Forex issue self-inflicted

THERE is a perceived crisis in the supply of foreign exchange from exports to meet the demand for it to pay for imports of goods and services from abroad.
This crisis is a self-inflicted problem Papua New Guinea is experiencing.
The three main causes for the crisis are provided as follows.
PNG has miserably failed to invest in agriculture, forestry and fishing sectors (AFF sectors), as well as in the critical supporting infrastructure such as roads, bridges, wharves, marketing, finance, and AFF research and extension services since independence in 1975.
The investment in and development of the extractive resource sector has been a major focus for PNG.
The main reason is that there is no cost for PNG to develop this sector.
All of the investment is done from abroad by foreign investors.
This has made PNG become complacent and lazy to invest in the AFF sectors.
Investment in the extractive resource sector has also brought to the fore a major foreign exchange trap by the construction of the project development agreements, which are suffocating PNG of much needed foreign exchange.
PNG is continuing to implement a major expansion of its unproductive system of Government and bureaucracy.
Expansion of departments, agencies, provincial governments, electorates, state-owned enterprises, and the education system are examples of how the Government has expanded since independence.
This is draining resources for investment in the AFF sectors, as well as in tourism.
These are the major causes as to why PNG is experiencing a serious problem of reduced inflow of foreign exchange to support its growing import demand.
They have also made PNG become more import-dependent and vulnerable to domestic and external supply and demand shocks, as it is with the current fuel crisis.
The Government must introduce the production sharing arrangement in the extractive resource sector, invest in the AFF sectors to increase production of value-added exports, and significantly improve its productivity and reduce its bureaucracy, and increase investment in the tourism industry.
These and other sectoral reforms and investments must be urgently implemented to boost exports to generate much needed foreign exchange, to support the growing demand for imports.
Otherwise, the foreign exchange crisis will continue to get worse every year.

Concerned Economist