About the CBI

September 2005
 Background Note: Papua New Guinea

Papua New Guinea flag: divided diagonally from upper left corner. Upper
triangle: red with a yellow bird of paradise; lower triangle: black with
Southern Cross constellation-5 white, 5-pointed stars.

PROFILE

OFFICIAL NAME:
Independent State of Papua New Guinea

Geography
Land area: 452,860 sq. km.; about the size of California.
Cities: Capital--Port Moresby (est. pop. 320,000). Other cities--Lae
(90,000), Mt. Hagen (71,000).
Terrain: Mostly mountains with coastal lowlands and rolling foothills. The
majority of the people live in fertile highlands valleys that were unknown to
the outside world until the 1930s, but that supported agriculture some 10,000
years ago, possibly before agriculture was developed elsewhere.
Climate: Tropical. NW monsoon, Dec-Mar. SE monsoon, May-Oct.

People
Population (2003 est.): 5.5 million.
Annual growth rate: 2.26%.
Languages: English (official), Tok Pisin, Motu, and about 800 other
languages.
Education: Years compulsory--0. Literacy--Men: 71.1%; Women: 57.7%.
Health: Infant mortality rate--51.5/1,000. Life expectancy--64.9 yrs.

Government
Type: Constitutional monarchy with parliamentary democracy.
Constitution: September 16, 1975.
Branches: Executive--British monarch (chief of state), represented by
governor general; prime minister (head of government). Legislative
--unicameral parliament. Judicial--independent; highest is Supreme Court.
Administrative subdivisions: 19 provinces and the national capital district
(Port Moresby).
Major political parties: National Alliance (NA), People's Progress Party
(PPP), Pangu Parti, People's Democratic Movement (PDM), and Melanesian
Alliance (MA).
Suffrage: Universal over 18 years of age.

Economy (2004 est.)
GDP: U.S. $5.0 billion.
Growth rate: 0.7%.
Per capita GDP: U.S. $744.
Natural resources: Gold, copper ore, oil, natural gas, timber, fish.
Agriculture (35% of GDP): Major products--coffee, cocoa, coconuts, palm oil,
timber, tea, vanilla.
Industry (37% of GDP): Major sectors--copra crushing; palm oil processing;
plywood production; wood chip production; mining of gold, silver, and copper;
construction; tourism; crude oil production.
Trade: Exports--50.6% of GDP: gold, copper ore, oil, timber, palm oil,
coffee. Major markets--Australia, Japan, China, Germany, U.K., Indonesia.
Imports--29.2% of GDP: machinery and transport equipment, manufactured goods,
food, fuels, chemicals. Major suppliers--Australia, Singapore, New Zealand,
China, Japan, Malaysia.

PEOPLE
The indigenous population of Papua New Guinea is one of the most
heterogeneous in the world. Papua New Guinea has several thousand separate
communities, most with only a few hundred people. Divided by language,
customs, and tradition, some of these communities have engaged in low-scale
tribal conflict with their neighbors for millennia. The advent of modern
weapons and modern migration into urban areas has greatly magnified the
impact of this lawlessness.

The isolation created by the mountainous terrain is so great that some
groups, until recently, were unaware of the existence of neighboring groups
only a few kilometers away. The diversity, reflected in a folk saying, "For
each village, a different culture," is perhaps best shown in the local
languages. Spoken mainly on the island of New Guinea--composed of Papua New
Guinea and the Indonesian province of West Papua--some 800 of these languages
have been identified; of these, only 350-450 are related. The remainder seem
to be totally unrelated either to each other or to the other major groupings.
Most native languages are spoken by a few hundred to a few thousand, although
Enga, used in part of the highlands, is spoken by some 130,000 people.
(However, the Enga are subdivided into clans that regularly conflict with
each other.) Many native languages are extremely complex grammatically.

Melanesian Pidgin serves as the lingua franca. English is spoken by educated
people and in Milne Bay Province.

The overall population density is low, although pockets of overpopulation
exist. Papua New Guinea's Western Province averages one person per square
kilometer (3 per sq. mi.). The Chimbu Province in the New Guinea highlands
averages 20 persons per square kilometer (60 per sq. mi.) and has areas
containing up to 200 people farming a square kilometer of land. The highlands
are home to 40% of the population.

A considerable urban drift toward Port Moresby and other major centers has
occurred in recent years. The trend toward urbanization accelerated in the
1990s, bringing in its wake squatter settlements, ethnic disputes,
unemployment, and attendant social problems, especially violent crime.

Almost two-thirds of the population is Christian. Of these, more than 700,000
are Catholic, more than 500,000 Lutheran, and the balance are members of
other Protestant denominations. Although the major churches are under
indigenous leadership, a large number of missionaries remain in the country.
The bulk of the estimated 2,500 Americans resident in Papua New Guinea are
missionaries and their families. The non-Christian portion of the indigenous
population, as well as a portion of the nominal Christians, practice a wide
variety of religions that are an integral part of traditional culture, mainly
animism (spirit worship) and ancestor cults.

Foreign residents comprise about 1% of the population. More than half are
Australian; others are from the United Kingdom, New Zealand, the Philippines,
and the United States, most of whom are missionaries. Since independence,
about 900 foreigners have become naturalized citizens.

Though cultures vary widely, traditional Papua New Guinea social structures
generally include the following characteristics:

* The practice of subsistence economy;
* Recognition of bonds of kinship with obligations extending beyond the
immediate family group;
* Generally egalitarian relationships with an emphasis on acquired, rather
than inherited, status; and
* A strong attachment of the people to land, which is held communally.
Traditional communities do not recognize a permanent transfer of
ownership when land is sold.
* Though land and other possessions may be inherited through the female
line in some cultures, women generally are considered and treated as
inferiors. Gender violence is endemic.
* Patterns and frequency of sexual activity, though never publicly
discussed, contribute to the current rapid spread of HIV.

Most Papua New Guineans still adhere strongly to this traditional social
structure, which has its roots in village life.

HISTORY
Archeological evidence indicates that humans arrived on New Guinea at least
60,000 years ago, probably by sea from Southeast Asia during an Ice Age
period when the sea was lower and distances between islands shorter. Although
the first arrivals were hunters and gatherers, early evidence shows that
people managed the forest environment to provide food. There also are
indications of gardening having been practiced at the same time that
agriculture was developing in Mesopotamia and Egypt. Early garden crops--many
of which are indigenous--included sugarcane, Pacific bananas, yams, and
taros, while sago and pandanus were two commonly exploited native forest
crops. Today's staples--sweet potatoes and pigs--were later arrivals, but
shellfish and fish have long been mainstays of coastal dwellers' diets.

When Europeans first arrived, inhabitants of New Guinea and nearby
islands--while still relying on bone, wood, and stone tools--had a productive
agricultural system. They traded along the coast, where products mainly were
pottery, shell ornaments, and foodstuffs, and in the interior, where forest
products were exchanged for shells and other sea products.

The first Europeans to sight New Guinea were probably the Portuguese and
Spanish navigators sailing in the South Pacific in the early part of the 16th
century. In 1526-27, Don Jorge de Meneses accidentally came upon the
principal island and is credited with naming it "Papua," a Malay word for the
frizzled quality of Melanesian hair. The term "New Guinea" was applied to the
island in 1545 by a Spaniard, Íñigo Ortiz de Retes, because of a fancied
resemblance between the islands' inhabitants and those found on the African
Guinea coast. Although European navigators visited the islands and explored
their coastlines for the next 170 years, little was known of the inhabitants
until the late 19th century.

New Guinea
With Europe's growing need for coconut oil, Godeffroy's of Hamburg, the
largest trading firm in the Pacific, began trading for copra in the New
Guinea Islands. In 1884, Germany formally took possession of the northeast
quarter of the island and put its administration in the hands of a chartered
company. In 1899, the German imperial government assumed direct control of
the territory, thereafter known as German New Guinea. In 1914, Australian
troops occupied German New Guinea, and it remained under Australian military
control until 1921. The British Government, on behalf of the Commonwealth of
Australia, assumed a mandate from the League of Nations for governing the
Territory of New Guinea in 1920. That mandate was administered by the
Australian Government until the Japanese invasion in December 1941 brought
about its suspension. Following the surrender of the Japanese in 1945, civil
administration of Papua as well as New Guinea was restored, and under the
Papua New Guinea Provisional Administration Act, 1945-46, Papua and New
Guinea were combined in an administrative union.

Papua
On November 6, 1884, a British protectorate was proclaimed over the southern
coast of New Guinea (the area called Papua) and its adjacent islands. The
protectorate, called British New Guinea, was annexed outright on September 4,
1888. The possession was placed under the authority of the Commonwealth of
Australia in 1902. Following the passage of the Papua Act of 1905, British
New Guinea became the Territory of Papua, and formal Australian
administration began in 1906. Papua was administered under the Papua Act
until the Japanese invaded the northern parts of the islands in 1941 and
began to advance on Port Moresby and civil administration was suspended.
During the war, Papua was governed by a military administration from Port
Moresby, where Gen. Douglas MacArthur occasionally made his headquarters. As
noted, it was later joined in an administrative union with New Guinea during
1945-46 following the surrender of Japan.

Postwar Developments
The Papua and New Guinea Act of 1949 formally approved the placing of New
Guinea under the international trusteeship system and confirmed the
administrative union of New Guinea and Papua under the title of "The
Territory of Papua and New Guinea." The act provided for a Legislative
Council (established in 1951), a judicial organization, a public service, and
a system of local government. A House of Assembly replaced the Legislative
Council in 1963, and the first House of Assembly opened on June 8, 1964. In
1972, the name of the territory was changed to Papua New Guinea.

Elections in 1972 resulted in the formation of a ministry headed by Chief
Minister Michael Somare, who pledged to lead the country to self-government
and then to independence. Papua New Guinea became self-governing in December
1973 and achieved independence on September 16, 1975. The 1977 national
elections confirmed Michael Somare as Prime Minister at the head of a
coalition led by the Pangu Party. However, his government lost a vote of
confidence in 1980 and was replaced by a new cabinet headed by Sir Julius
Chan as Prime Minister. The 1982 elections increased Pangu's plurality, and
parliament again chose Somare as Prime Minister. In November 1985, the Somare
government lost a vote of no confidence, and the parliamentary majority
elected Paias Wingti, at the head of a five-party coalition, as Prime
Minister. A coalition, headed by Wingti, was victorious in very close
elections in July 1987. In July 1988, a no-confidence vote toppled Wingti and
brought to power Rabbie Namaliu, who a few weeks earlier had replaced Somare
as leader of the Pangu Party.

Such reversals of fortune and a revolving-door succession of Prime Ministers
continue to characterize Papua New Guinea's national politics. A plethora of
political parties, coalition governments, shifting party loyalties and
motions of no confidence in the leadership all lend an air of instability to
political proceedings. For the first 27 years of independence, a "first past
the post" electoral system resulted in many parliamentarians elected with
less than 15 percent of their constituency. Fractious politics and a 75% loss
rate for incumbents precluded the development of strong political parties or
a stable national leadership. Many hope that limited preferential voting,
introduced in 2003, and an organic law on political parties will stabilize
national politics.

The 2002 elections returned Somare as Prime Minister at the head of a
coalition including Rabbie Namaliu as his Foreign Minister. The next national
elections are scheduled for 2007.

GOVERNMENT AND POLITICAL CONDITIONS
Papua New Guinea, a constitutional monarchy, recognizes the Queen of England
as head of state. She is represented by a Governor General who is elected by
Parliament and who performs mainly ceremonial functions. Papua New Guinea has
three levels of government--national, provincial, and local. There is a
109-member unicameral Parliament, whose members are elected every 5 years.
The Parliament in turn elects the prime minister, who appoints his cabinet
from members of his party or coalition.

Members of Parliament are elected from 19 provinces and the national capital
district of Port Moresby. Parliament introduced reforms in June 1995 to
change the provincial government system, with regional (at-large) members of
Parliament becoming provincial governors, while retaining their national
seats in Parliament.

Papua New Guinea's judiciary is independent of the government. It protects
constitutional rights and interprets the laws. There are several levels,
culminating in the Supreme Court.

Papua New Guinea's politics are highly competitive with most members elected
on a personal and ethnic basis within their constituencies rather than as a
result of party affiliation. Members of Parliament are elected on a "first
past the post" system, with winners frequently gaining less than 15% of the
vote. There are several parties, but party allegiances are not strong.
Winning candidates are usually courted in efforts to forge the majority
needed to form a government, and allegiances are fluid. No single party has
yet won enough seats to form a government in its own right. As the majority
of Parliamentarians do not retain their seats (75% lost in 2002), party
structure is weak and national leadership is not stable. The current
government was formed by a coalition of several parties after the 2002
election in which virtually the entire previous cabinet lost their seats. Sir
Michael Somare, the leader of the Melanesian Alliance (and the nation's first
Prime Minister in 1975), was elected Prime Minister.

Papua New Guinea has a history of changes in government coalitions and
leadership from within Parliament during the 5 year intervals between
national elections. New governments are protected by law from votes of no
confidence for the first 18 months of their incumbency, and no votes of no
confidence may be moved in the 12 months preceding a national election. In an
effort to create greater stability by reducing incessant votes of no
confidence, the Integrity of Political Parties Act was passed in 1999,
forbidding members of each party in Parliament from shifting loyalty to
another party.

In 2003, the electoral system was changed to limited preferential voting,
which many hope will encourage politicians to strike alliances and to be
responsive to constituent concerns once elected. The new system was first
used in a 2004 by-election with modest, but positive results.

On Bougainville Island, a 10 year rebellion was halted by a truce in 1997 and
a permanent cease-fire was signed in April 1998. A peace agreement between
the Government and ex-combatants was signed in August 2001. Under the eyes of
a regional peace-monitoring force and a UN observer mission, the government
and provincial leaders established an interim administration and made
significant progress toward complete surrender/destruction of weapons. A
constitution was drafted in 2004 and provincial government elections were
held in May 2005. The elections were deemed to be free and fair by
international observers, and Joseph Kabui was elected to serve as the first
president of the Bougainville Autonomous Government.

Principal Government Officials
Governor General--Sir Paulias Matane
Prime Minister--Sir Michael Somare
Deputy Prime Minister--Sir Moi Avei
Foreign Minister--Sir Rabbie Namaliu
Ambassador to the United Nations--Robert Aisi
Ambassador to the United States--Evan Paki

Papua New Guinea maintains an embassy at 1779 Massachusetts Ave. NW,
Washington, DC 20036 (tel. 202-745-3680; fax 202-745-3679). The Papua New
Guinea mission to the United Nations is at 801 Second Avenue, New York, NY
10017 (tel. 212-682-6447).

ECONOMY
Papua New Guinea is rich in natural resources, including minerals, timber,
and fish, and produces a variety of commercial agricultural products. The
economy generally can be separated into subsistence and market sectors,
although the distinction is blurred by smallholder cash cropping of coffee,
cocoa, and copra. About 75% of the country's population relies primarily on
the subsistence economy. The minerals, timber, and fish sectors are dominated
by foreign investors. Manufacturing is limited, and the formal labor sector
consequently also is limited. High commodity prices in 2004 lifted both
sectors after several years of declines.

Mineral Resources
Papua New Guinea is richly endowed with gold, copper, oil, natural gas, and
other minerals. In 2001 mineral production accounted for 25% of GDP. This
will inevitably decline as old discoveries are mined out. Years of sluggish
exploration due partly to post-independence difficulties over land tenure
mean that few new deposits will be open in the coming years. However, recent
regulatory and tax reform have led to a resumption of exploration which may
boost the sector in the out years. Government revenues and foreign exchange
earnings depend heavily on mineral exports. Indigenous landowners in areas
affected by minerals projects also receive royalties from those operations.
Copper and gold mines are currently in production at Progera, Ok Tedi,
Misima, and Lihir. A consortium led by Mobil/Exxon hopes to begin the
commercialization of the country's estimated 22.5 trillion cubic feet of
natural gas reserves through the construction of a gas pipeline from Papua
New Guinea to Queensland, Australia. The project is now ongoing, with
preliminary purchase commitments made by Australian industry. Realization of
those commitments will be essential to the project's completion. Interoil, an
American firm, opened Papua New Guinea's first oil refinery in 2004. It
produces 30,000 barrels of product a day, covering all of Papua New Guinea's
domestic requirements and leaving 15,000 b/d for export.

Agriculture, Timber, and Fish
Papua New Guinea also produces and exports valuable agricultural, timber, and
fish products. Agriculture currently accounts for 30.4% of GDP and supports
more than 85% of the population. Cash crops ranked by value are coffee, oil,
cocoa, copra, tea, rubber, and sugar. About 40% of the country is covered
with exploitable trees, but a domestic woodworking industry has been slow to
develop. A number of South East Asian companies are active in the timber
industry, but World Bank and other donors have withdrawn support from the
sector over concern for unregulated deforestation and environmental damage.
Recently enacted forestry legislation has exacerbated those concerns.
Although an official moratorium on log exports is currently in place, it is
poorly enforced and logging continues at an unsustainable rate. Papua New
Guinea has an active tuna industry, but much of the catch is made by boats of
other nations fishing in Papua New Guinea waters under license. Locally
produced fish exports are confined primarily to shrimp.

Industry
In general, the Papua New Guinea economy is highly dependent on imports for
manufactured goods. Its industrial sector--exclusive of mining--accounts for
only 9% of GDP and contributes little to exports. Small-scale industries
produce beer, soap, concrete products, clothing, paper products, matches, ice
cream, canned meat, fruit juices, furniture, plywood, and paint. The small
domestic market, relatively high wages, and high transport costs are
constraints to industrial development.

Trade and Investment
Australia, Singapore, and Japan are the principal exporters to Papua New
Guinea. Petroleum, mining machinery, and aircraft have been the strongest
U.S. exports to Papua New Guinea. These have slipped as mineral exploration
and new minerals investments have declined.

Australia is Papua New Guinea's most important export market, followed by
Japan and the European Union. The U.S. imports modest amounts of gold, copper
ore, cocoa, coffee, and other agricultural products from Papua New Guinea.
Most of those exports take place through third countries.

With the 2003 withdrawal of Chevron/Texaco, Australian companies are the most
active in developing Papua New Guinea's mining and petroleum sectors. Exxon/
Mobil retains a major share of natural gas reserves and is currently
conducting an engineering study for a proposed pipeline to Queensland,
Australia. Interoil, an American firm backed by an Overseas Private
Investment Corporation (OPIC) loan, operates a 30,000-barrel a day refinery
in Port Moresby.

Papua New Guinea became a participating economy in the Asia-Pacific Economic
Cooperation (APEC) Forum in 1993. It joined the World Trade Organization
(WTO) in 1996. It is an observer at ASEAN and a member of the ASEAN Regional
Forum.

Development Programs and Aid
Australia is by far the largest bilateral aid donor to Papua New Guinea,
offering about $300 million a year in assistance. Budgetary support, which
has been provided in decreasing amounts since independence, was phased out in
2000, with aid concentrated on project development. In 2004, Australia and
Papua New Guinea embarked on the Enhanced Cooperation Program (ECP), under
which Australia agreed to provide direct assistance, including 210 line
police officers, to the Papua New Guinea constabulary. The ECP met with
initial success, but was abruptly ended when Papua New Guinea's Supreme Court
stripped Australian police officers of immunity in May 2005. Virtually all
ECP personnel left Papua New Guinea following the court's decision. The
governments of Papua New Guinea and Australia are now involved in protracted
negotiations on a scaled-down version of the ECP.

Other major sources of aid to Papua New Guinea are Japan, the European Union,
the People's Republic of China, the Republic of China, the United Nations,
the Asian Development Bank, the International Monetary Fund, and the World
Bank. Volunteers from a number of countries and mission church workers also
provide education, health, and development assistance throughout the country.
(Approaching $75 per capita, foreign assistance to Papua New Guinea is very
high compared to other developing nations.) The U.S. funds a small HIV/AIDS
project in Papua New Guinea.

Current Economic Conditions
After years of decline and government deficit, Papua New Guinea was bolstered
in 2003/2004 by a general rise in commodity prices and by government steps
toward spending control. The economy grew modestly and the government deficit
fell from 8% of GDP to 1.7%. However, the commodity boom will be temporary
and the nation continues to have serious problems of corruption, a lack of
law and order, land tenure concerns stifling investment, political
interference in business, and a lack of political will to adopt needed
sweeping reforms. Mining output and oil production have led a general decline
in output of the modern economy, though some see long-term hope in a
resumption of exploration after recent regulatory reform.

FOREIGN RELATIONS
Papua New Guinea's foreign policy reflects close ties with Australia and
other traditional allies. Papua New Guinea is by far the largest Pacific
Island nation and has traditionally viewed itself as part of the Pacific.
However, in recent years it has also been cultivating relations with Asian
nations. Its views on international political and economic issues are
generally moderate. Papua New Guinea has diplomatic relations with 56
countries.

U.S.-PAPUA NEW GUINEA RELATIONS
The United States and Papua New Guinea established diplomatic relations upon
the latter's independence on September 16, 1975. The two nations belong to a
variety of regional organizations, including the Asia-Pacific Economic
Cooperation (APEC) forum; the ASEAN Regional Forum (ARF); the South Pacific
Commission; and the South Pacific Regional Environmental Program (SPREP).

One of the most successful cooperative multilateral efforts linking the U.S.
and Papua New Guinea is the U.S.-Pacific Islands Multilateral Tuna Fisheries
Treaty, under which the U.S. grants $18 million per year to Pacific Island
parties and the latter provide access for U.S. fishing vessels. The United
States has provided significant humanitarian assistance to Papua New Guinea
during the past 5 years and has contributed to the rehabilitation of
Bougainville. USAID supports a small HIV/AIDS project in Papua New Guinea.

The U.S. also supports Papua New Guinea's efforts to protect biodiversity.
The U.S. Government supports the International Coral Reef Initiative aimed at
protecting reefs in tropical nations such as Papua New Guinea. U.S. military
forces, through the Pacific Theater Command in Honolulu, Hawaii, provide some
training to the Papua New Guinea Defense Force (PNGDF) and have held
small-scale joint training exercises. The U.S. also provides police and other
education and training courses to national security officials.

The U.S. Peace Corps ceased operations in Papua New Guinea in 2001 due to
security concerns. About 2,500 U.S. citizens live in Papua New Guinea, with
major concentrations at two missionary headquarters in the Eastern Highlands
Province.

Principal U.S. Embassy Officials
Ambassador--Robert Fitts
Deputy Chief of Mission--Thomas Weinz
Consular Officer--Leslie Livingood

The U.S. Embassy in Papua New Guinea is located on Douglas Street, Port
Moresby (tel. 675-321-1455; fax 675-321-3423). The mailing address is 4240
Port Moresby Pl., U.S. Department of State, Washington, DC 20521-4240.