International trade is expected to contribute to better employment outcomes despite Papua New Guinea relying on international trade for much of its exemplary economic growth performance.
A recent report by PNG National Research Institute reveals only very few of its young people leaving schools and colleges every year find wage employment.
In “Employment effect of international trade in Papua New Guinea” (NRI Discussion Paper No. 181), Dr Francis Odhuno and Dr Diana Ngui investigate the twin effect of increasing PNG’s imports and exports on the country’s formal sector employment.
They used quarterly data of fairly large firms collected by the Bank of PNG to show that increasing both import and export values results in increases in formal employment in various sectors of the PNG economy. But, while the effect of increasing imports is immediate, it takes some time for the effect of increasing exports to be felt.
Increasing exports also has the potential to immediately increase formal sector employment in regions where large projects are to be located. But the effect of increasing exports on formal employment in the regions is mixed. The short-term positive effects are reversed in the future, when fewer wage employment opportunities are created in the regions.
The authors conclude that “PNG needs to increase the amount of domestically processed non-mineral products for domestic and export markets, but focusing on exports from labour intensive sectors such as agriculture, forestry, fisheries and manufacturing would also improve employment in formal enterprise sector and in the regions across the country. Domestic production in this case should be targeted at the consumables sector”.
The PNG NRI acknowledges the Australian Department of Foreign Affairs and Trade (DFAT) for the research funding support for this project.
-Press Release –