The Effect of the Global Financial Crisis and propagation of real shocks in PNG

The effect of the Global financial crisis and propagation of real shocks in PNG. pdf

This paper examines the propagation of real shocks, both external and internal,

and the different channels and mechanisms through which these shocks are

transmitted to the Papua New Guinea (PNG) economy. The increase in

globalisation and the interconnectedness with the other countries for trade and,

capital and financial flows have open up a lot of opportunities for PNG to import

technologies and goods (capital and consumption) that otherwise would have

been difficult to access. Since PNG is a small and open economy and very

dependent on international trade, it has become increasingly vulnerable to external

shocks. The global financial crisis in 2008 that resulted in global recession had

also affected PNG mainly through the trade sector. Given the widespread effect

of financial and economic losses and concerns about future shocks, this paper

seeks to share some light into the propagation of real shocks in PNG through

the various channels.

Relative Effectiveness of Policy Choices during the Global Financial Crisis in PNG

Relative policy choices during the Global Financial crisis in PNG. pdf

Empirical results show that the Global Financial Crisis had minimal effect on the PNG economy as financial institutions in PNG were mainly domestically funded and there was not much exposure to foreign shocks. It was also established that short term shocks can be mitigated in PNG by Fiscal Policy while long term economic growth prospects were suppoted by Monetary Policy.

Doing Business in a more transparent world - Economic Profile of Papua New Guinea

Doing Business in a more transparent world - Economic profile of Papua New Guinea. pdf

sheds light on how easy or difficult it isDoing Business presentsDoing Business

indicators for Papua New Guinea. To allow useful

comparison, it also provides data for other selected

economies (comparator economies) for each indicator.

Doing Business

for a local entrepreneur to open and run a small to

medium-size business when complying with relevant

regulations. It measures and tracks changes in

regulations affecting 10 areas in the life cycle of a

business: starting a business, dealing with construction

permits, getting electricity, registering property,

getting credit, protecting investors, paying taxes,

trading across borders, enforcing contracts and

resolving insolvency.

In a series of annual reports

quantitative indicators on business regulations and the

protection of property rights that can be compared

across 183 economies, from Afghanistan to Zimbabwe,

over time. The data set covers 46 economies in Sub-

Saharan Africa, 32 in Latin America and the Caribbean,

24 in East Asia and the Pacific, 24 in Eastern Europe

and Central Asia, 18 in the Middle East and North

Africa and 8 in South Asia, as well as 31 OECD highincome

economies. The indicators are used to analyze

economic outcomes and identify what reforms have

worked, where and why.

This economy profile presents the

Papua New Guinea Small holder Agriculture Development Project

Papua New Guinea Small Holder Agriculture Development Project.pdf

analysis of each mill‟s capability to treat liquid waste is needed in order to facilita

comprehensive analysis of current operations. The action plan attached here has been prepared

to follow-up on the issues that have been raised in the SADP effluent study and ensure

adequate mitigation measures are in place to deal with increased palm oil mill effluent due to the

te a more

Project.

In 2007, the World Bank approved an IDA Specific Investment Credit (IDA Credit 43740-PNG) of

US$27.5 million equivalent for the Papua New Guinea (PNG) Smallholder Agriculture

Development Project (SADP), which aims to improve community participation in local

development while increasing revenue flow from the already established local oil palm

production industry. The SADP has three components: (a) smallholder productivity

enhancement including: the infill planting of new smallholder village oil palm along existing

access roads; upgrading of provincial access roads and establishment of sustainable financing

for road maintenance; and strengthening of oil palm extension services; (b) local governance

and community participation, which supports the improved provision of local services and

infrastructure through participatory processes; and (c) Project management and institutional

support for Oil Palm Industry Corporation (OPIC), the implementing agency; and for the

smallholder sector, through training, research and studies. The Project was approved by the

World Bank‟s Board in December 2007, however the main Project activities (including road

reconstruction and maintenance and infill planting) will only commence in 2011 due to delays in

signing the Credit, establishing management capacity, and starting up implementation.

This report was undertaken to supplement information in the Environmental Assessment1

prepared for the SADP. Based on site visits and data analysis of the nine existing palm oil mills

in the Project areas in Oro and West New Britain, the report assesses the environmental

management implications of increased palm oil mill effluent (POME) production arising from the

SADP. The report concludes that most of the mills in the SADP project area are legally

compliant with Papua New Guinea national regulations. The author states that a categorical

statement about full legal compliance for all mills is not made because of a lack of clarity with

some of the permits and because all environmental performance data were not available

(notably from the Oro sites). At the same time, the report highlights the importance of updating

the PNG Environmental Code of Practice for the Oil Palm Processing Industry in order to

strengthen national regulations and improve environmental monitoring. The study also points

out discrepancies between the World Bank Group Environmental Health and Safety Standards

for Vegetable Oil Processing (2007) and existing national regulations and a number of specific

operational issues that need to be further investigated and addressed at different mills in the

Project area.

While the study findings indicate that the relevant milling companies should have the processes

and structures to adequately deal with additional wastewater production from the Project, it is

Bank Management's view that the study is not fully conclusive. Further in-depth technical

Prospects in PNG and possible shifts

The Bank of Papua New Guinea it its "monetary policy statement" for March 2012 projected the economy of PNG to grow by 7.8 percent in 2012. Headline inflation was focused at 9 percent, implying a nominal GDP growth of a whooping 16.9 percent. The predicted growth stems from spin-off benefits of the LNG construction. Apparently, most sectors of the economy are benefiting from the current LNG construction, with Government pumping in a lot of project finance to the land-owners like never before. Domestic demand should increase, thretening price stability. Anecdotal evidence shows that, due to the recent billion dollar LNG project there has been a structural change in the composition of CPI weights. Inflation pass through from exchange rate developments tend to be played down by domestic demand push inflation. Price bubbles expereinced in the domestic real estate market and the recent newspaper report of a up-surge in demand for real estate in Australia by PNG nationals has been the cause of the wealth effect created by the spin-off benefits of the LNG project.

There seem to be a shift in investment and service orientated business. Traditionally Australia used to be the major market for PNG, however, due to a lot of strict regulations by Australia on PNG business and individuals, recently, the shift is eminent. During a recent flight to Singapore, direct from Port Moresby, a lot of PNGeans are using that route to travel to other parts of Asia, Europe and even America's. Traditional travel routes through Australia is slowly weaning out, as Australian immigration rules have become to stringent.

The spill over effect of the LNG project and the double digit growth of PNG should have an impact in Australia. The real estate industry does seem to have picked up quiet a bit, however, the future looks bleam for Australia on the business side of things. Because of the stringent visa regulations, a lot of attention now for PNG nationals and businesses is either Asia or the other Pacific Island countries.

Double digit growth figures are sure to increase the wealth of a lot of Papua New Guineans and their spending and investment habits should increase in the near future and this should give rise to more offshore investments and surely, Australia will miss out on it.

Monetary Policy Transmission Mechanism in Papua New Guinea

Monetary Policy Transmission mechanisms in Papua New Guinea
 

Abstract

Monetary policy affects the economy through different transmission channels.

For central banks, understanding this process is important in assessing the

operations of monetary policy and its effectiveness. In general, five transmission

channels are discussed in economic literature. These are the interest rate, the

exchange rate, the credit, the asset price, and the expectations channels. The

first two channels are perceived to be the relevant ones regarding monetary

policy in Papua New Guinea (PNG). The empirical investigation uses Ordinary

Least Square (OLS) regression analysis to examine the transmission process in

PNG. The results suggest that changes in the kina exchange rates are

transmitted to inflation, the variable of concern, more directly than the

transmission from interest rate to inflation in the PNG economy.

Exchange Rate Passthrough in Papua New Guinea

Exchange Rate passthrough in Papua New Guinea.pdf

Abstract

This paper estimates pass-through from the exchange rate to inflation in

Papua New Guinea using 1989-2004 data. Results display sensitivity to

how inflation and the exchange rate are measured. Pass-through is found

to be higher than previously estimated and evidence is presented that

pass-through has increased since the kina was floated. The paper

concludes that pass-through to underlying inflation is approximately 50-60

percent and is complete after between four and six quarters. It also finds

that exchange rate movements have been the main source of variation in

inflation during the sample period.