PNG gas boom could cause economic woes
Updated 9 July 2013, 19:07 AEST
It's created a housing boom in the capital and employed thousands of locals.
But the Bank of Papua New Guinea says not all the changes will be positive and some come with major risks. Timothy Pope reports.
Reporter: Timothy Pope
Speaker: Robin Fleming, CEO Bank of South Pacific. Bryant Allen, Australian National University. Kelly Howlett, Port Hedland mayor
POPE: The latest economic outlook has some blunt warnings for the PNG government. With the end of construction in sight for Exxon Mobil's massive ESSO Highlands project, the Central Bank Governor is forecasting the onset of so-called Dutch Disease. It's an economic malaise brought on when the mining industry booms and strangles the rest of the economy.
Bank of Papua New Guinea Governor Loi Bakani says urgent investment is needed in the country's traditional agriculture industry. He says high wages offered by resource companies have lured workers away from farming.
CEO of Bank South Pacific Robin Fleming:
FLEMING: Certainly agriculture has suffered and that's been a combination of a number of factors. First it has been in the soft commodity area there's been a slowdown in demand. It dis-incentifies landowners and people who harvest those types of crops to participate in that particular sector.
POPE: Spurred on by the Central Bank's warnings the government has already mooted an economic stabilisation fund to make agriculture more attractive.
FLEMING: If properly funded and properly managed could be able to allow for the downturn in commodity prices, put aside revenues during the more buoyant times to be able to stabilise the prices, stabilise the output, outcomes for people involved.
POPE: But agriculture isn't the only area that's lost workers to the resources boom. Bryant Allen is a former community affairs field manager for Esso Highlands and a visiting fellow at the Australian National University's State Society and Governance in Melanesia project. He says just as in Australia's mining industry, workers are drawn from every field.
ALLEN: The wages paid by the gas and petroleum industries are much higher than the wages paid say to a school teacher, but the school teachers have qualifications that are needed by the gas industry, school teachers can read and write and there's plenty of evidence that school teachers are leaving their jobs to join the industry.
POPE: But he says these workers aren't lost to their professions forever.
ALLEN: The other side of it is that when the construction phase of the industry's over and employment drops by about 80 per cent, they'll come back into the general economy and they'll be better skilled and better qualified.
POPE: Robin Fleming says the government has planned for one situation the Central Bank is warning of, when construction workers are laid off there are a host of government projects in the pipeline.
FLEMING: That's certainly a clear intention of the government when they introduced the budget last year, the total budget was about 13-point-eight-billion kina of which five to six-billion kina is in infrastructure development, and the intention of the government was they could anticipate that there would be skilled workforce who would be available for redeployment.
POPE: But the Bank of Papua New Guinea is also concerned about the cost of living. High wages and an influx of foreign workers on these projects has seen a housing bubble in Port Moresby.
Bryant Allen, himself a former fly-in fly-out worker in PNG, says prices are soaring.
ALLEN: For normal sorts of accommodation they've gone through the roof. There's been a building boom in Port Moresby which for apartments and serviced apartments and things like that where expatriates, people who've worked in the oil industry come from all over the world because of their particular skills and need somewhere to stay.
POPE: Bank South Pacific says the locals not employed in the resource sector are the losers, with a severe shortage of affordable housing. It's a problem faced in mining towns like Port Hedland in Australia's Pilbara, home to a huge iron ore industry.
Port Hedland mayor Kelly Howlett:
HOWLETT: Particularly if you're not working in the resource industry or not having the company paying for those house prices or those house rents, you find if long-time locals, if they can't afford to live and remain in the community anymore, you'll see a drain of those people leaving town.
POPE: She says PNG should also watch its tourism industry, as housing in her town has become so tight there's no room for visitors.
HOWLETT: I guess it's really difficult to provide that incentive for anyone to operate say a backpackers accommodation when they know they can rent out their premises to resource industry for in excess of three-thousand dollars a week.
POPE: The Bank of Papua New Guinea says with careful planning all these issues can be managed, but it wants to be sure the LNG slowdown doesn't lead to economic disaster.
But the Bank of Papua New Guinea says not all the changes will be positive and some come with major risks. Timothy Pope reports.
Reporter: Timothy Pope
Speaker: Robin Fleming, CEO Bank of South Pacific. Bryant Allen, Australian National University. Kelly Howlett, Port Hedland mayor
POPE: The latest economic outlook has some blunt warnings for the PNG government. With the end of construction in sight for Exxon Mobil's massive ESSO Highlands project, the Central Bank Governor is forecasting the onset of so-called Dutch Disease. It's an economic malaise brought on when the mining industry booms and strangles the rest of the economy.
Bank of Papua New Guinea Governor Loi Bakani says urgent investment is needed in the country's traditional agriculture industry. He says high wages offered by resource companies have lured workers away from farming.
CEO of Bank South Pacific Robin Fleming:
FLEMING: Certainly agriculture has suffered and that's been a combination of a number of factors. First it has been in the soft commodity area there's been a slowdown in demand. It dis-incentifies landowners and people who harvest those types of crops to participate in that particular sector.
POPE: Spurred on by the Central Bank's warnings the government has already mooted an economic stabilisation fund to make agriculture more attractive.
FLEMING: If properly funded and properly managed could be able to allow for the downturn in commodity prices, put aside revenues during the more buoyant times to be able to stabilise the prices, stabilise the output, outcomes for people involved.
POPE: But agriculture isn't the only area that's lost workers to the resources boom. Bryant Allen is a former community affairs field manager for Esso Highlands and a visiting fellow at the Australian National University's State Society and Governance in Melanesia project. He says just as in Australia's mining industry, workers are drawn from every field.
ALLEN: The wages paid by the gas and petroleum industries are much higher than the wages paid say to a school teacher, but the school teachers have qualifications that are needed by the gas industry, school teachers can read and write and there's plenty of evidence that school teachers are leaving their jobs to join the industry.
POPE: But he says these workers aren't lost to their professions forever.
ALLEN: The other side of it is that when the construction phase of the industry's over and employment drops by about 80 per cent, they'll come back into the general economy and they'll be better skilled and better qualified.
POPE: Robin Fleming says the government has planned for one situation the Central Bank is warning of, when construction workers are laid off there are a host of government projects in the pipeline.
FLEMING: That's certainly a clear intention of the government when they introduced the budget last year, the total budget was about 13-point-eight-billion kina of which five to six-billion kina is in infrastructure development, and the intention of the government was they could anticipate that there would be skilled workforce who would be available for redeployment.
POPE: But the Bank of Papua New Guinea is also concerned about the cost of living. High wages and an influx of foreign workers on these projects has seen a housing bubble in Port Moresby.
Bryant Allen, himself a former fly-in fly-out worker in PNG, says prices are soaring.
ALLEN: For normal sorts of accommodation they've gone through the roof. There's been a building boom in Port Moresby which for apartments and serviced apartments and things like that where expatriates, people who've worked in the oil industry come from all over the world because of their particular skills and need somewhere to stay.
POPE: Bank South Pacific says the locals not employed in the resource sector are the losers, with a severe shortage of affordable housing. It's a problem faced in mining towns like Port Hedland in Australia's Pilbara, home to a huge iron ore industry.
Port Hedland mayor Kelly Howlett:
HOWLETT: Particularly if you're not working in the resource industry or not having the company paying for those house prices or those house rents, you find if long-time locals, if they can't afford to live and remain in the community anymore, you'll see a drain of those people leaving town.
POPE: She says PNG should also watch its tourism industry, as housing in her town has become so tight there's no room for visitors.
HOWLETT: I guess it's really difficult to provide that incentive for anyone to operate say a backpackers accommodation when they know they can rent out their premises to resource industry for in excess of three-thousand dollars a week.
POPE: The Bank of Papua New Guinea says with careful planning all these issues can be managed, but it wants to be sure the LNG slowdown doesn't lead to economic disaster.
http://www.radioaustralia.net.au/international/radio/program/pacific-beat/png-gas-boom-could-cause-economic-woes/1158826
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