Paul Barker, Executive Director, Institute of National Affairs: Interview

Interview: Paul Barker

What kind of impact do foreign investments have in terms of economic development?

PAUL BARKER: Australia is a traditional source of trade, investment and donor money for Papua New Guinea. Multilateral organisations like the Asian Development Bank and the World Bank have also been strong partners. In recent years, however, China has played an increasingly important role, entering the market quickly and securing many contracts and projects. A number of China’s state-owned enterprises and private companies have established branches in countries like PNG, providing new opportunities. However, the benefits for these countries are mixed. Chinese companies have made it easy and attractive for governments to commit to large and expensive construction projects. Moreover, despite being quicker to start projects than PNG’s traditional partners and sources of funding, some Chinese companies have been doing a substandard job. China’s fast rise in this region has led to concern among a number of PNG’s partners, encouraging Australia and the US to pursue more proactive engagement.

To what extent are investors hindered by landownership conflicts and a lack of information?

BARKER: The majority of land in PNG is under customary ownership. It is not always clear who owns the land, which can result in conflicting claims and even land grabbing. Only 2-3% of land is owned by the state. Systems for the buying and transferring of land must be implemented transparently, and public land needs to be administered in an accountable manner.

Information is critical: all public land needs to be properly digitised and records must be made accessible online in order to prevent the copying and illegal reselling of titles. Customary land transactions require free, prior and informal consent. There is a lot of fraud going on, so transparency is important for tracking processes and protecting landowners, leasers and buyers. It is important to start with new peri-urban areas that have fast-growing populations, as a lot of land in these neighbourhoods is sold by people who do not necessarily have the rights to do so. Special Agriculture and Business Leases and forest conversion agreements experience the same issues, which can result in disenfranchised communities. We must simplify processes while making it more difficult for individuals to go through the back door. Formalising the market is the only way to solve this problem.

How do you evaluate PNG’s economic outlook in the short to medium term?

BARKER: The growth rate has been consistently low since 2016, and revenue and foreign exchange reserves are tight, while debt levels and the deficit are growing. The new government has major challenges but also much public support to deliver needed reforms. The employment growth rate has also been stagnant, but there are few reliable statistics available to allow us to accurately analyse the situation. Although the National Statistical Office has updated GDP data, the Treasury has not yet integrated the results into their own statistics. In addition, while there is a national census coming up in 2021, for now we do not know the rate of population growth – though it is estimated to be around 3.1%. Lacklustre economic growth rates, therefore, cause us to go backwards when it comes to per capita GDP and job creation. Debt levels have also risen. Initially, this debt was domestic, but due to sovereign bonds and other borrowing it is now international.

The question is where revenue and foreign exchange will come from. The liquefied natural gas (LNG) project, Papua LNG, will provide positive stimulus during construction, but this is still a long time away. Meanwhile, revenue from current resource projects remains limited. Though the high expectations from past endeavours have not always been met, the government knows that even in challenging times a project like PNG LNG has the potential to be very beneficial for shareholders.