Papua New Guinea could become the next resources boom state, with a new study revealing the potential for export revenues to swell six-fold by 2030 to U.S.$38 billion a year.
According to a report by Port Jackson Partners commissioned by ANZ Bank, the island nation of 7 million people could benefit from U.S. $130 billion worth of resource-related capital investment through to the end of the next decade, creating more than 100,000 new jobs in mining, energy and support services.
For a country with nominal gross domestic product of an estimated U.S. $15 billion in 2012 and with nearly 40 percent of households living below the poverty line, the boost to national wealth could be considerable.
In a speech Monday to the Port Moresby Chamber of Commerce and Industry, ANZ chief executive Mike Smith said “modest gains” in market shares for key commodities such as copper, gold and gas would deliver major growth in revenues.
“…Even on more conservative assumptions, [the report] suggests that annual revenues from resources could reach U.S. $25 billion by 2030 – more than four times current levels,” he said.
Like Australia, Smith said Papua New Guinea could benefit from the continued urbanization and industrialization of Asia, with the prosperity of both nations “underpinned by a super cycle in mining and energy, and increasingly in agriculture.”
“I believe agriculture has the potential to be the next sector in PNG to experience significant Asia-led growth. Here there is enormous up-side in commodities like palm oil and coffee; an up-side that will also require significant investment which could in-turn create a new wave of additional jobs in rural communities.”
The head of the Australian-based bank warned, however, that the country faced competition from other investment destinations, with a need to share the resources boom’s benefits across sectors, upgrade infrastructure and increase productivity to maintain competitiveness.
O’Neill: Political stability essential
Smith’s comments were welcomed by PNG Prime Minister Peter O’Neill, who said they reflected “the policies my government has outlined as priorities for 2013”.
"The report commissioned by the ANZ highlights the enormous potential of our resource sector. Our challenge is to develop it responsibly, ensuring the benefits are shared, and ensuring the revenue inflows from resource development are responsibly managed,” he said in a statement.
O’Neill also used the remarks to bolster his case for political stability, after a standoff with past leader Sir Michael Somare that only ended with the July 2012 elections.
"Every major investor I meet also stresses the need for political stability. That is why my government is absolutely committed to the constitutional change to ensure the Prime Minister chosen after a national election cannot face a no confidence vote in the first half of the five year life of the National Parliament,” he said.
‘A lot can go wrong’
While the bullish forecasts may excite many, PNG watcher Blair Price, editor of the PNG Report, told The Diplomat that resources and not agriculture held the prospects for the greatest gains.
“I won’t comment on the estimates up to 2030 – ‘potentially’ a lot can go wrong quite fast in PNG. In my view the big opportunities come from gas and condensate developments which can build upon the PNG LNG project infrastructure. That includes additional trains for this project and the possibility that other gas finds can hook into this infrastructure for easier commercialization,” he said.
“The further copper-gold potential of PNG should not be overlooked either. Already the Wafi-Golpu and Yandera projects are world-class and the exploration potential at Bougainville is not well publicized – when that mine does reopen there will be huge opportunities if they are managed correctly.
“As for agricultural development, I think ANZ is being too optimistic. PNG is already facing stiff competition from Indonesia in oil palm and many parts of the country still have food production and drinkable water issues despite meters of annual rainfall and fertile soil. Then there is the dire lack of infrastructure to consider.”
According to the International Monetary Fund, Papua New Guinea has achieved buoyant economic growth averaging over 6 percent a year since 2007 on the back of strong commodity prices and macroeconomic stability, with growth estimated at 9 percent in 2012.
Ensuring the boom continues while avoiding the so-called Dutch disease will be the challenge for policymakers, as one of the region’s poorest nations suddenly finds itself among the emerging resources rich.