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Papua New Guinea: A New Gold Mountain?

It’s a country many people haven’t heard much about, but it is hosting the Asia Pacific Economic Cooperation (APEC) leaders in November, including the leaders of China, Japan and the US.  Located strategically between South East Asia and Australia, rich in resources and untapped opportunities, it’s time to pay more attention to Papua New Guinea. Chinese companies have certainly discovered it, even before Papua New Guinea joined the Belt and Road Initiative this year, and so has the media, with geopolitical rivalry being stirred up, although it seems Papua New Guinea just wants to make the most of its time in the spotlight.

Papua New Guinea is a land that some would say time forgot.  A place of tropical forests and spectacular coral reefs, for most of its people it is a place largely untouched by economic development.

It is a society of ancient cultures, including 850 languages amongst a population of only eight million.  It’s a young nation, independent since 1975 and has only this year begun to carve out a role in international relations, as chair of APEC for 2018.

Through its leadership of APEC, chairing important meetings of the some of the world’s leading economies, Papua New Guinea ministers and officials have demonstrated professionalism as well as policy acumen over the last year.   In a time of trans-Pacific trade tensions they have guided difficult discussions on improving digital and other connectivity and deepening regional economic integration, while bringing sustainable and inclusive growth to the heart of the policy agenda.


There are deep and abiding links to its southern neighbour, Australia, which was given the mandate by the League of Nations after World War One to act as colonial power and to bring Papua New Guinea to independence.  The two countries have a special relationship including deep economic and strategic ties.   Australia played a leading role in Papua New Guinea’s early resources projects, is the leading contributor of aid and no doubt will continue to be an important partner to Papua New Guinea.

In recent years, though, the focus has all been China.  Major new roads are being built, a rash of new buildings, airport and port construction all bear signs featuring China aid or Chinese companies. Investment from China reached almost US$2 billion in 2017, along with bilateral trade of nearly US$3 billion, making China the second largest economic partner for the nation, after Australia.  Chinese loans have also become an important source of funding infrastructure, although Papua New Guinea needs to be careful not to breach its long-term debt ceiling of 35 per cent of GDP or repayments could become a future problem.

Papua New Guinea has rich reserves of minerals.  It recently began developing its abundant Liquid Natural Gas (LNG) resources, with a project worth US$19 billion developed successfully by ExxonMobil and a second project under development by Total.  The biggest Chinese investment to date is by Metallurgical Corporation of China (MCC) which has an 85% share of the US$1.4 billion Ramu nickel/cobalt mine. In 2015, Zijin Mining Group bought a 50% share in Porgera gold mine.  In the next few years, Guangdong Rising Assets Management Company expects to develop the giant Frieda River mine, one of the largest undeveloped deposits of copper and gold in the world.

Drying sea cucumber for export to China

Papua New Guinea has significant maritime resources, including seabed resources ready for exploitation, now that the technology to access them is becoming viable.  In its Exclusive Economic Zone of 2.5 million square kilometres, the Pacific nation has vast fisheries, including 18% of the world’s tuna.  The nation can massively benefit from further development of fisheries but progress has been slow.

Papua New Guinea is the world’s leading exporter of tropical timber and is China’s second largest source of timber imports, although it has serious problems with illegal logging.  Forestry accounts for nine per cent of GDP and there is a growing downstream processing industry.  It also has plenty of land for agriculture, mostly undeveloped, which could yield much more than the current successful crops of palm oil, coffee and cocoa.  The traditional knowledge about low tech, organic production makes it an ideal source of branded, pure source products and there is an amazing story to tell – archaeological evidence indicates settlers in the Highlands’ Kuk Valley were some of the first people in the world to develop agriculture.

And what about tourism?  With its spectacular scenery, pristine reefs for diving and rich diversity of cultures, Papua New Guinea should be on any adventurous traveller’s bucket list.  The fact that it’s not – apart from some hardy Australians who hike the wartime Kokoda Track – can be blamed on law and order problems in the capital, Port Moresby, and some other large towns.  But the Government has an ambitious plan to bring tourists direct to the safe and spectacular islands in the north east of the archipelago.  Watch this space for the future development of Kokopo as a hub for tourists to experience a live volcano, cultural performances, swimming with dolphins, secluded island resorts and much more.  The infrastructure (and direct flights) might be missing currently, but Chinese investors are already lining up.

Diving, dolphins, volcanoes and more at Kokopo

Despite all the promise, though, Papua New Guinea faces huge challenges.  At independence, the young nation had only a secondary education system and no road between its capital and any other centre.  Its education levels have improved, its governance is stabilising and infrastructure is being developed, but there is a long way to go.

Perhaps the biggest challenge of all is some of the simplistic – and at times jingoistic – commentary that passes for geopolitical debate in the region.  To be sure, the rise of China as a major player is spooking some who are uncomfortable with change.  There are those who yearn for the supposed certainty of the past. Nevertheless, it is in everyone’s interests that not only Papua New Guinea, but also its larger neighbours such as Australia and Indonesia, continue to develop pragmatic economic engagement with the region’s leading economy.

China has the capacity, as both investor and as a major market, to help drive new industry development in Papua New Guinea that can create greater opportunities for its people.  As Prime Minister O’Neill points out, Australia has enormously benefited from trading with China, as well as investment and tourism from China.  Why should not Papua New Guinea?

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