By Wickramasinghe, Upali

Introduction
Papua New Guinea has a large smallholder agricultural sector as in many other developing countries in Asia and the Pacific. Smallholder farmers are often vulnerable to external shocks emerging from weather and market volatility and farm failures, which keeps them in perpetual poverty. It is not surprising that smallholders are often among the poorest of the poor and only marginally engage in markets. Because of these conditions, they are unable to take advantage of the opportunities offered by markets even when market conditions are seemingly favourable to them. Within this background, the Rio+20 conference, the L'Aquila Summit and many other meetings held in the post-2007/08 soaring food prices episode requested the international community and national governments to develop strategies for enhancing the welfare of smallholders and subsistence farmers by linking them with community, domestic, regional and international markets to enhance their welfare (United Nations, 2012; G8, 2009). This article reviews the current status of agriculture in Papua New Guinea with a view to identify factors that may explain the apparent mismatch between the current state of agriculture and its true potential.

Agriculture and the national economy
Papua New Guinea is a country of 7.06 million people. At the current rate of population growth (2.8 per cent during 2000-2011)1, the population will be 20 million by 2050. It is the same year on which the Government expects to have realized economic development that would reduce the country's dependence on the mining industry and expand the capacity of the agricultural sector and manufacturing industries. As the current status of agriculture provides the foundation for realizing these visions, it is worthwhile to briefly review the current status of the agricultural sector in the national economy along with its true potential.

The per capita gross national income (GNI) in Papua New Guinea is estimated to have reached USD 1,300 in 2010. The relatively high per capita income reflects a high income earned through royalties from extraction industries. The fact that 35.8 per cent of the population was living on less than $1.25 a day in 1996 (World Bank, 2012) implies that the national per capita income figure hides the true nature of poverty and destitution among the people in the lower strata of the society. Even when the national poverty line is used as a benchmark, 28 per cent of the population still lives below the poverty line.

According to the World Bank Development Indicators database, the value added as a percentage of GDP2 in 2011 stood at 36 per cent, whereas employment in agriculture as a percentage of total employment in 20003 was 72 per cent. Assuming that employment in agriculture as a percentage of total employment has remained the same, agriculture currently employs over 2 million people directly. A large share of employment in agriculture combined with a moderate share of agriculture in Gross Domestic Product (GDP) implies a low level of value addition per worker. In addition, it has been observed that 90 per cent of rural people are in subsistence or semi subsistence agriculture and only a minority is in commercial activities, including selling and buying in local, regional or national food markets. Even when smallholder farmers enter markets for selling their produce, it with the objective of selling the minimum amount of commodities to trade so as to meet their basic needs such as energy (often kerosene) and some 'store goods' and medicine, the goods they are unable to produce by themselves.

In addition to cash crops such as coffee, cocoa and betel nuts, smallholders produce a variety of fresh produce that is available within their local environments. It appears that fresh produce is a vital part of smallholder livelihood and cash earnings, especially when households are located relatively close to markets. Although information on the total volume of fresh food trade is not available, it is estimated that the fresh produce market is worth about USD 95 million per year4 (Fresh Produce Development Agency, 2009) and that demand is anticipated to increase with rising incomes and development in the mining industry. This is expected to contribute to increase incomes of the 85 per cent of Papua New Guinea's population who derive their income from food crops.

In addition to meeting the food security requirements of a population more than twice the current size and probably with increased incomes the economy must have the capacity to find suitable employment opportunities. And these conditions must also be met while ensuring environmental sustainability. The dominance of agriculture implies that Papua New Guinea will need to evolve a strong agricultural sector to meet the twin challenges the country is likely to face in the future: food security and generating employment opportunities.

Mismatch between current performance and potential
Out of a total land area of 452,860 km2 in Papua New Guinea, agricultural land area is estimated to be 115,500 km2 consisting of 2,600 km2 of arable land and 7,000 km2 of permanent crops (FAO, 2012). (1sq km = 100 ha). According to FAO estimates, 'agricultural land' area is 760 km2, which includes 'arable land', areas under 'permanent crops', 'permanent pasture' and land under market, kitchen gardens and temporarily fallowed. The area under permanent crops is approximately 60 per cent, which mostly consists of palm oil and tree crops. The arable land area is estimated at 260,000 ha, which consists of temporary crops. The extent of arable land per capita is very low (0.04 ha). Arable land (ha per person) is estimated at 0.04 ha in 2009 (World Bank, 2012). A better estimator would be to use the landholding sizes, but unfortunately such data are not available.

Juxtaposing production indices and import and export values for the period between 1960 to 2010, one could observe that Papua New Guinea has not had a significant growth in agricultural production while imports and exports in value terms have increased significantly. In order to visualize this more closely, data on a selected set of commodities at aggregate level for 2000 and 2009 along with output per hectare are provided in Table 1, which clearly shows the nature of slow growth of production, especially in terms of output per hectare. It is clear from the table that oil crops, fruits, and roots and tubers have dominated agricultural production. Whereas fruits and tubers are cultivated mostly for domestic consumption, part of the produce is sold in agricultural markets, which essentially contributes to household income generation. Large-scale corporations, often dominated by multinational companies, mostly carry out palm oil cultivation. Much of the production is exported in bulk, raw form, probably due to the fact that many of these plantations are owned by foreign multinationals who may find it economical to further process palm oil in their processing facilities overseas. Palm oil has been the main export commodity in the recent past (Figure 1). In relation to palm oil exports, exports of coffee, cocoa, coconut and rubber are relatively small, but their contributions to smallholders can be highly significant and provides an important source of income for rural households who may find it difficult to engage in regular markets due to distances involved and high costs.

Tubers and roots such as sweet potato, taro and yam, sago and banana provide the majority of food energy and protein consumed by people, while the main sources of fats and oils are meat (pigs, fish and other animals), coconut and imported vegetable oil. Much of the food consumed is produced locally but imports, especially rice and wheat with some vegetables and meat products, have risen in recent years. As can be seen from Table 1, area under roots and tubers has increased significantly within the last decade. The current land allocated to the production of cereals as well as for pulses and coarse grains is relatively small, although the demand for cereals such as rice, maize and wheat is relatively large, which makes it essential for Papua New Guinea to import large quantities of cereals (Figure 2). Vegetable production is widespread throughout the country, especially in the central highlands where the area under cultivation has increased by about 4,000 ha within the last decade. It is observable that output per hectare across different crops has seen only a negligible growth within the last ten years. For example, output per hectare of palm oil has increased from 1.5 tons in 2000 to 2.0 tons in 2009, which had been one of the best performing sectors, whereas all the food crop sectors have recorded either very small or negligible improvements. In order to compare the possibilities for further growth, output per hectare for Malaysia is also reported in the last column, which clearly shows that Papua New Guinea has the potential to produce cereals and further possibilities for achieving productivity growth in almost all other sectors.

A much greater potential for agricultural development exists in Papua New Guinea given its vast resource base, especially land, climatic conditions and the availability of water resources and reasonably good soil conditions, which are the basic essential elements for agricultural development. The rainfall data show that the country has a fairly stable pattern of rainfall and temperature. To make it even more attractive, different altitudes offer greatly varying climatic conditions suitable for growing different varieties of crops, providing an opportunity to produce food crops throughout the year. A greater part of the country receives around 2,000 mm of rainfall per year. Although some changes in weather patterns have been observed in recent years, the rainfall remains fairly stable. Except for occasional droughts experienced by some parts of the country. Papua New Guinea has a fairly stable supply of water for agricultural purposes; soil conditions are observed to be relatively good for agriculture, particularly in areas where sedimentation is occurring or volcanoes are depositing ash (Bourke and Harwood, 2009). Given the varying altitudes, a number of plants that have been adapted to different climatic conditions can be found here, and as a result, it is considered one of the world's biodiversity hotspots (see for a chart describing plant varieties that are grown on different altitudes in Papua New Guinea, Bourke and Harwoor, p. 113). What could be the reasons for the current lackluster performance in agriculture?

Agricultural policy environment
An area that needs attention is the agricultural policy environment and how these policies are implemented in the country. The Vision 2050 recognized that the economy is heavily dependent on mining and energy with 80 per cent of GDP derived from these two sources. The current strategic vision recognizes the need to develop agriculture, forestry and fisheries along with manufacturing, services and ecotourism so as to "shift an economy that is currently dominated by the mining and energy sectors, to one that is dominated by agriculture, forestry, fisheries, ecotourism and manufacturing" (Papua New Guinea Vision 2050). The Papua New Guinea Development Strategic Plan 2010-2030, which was developed as a medium term plan to achieve the Vision 2050, has set a target to make 70 per cent of subsistence farmers into small and medium primary agricultural enterprises. In order to achieve this objective, the medium term plan has proposed a strategy consisting of the following five elements:

  • Development of efficient land administration, allowing land owners to profit from their land;
  • Develop roads and supply chains to link producers and markets;
  • Provision of extension services to improve productivity;
  • Utilization of economic corridors, especially to utilize niche markets that Papua New Guinea may have competitive advantage; and
  • Enforce CODEX marketing standards to improve agricultural exports.

The Medium Term Development Plan 2011-2015 (MTDP), which is a five-year development plan currently under implementation, proposes to implement a number of interrelated interventions in the agricultural sector. The key focus has been on improving land access for agriculture development, especially for improving land administration of customary land, providing adequate extension services, and developing and improving roads and other agricultural infrastructure. The strategic plan of the National Agricultural Research Institute has proposed to enhance the enabling environment by enhancing marketing opportunities for smallholders through the development of existing and alternative marketing practices, improving access to and utilization of market information, identifying and implementing appropriate macro policies/ strategies on trade, subsidies, freight, taxation and access to developed and new markets and developing access to infrastructure.

While the broad set of policies identified in the strategic plans will provide a firm foundation for developing a viable agricultural sector, linking smallholders with markets requires the identification of specific conditions that would naturally lead smallholders to seek improved market opportunities and lessening the bottlenecks that limit their incentives to participate in markets. Public policy foundations that have been advanced over two centuries suggest that improving market access opportunities for smallholders will require addressing two fundamental factors: incentives structure for smallholders to seek more opportunities for specialization and greater productivity enhancements, and mechanisms that would reduce market participation costs. It is natural for farmers to seek ways and means to minimize their engagement in markets if these two basic conditions are not realized. The costs of market participation are often unique to each region, village or even farm households depending on the social institutions, social norms, legal rules and the technological environment. The identification of applicable policies and better targeted projects to address the issues that smallholders face will require the development of a comprehensive agricultural information system covering the agricultural systems of the entire country.

Conclusions
Agriculture in Papua New Guinea is significant as a source of GDP and livelihoods. Given the high incidence of poverty among the people living in rural areas and that they are more likely to depend on agriculture for food and livelihoods, agricultural development remains key to poverty reduction and food security. The greater availability of land and water resources and different climatic conditions along with greater biodiversity offers the country with much greater potential for agricultural development. Given the dominance of the smallholder sector in the economy, the effective utilization of these resources will hinge on the implementation of a set of policies that would allow smallholders to seek greater specialization and reduce market participation costs. This in turn will require the development of a comprehensive agricultural information system covering the entire country.

(References available upon request)

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1 The 2011 census preliminary figures show that the total population of Papua New Guinea has reached 7.1 million (The National, Oct. 22, 2012, based on the National Statistical Office). According to the 2000 census, the total population was 5.1 million. This means that the population has grown at an annual average rate of 2.8% during the 11 years between 2000 and 2011.
2 The figures reported by various institutions on this variable differ significantly. For example, the World Development Indicator database maintained by the World Bank reports 36% as a the value added of agriculture in GDP, whereas the Key Development Indicators 2012 report of the Asian Development Bank reports that agriculture in GDP, measured at producers' prices, as 31.1%.
3 That is the latest year for which data is available for this indicator.
4 FPDA indicated it to be PGK 250 million per year, which is converted to USD by using the average bid rates for PGK as reported by http://www.oanda.com/currency/historical-rates/ for year 2009.