PNG is facillitating foreign investment. Fear not the Duma or license expiration fears perpetuated by those claiming PNG will act opposed to it's own best interest.

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Papua New Guinea: Bold Thinking Needed to Harness Asia’s Growth

From the remote copper mines high in the mountains of Papua New Guinea, the gleaming new skyscrapers of Asia’s increasingly rich cities seem nearly a world away. But Papua New Guinea (PNG), with its significant natural endowments of minerals, energy and fertile land, has a historic opportunity to harness itself to the region’s growth.

Demand from Asia is surging for the resources the country already produces in large quantities, such as copper, gold and natural gas. Beyond that, Asia’s growing demand for food – and the potential for PNG to readily produce it – can assist in creating more balanced longer-term economic outcomes.

In a major new report from ANZ on PNG’s economic future, the size of this opportunity has been quantified for the first time.

Estimates show that by 2030 the country could expand its exports of natural resources by four to six times or as much as US$36 billion per annum, if it can attract up to US$170 billion in capital investment. This growth will have broader benefits through the creation of a skilled workforce, cross-sector infrastructure, and opportunities for local entrepreneurs to serve resource projects and their supporting communities.

With half of global growth in demand for food to come from Asia over the next 20 years, the soft commodities sector has a similar opportunity. The Papua New Guinea government has already set ambitious targets for soft commodities, particularly for palm oil, coffee and cocoa that aim to see exports reach US$3.5 billion by 2030, a five-fold increase from their 2010 level.

The scale of the opportunity provides a frame to re-imagine PNG’s future in the Asian Century and it highlights the need for government, business and the community to prioritise a new national development conversation.

The importance of understanding the size of the prize is that the challenges in realising this vision for PNG are many and can at times seem insurmountable.

At a high level, PNG must use the success of the world-scale US$20 billion PNG-LNG project to build further investor confidence by converting its current resource pipeline into real projects. At the same time, an environment needs to be created that will ensure balanced economic development with the critical sectors of resources, infrastructure and agriculture all playing their role in a national response to the Asian opportunity.

If there is a key message I see in this report, it’s that mobilising foreign capital will be critical to realising the opportunity that Asia’s growth is creating in PNG. Capital goes where there is stability and certainty, and if Papua New Guinea can consistently demonstrate this, the potential is enormous.

I’m incredibly optimistic about PNG though because the Asian Century creates a unique opportunity for the country to see itself in a very different way. It can’t erase the frustrations of the challenging post-Independence period but there is now a very clear reward for bold thinking and bold action.

PNG’s development trajectory is in its own hands. Now is the time to begin a long-term national conversation about clear and obvious issues. If the country can create an attractive and sought-after place for investors to do business, its economy and civil society will flourish, to the benefit of the people of Papua New Guinea.

Asia's economic surge is creating an incredible opportunity for Papua New Guinea's resources and agribusiness, according to ANZ.

A report launched in Port Moresby today, commissioned by the bank, projects that PNG could earn $437 billion by 2030 from such exports.

But it can achieve such revenues only if it can first attract and implement $119bn in capital investment, chiefly in infrastructure.

If PNG can't land any major new projects after the ExxonMobil-managed $19bn liquefied natural gas plant begins operations in January, and after the Ok Tedi copper-gold mine completes an extension, then the country's export revenues would peak in three years, and would earn only $163bn by 2030.

The report, prepared by Port Jackson Partners, is being launched at the Port Moresby Chamber of Commerce, whose executive director, Dave Conn, said yesterday it was vital for the government to enlist the private sector, as well as non-governmental organisations and churches, in building and maintaining the infrastructure PNG needs to realise its potential.

Funding will have to come mainly from global capital markets, the report says.

Even its "central case" for PNG growth opportunities would require, by 2030, investment in infrastructure almost three times the size of the Port Moresby Stock Exchange capitalisation.

The government has been able to deliver only 30 per cent of its 2013 development budget so far.

The report, Conn said, "states a lot of things we have been saying for a long, long time. I just hope that it proves a catalyst for unlocking these issues.

That depends on how it is received by government." He said that the business community would like to see the report feed into a national conversation - not only a political conversation - about PNG's direction.

The chamber will participate in a roadshow, planned with the government, that is intended to familiarise business audiences in several Asian capitals with investment opportunities in PNG.

The report views the resources sector as having a pre-eminent initial role in generating the wealth needed to invest in infrastructure, and thus support agricultural development that alone can offer the jobs the country needs -- including in coffee, cocoa and palm oil, and in tuna, of which PNG has the largest stock in the world.

The country's annual renewable water supply is almost five times, per head, that of Australia, but only 3 per cent of cultivated land is being used for cash crops.

Half the global growth in food demand is now coming from Asia - but almost all of PNG's food exports go to Europe and the US, in part because of preferential access.

“Most high-growth countries develop and rely on multiple sectors at once,” the report says. This is especially important for PNG, whose population of seven million is expanding so fast that it will exceed Australia's population by mid-century.

“Balanced growth is needed across resources, infrastructure and agriculture,” the report says.

Sovereign risks, it warns, arise when governments change tax or operating rules. And recently the PNG government has nationalised the Ok Tedi mine and has barred blue-chip Malaysian agribusiness Kulim from extending its stake in New Britain Palm Oil, PNG's leading rural corporation, from 48 per cent to 68 per cent for about $250 million.

At present, the report says, resources sector investors rank PNG's potential at just 73rd globally. But it jumps to third, behind Canada's Yukon and Mongolia, if land-use restrictions are relaxed and best-practice policies are introduced.

Infrastructure is crucial, the report says. Port turnaround times are three times those in Australia, and container export costs much higher. International travel to key Asian destinations can be 10 times the cost from Australia.

Only 12 per cent of households have access to power. And only 2.3 per cent of the population has internet access. These challenges are linked, the report says, to state-owned enterprise performance. The four largest SOEs are returning 1.7 per cent on their asset base despite high user charges.

The report says that “PNG has a history of reliance on government at all levels. Thinking boldly will help to imagine a different PNG, where private businesses play the dynamic, nation-building roles they do elsewhere in the Asian region.”.