Removing barriers to investment and development

Abstract

[Introduction]: One of the main aims of the Structural Adjustment Programs in Papua New Guinea has been the removal of barriers to investment and economic development, but while some progress has been made, much remains to be done. Regrettably, hardly any of the financing provided under the Structural Adjustment Program (SAP) has been used to remedy stark deficiencies in the country’s physical infrastructure, such as transport, power and communications. The SAP’s restrictions on public expenditure have led to declining levels and quality of public services. The SAP also failed to address the wholly backward land tenure arrangements that make it difficult if not impossible for investors to access land in most of the country outside the towns and old plantation areas. Moreover the SAP’s many conditions left untouched the country’s antiquated exchange control regime, inconsistently with the SAP’s removal of tariff protection. At the same time the SAP’s requirement for maintenance of tight monetary policy and high interest rates in a fruitless effort to stabilise the kina exchange rate has contributed to very high excess liquidity in the banking system.