Announcement of Report on Papua and New Guinea Economy on December 3, 1964

) • INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bauk Press Release No. 64/41 Fo.r P. N. l~ewspapers Subject: Report on Papua and New December 3, 1964 Gu:i.nea Economy 11 The Econondc Development of the Territory of Papua and New Guinea," the report of a mission organized by the :Jorld Bank, was ma.de public today by the Govcr~~ent of the Commonwealth of Australia. The purpose of the mission, under- tc'k~n at the request of the Commonwealth Government, was to review the economic :!)vt~ntialities of the Territory and to make recommendations to assist the .:1.ustralian Government in planning an economic development program designed to r~ise the standard of living of the people. • The mission's report will be published for the Horld Bank by The Johns Hopldns ~ress of Baltimore, Maryland, U.S.A., in the first half of 1965. The Territory consists of the Trust Territory of New Guinea, which was placed 1md~r the United Nations Trust.eeship system after World War II, and the Australian Territory of Papua; they are administered as a union by Australia. Executive autho- rity rests with the Administrator appointed by the Commonwealth Government. The Territory comprises the eastern half of New Guinea and about 600 other islands st.retching for more than 1,200 miles from east to west and 150 miles from north tc south. The New Guinea mainland, which accounts for about 85% of the Territory's .. total land area of some 184,000 square miles, has unusual variety. -- rugged moun- cain ranges, fertile valleys, great rivers, extensive forests and vast swamps. 'rl'~e indigenous people, who nwnber about two million, are for the most part primi- tive • • It is the e:,cpressed intention of the Commonwealth Government to help the inhabitants of the Territory to becol1,le sel.f-governing as soon as possiblA and to  , - 2 - • ensure that when this aim is reached the Territory will, to the greatest extent feasible, be able to stand on its own feet economically. The mission is of the opinion that while substantial economic gr~wth is possible over the nex1j five to ten years, economic viability in any meaningful sense will take several decades. 7'Jith education and trai.ning, the indigenous people can take an increasing role in the economy and government, and the natural resources of the Territory are consider- able. However, the molding of the human and natural resources into a modern econ- omy will take great effort, time and money. Financial support from Australia -- which now covers two-thirds of the Territory's expenditures -- will need to be con- tinued and even increased. In making its recommendations, the mission assumed that the Commonwealth Government would be prepared to increase this financial assist- ance; the prime limitation on the scale of the program it proposed was the avail- ability of skilled manpower which will have to come mainly from Australia. In its report, the mission has prepared a program for economic development • focused in particular on the next five years, 1964/65-1968/69; in crop production and livestock the projections cover 10 years. Its recor.anendations cover agriculture including livestock, forest~y and fisheries; secondary industry, handicrafts, tour- ism, mining and power; transport and comrnwli.cations; manpower and education; health, housing, water supply and sewerage; money, banld.ng, credit and public revenue. The report points out that because physical and human resources have not been developed to the point where economic viability is ye·t in sight, its recommended program can only set the pattern development should take. The mission believes that major emphasis should be given to the stimulation of production and the advaµcernent of the indigenous people. Economic progress in the first instance means expanding production for export, and agriculture and • forestry offer the best prospects for this growth. There are at least 6 million acres of land suitable for crop production of which only about one million acres are now used. Of the 80-90 million &. ··-'~s of forest, at leas,t 25 million acres have  - 3 - • a commercial potential. some 10 million acres of virtually unused natural grass- land are suitable for livestock production. The program sets targets.for increased production in these fie~ds and re- commends the steps required to attain them. The largest increase in agriculture is planned for copra, coffee, cocoa and rubber. Marketing channels are well de- ;}'81oped.; the soils are suitable and technical lmowledge exists. Australian planters are experienced in these connnodities and an increasing number of indi- g.enes are gaining experience. Two new crops, tea and pyrethrJm, as well as many ot·hers of less importance, present real development possibilities,. In forestry, a. small e=-.."Port, industry already supplements local needs; resources exist for a major expansion and the market outlook is promising. If its recommended programs for expansion are executed, the mission believes that eanlings from agricultural and forest products would double by 1968/69 to a total of J;.A 30 million ($67.2 • million) annually. Ani.~al production in the Territory is now li..'lti.tedo The mission believes that the time has arrived for a radical dlange in emphasis and that cattle pro- duction should b!ecome a major activity, to reduct.. meat imports which now total 10 million pounds a year, improve the diet of the people and, in the long run, provide substantial meat exports. It sets a target for ten years of 300,000 head of cattle, a ten-fold increase over the present herd •. In the first instance breed- ing herds will have to be developed by Australians because only they have the 9A-perience and skills necessary. However, after four years when nucleus breeding herds have been built up, cattle can be supplied to native farmers so t.ha.t by the tenth year they should ~ndle more than half the national total. The advancement of the indigene will come through his taldng a much greater • part in expanding production and by an acceleration of his training and edu- cation. This will come £ram practical experience, in-service training and for- mal education. The most urgent need in education is an expansion of' seconda17,  - 4- • technical and.highe~ educa~ion. In primary education, the emphasis should be on making the tu:l ~~urse available in existing schools rather than on broadening the base by the establishment of new s~hools. The mission considers that the greatest contribution the Admini- stration can. make to the expansion of industry will come fror.i the :ror.nulation of policies conducive to investment and to providing infor~ation to investors. Most industrial growth in the next few years is seen for plants processing agricultural, forestry and livestock products, construction materials and some simple consumer goods. There are good prospects for handicrafts which would bring many people into the cash economy. The Territory has an unusual variety of attractions for tourists. High mountains, lush forests, brilliant tropical flowers, birts of pa~adise, coral and sandy coasts, great rivers and lovely South Sea is!.ands afford a. great variety of scenery. The culture of the people is extraordinarily colorful and almost • unique. The mission recommends ·therefore that steps be ta.ken to promote tourism, and probably 'the most important single step to this ·;::!nd would be the ref:itroduc- tion of the international air service to provide direct connections with the Far East, Europe and North America through the Philippines. In the execution of the development program, credit is of funda- mental importance, and the mission considers that credit in adequate amounts and on suitable terms cannot be provided by the existing banks and other credit organi- zations. It recommends the establishment of a Territory Development Finance Com- pany. The Company would be an autonomous government institution whose capital would be provided by the·Commonwealth Government either directly or through the Administration. •  - 5 - • The mission belieYes the,t three basic principles must be adopted if the development program is to be a success; they relate to the concentration of effort, the selection of standards suitable to the Territory, and the need to foster greater responsibilities among the people. (1) Expenditures and manpower (technical and administrative) should be concentrated :tn areas and on act'-.vities where the prospective return is_ highest. For example, agricultural~development should take place in relatively accessible good land, rather than spre'¥1 widely tm-oughout the Territory where the physical characteristics present serious obstacles. In expanding basic infrastructures, priority should be given to the development of roads, coastal ~ ,\ "' . the projected shipp:tng services and . ports required to handle . e~nsion of agricultural and forestry production.· Government • spending should be increased tor agricultqre, forestry, trans- ,--) 11 port and education, and should be held down for curative health programs and ge~eral administrative services. (2) !'he standards of administration service.a and facilities should be related to Territory ~ond~tions. While it has been necessary \\ ,, , ) -to employ Ausir~lian(I and pay salaries geared to Australian ievels, i\ facilities such as new hospitals, court buildings and bouses, -1\ curative health and other services have been in keeping Wiith the standards of developed countries. Conti~ued develqpment along these lines ~annot be -supported by the resources of the Terri- tory. The gradual conversion of the public services to one f1 largely staffed by the indigenes, the adoption of simpler de- • ,,~ign standards of buildings and the maximum use of local '\;  -~ - 6 - construction materials would permit substantial savings infthe costs of government ~nd c·ontribµte . economi,C and financial Viability. to. the ·eventual goals: of • ( 3) The approach of the. AdlJlj.nist~at ion in the past has bee1;1 ~der-1 standably la.rgely one of'._benevolent paternali.sm. As a. modern economy emer.ges.,.a shif't in 'emphasis toward policies givlng greater responsibilities to the people is esoential. The mis~ion believes·tnat more responsibility should be given to the Native Local Government Councils., particularly in educa- tion, health and feeder road ~onstruction, and that in the, larger centers, urban.gqvernments.should be set.up. In the economic.sphere, charges should be mad~ for puti;c ~e~vices . ' which have been provided·free·or at charges greatly below costs. result. Such charges would have to be compens~ted by salary \._ \, adjustments, but net savings 'in the costs of government would In respect to health and education, the mission be- • I\ lieves the people should contribute to the costs either individually qr communally QY providing land for building and maintaining rural primary schools, teachers' houses, medical aid posts and health centers. The program recommended bY::,the mission would require expenditures averaging I.A 50.2 million ($112.4 million) \annually during the next five years, or about a third ~re than budget expenditures during 1963/64. \1 The proJectiou assumes a rise of about 5'/, for expenditures not following directly,/from its pro- ,·. / " gram. The mission estimated that about 27.5'1, would 'tie tinanced from internal • :, revenues and'~~hat With appropriate effort the Administration could obtain revenues of this order of magn!:Gude. The report stresses that the proJection as a whole  - 7 - • is primarily illustrative and do~s not purport to be a firm recommendation for total expenditures. The Commonwealth Government of Australia and the Admini- stration may have good re~9ons to deviate from the assumptions in a number of l instances. The mission's ~~in concern bas been that priority should be given to those expenditures that will directly strengthen the productive potential of the Territory and advance the indigene and that increases in the amounts spent on other items should be kept moderate in order to limit the dependence on Australian financial assistance • • •