Policy Reforms Necessary to Ensure Equal Economic Opportunities for all Papua New Guineans

Papua New Guinea can achieve stronger, more stable, and inclusive growth if it makes significant policy reforms in addition to the implementation of new extractives projects, a new World Bank analysis finds.

Papua New Guinea’s economic potential is restrained by excessive macroeconomic volatility, low productivity growth, and excessive reliance on natural resources, while at the same time missing opportunities to take full advantage of its human capital, according to the report, Country Economic Memorandum for Papua New Guinea.

The new report says that while PNG’s economy has expanded by 3.2 percent on average over the last 40 years, Gross Domestic Product (GDP) per capita has recorded an average annual growth rate of only 0.9 percent over the same period, while the gap between PNG’s per capita income levels and East Asia Pacific region has widened.

“While Papua New Guinea has made important economic strides in recent years, the gains have not been widely shared by all Papua New Guineans,” said World Bank Country Manager for Papua New Guinea Khwima Nthara. “A resource-rich country like Papua New Guinea has the capacity to achieve more shared prosperity and sustainable growth if it can convert revenues from resource projects into investments in the health, skills and education of its population, and into improved infrastructure,” he added.

To achieve stronger and more inclusive economic growth, Papua New Guinea should seek to maintain greater economic stability, boost productivity, and nurture human capital. Challenges for macroeconomic stability and the high risk of debt distress could negatively affect economic growth through reduced investor confidence. Policymakers can address this by continuing with fiscal consolidation with a focus on increasing domestic revenue.

For Papua New Guinea to better channel its natural resources into broad-based and sustained productivity-driven growth, improvements to the business environment – such as easing business entry and allowing greater competition — could boost investment, encourage positive economic spillovers from extractives industries, and share benefits more widely. Lifting legal and cultural barriers to women’s employment offers an enormous untapped opportunity to strengthen the economy.

In addition, improved health, education, and job opportunities will help expand human capital, a key driver of per capita wealth growth. In particular, Papua New Guinea must urgently deliver comprehensive programs to improve training, education, and employment opportunities for its large population of young people to achieve and sustain development gains.

“Stability and productivity are critical for Papua New Guinea to generate strong and sustainable growth,” said World Bank Senior Country Economist for Papua New Guinea Ruslan Piontkivsky, the main author of the report. “To get there, Papua New Guinea should expand economic opportunities for all of its population, notably for its growing number of young people and women.”

The Country Economic Memorandum for Papua New Guinea is now online.

About the World Bank in Papua New Guinea

The World Bank’s work in PNG aims to help end extreme poverty and promote shared prosperity in a sustainable way so that everyone – regardless of their gender, where they live, or their social and economic circumstances – can benefit equally to support PNG’s development goals.

The World Bank currently supports 11 PNG Government projects worth approximately US$503 million, in sectors including agriculture, health, transport, energy, water and sanitation, rural service delivery, labor mobility, child nutrition and youth employment.

Source – World Bank