Can PNG become the world’s richest black nation in 10 years?
16 June 2019
MAHOLOPA LAVEIL | Devpolicy Blog
CANBERRA - Papua New Guinea recently underwent a change in leadership, which saw the incumbent prime minister resign prior to a prime ministerial election on the floor of parliament.
James Marape was elected PNG’s eighth prime minister on 30 May 2019 with an overwhelming majority. Some 101 parliamentary members voted for Mr Marape, with seven voting for the other nominee, Sir Mekere Morauta.
That same evening Mr Marape addressed the country on one of its free-to-air television stations, EMTV, and later on social media. Amid thanking the former government and assuring the country it was in safe hands, Mr Marape announced that he aspired to make PNG the “richest black Christian nation on planet earth” within 10 years.
To assess the realism of such an aspiration, I put together a list of the top ten richest, black, Christian nations.
Christian nations are identified as those where most of the population identify as Christian (of whatever denomination). The richest were those with the highest real GDP in 2011 US dollars (‘real’ means adjusted for inflation) per person, using purchasing power parity (PPP) which adjusts for different costs of living across countries.
Real GDP per capita is a good indicator of wealth, as it measures the amount of income available to each person in a country. Black countries are those from sub-Saharan Africa, the Caribbean and the Pacific.
The richest black nation is Bermuda, with a GDP per capita of US$50,669. Bermuda is also predominantly Christian. Four nations that make the top-10 list are African, the remaining six are Caribbean. None of the predominantly black Christian nations in the Pacific region were wealthy enough to make the list (the richest being Fiji with a real GDP per capita of US$8,703).
It is of interest that none of the countries that make the top 10 are as populous as PNG. However, there are also larger black nations with a much higher GDP per capita than PNG.
For example, South Africa, with a population of 57 million, has a GDP per capita of US$12,294 – more than three times PNG’s GDP per capita.
All top-10 nations have a GDP per capita of above US$13,000, making them relatively wealthy, compared to PNG’s GDP per capita of US$3,825. If a simple compound growth rate is applied, for PNG to reach Bermuda’s current GDP per capita within ten years, it would have to sustain growth at 30% yearly.
PNG has never experienced 30% growth in the past; nor has any other country for that matter, at least not for any sustained period of time.
PNG has experienced two notable high GDP per capita growth rates in the past (according to World Bank data). In 1993, PNG enjoyed 15.3% growth. However, PNG’s growth rate plummeted to negative 5.8% in 1995 during a period of excessive government spending, increased domestic interest payments and unbudgeted advances on government price support scheme.
Decreasing public confidence led to capital flight and depletion of the Central Bank’s foreign reserves.
PNG’s second-highest real GDP per capita growth period was in 2014, when PNG experienced 13% growth resulting from the first shipments of the PNG LNG project. This was also followed by a sharp decrease in 2016 to negative 0.5% growth. This sharp decrease was due to the fall in world oil prices in 2015 which affected government budget revenues and resulted in a reduction in real GDP growth in subsequent years.
Policy changes proposed by the new government centre on increased local content in renegotiated mining and petroleum agreements, coupled with improved mechanisms for corruption detection and prosecution, and better accountability of government ministers.
Regardless of the merits of these policies, PNG’s history has shown it has not been able to sustain high growth rates. There are no quick and easy solutions to issues around lack of infrastructure, remoteness, and volatility in resource prices that make economic growth in PNG difficult.
While it is good to aspire to higher income, aiming to become a high-income country within a decade is unrealistic.
It may be more realistic to settle for goals such as catching up with Fiji’s per capita GDP of US$8,703, and aiming to be the richest Pacific nation, outside Australia and New Zealand.
Even this would require a growth rate of 8.6% for the next 10 years (assuming Fiji doesn’t grow at all). Catching up with Fiji alone will require not only very good policies, it will require longer than a decade.
Marape's whole statement is problematic, Daniel. I can sympathise with your objection regarding the word 'black'.
"The richest black Christian nation on planet earth" has other problems too.
Why does it have to be rich, for instance? We all know the old adage that money doesn't bring happiness.
And why Christian? Surely a nation's beliefs shouldn't be a determinate of its health?
Maybe Marape should adjust his aspirations.
Perhaps the happiest and most equitable nation embracing all colours and beliefs might be a better goal.
Posted by: Philip Fitzpatrick | 19 June 2019 at 10:26 AM
Hi Daniel - You're right about deep seated tribal affiliations. It can be a human strength or a weakness depending on how it is played up to.
We are all human and have the same basic DNA. As Abraham Lincoln said in his Gettysburg address, "we are all created equal". Unfortunately, after we are born, we then start trying to prove otherwise.
Posted by: Paul Oates | 19 June 2019 at 08:47 AM
I resent being called black, black simply means not white. We have deep rooted tribal identity forged over 10,000 years that far exceeds this vague generalisation that only came about after we were exposed to Europeans.
Posted by: Daniel Kamako | 18 June 2019 at 06:28 PM
PNG can become the richest black nation not by supporting transnational companies but by supporting the informal economy at the grassroots level.
Creating cash flow in the informal sector supports the poor people to eradicate poverty and improve living standards. When people are happy, the nation develops.
Posted by: Philip Kai Morre | 17 June 2019 at 10:38 PM
Wonderful analysis and insightful comments. A 10 year target should be realistic, and being #1 is not in the cards.
Elsewhere, I showed that the long term vision of PNG graduating to an upper middle income country (vision 2050), and no longer being a developing country is entirely possible if an average economic growth of 5% of GDP per year is sustained. http://bit.ly/2WOtL8g
Regrettably, in PNG required framework conditions are not present nor is there a credible and effective process in place to create them (law and order, sustainable tax system, property rights, health, education etc.), while economic policies have usually been misguided and disastrous. Consequently we have seen mostly boom-bust cycles and lack of capability to manage the economic cycle.
Posted by: Albert Schram | 17 June 2019 at 06:41 PM
There is capital flight not because of decreasing public confidence but purely due to extraction merchants stashing their earnings offshore with complicated business registration and ownership arrangements.
Using the huge political capital that the new prime minister has, simple amendments to resource laws can reverse that trend.
Posted by: Corney Korokan Alone | 17 June 2019 at 05:06 PM
That's a very good point about tourism and the comparison between PNG and Fiji.
Developing tourism in PNG requires two important precursors, fixing the law and order problem and providing suitable infrastructure such as good roads and better airports.
Tourism, law and order and infrastructure would all feed into each other. Youths who create many of the law and order problems could be employed in tourism and infrastructure projects for instance.
Marape's aspiration doesn't have to succeed to be successful. It simply needs to exist as a target. I'm sure he doesn't believe he can achieve such an aspiration, even in the long term.
Posted by: Philip Fitzpatrick | 16 June 2019 at 01:34 PM
Tourism is the sleeping giant in PNG for creating the most jobs and economic growth. Compare tourism in Fiji and PNG and examine the PNG tourism potential.
Posted by: A Fairsay | 16 June 2019 at 09:58 AM