30 Managing macroeconomic policies for sustainable growth The remainder of this chapter is organised as follows. The next section sets the chapter into context by providing an overview of PNG’s economy. Section 3.3 discusses commodity growth as the driving force of the economy, while Section 3.4 takes a closer look at the food sector. Section 3.5 briefly describes the features of the CGE model used in the analysis. Section 3.6 maps out the policy scenarios simulated in the analysis, while Section 3.7 presents and discusses the empirical results. Section 3.8 concludes with the summary and policy implications. 3.2 THE PNG ECONOMY The developing economy of PNG is well endowed with large reserves of renewable and non-renewable natural resources. The former includes timber which covers about 75% of the land area as well as agricultural and marine resources. The coastline is over 10,000 km long and the marine area inside the 200-mile economic exclusive zone covers 2.4 million km2 of ocean. The non-renewable resources include gold, copper, oil, gas and other minerals. Unfortunately, neither the two major mineral booms of the early 1990s nor the substantial aid from its colonial power, Australia, saw PNG’s average per capita GDP improve. Overall, PNG’s development record since its independence from Australia in 1976 has been disappointing. Life expectancy and adult literacy rates are well below those of neighbouring countries in the South Pacific and South-east Asia with a human development index rank of 148 out of 182 countries and a human poverty index...
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