Papua New Guinea

Resource-rich Papua New Guinea (PNG) was seen as an economic powerhouse in the Pacific Islands with a state-led focus on resource extraction initially expected to drive one of the world’s highest growth rates of 15 per cent last year. But in the wake of falling commodity prices, GDP growth has plummeted from 8.5 per cent in 2014 to a forecasted 3 per cent this year.

PNG has significant resources, including oil, gas, copper, gold, silver and timber, and the extractive industry has been worth about K150 billion (US$49.3 billion) since Independence in 1975. But corruption and low corporate taxes are among the causes of the discrepancy between extractive wealth and persistent hardship. Forty per cent of the country’s 7.3 million people live below the poverty line, 12 per cent have access to electricity and less than 5 per cent to formal sector employment.

In 2014 construction of the PNG LNG, the nation’s largest extractive project to date in the highlands region was completed. The Exxon-Mobil operated joint venture is expected to produce 6.9 million tonnes of liquefied natural gas (LNG) per year for export. Of the 21,220 workers employed on the project during its peak phase in 2012, an estimated 9,000 were Papua New Guinean.

But Hetha Yawas, Chair of the Rural Women’s Empowerment Association says the benefits for many families were temporary: “The little money that was given by husbands and other men in the family [who were employed] was used to buy store food for the family. However, that was short-lived and many mothers are now facing the reality of getting back to the basics of making traditional gardens to feed their families.”

Anticipated high revenues from the LNG project fuelled ambitious plans by the government to invest in infrastructure and services, such as an announcement in 2014 of K7 billion (US$2.3 billion) for road works over five years. But the price of Brent crude fell later that year from $76 per barrel to around $30 in January this year, while the natural gas index dropped from 101.6 to 58.8 in the same period. National mining and petroleum tax revenues dropped last year from an initial estimate of K1.7 billion (US$559 million) to K300 million (US$98.6 million), triggering 20 per cent cuts in public spending on transport and education.