The partnership between the EU and Papua New Guinea (PNG) is guided by the principles and objectives of the Cotonou Agreement and its successor Agreement for which negotiations concluded in 2021. This Agreement covers areas such as political dialogue, trade and development cooperation, including respect for democracy and human rights principles.

The partnership between both sides is strong due to an ever increasing political dialogue, where they have frequently engaged and exchanged on many topics of mutual concern such as human rights, gender issues, elections, matters relating to positions taken in the United Nations or visa matters including discussions of more development cooperation and consistently better aid delivery.

The EU’s ultimate goal is to build stronger political relations with PNG, and the entire Pacific region, while supporting good governance, security and sustainable development.

For the last 12-15 years, Papua New Guinea has embarked on major structural reforms, policy development and adjustments in the different sectors of the economy to support the diversification of the economy.

Apart from minerals, agriculture still represents about a third of PNG’s GDP. It also provides employment to nearly 80% of the population through combination of both cash crop and subsistence agriculture. It looks set to remain the backbone of the economy.

As exports comprise some 90 % of PNG’s GDP, trade liberalisation is an integral part of achieving strong and sustained economic growth, and poverty reduction.

PNG was the first country in the Pacific region to sign the 2009 interim Economic Partnership Agreement (iEPA) with the EU. Under this agreement, all PNG exports can access the EU market of 500 million consumers duty and quota free for all products made in PNG.

To help Papua New Guinea tap on this opportunity, the European Union in line with the PNG Development Strategic Plan 2010-2030, has put into place a Trade Related Assistance Programme, which aimed to increase PNG capacities to benefit from trade and investment with Europe and the rest of the world. The EU supports the implementation of both the EU-Pacific EPA and the National Trade Policy with a special focus to support the operationalisation of the National Trade Office.

To develop and unleash the productive and employment potential of the rural economy, the EU is also increasing trade opportunities for rural and costal entrepreneurs by reducing bureaucracy, rules and regulations.

See Support to Rural Entrepreneurship Investment and Trade - STREIT.

With a population of more than 9million and an annual GDP of over USD 20 billion, PNG has by far the largest economy in the Pacific region.

After a decade of fast growth which brought Papua New Guinea into the category of lower middle-income country, PNG’s economic growth declined from 2016 to 2018 resulting from falls in commodity export prices, the finalisation of major Liquid Natural Gas (LNG) projects and natural disasters. Yet despite the initial impressive growth, the country has one of the highest rates of child and maternal mortality, and the lowest rates of school attendance and literacy in the Asia-Pacific region.

PNG’s economic outlook is improving through the PNG Vision 2050 and Strategy Plan 2010-2030. These plans aim to both reduce the country’s excessive reliance on mineral resources and support the diversification of the economy thus operating a paradigm shift from brown to green economy (Stars). The EU supports the implementation of PNG strategies and the diversification of PNG’s economy including a special focus on both informal economy and MSMEs.

Papua New Guinea has received over 2 billion Kina in the form of development support from the European Union through the European Development Fund (EDF) between 1987 and 2020. Since the introduction of the new Global Europe Instrument in 2021, over 450 million Kina of grant funding has been committed to Papua New Guinea. Further support has been provided through dedicated thematic lines on relevant issues such as democracy, rule of law, gender based violence and support to non-state actors and community based organisations.

The period between 2014 and 2020 marked the final programme under the European Development Fund (11^th EDF) with a total funding of Euro 154 million (K616 m). The focus was on three sectors:

• Rural Entrepreneurship and Investment & Trade.
• Water, Sanitation and Hygiene and.
• Policy Reform and Good Governance and Complimentary Support.

The first Multi-annual Indicative Programme (MIP) from 2021 to 2027 under the Global Europe financing instrument received a financial allocation of Euro 115 million (K460 m) for the period 2021-2024. The allocation for the second period will be confirmed by the end of 2024 after the completion of the Mid-Term Review.

The focus of this programme is on three sectors:

• ‘Our Forest Our Future’, addressing the Forestry-Climate Change-Biodiversity (FCCB) nexus.
• ‘Water is Life’: Water, Sanitation and Hygiene (WaSH) for Human Development.
• ‘Transparent and accountable Governance.

The MIP is fully aligned with Papua New Guinea’s Multi-Annual Development Plan IV (2023-2027) and, with inclusion of some actions geared towards supporting sustainable infrastructure, also facilitates the implementation of ‘Connect PNG’ and the EU’s Global Gateway Strategy.

The European Union has been using a large scope of implementation modalities for its partnership with PNG. After many years of analysis, in 2020 the European Union qualified PNG to receive support through Budgetary Support, grant funding made available directly to the Treasury to enhance fiscal space and allow implementation of relevant and credible policies, with a commonly agreed set of objectives to achieve during the life of the support. This specific support targeted the Social Law & Order Sector (SLOS). Due to good progress made in the dialogue and coordination in this sector reform programme, the EU gave green light for the development of a second Budget Support programme for PNG which is expected to start in 2025.

For the new infrastructure related projects, the EU is ‘blending’ grant funding with concessional loans from development banks such as the European Investment Bank (EIB) and Asian Development Bank (ADB). In addition, the EU can provide guarantees for loans provided by development banks, increasing the concessionality of the financing for PNG.

Information on related programmes/ projects is provided here.

This holistic programme assists agripreneurs to develop, rehabilitate and expand production and trade of Cacao, Vanilla and Fisheries in PNG provinces of East Sepik and Sandaun.

With a contribution from EDF 11 of EURO 82M, STREIT is the largest grant-funded programme of the European Union in the country and in the Pacific sub-region. It supports not only entrepreneurs and farmers directly in the respective Value Chains, but it also helps to improve the enabling environment for these value chains: access to markets/communication, access to finance and financial inclusion, telecommunications, digitalisation and renewable energy.

This programme is implemented directly from the Sepik, by teams from the FAO (overall leadership), ILO, UNCDF and UNDP working closely with both Provincial authorities responsible for the sectors of intervention (Local branch of the Department of Agriculture and Livestock, Cocoa Board, Spice board and Fisheries.

The programme is also focusing on being inclusive through dedicated activities for women and youth.

Some activities dealing with the environment for business and trade as well as digitalisation have a PNG wide scope.

The Global Gateway is the EU’s positive offer of cooperation to our partner countries in support of their own strategic autonomy, aligning partner countries and EU interests, by scaling up high-quality geostrategic investments and promoting sustainable financing.

Covering five main themes (digital, climate and energy, transport, health and education and research), Global Gateway initiatives worldwide are implemented through a Team Europe approach where possible.

In Papua New Guinea, the EU is working on flagship initiatives regarding rural economic development, climate and energy and transport.

Country Flagship ‘Support to Rural Entrepreneurship, Investment and Trade (EU-STREIT)’

The EU ‘Support to Rural Entrepreneurship, Investment and Trade in Papua New Guinea’ (EU-STREIT PNG) programme is with a budget of EUR 81.3 million the largest grant-funded initiative of the EU in the country and in the Pacific, implemented by a consortium of UN agencies under the lead of the Food and Agriculture Organization (FAO). The programme aims to help improve the lives of the people from East Sepik and Sandaun provinces of Papua New Guinea, by focusing on increasing sustainable and inclusive economic development of rural areas through improved economic returns and opportunities from cocoa, vanilla and fishery value chains while strengthening and improving the efficiency of value chain enablers, including the business environment, and supporting sustainable, climate-proof transport and energy infrastructure development. Supported infrastructure development includes the installation of off-grid solar energy generation, clearing of waterways, rehabilitation of rural airstrips, and rehabilitation and maintenance of feeder roads.

Country Flagship ‘Upgrading of Rabaul's Green Port’

The ‘Upgrading of Rabaul’s Green Port’ is a blending project for a total of EUR 60.3 million with a grant from the EU and loans from the European Investment Bank (EIB) and the French Development Agency (AFD), including a requested EFSD+ guarantee for the EIB loan. The project will provide consultancy services for construction and project management, technical assistance, capacity building, and partially funding civil works investments. Civil works encompass the rehabilitation and enhancement of the two port wharves, a maintenance dredging operation, establishment of a site-wide stormwater drainage network and upgrades to the water supply and sanitation network the acquisition of new equipment, and enhancement of port’s operations with a focus on green port principles. This will ultimately contribute to territorial cohesion, inter-island connectivity, and the preservation of PNG’s natural heritage.