3 Aug 2018
Papua New Guinea: Market Profile
Major Economic Indicators
- Papua New Guinea is an island country located in the north of Australia and the southwest of Pacific Ocean. It encompasses the eastern half of the island of New Guinea and many outlying islands including New Ireland, New Britain and Bougainville. Situated along the Pacific Ring of Fire, the country has several volcanoes and is prone to earthquakes and tsunamis.
- The country is a former Australian colony for almost 70 years and it gained its full independence in 1975. It has become a constitutional monarchy under the British Commonwealth. With only 8.3 million population, there are almost 850 indigenous languages spoken, making it the world’s most linguistically diverse country. Thanks to its topography with mountains and jungles, it keeps the populations isolated and makes it easier for them to preserve their unique languages. Papua New Guinea adopted four official languages which include English, Hiri Motou, Tok Pisin and Sign Language.
- Despite Papua New Guinea’s priority in achieving universal primary education, schooling is still not free nor compulsory. Only half of the children who begin primary school completed the whole six years and only 25% of them pursued secondary education.
- With over 80% of the population lives in the rural area, agriculture is the major economic activity which provides livelihood for Papuan. High level of seasonal rainfall with a moderate tropical climate provides favourable farming environment. The country mainly produces cash crops such as coffee and cocoa, with half of the labour force involving in production, processing and exports.
- Due to the mountainous landscape, only 25% of the land is suitable for farming, which leads to the needs of sustainable agriculture in the country. The World Bank launched the Productive Partnerships in Agriculture Project (PPAP) in 2014, aiming to teach cash crop growers the correct farming techniques to protect the environment as well as building connections between local farmers and agribusiness, making farming more sustainable and economical.
- While agricultural sector accounts for majority of the labour force, minerals and energy sector contributes the most in terms of exports. Mineral fuels such as petroleum and crude oil accounted for 45% of total exports in 2017. The Department of Petroleum and Energy (DPE) is responsible for the country’s policies and planning on the energy sector.
- Being Australia’s closest neighbour, Papua New Guinea concluded a Free Trade Agreement with Australia back in 1977. In 2007, it entered the Pacific Island Countries Trade Agreement with other 11 island countries including Cook Islands, Soloman Islands and Vanuatu. It also signed an Economic Partnership Agreement with the EU and Fiji in 2009, aiming to reduce barriers in goods trade.
- China and Papua New Guinea have come to agreement to advance talks for establishing a Free Trade Agreement (FTA). A joint feasibility study will be undertaken to analyse the potential benefits and challenges of a potential China-Papua New Guinea FTA.
- Australia used to be the largest aid provider to Papua New Guinea but in recent years, China has significantly increased its aid spending to the country’s infrastructure, including a new convention centre, six-lane driveways and other transport network projects. China has also signed up Papua New Guinea to its Belt and Road Initiative (BRI) program, which is the only Pacific region country to take part in BRI, paving the way for more Chinese infrastructure development in the island country.
- Cumulative FDI stock in Papua New Guinea has remained at a level above US$4 billion since 2011 and amounted US$4.2 billion in 2016. China’s FDI reached US$1.9 billion in 2016, a fourfold increase from 2014.