 |
|
 |
|||
|
|
For the last couple of years, we have seen huge increases in government spending via four separate supplementary budgets that took care of windfall revenues from commodity exports. These have gone into a vast array of projects and areas and, obviously, due to a lack of capacity to properly handle such funds and to implement many projects we can hardly anticipate that their full potential will be realised. This is one of the reasons why comments can be heard that despite programmes such as the district service improvement programme and the huge amounts of government spending in recent times, many people believe little development has occurred in areas where they live. Of course another reason for that situation is the fact that everything deteriorated during the lost decade of the 1990s and fixing things again is a long and arduous process in itself. Nevertheless, the last five years have set a strong pattern of rehabilitation, recovery and economic growth. The increased levels of government and private sector expenditure is one criteria. This is also being translated into record numbers of job creation which, according to the Central Bank, is taking place in virtually every province in the country. Some of the job creation is being generated by what is possibly the biggest building boom the country has ever seen, leaving aside the sporadic activity of big mining operations at Ok Tedi, Porgera and Lihir. Several major housing projects are underway for middle class homeowners for the first time in about 15 years. The government is assessing home ownership programmes for its public servants. Unprecedented commercial building activity is also taking place in the national capital and in Lae. Construction will certainly be at the heart of the pick up in economic activity and it will bring spin offs in many areas. Labour requirements for building and construction ranges from unskill-ed workers to carpenters, electricians, plumbers to most engineering disciplines. In addition there will be a need for increased supplies of cement, bricks, timber, electrical supplies, infrastructure development, etc. If the nation can continue with this virtuous cycle, construction activities will continue to grow and prosper and underpin broader economic growth and development. Construction activity is one of the reasons why banks and financial institutions are experiencing strong credit growth, with PNG-owned Bank South Pacific pioneering the way for affordable homes by providing customers with 25-year housing loans. Much of the new found prosperity is due to booming prices for copper, gold and crude oil and the increased revenue flows going into government coffers. The resources boom is helping to spur PNG’s economy recovery even though exploration activity had fallen away to miniscule levels during the 1990s and up to the end of 2002. Now expenditure on mineral exploration is growing strongly and several new projects will commence in the next few years, putting paid to the expectation just over five years ago that PNG’s resources sector would collapse in the middle of the next decade. Increased revenue flow from the mining sector will enable the government to spend more on education, health and agriculture. The just concluded visit by the most high powered Japanese business delegation ever to visit PNG is another pointer to the virtuous cycle because without greatly increased private sector investment, the economic recovery will not be sustainable. The Japanese are keen to support projects of a scale never contemplated in PNG’s history such as plans for one or more LNG (liquefied natural gas) plants costing around US$10 billion each and a big petrochemical plant for alternate fuels. PNG’s as yet untapped gas resources are vital for these industries and can only be developed for large scale consumers because of the tremendous development costs involved. Another clear sign of the impact of a virtuous cycle is the performance of PNG-based companies on global stock exchanges. Various PNG operations have been able to raise large amounts of risk capital on the Australian, Toronto and London stock exchanges. These include big players like Lihir Gold and smaller companies like Nautilus, Marengo, Frontier Resources and others. Back in the 1990s PNG companies listing overseas were sold at a discount because investors considered PNG a risky place to do business and invest. This discount appears to have disappeared in recent years because of high commodity prices and the country’s geological prospectivity. There is much reason for optimism about the future and I have been telling people interested in the situation that if they came back to PNG in 10 years time, they will not be able to recognise much of the country!
|
||
| Previous | Back to top | Next | |
|
|||
