Papua New Guinea Urged to Transform Resource Wealth into Human Capital to Unlock Jobs Boom: World Bank Review

New report outlines urgent fiscal reforms and investment strategies to convert natural riches into sustainable economic growth and improved living standards.

Papua New Guinea (PNG), one of the world’s most resource-rich nations, stands at a pivotal crossroads. A new World Bank Public Finance Review argues that the country’s future prosperity will depend not on the volume of its natural resources, but on how effectively it converts that wealth into human capital.

Titled “Converting Resource Wealth into Human Capital,” the report presents a stark but actionable roadmap for policymakers: without stronger fiscal systems and significantly higher investments in health, education, and social protection, PNG risks missing its ambitious development goals.

A Wealthy Nation with Untapped Potential

Despite abundant reserves of gas, minerals, and other natural resources, Papua New Guinea has struggled to translate this wealth into broad-based economic development. The country has set bold national targets—creating one million jobs, expanding its economy to K200 billion by 2030, and achieving a balanced budget by 2027.

However, the World Bank warns that these goals remain out of reach unless structural reforms are accelerated.

The core challenge lies in the disconnect between resource extraction and public benefit. While production in the resource sector has nearly doubled over the past decade, government revenues from these resources have remained disproportionately low.

Between 2013 and 2024, resource revenues averaged just 1.9% of GDP, highlighting inefficiencies in taxation, revenue capture, and fiscal governance.

Three Strategic Priorities for Economic Transformation

The report identifies three critical pillars that could enable Papua New Guinea to unlock sustainable growth and job creation:

1. Strengthening Revenue from Natural Resources

PNG must secure a greater share of returns from its resource sector while broadening its tax base. This includes modernizing tax systems, improving compliance, and renegotiating fiscal terms where necessary to ensure fair value capture.

2. Improving Public Spending Efficiency

Better management of public finances is essential. The report emphasizes the need for transparent budgeting, reduced leakages, and performance-driven spending to ensure that every kina delivers measurable outcomes.

3. Investing in Human Capital at Scale

Perhaps the most transformative recommendation is a significant increase in spending on people. The World Bank estimates that PNG needs to boost annual investments by approximately 4.5% of GDP to strengthen education systems, expand primary healthcare, and build a national social protection framework.

Human Capital Crisis: A Barrier to Growth

The report paints a sobering picture of human development challenges in Papua New Guinea.

Nearly 50% of young children are stunted, reflecting chronic malnutrition and poor early childhood conditions. Child mortality remains high, with one in 25 children dying before the age of five. Education outcomes are also among the weakest globally, limiting the country’s ability to build a skilled workforce.

As a result, a child born in PNG today is expected to achieve only 42% of their potential productivity over their lifetime—a figure that underscores the urgent need for systemic reform.

These deficits are not just social issues; they directly constrain economic growth, reduce labor productivity, and limit the country’s competitiveness in a rapidly evolving global economy.

Demographic Opportunity—or Risk

Papua New Guinea’s rapidly growing youth population presents both an opportunity and a risk. If adequately educated, healthy, and skilled, this demographic could drive decades of economic expansion. If not, it could exacerbate unemployment, inequality, and social instability.

“The future of any country depends on the health, skills, and energy of its young people,” said Han Fraeters, World Bank Division Director for Papua New Guinea, Solomon Islands, and Vanuatu. “With focused actions, Papua New Guinea can turn its natural wealth into stronger services, a more diverse economy, and more jobs for the next generation.”

Innovation Through Policy: A Shift in Development Thinking

What makes this review particularly significant is its emphasis on “resource-to-human-capital conversion” as a development strategy. Rather than relying solely on extractive industries, the World Bank advocates for a model where natural resource revenues are systematically reinvested into human development.

This approach aligns with global best practices seen in countries that have successfully avoided the “resource curse” by prioritizing education, healthcare, and social systems.

For PNG, this could mean:

• Establishing sovereign wealth mechanisms linked to social investments

• Digitizing tax and expenditure systems for better accountability

• Expanding community-based healthcare delivery models

• Strengthening vocational and skills training aligned with labor market needs

A Narrow Window for Reform

The report concludes with a sense of urgency. With global energy transitions underway and commodity markets becoming increasingly volatile, Papua New Guinea has a limited window to maximize returns from its natural resources.

Without decisive action, the country risks remaining trapped in a cycle of high resource dependence and low human development outcomes.

But with the right reforms, PNG could chart a different path—one where natural wealth fuels inclusive growth, job creation, and long-term prosperity.