Papua New Guinea´s Economic Development

Contrast with China

Less developed, more traditional

•strongly influenced by early development as a European colony

The eastern half of the island of New Guinea -

second largest in the world - was divided between Germany (north) and the UK (south) in 1885.

The latter area was transferred to Australia in

1902, which occupied the northern portion during World War I and continued to administer the combined areas until independence in 1975.

• lacks a manufacturing base

• has a significant population outside the cash economy

• does not have a continuous transport network

• has followed a capitalist

rather than socialist pattern of development

• has more reliance on foreign investment

• is dependent on only a small number of primary products to earn export income

PNG: Improved Infrastructure Brings Economic and Social Growth

The growth in income due to rural infrastructure improvements is not to be understated. It has meant a difference in promoting poverty reduction.

January 12, 2008 - In Papua New Guinea, walking is the primary means of transportation.  The willingness to make a trip and its duration, to market or to school, for example, depends largely on the quality of the road to get there. It is therefore no surprise that improving the quality of roads would enhance social and economic conditions of villagers. What is surprising is how these conditions are enhanced and by how much.

INCOMEThis survey has shown a clear connection between a village’s proximity to a new road or bridge and its increased income (as high as 25 percent in some cases).

There has been a positive impact to villager's agricultural activities and their ability to get to markets.

Increased income and access to markets has supported greater food security for villagers.

Papua New Guinea (PNG) is rich in gold, oil, gas, copper, silver, timber and is home to abundant fisheries. Although it has a population of only 6.2 million, its people are strikingly diverse, organized in small, fragmented social groups and speak over 800 distinct languages.

PNG’s economy is highly dualistic consisting of an enclave based formal sector that focuses mainly on large-scale export of natural resources, and an informal sector dominated by the subsistence and semi-subsistence activities of the majority rural population.

The PNG economy is currently benefiting from the global commodities boom.

Despite the recent economic growth and the country’s cultural diversity and abundance of natural resources, the bulk of the population, which is primarily engaged in subsistence agriculture, remains poor. It is estimated that over half of the population now lives below the national poverty line (the national poverty line allows for 2,200 calories per adult per day and an allowance for basic non-food expenditure), rising from 37.5 percent in 1996 to 53.5 percent in 2005.

Urban unemployment and crime rates are high, the delivery of basic services and the state of infrastructure is poor and PNG ranks poorly in surveys on governance and corruption. Law and order problems add significantly to economic costs and remain a deterrent to investment.

Parliamentary elections were held from June 30 to July 14, 2007 with more than 2,700 candidates competing for 109 parliamentary seats. With only three deaths in election-related clashes reported during the polling period, these elections have been relatively peaceful. The final vote resulted in the re-election of Prime Minister Michael Somare and his National Alliance Party .

PNG’s main development challenge is to ensure that its natural resources are exploited responsibly and revenues utilized to stimulate broad-based growth and improved service delivery.

Poverty remains a growing concern with around 40 percent of Papuan New Guineans living on less that US$1 per day. Overwhelmingly, these people live in rural areas, characterized by lack of access to markets, services and income generating opportunities and where returns on subsistence agriculture are often reduced by low soil fertility, difficult terrain and vulnerability to pests and climatic events.

 

Transport networks are in poor condition, with about 85 percent of main roads and nearly all feeder roads impassable or abandoned during some time of the year. It is estimated that 17 percent of the population has no access to any road and 35 percent of the population lives more than 10 km from a national road. Shipping and air transport services to isolated communities are in decline and wharves and airstrips are falling in disrepair. 

Only seven percent of the population has access to electricity with wide variations across regions. Nearly two-fifths of health/sub-health centers and an even greater proportion of rural health posts have no electricity to power essential medical equipment and among the small minority of schools that have access to electricity, energy costs can account for up to 70 percent of their budget. 

Less than three in one hundred Papuan New Guineans have access to basic telecommunications.

Life expectancy is 56 years, infant mortality rates are 64 per 1,000 births and immunization rates are inadequate. The HIV/AIDS epidemic is generalized and accelerating. Among sexually active adults, HIV prevalence exceeds one percent in many rural areas, two percent in many urban areas and three per cent in the capital, Port Moresby.

Without effective inventions, the number of HIV infections could swell to over half a million, or 10 percent of the adult population by 2025.Gender inequality is significant in PNG.

Women have substantially poorer access to health care services and lower levels of educational attainment and literacy pose barriers to their equal participation in economic activity and political life. Most women lack access to credit, banking and markets.

Nearly half of PNG’s population is under the age of 20 and the number of young people is expected to double in the next 20 years. Youth unemployment is on the rise with only one in ten school graduates finding jobs in the private sector.

With many young people leaving their villages in search of jobs in the towns and cities, few job opportunities has lead to the expansion of urban youth gangs, known as raskol gangs who often turn to crime . 

This year’s HDI, which refers to 2005, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. By looking at some of the most fundamental aspects of people’s lives and opportunities it provides a much more complete picture of a country's development than other indicators, such as GDP per capita. Figure 2 illustrates that countries on the same level of HDI as Papua New Guinea can have very different levels of income.

The human development index trends tell an important story in that aspect. Since the mid-1970s almost all regions have been progressively increasing their HDI score (Figure 2). East Asia and South Asia have accelerated progress since 1990. Central and Eastern Europe and the Commonwealth of Independent States (CIS), following a catastrophic decline in the first half of the 1990s, has also recovered to the level before the reversal. The major exception is sub-Saharan Africa. Since 1990 it has stagnated, partly because of economic reversal but principally because of the catastrophic effect of HIV/AIDS on life expectancy.

East Asia and South Asia have accelerated progress since 1990. Central and Eastern Europe and the Commonwealth of Independent States (CIS), following a catastrophic decline in the first half of the 1990s, has also recovered to the level before the reversal.

The major exception is sub-Saharan Africa. Since 1990 it has stagnated, partly because of economic reversal but principally because of the catastrophic effect of HIV/AIDS on life expectancy.