Challenges for agricultural development in a resource-rich developing country: a case study of Papua New Guinea

Abstract

Many resource-rich developing countries are often faced with the challenge of generating sufficient employment for poverty alleviation due to factors such as the capital-intensive nature of resource extraction, the lack of (or weak) linkages between the resource sector and the wider economy, and potential Dutch disease effects. Using Papua New Guinea as a case study, this paper uses a dynamic computable general equilibrium model to analyse some options for a resource-dependent developing country to boost growth in the agricultural and manufacturing sectors. Four policy experiments were conducted to examine the impacts of increased primary factor productivity growth in the agricultural and manufacturing industries; increased investment in agriculture; increased investment in agriculture in conjunction with improved infrastructure; and improved value adding and productivity in agro-processing. Our results indicate that investing in agriculture and manufacturing without addressing supply side constraints such as poor road infrastructure would fail to maximise the desired impacts. We also show that by shifting the emphasis from production of primary commodities for export to value adding or secondary production activities, resource-dependent developing countries could enhance growth and employment.