The paradox of Papua New Guinea

The paradox of Papua New Guinea

Papua New Guinea has me so intrigued. I don’t know if it’s the puzzle of the country’s development or whether it’s the eternal lure of the tropics? But no matter how much I dig I just end up with more questions.

The first riddle is that PNG is a developing country with some 3 million people living in absolute poverty, yet, it’s economy is set to grow at ten per cent this year, which by the way, is a major slowdown from the forecast rate of 15 per cent, plunging oil prices etc.etc.

It’s a land clutching onto its traditional subsistence way of life, where every village is said to have its own distinct culture. And yet, it’s surging towards globalized trade through the mining and export of liquefied natural gas. With a little help from foreign interests of course.

I’m desperate to understand the economics of this disparity; at the same time my adventurous side wants to hike into the highlands and experience a rare glimpse of a subsistence way of life that is disappearing from our world so rapidly.

Australia had ruled PNG since the early 1900’s and it wasn’t until 1975 that the Crown relinquished control. There were festivities all over the country and while cash was splashed in celebration there were also cries of dissatisfaction by those who felt the funds would be better spent on the country’s poor.

Papua New Guinea is battling to balance its books with the latest economic update from the government showing its budget deficit ballooned from 4.4 per cent to 9.4 per cent this year. With public debt pushing above 40 per cent of GDP, the country is fast approaching a budget crisis.


The main culprit for the financial woes is the global plunge in commodity prices. PNG has a lot of gas coming on-line in a number of major projects but, with oil prices sliding, the gas will fetch far less than it did this time last year. This is a massive headache for the government with analysts suggesting the price slump could push tax revenues from gas sales towards zero for up to a decade.

The PNG-LNG project is a mammoth gas play that will pull natural gas from seven wells before it is liquefied and then shipped to foreign markets. The project lead is the Australian company Oil Search (based in PNG) and the project is operated by US multinational Exxon-Mobil. The PNG government also has a sizeable equity share in the project.

Gold and copper prices are also slipping and with drought ravaging the country the recently nationalized Ok Tedi gold mine has been shuttered.

The country’s export output is helping the country develop, but it’s not enough. The question lingers of how PNG can utilize these resource riches to bring development and greater living standards to everybody.

In the short-term PNG will remain Australia’s biggest foreign aid recipient. It was one of the few countries not to see its funding slashed in the last Aussie budget.


This brings us to the second riddle, the country’s relationship with Australia. The two countries have always been close and the bond was cemented in blood in WW2 on the Kokoda Trail where the locals fought with Australian allied forces against the Japanese.

Walking the track is a pilgrimage that planeloads of Aussies see as a badge of honour; by all reports it’s a tough trek with the rigour going some way to demonstrate the grim conditions that the diggers must have faced.

The tourist trade is making slow progress in PNG due in part to tribal feuds and corruption, traits all too common in post-colonial countries coming to terms with Western influences. Countries that are new to private land ownership, processed food and Western alcohol are always going to have their problems.

When we talk of links with Australia, social dislocation and a globalized world we cannot avoid talking about Manus Island.

This little island to the North of the PNG mainland has become infamous for being the site of one of Australia’s infamous offshore immigration detention centres.

The issue’s clearly been hugely divisive in Australia and it’s been described in harsh terms by international observers at the United Nations. Offshore processing at Manus Island was re-instated in 2013 by Kevin Rudd’s Labor government, before being re-branded under the Abbott government as Operation Sovereign Borders.

This issue has further complicated Australia’s relationship with PNG. Questions of incentives have been asked but haven’t been answered and we again hear echoes of the country’s colonial past as the big western power to the south makes its demands.

PNG seems poised at a crossroads; natural resources promise riches while a volatile oil price offers a timely warning. Australia is a friend but also a debtor.

No-one can answer these questions for PNG, it has a history and a culture all its own and it’ll deal with these issues in its own way. And maybe, in the end, that’s why I’m so intrigued about where it’s headed.


More reading… This piece from the Dev Policy blog gives a great insight into the security and social challenges facing ex-pats living in Port Moresby.


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