The government of Papua New Guinea’s newly re-elected Prime Minister, James Marape will be focused on building investor confidence and getting Porgera reopened, as it begins its new term.
In his first speech to parliament after re-election, Prime Minister James Marape said he wanted PNG to become a K200 billion (US$56.8 billion) economy in the next 10 years.
The International Monetary Fund predicts economic growth of 4.2% this year, and 4.7% in 2023, largely powered by growth in the resources sector. The IMF expects GDP growth to subside slightly to 3% from 2024.
Prime Minister James Marape continues to grapple with the Porgera problem, although it appears to be inching towards resolution. Agreement was made on reopening the mine last year, but it is still closed. Mineral Resources Enga and the Porgera gold mine landowners signed the Porgera gold mine shareholders agreement on August 18. Marape now says “the long-overdue reopening of the Porgera gold mine is finally in sight” following what he dubbed, this ‘milestone achievement’.
In July, Bank of South Pacific (BSP) Group CEO, Robin Fleming stressed the importance of Porgera: “We expect that the re-opening…will be a key priority for the government that emerges from the 2022 National General Elections. Porgera and other resource investments are important as the post COVID economic activity has been led by government spending in infrastructure, and private investment is important to make the recovery sustainable in the long term.”
Fleming said other projects can build on this momentum.
“Apart from the reopening of the Porgera gold mine, Wafi-Golpu, Papua LNG and P’nyang LNG are still being progressed. The delivery of these large projects represents a significant injection into the PNG economy and will ultimately impact growth and government revenue.
“Mining-adjacent sectors will also benefit from the uplift in activity with some spill over into retail, wholesale, and accommodation sectors,” Fleming added.
Financial inclusion
Prior to the election, Treasurer Ian-Ling Stuckey said the new growth forecasts did not include new resource projects, and flagged growth in the non-resource sector, including agriculture, fishing, selling goods, construction and transport. It is in these vital parts of the economy where many Papua New Guineans earn their living.
It is also where challenges around financial inclusion persist.
At the recent Pacific Update run by the Australian National University in Suva, academics Martin Davies and Laura Nettuno spoke of the barriers to inclusion posed by gender, education, distance to banks and fluency in English.
The International Monetary Fund states PNG had the lowest financial inclusion of all Asia-Pacific countries (2018).
Data analysed by Davies and Nettuno found women who have ‘more educated’ husbands are 7% more likely to be financially included. However, the reverse is not true; “women are listening to their husbands, but it looks like men aren’t listening to their wives,” they observed.
Men are 12% more likely to be financially included they found, and that “English speaking is very important”, noting that it is taught in primary schools.
They suggested continued investment in better roads, that financial institutions be encouraged to set up in more remote locations, and that mobile banking be explored further as an option.
Inflation
The war in Ukraine, import inflation (food and fuel) and the pandemic has seen overall inflation rise to 7.3% in PNG.
In response, the Bank of PNG has tightened monetary policy by increasing the Kina Facility Rate (KFR) by 0.25% to 3.25% (July 2022).
BSP expects these prices to remain high all year “as global recession fears affecting fuel, energy and logistic costs globally.” Increased commodity prices should help PNG respond to these inflationary pressures.
At this month’s Business Advantage Investment Conference, PNG’s High Commissioner to Australia, John Mali, said investor confidence would be rebuilt through “transparent processes in business entry, work permits, visa reforms with stable policy and operating environments, business processes improvements, important infrastructure, energy sustainability and security improvement in the environment and willingness to consult with the private sector.”
Mali said the Marape government was especially seeking new foreign direct investment in infrastructure and downstream processing in agriculture, fisheries, forestry and tourism.
Marape told parliament this month he wants PNG to become the richest black Christian nation on earth, a mantra he repeated often during his first term in office, continuing that some 52 years after political independence, he wanted the current generation of leaders to deliver economic independence to PNG.
