Spotted on the PNG Mine Watch blog

Many commentators are talking excitedly about the unprecedented riches that will come from Papua New Guinea’s resource boom. Phil Mercer writing for Voice of America (see below) is just the latest.

But who is REALLY going to reap the benefits from Papua New Guinea’s oil, gas, gold and silver?

Papua New Guinea has already experienced 20 years of massive resource exploitation. Its forests are almost logged out, tuna stocks over exploited, mines like Misima are already exhausted, Ok Tedi will soon close, Porgera, Tolokuma and Lihir have been operating for more than a decade and have been joined by Sinivit, Kainantu and Simberi.

But who has benefited from all these riches? Clearly not ordinary Papua New Guinean’s.

PNG ranks a lowly 137th out of 169 countries on the United Nations Human Development Index which ranks countries according to a broad measure of well being that is far more relevant to ordinary people than the usual indicators used by the exploiters, economic growth and annual income.

Papua New Guinea’s mining boom promises unprecedented riches for multinational corporations and a local elite of politicians, businessmen and bureaucrats but offers only more environmental damage and social problems caused by alcohol, violence and the break-down of family and community ties for ordinary people.

And don’t be fooled by all the talk of Sovereign Wealth Funds and trust accounts. The PNG Sustainable Development Fund sits on a fortune of almost $1 billion but is failing to use the money wisely or effectively because of the complete erosion of the public service by corruption and political neglect.

Mining boom promises unprecedented riches

Phil Mercer*

Papua New Guinea says a multi-billion dollar liquefied natural gas project is expected to help propel the country’s economic growth rate to a robust eight percent this year.

Fueled by rapidly growing demand in Asia for cleaner fuels and global concerns over climate change, the Exxon Mobil-led natural gas partnership with Papua New Guinea is part of a mining boom that is bringing unprecedented wealth to the South Pacific nation.

The liquefied natural gas – or LNG – project that is led by US energy giant Exxon Mobil is the largest investment scheme in Papua New Guinea’s history.

Production is expected to start within four years and has the potential to double the country’s income.

In the capital, Port Moresby, the government faces the challenge of ensuring that this new-found prosperity is handled responsibly and transparently.  Ministers have announced plans to set up special accounts known as sovereign wealth funds to save some of the revenue for future generations.

This week Papua New Guinea’s Treasurer, Peter O’Neil, told the national parliament that the boom in the mining and petroleum sectors had attracted large numbers of foreign investors, which is good news for the economy.

“Mr. Speaker the outlook for 2011 is very positive. The economy is expected to grow largely driven by the expected ramping up of the PNG LNG construction activity, and a strong growth in mining and agricultural sector,” he said.

On Friday, Treasury officials said the mining sector is providing the country with an unprecedented opportunity to alleviate poverty. They said money from the project will be reinvested into local communities, including funds for helping tribal landowners start businesses.

Mineral deposits, including gold, oil and copper, account for nearly two-thirds of Papua New Guinea’s export earnings. It is estimated that reserves of natural gas amount to more than 225 billion cubic meters.  The industry is fueled by strong demand from Asia, most notably Japan, China and South Korea.

But as companies rush to extract the country’s rich natural resources, Dr. John Burton, from the Australian National University, believes the government there might not be able to cope. 

“Is it a free-for-all? Well no, I do not think it is a free-for-all but every industry needs regulators simply to handle things like work permits, make sure the environmental compliances are going alright and that is just going beyond PNG’s capacity at the moment,” he said.

Exploiting natural resources in Papua New Guinea often involves complex negotiations with tribal leaders, along with the logistical challenges of building pipelines and roads over rugged and remote terrain. 

Papua New Guinea has a population of about 6 million people.  The country occupies the eastern half of the island of New Guinea.

As its mostly agrarian economy prepares for major upheaval due to a booming mining sector, analysts have warned that other social problems could derail progress.  Papua New Guinea has the second highest infection rate of HIV and AIDS in East Asia and the South Pacific, while the nation is also beset by serious law and order issues.

*Voice of America