The Future Prospects for Entrepreneurship in Papua New Guinea

Abstract

Like the beautiful bird of paradise which adorns its flag, the South Pacific nation of Papua New Guinea (PNG) is little known outside Oceania. Covering half of the second biggest island in the world, it has sometimes been described as an island of gold awash in a sea of oil. It contains vast natural resources and substantial potential for economic growth, yet many of its people have only recently emerged from traditional Neolithic (Stone Age) cultures. Within the last decade, the country has become a major commodity producer, while at least three so-called lost tribes were discovered. PNG has a larger population than New Zealand, has received substantial economic and technical assistance from Australia, and shares a common border with Indonesia, one of the most populous nations on earth. Despite this, economic development and private entrepreneurship has had only limited success to date. Today, the country has one of the lowest levels of per capita GDP in the South Pacific. Why has such a potentially rich nation failed to develop to its full potential, as well as produce the entrepreneurial class which is usually a necessary prerequisite for economic growth? This article attempts to explain this conundrum. It outlines the development of PNG in recent years, examines some of the causes of limited progress, and discusses some of the future prospects for increasing entrepreneurial activity in PNG. History While the island has been settled by Melanesian peoples for approximately 40,000 years, the first European contact took place in 1526, when Portuguese explorer Jorge de Meneses named the mainland Ilhas dos Papuas (the land of frizzy-haired people). In 1545, the Spaniard Inigo Ortiz de Retes mapped the coastline and gave it the name New Guinea, based on the apparent resemblance of its residents to the people of Guinea in western Africa. During the next three centuries, very little contact with Europeans took place. The Dutch claimed the eastern half of the island as part of their East Indies possessions (later Indonesia), but the western portion remained free from colonial activity until 1884, when Germany annexed the northern portion of the coast (Papua) and the United Kingdom annexed the southern coastline (New Guinea). Even then, much of the country remained remote and difficult to reach. In many parts of the mountainous highlands at the center of the island, first contact with Europeans did not take place until the 1930s. Australia assumed responsibility for the southern territory in 1905, and a few years later, during World War I, evicted the German colonists and absorbed the northern territory as well. Australia continued to administer the two territories under a United Nations mandate in the post-World War II era, eventually amalgamating them into the combined entity of Papua New Guinea (Sinclair 1971). In 1972, the area became self-governing with a Westminster style parliamentary democracy and in 1975 it was granted full independence. Geography and Culture PNG occupies the eastern half of the island of New Guinea, and some six hundred offshore islands, including Bougainville, New Britain, and New Ireland. Covering a total land area of 470,000 square kilometers, most of the country is swathed in dense tropical rainforests, swamps, and woodlands. It also has one of the highest annual rainfalls in the world. As a result, only a very small proportion of land, mainly concentrated in the central highlands well above sea level, is arable cropland. The dominant feature of the country is a sharp central spine of high mountain ranges that runs the length of the island from east to west. It is a nation of abundant, and still largely undeveloped, natural resources. These include substantial deposits of gold, oil, gas, copper, nickel, and timber. It also lays claim to an exclusive 200 kilometer maritime economic zone, which totals approximately three million square kilometers, and so has access to many different marine resources as well. …