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In support of the Jakarta conference relating to the Human Resource Impacts of the Economic Crisis, Papua New Guinea has submitted a case study draft of the impacts of and their responses to the economic crisis.

Summary of the Case Study Paper for Papua New Guinea 

By Albert C. Mellam and Pulapa Subba Rao

The global economic crisis has had minimal impact on the economy of Papua New Guinea (PNG) as indicated by GDP growth rates compared to neighboring economies, such as Australia and New Zealand, with which PNG has strong historical, diplomatic and trade relationships. This minimal impact can be attributed to PNG’s stable banking and financial regimes, low levels of formal employment, and the large proportion of the population living in rural areas, and depending almost entirely on subsistence agricultural, hunting, and fishing economies. In fact, PNG enjoyed strong economic growth in 2009 and this trend is set to continue in 2010. Export earnings of PNG has been on increasing trend until 2008, but recorded slight decline owing to decline in global prices of those products that PNG exports.

Applicability of Policy Responses from other Economies

Policy responses developed in other economies are not appropriate for PNG because the impact of the recession has been minimal and indirect. The traditional economy responded appropriately to rising food prices and house rents in certain pockets of the economy through the culture’s inherent social safety net. However, the Government of PNG has been taking steps to enhance the growth rate of the economy and to improve the human development index since 2005. Significant measures include the government’s commitment to Millennium Development Goals and to its own Medium-Term Development Strategy (MTDS), over and above fiscal measures. More recently it has fast tracked a 50 year development road map for PNG, the ‘PNG Vision 2050’ from which all other Government sectoral plans must take their cue from.

Impact on Labor Market

The recession did not affect the growth of employment therefore no labor-specific polices or interventions were designed; however, interventions in response to the recession’s impact on other economic variables did have an effect on the labor market. The PNG economy is expected to grow at fast rate because of land reforms and the Liquefied Natural Gas (LNG) project: an additional 1.2 percent in real terms each year if 3 percent more of customary land is brought under commercial production in the formal sector. This will bring an additional K 3.0 billion to K 4.5 billion to the GDP by 2020. Consequently, per capita GDP is expected to increase to K 2,420.50 by 2020. Recognizing the importance of manufacturing and downstream processing, the government has proposed that the value of manufactured products be increased so the sector’s contribution to GDP can rise from 5.93 percent (2008) to 9.0 percent (2012).

Other Topics addressed in Case Study

The government has recognised that human resources must be developed to meet the needs of a fast-growing economy. The government’s education policy will ensure that PNG’s brightest and most talented have an opportunity to benefit from higher education. Recognizing the value of physical and mental health in the workforce, the government has focused on improving access to primary health care and curbing the incidences of high-mortality diseases.

This paper further explores the impact of the agriculture sector as against manufacturing sector, human resource development policies of the Government, growth of the petroleum industry, construction, and the export sector, poverty, population growth, urbanization, transport and telecommunication policies, and expenditure polices on the recession implications as well as growth-driven policies and trends in PNG.