Papua New Guinea’s Forests as an Engine of Growth

For a funder the answer comes first. The part of the strategy the country can pay for itself, a cap on raw-log exports, US$1.26 billion in mill capacity timed to the planted forest harvest and 800,000 hectares planted over 2027 to 2031, lifts real GDP 2.97 percent above the baseline over 2027 to 2060 and household consumption per person 6.3 percent by 2060, keeps 3.25 million more hectares of forest standing and adds more to national wealth than to output. By 2060 public foreign debt is US$28.3 billion higher than in the baseline, which is the borrowed half of the programs; the mill build is US$0.83 billion of it.

Start with the sector as the model finds it. In 2023 the country harvests 4.6 million cubic meters of timber and ships 66.3 percent of them abroad unprocessed; its mills take 5.6 percent, and forestry and wood processing are 0.68 and 0.11 percent of GDP. Under the strategy the mills take 12.5 times as many logs, processed wood exports climb from 61 thousand cubic meters to 2.26 million, mill employment reaches 3.54 times its baseline and no raw logs leave the country from 2049. Logging output ends 44.7 percent higher: the cut is redirected, not stopped.

The mills have not been built because capital goes where it earns most, and that is never wood processing. Mills built without the restriction earn 0.00 of the economy’s average return; with it, the installed capital still earns only 0.16 by 2060. With the restriction alone the industry grows by 37.8 percent and absorbs 2.6 million cubic meters of timber; with the directed investment it grows by 327.8 percent and absorbs 8.2 million. On a private balance sheet the build does not pay. It is public investment, and its payoff arrives as jobs, exports and wealth: wealth up US$77.9 billion beside GDP up US$59.7 billion.

Alone, each instrument does little or harms the economy. By itself the export restriction adds 0.23 percent to cumulative GDP and lifts mill output only 10.0 percent, since the mills as they stand have little use for cheap logs. The mill investment by itself subtracts 0.18 percent, buying logs at the unrestricted price. The planted forest by itself subtracts 0.27 percent within the horizon, paying for establishment and replanting while its timber leaves as logs. Together they add 2.97 percent.

The model treats the rules it is given as followed. Its results rest on conditions it cannot supply: the rule of law and enforcement in the forest sector, independent monitoring of log exports and prices, a tax administration able to act on the gap between declared and overseas prices, free, prior and informed consent and benefit sharing with customary landowners, transparent award of permits and the plant, infrastructure and skills a mill needs.

A call to action

Papua New Guinea’s forests can support an industry, employment and rising national wealth while they remain standing. Achieving that calls for sustained international support, and for support of a particular kind. It means investing in the evidence on which decisions rest, and standing behind the customary landholders who own the forest, the government agencies that administer it, and the academic and civil society institutions that hold both to account. The conditions set out above are what the model cannot deliver on its own. They are matters of law, transparency and consent, and they are built over years by people working in country.

What the analysis shows is that the return is there. Mill capacity installed as the planted forest harvest arrives earns 0.16 of the average return, and pays instead in an industry, exports and employment. The planted forest estate adds US$18.5 billion of wealth before it yields any income at all. Ecosystem service changes are small, 0.05 percentage points of GDP in 2060, because the forest is still standing and only the difference reaches the economy.

Carbon finance is not what this case rests on. Ending deforestation with carbon payments gives the largest single income gain in the study, 2.92 percent of cumulative GDP, though it depends on payments of US$44.1 billion at US$25 a ton that no program has yet paid at that scale. The rest of the strategy stands without it.

The full results, maps and animations are on the Papua New Guinea report page.