Papua New Guinea (PNG) is richly endowed with natural resources, but exploitation has been hampered by rugged terrain, land tenure issues, and the high cost of developing infrastructure. The economy has a small formal sector, focused mainly on the export of those natural resources, and an informal sector, employing the majority of the population. Agriculture provides a subsistence livelihood for 85% of the people. Mineral deposits, including copper, gold, and oil, account for nearly two-thirds of export earnings. Natural gas reserves amount to an estimated 227 billion cubic meters. A consortium led by a major American oil company is constructing a liquefied natural gas (LNG) production facility that could begin exporting in 2014. As the largest investment project in the country's history, it has the potential to double GDP in the near-term and triple Papua New Guinea's export revenue. An American-owned firm also opened PNG's first oil refinery in 2004 and is building a second LNG production facility. The government faces the challenge of ensuring transparency and accountability for revenues flowing from this and other large LNG projects. 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 has brought stability to the national budget, largely through expenditure control; however, it relaxed spending constraints in 2006 and 2007 as elections approached. In recent years, the government has opened up markets in telecommunications and air transport, making both more affordable to the people. Numerous challenges still face the government, including providing physical security for foreign investors, 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 an HIV/AIDS epidemic, with the second highest infection rate in all of East Asia and the Pacific, and chronic law and order and land tenure issues. The global financial crisis had little impact because of continued foreign demand for PNG's commodities.
