Oxford Business Group - Paupa New Guinea 2012

THE REPORTPapua New Guinea 2012

ECONOMY ENERGY INDUSTRYBANKING MINING CAPITAL MARKETSINSURANCE TOURISM CONSTRUCTIONREAL ESTATE TELECOMS & IT INTERVIEWS 9 7 8 1 9 0 7 0 6 5 6 2 0

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Country ProfileA nation of many cultures and thousands of languagesResource wealth is set to transform the countryAssertive policies engage international trade partnersThe regional focus builds cooperative agreements

COUNTRY PROFILE SNAPSHOT

The nation’s peoples and languages are as numerous as its islands

Occupying the eastern half of the island of New Guineaand hundreds of adjacent smaller islands, Papua NewGuinea is an important exporter of metals (particular-ly gold and copper) and agricultural products such ascoffee and palm oil. The country is also set to becomea major exporter of gas, which expected to significant-ly increase the size and strength of the economy.

The primarily rural population is highly diversified,comprising thousands of distinct ethnic communitiesthat together account for approximately one-tenth ofthe world’s known languages, and PNG remains heav-ily marked by the indigenous cultural traditions of itspeoples. Geographically, the interior of PNG is moun-tainous, while the country’s tropical rainforest is famousfor the diversity of its flora and fauna.GEOGRAPHY: Whilst the eastern half of the island ofNew Guinea is the country’s mainland, PNG also includesthree large islands (New Britain, New Ireland andBougainville), in addition to more than 600 small islandsand archipelagos off New Guinea’s coast. It is locatedapproximately 160 km north of the north-eastern tipof Australia, and several hundred kilometres south ofthe equator, with the Solomon Sea to the east and theCoral Sea to the south and south-east.

The country has a geographical surface area of462,840 sq km and a coastline of 5152 sq km, as wellas an 820 km-long border with the Indonesian provinceof West Papua – formerly Irian Jaya – that makes upthe western half of New Guinea. The capital, Port Mores-by, is located on the south-eastern coast of the main-land, and as of 2009 was home to 314,000 people. Thecountry’s population is largely rural, though other maintowns include Lae, which has a population of around200,000 and Mount Hagen, with about 40,000 people.

PNG is geographically diverse, with terrain rangingfrom high interior mountains to jungle lowlands, inaddition to tiny island archipelagos. Rainforest coversapproximately 75% of the country. The highlands regionis located in the north and is made up of five provinces,namely Enga and Simbu provinces, and the Southern,

Western and Eastern Highlands provinces. The highestmountain in the country is Mount Wilhelm, which stands4509 metres high. The country is located in the aptlynamed ring of fire, the Pacific rim’s belt of numerousactive volcanoes. Among these are PNG’s Ulawun,Rabaul and Lamington. Earthquakes are relatively com-mon and sometimes accompanied by tsunamis.FEDERAL GOVERNMENT: PNG is a constitutional par-liamentary democracy. Reflecting the country’s colo-nial past (it was long ruled by Australia), the Britishmonarch remains the official head of state and is rep-resented through a local governor elected by the par-liament, though the role is largely ceremonial. A primeminister serves as head of the government, elected bythe country’s 109-member unicameral parliament,which is itself elected by popular vote every five years.The most recent elections were held in June 2012. LOCAL GOVERNMENT: The country is divided into 18provinces, the autonomous region of Bougainville (madeup of Bougainville Island and a number of other adja-cent islands) and the National Capital District, wherePort Moresby is located. Each province has an electedassembly and local government, headed by a provin-cial prime minister as well as a system of local gover-nors. In addition, the country has around 160 electedcouncils at the local level of government.POPULATION: As of July 2011 the country had an esti-mated population of 6.2m. The populace is fairly young,with a median age of just under 22 years, and is esti-mated to be growing at a rate of just under 2% a year.PNG remains a largely rural country, with only 13% ofthe population living in towns as of 2010. Moreover,Papua New Guinean society is extremely diverse, thanksin part to the long-standing isolation of many localcommunities in the hard-to-reach mountain areas ofthe country’s highlands region (and the Southern High-lands province in particular), where around 40% of thepopulation lives. Some isolated communities did nothave contact with the outside world until as late as the1970s. Among the major ethnic groups are the Papuan,

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Land of plentyHistory, tradition and a diverse range of natural resources

www.oxfordbusinessgroup.com/country/Papua New Guinea

COUNTRY PROFILE SNAPSHOT

Melanesian, Micronesian and Polynesian peoples, how-ever, the country is thought to host several thousandsmaller ethnic communities whose members mostlynumber in the hundreds, giving rise to the local saying“for each village, a different culture”.RELIGION: Christianity was introduced to PNG in thelate 19th century by missionaries, and just under 97%of Papua New Guineans identified themselves as Chris-tian in the national census in 2000. Yet the country ishighly diverse in terms of denominational adherenceand many Papua New Guineans combine elements ofindigenous religions with Christianity. The largest Chris-tian denomination is Roman Catholicism, to which 27%of the population subscribes, followed by EvangelicalLutheranism (20%), the United Church (12%) and Sev-enth-day Adventism (10%). All other denominationsaccount for less than 10% of adherents. The countryalso still has a small number of followers of the region’sindigenous belief systems, and Islam, Baha’ism and oth-er faiths are also practised. The constitution guaran-tees freedom of religion and there is no state religion.LANGUAGE: The country has three official languages,namely Tok Pisin (Melanesian Pidgin English), a creolethat is widely used as the lingua franca; English, whichis the official language of business and government,and widely spoken in urban areas; and Hiri Motu, atrade language spoken mainly on the southern coast.In addition to these, more than 850 indigenous lan-guages – or by some estimates more than 1000 – andamounting to around a tenth of all languages world-wide, are thought to be spoken in the country, manyby communities of just a few hundred people. CULTURE & HERITAGE: As an overwhelmingly Chris-tian country, PNG observes Christian holidays such asChristmas and Easter, though traditional indigenousfestivals are often celebrated more intensely. Commu-nities often mark local holidays and special occasionswith days-long feasts accompanied by music and danc-ing as well as the distribution of gifts such as pigs.Important non-religious national festivals include theMount Hagen cultural festival, begun by missionariesin the 1950s, during which several dozen local tribesand communities congregate for competitions, music,agricultural fairs and displays of traditional dress, ofteninvolving elaborate body and face painting. Since 1995the country has also hosted an annual mask festivalfocusing on the culture of mask-making that is foundparticularly in the Gulf Province, Momase and NewGuinea Islands regions of the country.

Traditional food includes tropical fruits such ascoconuts, mangos and a variety of bananas; vegeta-bles such as sweet potatoes, yams and breadfruit; andmeat such as pork, fowl and turtle, as well as seafoodin the country’s coastal regions. CLIMATE: Climactic conditions are broadly tropical butvary widely by region. While much of the country receivesfrequent and heavy rainfall, conditions in Port Mores-by more closely resemble those of northern Australia,being primarily dry during the year with a short rainyseason. Given its proximity to the equator, annual tem-peratures in Port Moresby do not vary substantially.

Daily average lows remain steady at 23-24°C, whiledaily average highs vary between 28°C in July and 32°Cin December and January. Humidity levels in the capi-tal are high for most of the year, with a slight respite inJuly and August. Average rainfall levels vary between alow of 18 mm in August, which on average sees aroundtwo wet days, to 198 mm in February, with seven.NATURAL RESOURCES: PNG is an important produc-er and exporter of metals and minerals. Total mineralexports in 2009, excluding crude oil, were worth approx-imately $2.8bn, amounting to around 62% of all exports.Mineral exports were overwhelmingly dominated by cop-per and gold, with gold exports alone amounting to justover $2bn in value in 2009, and copper exports stand-ing at approximately $770m.

The country will host the world’s first offshore met-als mining project, which is being developed to minecopper, gold and other metals at a depth of 1600metres below sea level in the Bismarck Sea, to the northof the country. In 2009 the country had oil reserves ofaround 90m barrels, ranking it the 61st in the world,and proven gas reserves of roughly 230bn cu metres,the world’s 40th-largest. A $15.7bn, 6.6m-tonnes-per-annum liquefied natural gas (LNG) facility is currentlybeing constructed and is due to begin operations in2014. The LNG plant will allow the country to begin gasexports that are expected to increase national exportrevenues three-fold. While minerals and hydrocarbonsdominate exports, around 85% of the country’s popu-lation is employed in the agricultural sector, which com-prises approximately one-third of total GDP.

The country’s primary agricultural exports are cof-fee, tea, cocoa, coconuts and palm oil. PNG ranked asthe world’s 17th-largest producer of coffee in 2010,accounting for roughly 0.7% of global production. In addi-tion, the country was the world’s seventh-largest pro-ducer and third-largest exporter of palm oil in 2008,with its 395,000 tonnes of foreign sales – accountingfor 1.3% of global exports. Forestry is also a substan-tial sector, amounting to approximately 4% of GDP.

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THE REPORT Papua New Guinea 2012

The traditional holidays are marked by indigenous festivals, competitions, music and feasts

COUNTRY PROFILE OVERVIEW

Tribal and Western political practices share common cause in PNG

With its state motto, “Unity in Diversity”, Papua NewGuinea is indeed a country with outstanding ethnic, lin-guistic and cultural variety, resulting from the ruggedand mountainous geography of the main island of NewGuinea, and the isolation of the smaller islands of thearchipelago. PNG is a young nation, and its diversity hasshaped efforts to address the challenges and oppor-tunities related to development.

According to the World Bank, PNG had roughly 6.85minhabitants in 2010. As a result of the diverse back-grounds and geographical spread of the people, thepolitical culture is vibrant and at times unsettled. Fol-lowing the election outcome in July 2012, the hopeamong many citizens and investors is that with thepolitical impasse resolved, the country may beginembarking on a legislative programme capable of match-ing and carrying forward the extraordinary economicgrowth experienced in recent years. DIVERSITY & CHOICES: Occupying the eastern half ofthe island of New Guinea and a collection of islands toits east, PNG has some of the greatest environmentaldiversity of any place in the world – from savannah andgrasslands, to highland and lowland rain forests.

Geography has long had a major impact on the pol-itics and peoples of the nation, too. The island of NewGuinea’s central mountain range was thrown up by acollision of tectonic plates, thrusting peaks high enoughinto the air to allow glaciers to form in the Indonesian,western half of the island. This range also created manysteep and isolated valleys in the interior of PNG, whereindigenous populations would reside, sometimesunaware of neighbours living only a few kilometresaway. Some of these communities were also unknownto the outside world until the 20th century.

PNG’s diversity is reflected in the astonishing num-ber of languages spoken by its people. The ancientroots of civilisation in PNG and the country’s mountain-ous terrain have contributed to a proliferation oftongues, with an average density of one language per558 sq km. Approximately half of these languages are

related, with indigenous languages divided between theAustronesian and Papuan language families.

This fundamental linguistic difference underpins theethnic diversity of the country. The Papuan languagegroup is traced to people who came to the regionapproximately 20,000 years ago, and the Papuan eth-nic group forms the majority of the country’s presentday citizens. The Austronesians likely arrived later –around 3500 years ago – settling in the offshore islandsnow known as New Britain and New Ireland.CIVIC ORGANISATION: Historically speaking, urbani-sation in PNG is a very recent development. Even in 2011the capital Port Moresby, PNG’s largest city, was hometo only 318,128 people. Given the primarily rural andtraditional nature of the population, tribal politicalorganisation is common, demanding and receivingstrong loyalties from adherents. Given the relativelyrecent development of urban centres such as PortMoresby, rural organisations tend to also have a pow-erful affect on city dwellers as well. PNG’s political cul-ture is thus highly influenced by these loyalties, whichoften take precedence over political parties and oth-er storms of political alignment.

Given this fundamental structure, PNG’s national pol-itics has often displayed highly fluid and fragmentedcharacteristics, with governments tending to comprisealliances of clans and tribes, centred around particu-lar leaders or figureheads, while deputies often moveacross party lines. This is also reflected in the civil serv-ice and other branches of the state.NATION CREATION: PNG became an independentstate on September 16, 1975, making it one of theAsia-Pacific region’s youngest nations. But its civilisa-tions are among humanity’s most ancient, likely datingback to around 60,000, when humans arrived by boatfrom South-east Asia. Little is clear about the ethnichistory of the island of New Guinea, prior to the arrivalof Europeans, although the cultural diversity that sur-vives today suggests a complex milieu of migration andtrade. The islands of modern-day PNG were probably

With approximately 6.85mpeople, only 12.5% ofwhom reside in urbanareas, the population ofPNG is extremely variedculturally and linguistically.

PNG achievedindependence in 1975,following 61 years ofAustralian rule. It is one ofthe youngest nations in theAsia-Pacific region.

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Coming togetherEthnic diversity brings cultural richness and political challenges



first sighted by Portuguese or Spanish navigators in theearly 16th century. They remained free from majorimperial interference, however, until the 19th century.The Netherlands laid claim to the western half of NewGuinea – modern day Indonesia – in 1828. In 1884, Ger-many made the north-east part of New Guinea thefirst colonial possession in the German Empire, whileBritain declared a protectorate over the south-east.

During the First World War, Australian forces, as partof the British Empire, occupied the German territories.The eastern part of the island, along with the Germanand British possessions offshore in the WesternSolomons, was then run as an Australian external ter-ritory until the Second World War brought about par-tial Japanese occupation.

A particularly long and bitter campaign was foughtin this region during the war, which left lasting markson the landscape of the country. Following the SecondWorld War and the Allied victory, the territory revert-ed to Australian control, with a UN mandate estab-lished to steer the nation through to independence.

That independence was also marked by a secession-ist uprising on Bougainville Island, which lies offshoreto the east of New Guinea. This was the first of a seriesof uprisings on the island, ending only in 1997 with aNew Zealand-brokered peace deal, which gaveBougainville autonomy within PNG.PROVINCES & POWERS: The uprising on BougainvilleIsland in 1975 also led to a redrafting of the constitu-tion for the newly independent state. In this, the restiveisland and the 18 districts of PNG, as well as the Nation-al Capital District (NCD), were all given a semi-federalstatus. This federal-state balance has largely held sinceindependence, although the districts are now knownas provinces, and several have new names.

The original provinces have also recently been joinedby two more – Hela and Jiwaka – and are grouped with-in four regions – the Highlands, which has the largestpopulation, at around 3m; the Islands, which includesBougainville; Momase; and Papua, which includes theNCD. These regions command loyalty as well, with polit-ical appointments sometimes characterised by an effortto keep a balance between them.

The province remains the key local government unit,with each having its own assembly. Until 1995 thesealso had cabinets led by premiers, operating on a uni-cameral, parliamentary model. The central governmentretains full power over the provincial governments,however, via the right of suspension. This right wasexercised often until 1995, when the provincial premierswere abolished and a system of provincial governorswas introduced. Since then, it has been used much lessfrequently. The governors are the regional deputiesfrom the national parliament, who simultaneously con-tinue to hold their national posts as well.

Each province is divided into a number of districts,and each district is further split into local-level govern-ment (LLG) areas. LLGs are then divided into wards.

The mineral-rich Bougainville region, however, main-tains a different organisational pattern, given itsautonomous status. The region includes Bougainville

Island, Buka Island and a number of smaller islands,including the Carterets group. Elections for theautonomous government were first held in 2005, withthe current president being John Momis.LEGISLATURE: The National Parliament of PNG is alsoa unicameral house. It currently has 109 members, allelected for five-year terms. Since 2007, elections havebeen organised under a limited preferential voting (LPV)system, in which voters choose their three favourite can-didates, with votes transferring in order until one can-didate wins 50% plus one vote. The 109 members aredivided into two groups: 89 of the members are elect-ed from single constituencies, and 20 from the provinces,one from each. These are the regional deputies thatnow act as provincial governors.

After a general election, the leader of the majorityparty or of the coalition of parties forms the govern-ment and becomes prime minister. The prime ministerthen appoints a deputy and a cabinet of ministers tohead the various departments of national government.While there has been some historical variation, thecabinet usually has 30 members and is known as theNational Executive Council (NEC). The government mayinitiate legislation based on the Westminster model –with bills proposed for debate in the chamber and forcommittees – although there is not a second chamberto further scrutinise proposed laws.

A key law governing parliament and the country’spolitical parties is the Organic Law on Integrity of Polit-ical Parties and Candidates (OLIPPAC), passed in 2001.This imposed restrictions on no-confidence votes,deputies changing parties, party funding, breaking a par-ty whip, and a number of other areas, with the aim ofstrengthening government and party loyalty. Certain pro-visions of this were then ruled unconstitutional by theSupreme Court in 2010, a move followed by some sig-nificant realignments in parliament.COALITIONS: Coalitions have generally been the rulewhen forming a government, as no one party has yetsecured a majority on its own. The 2007 election saw

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The legal system draws heavily on English and Australian codes alongside local procedures

The nation’s unicameralparliament is made up of109 members who areelected for five-year terms,with 89 elected from singleconstituencies and 20 fromthe provinces.

Coalition government is thenorm in PNG, with partiescoming together to build agovernment. The 2007elections saw 22 partiesgain representation in the parliament.


22 parties gain representation in parliament, the largestbeing the National Alliance Party (NAP) led by MichaelSomare, which won 27 seats. The second-largest group-ing (20) were independents, with 13 subsequentlydeclaring for the NAP. The second-largest party was thePNG Party (PNGP), which held eight seats and is led byBelden Namah, followed by the People’s Action Party(PAP), with six seats led by Gabriel Kapris. Another sig-nificant grouping is the People’s National Congress,which won four seats in the 2007 elections and is underthe leadership of Peter O’Neill. HEADS OF STATE: While the prime minister heads thegovernment, as a Realm of the Commonwealth, the headof state in PNG is Queen Elizabeth II of the UK. HerMajesty is represented in PNG by the governor-gener-al (GG), whom she appoints, but who is nominated byparliament, via a majority vote. The GG can serve amaximum of two terms (the second of which must beafter a two-thirds majority vote). Parliament, or theNEC, may also remove the GG via a simple majority vote.In the absence of a GG, the parliamentary speakerbecomes acting GG. The powers of this post are large-ly ceremonial, and include the swearing-in of new gov-ernments and the signing of new bills into law.

Michael Ogio was appointed GG by the Queen in2010, although parliamentary speaker Jeffery Napewas declared acting GG in late 2011, as the politicalimpasse took hold. This had seen Michael Somarereplaced as prime minister by a government led byPeter O’Neill, with Belden Namah serving as deputyprime minister. This change was not recognised bySomare, however, who continued to claim status aspremier. The changes to the government in 2011 werealso not recognised by the Supreme Court, and in lateMay 2012 the Supreme Court again stepped into thefray in support of Somare. O’Neill rejected the court’sruling that Somare’s government be reinstated, andthe impasse continued until the elections.

At the time of going to print it appears that the 2012election has delivered the most profound political

change in PNGs recent history. The preliminary votecount suggests that O’Neill’s People’s National Con-gress party has won enough seats to form a coalitiongovernment. Somare conceded his defeat and relin-quished control of the National Alliance Party. Afterover a year of tensions between the two political lead-ers there is finally hope that the country can return toa period of relative political stability. CONSTITUTIONAL COURT: The Supreme Court isempowered with advising the government on consti-tutional issues and is the highest court in PNG. The courtis headed by the Chief Justice – currently Salamo Injia– who is appointed by the GG following a recommen-dation to the post by the NEC.

Two new laws concerning the relationship betweenthe executive, parliament and the Supreme Court – theJudicial Conduct Act and the Supreme Court Amend-ment bill – are currently being hotly debated. Contro-versy surrounding the bills may be settled after the2012 elections, in particular the ongoing ambiguitywith regard to the separation of powers.

The National Court, whose members also sit on theSupreme Court, is present in all provincial centres andhas jurisdiction in hearing all serious criminal and civ-il cases. It also hears appeals from the district courts,which consist of juvenile, land and coroner’s courts.There are also village courts, presided over by magis-trates who are elected by the village. These are usual-ly specially convened Customary Courts, which allowtraditional laws more sway in many rural areas.

PNG’s code of law thus consists of both the Consti-tution, the customary law of the island nation’s indige-nous peoples, and English common law, in the form ittook at the time of PNG’s independence in 1975. Atthe same time, much of the statutory law is derived fromthe Australian system. The Criminal Code has beenadopted from Queensland, while the Rules of Court arefrom New South Wales, illustrating the effect of the longperiod of Australian control of PNG.OUTLOOK: Recent years have seen PNG face the polit-ical challenges resulting from competing claims ofauthority, but it looks to be moving forward with thecreation of a unified government post-elections.

Indeed, the political landscape is bound to be a chal-lenging one given the enormous diversity within thecountry, alongside the tensions of urbanisation andglobalisation faced by a largely rural, traditional socie-ty. While the level of poverty remains high in someareas, the country has made a great deal of progresssince independence, as the economic indicators sug-gests. The country is also continuing on a path of ongo-ing democratisation, with general elections seen as thepreferred mechanism for change. As of July 2012, itappeared that even in spite of considerable political con-troversy, the nation’s commitment to democratic changeremained. Bringing together the disparate communi-ties, clans and loyalties of this diverse country will con-tinue to be a major undertaking of national politics. Thechallenges that will be faced by the new governmentare considerable, and the priorities of reconciliation andreducing corruption are expected to top the agenda.

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The prime minister heads the government, while Queen Elizabeth II of the UK is PNG’s head of state

The legal code incorporateselements from indigenouscustomary laws and theEnglish common lawsystem, while the criminalcode and rules of court areadapted from those used inAustralia.


COUNTRY PROFILE VIEWPOINT

Prime Minister Peter O’Neill

Papua New Guinea is at a crossroads today: the coun-try is poised to enter a period of unprecedented eco-nomic prosperity, led by the PNG liquefied natural gas(LNG) project that is being developed by ExxonMo-bil. Revenue from this project is expected to doublePNG’s GDP growth, and a second LNG project in theGulf province, being developed by InterOil, is also pro-gressing well. While these developments are underway, production is expected to commence soon at anumber of mines nationwide, including the Ramunickel, Yandera, Wafi and Hidden Valley mines. In thecoming years, the revenue inflows from the export ofgas and minerals will be phenomenal and radicallychange the level of prosperity in PNG.

However, as I have travelled the length and breadthof this country in the past nine months I have beenshocked by the neglect that our educational andhealth facilities face, and the poor state of our keyinfrastructure, like roads and wharves. These havebeen allowed to deteriorate to a level where rebuild-ing them will require herculean effort.

Our roads are in such bad shape that potholes arecommon and accepted. Meanwhile, the ports in manyof our towns are no longer used, making sea travelrisky. Hospitals are run down, lack the proper staff andcannot provide the right drugs or treatments for cer-tain ailments. Finally, our schools are overcrowdedbecause of classroom and teacher shortages, andmany of the nation’s airstrips have been closed dueto lack of proper maintenance.

PNG’s economy has changed. The coffee and teaplantations in the Eastern and Western Highlandsprovinces, and the cocoa and copra estates in Eastand West New Britain, New Ireland and Bougainville,were all once strong contributors to the economy, butthese have been neglected and fallen to ruin. In thepast nine years, the country enjoyed a period contin-uous economic growth. Over PGK70bn ($33.3bn)flowed into the state’s coffers and five consecutivenational budgets have recorded surpluses of over

PGK6bn ($2.9bn), because of very high commodityprices. Unfortunately, there is little to show for all thiswealth. Look around PNG, and everywhere the storyis the same: dilapidated hospitals and classrooms,deteriorating roads and ports, airstrips rendered unus-able due to a lack of maintenance, and so on.

Heading a government with only 10 months to gov-ern, but so much to do, was not easy. However, I believewe have begun to lay the foundation for growth,improved services, and better education and healthfor all. We have introduced free education, which weare funding with PGK700m ($333m) in 2012, and wehave also allocated PGK350m ($166.6m) to fund a freehealth care programme. We have also begun talkswith the Exim Bank of China for a loan of PGK7bn($3.33bn) to roll out a comprehensive infrastructuredevelopment programme, central to which is the reha-bilitation of the highlands highway.

The Lae-Nadzab section of the highway will beexpanded to four lanes, to complement the PGK700m($333m) upgrade of the busy Lae Port. Once complet-ed, the improved infrastructure will ensure business-es can be more efficient and expand, and this growthwill bring more revenue to government.

Tackling corruption and improving law and orderremain key goals as well. The recent graduation of 600police recruits demonstrates our commitment toincreasing police manpower to an acceptable level.The new Task Force Sweep will identify and prosecuteperpetrators of corruption in government, and setsus on a path toward eradicating this cancer eating thenation’s resources and denying our people their rights.

The LNG and minerals beneath PNG are non-renew-able resources, and revenue from their export has tobe invested wisely to support the nation’s long-termeconomic growth and safeguard its future. We havepassed legislation to establish a sovereign wealth fundthat will manage these earnings. If we do not wiselyprotect and invest these revenues, we will leave behinda future with little for which our children can be proud.

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The wealth of a nationPrime Minister Peter O’Neill on the importance of investing export revenues wisely

COUNTRY PROFILE ANALYSIS

For this nation of islands, seafaring and ports are the keys to trade

Separated only by the Torres Strait – a distance of 150km – Papua New Guinea and Australia have translatedtheir geographic ties into political and economic coop-eration. Indeed, Australia has long been PNG’s largestexport market, while also being its biggest source ofimports. Australian companies are also heavily repre-sented in PNG and around 10,000 Australian expatri-ates currently live and work in the country.HISTORICAL TIES: The relationship between the coun-tries began in 1902, when what was then British NewGuinea – the southern half of modern-day PNG – wasplaced under the authority of the Commonwealth ofAustralia. Formal Australian administration began in1906. When the First World War broke out in 1914, Aus-tralian forces then occupied German New Guinea – thenorthern half of what is now PNG – retaining this undermilitary rule and a League of Nations mandate until 1921.

In the Second World War, the island of New Guineafaced Japanese invasion, with Australian and PapuaNew Guinean troops engaged in a particularly hard-fought campaign for the island from 1941 to 1945. Oneimportant testimony to this is the Kokoda Trail, still hon-oured today by many Australian visitors and veterans.

Following the war, Australia again administered theterritory. In 1972 the name was changed to PNG inpreparation for independence, which followed in 1975.Nowadays, the relationship is regularly overseen by theAustralia-PNG Ministerial Forum, which has reachedagreements on a raft of bilateral treaties over the years. TODAY’S RELATIONSHIP: The Partnership for Devel-opment has seen Canberra’s aid to PNG – which totalsjust over $500m for 2011-12 alone – focused on edu-cation, health, transport, and law and justice. In 2011the Australian prime minister, Julia Gillard, agreed to helpPNG reach its goal of producing 52,000 higher educa-tion graduates by 2015 and making significant improve-ments in basic education enrolment. Canberra alsofunded a project worth some $985,000 to bring morewomen into PNG politics. At the same time, negotia-tions have also been under way for an economic coop-

eration treaty, which is expected to be wider rangingthan the current Agreement on Trade and CommercialRelations, which was put into place in 1991. Both coun-tries are also signatories to the 1981 South PacificRegional Trade and Cooperation Agreement, whichprovides duty-free access to the Australian and NewZealand markets for South Pacific nations.

PNG is also involved in a number of political andsecurity-based agreements with Australia. These includeAustralian aid to the PNG police force and armed forces– some $20.9m in aid has been earmarked to the lat-ter for 2012-13. Additionally, both countries are mem-bers of the Commonwealth and regularly cooperate oninternational matters via the UN.TRADE: According to Australian government figures,exports to PNG stood at $2.19bn during 2010-11, whileimports from PNG reached $3.45bn. These Australiangovernment’s sources indicate that year-on-year,exports and imports grew 12.3% and 18.6%, respec-tively, and it is expected that this trend will have con-tinued during 2011-12. Indeed, Australian governmentofficials estimated in March 2012 that combined tradestood at approximately $6.95bn for that year.

The main goods exported by Australia to PNG arecrude petroleum ($449.8m in 2010-11), civil engineer-ing equipment and parts ($110.2m) and goods vehi-cles ($85.4m). Meanwhile, the biggest exports fromPNG to Australia include gold ($2.13bn), crude petro-leum ($1.01bn), and silver and platinum ($209m). Thisestablishes Australia as PNG’s top export destinationby a very high margin – the country received 27.9% ofall PNG’s overseas sales in 2010-11, while Japan, whichtook the second-highest amount, received only 9.1%.

Australian firms are active in PNG’s resource extrac-tion sectors in particular, including Oil Search, Santos,Newcrest Mining, Sun Engineering and Highlands Pacif-ic. In 37 years since independence, PNG and Australiahave periodically looked to shift their foreign policyfocuses elsewhere, but given the strength of geograph-ic and economic ties, the two will likely remain close.

The Australian governmentestimates that during the2011-12 period, combinedtrade between Australiaand PNG amounted toroughly $6.95bn.

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Lasting bondsShared historical, economic and political ties with Australia



China is PNG’s second-largest trading partner behind Australia

The People’s Republic of China (PRC) has become anactive partner of Papua New Guinea in recent years,and the close ties have risen each to prominence in theother’s homeland. PNG is China’s largest trading part-ner among South Pacific nations, while the Asian pow-erhouse has climbed to second place, behind Australia,in terms of trade volume with PNG. As a result, politi-cal relations between Beijing and Port Moresby havetaken on new strategic significance.A CLOSER FIT: Behind much of this is the global surgein Chinese overseas investment and interest that hasfollowed the country’s growing appetite for mineralsand energy. This rise in demand has coincided withPNG’s opening to wider and more diverse internation-al trade and diplomatic relationships in Asia-Pacific asa whole. PNG was among the first countries to recog-nise the PRC, and the two nations exchanged embassiesin 1976. Other milestones include a 1996 trade agree-ment, followed by a Memorandum of Understandingon the Promotion for Economic and Trade Cooperation,an Agreement on Fisheries Cooperation, and an Agree-ment on the Promotion and Protection of Investment.There are also agreements on double taxation and taxevasion. More recently, in 2010, a treaty on economicand technical cooperation was signed.

Within the framework of these agreements, Chineseinvestment in PNG has rapidly expanded. The flagshipproject for cooperation is the $1.5bn Ramu nickel andcobalt mine in Madang Province, which is due to hit max-imum capacity in mid-2013. At that point, the mineshould be producing some 31,150 tonnes of nickel and3300 tonnes of cobalt per year, for a 20-year term. TheMetallurgical Corp of China holds an 85% stake in theproject (see Mining chapter).

Meanwhile, following a 2009 contract between Chi-nese energy firm SINOPEC and ExxonMobil, the coun-try has purchased 2m tonnes of PNG’s natural gas everyyear. Indeed, at the end of 2010, the Chinese ambas-sador to PNG told the local press that trade betweenthe two countries had reached over $900m per year.

FINANCIAL SUPPORT: China has also funded somemajor aid and development projects in PNG, includingthe construction of the Usino-Yamagi road with a grantaid investment of some PGK22m ($10.5m). This is locat-ed in Madang, where China also provided a soft loanto back up the Pacific Marine Industrial Zone (PMIZ).This $300m regional tuna fish trans-shipment and pro-cessing plant is financed in part by a $71m concession-al loan from Exim Bank of China (see Industry chapter).

China has also been behind aid projects such asaccommodation expansion at Goroka and Vudal uni-versities, the Sir John Guise Stadium, the Wawin Nation-al High School, the Wewak Sports Stadium, the PapaLealea road upgrade and the Hagen Agriculture Tech-nical cooperation project. Many local students havealso been awarded scholarships to study in China, whilemany PNG civil servants have also been provided withtraining by Beijing. As both countries face many simi-lar challenges in development, the two have oftenfound areas where experiences can be exchanged andprogrammes improved upon. STRATEGIC COOPERATION: There has also been somemilitary cooperation in recent times, with the ChinesePeople’s Liberation Army providing some training forthe PNG Defence Force. From PNG’s point of view then,China has much to offer, and Port Moresby views rela-tions with Beijing as an important part of its wideningout perspective in its overseas relations.

In this context, PNG has tried to improve its relationswith others in the region as well, courting the Associ-ation of South-East Asian Nations (ASEAN), for exam-ple. PNG gained observer status in 1976, and 10 yearslater signed a Treaty of Amity and Cooperation. Yet,with ASEAN concentrating on consolidation as it triesto move towards a single internal market, combinedwith the troubled relationship with Indonesia over WestPapua – expansion to include PNG, and Timor Leste,has languished. Going forward, PNG may pursue clos-er ties with China, benefitting from the countries ongo-ing expansion of economic and diplomatic influence.

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As a result of the economicagreements between Chinaand PNG, the Chineseambassador told localpress in 2011 that tradebetween the two nationswas over $900m per year.

China comes to marketTrade reveals the symbiosis between mineral-rich PNG and theresource-hungry Asian giant


Julie Bishop, Australia’s Shadow Minister for Foreign Affairs

Australia’s relationship with Papua New Guinea mustbe one of the government’s highest foreign policy pri-orities. It is long past time for the relationship tomature and transition from aid donor and aid recipi-ent status. Australia and PNG must now engage as fulleconomic partners.

There is enormous good will between our twonations which I have observed during my extendedvisits and in regular meetings with officials. These vis-its have allowed me to see some of the challengesand opportunities in PNG and for our relationship.

As brothers and sisters in the Pacific region it is timefor us to broaden, deepen and diversify our relation-ship. We must take it to a level that better reflects thecontemporary reality of our nations.

One impediment to building closer links has beenthe difficulty faced by PNG businesspeople in obtain-ing visas to travel to Australia. This should be reme-died. These unacceptable bureaucratic hurdles arestanding in the way of greater trade and investmentand need to be resolved immediately.

PNG is on the cusp of an economic transformationdue to development of mining and resource projects,and particularly large liquefied natural gas projectscurrently either under way or on the drawing board.These projects will increase the role that PNG will takein the global economy, as its exports from the South-ern Highland – and the Hides natural gas fields inparticular – will be used to drive the engines of Asia’sindustrial heartland.

One of the challenges for PNG will be to foster askilled workforce to support these massive develop-ments. Australia can play a role in providing educa-tion and training as we have faced a similar challengefor many years. We should explore the opportunitiesfor greater workforce mobility between PNG and Aus-tralia as we support each other’s need for both skilledand unskilled labour in our respective workforces.

Recently I visited the Australia Pacific Technical Col-lege in Port Moresby. It has the potential to train a

number of young people in PNG and the region morewidely with Australian-standard trade qualifications.

This creates an opportunity for qualified people towork not only in the Southern Highlands, but also onmining and resource projects in Queensland and inWestern Australia. The projected benefits from thismining and resource development is a once in a gen-eration opportunity for PNG.

While there are current demands for health, edu-cation and infrastructure spending, it is vital that thegovernment invest part of the revenues for the ben-efit of future generations. Australia has assisted in thiseffort by providing advice through the Treasury. Theformer head of our Future Fund, David Murray, recent-ly visited PNG and spoke about the potential for a sov-ereign wealth fund.

This is an important issue and I am greatly encour-aged by the discussions that I have held with officialsabout their plans for the future.

Australia and PNG share a passion for sport and thisis an area where great strides can be taken in build-ing closer relations. Australia’s National Rugby League(NRL) competition is particularly of interest to manyPapua New Guineans. I have held initial discussionswith sports administrators in Australia about how tobuild closer links through sport.

Many people in PNG would love to have a team inthe NRL competition. That is, of course, a long-termgoal worth striving for, but there is much that can donein the interim. There are school team competitions andthe Queensland Cup which may provide a launchingpad for an eventual national PNG team in the NRL.

Another area of great potential is in the empower-ment of women in PNG. There are many outstandingwomen located within the country. Their contributionwill undoubtedly increase in the coming years as moreof them take leadership roles.

Australia and PNG enjoy warm relations. There arestrong foundations from which to build a closer rela-tionship and a true economic and social partnership.

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Warm relationsJulie Bishop, Australia’s Shadow Minister for Foreign Affairs and DeputyLeader of the Opposition, on bilateral relations



Regional engagement is key to the nation’s trading capabilities

Having enjoyed prolonged and positive relations, thedominant international powers in the South Pacificregion – traditional allies like Australia, the US, the UKand France – influenced PNG’s policy throughout the20th century. However, recent years have also seenan increasing recognition of the importance of Asianand South-east Asian states to PNG’s development.This geopolitical shift is occurring in tandem with arenewed interest from PNG’s traditional allies. West-ern powers, led by the US, are currently working torejuvenate their influence in Asia-Pacific.FORCE OF MODERATION: Since achieving inde-pendence in 1975, PNG has earned a reputation onthe international stage for exercising moderation inits approach to bilateral and multilateral issues. Thecountry has also signed up to a wide variety of inter-national treaties and organisations, a policy that hashelped the country to establish itself as a bridgebetween Asia and the south-east Pacific.

However, since the foundation of PNG’s Ministry ofForeign Affairs – now the Ministry of Foreign Affairsand Immigration – the Australian legacy has also beenstrong, tending to orientate PNG towards its neigh-bours in ways that have often been influenced by theoutlook from Canberra. PNG has thus traditionallylooked to Europe and the US, rather than to Asia orother Pacific nations, for partners and models.

As a result, PNG’s connections to its neighbourIndonesia, and northern Asian states such as Chinaand Japan, have traditionally been weak.

In recent times, however, there have been signsthat a greater fluidity in global affairs is also motivat-ing a reassessment of PNG’s wider foreign relations.This is not entirely new – in the mid-1980s, for exam-ple, the government discussed a “Look North” policythat would strengthen relations with Asia.ISLAND LIFE: PNG’s relations with other Pacific islandnations have been growing in recent years. The coun-try became a member of the Melanesian SpearheadGroup (MSG) – formalised in 2007 – along with Fiji,

the Solomon Islands and Vanuatu. This establishedpreferential trading between the nations, while alsodrawing in the independence movement in New Cale-donia, an issue over which PNG has received praisefrom Paris for its moderation.

The country is also a member of the Pacific IslandsForum (PIF), which includes Australia and New Zealand.The forum’s island countries (FICs) have begun oper-ating more as a distinct group, however, particularlywithin the UN, where they are members of the organ-isation of Pacific Small Islands Developing States(PSIDS), a grouping that does not include Australia orNew Zealand. At the same time, PNG has been increas-ing its contacts in mainland Asia. The country is anobserver at the Association of South-East AsianNations (ASEAN) and a member of the ASEAN Region-al Forum (ARF), while also being a member of the AsiaPacific Economic Cooperation (APEC). MARKET TIES: Companies from ASEAN nations havealso become important partners in PNG’s economy.Malaysia’s Rimbunan Hijau, for example, is PNG’slargest logging operator, and also owns the country’sEnglish language newspaper, The National.

Relations with China have also been growing, as hasbeen evidenced by Chinese investment in PNG’s min-ing, engineering and infrastructure sectors. The mil-itary has also taken part in training activities with theChinese army, in an effort to improve their defensivecapabilities. Other countries neglected in Cold Wartimes have also seen relations strengthen. Cuba nowprovides medical aid to PNG, while Russia has reen-gaged with the Pacific states in recent years, planninginvestment in the oil and gas sector in particular.

The PNG government has, however, been anxiousto stress that these new engagements are not beingundertaken at the expense of longer-standing friend-ships. This greater diversification in foreign policy is,rather, to be taken as a sign of the openness of thecountry to foreign investment and assistance, alongwith a growing maturity in pursuing its own interests.

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PNG has been assertive insetting a foreign policy ofengaging regional players,and the list of groups withwhich it is involved includesthe MSG, PIF, ASEAN andAPEC.

A regional playerBuilding relations with neighbours in the Pacific


William Hague, UK Secretary of State for Foreign & CommonwealthAffairs

Today the idea of the “developed West and developingrest” is all but irrelevant. The world has changed andso must the UK if we are to prevent our role and influ-ence in international affairs from declining. Key to thiswill be making the most of opportunities presented bya new international paradigm in which economic pow-er and influence is moving east and south. We are doingthis by shifting our diplomatic weight to reflect thesechanges and by building our relationships with emerg-ing powers. These relationships will be increasingly vitalfor forging agreements on the international stage andfor boosting trade and investment that support the UK.

South-east Asia epitomises the rationale for thisapproach. The ASEAN countries are already more pop-ulous than the EU and the Arab world, have a largereconomy than India and absorb more UK exports thanChina. They hold substantial geopolitical significance,with influence on neighbouring major powers. Theyshould be, and are, key partners for the UK.

The region deserves serious attention from globalpartners. The UK is fortunate to draw on a foundationof existing relationships, and we already enjoy multi-billion pound trade and investment links with ASEAN.Our largest businesses in finance, energy, life sciencesand food and drink are establishing a regional footholdand more of our retailers are becoming householdnames, especially in Thailand. Furthermore, every yearover 30,000 ASEAN students study in the UK, oftenreturning to positions of influence. They form part ofthe rich people-to-people links between our countries.

We build on these links all the time. On his visit toIndonesia last month the business secretary, VinceCable, launched the new UK-ASEAN Business Councilto strengthen commercial engagement with the region.The government’s public-private partnership body,Infrastructure UK, is already in the Philippines sharingexpertise, and we aim to do this more widely across theregion. Moreover, we continue to support develop-ment, democratic freedoms and transparency. But thereis more we can do. Our commercial relationships in the

region are strongest with our Commonwealth part-ners, Singapore and Malaysia. But while strengtheningthese we should be looking for opportunities else-where as well. We also need to continue to work along-side EU partners to secure free trade agreements withASEAN countries to open markets and boost trade. Fur-thermore, we need to do more to promote two-wayinvestment. International institutions rate the UK asthe easiest place to do business in Europe, with thestrongest business environment on the continent andthe lowest barriers to entrepreneurship in the world.

But our relationship is about more than trade andinvestment. We have interests in maintaining securityin a region that straddles some of the world’s mostimportant shipping routes and in tackling commonthreats, such as terrorism, nuclear proliferation, cyber-crime and climate change. There are a number of sep-aratist or other conflicts within ASEAN, and tensionsremain in the South China Sea. The UK has a wealth ofexperience and we are keen to share our knowledgeto promote stability. We form part of a small group ofcountries formally supporting efforts by the Filipino Gov-ernment and rebel groups to end their conflict.

The voices of ASEAN leaders will be increasingly influ-ential, both regionally and globally, in the future. Indone-sia’s impressive democratisation and Malaysia’s strongstand against violent extremism can serve as examplesfor the entire international community.

We also want to work with ASEAN members on cli-mate change. They are among the heaviest emitters ofgreenhouse gases, but could also be among those mostseriously affected by the consequences of changingtemperatures. Any durable solutions will thereforerequire commitment and close coordination with ASEAN.

Thus, our approach will be to build up our relationswith ASEAN, to share expertise and knowledge, to pro-mote increased and freer trade and to work togetherin a wide range of areas, from security to climate change.We will continue to look east, toward the tremendouswealth of opportunity to be found in South-east Asia.

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Bound togetherWilliam Hague, UK Secretary of State for Foreign and CommonwealthAffairs, on UK-ASEAN relations in the 21st Century


CONTENTS PAPUA NEW GUINEA 2012

Trickling downPage 20

Reporting 8.9% growth in 2011, Papua NewGuinea has experienced rapid economicexpansion in recent years on the back of prepa-rations for ExxonMobil's LNG project, whichis expected to begin production in 2014. Min-ing – which accounts for 25% of GDP – hasalso played a large role in generating wealth,while agricultural products, especially palmoil, are prominent in the nation’s export base.

Steady onPage 36

PNG’s population is highly under-banked,with penetration of only 15%. Corpo-rate clients make up the overwhelmingmajority of banks’ revenues, but the ris-ing middle class is seen as a growth mar-ket. Penetrating rural areas via mobilemicrofinance solutions is also being tar-geted. In late 2011 the central bankadopted a five-year development planto guide the sector through what is forecast to be a period of strong growth.

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COUNTRY PROFILELand of plenty: History, tradition and a diverse range of natural resources Coming together: Ethnic diversity brings cultural richness and political challengesViewpoint: Prime Minister Peter O’NeillLasting bonds: Australia and PNG share historic economic and political tiesChina comes to market: Trade reveals the symbiosis between mineral-rich PNG andresource-hungry ChinaViewpoint: Julie Bishop, Australia’s Shadow Minister for Foreign Affairs and Deputy Leaderof the OppositionA regional player: Building relations with neighbours in the PacificViewpoint: William Hague, UK Secretary of State for Foreign and Commonwealth Affairs

ECONOMYTrickling down: Revenues from large-scale energy and mining projects to fund long-termnational development strategyInterview: Ivan Pomaleu, Managing Director,Investment Promotion AuthorityStarting small: New support for SMEs could leadto widespread expansionFunding the future: A planned SWF will help the government manage a jump in revenuesInterview: Karel De Gucht, EU Trade Commissioner

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Interview: David Cox, Managing Director,Steamships Trading CompanyLooking ahead: The government launches a far-reaching national development strategyInterview: Caleb Jarvis, Trade Commissioner,Pacific Islands Trade and Invest Interview: Surin Pitsuwan, Secretary-General,ASEAN

BANKINGSteady on: Increased domestic involvement andsolid oversight point towards future growthInterview: Loi M Bakani, Governor, Bank ofPapua New GuineaPlanning for expansion: A new developmentstrategy lays out the central bank’s goalsthrough the end of 2015Roundtable: Vishnu Mohan, CEO (PNG), ANZBanking Group; Ian Clyne, CEO, Bank SouthPacific (BSP); and Ashleigh Matheson, Managing Director, Wespac Bank (PNG) On the line: Delivering microfinance productsvia mobile networks

CAPITAL MARKETSAttracting attention: Economic growth andsteadily rising incomes could translate into newmarket activityBuilding capacity: The market regulator isexpected to benefit from a number of new initiativesInterview: Geoff Mason, General Manager, PortMoresby Stock Exchange (POMSoX)Interview: Ian Mason, General Manager, BSPCapital

Share analysis & data provided by BSP CapitalOil Search: HydrocarbonsBank South Pacific: BankingCredit Corporation: FinanceCity Pharmacy: PharmaceuticalsNew Britain Palm Oil: AgricultureHighlands Pacific: Minerals

ISBN 978-1-907065-62-0

Editor-in-Chief: Andrew JeffreysEditorial Director: Peter Grimsditch Regional Editor: Paulius KuncinasEditorial Manager: Edward GregoryChief Sub-editor: Alistair TaylorDeputy Chief Sub-editor: JenniePattersonWeb Editor: Barbara IsenbergSub-editors: Sam Inglis, Sean Cox,Elyse Franko-Filipasic, Esther Parker,William Zeman, Elise Laker, DanyaChudacoffContributing Sub-editor: MiiaBogdanoff

Analysts: Nick Anderman, Oliver Fall,Jon Gorvett, Joe Wilcox

Senior Editorial Researcher: SusanManoğluEditorial Researchers: Souhir Mzali,Owen Barron, Thomas Bacon, AdelineOka

Art Director: Yonca ErginDeputy Art Director: Cemre StrugoArt Editor: Meltem MuzmuzIllustrations: Shi-Ji LiangPhotographer: Mark HammamiAdditional photographs provided byNautlilus Minerals

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OBG would like to thank its localpartners for their assistance andsupport in the research of this project.

CONTENTS PAPUA NEW GUINEA 2012


4

What lies beneathPage 71

With the start of the PNG LNG initiative, pro-jected to bring in up to an estimated $150bnover the course of its lifetime, the energy sec-tor looks set for massive expansion. Apartfrom this new mainstay of the economy, other projects are continuing as well, includ-ing extension of the energy grid to ruralareas and a revamping of the power segment.

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INSURANCEUnderwriting profits: The sector has expandedon the back of increased economic activity andrising incomes

ENERGYWhat lies beneath: New exploration and production to bring the sector back to the foreInterview: Peter M Graham, Managing Director,Esso Highlands, subsidiary of ExxonMobil Interview: Phil E Mulacek, Chairman and CEO,InterOilA bright idea: Plans to extend the national gridand provide power to every province are under wayInterview: Tony Koiri, CEO, PNG PowerGame changer: A new LNG project is expectedto have a huge impact on the economy

MININGA key earner: With numerous new projects coming on-line the sector is poised for largeincreases in productionInterview: Byron Chan, Minister of MiningInterview: Greg Anderson, Executive Director,Papua New Guinea Chamber of Mines andPetroleumInto the deep: An increasing number of operations are starting to move offshoreInterview: Peter Aitsi, Country Manager, Newcrest MiningUnder review: A new regulatory framework will clarify legislation

The long haul: Exploration activity speeds up asnew developers move in

TELECOMS & ITOn it grows: Little sign of a slowdown asproviders diversify products and services in linewith market demandInterview: Jim Miringtoro, Minister for Communication and Information TechnologyInterview: Charles Punaha, CEO, National Information and Communications TechnologyAuthority (NICTA) Banking on mobiles: Operators are rolling outnew services, but may face a shallow market Interview: John Mangos, CEO, Digicel (PNG)

INDUSTRY & MANUFACTURINGAdvantages ahead: Strong core segments andburgeoning new ones present opportunities Interview: Charles Abel, Minister of Trade, Commerce and Industry Interview: Murray Woo, Chairman, Manufacturers Council of Papua New GuineaAngling for a raise: The fishing industry looksset for a hefty catchBuilding the brand: Efforts are under way toboost production and local consumptionInterview: Michael Kingston, General Manager,K. K. KingstonKeeping pace: As income levels increase, theretail sector prepares for growth

TRANSPORTPaving the way: Transforming the nation’s land,sea and air infrastructure Interview: Wasantha Kumarasiri, CEO, Air NiuginiInterview: Stanley Alphonse, CEO, PNG PortsCorporation (PNG Ports)High-cost highways: Logistics firms are trying toovercome operational challenges Interview: Joseph Kintau, Managing Director,National Airports Corporation

CONSTRUCTION & REAL ESTATEGas-fired growth: Despite constraints, expansion is expected to continue through2014Interview: Keith Fletcher, Managing Director,Fletcher Morobe Construction

Chairman: Michael Benson-Colpi

Director of Field Operations: ElizabethBoissevain

Regional Director: Laura HerreroCountry Director: Annie Michailidou

Field Operations Executive: MeltemOkurField Operations Coordinator: ZeynepAkdamar

Project Coordinator: Seri Baru

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CONTENTS PAPUA NEW GUINEA 2012 5


A key earnerPage 84

With resources in mature markets declin-ing, emerging mining markets like PNG’sare on the rise. Mining and petroleumextraction represented two-thirds ofnational revenue in 2011, and new devel-opments promise hefty gains. A surge ofmining contracts and extraction projectsare well under way to explore the vastpotential of what still lies unearthed in PNG.

Gas-fired growthPage 146

The sector has faced higher labour costsand materials shortages, slowing construc-tion developments while the LNG projectsaps the market. However, the Mid-TermDevelopment Plans has a $17.7bn budgetto target 39 niche sectors, in addition to a$9.5bn plan to invest in road, maritime andairport infrastructure. These projects areexpected to underpin steady future growth.

Advantages aheadPage 116

The country is well placed to develop itsnascent industrial base into a strong eco-nomic contributor. Several initiatives lookset to boost production and capacity,such as the development of a new marineindustrial zone. New opportunities, par-ticularly in downstream industries liketuna processing and wood manufactur-ing, have accompanied economic growth.

From the roots upPage 163

Agriculture remains a mainstay of theeconomy, with 85% of the populationinvolved in semi-subsistence agricultur-al work. PNG exported around $1.31bnin agricultural products in 2010. Trans-port challenges are high, driving upproduction costs, but a focus on high-end products helps to compensate.

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Labour crunch: A shortage of skilled workers constrains expansion At last: Inroads are finally being made on landreform and ownershipHot, hotter, hottest: Correction seems likely,although opportunities remain in mid-marketand affordable segments

AGRICULTURE & PLANTATIONSFrom the roots up: Niche markets are helpingmake the most of productionCatching on: The fishing industry is maturingInterview: James Lau, Managing Director, Rimbunan Hijau PNGInterview: Pedro Celso, Managing Director, RDTuna; and Chairman, Fishing Industry Association PNGOn the rise: Very active palm oil productionearns a spot among top exportersKnock on wood: Logging is a key industry

TOURISMUntapped potential: Efforts to raise international awareness for lasting growthA sustainable model: Drive for new investmentrequires adept community relationsTaking to the seas: An increasingly popular portof call for the global cruise line industryInterview: Peter Vincent, CEO, Papua NewGuinea Tourism Promotion Authority (PNG TPA)

EDUCATIONSeas of change: Improvement agenda focuseson reviving the sectorBuilding up: Improving access to schools andrehabilitating existing facilitiesInterview: David Arore, Minister of Higher Education, Research, Science and Technology Gender gap: Working to address disparities

TAXDFK Hill MayberryFacts and figures: An overview of the tax lawsViewpoint: Tony Canning, Partner, DFK Hill Mayberry

LEGAL FRAMEWORKLeahy Lewin Nutley Sullivan LawyersConducting business: An overview of the present legal environment Viewpoint: John Leahy, Partner, Leahy LewinNutley Sullivan LawyersViewpoint: Gibson Geroro, Associate, LeahyLewin Nutley Sullivan Lawyers

THE GUIDEThe Kokoda Trail: Into the jungleHotels: Stylish accommodations Important telephone numbers: Contact information for foreign missions and services Facts for visitors: Tips for first-time travellers

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