PNG: Look to agriculture not minerals to strengthen economy

CALUM RUTTER | Public Finance International

LONDON, UK - Papua New Guinea should look to agriculture to strengthen growth as the economy recovers from a series of external shocks, the World Bank has said.

Structural transformation was needed in the country to bring about the inclusive and sustainable development that would enable its economy to become more resilient, the bank suggested in a report.

Real GDP growth in Papua New Guinea dropped gradually from 13.5% in 2014 to -0.5% in 2018.

During this time there was a commodity price shock, a particularly warm El Niño climate cycle and a 7.5-magnitude earthquake that hampered the economy, the World Bank pointed out in the report, released on Friday last week.

But now, real GDP growth is forecast to be about 5.6% in 2019, and hover at just over 3% in 2020-21 – a recovery mainly observed in the resource sector, dominated by liquefied natural gas.

Ilyas Sarsenov, World Bank senior country economist for Papua New Guinea, said:

“PNG’s growth outlook remains positive but fragile due to rising economic uncertainties ranging from the domestic political economy to the recent escalation of trade tensions between the United States and China.

“To mitigate downside risks to the outlook and better weather external shocks, it is recommended that PNG authorities adjust macroeconomic policy and focus on structural transformation of the economy, especially in agriculture as a potential economic driver for more diversified and inclusive development.”

About 87% of the country’s population live in rural areas, with three quarters of them involved in subsistence and cash income agriculture – including fresh foods, coffee, cocoa, palm oil, copra and copra oil.

High-value coconut products and spices make up a small but increasing proportion of the sector.

The report listed the main problems faced by rural farmers as lack of transport infrastructure, limited access to finance, climate change and inconsistent law and order.

Officials are recommended to focus on improving capacity through public-private partnerships.

Last month, PNG Treasurer Sam Basil said he recognised the “real potential” of the agriculture sector, and promised the 2020 Budget strategy will be “re-oriented” to take that into account.

In the same speech on 26 June, he announced that the 2019 agriculture, forestry and fishing sector growth forecast had been revised up, after better-than-expected palm oil and log production in the first quarter of the year.

Comments

[Garry Roche]

Phil, I agree that population growth is an issue. The main issue I was trying to point out is that traditional PNG highlands agriculture did not necessarily lead to serious deforestation. And even when a non-traditional crop like coffee was first introduced, as you will remember, numerous shade trees were planted all through the coffee plantations. I think the practice of shade trees may have later been abandoned. The tea plantations, - as the photo above illustrates – did not have shade trees.

[Philip Fitzpatrick]

Some people classify logging and oil palm as agriculture Garry.

You have to be careful about semantics when discussing mining too. Digging a hole and using the ore, be it coal, iron ore, copper or one of the other numerous minerals we deem essential, might look like a limited impact activity but when you take into account the end use, like burning the coal for energy, the environmental impact becomes much more pronounced.

The biggest problem by far is that there are now too many humans on the planet. Coupled to that is their insatiable taste for meat and the necessity to keep vast herds of environment destroying stock to feed that obsession.

[Garry Roche]

With regard to the UNFCCC report, it can be noted that Papua New Guinea was included in the research by Persson, Henders and Kastner concerning the impact of agriculture on deforestation, and thus on climate change.

However it was clear in that report that in PNG's case it was the oil palm industry and illegal logging that were the two main causes of deforestation.

It should perhaps also be noted that in traditional highland agriculture the replanting of trees was part of the whole agricultural cycle.

For research by Persson, Henders and Kastner see: - https://www.cgdev.org/publication/trading-forests-quantifying-contribution-global-commodity-markets-emissions-tropical

[Daniel Wakena]

"According to the United Nations Framework Convention on Climate Change (UNFCCC) secretariat, the overwhelming direct cause of deforestation is agriculture. Subsistence farming is responsible for 48% of deforestation; commercial agriculture is responsible for 32%; logging is responsible for 14%, and fuel wood removals make up 5%."

Mining leaves considerably less footprint on the environment if carefully operated than agriculture/farming.

Look at how the Amazon rainforest is drastically decreasing at an alarming rate and it's not because of mining.

Strengthen the economy or protect the environment you can't have it both ways.