According to COUNTRYAAH, Papua New Guinea is rich in natural resources. There are significant assets on gold, copper and natural gas, among others. Most of the country is wooded and the sea around the islands is rich in fish. Nevertheless, the country is the poorest and least developed in the Southeast Asia-Oceania region.
More than 85 percent of the residents live in the countryside and live on agriculture, in most cases on a self-sustaining level. Large areas are mountainous and difficult to reach on the main island. The villages are isolated and thus it is very difficult to expand teaching and medical care.
Mining, forestry and commercial fishing are mainly run by foreign companies and account for about 85 percent of the country’s export earnings. The manufacturing industry includes smaller companies that produce simple consumer goods for households.
During the latter part of the 1990s, the country for the first time showed significant economic growth over a number of years. This was not a result of increased production, but because the prices of the country’s commodities rose sharply on the world market and because the government had better control over finances. In addition, the weak industrial connection to the global economy caused Papua New Guinea to a small extent to be affected by the crisis in the world economy.
The socio-economic conditions of the population improve very slowly, and in 2017 the country was ranked 153th among 189 countries when the World Bank calculated the HDI (Human Development Index). Papua New Guinea is highly dependent on development aid, and by far the largest aid donor is Australia. The rapid increase in population leads to high youth unemployment and it is necessary to create employment outside the mining industry, both in cities and in rural areas. For a real development in the country, a major expansion of infrastructure and education is required at all levels. Corruption and complicated, traditional land ownership forms are also difficult obstacles.
In 2013, agriculture, forestry and fishing employed about 70 percent of the population. Most self-catering small farms are supplemented by barter, and burning still occurs. Primarily sweet potatoes, jams and other root vegetables, bananas, vegetables and melons are grown. Farmers living near markets where there are buyers can also grow and sell small quantities of coffee, cocoa or copra. Due to climate and tradition, very little grain is grown, which is imported instead. During the 00s, agricultural production increased by an average of 1.4 percent annually, which is significantly slower than the increase in population. With the rapidly growing population, the need to import basic foods is increasing.
The development of agriculture is hampered by old-fashioned methods and lack of capital, and cultivation is sensitive to changes in weather conditions. Disastrous harvest years are not uncommon after floods or droughts due to the El Niño weather phenomenon.
Plantations were built during the colonial period, mainly with coconut trees that provided copra for export. Since the 1950s, coffee, tea and vanilla are grown in the highlands and cocoa, rubber and oil palm trees in the lowlands. Palm oil accounts for almost 5 percent of export earnings and coffee accounts for close to 3 percent. In Papua New Guinea there are extensive pastures and breeding of carnivores, but farm household pets are almost exclusively pigs and chickens.
Cohesive forest areas cover just over 61 percent of the country’s land and make up the third largest rainforest area in the world, following the forests of the Amazon and Congo basins. Also included are areas with bush vegetation and smoother tree vegetation, mangrove forest and plantations, about 80 percent of the country is wooded.
Significant forest areas are inaccessible, while other areas gradually lose original (primary) forest. This is partly due to legal logging and road construction, and partly to illegal predatory logging made primarily by foreign companies. The large-scale interventions lead to erosion and serious damage to ecosystems that are extremely rich in content and have so far been poorly studied. Furthermore, both primary and secondary forests disappear for the land to be used for tree plantations and agriculture.
State-owned plantations, mainly with eucalyptus or acacia, make up less than 1 percent of the country’s land but account for one-seventh of forestry growth. Timber and timber products accounted for 3.4 percent of export revenue in 2008. About 3 percent of the forest land is state-owned, while 97 percent is traditionally owned by clans. As the state grants harvesting, it refers to access to the trees but does not mean land ownership or land lease. Traditionally, land cannot be sold. This often leads to unresolved conflicts between the local community, state and forestry companies. National forest legislation has allocated areas with total harvesting bans, with protection for fauna and flora and with bans for commercial harvesting, primarily to meet the needs of the local population. In addition, areas have been allocated for future production. The legislation shows an ambition that forestry should be sustainable, but estimates in the mid-00s indicated that just over half of all felling was then illegal. It is difficult to calculate at what rate the country’s forest area is shrinking, but analysis of satellite images has shown that the coherent forest area decreased by 9 percent between 1990 and 2010.
There are good fishing waters around Papua New Guinea, and fishing is common along the coasts, both for self-catering and for sale. Tuna and shrimp provide the biggest catches, and tuna as a canned can is a significant export commodity. However, domestic sea fishing has declined sharply in recent decades, while sales of fishing licenses to foreign fishing fleets have become an important source of income for the country.
Minerals and energy
Abbreviated as PNG by abbreviationfinder.org, Papua New Guinea has rich mineral resources, mainly copper and gold, but also silver, nickel and lead. In addition, large, hitherto unused deposits of cobalt and chromium. Copper and gold began to be mined in 1972 in a very large quarry on the island of Bougainville, but as a result of unrest and sabotage, the mine was closed in 1989. In other parts of the country, mining increased, mainly in Ok Tedi near the Indonesia border, where copper, gold and silver have extracted. Near the coast in the south, oil began to exploit in 1992, and mineral extraction has become increasingly important in the country’s economy. In 2008, it accounted for about a quarter of the country’s GDP, and gold, copper and oil accounted for most of the export earnings: gold for close to 30 percent, copper for 23 percent and oil for just over 22 percent.
At the same time, the exploitation and environmental degradation resulting from large-scale mining has led to many conflicts with the local people. The large openings destroy the landscape and the living conditions of the residents and the discharge of chemical waste water has in several areas made the water undrinkable and killed the fish. It is foreign companies, mainly Australian, that run the mining.
Foreign investors are attracted by the large occurrences but are deterred by the serious contradictions between the local population and the mining industry. The government wants to promote foreign investment, as domestic capital is lacking in order to sustain mineral production in the longer term. At the same time, it does not deny the environmental problems.
The largest deposits of oil and natural gas are found in the southern Highlands provinces. In 2010, a project was started to extract natural gas and transport it to the port of Port Moresby for export in liquid form. In contrast, oil production has declined in recent years as assets decline.
In the rainy and heavily hilly Papua New Guinea, there is enormous hydropower potential, but the expansion of power plants requires a lot of foreign capital. Hydroelectric power now accounts for more than half the energy supply, even though it has so far been produced on a small scale. At the end of the 1990s, only 7% of the country’s households had access to electricity and in the cities, electricity cuts were common.
The manufacturing industry accounts for just over 6 percent of GDP and a few percent of employment in the country. Its contribution to the export industry is small. Mainly, consumer goods are produced such as beverages, clothing, detergents, tobacco and paper products and in addition concrete, plywood and simple metal products, implements, machines and transport equipment. It is of the utmost economic importance that the timber industry and the food industry process fruit from oil and coconut trees and preserve tuna and meat products for sale in a wider market.
The broadening and development of the industry is mainly hindered by the fact that the home market is very small and has weak purchasing power and that transport conditions and other infrastructure are undeveloped. The low level of education, corruption and the poorly developed business climate have also meant that multinational companies have not been interested in relocating parts of production chains to Papua New Guinea.
Note: the capital city of Papua New Guinea is Port Moresby with a population of 382,500 (with suburbs, UN estimate 2020). Other major cities include Lae.
Minerals have always dominated the country’s exports and in 2017, oil, gold and copper together accounted for 3/4 of export earnings. In addition, timber and timber products, as well as products from agriculture and fishing. Imports, on the other hand, show a wide breadth of mining and forestry machinery, light aircraft and other means of transport, chemical products and industrial semi-finished products as well as increasing quantities of food and petroleum products. In 2017, 30 percent of imports came from Australia and 17 percent from China. Exports went mainly to Australia (19 percent), Singapore (18 percent) and Japan (14 percent). The exchange of goods has for many years shown a positive balance.
So far, tourism has had little significance for the country, despite its peculiar nature and culture. Potential visitors have been deterred by widespread crime and poorly developed infrastructure. Of the more than 180,000 tourists in 2016, just over half came from Australia.