THE CURRENT dip in commodities prices poses a short-term challenge to the Papua New Guinean economy, Prime Minister Peter O’Neill says, but the government is focused on a long-term investment.
In a series of speeches given to business groups and public servants, Mr O’Neill said 2015 would be a defining year for PNG as the local economy grows and government policies take root.
Speaking at the 2015 Leaders’ Summit in Port Moresby in February, Mr O’Neill said PNG had started production of liquefied natural gas at a turbulent time in the global economy.
“Certainly we have to be conscious of the challenges that confront the global economy – not deterred or frightened by it – and we must take steps to secure the future development of our vast resources,” he said.
The fact that early LNG sales had been made on better than expected spot prices and that forward LNG contracts had been set according to a fixed formula put PNG in a healthier position, he said.
“But we will be affected by lower oil prices if the current trend continues, moreso towards the end of this financial year.”
Speaking later at the Prime Minister’s Business Breakfast, Mr O’Neill said he might be forced to “make some hard decisions at some point in the future,” if oil prices did not improve.
“For now I am quite confident that our economy remains very strong. This is because our fundamentals are sound, and if we invest smartly, we will continue to see unprecedented levels of economic growth in our country.”
The government was committed to delivering its budget according to its Money Plan – adding that it was on track to deliver a balanced budget by 2017 going into 2018.
Yet it was important for Papua New Guinea to lift productivity and improve infrastructure to continue economic growth.
“We cannot afford to be a high-cost producer both in the resources sector and sectors like agriculture,” he told the Leaders’ Summit.
“The mining sector also continues to be impacted by low world mineral prices. That presents a challenge for us as well… a challenge we must address through better productivity and a competitive environment.”
“The same applies to our agriculture sector. There are some ‘green shoots’ but more needs to be done to improve production, and ensure that we have efficient delivery from the farm to the customers.”
Mr O’Neill encouraged PNG to look further into downstream processing of materials in order to value-add to the materials produced and create more long-term employment opportunities for people.
He told the Business Breakfast that he would like to see business provide housing for their workers, while also encouraging investment in power generation.
“We have invested heavily in infrastructure over the last two and a half years. Including our investment in the Pacific Games and other infrastructure, we have invested close to K5 billion in infrastructure all around the country,” he said.
Infrastructure was one of the “pillar policies” of the government, he said, adding that education, health, law and order and building a strong economy were the others.
But another key policy was business regulatory reform, with Mr O’Neill telling the Business Breakfast that there was a lot to be done.
“The environment in which business regulations have been carried out in some of our public service has been discouraging at times to say the least,” he said.
“You can be assured that we will do everything possible to get the one-stop-shop idea up and running.”
Mr O’Neill said some portions of the public service were resistant to change, but added that he was sure planned reforms would be taken forward.
“I want to assure you that the processing of visas and work permits for international skilled workers and business people will be much easier,” he said.
PNG’s tax review, led by Sir Nagora Bogan, would be ready this year, he said.
“We are hoping that some of the recommendations of that review will be captured in the 2016 budget that we will present later in the year,” he told the Business Breakfast.