The Stanley Hotel in Port Moresby advertised that they would be holding a ‘walk-in’ interview for about 100 positions. More than 2000 showed up for the interview in early February 2023, and stood in line for hours soaked in the pouring rain. This comes after about 20, 000 applied for just 576 positions advertised by the PNG Police Department at the end of 2022. PNG SEEKJOB website, an online recruitment portal reports that 86, 262 applicants have registered for just 213 jobs advertised, and the site has 110, 000 visits per month. These statistics gives a snap-shot of the level of unemployment in a country of about nine million. What consequences lie ahead is anybody’s guess, but definitely not a good one. The PNG Trade Union Congress President called the unemployment rate a “ticking time bomb.’
Whereas the private sector is the largest employer in many countries, in PNG, the state is the major employer. The state employs about 700, 000 people, whilst the private sector employs an estimated 260, 000 people (2020 estimates). The troubling news is that not only are there limited employment opportunities: there are more and more people losing their jobs as this study shows. Period for which data is available shows that there were about 305, 000 people employed in the private formal sector in 2013, but dropped to about 260, 000 in 2020. As Figure 1 below shows, this drop started before COVID-19, so COVID-19 is not the sole reason for unemployment.
The problem in PNG is threefold: first, the government focuses more on the mineral and extractive sector which provides minimum employment opportunities; second, the business environment in PNG has deteriorated significantly; and third, the COVID-19 has stunned economic growth world-wide – PNG is no exception. Below we look at each point.
Mineral sector = low employment
According to World Bank data, Papua New Guinea is the tenth most resource intensive economy in the world. Guys from Devpolicy say that “measure of underground resource rents (profits from oil, gas, coal and minerals) as a percentage of GDP, out of 205 countries puts PNG tenth at 19.3%, just below Saudi Arabia at 20%. By comparison, the global average is only 1.5%.” PNG’s economy relies on extractive industries (PNG LNG, OK Tedi etc).
Why is this a problem for PNG?
This is a problem because the resource sector employs less people than manufacturing and service sectors. Case in point is the PNG Exxon Mobil Project. According to its website, PNG Exxon Mobil, a LNG company, employs around 3,200 people, 86 percent are Papua New Guineans. Exxon Mobil’s market cap is $460 billion or K1, 643 billion.
East New Britain Oil Pam Company (ENBPO), on the other hand, employs 25, 000 people, of which only 106 are expatriates – the rest are Papua New Guineans. How much ENBPO is worth is not known, but there was a K4.319 billion bid to buy the company in 2014. This amount was the market value or how much ENBPO was worth at the time. ENBPO engages in planting and manufacturing Palm Oil products in PNG.
As these two cases show, ENBPO Company employs about seven (7) times more Papua New Guineans than Exxon Mobil. Exxon Mobil, whose worth is about 410 times bigger than ENBPO employs less people.
Why are the differences in employment so big?
Because Exxon Mobil is a company that requires more machines to do its drilling and other related jobs, whilst ENBPO needs more humans to do every things from planting, and harvesting to manufacturing. These manufacturing companies are low-skilled and labour intensive. This simply means they employ people with low education, and need more people than machinery to do the work.
Another manufacturing sector that employs many Papua New Guineans is the tuna canneries. The seven tuna canneries in PNG employ more than 10, 000 people.
The obsession of PNG politicians with minerals companies means there is more focus on the sector (mineral resource sector) that employ less people. The neglect of manufacturing companies means the sector (manufacturing) that present the highest employment opportunities in PNG is neglected. Worse still, tax holidays given to mineral companies results in low revenues coming into the state coffers. The services sector such as tourism is also labour intensive, and provides more employment than the mineral sector.
Poor Business Environment
The second factor is the poor business environment in PNG. The World Bank used to produce an annual survey on the “ease of doing business” where it ranked 190 countries based on how easy it was to start and sustain small to medium enterprises or SMEs (was discontinued since 2020 after revelations that WB manipulated data for China to make it look good). The last report on PNG was published in 2020, and can be accessed on World Bank website. There are 11 indicators, and a country is ranked out of 190 – with number 1 being the best. By 2020, PNG ranked in the top 50s in only one indicator – getting credit – where it ranked 47 out of 190, whilst the worst was enforcing contract, where it ranked 173 out of 190. Overall, PNG ranked 120 out of 190. Any aspiring entrepreneur or SME owner will tell you how hard it is to meet the requirements of starting a business in PNG.
An important consideration for businesses that the Work Bank report did not sufficiently cover is the debilitating law and order problems in PNG. According to World Population Review, PNG ranks second in the world index of countries with the highest crime rate in 2023. Overall crime rate is calculated by dividing the total number of reported crimes of any kind by the total population, then multiplying the result by 100,000 (because crime rate is typically reported as X number of crimes per 100,000 people). Only Venezuela beats PNG in the number one position. With a crime rate like this, businesses, especially foreign companies, will not invest in PNG. No investment means no jobs.
Other constraints include poor government policies such as currency rationing. Case in point of such policies is the Puma-Bank of PNG-Air Niugini saga in early 2023. In the first week of January 2023, Air Niugini flights were grounded because Puma Company, which supplies the aviation fuel Jet A1, did not supply the fuel to Air Niugini. Puma’s argument was that it did not have enough foreign currency to import the A1 fuel. The Bank of PNG controls the amount of foreign currency (FX) given to companies. In this case, it placed limits FX Puma requested – or rationed foreign currency. FX rationing has been an ongoing problem in PNG. If businesses are affected, employment is affected. There are other factors such as the level and quality of literacy in the country that contributes to low investment in PNG.
COVID-19 as a cause for unemployment is self-explanatory. COVID-19 has affected businesses world-wide, and PNG is no exception. The difficulties businesses face range from social distancing requirements, and low demands, to increasing costs of doing business. Struggling businesses lay off workers. An article on Devpolicy estimates that about 10, 000 jobs were lost in PNG in 2020. Whether this has recovered is not clear.
There may be many factors, but the three discussed above, in my view, are the main causes for high unemployment in PNG. Addressing these problems will take a government that is serious, and is not afraid of making unpopular decisions.