Lasting improvements in prosperity require smart spending and business-friendly reforms: World Bank Group
PORT MORESBY, December 20, 2012 – As a decade of strong economic growth comes to an end, Papua New Guinea’s policy makers face new challenges to achieve lasting improvements in living standards, World Bank economists said at a seminar hosted by the Business Council of PNG yesterday.
The World Bank recommended continued efforts to reduce costs of regulation; to support a dynamic private sector, and to ensure government authorities continue to translate public funds into effective goods and services.
Economists said that this would help PNG meet its long-term employment and service delivery priorities for the years ahead, even in the face of returning economic pressures.
“Papua New Guinea has enjoyed almost 10 years’ strong, good quality economic growth but there are challenges on the horizon,” says Laura Bailey, World Bank country manager for PNG.
“Ensuring the public sector is at its most effective and accountable will be key to ensuring the Government can continue to meet the needs of its people.”
In its latest Economic Update, released yesterday, the World Bank found that PNG's economic growth in 2012 remained high at about 8%.
However this was around 1% slower than in 2011, attributed to the stronger Kina and weakening international commodity prices, which led to lower-than-expected rural incomes and government revenue.
The report also predicts PNG’s growth will slow markedly in 2013 and 2014.
It says that financing spending priorities in future years will become more difficult because of slower, more heavily resource-driven economic growth, weaker public revenues, and fewer new resources investments in the pipeline.
“The government is looking to broaden and extend the boom to meet a pressing human development agenda,” said Tim Bulman, World Bank country economist for PNG.
“Despite the projected slowdown, smart investments today will help build on PNG’s many successes in recent years - notably in achieving broadly-based growth that has benefitted more sectors of the economy.”
Spending commitments are likely to intensify as the government works to address key development challenges, economists said, including poor access to nutrition for many children, high maternal mortality and a significant exposure to violence.
It also has goals of improving literacy and access to schools for younger Papua New Guineans, and of increasing access to finance through emerging technologies such as mobile banking.
“Continuing vital regulatory reforms will be critical to reduce costs and save time for local businesses, a key long-term driver of jobs and the economy,” said Jonathon Kirkby, senior investment policy officer for the International Finance Corporation.
“These reforms can be the most effective means of providing a supportive environment for PNG’s businesses to grow and develop and ensure Papua New Guineans can benefit from competitive markets.”
Ongoing construction of the PNG LNG (liquefied natural gas) project, its various spin-off private sector investments, and pre-election government spending were the key drivers of PNG's economic growth.
Although production from PNG LNG will contribute to headline growth, the non-mineral economy will slow as construction of the project finalises, and less money comes to rural areas from cash crop production.