Introduction

Papua New Guinea (PNG) celebrated its first 25 years of independence from Australia on 15^th September 2000. There were those who believed there was little to celebrate, as the government led by Sir Mekere Morauta struggled to restore governance after the near collapse of the main institutions of public life during the premiership of Bill Skate (July 1997 to July 1999). A World Bank report (2000b) had commented early in 2000 that “the country has experienced an almost complete failure of governance”, while a leading business journal described the country as “the business environment from hell, [with] interest rates at 23 per cent, inflation 14 per cent, unemployment 36 per cent, corruption endemic, only a third of children at primary school, only half the population literate…[and] top of the world in violent crime” (Callick, 2000). 

This paper’s update of APEL’s previous review of the PNG economy (Duncan and Temu 1995) offers a more balanced account of what are nevertheless disappointing outcomes. The paper concludes thatsuccessive governments’ failure to address land reform could well explain why their fiscal and monetary policies have limited the second round, “multiplier”, creation of wealth that should have resulted from the country’s strong export performance.[1]

Tim Curtin was formerly a consultant in PNG’s Treasury from1988 to 1999, and is currently a special adviser to the PNG Government in its negotiations with Bougainville.

Socio-economic environment

Within three years of the closure of the Panguna copper mine in 1989, which had been PNG’s largest single exporter, new gold mines at Misima, Porgera, and the oilfields around Lake Kutubu (in Milne Bay, Enga, and Southern Highlands respectively) more than replaced its contribution, together with expanded copper output from Ok Tedi (Western Province) and since 1997, the Lihir gold mine (in New Ireland). Total exports rose from US$1.5 billion in 1988, the last full year of production at Panguna, to US$2 billion in 2000, despite the large fall in the price of gold since 1997, that having been the country’s most valuable export commodity as recently as 1995. 

Prospects for the mineral sector for the next 10 years are of steady decline, as old mines close (Misima in 2001, Porgera, Ok Tedi) and output from the oil fields drops from the peak of 46 million barrels in 1994 to less than 10 million in 2010. Land disputes threaten to delay indefinitely Chevron’s project to export natural gas to Queensland from PNG’s large unexploited gas reserves.

Exports of US$2 billion a year amount to US$435 per head of the population, and account for half of current GNP per head. Various observers have pointed out that this export performance has not flowed through to the rest of the economy, describing the mineral project areas as mere enclaves. There may be some justice in this comment, not least because all the mineral areas have been distant from the main population centers and from each other, so there has been no scope for shared infrastructure such as power and transport. However there is no doubt that Port Moresby has benefited as a service centre for legal and financial services to the mineral industry, although to a declining extent since the capital’s law and order problems have led to an exodus of technical and administrative staff to Cairns and Brisbane (see Levantis 2000, 2001b for fuller discussions of the impact of law and order on business development in Papua New Guinea).[2]

Employment

Such factors may explain the discrepancy between wage employment in 1990 reported by the 1990 Census and the level of employment implied by applying the BPNG index to enumerated private sector employment in 1982. The BPNG index implies the latter to have been 139,500 in 1990, well below the 185,000 indicated by the Census estimate for total wage employment of 240,763 and the known level of public sector employment of 55,452 (McGavin 1997, table 2.3).

Despite PNG’s apparently poor job creation record, Fig. 1 shows how some sectors have grown rapidly over the last 11 years, notably mining (52.7 per cent to June 2000), manufacturing (33.4), and finance (36, down from 50 per cent in 1999), and community services (mainly due to a doubling in the number of teachers). These increases may be partly a response to the changes in the policy environment, but the growth of the services sectors is in line with similar trends worldwide.

The evident slow growth of wage employment is reflected in the remarkable decline in the share of compensation of employees in GDP, from 38.6 per cent in 1984 to 22.28 per cent in 1998 (Fig.4), one of the lowest shares in any country worldwide. That is naturally matched by the corresponding large increase in the share of gross operating surplus in GDP, from 44 per cent in 1984 to 62 per cent in 1998, with part of this increase due to minor falls in the shares of depreciation and net indirect taxes. Much of the increased share of profits is no doubt accounted for by the mineral sector, especially oil after the Kutubu project began production in 1992. But this enormous rise in the share of profits in GDP has not been matched by a rising contribution to government revenue. 

Indeed, contrary to the expectation of Duncan and Temu that the mineral sector, which provided 20 per cent of government revenue in 1989, could produce more than 35 per cent by 1999 (p.49), in the event it produced only 12 and 16 per cent of total non-aid revenue in 1999 and 2000 respectively (see Table 3). Although non-mining companies paid nearly as much in corporate taxes as the mineral companies in 1999, the total contribution of company taxation to government revenue was 24 per cent, less than half the profits share of GDP. Evidently the growth of profits has not expanded the narrow tax base noted by Duncan and Temu (p.41), in part because of the low company tax rate of 25 per cent (except for mining 35 per cent until 2001 and petroleum 50 per cent).

Social indicators

Despite the slow growth of the monetary economy implied by the wage employment index, and the perverse falling contribution of profits to general taxation, there has been continuation of the “significant progress in social development” reported by Duncan and Temu (p.37). Although infant mortality remains too high for comfort, life expectancy has improved (see Table 1). Duncan and Temu noted (Table 1) that in 1995 PNG’s health and education indicators did not compare well with performance in East Asia and the World Bank’s lower middle-income countries – but the latter are hardly valid comparators with a country whose nominal exchange rate has been consistently over-valued, exaggerating its GDP in US dollar terms, and whose colonial rulers uniquely provided no public education or health services for its indigenous population before 1946. Table 1 here compares PNG with its peers in the low-income group of countries. 

Education

The 1990 Census showed that 232,000 children aged 10-14 out of 436,645 in that age-group were at school, or 53 per cent. On paper this had improved to at least 87 per cent in 1998, for then there were 668,000 children enrolled in elementary and primary schools, while the 1990 Census showed that there were then 763,873 in the 0-6 age-group who would have been aged 8-14 in 1998 (had none died). Allowing for mortality at about one per cent p.a. reduces the extant age-group in 1998 to 704,000, implying about 95 per cent enrolment of that age-group in 1998, an as yet unnoticed but considerable achievement, and also an indication that the large budget allocations to education since the beginning of the 1990s are having an impact – education accounted for as much as 17 per cent of the national budget in 1998, very high by world standards (World Bank, 1998). However drop-outs remain a problem, especially when parents cannot afford fees, rising from over K100 per child at the primary level to K300 at secondary.

The 1990 Census also showed that only about half the population aged over 10 was receiving or had obtained some schooling, and was therefore potentially literate. But the rapid growth of enrolments since 1990, and the likely demise of many of the older illiterate members of the population, explains the reduction in illiteracy to 27 per cent (Table 1) - still high, but significantly less than Callick’s 50 per cent. 

Comparison of the 1980 and 1990 Census data on the educational status of employed workers showed that it was those with at last some post-primary schooling that much more easily found jobs than those with only primary schooling, who fared little better than those with none (Curtin 1996). This finding was supported by data in a World Bank study (Ahuja 1998) showing that the majority of the poor in five S.E. Asian countries including PNG were those with only primary schooling, whilst hardly any of those with at least some secondary schooling were to be found amongst the poor. Moreover post-primary education has demonstrably been more effective than primary in raising awareness of health (e.g. Aids) and maternal care issues in PNG’s female population (Curtin and Nelson 1999).

Land

The difficulties created by the lack of certificated land title in both the mining and forestry sectors have been well described by the contributors to Toft (1997) and Larmour (1997). For example, Filer (1997) and Duncan and Duncan (1997) show how compensation paid for supposed losses incurred by putative landowners in mining areas have progressed to become in effect land rentals unrelated to the losses. Had there been formal tenure at the outset, sales or rental agreements could have been negotiated. In their absence, “compensation” claims become an on-going saga that is no doubt a powerful deterrent to investors in all but the most lucrative prospects. But the main issue is the inability of so-called landowners to mobilise bank credit in the absence of certificated title. A telling example is the decision by the landowners in the Porgera mining area to acquire real estate in the form of two tower blocks in Port Moresby, where leasehold title is available, rather than investing more in their home areas.

Jones and McGavin (2000) described how difficult it is even for those Papua New Guineans who do seek to register their land ownership to surmount the bureaucratic obstacles and sheer inertia that stand in their way. Their study calls to mind the similar work by de Soto (2000) in Peru, Haiti, and Egypt, where a normal lifetime may well not be long enough to achieve registration of title. Yet as de Soto suggests, the land rights of the peasantry as much in a country like PNG as elsewhere are worth much more – if they could only be mobilised as collateral - than the total aid receipts the country has ever received. A first step would be to adopt the proposal by Trebilcock and Knetsch (1981) for establishment of an autonomous Land Management Agency.

Political Developments

The general elections in 1997 continued the patterns whereby only a small minority of MPs was elected with more than 50 per cent of votes cast; most seats were contested by large numbers of candidates, and many MPs won with as little as 15 per cent of the votes. Sir Julius Chan was the first incumbent prime minister to lose his seat at an election, but his party continued to be in government until late in 2000. His successor Bill Skate was only the second prime minister to take office after a general election, and in 1999 became the fifth to lose office on the floor of Parliament rather than after an election, when most of his supporters deserted to join the grouping put together by his Minister of Planning, Sir Mekere Morauta. 

Against this background of a virtual absence of party-based politics, the Morauta government succeeded in November 2000 in amending the Constitution with the Integrity of Political Parties Act. This Act seeks to limit the freedom of MPs to change parties and to leave/join the government/opposition groups in Parliament. It also provides for a degree of state funding of parties, and for party office-holders not to be eligible for top-level employment in statutory and other public bodies. But the most significant clauses in the Act are those providing that after future elections it will be the leader of the largest party who becomes prime minister, unlike the present system whereby the prime minister is elected on the floor of the house. The new system would rule out Bill Skate, who became prime minister in 1997 even though his party won only 6 seats.

Duncan and Temu identified a number of areas where the provincial government system that PNG adopted in 1977 had weaknesses (p.39).A major reform of the system was enacted in 1995. The new system abolished provincial parliaments with their own elected governments, and replaced them with assemblies consisting of ex officio members including the nationally elected MPs in each respective province, and with premiers replaced by governors, normally each province’s “regional” MP, elected by the province as a whole (all other MPs are elected on a constituency basis). 

The limited financial autonomy of the old system whereby certain provinces had their own revenue raising powers and could use them to fund their functions independently of the central government was also modified in 1995. The main source of funding of provincial governments (and local councils) is now a range of block grants from the national government, apart from a share (30 per cent) of the national value added tax introduced in 1999. Centralisation of funding and decentralisation of spending led to a notable loss of expenditure control, exemplified by the collapse of rural health services.

The fundamental defect of the reduced fiscal autonomy of provincial governments since 1995 is the separation of taxing and spending powers. Whilst common enough in federations like Australia, the experience in PNG before 1995 was that the 8 provinces granted power to levy taxes managed their spending functions better than the 11 that were wholly financed by the central government (Axline 1986).

The establishment of provincial governments in 1977 had been a response to moves to secession from PNG by the North Solomons Province, now known as Bougainville. Opposition to the continued operation of the copper mine at Panguna was combined with a new thrust for secession in 1989. The national government’s forces were expelled and there was an internal civil war. Negotiations to reintegrate Bougainville into PNG with a high degree of political and financial autonomy have been in progress since 1997, with particular emphasis on allowing the autonomous government to levy its own personal income and excise taxes and to retain a proportion of national taxes (company, customs, VAT) collected in Bougainville to enable it to be fiscally self-supporting. It is possible that the final model if adopted could be extended in time to the other 18 provinces, completing the move to a federal system that was partially contemplated in 1977 but reversed in 1995.

Duncan and Temu described how because of its dependence on primary commodity exports, PNG experiences marked boom-bust cycles with strong GDP growth in some years followed in other years by nearly as large falls (p.36).That pattern has continued since 1995, with first a period of falling world oil prices until late in 1999, and then a rapid surge in 2000 and 2001 to the highest recorded levels since PNG’s oil production began in 1992. The world gold price also fell markedly after 1996 and at time of writing remains $120 an ounce below the US$380 level on which the feasibility of the Lihir gold mine was predicated in 1995. 

The East Asian financial crisis in 1997 led to a sharp fall in prices of logs and palm oil, PNG’s most valuable non-mineral exports in 1994. In addition PNG experienced a devastating drought in 1997 that ravaged food and cash crop production in the highlands and other areas as well as halting production of copper and gold at Ok Tedi and Porgera. The combination of falling prices of logs, palm oil, gold, and oil, and the drought-induced falls in production of these commodities in 1997 and 1998 certainly created a classic exogenous-shock bust, initiating a recession in 1998 from which as yet there are few signs of recovery, despite higher crude oil prices since 1999.

Duncan and Temu commented that although PNG had applied “generally sensible policies” to the minerals sector, and that “its macroeconomic policy adjustments work extremely well by comparison to [those of] most other developing countries” facing boom and bust resource exports, “the rest of the economy presents a mostly depressing picture within a policy framework that seems to include most of the worst kinds of rules and regulations” (p.36). These judgments largely remain valid, although the macroeconomic response to the drought-induced mineral and coffee exports slump in 1997 was poorly handled. There has been some progress in dismantling a few price controls and restrictions on foreign investment, but there is no justification for the remaining controls. The use of price control to delay changes in energy prices and airfares to reflect the near tripling of fuel costs in 1999-2000 has been almost as disastrous for the electricity commission and airlines in PNG as for the power utilities in California in 2001.

For most of the period covered by Duncan and Temu, PNG maintained a fixed exchange rate, with administered appreciations in the later 1970s followed by two limited realignments in 1982 and 1990. In August 1994 the Kina was still nominally worth more in terms of the Australian dollar than at independence in 1975. Duncan and Temu (p.44) attributed the enforced devaluation in September 1994 to fiscal laxity over the previous decade, but capital flows had also been adversely affected – in both directions - by the then Government’s compulsory purchase of an extra 15 per cent share in the Porgera Gold Mine Joint Venture in 1993 and its threats to take similar action with the new Lihir gold mine in 1994. These threats delayed the startup of construction of that mine until late 1995 – and did nothing to sustain overseas investors’ confidence in PNG. 

Garnaut (1995) concluded that the objectives of the hard (fixed) Kina regime had been achieved into the 1990s, despite some fiscal relaxation after 1985, in terms of currency convertibility, low inflation, and low interest rates. Equally there is no doubt that the floating of the Kina has since 1994 been associated with high inflation and high interest rates. These have resulted partly from the actual increase in currency convertibility that followed on the floating of the Kina and facilitated capital outflows. The authorities’ administered increases in interest rates were aimed at stemming the capital outflows that had led to the declines in the nominal exchange rate, but those declines raised import prices and the CPI, both accommodated by the enlarged money supply arising from the increase in the Kina value of exports, and leading to further depreciation of the Kina, yet higher Kina values of exports and imports, and a new round of increases in the money supply and the CPI. The inflationary spiral depicted here in Fig. 6 is typical of countries like Indonesia that since 1997 have failed to establish price stability after floating their currencies – and explains the faster depreciation of PNG’s nominal than its real exchange rate (Fig.5). 

Garnaut (1983 and 1995) emphasised what he saw as the difficulties created for macroeconomic policy by the indexation of minimum wages after 1975. Indexation ended in 1992, so wage inflation cannot be blamed for the failure to achieve macroeconomic stability since then. On the contrary, wages have not merely failed to keep pace with prices since 1992, but, for all except the top quintile of employees, have fallen far behind (see Table 2 for average nominal and real wages by quintiles). This failure of nominal wages to keep pace with prices is consistent with the fall in the share of employee compensation in GDP noted above.

Levantis (2000) argues that de-indexation and the reduction in the urban minimum wage to parity with the rural did lead to increases in wage employment, despite the official index showing virtually no growth in private sector employment since 1989. An alternative explanation for the apparent correlations of wage indexation with both rising employment between 1975 and 1992, and of de-indexation with stagnant employment since 1992 could be that indexation’s macro-economic effect was to protect the purchasing power that has collapsed since 1993. 

All data on actual wages received by the labour force shows that except in the rural plantation sector, the majority of even the lowest paid workers have always, both before and after de-indexation, earned more than the statutory minimum wage. Thus Garnaut (with Curtain and Wright, 1977) showed how as early as the mid-1970s, urban employment in PNG was dominated by those with at least some education. This pattern was confirmed by McGavin’s data (1988) for urban employment in the mid-1980s, showing nil employees earning only the minimum wage, and again by Levantis (2000, p.81), who showed that unskilled employment was concentrated in the rural sector. Similarly, when the urban minimum wage was reduced to the rural in 1992, most urban employers continued to pay much more than the new minimum, if only because that was barely enough to cover bus fares let alone costs of food and accommodation. Thus as noted below (see also Levantis, 1997), the great majority of wage-earners is paid substantially more than the current national minimum wage of K22.96 per week – and even the proposal by the Minimum Wage Board in 2000 to restore the minimum wage to the 1992 level of K60 per week would not do more than ratify actual wage levels received by the lowest paid in urban areas.

In effect the reduction in the urban minimum wage in 1992 from K61.78 per week to K22.96 took it below the “reserve price” of labour, when that includes proceeds of crime, as suggested by Levantis, whose surveys of 1995 and 1998 also found that less than 5 per cent of urban workers were aged 20 or under (2000, p.68). However Levantis’ and his predecessors’ analyses suffer from the lack of adequate aggregate time series data on employment in PNG - samples and surveys allow no firm conclusions as to the overall trend.

Macroeconomic perfomance since 1995

PNG achieved an annual average increase in its real GDP between 1974/5 and 2000 of 3.23 per cent p.a., but the rise in the population growth rate to over 3 per cent p.a. since 1990 has eroded the gains in GDP per head to less than one per cent p.a., from K610 in 1975 to K727 in 2000, an absolute increase of K117 or 19 per cent.[5]The per capita increase would have been greater if population growth had been less – and that growth belies some commentators’ claims of worsening socio-economic indicators like infant mortality rates.

The deflators used to arrive at the constant-price series have not been re-based since 1977, and by 1990 there were significant changes in the composition of household purchases which according to Gibson would have reduced annual inflation to 1990 by as much as one per cent (1995, p.36). Using Gibson’s weights and the sectoral CPI (BPNG, 2000), the all-groups CPI would have been 5 per cent lower in September 1999, and the data for real GDP in 2000 in Fig.2 would then be understated. 

Revised estimates of GDP for the period from 1993 to 1998 have been issued using (unlike the BPNG and Treasury series) the 1968 United Nations system of National Accounts (BPNG, 2000). As the IMF (2000, p.4) has noted, the new series differs considerably in some years from the previous estimates, showing a contraction rather than the surprising – given the continuing effects of the severe drought in 1997 - one per cent growth in 1998 of the latter (Treasury, 1999, Appendix 2). 

The salient trends evident in the new data on gross national expenditure are the increase in the share of private consumption, from 56 per cent in 1984 to 63 per cent in 1998, at current prices, and 60 per cent in 1983 prices (see Fig.3).In current prices government consumption fell from 20.5 per cent in 1984 to 18.8 in 1998; in constant prices there was a small increase, to 21.5 per cent. The inevitable counterpart of these trends is the fall in the share of gross fixed capital formation, from 21 per cent in 1984 to 13.9 in 1998 at current prices, and 13.7 in real. Changes in stocks, which increased, account for the balance, an indication of the recession that resulted from the drought in 1997. This fall in investment matches the net outflow of foreign capital that is evident in the balance of payments since 1994 – and must raise doubts about the ability of PNG to maintain even its subdued growth between 1975 and 2000.

However the new GDP data more encouragingly show an increase in the share of exports, from 39.6 per cent in 1984 to 50 in current prices in 1998 (real 37.7 to 43.5). The share of imports fell, from over 53 per cent in 1984 to 45.5 in 1998 (real 52.9 to 33.9). Given that 1998 was not a good year for oil exports, because of low prices, these trends suggest that despite all the failures in other areas of policy, there has been structural change since the collapse of the hard Kina in 1994, with the falling share of imports implying response to the fall in the nominal exchange rate after 1994. 

The increase in the share of exports also suggests that the Kina’s nominal depreciation since 1994 has been successful in mitigating the Dutch disease effect of the former deliberately over-valued nominal exchange rate of the Kina, contrary to expectations that “kina devaluation would elicit little supply response in the absence of microeconomic reform” (Millett, 1990, Duncan and Temu, 1995, p.47). Given the inadequacy of micro reform (Weise 2000), the greater contribution of agriculture than of minerals to export growth since the Kina was floated in 1994 suggests that the nominal devaluation did indeed promote some structural adjustment. Chand and Levantis (2000) use a CGE model to show rather mechanistically that PNG never suffered from Dutch disease – but the fall in the share of agricultural exports during the period of the hard Kina and the rise since the Kina was floated in 1994 suggest there was infection before 1994 and that the IMF and World Bank were right to press for a market determined exchange rate.

Taxation

All the same, comparing the 1993 and 2000 Surveys produces some interesting information that might have led the Taxation Review (IRC, 2000) to more than just its largely cosmetic adjustments to income tax scales and rates:

• In 1993, only 10 per cent of the employed labour force had average wages equivalent to the national minimum wage (K1,194 p.a.), the balance of 90 per cent had average wages of K4,928 p.a.;
• in 2000 the bottom quarter of the employed taxpaying labour force received average wages nearly double the unchanged national minimum wage, at K2,242 p.a.(K43 per week); the balance of 75 per cent had average wages of K14,726 p.a.;
• there was rapid growth of the total wage earning labour force’s annual average wages between 1993 and 2000, from K4,555 to K11,123, but this conceals the rising share of the top earners, as more Papua New Guineans reached peak earning ages and moved into the best paid positions (in 1993 the first graduates from UPNG and Unitech would still have been aged only about 45);
• the top 22 per cent of wage-earners received 38 per cent of total wages in 1993, and 56 per cent in 2000 – this results in the pronounced outward movement in the Gini curve between 1993 and 2000 (see Fig. 7);
• the lower income groups suffered a serious decline in their average real wages: for example, the bottom 30 per cent of wage earners had average wages of K2,160 in 1993, and K2,610 in 2000, but adjusting for the increase in the CPI between June 1993 and June 2000, their real wage in 2000 in 1993 prices was only K1,237, a reduction of over K1,000 or 43 per cent in just 7 years;
• the middle income group (nearly 50 per cent of all workers) also suffered some decline in real income, but only 11 per cent, from K4,522 in 1993 to a real wage in 2000 of K4,034 (nominal K8,514).
• the upper income groups alone appear to have kept ahead of inflation: the top 22 per cent had average wages of K7,862 in 1993, and K28,859 in 2000 – but even after allowing for inflation their 2000 income amounted to K13,673 in 1993 prices, an increase of 74 per cent.[7]

The very large increase in both the real and the nominal incomes of the upper 22 per cent of the wage-earning labour force is at least partly due to their relatively larger increase in productivity, given that they are mostly persons entering the most productive period of their lives when their lengthening experience is allied with their superior educational qualifications. The highly paid are few in number, but contribute disproportionately. Thus tax paid by the very highest earners was in the 2000 Survey nearly as much as the total tax paid by all the remaining 99 per cent of taxpayers.

Nevertheless, the Gini curves shown in Fig. 7 indicate a significant increase in inequality of both before- and after-tax incomes between 1993 and 2000. Papua New Guinea’s tax:GDP effort, at around 25 per cent, falls short both of what is needed to finance its still deficient public health and education services, and of the tax effort on the donor countries to whom it looks for aid, even if it compares favourably with most sub-Saharan African countries (Curtin 2000). The Gini curves suggest there is room for revisiting the tax schedules in the next Budget, not only to moderate growing inequality but to raise the revenues needed to enhance public services for the poor.

The 2001 Budget also implemented the more substantial changes to Papua New Guinea’s mineral taxation regime proposed by the Taxation Review. This had become critical following the marked slowing of expenditure on exploration – and the concomitant absence of new mineral discoveries since the Moran oilfield in 1996. These included changes to the Additional Profits Tax system (APT) that has been more of a perceived bugbear than a real threat, with no company ever having had to pay the tax since its inception.[8] The new regime could generate some revenue for the first time, offsetting the tax forgone by the downward revisions to the standard corporate rates, to 30 per cent from 35 per cent in the case of mining.

The introduction of Value Added Taxation (VAT) in 1999 was a more radical – and controversial - move than the changes to direct taxation in the 2001 Budget. Levantis (2000b) has described the tax as a largely futile exercise, tying up scarce human resources in the Internal Revenue Commission, with at best only a zero rather than negative impact on growth of GDP. The World Bank had long advocated the tax as a means of rationalizing the country’s indirect taxation, first by replacing the various provincial sales taxes, and second by substituting for a myriad of tariff rates on imports, as part of the general reform of the external tariff, which is aimed at eliminating all protective rates. 

The VAT was intended to be revenue neutral and may eventually increase the share of indirect revenue total receipts, as has been the case in other countries that have introduced similar regimes, but early indications are of a net reduction: in 1998, the last full year before its introduction, the Government raised K397.8 million in import duties, and the provincial governments raised and retained their own sales taxes (now abolished) at average rates of 2-3 per cent (yielding an estimated K100 million). The national Budget for 2001 expects net collection of K310 million in VAT, and only K85 million in import duties per se. In practice internal collection difficulties (apparently many trade stores fail to remit the VAT they collect) have meant that most VAT collection derives from imports. However the main long-term benefit of the VAT system, albeit discounted by Levantis (2001), is likely to be the encouragement to exporters arising from the refund of VAT they paid on their inputs (if realised, first indications are of late or nil refunds) – a first straw in that wind is the announcement that Yamaha has licensed a Papua New Guinea firm Samarai Plastics as a regional manufacturer for the South Pacific of its fiberglass motor boats (Post-Courier, 21 February 2001). 

Fiscal Policy since 1995

There followed a roller coaster period under the Skate government (1997-1999). The national budget blew out, partly to accommodate large discretionary expenditure allocations of K1.5 million to each national MP, and the country’s main commercial bank, PNG Banking Corporation, came under the direction of the chairman of the largest party in the governing coalition, and increased its lending by 40 per cent, producing a 30 per cent increase in total private sector credit in 1998 (Weise 2000, p.3; BPNG, 2000, p.S4). In addition the World Bank withheld resumption of the SAP because of a dispute over the government’s appointment of a former Bank official as its economic adviser (see Curtin 2000a for details).

Realised budget deficits from 1985 to 2000 (as commonly defined) have been fairly modest by standards in many other developing countries, mostly (except in 1992 and 1993) within the “good fiscal housekeeping” criterion of the Maastricht Treaty of the European Union (3 per cent of GDP, see Gupta, 1995, p.6; and my Table 3). Although PNG would also (just) meet one of the other criteria for the European monetary union, of public debt at less than 60 per cent of GDP, its inflation rate (averaging 13 per cent p.a. from1994 to 2000) and interest rates (bank rates increased from 10 per cent in 1996 to 20 per cent in 1999, and treasury bill rates to 28 per cent) are well in excess of the Maastrichtceilings, of 3 per cent and 9.8 per cent respectively. 

The combination of the fall in the Kina after 1994 and the high cost of government borrowing by issuing Treasury bills at up to 28 per cent in 1999 led to a large increase in the share of external debt servicing in the national budget. The total cost rose to K656 million in 2000 – amortisation of K488 million was more than double the level of the early 1990s despite the reduction in the US$ amount of debt outstanding. 

PNG’s modest fiscal rectitude as measured by the deficit:GDP ratio has proven insufficient for satisfactory economic performance. However the rapid growth of the money supply since 1995 was not wholly due to fiscal deficits, and it is that growth which led to most of the pressure on the balance of payments and the nominal exchange rate. This judgment is confirmed by regression analysis, showing that if changes in the money supply (M3) are a function of changes in inflows of foreign exchange (FX) and changes in government expenditure (G):

then the coefficient on foreign exchange is significant (t=1.65) and positive (0.26) while that on government expenditure is negative (-0.2) and insignificant (t = -0.6), with standard errors of 0.16 and 0.32 respectively, for data covering the period 1978-1999.

Budgeting in PNG since 1994 has also been complicated by the combination of large external debt repayments falling due in the 1990s with the generally low level of commercial and concessional loans made available to PNG over many years, and especially since 1990. In the 1990s the Government managed to secure only one commercial loan, of US$90 million from UBS, and concessional loans from 1990 to 1998 of only US$500 million (much less than it borrowed in the 1980s). There was a net reduction in external debt between 1990 and 2000 even after drawings from the SAP loans in 1999 and 2000 (see Table 3). 

Perhaps more important than the budget deficit per se, or the share of public expenditure in GDP, which is much lower than in the OECD countries, at less than 30 per cent (see Curtin 2000b), is the qualitative dimension. This partly relates to the failure of budget allocations to the spending departments to keep pace with inflation, resulting in scarcity of funds for basic running expenses, even though public service salaries have also failed to keep up with inflation. But it is also due to the manifold inefficiencies in departments’ management of resources that have been discussed at length by commentators such as Blyth (1994).

Repeated attempts at “public service reform” have been based on the assumption that all that was needed was an across-the-board reduction (except for education and health) in the overall size of the public service, as attempted in the 1999 Budget (see Curtin 2000a). The current IMF/World Bank programme once again includes public service reform as a key condition, but whilst for the first time addressing the substantive issues of structure and management, has failed to insist on ending of appointments to top positions by the cabinet. 

A major source of qualitative inefficiency is poor cash flow management by the Treasury department, even without the recent difficulties caused by the no doubt justified withholding by the IMF/World Bank/Australia of K180 million that had been committed for payment before the end of 2000, because of slippage in the government’s compliance with their conditions. The outcome was yet again an accumulation of arrears from budgeted expenditure commitments that could not be honoured in the absence of the expected loans, even though avoidance of such arrears is itself one of the IMF’s conditions. It is one thing to have budget allocations to key services like health and education that are in accordance with World Bank guidelines, another entirely if budget appropriations to provincial education departments, such as the so-called education subsidies, are paid late if at all as once again in 2001 (these subsidies are the national government’s only contribution to school running costs other than teachers’ salaries).

It is also fair to note that the methods by which the Government has financed its deficits have not been as damaging as they might have been. It had four main options:

1.monetising the deficit by borrowing at zero cost from the central bank;

2.borrowing at below market interest rates by coercion of the commercial banks;

3.borrowing abroad in foreign currency;

4.borrowing at market interest rates from voluntary domestic private sector lenders.

Fry (1996, p.7) notes that the first three impede economic development, and contests Barro’s version (1989, p.39) of the Ricardian equivalence theorem, that the substitution of a budget deficit for current taxes has no impact on the aggregate demand for goods. Only the fourth method “appears to reduce the damaging effects of any given deficit” -“moving to this method offers benefits in terms of lower inflation and higher saving and growth”. This can also be considered a valid method of spreading the inter-generational costs of public investments that benefit more than just the present generation as taxes have to be raised in the future to repay loans raised now in lieu of taxation (Blejer and Cheasty, 1993).

PNG’s deficits as evident in Table 3 have usually been well within the developing country mean of 4% and consistent with the OECD median of 3.3% of GDP (Fry, 1997, p.7). Financing of the deficits has mostly been by a combination of method (1), borrowing from the central bank, via Treasury Bills issued at market rates, with method (4), domestic borrowing at market rates. In 1999 and 2000 treasury bill rates were above the prime rates of PNG’s commercial banks. Thus PNG’s budget deficits have in practice been financed at or above market rates, partially mitigating the worst monetary effects of any given deficit. But this market-based financing has led to crowding out the private sector insofar as the commercial banks have at all times had excess lending capacity that has not been taken up at the prevailing level of interest rates. 

The underlying deficits of the 2000 and 2001 Budgets were wholly financed by method (3), foreign borrowing, in the form of the structural adjustment programme financing provided by the IMF, World Bank, Australia, and Japan. The adverse effects of this form of financing are noted by Weise (2000), in the form of future debt servicing burdens compounded by exchange risks that do not apply to domestic financing, but are discounted by the central bank, whose policy is to use structural loans to retire domestic debt (BPNG 2001, p.6).

The aggregate contribution of the 1999-2001 structural adjustment loans to PNG’s external debt is very large, at over K1 billion, or about US$375 million (Weise 2000, p.1), amounting to 33 per cent of the previous level of external public debt. It would require great faith in the productivity of this budget financing to see it generating at least a fiscal return of 7 per cent p.a. (i.e. extra tax receipts of K70 million p.a. would be needed to meet the interest on these loans before repayment of principal).

Successive governments have striven (in the annual Medium Term Development Strategy produced by the Ministry of Planning and Implementation) to increase the proportion of the budget devoted to development (i.e. capital) expenditure. This somewhat obsolete ambition overlooks the extent to which the recurrent budget contributes to human capital formation and protection through the education and health budgets. All the same there has been a significant shift in the share of the development budget in 2001, to K1 billion, 9.6 per cent of GDP, and nearly half as large as total recurrent expenditure, but this has in part been achieved by accounting devices such as treating road maintenance allocations as capital rather than recurrent spending. What is striking is the still low level of appropriation for capital works of the traditional kind, such as new roads, bridges, airfields, power stations, and power transmission lines. For example, more than a dozen years after completion of the Yonki hydropower scheme in the north, there is still no transmission line to Port Moresby in the south, which in consequence increasingly depends on high cost thermal generation. Similarly, after 25 years of independence there is still no sealed road link between the national capital and any of the 13 provincial capitals on the mainland, and food supplies from the most productive agricultural region of the country can reach the biggest city only by sea or air.

Monetary Policy

Those responsible for monetary policy in Papua New Guinea – since the new Central Banking Act in 2000 the central bank now has sole responsibility - have faced more difficult challenges than the framers of the annual budget (BPNG 2001).Their problems result from the very success of the country’s mineral and primary industry exporters. 

An alternative to the lack of physical linkages between - and enclave nature of- PNG’s mineral project areas and the rest of the country would be financial, with deposits by the resources companies available to underpin lending by the banking system to the non-mining economy. Very soon after independence the government took steps to ensure that mining companies banked their cash balances on-shore. As a concession, and to reduce short-term in and out flows, the companies were allowed by their Project Agreements to retain offshore sufficient funds to meet their rolling three-months forward obligations in regard to offshore interest and dividend payments. In practice, the obligation to remit cash balances has only aggravated the problems of monetary policy, by creating a much larger asset base for the commercial banks than they are able to deploy in loans to the non-mining sector. 

Evidence of lack of lending opportunities includes failure or inability of the banks either to lend to the limit of the imposed minimum liquid assets ratio (MLAR), or to lend very much for other than import finance. Australia has no imposed MLAR, the USA’s legal minimum is 4 per cent (Rose, 1999), yet Papua New Guinea’s MLAR has never been below 10 per cent, averaging 16.4 per cent from 1980 to 1997 (Meesook, 1997, Table 2.1, and BPNG, 2000), and 25 per cent since 1999 (implying a deposit multiplier of 4 instead of 12.5 if the MLAR was 8 per cent). The de facto deposit multiplier at the end of 2000 was just 1.5 per cent, given the apparent inability of the commercial banks to lend to the limit of the MLAR.

Whilst most commentators as noted above focus on fiscal “indiscipline” as the reason for the constant pressure on the exchange rate of the Kina, and as the immediate cause of the floating of the Kina in 1994, the much more compelling explanation (given the usual primary budget surpluses (i.e. excluding debt servicing) and overall deficits of less than three per cent of GDP, is the explosive actual and potential lending capacity of the very large liquid assets generated by the cash balances of the mining and oil companies. 

In the absence of lending opportunities for investment in production or construction of housing in the domestic economy, it is natural for the banks to concentrate on lending to finance imports. For the same reason affluent Papua New Guineans unable to invest in either primary production or building houses in their home villages, because of the lack of availability of land title, seek and find more profitable outlets in Queensland, where title is instantly available.

As a result lending for home ownership amounted for only K96.2 million (about A$50 million), or only 5 per cent of total bank lending as of September 2000 (BPNG, 2000, p.S13), and bank lending to the agriculture, forestry, and fishing sector was even less, at K86.9 million, as against net deposits by the minerals sector of over K300 million. The outcome has been a steady outflow of capital, despite exchange control regulations that limit individuals to remitting not more than K50,000 p.a. unless they can demonstrate tax clearance. In practice, cases that like of a recent Chairman of the National Provident Fund indicate that well-connected individuals have had no difficulty in exporting very large sums at will (Post-Courier, 21 February 2001). 

At least part of the outflows of about US$1 billion in 1993-94 before the Kina was floated in October 1994 would have been repayments of loans used to construct the Porgera and Misima mines and the Kutubu oilfield and pipeline. But in 1999 the mineral sector accounted for just over half of the total net private capital outflow of K305 million (Treasury, Budget 2001, vol.1, p.83). For a developing country like Papua New Guinea to have been a net exporter of private capital over most of the period since 1992 ought to be of more concern to the authorities than appears to be the case (see BPNG, QEB March 1999, for an analysis of equity inflows and outflows).

The irony is that Papua New Guinea would have little need of external capital if its banking system was empowered and found opportunities to lend to the prudential – rather than legal – limits of its liquid assets base. For example, using the USA’s liquid assets ratio of 4-5 per cent (see Rose, 1999, pp.71-72), the banks would be entitled to lend up to twenty times more than their present liquid assets of K1.18 billion as at 29 December 2000, i.e. over K20 billion, instead of their actual total lending of a mere K1.5 billion, barely 10 per cent of what would be allowed by the conventional prudential norm for reserve ratios of 8 per cent. 

Although there are real limitations on lending opportunities due to the lack of land titling, two major projects where that would not be a problem are not proceeding, at least partly because of perceived sovereign risks involved in lending to Papua New Guinea. For in principle the Papua New Guinea banking system would at its present level of liquid assets - if it were under different direction - have the capacity to finance both the Kutubu-Queensland gas pipeline project and the Ramu nickel project, given that these are export projects that will more than return the foreign exchange costs of their development. 

No doubt in practice it would also be necessary either to emulate Malaysia’s fixed exchange rate, at least during the construction phase, or to adopt the advice of Duncan and Xu (2000) and dollarise the Kina, by readopting the Australian dollar as the national currency. Dollarisation would in effect convert the enormous lending potential of Papua New Guinea’s banking system to “real” money, i.e. from K14 billion to A$7 billion, with MLAR at 8 per cent, at the current parity of about two for one rather than the one for one established when the Kina began life in 1975.

Public Sector and Privatisation

Public service employment amounts to around 1.33 per cent of PNG’s total population, and the central government wage bill was 8 per cent of GDP in 2000. A World Bank study (Schiavo-Campo et al., 1999) shows that total government civilian employment (excluding police and defence) averages about 4.7 per cent of population worldwide, ranging from 7.7 per cent in the OEC to 2 per cent in Africa and 2.6 per cent in Asia. By such measures PNG’s public service is hardly overblown, nor it is overpaid. Average wages of the PNG central government employees were K13,000 p.a. in 2000, about six times larger than per capita income, slightly higher than sub-Saharan Africa’s 5.5 ratio, and more than the world average of about 3, but that is an indication of low GDP rather than overblown public services, given PNG’s evident very low ratio of public servants to population.[10]

PNG’s public enterprises sector was never as large as in most other developing countries in Africa and Asia, including its northern neighbour Indonesia, although there was a tendency to create “corporatised” agencies such as the mainly donor-funded Small Business Development Corporation. In the 1970s the Government had acquired shareholdings in various plantations, and it required to be allocated up to 30 percent of the equity in mineral projects, paid for by forgone profits in the case of oil but up-front in the case of mining. The plantation shareholdings were gradually transferred to joint venture partners in the 1990s, while the government privatized its mineral sector holdings by the floating of Orogen Minerals Ltd in 1996, in which however the Government retains a non-voting stake of 50.1 per cent. After the Bougainville crisis in 1988, the Government assigned up to 10 per cent of its initial equity in mineral projects (Ok Tedi, Misima, Porgera, Kutubu, and Lihir) to trust funds representing the respective landowners and charged with financing social and community projects on their behalf. Assigning equity to individual landowners (proposed by Duncan and Duncan 1997) who are then free to dispose of it can create the kind of inter-generation conflict that was the immediate cause of the closure of the Panguna mine in 1989.

The current Structural Adjustment Programme requires the Government to implement its long-declared intent to privatize the five big parastatals (PNG Banking Corporation, Electricity Commission, Telikom, Air Niugini, Harbours Board). Already the target date for PNGBC of end-2000 has been missed – but the Central Bank (BPNG) put it under direct supervision in August 2000. BPNG was able to do this only after its own independence from government interference was established by the new Central Banking Act of June 2000 – this in the long run will prove to have been the most important achievement of the Morauta government in its first year in office. 

The Government has agreed with the IMF that privatization proceeds will be used to reduce public debt. However that is a fantasy, as the Prime Minister admitted in November 2000 that the net worth of all five parastatals is at best zero, after the years of Indonesian-style management by political appointees (including his own at PNGBC).

There has been a tendency in much of the literature on the economy of PNG to single out “Sole Cause” explanations of its commonly perceived poor performance. For some it has been lax budgets, others diagnose Dutch Disease, and for Levantis and Chand (1998) it has been lack of law and order. This paper may suffer from the same defect, by stressing the obstacles to investment outside the small area (3 per cent) of the country where individually titled land tenure is available. No doubt each has played a part, and jointly reinforced their several negative impacts. For example, although Levantis and Chand consider that the high potential of PNG for tourism “has been completely disabled in its development by the law and order problem” (1998, p.10), both the Dutch disease symptom of an over-valued exchange rate, and the impossibility of obtaining land title even for resort construction anywhere in PNG outside the towns and old copra plantations, have been powerful deterrents to mass tourism[11].

Connell (1997) concluded his comprehensive study of PNG’s economy with the judgment “neither growth nor development”. That is a little harsh, for as this paper shows there has been some economic growth, and even some deepening of development, such as the evident declining share of the mineral sector’s contribution to exports and tax receipts, but not as much there might well have been had land titling been allowed to proceed as proposed by the colonial administration in 1971. The vacuum created by communal land tenure is filled across most of the country by foreign loggers with little long-term commitment to the industry – and prevents deployment of the full value of the credit multiplier that is available from the asset base of the banking system. Until land tenure has been reformed, Papua New Guinea is likely to continue to lurch from one exchange rate crisis to another, however high it keeps its interest rates, and however closely it conforms to the IMF’s fiscal targets.

Timothy Curtin

Port Moresby

27 March 2001

REFERENCES

Ausaid (1997) Economic Survey of Papua New Guinea. Australian Agency for International Development, Canberra.

Axline, Andrew (1986) Decentralisation and development policy: Provincial government and the planning process. Institute of Applied Economic and Social research, Port Moresby.

Blejer, Mario and Adrienne Cheasty (1993) How to measure the fiscal deficit. International Monetary Fund, Washington DC. 

Blyth, Conrad (1994) Sustainable Budgets for Papua New Guinea’s economic development. Institute of National Affairs, Port Moresby.

BPNG (1990, 1995, 1999,2000) Quarterly Economic Bulletin, Bank of Papua New Guinea, Port Moresby.

BPNG (1998) Money and Banking in Papua New Guinea. Bank of Papua New Guinea, Port Moresby.

BPNG (2001). Semi-annual Monetary Policy Statement. Bank of Papua New Guinea, Port Moresby.

[

Callick, Rowan (2000). “PNG at the edge of an abyss”, Australian Financial Review, 9 March 2000.

Connell, John (1997) Papua New Guinea: the struggle for development. Routledge, London.

Curtin, Timothy (1991) Economics of public investment in education in Papua New Guinea. University of Papua New Guinea, Waigani.

Curtin, Timothy (1996) Project Appraisal and human capital theory. Project Appraisal, 11(2), 66-78.

Curtin, Timothy, and E.A.S. Nelson (1999) Economic and health efficiency of education funding policy. Social Science and Medicine, 48, 1599-1611.

Curtin, Timothy (2000a) Public sector reform in Papua New Guinea and the 1999 Budget. Labour and Management in Development, 1(4).

Curtin, Timothy (2000b) A new dawn for Papua New Guinea’s economy? Pacific Economic Bulletin, 15(2), 1-35.

DFP (1986). National Manpower Assessment 1982-1992. Department of Finance and Planning, Wards Strip.

Department of Industrial Relations (1997). Labour Statistics in Papua New Guinea. Government of Papua New Guinea, Boroko.

De Soto, Hernando (2000). The Mystery of Capital. Bantam Press, London.

Dorney, Sean (2000). Papua New Guinea. People, politics, and history since 1975. Australian Broadcasting Corporation, Sydney.

Duncan, Ron and Ila Temu, (1995a). Papua New Guinea: longer term developments and recent economic problems. Asian-Pacific Economic Literature, 9, 2, 36-54.

Duncan, Ron and Ila Temu, (1995b). The need for fiscal discipline. Pacific Economic Bulletin, 10(10, 14-18.

Duncan, Ron and Rod Duncan (1997). Improving security of access to customary-owned land in Melanesia: mining in Papua New Guinea, in Larmour 1997

Duncan, Ron and Xinpeng Xu (2000). Should Papua New Guinea adopt a stronger exchange rate regime? Pacific Economic Bulletin, 15(2), 36-45.

Filer, Colin (1997) Compensation, rent, and power in Papua New Guinea, in Toft (1997).

Fry, Maxwell J (1997) Emancipating the Banking System and developing markets for Government Debt. Routledge, London.

Garnaut, Ross, M. Wright, and R. Curtain (1977). Employment, Incomes and Migration in Papua New Guinea towns. IASER, Port Moresby.

Garnaut, Ross, Paul Baxter, and Anne Krueger (1983). Exchange rate and macro-economic policy in independent Papua New Guinea. Department of Finance, Port Moresby.

Garnaut, Ross (1995). Monetary stability or more devaluation? Pacific Economic Bulletin, 10(1), 19-24.

Garnaut, Ross (2000). The first 25 years of searching for development. Pacific Economic Bulletin, 15(2), Supplement, 29-36.

Gibson, John (1995). Food consumption and food policy in Papua New Guinea. Institute of National Affairs, Port Moresby.

Graham, Bryan S. (1998). Economic growth in Papua New Guinea: some empirical evidence. Pacific Economic Bulletin, 13(2).

Gupta, Desh (1995). Current economic trends. Pacific Economic Bulletin, 10(1), 3-17.

IMF (2000). Papua New Guinea. Recent Economic Developments. International Monetary Fund, Washington DC.

IRC (2000). Report of the Taxation Review. Internal Revenue Commission, Port Moresby.

Jones, L.T.and P.A. McGavin (2000) Creating economic incentives for land mobilisation in Papua New Guinea. Institute of National Affairs, Port Moresby.

Larmour, Peter (editor) (1997). The Governance of Common Property in the Pacific Region. National Centre for Development Studies, Canberra.

Larmour, Peter (editor) (1998). Governance and reform in the South Pacific. National Centre for Development Studies, Canberra.

Lea, David (1997). Melanesian Land Tenure in a Contemporary and Philosophical Context. University Press of America, Maryland.

Lea, David (2000). Dependency theory and its relation to problems of development in Papua New Guinea. Pacific Economic Bulletin, 15(2), 106-120.

Levantis, Theodore (1997). The urban labour market of Papua New Guinea, post de-regulation. Pacific Economic Bulletin, 12(2): 54-72

Levantis, Theodore (2000). Papua New Guinea: Employment, wages, and economic development. Asia Pacific School of Economics and Management, Canberra.

Levantis, Theodore (2001a). Indirect tax reform and the VAT in Papua New Guinea. Institute of National Affairs, Port Moresby. 

Mawuli, Agogo, and Zulai, Romeo (1993) Small business employment in Port Moresby, in Millett (1993).

McGavin, P.A. and M.A. Ross (1988) Rates of return to investment in education in Papua New Guinea. Institute of National Affairs, Port Moresby.

McGavin (1991) Wages, Incomes, and Productivity in Papua New Guinea. Institute of National Affairs, Port Moresby.

McGavin. P.A. (1997). Labour Resource Utilisation in Melanesia. National Centre for Development Studies, Canberra.

Meesook, Kanitta (1997) Financial sector developments 1980-1996, in Temu (1997).

Millett, John (1990) Private sector development in Papua New Guinea. Institute of National Affairs, Port Moresby.

Millett, John (1992) Industrialisation in Papua New Guinea: unrealized potential? Institute of National Affairs, Port Moresby.

Millett, John (editor) (1993) Seminar on Employment, Agriculture, and Industrialisation. Institute of National Affairs, Port Moresby.

Mulina, Rupa (1997). Growth with stability: monetary and fiscal policy in Papua New Guinea, in Temu (1997).

NSO (1997). Papua New Guinea. Demographic and Health Survey 1996. National Statistics Office, Waigani.

Pourhosseini, M. (editor) (1994). Papers and Proceedings of the National Employment Summit. National Library Service of Papua New Guinea and United Nations Development Programme, Port Moresby.

Rose, Peter S. (1999) Commercial Bank Management. Irwin McGraw Hill, Boston.

Schiavo-Campo, Salvatore, Giulio de Tommaso, Amitabha Mukherjee (1999) An International Statistical Review of Government Employment and Wages. World Bank (mimeo), Washington DC.

Temu, Ila (editor) (1997). Papua New Guinea: a 20/20 Vision. National Center for Development Studies, Canberra.

Treasury, Department of (1998, 1999, 2000). Budget Documents 1999, 2000, 2001. Port Moresby.

Trebilcock, Michael and Knetsch, Jack (1981). Land policy and economic development, Melanesian Law Journal, 9, 102-115.

Toft, Susan (editor) (1997). Compensation for Resource Development in Papua New Guinea. National Centre for Development Studies, Canberra.

Weise, Daniel (2000). Impact of financial sector reform on business in PNG. Papua New Guinea Institute of Accountants, Port Moresby (mimeo).

World Bank (1998) Papua New Guinea. Education sector study. IBRD, Washington DC.

World Bank (1999). Papua New Guinea. Country Brief. IBRD, Washington DC.

World Bank (2000a). Papua New Guinea at a glance. IBRD, Washington DC

World Bank (2000b). Report and recommendation of the President: Governance Promotion Adjustment Loan to the Independent State of Papua New Guinea. IBRD, Washington DC

World Bank (2000c). World Development Indicators. IBRD, Washington DC

Sources: GDP at 1983 prices (old series) 1983-1998: BPNG 1998; GDP 1999: Treasury 2000. Employment, BPNG 1998, 2000.

Source: Quarterly Economic Bulletin, September 2000, BPNG.

Source: World prices – The Economist; PNG CPI and exchange rate, Quarterly Economic Bulletin, BPNG, 1995, 2000.

Source: Internal Revenue Commission 1993, 2000 (unpublished spreadsheets)

Source: World Bank 2000c