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Geographical partnerships

EU Relations with Papua New Guinea

Country Overview

General Background

Papua New Guinea (PNG) is the largest of the ACP countries in the South Pacific and one of the most diverse countries in the world - geographically, biologically, linguistically and culturally. It has an abundance of natural resources, providing home to around 6% of the world's bio-diversity and one of the last remaining tracts of tropical rainforest on earth.

The population is 5.1 million, according to the 2000 census figures, and it is growing at an average annual rate of 2.3%. Half of the population is under 19 years of age. Entirely Melanesian, there are more than 800 distinct language groups. English is the official language of Education, Commerce and Industry. Over 85% of the population live in the rural areas with limited access to basic services.

Recent report(s)

Political situation

Papua New Guinea became independent from Australia in 1975. It has a parliamentary democracy based on the Australian model - a single legislative chamber of 109 members elected by universal adult suffrage for a period of five years. Its Head of State is Queen Elizabeth II who is represented by a Governor General. It has a second tier provincial system of government.

PNG has a relatively large number of political parties, most of which have seats in Parliament. The House also contains a large number of independent members. The voting system is 'first past the post,' although a Limited Preferential Voting (LPV) system will be introduced at the 2007 parliamentary elections. Under the current system, with a large number of candidates competing, winners do not always represent the majority of the voters in their constituencies: they can win with as little as 9% of the votes cast.

The political system is characterised by high volatility. Party affiliation is not generally based on ideology or shared political convictions, but on personal allegiances and political expediency. Until 2002, sudden shifts between parties happened frequently and votes of no confidence were a common occurrence. In fact, so far no government has survived its full term since PNG gained independence in 1975. The nature of the political system, coupled with the socio-cultural backdrop of a clan-based society, created a political environment that was inherently unstable, making the task of governing the country a difficult one at best. A law on “the Integrity of political parties and candidates”, passed in 2001 and which came into effect in 2002, made it impossible for a new government to be the subject of a vote of non-confidence in its first 18 months in office. It also made the crossing of the floor by Members of Parliament, from one party to another, more difficult. An independent judiciary, a free and an often outspoken press, a strong ombudsman system, free trade unionism, and critical churches and non-governmental organisations (NGOs) provide some checks and balances within the political system.

The 2002 parliamentary elections were the worst ever in PNG. It was marred by unprecedented levels of violence, kidnappings, intimidation and ballot rigging, as well as deaths and destruction. It was won by Sir Michael Somare who became Prime Minister, for the third time, Sir Michael led PNG to independence in 1975. His Government has lasted much longer than anticipated. He has so far sought unsuccessfully to enact legislation changing the grace period of no-confidence motion from 18 to 36 months.


A civil war was fought for nine years on the island province of Bougainville during which over 15000 peoples were believed to have lost their lives. The war officially came to an end on 28 March 2002 when Parliament voted the necessary constitutional changes giving legal effect to the Comprehensive Peace Settlement Agreement, which the PNG government reached with Bougainville leaders in Arawa on 30 August 2001 .

The crisis began with protests by indigenous people over the non-payment of compensation for their land and pollution of their environment by a mining company. The protests degenerated into a civil war and a demand for independence. Fighting stopped in 1998 when the Lincoln agreement, brokered by New Zealand , was signed launching a peace process for a permanent settlement under the auspices of the United Nations. This process led to the conclusion of the Comprehensive Peace Settlement Agreement in March 2002. The agreement provides, among other things, for weapons disposal, autonomy for Bougainville and a referendum on independence in 10-15 years.

The weapons disposal exercise having been completed and a provincial Constitution drawn up and approved by both the PNG Government and Bougainville leaders, provincial elections were held in Bougainville in May/June 2OO5 for an autonomous Bougainville Government. They were won by the Bougainville People’s Congress led by Joseph Kabui, one of the rebel factional leaders during the war. Mr Kabui was also elected President of Bougainville.

Economic situation

Until recently, Papua New Guinea was classified as a lower middle income country, because of a per capita income which was as high as €1200. But GDP per head has fallen consistently since the mid-1980s, reaching €930 in 1999 and €670 in 2003. Average life expectancy is 57 years and adult literacy is 50-60 %. The economy is sustained by high levels of international aid (€78 per capita per annum).

PNG has a relatively broad agricultural base despite the fact that less than 2% of its land area is currently cultivated. Ninety-eight per cent of the land is communally owned. Farming is the principal activity of the majority of the people. Although operating largely at subsistence level, significant numbers are increasingly becoming part of the cash economy producing, on a small scale, export crops such as coffee, copra, palm oil, tea and cocoa. PNG has a variety of mineral deposits, notably, copper, nickel and gold. It also has gas deposits.

Mining is the mainstay of the economy, accounting for 72% of export earnings annually (24% of the GNP). The country has extensive forest reserves, which cover three-quarter of its land surface. It also has considerable fishery resources. Indeed PNG has one of the richest tuna fishing grounds in the South Pacific.

This abundance of natural resources provides PNG with great potential for economic diversification as well as opportunities for greater self-reliance. However, these resources have not, over the years, been reflected in the economic wellbeing of the people. In fact, the level of poverty in PNG, as measured by social indicators, has increased since independence. Government mismanagement and high levels of corruption are principally to blame, although the situation has been compounded by the closure of the Panguna mine, one of the biggest open cast copper mines in the world, as a result of the civil war in Bougainville .

Efforts at structural adjustments, with the backing of the Bretton Woods Institutions, have yielded minimal results. In 1998, relations with the World Bank were broken off, but restored two years later by the Morauta government when a two-year (2000-2002) Economic Reform and Structural Adjustment programme was adopted and pursued. Measures imposed included greater budget discipline and control, strengthening of the independence of the Central Bank and privatisation of loss-making public enterprises.

The adjustment programme was relatively successful in restoring a measure of macro-economic stability, particularly in reducing inflation and improving the country’s foreign exchange reserves, but was badly compromised in early 2002 when the government embarked on a high level pre-election spending. The result was a dramatic slump in the economy, which accentuated the already bad social consequences of structural adjustment.

The Somare government has so far had a measure of success in improving the economic situation partly as a result of favourable prices of PNG’s main agricultural and mineral exports and partly as a result of good fiscal management. PNG recorded positive growths of 2.8% in 2003 and 2.6% in 2004.

The regional and sub-regional frameworks

Papua New Guinea is an active member of all of the Pacific regional trade and economic organisations, including APEC (Asia Pacific Economic Co-operation), the Melanesian Spearhead Group Pacific Island Countries Trade Agreement (PICTA) and Pacific Agreement on Closer Economic Relations (PACER). It is particularly active in the Pacific Islands Forum.

PNG’s trade policies had been conducted largely on an ad hoc basis until 1997 when tariff reduction was adopted as the main policy instrument to promote private sector-led growth, enhance productivity and improve the competitiveness of the country’s exports. In July 1999, tariffs were cut across the board from an average rate of 22% to 9%.

PNG has access to the Japanese and US markets under the Generalised System of Preferences.

Relations with the EU

Relations between the European Union and Papua New Guinea have been good since the latter gained independence in 1975. The country has benefited considerably from both programmable and non-programmable aid over the years- a total of € 448 million from the 4 th to the 8 th EDF (€ 164 million of programmable plus €245 million of Stabex transfers and €30 million of Sysmin payments since PNG signed the Lomé Convention in 1978).

PNG’s 7 th and 8 th EDFs financial envelopes were respectively € 46.2 and € 50 million. The focal sectors were: (1) Human Resources Development. This encompasses the building of elementary schools and upgrading of existing secondary schools; the expansion of teachers training college facilities; the rehabilitation and upgrading of physical facilities at the University of Technology; training and scholarships, and up-grading of environmental research and management institutions; (2) Rural Environment. This refers to the provision of basic public services at village level, (education, training, health, law and order, infrastructure, water supply, fisheries, most notably a coastal fisheries development project, and agricultural extension and forestry, in particular eco-forestry. A sexual health project to stop the further transmission of HIV/AIDS is being implemented outside these sectors. The EC has been involved a significant manner in the agricultural rehabilitation of Bougainville , particularly cocoa, using the STABEX facility.

Under the 9 th EDF, Papua New Guinea had been allocated a total of €166 million made up of an A financial envelope of €81 million and a B-envelope of € 35 million (plus €50 million of Sysmin transfer under the 8 th EDF in support of the mining sector in decline). Following the Mid-Term Review in 2004 the resources were reduced by €19 million because of concerns over PNG’s absorptive capacity.

The focal sectors of the 9 th EDF are education, training and human resources development and rural water supply and sanitation. There is a non-focal sector on institutional capacity building and governance.

PNG has benefited considerably from Pacific Regional Programmes, notably support to the Medical Faculty of the University of Papua New Guinea and the Pacific Agricultural Programme on sweet potatoes and taro beetle control.

Two EU Member States, the United Kingdom and France, maintain diplomatic relations with PNG and are involved in various degrees in the country’s development. Germany 's co-operation with PNG was the largest until five years ago when it decided to wind down its programme and close its embassy.

Papua New Guinea maintains an Embassy accredited to the European Union in Brussels .



Country strategy     

In recent years, Papua New Guinea has faced severe economic difficulties and economic growth has slowed, partly as a result of weak governance and civil war, and partly as a result of external factors such as the Bougainville civil war which led to the closure in 1989 of the Panguna mine (at that time the most important foreign exchange earner and contributor to Government finances), the Asian financial crisis, a decline in the prices of gold and copper, and a fall in the production of oil. These difficulties compromised the realisation of PNG’s development objectives set out in the Medium-Term Development Strategy (1997-2002). The development priorities of the MTDS includes, among other things, elementary and primary education, primary health care, the promotion of income earning opportunities for rural entrepreneurs, and the resolution of the Bougainville conflict.

An evaluation of the EC Country strategy for PNG completed in 2000 noted that the EC has a long standing involvement in the education sector, and that this focus is highly relevant to poverty alleviation. It further concluded that, with poverty concentrated in rural areas, improving. The evaluation further concluded that with poverty concentrated in rural areas, the past focus on the rural environment is relevant to the poverty reduction objective.


Priorities for co-operation

Accordingly, two focal sectors have been chosen as areas of priorities: Education, Training, and Human Resources Development, and a Rural Communities Water Supply and Sanitation Programme. In addition, anon-focal sector has been chosen - Institutional Capacity-building and Governance - in recognition of a clear need to improve the quality of economic performance by improved decision making, and the perspective of transparent and accountable governance

Education, Training and Human Resources Development Programme
Effective human resources development is the necessary foundation for development in every economic sector as well as for building a true national identity for PNG. The primary focus will be on the quality and motivation of the teachers and trainers and on providing a range of educational and training opportunities for students with differing needs and profiles. The achievement of universal primary education by 2004 remains a target.

Rural Communities Water Supply and Sanitation Programme
Although PNG has an abundance of water resources, 70% of the rural population have no access to safe water, and sanitation is a major problem. Furthermore, women whose responsibility it is in PNG society to fetch water have to go long distances for it. Gender considerations, easy access and poverty alleviation are critical factors in the choice of this focal sector. Furthermore, the EC has considerable experience in this area.

Institutional Capacity-building and Governance Programme
PNG's economic development record over the past few years is evidence that governance issues underly many of the country’s problems. Good governance, which may be defined as the transparent and accountable management of human, natural, economic and financial resources for the purposes of equitable and sustainable development, flows from proper public sector management, efficient fiscal and accounting mechanisms, and a willingness to make service delivery a priority in practice.

The EC Country Support Strategy for Papua New Guinea will be financed through different instruments with following indicative allocations:



9th EDF Financial Data

  • Education, Training and Human Resources Development (€35 m)
  • Rural Communities Water Supply and Sanitation (€25m)
  • Institutional Capacity building and Governance (€21m, of which €6m is reserved for the strengthening of Non-State Actors).


EDF financial data




Main Development Projects

There are no "Main Development Projects" to mention


Last update: 23-03-2007
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