Lasting bonds: Shared historical, economic and political ties with Australia

The Report: Papua New Guinea 2012 – Country profile

Separated only by the Torres Strait – a distance of 150 km – Papua New Guinea and Australia have translated their geographic ties into political and economic cooperation. Indeed, Australia has long been PNG’s largest export market, while also being its biggest source of imports. Australian companies are also heavily represented in PNG and around 10,000 Australian expatriates currently live and work in the country.

HISTORICAL TIES: The relationship between the countries began in 1902, when what was then British New Guinea – the southern half of modern-day PNG – was placed under the authority of the Commonwealth of Australia. Formal Australian administration began in 1906. When the First World War broke out in 1914, Australian forces then occupied German New Guinea – the northern half of what is now PNG – retaining this under military rule and a League of Nations mandate until 1921.

In the Second World War, the island of New Guinea faced Japanese invasion, with Australian and Papua New Guinean troops engaged in a particularly hardfought campaign for the island from 1941 to 1945. One important testimony to this is the Kokoda Trail, still honoured today by many Australian visitors and veterans.

Following the war, Australia again administered the territory. In 1972 the name was changed to PNG in preparation for independence, which followed in 1975. Nowadays, the relationship is regularly overseen by the Australia-PNG Ministerial Forum, which has reached agreements on a raft of bilateral treaties over the years.

TODAY’S RELATIONSHIP: The Partnership for Development has seen Canberra’s aid to PNG – which totals just over $500m for 2011-12 alone – focused on education, health, transport, and law and justice. In 2011 the Australian prime minister, Julia Gillard, agreed to help PNG reach its goal of producing 52,000 higher education graduates by 2015 and making significant improvements in basic education enrolment. Canberra also funded a project worth some $985,000 to bring more women into PNG politics. At the same time, negotiations have also been under way for an economic cooperation treaty, which is expected to be wider ranging than the current Agreement on Trade and Commercial Relations, which was put into place in 1991. Both countries are also signatories to the 1981 South Pacific Regional Trade and Cooperation Agreement, which provides duty-free access to the Australian and New Zealand markets for South Pacific nations.

PNG is also involved in a number of political and security-based agreements with Australia. These include Australian aid to the PNG police force and armed forces – some $20.9m in aid has been earmarked to the latter for 2012-13. Additionally, both countries are members of the Commonwealth and regularly cooperate on international matters via the UN.

TRADE: According to Australian government figures, exports to PNG stood at $2.19bn during 2010-11, while imports from PNG reached $3.45bn. These Australian government’s sources indicate that year-on-year, exports and imports grew 12.3% and 18.6%, respectively, and it is expected that this trend will have continued during 2011-12. Indeed, Australian government officials estimated in March 2012 that combined trade stood at approximately $6.95bn for that year.

The main goods exported by Australia to PNG are crude petroleum ($449.8m in 2010-11), civil engineering equipment and parts ($110.2m) and goods vehicles ($85.4m). Meanwhile, the biggest exports from PNG to Australia include gold ($2.13bn), crude petroleum ($1.01bn), and silver and platinum ($209m). This establishes Australia as PNG’s top export destination by a very high margin – the country received 27.9% of all PNG’s overseas sales in 2010-11, while Japan, which took the second-highest amount, received only 9.1%.

Australian firms are active in PNG’s resource extraction sectors in particular, including Oil Search, Santos, Newcrest Mining, Sun Engineering and Highlands Pacific. In 37 years since independence, PNG and Australia have periodically looked to shift their foreign policy focuses elsewhere, but given the strength of geographic and economic ties, the two will likely remain close.

Countries: Australia and Papua New Guinea
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