Closing the rich-poor divide in PNG

The Papua New Guinea (PNG) economy has undergone a remarkable 11 straight years of economic expansion, averaging GDP growth of almost 6% per annum. High levels of foreign investment coupled with strong commodity prices for PNG’s mining, oil and agriculture exports have stimulated output, enhanced government revenues, and buffered the economy against some major global economic shocks. This impressive growth performance has also been made possible by prudent government monetary and fiscal policies. Furthermore, structural reforms in financial services, telecommunications and aviation have boosted business investment and encouraged economic diversification.

Yet PNG continues to face significant challenges in translating a booming economy into “inclusive growth” – the kind that brings opportunities to even the poorest and most vulnerable segments of society. Available evidence shows that less than 10% of PNG’s working age population have to access formal private sector job opportunities. Meanwhile, many areas of service delivery – such as classrooms or clinics – have deteriorated over the last decade, particularly in rural areas. PNG is currently not on-track to meet any of the Millennium Development Goals by 2015.

PNG's future prosperity, and the eradication of poverty, will require much more than simply high economic growth. Active steps must be taken to balance the country's economic expansion with more inclusive policies. Cut off from economic opportunities due to poor roads, expensive aviation, and a lack of reliable, safe shipping services, many of PNG’s rural communities are watching the chasm between rich and poor grow ever wider.

The Asian Development Bank (ADB) is working in partnership with the PNG Government to improve service delivery, foster inclusive economic growth and reduce poverty.

A central priority is improving the quality of PNG’s transport infrastructure to promote more efficient and safer movement of people and goods around the country. Connectivity is vital for both the creation of livelihood opportunities and improved access to the basic services that are crucial to inclusive growth. To help the Government achieve these results in its “year of implementation”, ADB must make it a priority to work across the country from central agencies in Port Moresby to rural Local Level Governments, supporting their efforts to execute timely, cost effective, projects that provide value for money for the communities which they aim to serve. Through its infrastructure investments and policy dialogue, ADB also aims to help PNG address the risks posed by climate change, incorporating climate adaptation measures into project designs and working in partnership with the private sector and government to tap the country’s vast potential for renewable energy projects.

ADB also aims to assist PNG maximize the opportunities offered by its geographic location through regional cooperation and integration. A recent ADB study suggests that Asia could be producing more than half of global GDP by mid-century, with three billion Asians having per capita income levels equal to that of Europe today. Asia has shown that openness to trade is a key ingredient for economic success and improved living standards. By connecting local PNG producers to domestic, regional and global markets, trade will help fight poverty and enhance the productive capacity of the entire economy. It facilitates the availability of technology, know-how, and helps make goods cheaper and more widely available. It also weakens the grip of local monopolies.

Private sector development is also a central element of ADB’s poverty reduction strategy. By creating better conditions for the private sector to drive economic expansion, and continuing to promote economic diversification, the PNG economy can give more opportunities to more people. Supporting business to implement new technologies such as mobile telephones has also helped to reduce the limitations imposed by geography, changing PNG’s economic landscape and opening up new business opportunities. Mobile phone technology, meanwhile, now also provides a more effective means of delivering services like education and health care, which is essential for building up PNG’s biggest natural resource – its people.

By accessing quality education, health, nutrition, rural infrastructure, and credit services, Papua New Guinean’s will be able to take full advantage of the opportunities provided to them by the “Asian century.” While the challenges to reduce poverty appear daunting, there is much to be optimistic about regarding PNG’s development prospects. Shortcomings in translating the growth of the last decade into social development achievements are being recognized and understood, allowing Government to focus on what needs to be overcome. Underpinning these efforts will be PNG’s ability to maintain good governance and obtain value-for-money from government expenditure. If this can be achieved, PNG will be able to reach its full potential and catch up with Asia’s other emerging market economies.