Announcement of the Third Meeting of the Consultative Group for Papua New Guinea on May 18, 1990

'• "World Bank contact: Richard Kollodge (in·Singapore) 338-0066 Ext,1007 THIRD MEETING OF THE CQNSULTATIVE GROUP FOR fAPUA NEW GUINEh SINGAPORE, May 18, 1990 The third meeting of the Consultative Group for Papua New Guinea was held in Singapore on May 1? and 18, 1990. The meeting was attended by representatives of the Governments of Papua New Guinea, Austraiia, the Federal Republic of Germany, Japan, the Republic of Korea, New Zealand and the United States, as well as delegates from the Asian Development Bank, the Commission of the European Communities, the European Investment Bank, the commonwealth Fund for Technical Coop~ration, the International Fund ror Agricultural Development, the International Monetary Fund, the united Nations Development Programme and the World Baruc. Frange,_s ingapore_and_the--United Kin_gdom attended as observers. This is the first time that the Ciovernment or- singaporea"nd the Commonwealth Fund for Technical coope ration have participated in the consultative Group. The meeting was attended by the Right Honourable ttabbie Nam~liu, CMG, MP, the · r_of Papua New Gui~ea, who delivered the meeting's opening address. The Papua New Guinea delegation was led by the Minister for Finance and :-e_ianning, the Honourable Paul Por a ~ . 'l'he meeting was cha-ired by the World Bank. The meeting reviewed recent economic and socia 1 developments in Papua New Guinea; discussed the policies adopted by the Government ~or stabilization and_____structural ~ ~s'U~Atment in response to th "eniajor- snocJcswnic h ... have affected __ the e.c onomy; consiae.red the Governmen 's Public Investment Programme, the Special Interventioh Programme aimed at alleviating the soclal costs of adjustment, and the Tropical Forestry--lrct±on-- Plan < directed towatd improved management and conservc1llon of forest ~ esources; and assessed the count_!="Y_ ~ _s requirements _ f_or_ external financing. . - The meeting noted the major economic difficulties encountered by Papua New Guinea over the past ·year uue to the ""-c_ losure_Qj:......t.he__B ougainv_il_ opE..e~ and gold m:!-n~ _!n _ l ~ _ c_ __M~y 1989 and _ ....a-Sh.a.rp_cir.op_i~. The~e s fiock.s~~~he __ ~co~omy~ ere lar ..9:e in terms of the magnitude of ~h~ esultant loss of export earnings and national income, compareq _ to t ~e shocks experienced by most develo i n cciu11t r les undertaking adjustmen t programs in · ,·t he 198 Os. -  - 2 - "\ The meeting strongly conunenqed the Government of Papua New Guinea for the prompt, and decisive, steps it had taken in responding to the chaIIenges posed by these developments. ' The a d ~ u s t m e n ~ h a t the Government had embarked on was aimed at maintaining financial stability and undertaking structural reforms to. accelerate Llre--devetopment of the non- mining economy. It- was__ recognized that the implementation of the agenda for structural reform would require . conc et'tf;fd:- and o sustainede f fort e;---ver the next t:lir e~ f-i-ve-years. Two particular~ i-rnportant-areas of strcrcturrrneorm-during the next two years would be the__improvement-of- public._r_es.o..u.t:Q.~..ID.~J}agement and the ~promotion of non-mining private sector investment :--- The meeting welcomed the Prime Minister's statement expressing his Government's strong commitment to the str_!!ctural adjus tment program. TfiePrime Minis~r particularly stressed the priority being given by the Government to improving the environ~ent for private sector investment. The Prime Minister ~unced major addit~onal steps taken 6y the Government during the recent weeks, including the simplification and liberalization of the regulatory framework governing fureign privat~ investm~nt and the signing by the Government of the Convention of the Multi latera l Invest ment Guarantee Agency, a World ·, Bank affiliate est--atr~tsm.m in 1988 to encourage dir e ct foreign investment in developing countries. The meeting welcomed the Government's commitment to the implementation of these and other measures which would facilitate significant private ~ector growth. The Consultative Group supported the Government's efforts to protect priority investments in the Public Investment Programme from the expenditure cuts necessitated by the revenue shortfalls resulting from the adverse developments confronting the economy. Maintaining a strong_p lie investment effort over the next three ~f i ve years was essential to support the developmene oft e p:fiys1caI and social infrastru~ture for future economic growtn as well as social deveiopmerit . and stability. To alleviate the adverse effects on incomes and employment of the recent dev_ eloprnents and _th_e _ consequent need for adjustroent::=thELP.r~p-~r~tion of a S~~? ial Inter~ention Programrn~ by the Government with donor assistance was considered a very time1y ·-1nitTatTve·. -- It was rioted that, to achieve its objective, the Programme would need to be implemented on an accelerated basiP- The forestry sector initiatives announced by the Government at the Tropical Forestry Action Plan Roundtable held in April of this year, including the eroposal to set aside areas for conserva_ t_i on "Uf1a ~ ttieWorldHer tag.a Eoundation_,_re.cei ved a strong endorsement f rom the members of the Cg_nsultative Group. :i,ng_irlt~ouridtable confirmed their interest Donor·s p a t_tin.15-al:_ in s upporting respective com onent~ of the Government's forestry action plan.  - J - The meeting noted that Papua New Guinea's external financing requirements would be sharply higher over the next few years. Tne maJor reason f-Or-thatvla-s-tne ongo i ng and plannea development of new mineral p_~jects, which would be financed predominantly from~ i ~ ~ i ~ws. Part of the projected increase in the financing requirements represented the significant official balance of__.Eayments assistance that would be needed to support .nmen_ the Go"ler t~_adJ ll[fnierf't: program. Official project-related financing would also need to increase, but at a relatively moderate pace determined by the rate at which public institutional capacities for project preparation and implementation grow. The country's overall external !inanalng requirements wer~ expected to decline appreciably toward the mid-1990s as the new min er J ects came on stream. The meeting noted that,despite _~ l =Pi~_ the shocks to the economy referred to earlier, Papua New Guinea's medium-term exte;11a1 tinanc ia J out.i.o_ o_~- ~d cr.tt.<1.i t'!'.mrthiness, r.e:m.g_ in.ed~ !:ong as a r_ esulL. of a co~ination or policy actions by the Government and support from tfie'donor community. The members of the Consultative Group made indications of ..a_ tot~ amount of assistance to Papua New Guinea ot _about US$710 mlJ.Tiorrduring-1990-;-0rwfitclL .apou t 0$$320 million woµld ~ ~fn-t ne-fo-Ym.::Or-gi'ants. The indicated assistance included: about j:!S~210 million in budgetary suE_Eort from Australia; about US$255 m1.l!1on in project-relat~~_anQ.... technlL:dl assistance to support::tha:P..ubt te:Inv:eafiiie.nL:er.ogram.me, the Speciali n t e.nc.en:tion Progral.l@_e and the Q:cg..s.b:y action plan; and about _Y._S$245 million in quic~ i~~ ng program assistance to support the balance of pa"ymen't: s • It was decided that:_ ! b.e- next- meeting - of _ th~ Consultative Group would take pla~ in Singapore in May 1991. ~