In discussing the trends likely to shape PNG’s future, it would be wrong to give the impression that nothing good has happened in Papua New Guinea in the last 40 years.
Papua New Guineans have embraced democratic participation through elections. These are held every five years and contested by increasing numbers of candidates. While many changes of government have been enabled by motions of no confidence on the floor of the parliament, no government in Papua New Guinea has been removed by military force. A free media has endured despite attempts by various governments to intimidate journalists.
The country has made important strides in developing trade and investment links with fast-growing Asian nations, including China, and expanded the focus of its relationship with Australia beyond aid. The success of ExxonMobil’s investment in PNG’s liquefied natural gas (LNG) has spurred international investor confidence in the potential of the country.
PNG governments have not been short of vision and ambition for their country. In 2009 the Somare government launched Papua New Guinea Vision 2050, a bold strategic framework to guide successive governments in developing Papua New Guinea over 40 years.[5] In 2014 the O’Neill government refined this strategy and introduced the National Strategy for Responsible Sustainable Development, which foresees the “support and engagement of all sectors of society” in building a “truly sustainable and responsible economy”.[6] Nevertheless, if PNG’s efforts to reshape the country’s future are to succeed they will need to tackle seven key trends.
Weak governance
Successive Australian governments have been in despair about poor governance in Papua New Guinea, worrying about weak institutions, lack of capacity in the public service, corruption, political instability, ineffective leadership, and a thin civil society ill-equipped to hold government to account. Many PNG and Australian businesspeople and government officials have commented to the author that weak capacity and inadequate skills in the public service are the most critical inhibitors to development in Papua New Guinea.[7] The PNG Government has invested in training, worked with aid partners, the private sector, churches, and non-government organisations to help fill capacity gaps. In the past 15 years the Australian Government says it has spent between a third and a fifth of its total aid budget to Papua New Guinea on improving governance,[8] although the proportion may be even higher as expenditure in all sectors of the aid program involves governance programming.[9]
The return on this substantial investment has been poor. The World Bank’s Worldwide Governance Indicators (WGI) show little overall improvement in governance in Papua New Guinea in the period between 1998 and 2014. The WGI measures voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law, and control of corruption. Despite reform and significant Australian investment in improving the performance of the PNG public service, the WGI show that government effectiveness diminished between 1998 and 2014. Placed in the 32nd percentile in 1998 (i.e. PNG’s government effectiveness was better than 32 per cent of all countries assessed) it fell to the 27th percentile in 2014.[10] The WGI judged the country’s rule of law to be in the 28th percentile in 1998; that fell to the 21st percentile in 2014.
PNG World Governance Indicators
Source: World Bank, Worldwide Governance Indicators (WGI).
Note: 1999 and 2001 are averages as the WGI were not recorded in these years.
A key feature of weak governance in PNG is corruption. Transparency International’s 2015 Corruption Perceptions Index ranks Papua New Guinea 139th in a list of 163.[11] Its score of 25 — which indicates the perceived level of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean) — has remained constant in this Index for the last four years. That score is borne out by similar flatlining of the WGI assessment of PNG’s control of corruption over the last four years. In the Asia-Pacific, where Papua New Guinea seeks to do more business, only four countries score lower in Transparency International’s Index: Myanmar, Cambodia, Afghanistan, and North Korea — all of which have experienced either civil war or long-term dictatorship in their recent histories. The WGI assessment of PNG’s performance in controlling corruption showed that Papua New Guinea fell from the 19th percentile in 1998 to the 15th percentile in 2014.
There are no quick fixes or indeed straightforward long-term fixes to improving governance and building capacity in the public service in Papua New Guinea. In many cases the PNG Government itself appears to have given up on improving capacity of national government agencies. The District Services Improvement Program, introduced by the O’Neill government, has seen devolved funding flow to individual members of parliament to manage the delivery of many services in their districts.
After decades of effort building up a national public service, this move has transferred responsibility for improving living standards to politicians and provincial and district governments, with even less transparency and accountability standards than existed at the national level. This approach has significant disadvantages. There is an equal chance of implementation failure, more pressure is put on inadequately resourced local-level governments, and there is more potential for fraud and corruption. And as greater national funding is devolved to local-level governments, less funding is invested in strengthening the capacity and expertise of national agencies, thus threatening the viability of key service delivery agencies. As the national government is the primary employer in the formal sector, the decline of these agencies would have further implications for the welfare of their employees and extended families.
The Australian Government has invested heavily in capacity building through the placement of contracted technical advisers in PNG’s public service and through the direct deployment of Australian public servants — mostly from the Departments of the Treasury and Finance — in counterpart agencies in Papua New Guinea. A 2009 review of Australian aid in Papua New Guinea commissioned by the Australian Government found the ‘capacity building through advisers’ approach to be flawed, based on evaluations of the aid program, the WGI, international evidence, and local experience. The review recommended a variety of mechanisms to reduce reliance on this approach and improve the impact of the technical advice that is still in demand in Papua New Guinea.[12] Australia has adjusted its approach to capacity building but faces challenges in managing political expectations that foreign advisers be more accountable to PNG government ministers.
Poor law and order
Law and order challenges in Papua New Guinea are intractable. Levels of crime and violence are high and are a major obstacle to economic development. Robbery, assault, and domestic violence are the most commonly reported crimes. Urban centres — notably the capital Port Moresby, the industrial town of Lae, and Mount Hagen in the Highlands — have high crime rates. Disturbingly, the physical features of the business centres and residential areas in those urban centres are security walls. Tribal violence occurs without legal recourse. Many women who are victims of violence face insurmountable challenges to gaining legal redress.
Crime trends in Papua New Guinea are difficult to track accurately. A 2014 World Bank report on trends in crime and violence in Papua New Guinea found that the limited literature available to determine crime trends does not rely on “robust empirical evidence”.[13] The report says that two longitudinal datasets — crime data reported by the Royal Papua New Guinea Constabulary (RPNGC) and urban crime victimisation studies — show significant variance in the numbers and types of crimes committed. Under-reporting of crime is common in Papua New Guinea, further complicating attempts to determine trends.
What is clear is that overall levels of crime and violence are high in Papua New Guinea compared with crime and violence rates in other countries. The 2014 World Bank report found that crime was increasing in a number of “hot spots” in Papua New Guinea, including Lae, Port Moresby, Madang, East New Britain, West New Britain, Western Highlands, and Enga.[14] Violent crime was growing as a proportion of crimes reported between 2007 and 2010. Property crimes were also increasing in urban areas. The spread of firearms in the country has created further problems with violence.
In 2015 the Economist Intelligence Unit ranked Port Moresby as the world’s third least liveable city.[15] Only Dhaka, a city of nearly 7 million people, and Damascus, in the middle of a long-running civil war, ranked lower. Human Rights Watch says Papua New Guinea is one of “the most dangerous places in the world to be a woman, with an estimated 70 per cent of women experiencing rape or assault in their lifetime”.[16] The high rates of family and sexual violence qualify as a national humanitarian emergency. World Bank research has found that:
“Eighty-one per cent of businesses [in Papua New Guinea] reported that their decisions for further investment or expansion of their operations were affected by the law and order situation in the country. Sixty-seven per cent of firms identified crime as a constraint … more than four times the regional average for firms in East Asia and the Pacific.”[17]
The law and justice sector’s ability to deal with rising levels of crime is constrained by poor performance, funding problems, and capacity weaknesses in the RPNGC. Papua New Guinea has a very low police to population ratio of 78:100 000, compared with 268:100 000 in Australia.[18] The numbers of police have barely improved in the last 40 years. The RPNGC numbered 4100 officers at the time of independence. By 2013 it had grown only 25 per cent to 5724 sworn and 374 unsworn members; at the same time the population had tripled.[19] Papua New Guinea Vision 2050 envisages increasing the police personnel to population ratio from 1:1317 to the UN benchmark of 1:450 by 2050.[20] There is a political commitment to increase police numbers — the 2015 budget allocated PGK15.2 million to recruit 750 new police officers.[21] The current budget crisis, however, will likely mitigate against significant new recruitment or reform taking place in the medium term. A rapid turnover of police commissioners in recent years has also worked against effective management of the police.
Meanwhile, spending on private security continues to increase. In 2014, 84 per cent of companies in Papua New Guinea used private security firms.[22] The security service industry is the fastest-growing business in the country — it is estimated to be worth PGK1 billion and employs approximately 30 000 people.[23] This industry fills very obvious gaps created by scarce resources and weak capacity in the RPNGC. However, while private security guards can prevent criminal acts, they cannot take over the role of the police in prosecuting crimes and providing a service for the entire nation.
A failing health system
Papua New Guinea has major health challenges. Among the top five causes of morbidity and mortality are those associated with PNG’s climate and environment, such as malaria and diarrhoeal and waterborne diseases.[24] But the top five list also includes vaccine-preventable diseases such as tuberculosis. Immunisation coverage has fluctuated in recent years but is below World Health Organization (WHO) standards. Approximately 30 000 people live with HIV in Papua New Guinea.[25] The maternal mortality rate is very high at 230 per 100 000 live births, more than double the United Nations Millennium Development Goal target set for Papua New Guinea in 2015.[26]
The number of people affected by non-communicable diseases, including cardiovascular and respiratory disease, cancer, and diabetes, is also increasing. Non-communicable diseases were responsible for an estimated 44 per cent of all mortality in 2008, up from 37.9 per cent in 2004. Cardiovascular diseases accounted for 21 per cent of this mortality rate, with cancer accounting for 8 per cent, respiratory diseases 5 per cent, and diabetes 2 per cent.[27]
Although these challenges are worrying, WHO statistics show that some of PNG’s health outcomes have improved. The overall incidence of malaria declined between 2008 and 2013, with the prevalence of the parasite in the population falling from 18.2 per cent to 6.7 per cent.[28] And there has been a slow decline in under-five child mortality and infant mortality.[29]
Still, despite increased levels of health spending by the PNG Government, improved health outcomes have been incremental at best and non-existent at worst. For example, the United Nations Development Program’s 2014 report on Papua New Guinea notes that maternal health is poor and possibly worsening. The report points to Department of Health data from 2013 which showed that the level of antenatal care had declined in the previous three years in all regions except the Highlands and that there was an extreme shortage of skills in the maternal health field.[30] Treating the impact of violence against women and children is a major challenge for the health sector.
Papua New Guinea has very low numbers of medical professionals per capita. According to WHO, there are 5.3 nurses and midwives and fewer than 1 doctor per 10 000 people.[31] While some 85 per cent of the population live in rural areas, only 51 of an estimated 400 doctors work outside the capital, Port Moresby.[32]
One benefit of a sustained period of economic growth over the past decade has been an increase in the proportion of government expenditure on health as a percentage of total expenditure, rising from 8.7 per cent in 2005 to 12.6 per cent in 2015. Total expenditure on health as a percentage of gross domestic product rose from 4 per cent in 2005 to 4.5 per cent in 2015.[33] This is positive but more needs to be done to improve health outcomes for PNG’s citizens.
Churches have long played an important role in delivering health services in Papua New Guinea. They have carved out a niche in caring for the poorest, the most remote, and the most marginalised people and become an integral part of the nation’s health system. Resources companies have taken responsibility for delivering health services to the districts where they operate. Some health initiatives driven by the private sector have delivered impressive results in treating and preventing malaria and HIV. On current trends, improvements in the delivery of health services are possible but based on the investment in doctors and infrastructure required, and the health challenges that the population faces, any improvement will be incremental at best.
A mediocre national education system
The average number of years of schooling achieved by adults in Papua New Guinea is four.[34] This is the lowest level in the Pacific Islands region and is comparable to the levels of schooling attained by adults in sub-Saharan Africa. In Fiji, for example, the average is nearly ten years. The current completion rate of primary school in Papua New Guinea is 59 per cent.[35]
Nelson Mandela’s maxim that “no country can really develop unless its citizens are educated” has been embraced by the PNG Government.[36] Prime Minister Peter O’Neill said the prime aim for the next 40 years is “to grow jobs for our people, and to do that we need to build a skilled labour force and a productive population, through education”.[37] The O’Neill government has sought to address low levels of education with its tuition fee-free education policy. This policy, introduced in 2012, has five key objectives: “to improve access to schools (especially for girls); improve retention; improve the quality of education; strengthen education management; and improve equity to schooling across the country.”[38]
The policy is a worthy aim and has succeeded in increasing the numbers of children attending school as well as equity in schooling. However, quantity outcomes have been prioritised over quality outcomes. The government has not ensured sufficient numbers of qualified teachers are available to respond to increased demand for primary school education. Better sequencing — investing in teacher training first — could have made this policy more effective. As it stands, more children will be pushed through primary school classrooms but not necessarily emerge with an education that will allow them to continue to secondary school or make a contribution to building the economy.
Papua New Guinea’s schooling system has suffered from a number of policy shifts, drastic changes in curriculum, and under-resourcing. A ‘standards-based education’ curriculum replaced the ‘outcomes-based education’ curriculum in primary schools in 2015. The tuition fee-free education policy has imposed significant strain on teachers accommodating very large classes. Teachers and administrators need stability and support to deliver better education to the growing number of children attending school.
It is not only primary and secondary schools that need reform in order to deliver higher-quality education. Of the 23 000 students who completed Grade 12 in 2015, only 4700 (around 20 per cent) are continuing with higher education in 2016. Even this number is saturating the capacity of PNG’s universities and vocational training institutions.[39]
An over-reliance on the extractives industry
Papua New Guinea is blessed with a vast endowment of natural resources and a geographic proximity to rapidly growing Asian markets for those resources. But as many developing countries have found, such blessings can also be a curse. Although PNG policymakers are aware of the resources curse, they have been unable to avoid suffering from it.
The successful development of the US$19 billion ExxonMobil LNG investment in the PNG Highlands by 2014, ahead of schedule and within budget, has been a boon for both the PNG economy and the country’s prospects of attracting further foreign investment. Although the current downturn in prices has slowed further investment in the extractives sector, the success of PNG LNG spurred interest from Total, a French multinational oil and gas company, which is leading the new Elk-Antelope exploration in Gulf Province. Many of PNG’s emerging leaders themselves benefit from careers in the extractives sector and understand the importance of the sector to the economy.
Nonetheless, the socio-economic impact of PNG’s extractives sector has been uneven at best. The resources sector will continue to offer opportunities to skilled university graduates but the majority of these jobs are largely dependent on favourable world prices and are limited in number. Moreover, there is often a sharp downturn in benefits once a project is underway. ExxonMobil’s massive LNG project directly employed 9300 people during the construction phase and 1000 people post-construction.[40] Chinese investment in the Ramu nickel mine provided 5000 construction phase jobs and 2000 jobs post-construction.[41]
GDP and GDP per capita, 2012 prices
Source: Michael Cornish et al, “PNG Survey of Recent Developments, 2014-15”, Development Policy Centre Discussion Paper No 41, 13 September 2015.
The most recent growth of the extractives sector, due in large part to ExxonMobil’s investment, has coincided with the growth of the non-extractive sector of the economy. Indeed, the latter performed well over the past decade and contributed to the private sector doubling in size. The diversity of this growth was impressive with agriculture accounting for 30 per cent and manufacturing 21 per cent, and building and construction, wholesale and retail trade, transport, and finance and business making up the balance.[42] The Asian Development Bank (ADB) attributes this positive trend to a commitment to fiscal discipline and macroeconomic stability, reduced public debt and favourable external conditions, aided by structural reforms in the finance and telecommunications sectors.[43]
The government’s mismanagement of the most recent resources boom and subsequent budget crisis has underlined the risk of its over-reliance on the extractives industry. The government assumed high oil and gas prices would endure and guarantee windfall revenue for many years, which led to excessive government spending before these revenue streams were realised. When prices dropped in 2015, the government lacked sufficient reserves or alternative productive sectors to compensate for the loss of revenue. Foreign exchange controls imposed to maintain PNG’s inflated exchange rate are hurting the private sector and curtailing trade. Commitments to host international events such as the Pacific Games in 2015, the African, Caribbean and Pacific Group Leaders’ Summit in 2016, and APEC in 2018 have put further pressure on PNG’s budget while the government struggles to fund service delivery.
The ADB has argued fiscal prudence and macroeconomic stability rather than investment in the extractives sector alone will remain vital to enabling formal sector job creation. The formal sector currently employs about 15 per cent of the population. The informal sector is dominated by subsistence and semi-subsistence activity.
In the absence of increased major corporate investments over the next 40 years, formal sector growth will need to come from the development of domestic small to medium enterprises. The World Bank’s Doing Business Survey for 2016 ranks Papua New Guinea at 138 out of 189 countries for ease of starting a business.[44] Successive Lowy Institute dialogues with emerging leaders in Papua New Guinea have identified a range of serious obstacles for young entrepreneurs. These have included difficulties raising capital, the high cost of renting business premises, high utility costs, limited internet access, lack of access to infrastructure in rural areas, safety, and difficulties in sourcing business inputs.
The unrealised potential of subsistence agriculture
Papua New Guinea relies on subsistence agriculture to feed approximately 80 per cent of its population. The rural population’s ability to feed themselves from crops they grow means the country largely avoids the severe hunger problems that afflict much of the developing world. A diet based on subsistence agriculture has also helped Papua New Guineans avoid the growth of diet-related non-communicable diseases such as obesity and Type 2 diabetes that have afflicted their neighbours in Polynesian and Micronesian states (although as noted above, the rates of these diseases are now rising).[45]
While the government has focused on enabling opportunities for the extractives industry, it has ignored the very substantial job creation and economic returns that could come from investment in commercialising subsistence agriculture.
Growth in PNG primary commodity prices (2000 = 100%)
Source: International Monetary Fund, Primary Commodity Prices Projections.
Subsistence agriculture has shown remarkable durability, failing only during periods of extreme drought or frost (as experienced in heavily populated parts of Papua New Guinea in 2015 and 2016). But it is not the panacea for poverty that most PNG politicians believe. The 2009–2010 Household Income and Expenditure Survey shows that PNG’s rural population had a higher incidence of food poverty (28.5 per cent of the population) than the urban population (14.4 per cent).[46] Subsistence agriculture is also highly vulnerable to changing weather patterns. The recent El Niño-driven drought in Papua New Guinea has drawn attention to the vulnerability of rural communities dependent on subsistence agriculture.
Successful farmers in Papua New Guinea complain that the younger generation is not interested in tending to family gardens or in commercial agricultural ventures. Increasing urbanisation is in part caused by young people seeking out work in the formal sector in Port Moresby or Lae. The majority of school leavers want the security of a formal job with a secure wage rather than working their land.
The population in urban areas, who are for the most part removed from their traditional gardens, buy food from markets, street sellers, and supermarkets. Imported processed foods have become more popular in recent years, in part because a capacity to purchase processed foods is perceived as an indicator of wealth and progress. The majority of Papua New Guineans still benefit from growing their own food but could be contributing so much more to the economy with more investment.
Growing population
Dame Carol Kidu, former Minister for Community Development in the Somare government, believes that “rapid population growth and increasing, unmanaged urbanisation and underlying social breakdown” are the biggest challenges Papua New Guinea faces in the next 40 years.[47] The Papua New Guinea Office of Urbanisation estimates the urban population to be 1.2 million, spread across the three urban centres of Port Moresby, Lae, and Mount Hagen.[48]
The population of Papua New Guinea was recorded at 7.3 million in the 2011 census, a 40 per cent increase since the previous census in 2001 and a 160 per cent increase since the estimated population of 2.8 million at the time of independence.[49] When he launched PNG’s National Population Policy, Charles Abel, Minister for National Planning, estimated the population would be 30 million by 2050.[50]
Port Moresby’s population numbers between 500 000 and 750 000.[51] Port Moresby benefits from a high level of infrastructure spending, to the frustration of residents of the rest of the country who complain that it is the capital rather than the country that benefits from the resources boom. Although it attracts rural dwellers in search of employment, life in the capital is expensive. The costs of living, particularly in rental accommodation, are high. The growth of settlements is putting pressure on service delivery.
Urbanisation presents a complex set of challenges for Papua New Guinea. It offers an opportunity to drive GDP growth and improve human development by benefiting from the concentration of the population.[52] But it also increases the burden on service providers in urban areas as people who move from rural areas no longer have access to their land and become less self-sufficient.
