Papua New Guinea and the natural resource curse
Abstract
By Nayda Avalos, Veronica Gonzales Stuva, Adam Heal, Kaoru Lida and Naohito Okazoe
Several empirical studies have found that when exports are concentrated in natural resources countries experience slower rates of economic growth. Various potential channels for this relationship have been identified including Dutch disease, volatility in the terms of trade, and impacts on governance. This paper explores whether Papua New Guinea (PNG), a resource rich state in the South Pacific, displays signs of suffering from the natural resource curse. The paper finds some evidence of Dutch disease in the decline of local manufacturing. This may also be exacerbated by large scale exports of liquefied natural gas (LNG) in future years. In addition, the paper finds that extractive industry governance is a pressing challenge for PNG and makes suggestions for reform in revenue management and spending.
