Papua New Guinea - Overview of economy

The extraction of Papua New Guinea's rich mineral and petroleum resource base dominates the national economy, accounting for 72 percent of export earnings. Gold, copper, and petroleum are the most important of these resources. Mining, however, is concentrated in only a few areas, employs only a small percentage of the country's population, and is dominated by international corporations. Most Papua New Guineans (85 percent) depend on subsistence agriculture , in which crops are grown for family and local use and not exported. Papua New Guinea's tropical climate and rich soil allow both subsistence and commercial agriculture to flourish. The commercial agricultural sector, which once dominated

the economy, has greatly decreased in size relative to the growing mining sector. Coffee, palm oil, cocoa, and coconut products (a dried form called copra and coconut oil) are the most important agricultural exports. Forestry is also a growing economic sector. Despite its rich mineral and agricultural resource base, Papua New Guinea has limited manufacturing and service sectors, and must import most manufactured products such as machinery, motor vehicles, and many foods.

The diversity of the population, political disputes, and the ruggedness of Papua New Guinea's landscape have been the key factors limiting economic development in the country. Changing political leadership and policies since independence in 1975 have hampered long-term planning. Additionally, the rugged terrain of much of the country, with extensive swamps, mountains, and scattered islands, requires expensive communications and extraction infrastructure with high maintenance costs. Conflicts between the national and provincial governments reflect the country's diversity and add to the difficulties of formulating economic policy. A revolutionary movement on the island of Bougainville, the location of one of Papua New Guinea's largest mines, led to sabotage and closure of the mine in 1989. The mine has not reopened but recent peace talks are putting an end to the conflict.

Papua New Guinea's total external debt is estimated at US$2.4 billion (1999). In 1998, the country's debt service stood at US$178 million. Australia is by far the largest donor of foreign aid, giving about US$150 million each year. Much of this aid is used for the development of health services, infrastructure, education, and the maintenance of law and order. Papua New Guinea also receives aid from other donors such as the Asian Development Bank. Donors have also provided additional aid in times of crisis, such as during the devastating 1997 drought.