Philippines

Papua New Guinea is richly endowed with natural resources, but exploitation has been hampered by rugged terrain and the high cost of developing infrastructure. Agriculture provides a subsistence livelihood for 75% of the population. Mineral deposits, including copper, gold, and oil, account for nearly two-thirds of export earnings. The government of Prime Minister SOMARE has expended much of its energy remaining in power. He was the first prime minister ever to serve a full five-year term. The government also brought stability to the national budget, largely through expenditure control; however, it relaxed spending constraints in 2006 and 2007 as elections approached. Numerous challenges still face the government including regaining investor confidence, restoring integrity to state institutions, promoting economic efficiency by privatizing moribund state institutions, and balancing relations with Australia, its former colonial ruler. Other socio-cultural challenges could upend the economy including a worsening HIV/AIDS epidemic, currently the highest rate in all of East Asia and the Pacific, and chronic law and order and land tenure issues. Australia supplied more than $300 million in aid in FY07/08, which accounts for nearly 20% of the national budget. A consortium led by a major American oil company hopes to begin the commercialization of the country's estimated 227 billion cubic meters of natural gas reserves through the construction of a liquefied natural gas (LNG) production facility by 2010. The project has the potential to double the GDP of Papua New Guinea.