Photo: Australian High Commission, Port Moresby
Although the focus today in Papua New Guinea is very much on events in parliament, the Pacific nation faces stark economic realities, particularly when it comes to formal employment in its economy. Jonathan Pryke and Anna Kirk write about some of the programs working to tackle this problem by encouraging entrepreneurship in young Papua New Guineans.

Despite a decade of rapid economic growth, the formal labour market still only provides livelihoods to about 10-15% of the working age population. Compounding this problem is a rapidly growing population and a universal education policy in a country that now graduates approximately 80,000 young people from school a year. Unfortunately, the formal labour force can absorb less than 10,000 per year, mostly in jobs that require post-secondary education. But enrolment numbers in both universities and technical colleges in PNG are only at around11,000 per year, and graduation rates half that. That leaves a lot left over.

These statistics paint a worrying picture but it is important to remember that Papua New Guinea also has a massive informal economy, particularly in rural areas where 80% of the population live. The informal economy is centred on semi-subsistence agriculture, forestry and fisheries, which generates livelihoods for most of the remaining working-age population. This, combined with the traditional wantok system of welfare (extended kinship networks, where those who are employed in the formal sector help to support kin in the village) explains how the country survives with such low levels of formal employment. These systems, however, can only do so much to improve the welfare of everyday Papua New Guineans.

Meanwhile, increasing urbanisation and a dearth of informal sector opportunities in cities is contributing to the growth of an underclass of young urban poor. This can add to law and justice challenges in urban areas. More formal sector opportunities are needed for these young people, but the government and the existing private sector cannot be expected to solve the problem on their own.  Support, and new ways of thinking, are welcome.

The Lowy Institute, under the auspices of the Aus-PNG Network and in partnership with DFAT, the PNG National Development Bank and the UN, brought together a group of young Australian entrepreneurs with roughly 40 aspiring Papua New Guinean entrepreneurs to workshop  opportunities and challenges, and to help build a community of young entrepreneurs in PNG. You can read the outcomes document here.

We also took the opportunity to survey Papua New Guinean entrepreneurs (raw results available here) to gauge why they wanted to become an entrepreneur, and their biggest challenges. When asked to name the top three factors influencing their decision to enter business, the most common responses were ‘I wanted to give back to my community’, ‘I like the flexibility it provides me’ and ‘I wanted to be my own boss’. Clearly, there is a strong concern for the wider Papua New Guinean community among participants. The factors that most strongly affected their ability to successfully run their businesses were ‘building a client base’, ‘access to finance’ and ‘securing contracts’.

There has already been great work done by both the donor community and the government to make starting a business in Papua New Guinea easier. Many of the participants in our workshop came from incubator programs that have been running in PNG for some time.

The first is through PNG’s National Development Bank, specifically NDB Investments, which launched Papua New Guinea’s first ever youth in business program with the Stret Pasin Young Enterprise Scheme in November 2014. The program aims to decrease the high percentage of youth unemployment by providing the opportunity for keen entrepreneurs to start their own businesses. The two-year scheme offers entrepreneurial training, funding, mentoring and business support services. You can read about the experience of one of the participants, Janine Aringa-Garap, here.

The second is through the Kumul Gamechangers initiative, implemented by the UN Development Programme in partnership with the Kumul Foundation, the Institute of Banking and Business Management, and supported by the Australian Government. The program aims to influence the inclusive development discourse through work with entrepreneurs, impact investors and inclusive businesses. The initiative has lined up a host of services including strategic mentoring, business skills development, access to sector knowledge, media visibility and the opportunity to fund-raise. The program has completed its first competition and is contemplating an expansion into seed funding for the second phase.

While both of these incubator schemes show potential it is too soon to tell how much impact they will have. So why put such faith in them? Why invest into entrepreneurship, an incredibly volatile and risky industry, at all? To answer that question let’s head to Nigeria. In 2011 the Nigerian government launched an entrepreneurship program which handed out $US60 million to around 1200 entrepreneurs (about $50,000 each). Of the 24,000 Nigerians who applied, the government selected about 6000 to get training and advice to develop their plan. The plans were scored, and about 1200 were funded.

On the face of it such a scheme seems crazy, but it turns out it might be one of the most effective development programs in history. By partnering with the World Bank the impact of the program could be closely evaluated, and three years on the results are astounding, with hundreds of new profitable companies creating thousands of jobs.

You can hear more about this story below. It demonstrates just how valuable spurring entrepreneurship can be, and why such initiatives should be supported, and indeed expanded, in Papua New Guinea.


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About the Authors

Jonathan Pryke - Director, Pacific Islands Program, Lowy Institute - Lowy Institute

Jonathan Pryke

Director, Pacific Islands Program, Lowy Institute

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Jonathan Pryke is the Director of the Pacific Islands Program at the Lowy Institute. Prior to joining the Institute Jonathan was a Research Officer at the Development Policy Centre at the Australian National University where, on top of his research obligations, he was editor of the Development Policy Blog and a co-convenor of the Australasian Aid Conference. Jonathan is interested in economic development in the Pacific Islands region, Australia’s relationship with Melanesia, the role of aid and the private sector in Pacific Islands development and Pacific labour mobility. Jonathan holds a Bachelor of Commerce from The University of Sydney, a Masters of Public Policy (Development Policy), Masters of Diplomacy and Graduate Diploma in International and Development Economics from the Australian National University.

Anna Kirk - Project Director, Aus-PNG Network - Lowy Institute

Anna Kirk

Project Director, Aus-PNG Network

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Anna Kirk was Research Fellow and Project Director of the Aus-PNG Network at the Lowy Institute, where her work focused on Australia’s relations with Papua New Guinea and the Pacific Islands. Anna holds a Bachelor of International Studies from the University of Queensland, with majors in Peace and Conflict Studies and Spanish. Anna grew up in Port Vila, Vanuatu. During her undergraduate degree she spent a semester studying Spanish language at the Universitat Pompeu Fabra in Barcelona. In 2013, Anna spent six months teaching English in Santiago, Chile.