PAPUA New Guinea is on the verge of a mining and resources boom with the potential to radically alter the course of its economic and social development.
With a number of large mineral and resources projects soon to come online, there is a sense of optimism and expectation that a new beginning for the country is just around the corner.
Its liquefied natural gas project alone is expected to double the country's gross domestic product and triple its exports.
During a recent visit I asked a representative of the operator, Exxon Mobil, how he would rate the project's difficulty, with one being easy and 10 being extremely difficult. He gave the project a two from the location and logistical perspective, but nine for the social and cultural challenges.
PNG faces significant challenges with high poverty rates, poor life expectancy and high infant and maternal mortality.
While its LNG project will bring huge benefits, it also presents challenges that will test the institutional capacity of the government. The dangers of "Dutch disease" - when a decline in manufacturing follows a boom in resource exploitation - are well known to countries with a dominant energy and mineral resources sector.
So it's crucial to promote growth in other sectors of the economy, by reinvesting the earnings from mining.
The lessons from the 1990s mineral boom are harsh.
Mismanagement, waste, corruption, excessive spending and a collapse in commodity prices all combined to deny PNG the long-term benefits that should have come from that boom.
The relationship with PNG should be one of Australia's highest foreign policy priorities. Yet our development assistance to PNG, estimated to be $482 million in 2011-12, has declined as a percentage of PNG's GDP.
With the revenue from resources projects set to boost its economy even further, Australian aid will play less of a role in PNG's development. However, we believe that as the PNG government takes on a larger role in the delivery of services and conditions improve, Australian assistance should progressively be directed towards areas that will help facilitate economic growth.
One such initiative is the Enterprise Challenge Fund, established in 2007, which aims to stimulate growth and employment opportunities, and ensure that the disadvantaged are able to participate in the economy.
I visited a small business in Port Moresby that used a grant from that fund to purchase food-processing equipment from India and set up a spice and oils export business that supports hundreds of growers and their families.
Providing access to capital is ultimately a job for the private sector, but our aid program can fill a gap as the business sector matures. Other avenues outside government channels, such as churches, local community groups and non-government organisations, must also be leveraged.
Australia and PNG must work to build a new generation of networks in government, business and the community, to improve the transfer of knowledge and skills needed in basic service delivery, policy formation and public service management.
As permanent partners and close friends, Australia must be committed to helping the people of PNG along the road to a more sustainable and prosperous future. With its economy expected to grow sharply in the coming years, PNG is well positioned to take hold of its destiny. This will require strong leadership and an unrelenting determination on the part the PNG government to succeed.
Ultimately, it will be our actions, not our words, that will demonstrate beyond doubt that PNG is one of Australia's top foreign policy priorities.
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