PAPUA NEW GUINEA EXPORTS Trends and development impacts

Aaron Batten, Country Economist Port Moresby Resident Mission

June 27th 2013

INTRODUCTION

What has the last decade of economic growth meant for the export linkages of the PNG economy? Are PNG businesses integrating themselves with ‘factory Asia’ or opening up other new partnerships? What implications do these trends have for encouraging more inclusive growth?

Underpinning the last decade of economic growth has been a dramatic increase in PNG’s exports…

PNG exports ($US, billions)

Export sales have increased from $1.6

billion in 2002 to $7.5 billion in 2012.

Share of exports to GDP has increased from 40% in 2002

to 51% in 2012.

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012*

By 2012, sales of gold, copper and oil, were contributing roughly two thirds,

or $4.5 billion, of total export

earnings.

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012*

Oil

Copper

Gold

Total

…driven by increasing sales of gold, copper and oil…

PNG exports ($US, billions)

With strong commercial links to PNG’s mining and petroleum sectors

these two countries now purchase

roughly ¾ of PNG’s total exports, with

Australia alone responsible for 55%

in 2012.

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012*

Japan

Australia

Total

…reinforcing PNG’s traditional export partnerships with Australia and Japan.

PNG exports ($US, billions)

Excluding Japan,

about 20% of PNG’s exports sold to Asia

while North America and Europe

accounted for less than 15% of sales.

…and painting a stagnant picture of PNG’s export diversification.

PNG exports ($US, billions)

0

2

4

6

8

2000 2002 2004 2006 2008 2010 2012

Other Pacific

Europe Rest of Asia

Total

BUT the PNG economy has been more dynamic than aggregate figures suggest…

Asian and European economies have

driven rapid growth in non-mineral

exports over the last decade.

Between 2000 and 2011, PNG’s non-

mineral export earnings rose in value by 230%, from $660

million to $2.2 billion.

PNG non-mineral exports ($US, billions)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2000 2002 2004 2006 2008 2010 2012

US Pacific

Japan Australia

Europe Rest of Asia

0

100

200

300

400

500

600

700

2000 2002 2004 2006 2008 2010 2012*

Thailand Singapore

Philippines Malaysia

Japan Indonesia

India PRC

…Asian non-mineral exports led by PRC along with Malaysia, Thailand, Singapore, Philippines & Indonesia…

PNG non-mineral exports ($US, billions) China dominates

non-mineral Asian exports, with

Malaysia, Thailand, Philippines, India

and Indonesia also growing.

Japan has been declining as an

export destination.

0

200

400

600

800

1,000

1,200

1,400

2000 2002 2004 2006 2008 2010 2012

OtherOil seed & fruit oilRubberAnimal and vegetable oils, fats and waxesFish and crusteceansCoffee, tea, cocoa and spicesWood

PNG non-mineral exports ($US, billions)

…dominated by sales of logs and log products…

Wood products

make up roughly 65% of sales to Asia.

0

100

200

300

400

500

2000 2002 2004 2006 2008 2010 2012

Other

Oil seed & fruit oil

Rubber

Animal and vegetable oils, fats and waxes

Fish and crusteceans

Coffee, tea, cocoa and spices

…but also with significant growth in a number of other commodities.

PNG non-mineral exports ($US, billions)

Coffee, cocoa, and fish have all been major sources of

growth.

European exports increased almost

fourfold from $220 million in 2000 to

$810 million in 2011.

European export growth led by Germany, Netherlands, UK and Italy…

0

100

200

300

400

500

2000 2002 2004 2006 2008 2010 2012

Germany Netherlands

Italy UK

PNG non-mineral exports ($US, billions)

Growth focused on

vegetable oils, seafood, coffee,

cocoa, tea, spices, and rubber.

0

200

400

600

800

1,000

2000 2002 2004 2006 2008 2010 2012

Other

Fish and crusteceans

Coffee, tea, cocoa and spices

Animal and vegetable oils, fats and waxes

Palm oil, copra, cocoa and fish have led these growing export sales…

PNG non-mineral exports ($US, billions)

Other markets are also becoming important, like the United States.

0

20

40

60

80

100

120

140

160

2000 2002 2004 2006 2008 2010 2012

Other

Fish and crustaceans

Coffee, tea, cocoa, spices

Petroleum

Growing sales to USA comprised of coffee, cocoa, fish

and vanilla.

PNG non-mineral exports ($US, billions)

Conclusion 1/3: PNG’s export performance has been more dynamic than aggregate figures suggest.

Export volumes (2002 = 100)

0

50

100

150

200

250

Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12

Non-Mineral

Gold

Copper

Crude Oil

Non-mineral export growth driven by both

price and volume increases.

Mineral export growth driven exclusively by

prices.

Source: BPNG QEB 2013.

Conclusion 2/3: Non-mineral exports have been a key driver of employment growth, formal and informal.

Employment growth (annual % change)

-10

-5

0

5

10

15

20

Mar-02 Jul-03 Nov-04 Mar-06 Jul-07 Nov-08 Mar-10 Jul-11

Agriculture/Forestry/Fisheries Total

Non-mineral exports and total

employment growth are closely

related.

Source: BPNG QEB 2013.

Conclusion 3/3: PNG’s progress towards extending its domestic value chains has been limited.

PNG economic complexity of exports index (out of 128 countries)

0

32

64

96

128

1975 1982 1989 1996 2003

PNG economic complexity rank

(out of 128 countries)

Index measures the diversity and

ubiquity of products

exported by a country.

PNG has become one of the worlds least ‘knowledge based’ exporters.

Source: Hausman and Hidalgo (2012).

Thank you.

Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines

Tel + 632 632 4444

Port Moresby Resident Mission Level 13, Deloitte Tower

Port Moresby, PNG