Hard Currency Strategy and Economic Development in Papua New Guinea

the basic unit of production. Labour is controlled by a household or group of households whose members are closely related. Most of the population live in the villages and are engaged in subsistence agriculture. But in recent years, a money economy has developed in the town and village. In accordance with the development of a money economy, the traditional society of PNG is changing rapidly. The socio-economic structure of PNG is dualistic. There remains a traditional socio-economic system in the core, and modern one is penetrating the surface. According to the classification by the World Bank, PNG is situated in the middle in come group (per head income : US. $ 890 in 1989). But if we see PNG's socio-economic indications, the country would surely be classified as a less developed country. For exam ple, the ratio of nonliteracy of PNG residents (55%) in 1985 is much higher than that of Ethiopia (38%) and China (31%), which are classified among the low income countries (the least developed countries). Therefore, I have some questions about whether or not we can analyze the socio-economy of PNG with the instruments of modern economic theory. We can surely analyze and understand only a part of the economic activities with the modern economic theory. With this caution in mind, I will discuss the problems of the hard currency kina strategy in PNG in this paper.