Economics, Politics and Public Policy in East Asia and the Pacific
Author: Mekere Morauta, PNG
Navigating a small economy through the choppy waters of the global economy is never easy.
But it is even harder when facing the peaks and troughs of resource booms and the unpredictable undercurrents of a complex polity. Read more…
Author: Stephen Howes, ANU
The Australia-PNG Ministerial Forum convened today in Canberra after a break of over two years.
And today the prime ministers of the two countries will also meet for the first time (outside of sideline meetings) following this significant interlude. Read more…
Author: Bill Standish, ANU
The opposition’s nomination of Works Minister Peter O’Neill as Papua New Guinea’s new prime minister on 2 August came as a shock to many.
But there were clues in some earlier press comments. Read more…
Author: Colin Filer, ANU
In April this year, the Policy Board of the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD) approved the National Programme Document which sets out how the Government of Papua New Guinea proposes to achieve a state of ‘REDD plus readiness’ within the next three years.
This triggers the release of about US$6.4 million towards the cost of making PNG look like it deserves to receive compensation from the international community for various steps taken to reduce carbon dioxide emissions from this source. Read more…
Author: Bill Standish, ANU
Papua New Guinea’s political dramas have intensified in the 10 weeks that Prime Minister Sir Michael Somare has spent in intensive care in Singapore’s Raffles Hospital.
Only on 22 June did Arthur Somare, the Minister for Public Enterprises, tell Parliament that his 75-year-old father had undergone a heart valve operation plus two further emergency operations. Read more…
Author: Andrew Herd, ANU
The issue of asylum seekers is one of the most controversial and difficult political issues Australian Prime Minister Julia Gillard and her Labor government faces.
The difficulty does not arise from the actual number of asylum seekers attempting to get to Australia by boat — the numbers approaching Italy demonstrate that comparatively few are attempting to come to Australia — but from the perception, perpetuated by politicians of both sides, that such actions represent a government failure and the need to restore sovereignty. Read more…
Author: Graeme Smith, UTS and ANU
With China’s hunger for resources, its mining ventures into the Pacific continue to expand. With the discovery of vast tracts of copper deposits in New Britain, there are likely to be new investments in PNG undertaken by Chinese state-owned enterprises, quite possibly in partnership with Australian mineral exploration companies.
To date, China’s flagship project in the Pacific islands has been the Ramu nickel and cobalt mine, a US$1.4 billion investment in PNG’s Madang province managed by the China Metallurgical Corporation (MCC), in partnership with Brisbane-based Highlands Pacific. Read more…
Author: Ronald J. May, ANU
Grand Chief Sir Michael Somare has been a member of the Papua New Guinea (PNG) National Parliament since 1968, and for 18 of his 43 years in Parliament he has been chief minister/prime minister, as head of a coalition government.
In the country’s most recent general election, held under a recently introduced limited preferential voting system in 2007, Somare was re-elected to his East Sepik Provincial seat, gaining 38 per cent of first preferences and enough second and third preferences to carry him over the line, albeit only after the final elimination. Read more…
Author: Aaron Batten, Ministry of Finance, Malawi
Optimism continues to run high about PNG’s development prospects.
The last eight years have seen sustained growth across the PNG economy – the first time since independence. It is also the first time that real per capita incomes have begun to increase after a 30 year period of stagnation. Formal sector employment across all industries is now at record levels. Read more…
Author: Bill Standish, ANU
The 1990s were a decade of chaotic governance in Papua New Guinea (PNG), but some people are asking if the situation is any better now. Since 2006 the Somare government has taken credit for stability and new foreign investment in the minerals and petroleum sectors. The Opposition and civil society groups, by contrast, have alleged poor governance and pointed to the near collapse of essential services in many areas, while the conventions of democracy and the Standing Orders of Parliament are flouted.
Discontent from within the government could not be hidden on 20 July when the Deputy Prime Minister Sir Puka Temu, two other ministers and 17 other government MPs crossed the floor to sit with the Opposition. Read more…
Author: Aaron Batten, Ministry of Finance, Malawi
The PNG economy continued to perform well in 2009. Despite declines in the oil and gas sector, lower commodity prices, and reduced international demand because of the global financial crisis, real GDP grew by a solid 4.5 per cent. This growth was also relatively diversified with a 4 per cent increase in formal non-mining sector jobs adding further to the large employment gains made since 2005.
The government’s management of the economic expansion has been mixed, however. The fiscal surpluses of previous years have eroded, with this year’s budget recording a 0.4 per cent of GDP deficit after a 2.2 per cent of GDP deficit in 2008. Read more…
Author: Ron Duncan, ANU
What of PNG trade policy and the various trade agreements that have been signed and those proposed?
The first thing that I would say is to reiterate Prof. Jagdish Bhagwati’s comments on the question of whether preferential regional trade agreements are ‘stepping stones or stumbling blocks’ for trade growth when he delivered the 2006 Heinz Arndt memorial public lecture at the ANU.
Bhagwati called the proliferation of preferential regional trade agreements a ‘pox’ on the world trading system, noting that they result in trade diversion rather than trade creation. This is especially the case with preferential trade agreements among small, developing countries. I would add that they divert tariff revenue and investment from the smaller, less well-developed countries in such trading blocs to the more developed. As regards the Pacific Island Countries Trade Agreement (PICTA) preferential agreement amongst the Pacific island countries, I anticipate that any benefits will mainly accrue to Fiji and PNG and the disadvantage that they will suffer will only make the other Pacific islands countries even more antagonistic towards freer trade (see my ADB study, Pacific Trade Issues, [pdf])
Author: Ron Duncan, ANU
Despite two major mineral commodity booms, PNG’s average per capita GDP has been on a declining trend over the 30 years since independence. Undoubtedly, some people have done well—which means that people at the lower end of the income scale have done even worse than implied by the trend in average per capita GDP.
A great deal of the revenue from the exploitation of natural resources has flowed through to communities; but why has this revenue not been used to better effect in funding investment, job creation, and ultimately economic growth? An open trading system, leading to good growth in exports and imports, is held to be a key driver of economic growth and incomes. What role has trade policy played in this poor outcome in PNG? Getting answers to these questions is important if PNG is to see a better outcome from the implementation of the huge LNG project now in prospect
Author: Aaron Batten
There are many reasons to be optimistic about the PNG economy over the coming years. Its relative insulation from the global financial crisis combined with substantial savings still remaining in trust from the commodity boom period leave it well placed to sustain moderate rates of economic growth. This growth will build on the considerable macroeconomic improvements made in recent years particularly in terms of employment creation and business confidence. Optimism is further buoyed by the prospect of new investment in a range of extractive industries – especially the upcoming LNG project.
[/caption]Certainly, dangers to the relative sense of macroeconomic stability exist. The government is having difficulty reigning in expenditures in light of reduced domestic revenues. This has raised concerns about a return to sustained budget deficits between when the trust accounts run out and the LNG revenues start to flow. The final few years of the commodity boom period also saw a considerable growth in the types of wasteful expenditure patterns that have plagued past governments – in particular large increases in salaries and wages and the emergence of increasing numbers of special interest projects. This, in turn, has limited the growth in funding to core development priorities like health and education.
Author: Aaron Batten
PNG had another interesting year in 2008. The first half of the year saw economic growth remain strong as the country continued to benefit from yet another boom in the price of its commodity exports. High resource prices underpinned a significant expansion in the manufacturing, construction and agriculture sectors. Towards the middle of the year, however, poor monetary responses to a prolonged growth in domestic liquidity, coupled with a continued strong external sector, meant that inflationary pressures began to increase, with inflation rising to 13.5 per cent in September 2008.
September, of course, also marked the onset of global financial crisis. Barring a couple of jitters on the PoMEX, PNG’s economy weathered the direct impacts of the crisis relatively unscathed. In large part this was because of the healthy supply of foreign exchange reserves and domestic bank liquidity built up over previous years which gave the financial sector sufficient flexibility to cope with any adjustment costs.
The flow on effects of the crisis have led to a large downturn in the price of many of PNG’s key commodity items which had been driving revenue and output growth. This has had an immediate impact on the Government’s fiscal position with the 2009 Budget predicting a 25 per cent overall decline in domestic tax revenue.
Read more…