Papua New Guinea

Money & costs

Costs

You’d think PNG, being a developing country next to dirt-cheap Indonesia, would be an inexpensive place to travel. It’s not. The reason is that the cost of doing anything in PNG is unreasonably high. Loan interest rates have fallen from over 20% in recent years, but they remain high and repayment periods are short. Virtually everything is imported and there’s little competition despite the usual free-market forces.

For the traveller, this means sleeping, eating and getting around are all relatively expensive. But the biggest single factor is that fact that getting anywhere within PNG usually means flying and there the costs add up rapidly. Backpackers are doing well if they can get by on less than K178 (US$60) per day, staying in guesthouses, self-catering and eating in cheap restaurants and at kai bars (cheap, takeaway food bars). Budget any flights on top of that. If you’re staying in good hotels and resorts, eating in the better restaurants, with activities and flights, the sky is the limit, but figure on about K890 (US$300) per day. There are plenty of midrange options and couples or pairs pay less per person – most midrange solo travellers staying in the main towns can expect to spend about US$100 per day. However, your expenses plummet if you get off the beaten track. Wandering off to stay in the villages is not only a great way to see the country and witness the culture, it’s also inexpensive: food and lodging will cost you about K50 per night, often less. The steady devaluation of the kina has made travelling slightly cheaper in recent years. But tourism facilities tend to use imported goods.

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Tipping

Tipping is not customary anywhere in PNG or the Solomons. The listed price is what you’ll be expected to pay.

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Economy

About 85% of Papua New Guineans and Solomon Islanders live subsistence agricultural lifestyles in rural villages. Surplus food production is traded in informal cash economies and this makes up the bulk of financial activity in both countries.

Industries that dominate the formal economic sector are the capital-intensive mining and oil industries that employ large numbers of foreign nationals and relatively few locals. They tend to be controlled by overseas interests and thus considerable portions of the profits are taken offshore. In 2005 PNG’s total export earnings reached K10 billion (US$3.5 billion) for the first time. Gold was the biggest foreign-exchange earner with the export of 70.5 tonnes worth K2.8 billion to the national economy. Copper, principally extracted from the giant Ok Tedi mine, and crude oil are respectively the second- and third-highest earning export commodities.

The agricultural sector is more labour-intensive and employs far more PNG and Solomons nationals than the mining sector. Forestry, copra and palm oil again tend to be controlled by foreign interests. Increases in world coffee prices have provided direct benefits to PNG growers who are mostly smallholders in the Highlands. In 2006 coffee exports were worth K471 million. PNG rubber exports are also significant.

Both PNG and the Solomons have poor economic infrastructure, which makes the cost of doing business very high. Except for the PNG’s Highlands Highway that connects Madang and Lae to the major population centres in the Highlands, neither country has any significant road network. PNG’s mountainous mainland and the many islands in the region means that communities are isolated from each other and the internal transportation systems comprise mostly light aircraft and informal trade-boat routes. (It is interesting to note that domestic aviation was born in PNG.) Both countries lie off the major shipping routes and thus sea-freight costs are high and services to and from the rest of the world are infrequent. There is almost no manufacturing base in PNG or the Solomons, so just about everything is imported (mostly from Australia and Asia) and everything is expensive.

Productivity growth is also restricted by poor education at one end of the human-resources spectrum and a significant ‘brain drain’ at the other. In PNG fewer than 60% of children complete 6th grade and only about 10% enrol in secondary school, while many of the best and brightest of the professional class leave for better-paid employment overseas.

Between 1960 and PNG independence in 1975 the economy on average was growing at more than 5.5%, thanks in large part to a substantial and productive Australian expatriate community and the Panguna copper mine in Bougainville, which began operating in 1968. The Panguna mine accounted for 40% of the country’s income and its closure in 1989 led to a sharp decline in GDP. Between 1975 and 2004 the PNG economy grew at an average 2.3%, although the last couple of years have seen stronger growth due to strong commodities prices and high minerals yields.

Foreign aid remains an important component of PNG's economy. In 2007 it received K880 million (US$310 million), although the amount has been falling in recent years. Through AusAID, Australia contributed about 78% of that amount, with the balance made up of contributions from Japan, the EU, New Zealand, China and the USA.

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Money

Perhaps appropriately for such a diverse country, travelling in PNG requires a diverse approach to money. Cash, credit cards and travellers cheques will all be useful, and it pays not to put all your eggs in one basket. Credit cards are increasingly accepted, but you don’t need to go too far off the track before you’re fully reliant on cash.

The PNG kina has seen a steady decline in value against major currencies. But expect inflation to take prices of goods and services up to the same rate as the local currency falls. Since almost everything is imported, the slide in the local currency just means that things cost more.

Traditional currencies, such as shell money and leaf money, are still occasionally used. You’ll see women in the Trobriand Islands carrying doba (leaf money), which is dried banana leaves with patterns incised on them.

PNG’s currency, the kina (kee-nah), is divided into 100 toea (toy-ah). Both are the names of traditional shell money and this connection to traditional forms of wealth is emphasised on the notes, too. The K20 note features an illustration of that most valuable of village animals, the pig. Most banknotes are plastic and look very similar to Australian banknotes – the colours are even the same. In remote areas, having enough small bills is important. People are cash-poor and won’t have change for K50. You’ll need cash for small purchases and PMV rides and it won’t hurt to give a child a kina for showing you that WWII relic.

Credit cards are accepted in most top-end and many midrange hotels, and in a few restaurants and stores in Port Moresby and other larger cities. Visa and MasterCard are the favourites, with Amex, JCB and Diners Club not so widely accepted. Credit-card payments often incur an additional charge.

ATMs are fairly common in cities, but only those at ANZ (www.anz.com/png/importantinfo/atmlocations.asp) and Westpac (www.westpac.com.au) branches allow you to withdraw cash against your Visa or MasterCard. ANZ has many more ATMs than Westpac, and in our experience these machines are far more likely to issue cash. Both ANZ and Westpac machines are linked to the Cirrus, Maestro and Plus networks, though it is dangerous to be relying solely on getting money this way. If the machines are broken, head inside and you should be able to get a cash advance against your credit card over the counter.

Bank South Pacific (BSP) has plenty of ATMs, but they’re still not linked to international networks.

Oanda (www.oanda.com/convert/classic), the online currency converter, is useful for calculating up-to-date exchange rates, but be aware that you won’t get the Interbank rate with banks in PNG. You’ll be selling your local currency for kina at the ‘typical cash rate’ which is some increments less attractive.

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International transfers

The easiest way to transfer money to PNG is by Western Union. For a list of Bank South Pacific branches that are Western Union agents, see www.bsp.com.pg/personal_banking/per_western_union.htm.

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Taxes

There is a 10% value added tax (VAT, and sometimes called GST) on top of most transactions in PNG. It’s worth asking your hotel whether this is included in the quoted rate, as quite often it is not.

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Travellers cheques

You can change travellers cheques in every major town in PNG, although chances are it will take ages. It will cost a bit too, with all the banks (in typical Australian-bank fashion) applying hefty charges for changing your cheques.

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