In a recent working paper, we examine staple and cash crop production yields in Papua New Guinea (PNG). In doing so, we assess the yield gap (difference between the crop yields farmers commonly obtain and what they might realize with optimal inputs and crop management) for the main staple food crops in PNG. The yield gap for sweet potato is the smallest (1/4 - 1/3 less than attainable yields), while banana shows the largest yield gap at about ¾ less than what might be achieved under intensive cultivation. In addition, we compare PNG agricultural output with areas of similar growing conditions in Indonesia to provide insight into potential investments to further spur agricultural productivity in PNG. Finally, we assess current sector policies in PNG that aim to support agricultural development as an engine for economic growth.
If smallholder farming households in Papua New Guinea achieve higher crop productivity levels, progress will be made along several dimensions of the development vision for PNG – increasing GDP for the agricultural sector and the overall economy; driving growth, diversification, and transformation of local rural economies; improving food consumption; and reducing poverty. In this paper, we examine recent data on yields for the most important crops grown in PNG, assess what yields might be achieved based on productivity data from areas of Indonesia with similar growing conditions, and sketch where policy reforms could provide incentives and access to technologies to achieve higher crop yields by all farmers across PNG.
Policy simulations utilizing an economy-wide model based on PNG national accounts and survey data highlight the importance of linkages between the agricultural and non-agricultural sectors of the PNG economy. There are potentially major benefits of increased agricultural productivity for national income and urban households. To reduce rural poverty, however, transport and processing costs must be lowered, as well. Even if only half of the increase in foreign exchange earnings from the 2022 world energy price shock is absorbed into the PNG economy, the real exchange rate appreciates by 13 percent, reducing incomes from export crops. However, increased domestic demand for non-tradable crops contributes to a 10 percent income gain for the rural poor. Using a portion of increased oil and natural gas revenues to finance new investments in crop agriculture, processing and transport, provides even greater benefits by spurring real GDP growth and raising real household incomes by an additional 2 to 4 percentage points. A hypothetical carbon credit arrangement in which PNG reduces deforestation in exchange for funds used to finance cash transfers to the poorest 20 percent of both urban and rural households could raise the incomes of these groups by about 13 percent.
Policymakers in Papua New Guinea face difficult choices as to how best to promote economic growth and reduce poverty in the context of vast differences in technology and infrastructure across the country. Fluctuations in world prices of petroleum, minerals, and export crops complicate the management of the economy because of their large impacts on export earnings and government revenues, as well as household welfare. Moreover, other shocks, such as the Covid-19 pandemic that shut down major parts of the economies of PNG and the rest of the world, have far-reaching effects on various economic sectors, as well as the health and welfare of the population. This paper presents an analysis of investment options in the agricultural sector and the effects of major economic shocks to the PNG economy using an economy-wide computable general equilibrium (CGE) model that provides estimates of the economic linkages between production, household incomes, consumption, investment, and trade. The model’s base data, a Social Accounting Matrix (SAM) for 2019, and many of the parameters are derived from the national accounts, household surveys and other data for PNG. It is important to realize, however, that even though the SAM and model structure provide a framework that guarantees a consistency of many of the assumptions, there remain many uncertainties in the data. Thus, the results presented here should not be interpreted as exact estimates, but only approximations of potential effects of policies and external shocks. The plan of this paper is as follows. Chapter 2 provides an overview of agriculture and economic growth in PNG over the last two decades, highlighting the declining share of agriculture in GDP despite positive agricultural GDP growth rates and changes in the real exchange rate that have major implications for incentives in the economy. Chapter 3 then presents a summary of the economy-wide model used in the analysis. Details of the model are found in the annexes and in the references included in the paper. Design of the model simulations and model results are discussed in Chapter 4. These simulations cover various investments in agriculture and transport infrastructure, increases in world prices of petroleum and natural gas, price increases for agricultural exports and hypothetical carbon credits tied to a reduction in exports of forestry products. Chapter 5 concludes with a summary of the main findings, policy implications and suggested areas for further work.
Despite abundant natural resources and the prospects of a major increase in mineral revenues, Papua New Guinea faces several development challenges in the years ahead. Nevertheless, opportunities exist provided that sound economic ¿polices are maintained, private sector initiatives are encouraged, projects are successfully implemented, skilled manpower is increased and the required external capital and technical assistance is obtained. This paper consists of five chapters which provide an overview of development and growth prospects in Papua New Guinea. Chapter 1 looks at the country's recents performance, policy issues and prospects. Chapter 2 reviews the development issues of the mining and petroleum industries as well as the key productive sectors. It pays particular emphasis to agriculture and suggests supporting initiatives in the expansion of infrastructure and human resource development. Chapter 3 discusses the main elements of investment strategy and policy against a backdrop of recent trends. Chapter 4 examines key issues related to resource management in the public sector, including fiscal management, budgetary support, public investment and institutional reform. Finally, Chapter 5 discusses the requirements, performance and prospects of external trade and financing.
Despite abundant natural resources and the prospects of a major increase in mineral revenues, Papua New Guinea faces several development challenges in the years ahead. Nevertheless, opportunities exist provided that sound economic ¿polices are maintained, private sector initiatives are encouraged, projects are successfully implemented, skilled manpower is increased and the required external capital and technical assistance is obtained. This paper consists of five chapters which provide an overview of development and growth prospects in Papua New Guinea. Chapter 1 looks at the country's recents performance, policy issues and prospects. Chapter 2 reviews the development issues of the mining and petroleum industries as well as the key productive sectors. It pays particular emphasis to agriculture and suggests supporting initiatives in the expansion of infrastructure and human resource development. Chapter 3 discusses the main elements of investment strategy and policy against a backdrop of recent trends. Chapter 4 examines key issues related to resource management in the public sector, including fiscal management, budgetary support, public investment and institutional reform. Finally, Chapter 5 discusses the requirements, performance and prospects of external trade and financing.
Agriculture dominates the rural economy of Papua New Guinea (PNG). More than five million rural dwellers (80% of the population) earn a living from subsistence agriculture and selling crops in domestic and international markets. Many aspects of agriculture in PNG are described in this data-rich book. Topics include agricultural environments in which crops are grown; production of food crops, cash crops and animals; land use; soils; demography; migration; the macro-economic environment; gender issues; governance of agricultural institutions; and transport. The history of agriculture over the 50 000 years that PNG has been occupied by humans is summarised. Much of the information presented is not readily available within PNG. The book contains results of many new analyses, including a food budget for the entire nation. The text is supported by 165 tables and 215 maps and figures.
