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.
