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Old 04-05-2003, 12:56 PM
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Papua New Guinea

General Information :

The mainland of Papua New Guinea together with its six hundred other islands (463 000 square kilometres) has a population of approximately 5.3 million. Most of the people are Melanesian, but some are Micronesian or Polynesian. There are over seven hundred language groups, reflecting the diverse origins of the people. English, Tok Pisin (Pidgin), and Motu (the lingua franca of the Papuan region) are the official languages.

The spectrum of Papua New Guinean society now ranges from traditional village-based life dependent on subsistence and small cash-crop agriculture, to modern urban life in the main cities of Port Moresby (capital), Lae, Madang, Wewak, Goroka, Mt Hagen, and Rabaul. Some 85 per cent of the population directly derive their livelihood from farming, and 15 per cent of the population live in urban areas. It is estimated that the population is growing at a rate of approximately 2.5 per cent per annum.

Political Overview :

System of Government :

The Head of State is HM Queen Elizabeth II, represented in Papua New Guinea by the Governor-General, Sir Silas Atopare. The National Parliament is a single chamber legislature elected for five year terms by universal suffrage in single constituency open or provincial electorates. The National Executive Council comprises the Prime Minister (who is appointed and dismissed by the Head of State, represented by the Governor-General, on the proposal of Parliament) and ministers (who are appointed and dismissed by the Head of State on the proposal of the Prime Minister). An independent judicial system comprises the Supreme Court and National Court, and local and village courts.

The system of government is thus one of responsible parliamentary democracy. As no one party has ever achieved an absolute majority in parliament and party alliances are volatile, loss of government by a vote of no confidence has been characteristic of Papua New Guinea politics since Independence. New laws covering the integrity of political parties may change this (see below).

Recent Political Developments :

Sir Michael Somare was elected Prime Minister on 5 August 2002. He enjoys the support of a broad coalition and his election to the position of PM was unopposed. Somare was Papua New Guinea's first Prime Minister in 1975 and served as Prime Minister again from 1982-87. Prime Minister Somare has recently identified continued economic reform as a top priority for his government.

Apart from the election of the new Somare government, there have been other important recent developments. The `Organic Law on the Integrity of Political Parties and Candidates' is now in effect. This new law is designed to enhance political stability by outlawing the practice of MP's switching political allegiances after an election. It is also designed to provide proper funding for political parties and encourage female candidates. The law also provides for the implementation of a limited preferential voting system for future elections, including by-elections (the next general election is due in 2007).

Bougainville :

In 1997, the PNG Government and Bougainvillean officials reached agreement to end the lengthy secessioinist conflict on Bougainville and to establish a Truce Monitoring Group (which later became the Australia-led Peace Monitoring Group). On 30 August 2001, the Bougainville Peace Agreement was signed at Arawa, Bougainville. It provides a framework for disarmament and an autonomous Bougainville Government. (see separate section on the Bougainville Peace Process). Currently, weapons disposal is the main focus of the peace process, with over 1700 weapons contained to date. By the end of 2002, Australia will have contributed $100 million over five years towards development on Bougainville, as well as leading the four-nation Peace Monitoring Group since 1998.

Foreign Policy :

Membership of South Pacific regional organisations and participation in the wide range of island country arrangements have been an important aspect of PNG's foreign relations since before Independence. Papua New Guinea is a member of the Pacific Islands Forum and the South Pacific Commission, and regional sub-groupings such as the South Pacific Regional Environment Program (SPREP). PNG is also a member of the United Nations. Papua New Guinea's membership of APEC and the WTO has brought it into closer association with the major economies of the region and has provided a formal framework for movement towards recasting its domestic economic policies.

Papua New Guinea has emphasised its relations with the countries of East and South East Asia by, with ministers of successive governments visiting the region regularly. Indonesia, with which Papua New Guinea shares a land border, has been of key importance, with relations underpinned by a Treaty of Mutual Respect, Friendship and Co-operation.

Japan is also significant in Papua New Guinea's foreign relations, particularly as it is a major aid donor. A memorandum of understanding on regular high level consultations was agreed with China in 1992. Relations with Malaysia and the Philippines are long-standing, and those with Singapore have been developing in recent times. As elsewhere in the South Pacific, companies based in East and South East Asia have interests in some of Papua New Guinea's major resource industries, including logging and fisheries.

Papua New Guinea is an Associate Member of ASEAN, and signed a Treaty of Amity and Cooperation with that organisation in 1989. Papua New Guinea is keen to upgrade that relationship. PNG is also a member of the ASEAN Regional Forum (ARF).

Papua New Guinea maintains official overseas representation in Australia, New Zealand, Fiji, Solomon Islands, Indonesia, Japan, China, the Philippines, the United Kingdom, Belgium (Mission to the European Union - a major donor), and the United States, and to the United Nations in New York.
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  #2  
Old 04-05-2003, 05:59 PM
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Economy :

PNG's economy is dual in nature, including a 'modern' formal economy and a large informal economy where subsistence farming accounts for the bulk of economic activity. The formal sector provides a rather narrow employment base, consisting of workers engaged in mineral production, a relatively small manufacturing sector, public sector employees and service industries including finance, construction, transportation and utilities.

The bulk of the population is engaged in the informal sector, although migration to major city centres in the past decade has contributed to urban unemployment and attendant social problems. Papua New Guinea's social indicators, in general, are well below those of lower middle income countries (particularly in rural areas). Papua New Guinea's per capita GDP was equivalent to around US$531 in 2002 (see fact sheet).

Over the past two decades, Papua New Guinea's economic growth has been characterised by a heavy reliance on commodity exports from the mining and petroleum sectors. Despite its enclave nature, the mining and petroleum sectors have a major impact on the PNG economy through their contribution to foreign exchange and government revenue (funding around 20 per cent of government revenue). T

he mining and petroleum sectors account for around 60 per cent of Papua New Guinea's export revenue (compared to 25 per cent from agriculture). Over 85 per cent of Papua New Guinea's population depend upon agriculture, forestry or fishing for their livelihood. The monetised part of the agricultural and forestry sectors is generally geared towards servicing overseas markets, with coffee, palm oil, cocoa, copra and unprocessed logs the most important exports.

Economic Outlook :

The PNG economy is currently experiencing difficult times. The new Somare government nonetheless faces a major challenge, particularly to control the budget deficit. Somare has identified this as a top priority for his government. The IMF/World Bank package introduced in March 2000 has encouraged economic stability. And in June and December 2000, Australia made two loans of $US80 million and $US30 million to Papua New Guinea.

The loans support economic and governance reform, focusing on the establishment of financial stability, delivery of services to rural areas, institutional and public sector reform, privatisation and forestry sector management.While the enclave mining and petroleum sectors have done well in recent times, the non-resource economy - particularly coffee and copra which have been seriously affected by low production and low international prices - has performed poorly. Business has been hard-hit by a combination of low government spending, depressed consumer demand, high interest rates and a depreciating kina.

The 2003 budget is a serious attempt to establish a sustainable medium-term fiscal framework. Implementation of this tough budget will not be easy, however, and financing the budget will likely require closer engagement with international financial institutions such as the IMF and the World Bank.

For more information see:Other Australian Assistance :

Apart from the above, and $300 million per annum in development assistance (see below), Australia is also providing technical assistance in the areas of budget and economic planning, statistics, privatisation, taxation and other key areas of economic management. The PNG-Australia Treasury Twinning Scheme (PATTS) aims to enhance economic governance in PNG by training PNG officials in economic and financial policies and procedures and establishing co-operative relationships between key Australian and PNG agencies.

Papua New Guinea - Australia Bilateral Relations
Introduction :


Geographic proximity and historical links have given Papua New Guinea a special place in Australia's foreign relations. A quarter of a century on from Papua New Guinea's independence, Australia's bilateral relationship with the country is one of its most complex and wide-ranging. As a friendly and sympathetic neighbour, Australia has an overriding interest in Papua New Guinea's sustainable economic development and stability. The presence of around 6-7,000 Australians in the country is also of significant interest to Australia.

Key aspects of the relationship between Australia and Papua New Guinea are encompassed in a number of formal bilateral arrangements. The umbrella agreement is the Joint Declaration of Principles of 1987, revised in 1992. Specific arrangements include: the Papua New Guinea-Australia Trade and Commercial Relations Agreement (PATCRA II); the Agreement for the Promotion and Protection of Investment (APPI); the Double Taxation Agreement; the Treaty on Development Cooperation; the Agreed Statement on Security Cooperation; and the Torres Strait Treaty. Australia and Papua New Guinea also signed an MOU on the PNG-Queensland Gas Pipeline on 5 August 1998.

The major bilateral meeting for Australia and Papua New Guinea is the Australia-PNG Ministerial Forum. The Fourteenth Annual Australia-PNG Ministerial Forum was held in Port Moresby on 15 November 2002.

Trade and Investment :

Papua New Guinea is Australia's 21st largest merchandise trading partner and total bilateral merchandise trade was worth around $2.2 billion in 2001 (about 1 per cent of Australia's total trade in goods). The balance of merchandise trade was $212 million (trade surplus to Papua New Guinea).

Australian merchandise exports to Papua New Guinea were worth $1.03 billion in 2001 Papua New Guinea is Australia's 23rd largest export market for goods.

In 2001 Australian merchandise imports from Papua New Guinea totalled $1.24 billion. Papua New Guinea is Australia's 22nd largest import market in goods.

Australia's services trade with Papua New Guinea was worth $578 million in 2000. Australia's services exports to Papua New Guinea totalled $380 million and services imports from Papua New Guinea were worth $198 million.

Australian investment in Papua New Guinea was estimated at $3.52 billion at end June 2000 (mining and petroleum dominate, followed by services). Papua New Guinea investment in Australia totalled $167 million in June 2000.

Development cooperation :

Reflecting the strong ties between Australia and Papua New Guinea, the development cooperation program between our two countries is by far the largest of any of Australia's bilateral aid programs. Australia provides bilateral aid to PNG of some $300 million annually, representing about one third of our overall bilateral aid and one fifth of our total aid program. By the end of 2002, Australia will also have provided $100 million over five years in development assistance for Bougainville, drawn from the total aid program.

Both Governments have agreed that Australia's aid program can best support the goal of relieving poverty and achieving sustainable development by focusing on the four key objectives of:
  • strengthening governance;
  • improving social indicators;
  • building prospects for sustainable economic growth; and
  • consolidating the peace process in Bougainville.
The PNG Government has identified education, health, governance and infrastructure as the highest priority sectors. It has placed an emphasis on upgrading the delivery of basic services to rural areas, especially to women and children. HIV/AIDS poses one of the biggest challenges to the social and economic development of PNG. In response Australia is funding a large multi sector initiative aimed at supporting the PNG Government to implement its national prevention and care program.

New and highly effective approaches to delivering aid are now operating in PNG. An incentive fund which is open to private and public sector organizations and non-government agencies allows organizations with a good track record to participate in development activities.

A sector-wide approach focused on strengthening existing PNG health systems at a national, provincial and district level is also being developed. This will help the PNG health system to better plan, deliver and monitor aid across the health sector. Defence Relations :

Australia has provided significant assistance ($20 million) in response to the PNG government's plan to reform and reinvigorate the PNG Defence Force. The goal of the program is to down-size the existing force improve its professionalism and sustainability.

Expenditure on defence cooperation has declined from a peak of $52 million in 1990-91 (coinciding with major infrastructure projects) to $10 million (2001-2002 estimate). Nevertheless this allocation of defence cooperation funds is the largest allocated to any single country, signifying the importance of Australia's defence relationship with Papua New Guinea.

Australian assistance is focused increasingly on personnel and training assistance. Australia has also provided support and assistance in the construction of new armouries at PNGDF barracks, to improve the security of weapons.
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