such competition will only result in price increases, increase in imported inputs, including materials, equipment and labour, and misallocation of the limited resources resulting in losses to the nation. therefore, my recommendation is that during the lng construction period the government should refrain from undertaking major infrastructure projects. undertaking major infrastructure projects by the government will only compete with the limited resources in equipment and manpower in the areas of earth moving, building and construction, as well as other industries that are and will be fully utilized for the lng project construction. the government should instead do work in the areas of, maintenance, upgrading and some instances complement work done by the developer of the lng project. the government should commence planning its infrastructure implementation and be ready to implement them, as and when the lng project scales down its construction operations and the highly skilled labour trained by the developer, equipment and materials, become available and can be utilized, for other infrastructure developments. during the construction phase of the lng project, the government should concentrate its efforts on areas that do not compete with the lng developer on resources, which are the social sectors of education, including the up - skilling of the workforce through vocational and on the job training, health and law and order. it is clear that the expansion of the services in these areas will require investment in classrooms, aid posts, police stations and housing for teachers, health workers and police personnel. the recommendation is not to refrain from all work in the area of building and construction, but to limit them to the bare minimum necessary to maintain the existing infrastructure and complement it with the most needed additions. once the lng project construction winds down, the opportunity to move the skilled labour trained by it, and the resources becoming available, to major infrastructure and building and construction projects should be planned. this means that the government must have a clearly designed plan, including detailed implementation plans and programs for it. iii. combating “ dutch disease ” the second important micro level proposed initiative is to invest in the agriculture sector and social infrastructure. in many presentations of the problems that the development of the lng project might create, the subject of the “ dutch disease ” which involves the pricing out of the traditional export sectors is raised. one of the most efficient ways to counteract it is, by investing and developing a competitive traditional export industry. papua new guinea is bis central bankers ’ speeches blessed with very fertile land, abundant water resources, and available labour force, and has the potential to develop a competitive

loi martin bakani : economic prospects and outlook for 2011 to 2015 address by mr loi martin bakani, governor of the bank of papua new guinea, to the consultative implementation and monitoring council ( cimc ) national development forum, port moresby, 24 august 2011. * * * acknowledge dignitaries and organizers ( cimc ) of the forum. although the period for the topic is 2011 to 2015, allow me to confine my presentation to the period 2011 to 2014, which is largely the period for the construction phase of the png lng project. i. economic prospects : 2011 to 2014 papua new guinea is currently enjoying the longest streak of economic growth in its history as an independent nation. 2011 will be the 10th year of economic growth as measured by the increase in real gross domestic product ( gdp ). the average increase in real gdp for the period from 2002 to 2010 was 5. 4 %. the driving force behind the growth for most of the period was the non - mineral sector. projections by the bank of papua new guinea indicate that economic growth in 2011 will be around 9. 5 %. the growth in economic activity shall continue all through the 2011 to 2014 period. the high economic growth in 2011 is driven by the construction of the lng project, and the global demand for the country ’ s primary exports. even if there will be a slowdown in the economic activity in the developed economies, high growth in the major emerging markets of brazil, russia, india, china and south africa ( brics ) should ensure that the slowdown in global activity will not be severe. hence, the international commodity prices might decline, but will still be historically high, which should benefit our agriculture, forestry and fisheries industries. the construction of the lng project will benefit the sectors of the economy that supply inputs and services to the developer, mainly manufacturing, earth works, infrastructure, building and construction, transport, communication, commerce ( wholesale and retail especially equipment and vehicles ), personal services, accommodation and hotels, and local food production for the workforce. in addition the high international metal prices of copper and gold will result in high mineral export receipts and taxes to the government, which will allow for continued high public expenditure and the public sector contribution to aggregate demand, and gdp. based on the above outlook it is assumed that economic growth as measured by real gdp will continue to be high at the 8 % to 10 % range, all through the period of the construction of the lng project,