Papua New Guinea Country Brief - April 2008

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.

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 Agreed Statement on Security Cooperation; the Torres Strait Treaty; and, most recently, the Joint Agreement on Enhanced Cooperation agreed in July 2004.

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.

The Papua New Guinea Government hosted the most recent Australia-PNG Ministerial Forum on 23 April 2008 in Madang.

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.

See also Australia's Aid Program to PNG

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 23 ADF personnel 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).

After several years of contraction, the PNG economy has been growing since 2003. The economy grew at 5.2 per cent in 2007, and PNG Treasury projects growth of 6.6 per cent for 2008. Other macroeconomic indicators have also improved, with inflation rates and interest rates remaining low, foreign reserves at historic levels and employment in the formal sector growing. In 2008, the PNG Government has forecast inflation to reach to 5.2 per cent.

The PNG Government has projected a budget surplus of Kina 202.3 million, or 1.1 per cent of GDP, for 2008. The surplus will be used to reduce external borrowings and PNG’s total public outstanding debt is forecast to reduce to 31.8 per cent of its GDP by the end of 2008.

Bilateral Economic and Trade Relationship

Australia is by far PNG’s largest source of imports and is also its number one export market. In 2006, Australia purchased 30.1 per cent of PNG’s merchandise exports, ahead of PNG’s second and third largest export partners, Japan and China, on 8.1 per cent and 5.7 per cent respectively. Australia provided 52.3 per cent of PNG’s merchandise imports in diverse categories including industrial and agribusiness products, food and beverages and household wares. Australia is ahead of PNG’s next largest import sources, Singapore at 12.6 per cent and Japan at 5.9 per cent.

In 2006-07 Australia imported $2.2 billion worth of goods from PNG, a 4.5 per cent decline on 2005-06. Australia’s merchandise exports to PNG totalled $1.5 billion, a 9 per cent increase on 2005-2006. Two way merchandise trade is valued at around A$3.7 billion annually, making PNG our 21st 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 2006-07 were crude petroleum (A$442 million), engineering equipment (A$50 million), specialised machinery (A$44 million) and transport vehicles (A$35 million).

The major Australian imports from Papua New Guinea in 2006-07 were crude petroleum (A$1,101 million), non-monetary gold (A$1.011 million), coffee and coffee substitutes (A$31 million) and refined petroleum (A$23million).

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 email the Department of Foreign Affairs and Trade.