Papua New Guinea is richly endowed with natural resources, but exploitation has been hampered by rugged terrain and the high cost of developing infrastructure. Agriculture provides a subsistence livelihood for 85% of the population. Mineral deposits, including oil, copper, and gold, account for 72% of export earnings. Former Prime Minister Sir Mekere Morauta had tried to restore integrity to state institutions, stabilize the kina, restore stability to the national budget, privatize public enterprises where appropriate, and ensure ongoing peace on Bougainville.

The Morauta government had considerable success in attracting international support, specifically gaining the backing of the IMF and the World Bank in securing development assistance loans. Significant challenges face the current Prime Minister Sir Michael Somare, including gaining further investor confidence, continuing efforts to privatize government assets, and maintaining the support of members of Parliament. The third quarter (September, 2004) Reserve Bank Report by the Governor of Bank of PNG showed positive economic stance by the Government, with inflation at zero.

Economy - in greater depth

The economy generally can be separated into subsistence and market sectors, although the distinction is blurred by smallholder cash cropping of coffee, cocoa, and copra. About 75% of the country’s population relies primarily on the subsistence economy. The minerals, timber, and fish sectors are dominated by foreign investors. Manufacturing is limited, and the formal labour sector consequently also is limited.

Mineral Resources

In 1999 mineral production accounted for 26.3% of gross domestic product. Government revenues and foreign exchange earning depend heavily on mineral exports. Indigenous landowners in areas affected by minerals projects also receive royalties from those operations. Papua New Guinea is richly endowed with gold, copper, oil, natural gas, and other minerals. Copper and gold mines are currently in production at Progera, Ok Tedi, Misima, and Lihir. New nickel, copper and gold projects have been identified and are awaiting a rise in commodity prices to begin development. A consortium led by Chevron is producing and exporting oil from the Southern Highlands Province of Papua New Guinea. In 2001, it expects to begin the commercialization of the country’s estimated 640 km³ (23 trillion cubic feet) of natural gas reserves through the construction of a gas pipeline from Papua New Guinea to Queensland, Australia.