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Livestock Development Report No. 16737-PNG Papua New Guinea Accelerating Agricultural Growth Public Disclosure Authorized An Action Plan June 1997 Agricu Dlture Di ,io n ( ountr\ Dep tilik lIIK er Dcst AXsi f Pth(IWoi(Rl Bn( Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank PAPUA NEW GUINEA CURRENCY EQUIVALENTS ANNUAL AVERAGE 1981 K1.00 = US$1.49 1985 K1.00 = US$1.00 1986 K1.00 = US$1.03 1987 K1.00 = US$1.10 1988 K1.00 = US$1.15 1989 K1.00 = US$1.16 1990 K1.00 = US$1.05 1991 K1.00 = US$1.05 1992 K1.00 = US$1.04 1993 K1.00 = US$1.02 1994 K1.00 = US$1.00 1995 K1.00 = US$0.781 1996 K1.00 = US$0.76 1997 K1.00 = US$0.72 (June) -'I FISCAL YEAR January 1 - December 31 ACRONYMS AND ABBREVIATIONS ADB = Asian Development Bank AREP I = Agricultural Research and Extension Project Phase I AREP II = Agricultural Research and Extension Project Phase II AusAID = Australian Agency for International Development BRI-UD = Village Banks of Bank Rakyat Indonesia CAI = Competitive Advantage Indicator CCRI = Cocoa and Coconut Research Institute CDA = Coffee Development Authority CIC = Coffee Industry Corporation CLR = Coffee Leaf Rust CMB = Copra Marketing Board CMD = Coffee Management Division of the CIC CPI = Consumer Price Index EffectiveOctober 10, 1994 the exchangerate has been determinedthrough daily auctionsbetween registeredforeign exchangebrokers. As of July 18, 1995. Vice President Jean-Michel Severino Director : Marianne Haug Division Chief/Manager Gershon Feder Staff Member Muhammad Osman Farruk CRI = Coffee Research Institute of the CIC DAL = Department of Agriculture and Livestock DPI = Division of Primary Industry DRC = Domestic Resource Costs EEC = European Economic Community (European Union) FAO = Food and Agriculture Organization FFB = Fresh Fruit Bunches (Oil Palm) FMD = Food Management Division of the DAL FPDC = Fresh Food Produce Development Company GB = Grameen Bank (Bangladesh) GBE = Green Bean Equivalent (Coffee) GoPNG Government of Papua New Guinea IDA = International Development Agency IFAD = International Fund for Agriculture Development IRRI = International Rice Research Institute ISNAR = International Service for Agricultural Research KUPEDES = General Village Credit Program (Indonesia) LDC = Livestock Development Corporation NAQIS = National Agricultural Quarantine and Inspection Services NARDC = National Agricultural and Rural Development Council NARI = National Agricultural Research Institute NEC = National Economic Council NGO = Non-Government Organization OPIC = Oil Palm Industry Corporation PIP Public Investment Program (GoPNG) PNGAB = Papua New Guinea Agriculture Bank PNGBC = Papua New Guinea Banking Corporation PNGOPRA = Papua New Guinea Oil Palm Research Association PNGRIS = Papua New Guinea Resource Information System RDB = Rural Development Bank SMAFSP = Smallholder Market Access and Food Supply Project UNDP = United Nations Development Programme WID = Women in Development - TABLE OF CONTENTS Executive 5ummary................................... i.. C.hnpter1: %7Ytroduction.................................. 1 Cbnpter 2: 7he Turnl .5cene..................................... 3 Women In The Rural Economy.................................... 3 A TraditionalLand Tenure System.... 3................................3 Rural Infrastructureand ProduceMarketing ...... 4..............................4 An ImpoverishedRural Population..................................... 5 Chapter3: production of Crops and ,Givestoek. CAJnOverview ............................................7 AgriculturalProduction Modes ............................................................... 7 Productionof Crops and Livestock................................................................ 8 How Competitiveis PNG's Agriculture?............................................................... 10 Technologyfor ProductivityImprovements and Land Management................................................. 11 C.hapter4: .Oeliverin 9 ,5upport,3ervices . ................................................................ 13 Extensionand Research.................................................................... 13 ImprovingPublic Sector SupportServices .................................................................... 15 Commercial,Marketing and RegulatoryServices .................................................................... 17 Rural FinancialIntermediation . 18 The Potentialfor Micro Credit Development. .................................................................... 8 ClhapterS: Teformine economic'Oevelopment policies c4ffecting o49riculture................ 21 Macro-EconomicPolicies .21 Export CropPrice Supportand Stabilization.............................. ...................................... 22 Input and TransportSubsidies .................................................................... 23 Public SectorResource Allocation .................................................................... 24 C-hapter6: 'oving to the 216*Centurai: oA Vision, .5trnteg5and 'Actionp lan ...............27 The Challenges.................................................................... 27 A Vision, Strategyand Action Plan.................................................................... 28 Strategy.................................................................... 28 Policy and InstitutionalReforms ...................... .............................................. 28 Public Investments.................................................................... 29 ndnoteS........................................... 33 4oZnex7abiws Table 3.1: Papua New Guinea: ExportPrices and Cost of Productionfor Four Major Export Crops (Kina per ton) ........................................................... 37 Table 3.2: Estimatesof domesticresource cost (DRC), 1991 and 1995 .........................................................37 Table 3.3: Estimatedretail prices for importedand locally grownproduce, December,1995 ........................................................... 38 Charts in 7ext Figure 1.1: Agriculturein PNG Economy........................................................... 1I Figure 1.2: AgriculturalGrowth in PNG (/6) ........... 2................................................2 Figure 3.1: Sourcesof SmallholderIncome in Four Provinces................................ ............................ 7 Figure 3.2: AverageExports ('000Tons) ........................................................... 9 Figure 5.1: ExpenditureRatio of PNG vs. SelectedOther Countries,1984-88 Average ............................... 24 Figure 5.2: CentralGovernment Agriculture, 1990-95 ........................................................... 24 Figure 5.3: AgricultureSector Expenditure- AGGDP,GDP and Public....................................................... 24 1goxesin 7ext Box 1: Women in PNG Agriculture: Some Issues ........................................................... 4 Box 2: Competitionin the Coffeeand CocoaMarketing Systems ............................................................ 5 Box 3: The Many Obstaclesto MicrocreditPrograms in PNG ........................................ ................... 19 Box 4: Devaluationof the Kina: AlternativeEstimates of Impact........................................................... 21 cAnnexe% Annex 1: Agro-Ecologyand FarmingSystems of PapuaNew Guinea......................................................... 39 Annex 2: AgriculturalSupport Services Institutions ............................................................ 42 Anmex3: AgriculturalResearch and the State of Technology........................................ .................... 49 Annex4: NationalAgricultural Research Institute ............................................................ 55 Annex 5: LivestockDevelopment: Past and Future ............................................................ 61 Annex 6: Microcredit: InternationalExperiences ............................................................ 74 Annex 7: Microcreditin PNG: Forays by an NGO ............................................................ 80 Annex 8: The Rural DevelopmentBank (RDB)of PNG ....................... ..................................... 85 Annex 9: The PlantationDebt Situation............................................................ 89 Summaryand Reconmmendations............................................................ 92 PAPUANEWGUtINEA ACCELERATINGAGRICULTURALGRO\H ANACnON PLAN EXECUTIVESUMMARY The Context the traditionalfood securityand naturalresource managementsystems. More importantly,low i. Agricultureprovides income, employment smallholderproductivity and high costs of and livelihoodfor over 85 percentof PNG's productionand marketing have jeopardized the population,and contributed27 percentto PNG's internationalcompetitiveness of many of PNG's grossdomestic product (GDP), 35 percentto its agriculturaltradeables, despite excellent agro- exportrevenues and about40 percentto the formal ecologicalconditions for their profitablecultivation. private sector employmentduring 1980-90.Its importanceis likelyto remainundiminished during iii. The recent surge in agriculturalGDP the comingyears, and may even increasegiven the growth,about 7.6 percentp.a. during 1992-95,is likelihoodof the mineraland oil sectorresources not likelyto be sustainedbecause it was rooted in taperingoff by the turn of the century. Yet, past windfallgains in the world marketprices for some economicdevelopment and public investment of PNG's exportcrops and forestryproducts,
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