This Side of Paradise: Papua New Guinea on the Cusp

This past Thursday in the village of Tari in the Southern Highlands of Papua New Guinea a delegation of senior government ministers and members of Parliament were pelted with stones by an angry mob. The police fired several shots in the air, which were met by a single shot from the crowd. No casualties were reported. The group was in Tari to hold a forum on the agreements, currently under discussion, for sharing of benefits between government and local landowners from a huge project that will take gas from the Southern Highlands, transport it by pipeline to the capital, Port Moresby, where it will be converted into liquefied natural gas and shipped to China, Japan, and other markets. Universally referred to as “the LNG,” the project, led by ExxonMobil in partnership with several other companies and the government of Papua New Guinea, will cost an estimated $10 billion to develop, and will produce direct government revenues from royalties, taxes, and the government’s equity stake, of about $30 billion over the 30-year project life. This is a lot of money sloshing around in a country of 6.5 million people. Oil already accounts for a significant chunk of export revenues and there is another, even larger, gas project in the planning stages and several huge mining projects, which together are expected to at least quadruple the country’s GDP over the next 30 years or so.

Papua New Guinea, a country known to most people, if at all, as a land of jungles, cargo cults, and painted cannibals with bones through their noses, both differs from and corresponds to the stereotypes, as most places do.

Highland Chief, Papua New Guinea

This is not a travelogue, so I won’t go into detail, but PNG is a country where over 700 distinct languages are spoken, where some people do go around with their bodies painted and noses pierced, and where huge areas covered with jagged mountains and dense forest remain accessible only by jungle footpath. As for cannibalism and cargo cults, their past existence is well-documented but I’ve read and heard nothing about current practice.

The Tari villagers were upset that their area had been excluded from the mapping of development license areas, and feared they would be deprived of their fair share of the revenues. Thursday’s altercation in Tari presages what could become a conflict that expands in scope and intensity to engulf the entire country. The problems are compounded by Papua New Guinea’s system of customary land tenure, which covers over 97% of the national territory. Communities are now allowed by law to form corporations, which hold the communal land and can enter into contracts with private companies and government agencies. These corporations, known as “landcos,” are in some ways an improvement over the traditional system, but many villagers fear – with reason – that a few insiders, possibly acting in cahoots with politicians, will misappropriate the funds meant to contribute to local development. Endemic corruption makes this more than just a theoretical possibility.

There is an equal risk that the people in these communities will spend all the money on drink and cars and shopping trips to Australia and will end up much worse off for the wealth they have frittered away. There are so many examples from around the world of both kinds of responses to a sudden surge in mineral wealth that there is a name for it: the resource curse. From Native Alaskans, reduced by oil revenues to drunkenness and domestic violence, to Sierra Leoneans who lost their lives or limbs to Charles Taylor’s mad pursuit of diamonds, the world is littered with failed or nearly failed states and communities that would have been far better off if their wealth had remained buried in the ground. Even leaving aside the most apocalyptic scenarios, the resource curse, which often entails a rapid appreciation of the currency, often destroys most other sectors of the economy, making it impossible for them to export or compete against cheaper imports. Think of Nigeria, formerly a food exporter, which is only now, after 40 years neglect, trying to rebuild its agricultural base.

Apart from a handful of manual laborers, the LNG will employ few Papua New Guineans. The project will require more welders than there are in the entire country, most of whom have inadequate skills and training to do the job. The project is already sucking up most of the available labor in any case. Local businessmen say they lose workers every day, but how could they not? A truck driver who ordinarily would earn $1.25 an hour can make three or four times that much working for ExxonMobil.

To its credit, the national government is aware of all these risks and is determined to combat them. It is working on establishment of a sovereign wealth fund, modeled on those owned by the likes of Norway and Abu Dhabi, to preserve some of the wealth for future generations. It has worked hard to reach agreements with the landcos to ensure that they don’t feel left out of the bonanza, and it has plans to spend money intelligently to upgrade transport infrastructure, increase the supply of electricity, and improve education, training, sanitation, and health care. Senior officials have often expressed the conviction and determination that PNG will transform itself into something resembling Singapore. This may be a dream, but it is certainly possible for the country to follow the example of Botswana, a country that has used its mineral wealth to build a stable and relatively prosperous society.

To its advantage, Papua New Guinea is unlike many other resource-rich countries such as Botswana,  in that it has numerous other industries ripe for development. With hundreds of islands, pristine beaches, rugged mountains, coral reefs, unique ecosystems, and a profusion of unique cultures, the country could make as much money from tourism as it will from natural gas. From diving holidays to big game fishing to jungle trekking and cultural tourism, there is almost an infinity of experiences the country can offer.

View from Buka Town, Bougainville Autonomous Region

But my flight last week from Port Moresby to Buka, in the Bougainville autonomous region (see picture) cost over $1,000 for the round trip (okay, I flew business class, but even in economy it would have cost around $600), similar to the cost of a return economy class fare from Australia, Hong Kong, or Singapore, the nearest international destinations. From Japan, the U.S. or Europe, you’d be doing well to get there and back for less than about $3,000. This means that a family of four, intending to visit, say, three different locations in PNG, would have spent a good $20,000 on airfares alone, before spending a nickel on hotels, meals, drinks, diving lessons, and souvenirs. This may decrease, as government improves airports and civil aviation and allows greater competition in the air. Right now, Qantas and Air Niugini have a virtual monopoly on flights both into and within the country, but at least one private airline has started operating and others could follow.

The Markham Valley in Morobe Province could potentially supply all of PNG with fresh produce and grains, as well as exporting to markets in East Asia and Australia. If Zimbabwe even now can export freshly-picked French beans to supermarkets in the U.K. and Kenya can supply cut flowers to the markets in Amsterdam and Dubai, there is no reason PNG could not do the same in its region. The region is also the source of most of PNG’s coffee, which has begun to develop a premium image in export markets. I have even bought PNG coffee at Trader Joe’s. If Rwanda and Ethiopia can succeed at this, there is no reason PNG cannot. Projects to improve the Highlands Highway that runs through the valley and the airport and seaport at Lae, could unlock this potential, and a few intelligent irrigation and water management schemes could help, and there are plenty of indications the government and international donors are trying to make this happen. Even now, after a decade of armed separatist conflict and laborious reconstruction, Bougainville produces some of the world’s most coveted cocoa, which commands a premium price with European and Japanese confectioners. It’s not far-fetched to think we will soon see seven-dollar Bougainville-origin chocolate bars in Whole Foods, alongside similar products from Ecuador, Venezuela, and São Tomé.

F. Scott Fitzgerald’s novel This Side of Paradise, and the Rupert Brooke poem Tiara Tahiti from which he took his title, both concern coming of age, loss of innocence, and recognition of one’s own mortality. Both works contain ambivalence about this transformation and it is never entirely clear on which side of the divide paradise truly lies. It depends, of course, on which side of the divide you are standing. It is possible that Papua New Guineans thirty years hence will wake up with a massive hangover amidst the wreckage of what was once their beloved homeland, now strewn with wasted lives and expensive monuments to vanity and greed. It is equally possible that they will look back, if not from the vantage point of a Singapore-like high tech marvel, at least from a position of solid and sustainable prosperity and opportunity. The choice is not entirely theirs: the global economy and geopolitics are a big part of the equation. But if Papua New Guineans and those who govern them can put aside clan and ethnic rivalry and keep personal greed within acceptable limits, I’d have to rate the chances of success pretty high.