PNG's reality gap

PAPUA New Guinea’s resources sector has the potential to grow export revenues at least fourfold to $US23 billion ($A24.7 billion) per annum by 2030 but will require an estimated $112 billion in capital investment, according to a leading banker.
PNG's reality gap 
PNG's reality gap 
PNG's reality gap 
PNG's reality gap 
PNG's reality gap

ANZ Group chief executive Mike Smith said the aim was to examine the potential for PNG to benefit more broadly from Asia's industrialisation, urbanisation and growing demand for natural resources as well as agricultural commodities.

Addressing members of the Port Moresby Chamber of Commerce and Industry on the importance of PNG's future in the Asian century, Smith said total trade flows between the Pacific and Asia had risen from $1.7 billion in 2000 to almost $10 billion in 2013.

Exports from the Pacific to Asia have also quadrupled in the decade to 2012 and imports from Asia into the region have risen by more than 10 times over the same period.

Smith said a more active conversation was needed about how to make the most of the Asian century but warned there was a large gap between potential and the current reality, which was discussed in the bank's Bold Thinking report.

"It became obvious to me during my visits to PNG that the Asian century is a perfect match for PNG's location, its resource endowment and its growth aspirations - and we wanted to contribute to making the most of this opportunity," Smith said.

"Second, PNG has begun to put runs on the board with successful world-class projects such as PNG LNG.

"The ANZ team here, led by our CEO Mark Baker, felt there was an opportunity to bring these examples to the attention of international investors by highlighting PNG's potential and the pathway that exists for its success."

Smith reminded the chamber that agriculture was a longer-term opportunity that could drive sustained growth by facilitating agribusiness entrepreneurship and business scale.

He said essential infrastructure improvements addressing the significant challenges existing in the energy supply could be achieved through a fresh approach to delivery through prioritisation, private sector involvement and improved governance.

"Whatever your own view of commodity markets and these projections, I think we all agree that to deliver anything like the resources sector's potential, PNG needs to be much closer to the head of the queue for global resources investment than it is at present," Smith continued.

"As the report describes, when the Fraser Institute asked investors to rank the attractiveness of PNG's resources sector against 95 other countries, it comes 73rd.

"However, when asked to imagine the country with best practice policy settings, investors rank PNG third in the world.

"This huge increase occurs because investment risks currently overwhelm PNG's geological and geographic potential.

"And the gap illustrates why PNG has to urgently refocus its national discussion on lowering actual and perceived investment risks and also on skills development and transfer from the growing resources sector."

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