Economy of Papua New Guinea
Encyclopedia
Papua New Guinea
is richly endowed with natural resources
, but exploitation has been hampered by the rugged terrain and the high cost of developing infrastructure
. Agriculture provides a subsistence livelihood for the bulk of the population. Mineral
deposits, including oil
, copper
, and gold
, account for 72% of export earnings. Budgetary support from Australia
and development aid
under World Bank
auspices have helped sustain the economy. In 1995, Port Moresby
reached an agreement with the International Monetary Fund
(IMF) and World Bank on a structural adjustment program, of which the first phase was successfully completed in 1996. In 1997, droughts caused by the El Niño weather pattern wreaked havoc on Papua New Guinea's coffee
, cocoa, and coconut
production, the mainstays of the agricultural-based economy and major sources of export earnings. The coffee crop was slashed by up to 50% in 1997. Despite problems with drought, the year 1998 saw a small recovery in GDP. Growth increased to 3.6% in 1999 and may be even higher in 2000, say 4.3%.
. Government revenues and foreign exchange earning minerals. Copper and gold mines are currently in production at Porgera, Ok Tedi, Misima
, Lihir
, Simberi
and Hidden Valley. 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.
, oil
, cocoa, copra
, tea
, rubber
, and sugar
. 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 exploitable trees, and a domestic woodworking industry has been slow to develop. Fish exports are confined primarily to shrimp. Fishing boats of other nations catch tuna in Papua New Guinea waters under license.
Papua New Guinea is the largest yam market in Asia.
, Singapore
, and Japan
are the principal exporters to Papua New Guinea. 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, so did United States
exports. Australia is Papua New Guinea's most important export market, followed by Japan and the European Union
. 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
.
Papua New Guinea became a participating economy in the Asia-Pacific Economic Cooperation
(APEC) Forum in 1993. It joined the World Trade Organization
(WTO) in 1996.
, 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.
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.
lowest 10%:
1.7%
highest 10%:
40.5% (1996)
Labour force:
1.941 million
Electricity - production:
1,700 GWh (1998)
Electricity - production by source:
fossil fuel:
69.54%
hydro:
30.46%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:
1,600 GWh (1998)
Electricity exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
coffee
, cocoa, coconut
s, palm kernels, tea
, rubber
, sweet potato
es, fruit, vegetables; poultry, pork, vanilla
Currency:
1 kina (K) = 100 toea
Exchange rates:
kina (K) per US$1 – 2.7624 (November 1999), 2.520 (1999), 2.058 (1998), 1.434 (1997), 1.318 (1996), 1.276 (1995)
Papua New Guinea
Papua New Guinea , officially the Independent State of Papua New Guinea, is a country in Oceania, occupying the eastern half of the island of New Guinea and numerous offshore islands...
is richly endowed with natural resources
Natural Resources
Natural Resources is a soul album released by Motown girl group Martha Reeves and the Vandellas in 1970 on the Gordy label. The album is significant for the Vietnam War ballad "I Should Be Proud" and the slow jam, "Love Guess Who"...
, but exploitation has been hampered by the rugged terrain and the high cost of developing infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
. Agriculture provides a subsistence livelihood for the bulk of the population. Mineral
Mineral
A mineral is a naturally occurring solid chemical substance formed through biogeochemical processes, having characteristic chemical composition, highly ordered atomic structure, and specific physical properties. By comparison, a rock is an aggregate of minerals and/or mineraloids and does not...
deposits, including oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
, copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
, and gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, account for 72% of export earnings. Budgetary support from Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
and development aid
Development aid
Development aid or development cooperation is aid given by governments and other agencies to support the economic, environmental, social and political development of developing countries.It is distinguished...
under World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
auspices have helped sustain the economy. In 1995, Port Moresby
Port Moresby
Port Moresby , or Pot Mosbi in Tok Pisin, is the capital and largest city of Papua New Guinea . It is located on the shores of the Gulf of Papua, on the southeastern coast of the island of New Guinea, which made it a prime objective for conquest by the Imperial Japanese forces during 1942–43...
reached an agreement with the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) and World Bank on a structural adjustment program, of which the first phase was successfully completed in 1996. In 1997, droughts caused by the El Niño weather pattern wreaked havoc on Papua New Guinea's coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, cocoa, and coconut
Coconut
The coconut palm, Cocos nucifera, is a member of the family Arecaceae . It is the only accepted species in the genus Cocos. The term coconut can refer to the entire coconut palm, the seed, or the fruit, which is not a botanical nut. The spelling cocoanut is an old-fashioned form of the word...
production, the mainstays of the agricultural-based economy and major sources of export earnings. The coffee crop was slashed by up to 50% in 1997. Despite problems with drought, the year 1998 saw a small recovery in GDP. Growth increased to 3.6% in 1999 and may be even higher in 2000, say 4.3%.
Economy
The economy generally can be separated into subsistence and market sectors, although the distinction is blurred by smallholder cash cropping of coffee, cocoa, and copra. About 75% of the country's population relies primarily on the subsistence economy. The minerals, timber, and fish sectors are dominated by foreign investors. Manufacturing is limited, and the formal labour sector consequently also is limited.Mineral resources
In 1999, mineral production accounted for 26.3% of gross domestic productGross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. Government revenues and foreign exchange earning minerals. Copper and gold mines are currently in production at Porgera, Ok Tedi, Misima
Misima Island
Misima is a volcanic island in the northwest of Louisiade Archipelago within Milne Bay Province of Papua New Guinea. The island measures 40 km by 10 km and has an area of 202,5 km². It is located some 20 km north of the northwest extreme of the barrier reef of Vanatinai at Isu Raua Raua Island,...
, Lihir
Lihir Island
Lihir Island is the largest island in the Lihir group of islands, 22 km long and 14.5 km wide, in Papua New Guinea's New Ireland Province. It consists of a complex of several overlapping basaltic stratovolcanoes rising 700m above sea level. While the volcanoes are not currently active,...
, Simberi
Simberi Island
Simberi Island is a volcanic island in the Tabar Group, in Papua New Guinea's New Ireland Province.-Geography and geology:Simberi is the northern most and smallest of the three islands in the Tabar Group. The island is about 9 km long and 7 km wide and has an area of about 40 square...
and Hidden Valley. 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
Mount Suckling
Mount Suckling or Goropi, is the highest peak of the Goropu Mountains, part of the Owen Stanley Range in southeastern Papua New Guinea. It lies about east of Port Moresby. Situated on a relatively narrow peninsula, it lies only about from the sea to both the northeast and the south...
project has found at least two new large highly prospective porphyry
Porphyritic
Porphyritic is an adjective used in geology, specifically for igneous rocks, for a rock that has a distinct difference in the size of the crystals, with at least one group of crystals obviously larger than another group...
bodies at Araboro Creek and Ioleu Creek. A consortium led by Chevron
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
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.
Agriculture, timber, and fish
Papua New Guinea also produces and exports valuable agricultural, timber, and fish products. Agriculture currently accounts for 25% of GDP and supports more than 80% of the population. Cash crops ranked by value are coffeeCoffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...
, cocoa, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
, and sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
. 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 exploitable trees, and a domestic woodworking industry has been slow to develop. Fish exports are confined primarily to shrimp. Fishing boats of other nations catch tuna in Papua New Guinea waters under license.
Papua New Guinea is the largest yam market in Asia.
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.Trade and investment
AustraliaAustralia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, and Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
are the principal exporters to Papua New Guinea. 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, so did United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
exports. Australia is Papua New Guinea's most important export market, followed by Japan and the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. Crude oil is the largest U.S. import from Papua New Guinea, followed by gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, cocoa, coffee, and copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
ore.
U.S. companies are active in developing Papua New Guinea's mining and petroleum sectors. Chevron operates the Kutubu and Gobe
Gobe
Gobe may refer to:* Great Ordovician Biodiversification Event* Gobe Software...
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
Port Moresby
Port Moresby , or Pot Mosbi in Tok Pisin, is the capital and largest city of Papua New Guinea . It is located on the shores of the Gulf of Papua, on the southeastern coast of the island of New Guinea, which made it a prime objective for conquest by the Imperial Japanese forces during 1942–43...
.
Papua New Guinea became a participating economy in the Asia-Pacific Economic Cooperation
Asia-Pacific Economic Cooperation
Asia-Pacific Economic Cooperation is a forum for 21 Pacific Rim countries that seeks to promote free trade and economic cooperation throughout the Asia-Pacific region...
(APEC) Forum in 1993. It joined the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(WTO) in 1996.
Development programs and aid
Papua New Guinea is highly dependent on foreign aid. Australia is the largest bilateral aid donor to Papua New Guinea, offering about US$200 million a year in assistance. Budgetary support, which has been provided in decreasing amounts since independence, was phased out in 2000, with aid concentrated on project development. Other major sources of aid to Papua New Guinea are JapanJapan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, the People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
, the Republic of China
Republic of China
The Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
, the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
, the Asian Development Bank
Asian Development Bank
The Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
, the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
, and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. Volunteers from a number of countries, including the United States, and mission church workers also provide education, health, and development assistance throughout the country.
Economic conditions
- (as of 2003)
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
Mekere Morauta
Sir Mekere Morauta, KCMG is a Papua New Guinean political figure. He served as the sixth Prime Minister of Papua New Guinea between 1999 and 2002, and later as Leader of the Opposition. He is the sitting member for Moresby North-West in the national parliament, and he was until recently the...
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.
Statistics
Household income or consumption by percentage share:lowest 10%:
1.7%
highest 10%:
40.5% (1996)
Labour force:
1.941 million
Electricity - production:
1,700 GWh (1998)
Electricity - production by source:
fossil fuel:
69.54%
hydro:
30.46%
nuclear:
0%
other:
0% (1998)
Electricity - consumption:
1,600 GWh (1998)
Electricity exports:
0 kWh (1998)
Electricity - imports:
0 kWh (1998)
Agriculture - products:
coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, cocoa, coconut
Coconut
The coconut palm, Cocos nucifera, is a member of the family Arecaceae . It is the only accepted species in the genus Cocos. The term coconut can refer to the entire coconut palm, the seed, or the fruit, which is not a botanical nut. The spelling cocoanut is an old-fashioned form of the word...
s, palm kernels, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
, sweet potato
Sweet potato
The sweet potato is a dicotyledonous plant that belongs to the family Convolvulaceae. Its large, starchy, sweet-tasting, tuberous roots are an important root vegetable. The young leaves and shoots are sometimes eaten as greens. Of the approximately 50 genera and more than 1,000 species of...
es, fruit, vegetables; poultry, pork, vanilla
Currency:
1 kina (K) = 100 toea
Exchange rates:
kina (K) per US$1 – 2.7624 (November 1999), 2.520 (1999), 2.058 (1998), 1.434 (1997), 1.318 (1996), 1.276 (1995)