3. ____________________________________________________ 3.1 INTRODUCTION There are 22 Pacific Island countries (PICs) and territories spread across the South Pacific Ocean with a total land area of about 500,000 km2. These economies are considered to be amongst the most vulnerable economies in the world. This vulnerability and the remoteness of these countries have often been blamed for being among the causes of slow growth in the region (Gibson, 2007). In addition, although Pacific countries currently receive some of the world’s highest levels of aid relative to the size of their economies, unfortunately, this has had limited impact on their economies (Feeny and McGillivray, 2008). But all too often, these economies are studied in a regional context (partly because of the paucity of time-series data on each Pacific economy) which masks the differences in the impacts due to the differences in size, economic composition of the sectors and the macroeconomic policies undertaken by the governments. Hence, a countryspecific analysis is necessary for a deeper understanding of the situation to improve policy making. The focus in this chapter is on Papua New Guinea (PNG) which is the largest PIC, accounting for 83% of the region’s land area and 80% of the total Pacific population. Despite the relatively large land mass and rich natural endowments, PNG’s economic development performance has been disappointing to date. How can PNG move forward in the current climate? This question can be addressed in a number of ways including how it can increase productivity in areas such as agriculture and...
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