Papua New Guinea and the Natural Resource Curse

Nayda Avalos, Veronica Gonzales Stuva, Adam Heal, Kaoru Lida and Naohito Okazoe
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Nayda Avalos: Department of Economics, University of Central America, Bulevar Los Próceres, La Libertad, El Salvador
Veronica Gonzales Stuva: Inter-American Development Bank, 1300 New York Avenue, N.W. Washington, D.C. 20577, USA
Kaoru Lida: Ministry of Finance, 3-1-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8940, Japan
Naohito Okazoe: Fisheries Agency of Japan, 1-2-1 Kasumigaseki, Chiyoda-ku, Tokyo, 100-8907, Japan

Comparative Economic Studies, 2015, vol. 57, issue 2, 345-360

Abstract: Several empirical studies have found that countries experience slower rates of economic growth when exports are concentrated in natural resources (NRs). 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 ‘NR curse’. PNG displays some evidence of Dutch disease in the decline of local manufacturing in the past decade alongside exchange rate appreciation. This may be further exacerbated by large-scale exports of liquefied natural gas in future years. Extractive industry governance is a pressing challenge for PNG and the paper makes suggestions for reform in revenue management and spending.

Date: 2015
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