The Australian based Lowey Institute says Papua New Guinea's massive new Liquified Natural Gas project¹ and large mining investments will not reduce poverty unless there is a radical re-thinking of the government's approach.

The US$18 billion LNG project has been heavily hyped by the PNG government as providing a rich future for the country but the evidence presented by the Lowey Institute suggests otherwise.

The LNG project has already been beset by landowner disputes and violence while in the national capital, Port Moresby, costs have escalated, putting housing in particular, beyond the means of ordinary people.

Despite 8 years of continuous economic growth PNG has failed to make any progress on achieving the Milleneum Development Goals and has slipped backwards on many social indicators. PNG currently sits 148th on the United Nation's Human Development Index - two places below Bangladesh and forty places lower than Fiji.

The problem, according to the Lowey Institute, is that investment and growth are not reaching the poor and the LNG project will only reinforce the existing structures in which the poor are largely excluded.

Instead of just inviting large investments from overseas there needs to be a much greater emphasis on ensuring domestic employment and not just a focus on increasing government revenues. Foreign owned companies also need to be encouraged to reinvest their profits in PNG rather than just shipping their gains off-shore, says the Institute. 

"When companies are foreign owned, their profits are typically withdrawn from the economy and have no discernible impact on PNG's poor".

Although major resource projects do result in higher government revenues and government revenues over the last eight years have grown faster than the economy as a whole, "expenditure choices result in far too few benefits for the poor" says the Lowey Institute, and only modest reductions in poverty.  

The Lowey Institute report can be downloaded below