Alfonso Garcia Mora, Vice-President Asia and Pacific for the International Finance Corporation (IFC), a member of the World Bank Group, outlines some of the development challenges Papua New Guinea faces today and how the IFC is supporting private sector investment to address them.

The COVID-19 pandemic is leaving an indelible mark on all of us. It has impacted the lives and livelihoods of millions of people and reversed years of development gains.

The impact on women is particularly troubling, adding to their burden as primary caregivers. Most regrettably, gender-based violence has increased.

The deep scarring to the global economy will be lasting. The pandemic has hit Papua New Guinea particularly hard, as the economy is highly vulnerable to commodity prices and natural disaster shocks.

COVID-19 has exacerbated already existing development challenges in the country, such as poor health infrastructure. It has only further exposed structural economic challenges – notably the boom-and-bust cycles driven by swings in exports of natural resources. While the economy remains heavily dependent on the extractives sector, it is clear that the growth of the sector is not generating sufficient employment opportunities to reduce poverty.

Low carbon economy

The IFC’s Alfonso Garcia Mora

And another point to consider: while gas has long been as seen as part of the transition to a low carbon economy, the challenge for business looking to PNG is to think and imagine the low carbon economy of the future. What will it look like?

Our climate is changing fast.

Climate change is an enormous threat facing every nation. In its report for COP23 hosted by Fiji, PNG spelt out that rising sea levels and destructive weather events have a serious impact on land and at sea. Increasing temperatures hamper agriculture, impacting people’s livelihoods.

‘A transition to a net zero world needs massive flows of capital towards sustainable and impact investments.’

The world is at risk of irreversible and disastrous consequences if we do not act, now. The urgency is real. The 2018 Intergovernmental Panel on Climate Change report stressed that we have only 12 years left to stop runaway climate change. Now we have nine – this is less than two average business cycles.

We now know that fossil fuel resources will need to be replaced fast with renewable energy if the world is to meet the targets of the Paris Agreement, to limit global warming to well below two, preferably to 1.5 degrees Celsius. It requires significant changes in emissions – 45 percent reduction by 2030 and net zero emissions by 2050.

A transition to a net zero world needs massive flows of capital towards sustainable and impact investments. According to the International Energy Agency, we need to double our investment in energy today to reach US$3.5 trillion every year for decades to enable such transition.

Combating climate change requires collective commitment from all stakeholders .

Economic diversification

In looking at the challenges, now though more than ever, diversification of the economy will be key. There’s a need to look for new opportunities, from agriculture to renewable energy.

The private sector plays a central role in tackling climate change. In fact, we’ve estimated that Asia as a whole offers over 80 per cent of the total estimated climate smart investment opportunities of US$23 trillion in the emerging world to 2030.

‘Demand for agricultural crops is expected to double … by 2050. PNG with its fertile lands could play a much greater role in helping meet that demand.’

And at a time when governments are facing increasing fiscal constraints, these investment opportunities should be seized by the private sector.

Climate finance is a top priority for IFC. We aim to achieve 85 per cent of our new operations to be aligned with the Paris Agreement by July 1, 2023 and 100 percent of these by July 1, 2025.

Mobilising finance

The World Bank Group is committed to support a green, resilient and inclusive recovery. Under our climate action plan, we’re working to create bankable investment opportunities and to mobilise private financing towards decarbonising five key sectors: energy; agriculture, food, water, and land; cities; transport; and manufacturing.

In PNG, renewable energy represents a clear opportunity for business and investment. There is far more potential to harness renewable sources of power including wind, solar and hydro. It’s especially needed given that PNG has one of the world’s lowest per-capita electricity consumption rates.

With the support of the governments of Australia and New Zealand, we are helping PNG address the gap between supply and demand by creating more space for the private sector to deliver renewable and clean energy, through public-private partnerships.

A woman reads the newspaper at night, something that wouldn’t have been possible before. Credit: IFC

Meanwhile, our lighting solar program has helped create an attractive market for solar entrepreneurs. The off-grid solutions have helped more than two million people light their homes and charge their cell phones using solar power.

We’re hoping a trial program with PNG Power will open up the solar rooftop market to private investment.

More can be done. But we need to work together to develop business models that can be replicated and are bankable and leverage the expertise and financial capacity of the private sector.

Agribusiness

In the wake of COVID-19, strengthening the agribusiness sector is another priority.

Just consider – demand for agricultural crops is expected to double as the world’s population nears an estimated 10 billion by 2050.

PNG with its fertile lands could play a much greater role in helping meet that demand.

But today there is a vast gulf between the majority of people who are in agriculture – mainly subsistence farming – and the country’s agricultural exports.

There are investment opportunities – from logistics to processing to the commercialization of agriculture.

The fertile Markham Valley near Lae is one of PNG’s most productive agricultural regions.

During this conference, IFC will be showcasing our Markham and Ramu commercial agriculture study. It seeks to develop an investment blueprint to take advantage of the high-quality land in the Markham and Ramu Valleys.

Demonstrating the impact of a geographically focused, long-term agribusiness project will help pave the way for investments in agribusiness.

One needed reform in this area is already underway – IFC has been working with the National Agriculture, Quarantine and Inspection Authority on a National Biosecurity Bill to safeguard the country’s agricultural and natural resources, boost trade and protect public health.

Opportunities for women

Before closing, I want to raise another important point in relation to business and PNG. It is the need to enhance women’s voices and opportunities in the country.

You might be aware that IFC established the Business Coalition for Women in PNG to drive positive change for women and businesses.

Gender equality has been proven to drive productivity, profitability and performance.

There’s also a clear case – as we’ve shown through our research work – for business to act in the workplace to tackle issues of violence.

Research from IFC, in partnership with the Business Coalition for Women, recently found that family and sexual violence was costing employers in Papua New Guinea almost ten days of work per employee each year. The research showed that businesses which are more gender equal and which provide workplace support for those impacted by family and sexual violence also see more positive results, including reduced business costs.

Alfonso Garcia Mora is Vice President for Asia and the Pacific at the International Finance Corporation, a member of the World Bank Group. This piece is an extract from his keynote address to the 2021 Business Advantage Papua New Guinea Investment Conference.