurfaced, with the Autonomous Bougainville Government and National Government of Papua New Guinea expressing interest in restarting mining operations in the area. New nickel, copper and gold projects have been identified and are awaiting a rise in commodity prices to begin development. At early 2011, there are confirmation that Mount Suckling project has found at least two new large highly prospective porphyry bodies at Araboro Creek and Ioleu Creek. A consortium led by Chevron is producing and exporting oil from the Southern Highlands Province of Papua New Guinea. In 2001, it expects to begin the commercialization of the country's estimated 640 km3 (23 trillion cubic feet) of natural gas reserves through the construction of a gas pipeline from Papua New Guinea to Queensland, Australia. The project was shelved. In 2019, the country was the 8th largest world producer of cobalt, and the 15th largest world producer of gold. In the production of silver, in 2017 the country produced 90 tons. Mineral deposits account for 72% of export earnings. Traces of gold were first found in 1852, in pottery from Redscar Bay on the Papuan Peninsula. Oil and gas The Iagifu/Hedinia Field was discovered in 1986 in the Papuan fold and thrust belt. Most crude oil produced is exported, although some is imported for energy production. It is the largest private-sector investment in the history of PNG. A second major project is based on initial rights held by the French oil and gas major TotalEnergies and the U.S. company InterOil Corp. (IOC), which have partly combined their assets after TotalEnergies agreed in December 2013 to purchase 61.3% of IOC's Antelope and Elk gas field rights, with the plan to develop them starting in 2016, including the construction of a liquefaction plant to allow export of LNG. TotalEnergies has separately another joint operating agreement with Oil Search. Further gas and mineral projects are proposed (including the large Wafi-Golpu copper-gold mine), with extensive exploration ongoing across the country. ==Agriculture, timber, and fish==

The agricultural, forestry, and fishing sector accounts for most of the labour force of PNG. Agriculture currently accounts for 25% of GDP and supports more than 80% of the population. Most agriculture is subsistence, while cash crops are exported. The main crops by value are coffee, oil, cocoa, copra, tea, rubber, and sugar. Agriculture Agriculture in the country includes crops grown for domestic sale and international export, as well as for subsistence agriculture. Nearly 40% of the population are subsistence farmers, living relatively independently of the cash economy. Their traditional social groupings are explicitly acknowledged by the Papua New Guinea Constitution, which expresses the wish for "traditional villages and communities to remain as viable units of Papua New Guinean society" and protects their continuing importance to local and national community life. This makes farming the most widespread economic activity. Most is carried out through simple rainfed surface irrigation, with specific techniques varying by location. Taro is a historical crop, although the introduction of the now-staple sweet potato allowed for cultivation as high as . Metroxylon (a sago palm) is another common crop. It is estimated that only 30% of the country's land has climate conditions and terrain amenable to agriculture. Most produce comes from smallholders, who farm less than . Plantation production has decreased since the 1980s, and by the mid-2010s smallholders produced 70% of tree crops. Intensive farming is carried out in highly populated areas, with a variety of land management techniques used to maintain soil productivity. Other crops produced and consumed domestically include sweet potato, banana, sago, taro, cassava, and sugarcane. Timber The timber industry was not active in 1998, due to low world prices, but rebounded in 1999. About 40% of the country is covered with timber rich trees, and a domestic woodworking industry has been slow to develop. As of 2018, over three-quarters of the forest was considered old-growth, 11.9% was heavily logged, and 0.2% had been logged at small-scales. Fish Fish exports are confined primarily to shrimp, although fishing boats of other nations catch tuna in Papua New Guinea waters under license. The country has inland fisheries and aquaculture. Marine resources include sea cucumber, shrimp, and tuna. There is a domestic shrimp fishing industry, and a tuna longline fishing industry. Deep-water tuna fishing and purse seine fishing is carried out in Papua New Guinea waters by foreign ships. The overall market is thought to be somewhere between K350 and K400 million per year, although this is highly variable. ==Industry==

In general, the Papua New Guinea economy is highly dependent on imports for manufactured goods. Its industrial sector—exclusive of mining—accounts for only 9% of GDP and contributes little to exports. Small-scale industries produce beer, soap, concrete products, clothing, paper products, matches, ice cream, canned meat, fruit juices, furniture, plywood, and paint. The small domestic market, relatively high wages, and high transport costs are constraints to industrial development. ==Telecommunications==

Until the second half of 2007, information and communication technology (ICT) services in Papua New Guinea (PNG) were limited to urban centres under the monopoly operator, Telikom PNG (Mitchel 2008). Thereafter, the Irish owned utility Digicel entered the mobile market and expanded mobile signal coverage across the country enabling connectivity to many people — the mobile phone penetration rate reached 41 per cent by 2014, marking a substantial change in the communications landscape. PNG has 42.68 mobile phone users per 100 population, estimated in 2017. PNG has a low level of broadband uptake, estimated in 2017 at 0.213 per 100 population. ==Energy==

Particularly in rural areas there is reliance on traditional sources of biomass energy for cooking. Electricity Access to electricity By 2017, only 50.42% of the rural population had access to electricity. 80.23% of the urban population in 2017 had access to electricity. Limitations in the transmission and distribution infrastructure lead to frequent outages in urban centers. Around half of electricity is produced using petroleum products, while most of the rest comes from natural gas, and some comes from renewables (mainly hydropower). As of 2018, around half of the 797MW produced was from private sources, and this was mostly for use in mining. As of 2018 the country had 8 power stations and 28 substations. Significant sources of energy generation include hydropower and diesel generators, while smaller sources include biogas, natural gas, and geothermal. Entities and institutions The Electricity Commission (ELCOM) was privatised with the passage of the Electricity Commission (Privatization) Act 2002. PNG Power Limited (PPL) is a vertically integrated utility responsible for generation, transmission, distribution and retailing of electricity throughout Papua New Guinea. Electricity generation by source Renewable energy A study by Bloomberg New Energy Finance ranked PNG in the top 10 for potential renewable resources, with about 2.5 GW of these but only 2% of it exploited. Hydroelectric projects The Yonki Dam project, which commenced operation in 1991, on the Ramu River has generation capacity of 77 MW (103,000 hp) (Ramu 1) plus proposed additional capacity of 18 MW. As of 2018, there was 432MW of hydropower capacity. Edevu Dam is to be constructed by PNG Hydro Development Ltd (PNGHDL) to generate 50 Megawatts (MW). Consultants to PNG Power have conducted feasibility studies for the Naoro Brown hydroelectricity Project which would supply up to 80MW of electricity to the Port Moresby grid. ==Transport==

The country's mountainous terrain impedes transport. Aeroplanes opened up the country during its colonial period and continue to be used for most travel and most high-density/value freight. The capital, Port Moresby, has no road links to any of PNG's other major towns. Similarly, many remote villages are reachable only by light aircraft or on foot. Jacksons International Airport is the major international airport in Papua New Guinea, located from Port Moresby. In addition to two international airfields, Papua New Guinea has over 500 airstrips, most of which are unpaved. 21, including the international airport, are considered national airports. As of 2018, Air Niugini flew between 11 of the domestic airports. The second largest airline is PNG Air, and the third is Mission Aviation Fellowship. In total there are 22 official ports, 16 of which are run by the PNG Port Corporation. Private companies may maintain their own ports, usually to assist extractive industries. International trade routes from East Asia to East Australia pass through Papua New Guinean ports. As of 2010, international trade ships stopped in Papua New Guinean ports 6,330 times. ==Finance==

The Bank of Papua New Guinea (BPNG) is the central bank of Papua New Guinea. Its main function is to issue currency and to act as the banker and financial agent to the Government. It is also in charge of regulating banking and other financial services and manages the gold, foreign exchange and any other international reserves of Papua New Guinea. BPNG is engaged in developing policies to promote financial inclusion and is a member of the Alliance for Financial Inclusion, which had been formed in 2008. In 2013, BPNG made a Maya Declaration Commitment to create an enabling environment for building an inclusive financial sector in Papua New Guinea. The currency of Papua New Guinean, issued by the BPNG, is the kina, which was introduced on 19 April 1975 to replace the Australian dollar. ==Trade and investment==

In 2014, Papua New Guinea's merchandise exports were: • 41% fuels and mining; • 23.8% agriculture; • 6.2% manufacturing; and • 29% other. Major destinations for merchandise exports include Australia (39.9%), the European Union (20.2%), Japan (11.7%), China (6.7%), and Singapore (5.6%). In 2014, Papua New Guinea's merchandise imports were: • 17.8% fuels and mining; • 11.4% agriculture; • 69.4% manufacturing; and • 1.4% other. Major source countries for merchandise imports include Australia (34.4%), Singapore (14.3%), the European Union (8.3%), China (6.9%), and Japan (6.4%). Petroleum, mining machinery and aircraft have been the primary U.S. exports to Papua New Guinea. In 1999, as mineral exploration and new minerals investments declined, as did United States exports. Crude oil is the largest U.S. import from Papua New Guinea, followed by gold, cocoa, coffee, and copper ore. U.S. companies are active in developing Papua New Guinea's mining and petroleum sectors. Chevron operates the Kutubu and Gobe oil projects and is developing its natural gas reserves. A 5,000–6,000 m3 (30,000–40,000 barrel) per day oil refinery project in which there is an American interest also is under development in Port Moresby. In 1993, Papua New Guinea became a participating economy in the Asia-Pacific Economic Cooperation (APEC) Forum. In 1996, it joined the World Trade Organization (WTO). ==Development programs and aid==

Papua New Guinea is highly dependent on foreign aid. Australia has been the largest bilateral aid donor to PNG, providing $A506 million ($US376 million) in 2016. Budgetary support, which has been provided in decreasing amounts since independence, was phased out in 2000, with aid concentrated on project development. Other major aid sources to Papua New Guinea are Japan, the European Union, the People's Republic of China, the Republic of China, the United Nations, the Asian Development Bank, the International Monetary Fund, and the World Bank. Volunteers from a number of countries, including the United States, and mission church workers also provide education, health, and development assistance throughout the country. In July 2024 The International Monetary Fund would provide Papua New Guinea with immediate access to about $125 million in order "to support Papua New Guinea’s reform agenda, help protect the vulnerable and foster inclusive growth, with a focus maintained on strengthening debt sustainability, alleviating FX shortages, and enhancing governance and anti-corruption frameworks," Many countries and international organisations have supported climate change-related activities. ==Land tenure==

in southwestern Papua New Guinea Over 97% of the country designated as customary land, held by communities. Many such effective titles remain unregistered and effectively informal. Land registration efforts have had very limited success. alienated land is either held privately under state lease or is government land. Freehold title (also known as fee simple) can only be held by Papua New Guinean citizens. Only some 3% of the land of Papua New Guinea is in private hands; this is privately held under a 99-year state lease, or it is held by the State. There is virtually no freehold title; the few existing freeholds are automatically converted to state leases when they are transferred between vendor and purchaser. Unalienated land is owned under customary title by traditional landowners. The precise nature of the seisin varies from one culture to another. Many writers portray land as the communal ownership of traditional clans; however, closer studies usually show that the smallest portions of land whose ownership cannot be further divided are held by the individual heads of extended families and their descendants or their descendants alone if they have recently died. This is a matter of vital importance because a problem of economic development is identifying the membership of customary landowning groups and the owners. Disputes between mining and forestry companies and landowner groups often devolve on the issue of whether the companies entered into contractual relations for the use of land with the true owners. Customary property—usually land—cannot be devised by will. It can only be inherited according to the custom of the deceased's people. The Lands Act was amended in 2010 along with the Land Group Incorporation Act, intended to improve the management of state land, mechanisms for dispute resolution over land, and to enable customary landowners to be better able to access finance and possible partnerships over portions of their land if they seek to develop it for urban or rural economic activities. The Land Group Incorporation Act requires more specific identification of the customary landowners than hitherto and their more specific authorisation before any land arrangements are determined; (a major issue in recent years has been a land grab, using, or rather misusing, the Lease-Leaseback provision under the Land Act, notably using 'Special Agricultural and Business Leases' (SABLs) to acquire vast tracts of customary land, purportedly for agricultural projects, but in almost all cases as a back-door mechanism for securing tropical forest resources for logging—circumventing the more exacting requirements of the Forest Act, for securing Timber Permits (which must comply with sustainability requirements and be competitively secured, and with the customary landowners' approval). Following a national outcry, these SABLs have been subject to a Commission of Inquiry, established in mid-2011, for which the report is still awaited for initial presentation to the Prime Minister and Parliament. ==Science and technology==

Papua New Guinea's National Vision 2050 was adopted in 2009. This has led to the establishment of the Research, Science and Technology Council. At its gathering in November 2014, the Council re-emphasised the need to focus on sustainable development through science and technology. Vision 2050's medium-term priorities are:) In 2016, women accounted for 33.2% of researchers in Papua New Guinea. The European Union funded the Renewable Energy in Pacific Island Countries Developing Skills and Capacity programme (EPIC) over 2013 to 2017. The programme developed a master's programme in renewable energy management, accredited in 2016, at the University of Papua New Guinea and helped to establish a Centre of Renewable Energy at the same university. Papua New Guinea is one of the 15 beneficiaries of a programme on Adapting to Climate Change and Sustainable Energy worth €37.26 million. The programme resulted from the signing of an agreement in February 2014 between the European Union and the Pacific Islands Forum Secretariat. The other beneficiaries are the Cook Islands, Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Nauru, Niue, Palau, Samoa, Solomon Islands, Timor-Leste, Tonga, Tuvalu and Vanuatu. ==Economic conditions==

By mid-1999, Papua New Guinea's economy was in crisis. Although its agricultural sector had recovered from the 1997 drought and timber prices were rising as most Asian economies recovered from their 1998 slump, Papua New Guinea's foreign currency earnings suffered from low world mineral and petroleum prices. Estimates of minerals in exploration expenditure in 1999 were one-third of what was spent in 1997. The resulting lower foreign exchange earnings, capital flight, and general government mismanagement resulted in a precipitous drop in the value of Papua New Guinea's currency, the kina, leading to a dangerous decrease in foreign currency reserves. The kina has floated since 1994. Economic activity decreased in most sectors; imports of all kinds shrunk; and inflation, which had been over 21% in 1998, slowed to an estimated annual rate of 8% in 1999. Citing the previous government's failure to successfully negotiate acceptable commercial loans or bond sales to cover its budget deficit, the government formed by Sir Mekere Morauta in July 1999 successfully requested emergency assistance from the International Monetary Fund and the World Bank. With assistance from the Fund and the Bank, the government has made considerable progress toward macroeconomic stabilization and economic reform. As of 2019, although statistics show that an economic recovery is underway, Papua New Guinea's economy is still struggling. The rugged terrain (including high mountain ranges and valleys, swamps and islands) and the high cost of developing infrastructure, combined with other factors (including law and order problems in some centres and the system of customary land title) make it difficult for outside developers. Local developers are hindered by years of deficient investment in education, health, and access to finance. The country's terrain has made it difficult for the country to develop transportation infrastructure, resulting in air travel being the most efficient and reliable means of transportation. There are five highways, although only two go into the interior. Domestic shipping is limited. There are 22 international ports, although not all are operational. The biggest is Lae Port, which handles about half of all international cargo. The Institute of National Affairs, a PNG independent policy think tank, provides a report on the business and investment environment of Papua New Guinea every five years, based upon a survey of large and small, local and overseas companies, highlighting law and order problems and corruption, as the worst impediments, followed by the poor state of transport, power and communications infrastructure. Main indicators The following table shows the main economic indicators in 1980-2026. Inflation below 5% is in green. ==Statistics==

Household income or consumption by percentage share: lowest 10%: 4.3% highest 10%: 36% (2008) Labour force: 2.078 million Electricity – production: 2,200 GWh (2008) Electricity – production by source: fossil fuel: 67.78% hydro: 32.22% nuclear: 0% other: 0% (2008) Electricity – consumption: 2,000 GWh (2008) Electricity exports: 10 kWh (2008) Electricity – imports: 0 kWh (2008) Agriculture – products: coffee, cocoa, coconuts, palm kernels, tea, rubber, sweet potatoes, fruit, vegetables; poultry, pork, vanilla Currency: 1 kina (K) = 100 toea Exchange rates: kina (K) per US$1 – 3.14 (April 2016), 2.7624 (November 1999), 2.520 (1999), 2.058 (1998), 1.434 (1997), 1.318 (1996), 1.276 (1995) ==See also==