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,

managing financial crises and alternative courses of action proliferate. politicians, whether or not they have the authority over the decision to intervene, want to satisfy themselves that intervention is justified and what is proposed is the right way forward. often the process of arriving at a consensus takes time and meanwhile the problem worsens and the effectiveness of the actions to be taken is eroded. i believe therefore that those responsible for the maintenance of monetary and financial stability should have the necessary emergency powers to do what is required independently and promptly. there is of course the need for transparency and accountability when exercising these powers to ensure appropriate checks and balances. at a time when many jurisdictions and international forums are reviewing the financial regulatory structure, the ability or inability of the financial authorities to take unusual action, independently and promptly, to protect the public interest should be addressed. my fourth and last issue is an involvement. this concerns the extent to which the authorities should be involved in the development of the financial infrastructure. i am sure you are aware of the huge amount of public money spent in all jurisdictions in the development of the physical infrastructure, building highways, bridges and airports to take people and goods from one place to another safely and efficiently, thus facilitating the conduct of economic activities for the benefit of all. authorities, however, seem to devote only disproportionately small amounts of resources to the development of the financial infrastructure to move money and financial instruments from one entity to another safely and efficiently for the purpose of enhancing financial efficiency that promotes economic prosperity. to some extent, the development of the financial infrastructure can be left to the market, with swift being a sterling example of private sector initiative in this area. but many of the important elements of the financial infrastructure are public goods, the provision of which, in a form that serves the public interest best, may not be financially viable for the private sector. furthermore, the conflict i mentioned earlier often comes in, affecting the willingness or the enthusiasm of the financial intermediaries to develop and use a financial infrastructure that promotes financial efficiency. i believe this is one of the main reasons why x in t + x in the settlement of some financial transitions is still a number other than zero, or why t + x is still not replaced by rtgs dvp even though the technology to do so has been available for some time. very simply therefore there is a case for the authorities to get involved, as a developer or a service provider, when a private sector solution that is in the public interest