UNDP Around the world

UNDP report calls for prudent management of extractive wealth to ensure improved human development

Nov 27, 2014

Port Moresby - 27 November 2014 - Wealth from extractive industries has the potential to more significantly boost the wellbeing of Papua New Guinea’s citizens. Yet the country’s development could be undermined if resources are not used in economically, socially and environmentally sustainable ways, says a new report by the UN Development Programme.


The report points out that almost 40 per cent of the country’s population continue to live on less than one dollar per day with inequalities on the rise, despite strong economic growth as a result of extractive industries such as oil, gas and mining. Over 25 per cent of children are not attending schools, and two out of three women and girls in the country experience gender-based violence. The 2013 Global Human Development Index ranked Papua New Guinea 156 out of 187 countries.


The new National Human Development Report From Wealth to Wellbeing: Translating Resource Revenue into Sustainable Human Development launched today in Port Moresby by Minister for Planning, Hon. Charles Abel, MP and UNDP Resident Representative, Roy Trivedy, provides a fresh perspective on extractive industries, brings in global experience and proposes ways to translate economic gains into practical sustainable outcomes.


Extractive activities in Papua New Guinea have grown exponentially over the last decades and lie at the heart of country’s high economic rates. Forecasts show that in 2015 new projects will bring up to 20 per cent GDP growth to national economy. The report states this is a critical time for Papua New Guinea to capitalize on these revenue flows to translate extractive wealth into sustainable and inclusive development outcomes for Papua New Guineans in all provinces of the country.


It adds, that “paradox of plenty” – a situation when abundant natural resources contribute to economic stagnation because capital and labour generate increases in tradable exports, but fail to strengthen knowledge, skills and expertise of citizens - is faced by many resource-rich economies. It can be avoided, if relevant policies and improved governance practices are adopted.


The Report also finds that Papua New Guinea has accumulated some experience in managing natural resources, introducing number of relevant and novel policies. However, there is still substantial progress to be made towards building strong institutional base for resource management, including development of clear strategy and scaling up the results nation-wide.


“This National Human Development Report seeks to focus on key choices and decisions that leaders need to make in the short and medium term to ensure that human development outcomes are maximised, said Roy Trivedy, UNDP Resident Representative. “All Papua New Guineans, its leaders from the public and private sector as much as ‘ordinary citizens’, need to assume greater responsibilities to make the wealth of the country work more effectively by ensuring that revenues from resource extraction are used wisely to improve the quality of lives of all Papua New Guinea citizens now and for the future.”


The report’s key policy options are focused around 4 pillars:


GOOD GOVERNANCE AND ACCOUNTABILITY


The report holds that a set of appropriate, accountable and effective institutions is a key factor to ensure the translation of natural resource wealth to human development. There is a need for tighter integration of budget funding with planning and accountability mechanisms. It points out the importance of involving communities in negotiations, and shifting from state ownership of minerals to a shared model in which ownership is vested in landowners, local communities and the state.


PEOPLE-CENTERED EXPLORATION AND EXTRACTION


Participation of local communities from the start can provide a greater sense of control and prevent potential conflicts. As the case of Bougainville illustrates, local conflicts can easily escalate to national-level political battles, civil strife, and threaten continued investments. Business risks can be reduced and human development maximised through the participation of communities at all levels. The report introduces the idea of an independent Mining Ombudsman’s office that can mediate and manage community conflicts around extractive sites.


PRUDENT REVENUE COLLECTION AND MANAGEMENT


The report’s policy option include strengthening sound and robust fiscal management, an emphasis on diversification of the economy and the importance of saving a portion of revenues for future generations through a Sovereign Wealth Fund (SWF). Translation of resource wealth into human development requires particular forms of revenue management that will reduce the effects of fluctuating extractive sector revenues and protect against the distortions in future.


INVESTMENT IN HUMAN, PHYSICAL, FINANCIAL, SOCIAL CAPITAL


Government (national and provincial) should consider investing more in key human development in areas such as health, education and infrastructure. The report also advocates that resource revenues should be allocated strategically and directed towards other economic sectors – such as agriculture and tourism, research and development, which will form the basis for more inclusive growth throughout the country in the long run.


“Papua New Guinea has tremendous potential and unique opportunity to translate the resource-led boom that the country is experiencing now into significant improvements in human development that match the economic growth that is forecasted,” the report observes. “To do so, though, there is an urgent need to broaden the scope of policy initiatives beyond the existing arenas into areas where the potential contribution to sustainable human development can be significantly enhanced for the population.”
The Report was produced by independent experts in close collaboration and consultation with the Government of Papua New Guinea, as well as representatives from the private sector, civil society and development partners. Following the launch in the Port Moresby, UNDP plans to launch the Report in the four Regions of Papua New Guinea in 2015.

Contact information

 

Assel Tleof assel.tleof@undp.org Tel: +675 79092648