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Investments are critical for faster growth

By Brian Gomez - posted Tuesday, 27 June 2006

Clearly an improved investment climate is critical to Papua New Guinea’s prospects for faster economic growth, as has been brought home in a landmark study by the IMF’s Ebrima Faal.

Mr Faal has been able to pinpoint investment levels needed to generate economic growth at 5 per cent or even 7 per cent. In the short to medium term, these targets seem out of reach of the national government, which is presently not even trying to attain such targets.

This means that despite superficial signs of increased prosperity - more cars on the roads and greatly increased construction activity - many people will have to cope with grinding poverty for many years to come.


Increased investments do part of the job in terms of economic growth. Another essential ingredient is productivity, the key factor that has been driving the US and Australian economies in recent years.

What is somewhat scary from Mr Faal’s analysis of economic data since 1960 is that productivity levels have not improved at all since independence. At present no public authority pays any attention to this issue.

The lackof investment and increased productivity accounts for the fact per capita incomes in PNG today are about 50 per cent less than they were at the time of Independence.

Despite being a bearer of bad news, the IMF report is important because it shows the way forward by providing goalposts for government planners to aim at.

Two other recent articles, published in The National, provide important analysis about why the economic situation has been so dismal for a country with such immense natural wealth.

The more important of these is by Professor Oskar Kurer, from the Institute of Economics at the Friedrich Alexander University of Erlangen-Nuremberg. Professor Kurer studied PNG’s economic performance as a visiting fellow at the Asia Pacific School of Economics and Government at the Australian National University in Canberra.


Writing in the Pacific Economic Bulletin he explained that the PNG economy had done well in the decade from 1965 because the Australian colonial administration had followed an earlier World Bank prescription for export-led growth.

These policies got derailed after Independence because the ruling Pangu Pati adopted the findings of another landmark report that gave priority to the redistribution of wealth rather than the pursuit of optimum economic growth.

This was neatly captured in the title of Professor Kurer’s article: “The Papua New Guinea malaise: from redistributive politics to a failing state”.

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First published in The National on May 25, 2006.

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About the Author

Brian Gomez is based in Sydney and is Asia-Pacific editor for The National , a daily newspaper in Papua New Guinea. He also contributes a regular column to, a Perth-based website. Brian has worked as a journalist in Australia, Papua New Guinea, Singapore and Malaysia and has a special interest in development issues.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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