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Papua New Guinea Country Brief

General Information

The mainland of Papua New Guinea, together with its six hundred other islands (463,000 square kilometres), has a population of approximately 6.1 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 2.7 per cent per annum.

History

Archaeological evidence suggests human settlement on the island dates back at least 60,000 years. Migration probably occurred by sea from South East Asia during an ice age when sea levels were lower and distances between islands shorter.

The first Europeans to sight New Guinea were probably Portuguese and Spanish navigators sailing in the South Pacific in the early part of the 16th century.

1526-27

Don Jorge de Meneses credited with naming the principal island "Papua" - a Malay word meaning frizzy hair

1545

Yngio Ortis de Retez (a Spaniard) coins the term "New Guinea" because of a presumed resemblance to inhabitants of the African Guinea coast

1884

Germany takes formal possession of the northeast quarter and adjacent islands (including Bougainville)

1884

British protectorate - British New Guinea - proclaimed over the southern coast (the area called Papua) and adjacent islands

1888

British New Guinea annexed by Britain on 4 September

1899

German imperial government assumes direct control of the northern territory, naming it German New Guinea

1902

British New Guinea placed under the authority of the Commonwealth of Australia

1905

Passage of Papua Act in the Australian parliament - British New Guinea now known as Territory of Papua

1906

Commencement of formal Australian administration of the Territory of Papua

1914

Australian troops occupy German New Guinea, which remains under Australian military control until 1921

1920

British Government, on behalf of the Commonwealth of Australia, assumes a mandate from the League of Nations to govern the Territory of New Guinea

December 1941

Japanese invasion brings suspension of Australian civil administration of the Territory of Papua

1941-45

Allied military administration of the Territory of Papua

1945

Japanese surrender restores civil administration of Papua, as well as New Guinea, under Papua New Guinea Provisional Administration Act, 1945-46

Post-war developments

In 1949, the Papua and New Guinea Act confirmed the administrative union of New Guinea and Papua under the title of 'The Territory of Papua and New Guinea' and placed it under the international trusteeship system. The Act provided for a Legislative Council (established in 1951), a judicial organisation, a public service, and a system of local government. The first House of Assembly, which replaced the Legislative Council in 1963, opened on 8 June 1964. In 1972, the name of the territory was changed to Papua New Guinea and elections saw the formation of a ministry headed by Chief Minister Michael Somare, who pledged to lead the country to self-government and then to independence. Independence from Australia was proclaimed in 1975.

Political Overview

System of Government

Papua New Guinea is a constitutional monarchy. The Head of State is HM Queen Elizabeth II, represented in Papua New Guinea by a Governor-General. The Governor-General is elected directly by Members of the National Parliament and performs mainly ceremonial functions. Sir Paulias Matane was sworn in as PNG's eighth Governor-General on 29 June 2004.

Papua New Guinea has three levels of government - national, provincial and local. The National Parliament is a 109-member unicameral legislature elected for five year terms by universal suffrage. The Prime Minister is appointed and dismissed by the Governor-General on the proposal of Parliament. The Cabinet – or National Executive Council – is appointed by the Governor-General on the recommendation of the Prime Minister.

Members of Parliament are elected from 19 provinces and the national capital district of Port Moresby. Parliament is made up of 89 single-member electorates and 20 regional electorates. The regional electorates coincide with PNG's provinces and the National Capital District – members from these electorates also serve as the provincial Governors. Each province is responsible for its own provincial assembly and administration.

The Supreme Court, National Court, and local and village courts form the independent justice system.

Political system

Historically, there has been a high turn-over of parliamentarians at general elections in PNG. In 2002, for example, around 80 per cent of sitting members lost their seats. Up to and including the June 2002 general election, members of parliament were elected on a first-past-the-post basis, and they frequently won with less than 15 per cent of the vote. After the 2002 election a system of limited preferential voting was introduced, under which voters are required to list a first, second and third preference.

To date, no single party has won enough seats to form a government in its own right; governments have been coalitions. The main parties include the National Alliance (NA), PNG Party, People’s Action Party (PAP), People’s Democratic Movement (PDM), PANGU Pati, United Resources Party (URP), People’s National Congress (PNC), People’s Progress Party (PPP), New Generation Party (NG) and the Rural Development Party (RDP).

The Organic Law on Integrity of Political Parties and Candidates (OLIPPAC) or 'Integrity Law', was enacted by the Morauta Government in 2001, with the aim of strengthening political parties and the executive government in PNG. The OLIPPAC included new regulations on the formation, composition and funding of parties; limitations on how MPs can vote on a motion of no-confidence against the executive; changes to the rules on the formation of government, defections from political parties and offences for breaking the law; and restrictions on independent MPs.

PNG governments are protected by the Constitution from no-confidence motions for the first 18 months of a five-year term. Once the 18-month moratorium expires, a successful no-confidence motion results in an alternative Prime Minister (nominated in the no-confidence motion) being able to form a new government without the need for a national election, unless the no-confidence motion occurs during the last twelve months of a five-year term in which case a national election must be held. With the exception of the recently completed 2002-2007 parliamentary term, changes in government following motions of no-confidence have been a characteristic of Papua New Guinea politics since independence.

Recent political developments

At national elections held in June and July 2007, incumbent Prime Minister Sir Michael Somare’s National Alliance party won the highest number of seats (27 out of 109). At its first sitting, on 13 August, the new Parliament elected Sir Michael as Prime Minister for another term. National Alliance leads a coalition which includes the People’s Action Party, United Resources Party, PANGU Pati, People’s National Congress, People’s Democratic Movement and a number of smaller parties. The Opposition includes former Prime Ministers Sir Mekere Morauta (PNG Party), Sir Julius Chan (People's Progress Party) and former Treasurer Bart Philemon (New Generation Party).

Sir Michael announced his National Executive Council (Cabinet) on 29 August 2007. The 18 month period of grace during which the Somare Government was immune from a motion of no confidence expired on 13 February 2009.

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. More than 30 years after Papua New Guinea's independence, Australia's relationship with the country is one of our most complex and wide-ranging. Australia has a strong interest in Papua New Guinea's sustainable development and stability. The presence of approximately 8,000 Australians in PNG is also of significant interest to the Australian Government.

Key aspects of the bilateral relationship 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 Torres Strait Treaty; the Joint Agreement on Enhanced Cooperation agreed in July 2004 and most recently, the Joint Understanding on the Kokoda Track and Owen Stanley Ranges which was signed at the Australia-Papua New Guinea Ministerial Forum in April 2008 and the Partnership for Development, which was signed by the Australian and Papua New Guinea Governments on 21 August 2008.

Australia-Papua New Guinea Ministerial Forum

The Australia-Papua New Guinea Ministerial Forum is the highest-level regular meeting between the two countries. Foreign Ministers from each country traditionally lead their delegations to the Forum. In the past, Ministers in charge of the treasury, finance, defence, attorney-general, immigration, police, customs, trade, transport, among others, have attended. The Forum usually includes an opportunity for the business community to engage with Ministers from both countries.

Australia hosted the 19th Australia-PNG Ministerial Forum on 10 June 2009 in Brisbane. The Australian Minister for Foreign Affairs, Mr Smith, and his counterpart from Papua New Guinea, the Minister for Foreign Affairs, Trade and Immigration, Mr Sam Abal, co-chaired the Ministerial Forum, possibly the largest bilateral meeting ever held in Australia.

The 19th Ministerial Forum demonstrated the importance both countries attach to the bilateral relationship. Eight Ministers and three Parliamentary Secretaries from Australia, and seventeen Ministers from Papua New Guinea participated in the Forum, which also provided an opportunity for close engagement between government delegates and business representatives on commercial and trade issues.

The 19th Ministerial Forum took forward the comprehensive outcomes of the 18th Ministerial Forum, which was hosted by Papua New Guinea in April 2008 in a spirit of renewal and cooperation following the March 2008 visit to Papua New Guinea by Prime Minister Rudd. The 19th Ministerial Forum also built on the goodwill generated by the visit to Australia in April/May 2009 by the Prime Minister of Papua New Guinea, the Right Honourable Grand Chief Sir Michael Somare.

Key outcomes from the 2009 Australia-Papua New Guinea Forum included:

The Communiqué is available on this website.

Development cooperation

Reflecting the strong ties between Australia and Papua New Guinea, the development cooperation program is one of Australia's largest bilateral aid programs.

Defence Relations

The bilateral Defence Cooperation Program involves the provision of assistance in training and technical advice, as well as a number of bilateral exercises that are conducted on a regular basis. Support is provided by 21 ADF personnel and 2 defence civilians who fulfil a variety of advisory and in-line roles in the PNG Defence Force.

Economic Overview

PNG has a dual economy comprising a formal, corporate-based sector and a large informal sector where subsistence farming accounts for the bulk of economic activity. The formal sector provides a 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. Migration to major city centres in the past decade has contributed to urban unemployment and social problems. Papua New Guinea's social indicators, in general, are well below those of lower middle income countries (particularly in rural areas).

In comparison to other Pacific island countries, PNG is in a reasonably strong economic position, with the savings it accrued during the commodity boom now acting as a fiscal buffer against the Global Economic Crisis (GEC), and its financial sector relatively sheltered from the impact of the global credit crunch.

However, while economic growth is expected to be positive in 2009, driven by strong domestic activity, recent forecasts show a significant slowing, from around 7 per cent in 2008 to around 4 per cent in 2009.

The prices of most of PNG’s key export commodities (copper, oil, palm oil, timber, coffee and cocoa) have fallen significantly, impacting on budget revenues and the balance of payments. PNG’s Final Budget Outcome for 2008 has swung around from an expected 2 per cent (of GDP) surplus to a 1 per cent deficit. With a heavy reliance on mineral extraction, a protracted global recession would pose a significant risk to the outlook for PNG’s economy.

On the upside, the fall in the oil price and in commodity income has taken some inflationary pressure out of the economy. The Bank of PNG (PNG’s Central Bank) now expects inflation to fall to 7 per cent in 2009, down from 13.5 per cent in the year to September 2008. The GEC has also boosted the price of gold, PNG’s third key export, to some degree offsetting declines in other commodities.

Bilateral Economic and Trade Relationship

Australia is by far PNG’s largest source of imports and is also its number one export market. In 2007, Australia purchased 25.9per cent of PNG’s merchandise exports, ahead of PNG’s second and third largest export partners, Japan and China, on 9.5 per cent and 5.8 per cent respectively. Australia provided 50.9 per cent of PNG’s merchandise imports in diverse categories including crude petroleum, civil engineering equipment, specialised machinery and food, especially meat (excluding beef). In 2007, Australia was ahead of PNG’s next largest import sources, Singapore at 11.3 per cent and China at 7.7 per cent.

In 2008 Australia imported $2.9 billion worth of goods from PNG. Australia’s merchandise exports to PNG totalled $1.6 billion. Two way merchandise trade is valued at around A$4.5 billion annually, making PNG our 23rd largest trading partner.

The mining sector has traditionally been a focus of Australian investment in PNG, particularly gold mining and oil and gas. Key Australian companies in the mining and petroleum sector are Australian listed companies Oil Search Ltd, Lihir Gold Ltd and Highlands Pacific Ltd. Lihir's major shareholder is Rio Tinto.

Other key investors in PNG include Australia-based companies Coca Cola Amatil, Campbell Australia Pty Ltd and Nestle Australia.

Export Opportunities

The major Australian merchandise exports to Papua New Guinea in 2008 were crude petroleum (A$312 million), engineering equipment (A$51 million), specialised machinery (A$51million) and meat (excluding beef) (A$40 million).

The major Australian imports from Papua New Guinea in 2008 were non-monetary gold (A$1.634 million), crude petroleum (A$1.184 million), coffee and coffee substitutes (A$31 million) and refined petroleum (A$25million).

Opportunities continue to exist for Australian companies to supply PNG's mining sector, which looks for competitive services, prompt delivery and good after-sales service.

TradeWatch Contacts

If you would like more information on the trade and economic conditions in PNG, please e-mail the Department of Foreign Affairs and Trade.

Updated September 2009